Supreme Court frowns upon bureaucratic lethargy, says it discourages entrepreneurship
A Bench of Justice JB Pardiwala and Justice R Mahadevan says the State must abandon colonial conception of itself as sovereign dispensing benefits at discretion
Describing bureaucratic lethargy as a factor discouraging entrepreneurship, the Supreme Court has said that the State must abandon the colonial conception of itself as sovereign dispensing benefits at its “absolute discretion”.
A Bench of Justice JB Pardiwala and Justice R Mahadevan said policies formulated and representations made by the State generate legitimate expectations that it will act in accordance with what it proclaims in the public domain.
The top court allowed an appeal filed by IFGL Refractories Ltd challenging a December 2018 judgment of the Orissa High Court denying disbursement of sanctioned capital-investment subsidy and DG-set subsidy to the company by the Orissa State Financial Corporation under the industrial policy of 1989.
Holding that the company was entitled to disbursement of the sanctioned subsidies, it directed the authorities concerned to disburse over Rs 11.14 lakh along with interest at the rate of 9 per cent per annum from the date of the sanction of the respective subsidies towards capital investment and a DG set, in favour of the appellant company in three months.
“This litigation is a fine specimen of bureaucratic lethargy. It is this bureaucratic lethargy which gave rise to this long drawn litigation. This Court in many of its decisions has reminded various State Governments that if the object of formulating the industrial policy is to encourage investment, employment and growth, the bureaucratic lethargy of the State apparatus is clearly a factor which will discourage entrepreneurship,” it said.
“The State must abandon the colonial conception of itself as sovereign dispensing benefits at its absolute discretion. Policies formulated and representations made by the State generate legitimate expectations that it will act in accordance with what it proclaims in the public domain.
“In the exercise of all its functions, the State is bound to act fairly and transparently, consistent with the constitutional guarantee against arbitrariness enshrined in Article 14 of the Constitution of India. Any curtailment or deprivation of the entitlements of private citizens or private business must be proportional to a requirement grounded in public interest. This understanding of the limits of State power has been recognised and reiterated by this Court in a consistent line of decisions,” the top court said in its January 6 verdict.
Noting that representations made by public authorities must be subjected to the most exacting standards, for citizens order their affairs and regulate their conduct on the basis of the trust they repose in the State, it said, “A failure on the part of public authorities to honour their representations, absent adequate and cogent justification, undermines the confidence of citizens in the State and erodes the credibility of governmental action.”
It sought to emphasise that creation of a business-friendly environment conducive to investment and trade was intrinsically linked to the degree of faith that may be placed in a government to fulfil the expectations it engendered.
