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State cannot back-out of their commitment promise of subsidy for lack of funds

In Renu Jangu Vs. State Of Rajasthan, the petitioners by way of this writ petition claimed subsidy as declared by the State Government vide their circular dated 03.07.2012 through Agricultural department under a scheme to the farmers who have established food processing units on their own agricultural lands.

The Doctrine of Promissory Estoppel is enshrined in Section 115 of the Indian Evidence Act which states - When one person has, by his declaration, act or omission, intentionally caused or permitted another person to believe a thing to be true and to act upon such belief, neither he nor his representative shall be allowed, in any suit or proceeding between himself and such person or his representative, to deny the truth of that thing. Illustration A intentionally and falsely leads B to believe that certain land belongs to A, and thereby induces B to buy and pay for it. The land afterwards becomes the property of A, and A seeks to set aside the sale on the ground that, at the time of the sale, he had no title. He must not be allowed to prove his want of title.

The Delhi High Court while referring to the decision of the Supreme Court in State of Rajasthan & Anr. Versus M/s. Mahaveer Oil Industries, held that while the State from withdrawing the benefit prospectively even during the period of the scheme, if public interest so requires. Even in a case where a party has acted on the promise, if there is any supervening public interest which requires that the benefit be withdrawn or the scheme be modified, that supervening public interest would prevail over any promissory estoppel. However the court observed that in the present case the entrepreneur having set up the food processing unit on the basis of promise, the respondents cannot be allowed to rescind from their promise so as to deny her claim only because the State has not granted the budget for the subsequent year.

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