ORDER
Sujata Manohar Acting C. J.
1. The petitioners carry on the business of manufacturing veneer, ply wood and allied ply wood products at their factory situated at M.I.D.C. Estate, Nagpur, in the Vidarbha Region. According to the petitioners, in the year 1974 they set up their factory at Nagpur in view of the Government Resolution No. FND/1269/211097-2 dated 25th September, 1969 passed by the Government of Maharashtra, Revenue and Forest Department. The Resolution sets out that forest industries in Maharashtra State are largely located in the Bombay Pune Region. These industries are generally located in areas remote from important resource centres; while industrial development has languished over the extensive forest areas in the regions of the State which have substantial surplus production potential. The Resolution also states that there is a need for a rational dispersal of industries in the under-developed regions of the State. Therefore, to achieve national economic planning for forest industries and encourage establishment of resource oriented industries to utilise available surplus production from the forest areas in the State, the Government has taken various policy decisions. These include, inter alia, granting of applications for forest based industries in the proximity of forest regions. Under clause (2), the available limited production of certain forests on which specific industries entirely depend are to be reserved for the industries as specified in that Resolution. Clause (3) of the Resolution states that the lease of forest produce should be granted to forest based industries initially for 20 years as set out therein. Clause (5) states that the forest produce should be supplied to the industry charging royalty corresponding to market rates for the produce with keen competitive demand and on such other terms and conditions as may be mutually agreed upon.Clauses (5) and (7) on which the petitioners are basing their claim are as follows:--
'Clause (5): The forest produce should be supplied to the industry charging royalty which will correspond to market rates for the produce with keen competitive demand and on such other terms and conditions as may be mutually agreed upon. The 'Market rates' in such cases will be determined by Government taking into consideration the following factors:
(a) The rates obtained in the open auction sales by the department.
(b) the rates obtained by the department by inviting offers (i.e. auction sales or tenders) for the available production on long term leases from the competing entrepreneurs for specified industry restricting the sale for specified industrial use.
(c) The recommendations of Revenue and Forest Department in regard to acceptance of offers will be finally decided by a High Power Committee referred to below.'
'Clause (7): The royalty to be charged and mode of payment should be reviewed at three years' intervals.'
2. Accordingly, the petitioners negotiated with the Revenue and Forest Department, Government of Maharashtra, for setting up their timber based industry in Nagpur. The initial proposal of the petitioners was for setting up two units. The Government, however, agreed to supply forest raw material on a long term basis only to the 1st unit of the 1st petitioner. Therefore, ultimately, an agreement has been arrived at between the petitioners and the State of Maharashtra for supply of their requirements which is recorded in the letter dated 1st September, 1973 addressed by the Chief Conservator of Forests, Maharashtra State, to the petitioners. The agreement records the requirements of limber as claimed by the petitioners. It also records that out of the proposed two units, the Government was in a position to supply on a long term basis forest raw materials only in respect of the 1st unit viz., M/s. Vidarbha Veneer Industries, who arethe present petitioner No. 1, provided they agree to accept timber of several specifications as set out in that letter. The second paragraph of the letter sets out the quantities of timber which would be made available to the 1st petitioner subject to annual availability. The quantities of teak and miscellaneous timber which will be so supplied annually are set out in the said paragraph with their specifications, Paragraph 3 of the letter sets out the conditions which cover the long term lease of forest produce to the petitioners. It states that the lease would be initially for a period of 20 years. Sub-para (ii) states that royalty to be fixed for the supply of timber would be determined by the Government with reference to the prevalent market rates. Sub-clause (iii) sets out that the royally will be reviewed after every three years. Sub-clause (iv) states that the quantities of various species to be supplied are given in Annexure 1 to the letter. Accordingly, from 1st February, 1974 the petitioners have received supply of timber for the 1st petitioner's factory at Nagpur under this agreement at prices which have been fixed and reviewed at three-yearly intervals.
3. In 1982, in view of the fact that the demand for various produce like teak-wood had considerably increased and the price-trend was upwards, the Government decided in public interest to pass a Government Resolution dated 6th January, 1982 under which it was decided that there should be no reservation of specific forest produce for specific industries. It was, inter alia, decided that a committee consisting of the representatives of the Revenue and Forest Department, Industries Department and the Finance Department should make recommendations regarding fixation of initial price of forest produce or its revision. One of the decisions taken was that price of forest produce should be revised annually. However, in respect of the commitments for supply of forest produce to forest based industries already made, the prices should be revised as provided in the respective agreements unless such terms were modified.
4. Thereafter, however, the MaharastraSupply of Forest-produce by Government (Revision of Agreements) Act, 1982, has been passed by the State of Maharashtra. The Act came into operation on 23rd March, 1983. The preamble to the Act sets out that it is expedient to take power to the State Government to revise certain agreements to get fair price for forest-produce sold or supplied by the State Government to the purchasers for long term period and to prevent loss of income to the Government. Under Section 3, notwithstanding anything contained in any law and in any agreement subsisting on the dale of commencement of the Act, it shall be lawful for the State Government, from time to time, to amend any of the terms and conditions of such agreement, for one or more of the following purposes:
'(a) to provide for a revision or a periodical revision of the price or rate for sale or supply of forest-produce to the purchaser, where such agreement does not provide for any such revision or periodical revision, as the case may be, and, where such periodicalrevision is provided in the agreement, to provide for reducing or enhancing the period of revision;
Provided that, the price or rate once fixed shall not be liable to be revised by the State Government for a period of at least twelve months from the date on which such price or rate has come into force;
(b) to provide for the removal or any modification of any ceiling imposed in any such agreement on the increase, at the time of revision, in the price or rate at which the forest-produce is to be sold or supplied to the purchaser;
(c) to provide for the adjustment or change in the unit of weight or measure in which the forest-produce is to be weighed, measured or counted, for the purpose of its sale or supply to the purchaser or for the purposes of charging or recovery of the price or rate therefor, without, however, materially or substantially changing the quantity of forest-produce agreed to be sold or supplied to the purchaser.'
Section 4 provides as follows:
'4(1): The price or rate for sale or supply of the forest-produce, to be fixed at the time of any revision of the price or rate under S. 3, shall not exceed the market value of the forest-produce at the time of such revision, as may be determined by the State Government in the prescribed manner.
(2) Where the price or rate is fixed, at the time of revision, for a period exceeding twelve months at a time, the State Government may provide for an annual increase in the price or rate towards the anticipated escalation in the market value of the forest-produce during the period the revised price or rate is to remain in force.'
Under Section 7, a power is given to the State Government to make rules, inter alia, for the purpose of giving notice and hearing to the concerned party before making amendments to the agreement and for setting out the principles on which and the authority by which the market value should be determined for the purposes of Section 4.
5. Accordingly, the State Government has published Rules known as the Maharasthra Supply of Forest-Produce by Government (Revision of Agreements) Rules. 1983. Rule 4 provides in detail for the manner of determination of market value under S. 4. The criteria basically remain the same as under the Government Resolution of 25th September, 1969 but they are more specific. For instance, the market value is to be determined after taking into consideration the sale prices obtained in the open and negotiated sales of such forest-produce within a period of one year as set out in the Rule. It also provides for taking into account the general trend in the price of the forest-produce since the dates of sales under clause (a) and also taking into account certain other relevant factors.
6. In view of these provisions, the respondents gave a notice dated 22nd May, 1984 to the petitioners under R. 3 of the said Rules, why condition (iii) of paragraph 3 of the letter dated 1st September, 1973 should not be altered so as to reduce the periodicity of revision of rates from 3 year to 1 years. By theletter dated 23rd June, 1984 the petitioners replied to this show cause notice. Thereafter they filed the present petition challenging the show cause notice for amending the period of revision of price from 3 years to I year.
7. The claim of the petitioners is based on promissory estoppel. According to them, they have set up their factory on the basis of promises in the Government Resolution dated 25th September, 1969. According to the petitioners, one of the promises so made was that the price would be revised once in three years. Since the petitioners have acted on the basis of this promise and have set up their factory at Nagpur, the Government cannot now go back and revise price every year. The petitioners rely on the well-known decision of the Supreme Court in the case of M/s.Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh reported in : [1979]118ITR326(SC) , where the Supreme Court has set but the principle of promissory estoppel. The petitioners contend that by the Resolution of 25th September, 1969, the respondents have made a clear and unequivocal promise to revise the rates every three years knowing that it would be acted upon by the petitioners; and the petitioners have, in fact, acted upon the same by setting up their factory at Nagpur; and hence the respondents cannot be allowed to back out of that promise. The petitioners also rely upon a decision of the Full Bench of this Court in the case of Tapti Oil Industries v.Bom 161.
8. Before we examine the law on promissory estoppel, it is first necessary to examine what exactly was the promise which was held out to the petitioners by the respondents. A perusal of the Resolution of 25th September, 1969 shows that it was essentially a promise to assure to the petitioners a long term supply of timber required for their factory if the factory was set up in a forest region. The said Resolution as well as the letter of 1st September, 1973 provide for such a long term supply for a period of 20 years of various qualities of timber as set out in that letter. There is no change in this basic promise which was made. Secondly, neither the Resolution nor theletter of 1st September, 1973 promises any concessional price for the supply of timber. On the contrary, both the Resolution as well as the letter of 1st September, 1973 make it clear that the timber required by the petitioners would be supplied to them at the prevailing market rates. There was, therefore, no promise as to special or concessional price. Since the lease was for a period of 20 years, the letter of 1st September, 1973 provided for a review of this price every 3 years. This is in accordance with the Government Resolution of 25th September, 1969. The said Resolution also provides for revision of price every 3 years. The petitioners have construed this power of revision as an assurance of price stability for a period of 3 years. We, however, do not find any such assurance of price stability in the Resolution or the letter. The provision for revision of prices every three years is an enabling provision permitting the government to revise prices every three years since the agreement is for long-term supply of timber for 20 years. Looked at a little differently, there was no promise to the petitioners that the prevailing market price which was to be fixed over a period of 3 years, would not take into account the market trend of such price or its likely escalation over the 3 years' period. The Resolution of 25th September, 1969 clearly sets out the factors which have to be taken into account by the Government for fixing the market rate. The Government will certainly be entitled to take into account the fact that the price was being fixed for a period of 3 years while determining the same. This factor has been clearly brought out now in the Maharashtra Supply of Forest-produce by Government (Revision of Agreements) Act, 1982. Section 4(2) clearly provides that where the price or rate is fixed at the time of revision for a period exceeding twelve months at a time, the State Government may provide for an annual increase in the price or rate towards the anticipated escalation in the market value of the forest-produce during the period the revised price or rate is to remain in force. Therefore, merely because the original] agreement provided for a review of price every 3 years, there was no reason for the petitioners to expect that the price would be fixed only with reference to the market trendpreventing in the first year and they would have the benefit of that price for the next 3 years. There is no such promise either in the Resolution of 25th September, 1969 or in the letter of 1st September, 1973. The reduction of this period of price revision to one year, therefore, does not amount to breach of any material promise held out to the petitioners under the Resolution of 25th September, 1969; nor does it cause any substantial prejudice.
9. The Act also provides for a notice being given to the petitioners and they are being heard before any change is made in the agreement for reducing the period of revision. The principles of natural justice are also not violated.
10. It is also pointed out by the respondents that the principle of promissory estoppel is not absolute. It may be required to give way to public interest. In other words, the Court would have to weigh the public interest served by holding the Government to its promise as against the public interst which may be served if the Government is required to go back on this promise in such circumstances where public interest so requires. (See in this connection M/s. Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh reported in : [1979]118ITR326(SC) . The respondents submit that public interest requires that in respect of forest-produce, the State Government should get from the purchasers who have entered into agreements for the purchase for such produce over long term periods, a fair price for the produce; so that no loss is caused to the public exchequer. Merely reducing the period of revision of price does not cause any substantial prejudice to the petitioners when the basic factor for determining the price remains the same namely the prevailing market price. This, therefore, is a case where assuming that there is any promise, public interest requires the Government to modify that promise.
11. Lastly, it is also urged by the respondents that there can be no promissory estoppel against any legislation. We find considerable force in this argument also. In the present case, a law has been enacted underwhich the State has been given a power, inter| alia, to amend the terms and conditions of the agreements as set out in that Act for this purpose of changing the period of revision of price provided in such agreements with a proviso that the price so fixed should not be revised for a period of at least 12 months. In view of this legislative enactment, the petitioners cannot claim promissory estoppel against the Act. It is true that the Act does not, in terms, amend any particular agreement. It merely enables the State Government to amend such an agreement within the limited parameters set out in the Act. But the exercise of this power within the parameters laid down by this legislation cannot be considered as in breach of any promise held out when the law authorises the State to amend the agreement and the specific promise in question. Such a promise, if any, is, therefore, impliedly withdrawn by legislation. In V. S. Rice and Oil Mill v. State of Andhra Pradesh reported in : [1964]7SCR456 , the Supreme Court has observed that the terms of a contract can be altered if legislation confers power on the State to modify and vary contractual terms in respect of supply and distribution of essential articles. The doctrine of promissory estoppel would not apply to such a situation.
12. In this petition, the petitioners have also raised a challenge to the constitutional validity of the said Act. This challenge has not been pressed. They have also prayed that the respondents should be prohibited from withdrawing 50% of the assured supply to them to determine the market price of the forest-produce. This issue has also not been pressed by the petitioners. Hence, we have not examined these questions. It is only relevant to note that despite the agreement which remained in force till 1st September, 1993, from the year 1987 onwards the respondents have not offered and the petitioners have not purchased timber from the respondents but have purchased the same from the open market. Hence, the issues involved in this petition cover only the short period from 1983-84 to 1986-87 and the right of the respondents to revise prices every year during this period.
13. For the reasons set out above, the petition fails and the same is dismissed. Rule is discharged. Looking to the circumstances, there will be no order as to costs.
14. On the application of the petitioners, interim order will continue to remain in force for a period of four weeks from today.
Petition dismissed.