State Can't Treat Similarly Situated Parties Differently: Bombay High Court Orders Release Of ₹75 Lakhs Export Subsidy To Manufacturer

The Court noted that non-payment of subsidy to the manufacturer would amount to treating identically placed parties differently, which is against the principles of fairness and non-discrimination under Article 14.

A division bench of Justice B. P. Colabawalla and Justice Firdosh P. Pooniwalla was hearing the plea of Sunfresh Agro Industries Pvt. Ltd., a milk powder manufacturer.

In 2018, the State floated a scheme for granting Export Subsidy to powder manufacturers. This was because the prices of milk powder fell drastically and manufacturers were unable to sell the milk powder at a price which would break even their costs. As a result, the stock of milk powder with the manufacturers increased.

To clear the existing stock of milk powder within the State and restart the manufacturing of milk powder, the State Government issued a GR dated 31 July 2018, where it introduced a subsidy scheme for stock milk powder manufacturers at a certain rate.

The petitioner submitted that the State Government inspected and calculated its stock milk powder and claimed to be entitled to Rs. 75 lakhs as per the GR.

By an order dated 04 March 2022, the Principal Secretary, Dairy Development stated that milk powder manufacturers including the Petitioner were entitled to receive export subsidy as per the GR. After conducting an inquiry, the Principal Secretary submitted a report dated 26 May 2022, where it was stated that the petitioner admitted that the Petitioner was entitled to an amount of Rs. 75 lakhs.

After this report, the petitioner made several requests to the State authorities to release the subsidy amount, but they refused to do so.

Meanwhile, an entitiy similarly placed like the petitioner approached the High Court seeking the release of export subsidy amount by the government in the case of Indapur Dairy. On 20 March 2023, the Court held that the milk powder manufacturers were entitled to receive the export subsidy as per GR dated 31 July 2018.

After this order, the State Government made payment of the entire amount of export subsidy to one of the manufactures, Indapur Dairy.

However, it did not release any subsidy amount to the petitioner despite its repeated requests.

The petitioner argued that despite its entitlement of subsidy amount being decided by the Principal Secretary, Dairy Development, the State authorities failed to disburse amount. It also contended that due to the Court's orders dated 20 March 2023 in case of Indapur Dairy, who is similarly placed as the petitioner, the authorities failed to release the amount of export subsidy without any valid and cogent reason.

Here, the Court remarked that if the same relief is not granted to the petitioner which is identically placed to Indapur Dairy, it would “amount to doubting solemn Orders passed by this Court and implemented by the Respondents, which is not permissible in law.”

It also stated that if the petitioner, who is identically situated is not paid the same subsidy, it would be violative of Article 14 of the Constitution.

“..once Indapur Dairy, which is identically placed like the Petitioner, has been paid the Export Subsidy, it would be violative of Article 14 of the Constitution of India, if the Petitioner, being identically situated, is not paid the same subsidy, as it would amount to persons identically situated being treated differently, which goes against the very principles of Article 14 of the Constitution.”

The Court observed that a differential treatment to the petitioner would breach the principles of reasonableness, fairness and non-discrimination under Article 14.

“We may observe that once a party like Indapur Dairy, who was similarly placed like the Petitioner, was in receipt of such subsidy, which is certainly in the nature of a State largesse, all attributes of reasonableness and fairness emanating from Article 14 of the Constitution of India would stare at the Respondents in similar treatment to be meted out to a person like the Petitioner who was identically placed. A different treatment being meted to the Petitioner would result in breach of the basic rights of the Petitioner of non-discrimination guaranteed to the Petitioner under Article 14 of the Constitution.”

Noting that the subsidy scheme was a welfare scheme which was fully implemented upon Indapur Dairy, the Court said that it recognizes the petitioner's rights as conferred by the constitution and the scheme.

The Court thus directed the State authorities to release the export subsidy amount of Rs. 75 lakhs to the petitioner.

Case title: Sunfresh Agro Industries Pvt. Ltd vs. State of Maharashtra & anr. (Writ Petition No. 199 of 2024)

Citation: 2024 LiveLaw (Bom) 622