The Fertilizer Association Of INDIA & Ors vs. Union Of INDIA & Anr

Facts

The petitioners, The Fertilizer Association of India & Ors., filed a writ petition seeking directions for timely payment of subsidy on Urea and Phosphatic & Potassic (P&K) fertilizers, including Single Super Phosphate (SSP). They argued that the government fixes the Maximum Retail Price (MRP) for Urea below production cost, and the subsidy is essentially a reimbursement of costs plus a reasonable return. Clause 7(iv) of the New Pricing Scheme-III (NPS-III) stipulated a 45-day payment period for Urea subsidy. For P&K fertilizers, a notification dated 05.08.2002 mandated processing claims received by the 10th of the month within that same month. The petitioners contended that the respondents consistently delayed these payments beyond the stipulated periods without paying interest, causing financial strain. They sought interest on these delayed subsidy payments.

Held

The Court held that the petitioners' claim for interest on delayed subsidy payments is a disputed question of fact. It noted that while Clause 7(iv) of NPS-III for Urea subsidy mentions a 45-day payment limit, it does not stipulate any consequences, such as interest, for delays, rendering the provision directory. The Court also observed that the petitioners are required to declare the interest component in their cost of manufacturing/import on a self-declaration basis, and whether this claim is already inbuilt in their submissions is a factual dispute. Furthermore, the reasons for delay in subsidy payments can vary, with some potentially justified and others not, making a uniform policy guideline by the Court under Article 226 inappropriate. The Court cited precedents like Devyani Phosphate (P) Ltd. v. Union of India, emphasizing that economic policies are within the domain of the executive and can only be set aside on grounds of malafides, extreme arbitrariness, or unconstitutionality. Therefore, the Court found no merit in the petition, as these matters are better suited for resolution in a civil suit.

Key Issues

1. Whether the petitioners are entitled to interest on the delayed payment of subsidy for Urea fertilizer, considering Clause 7(iv) of NPS-III mandates payment within 45 days. 2. Whether the petitioners are entitled to interest on the delayed payment of subsidy for P&K fertilizers, considering the processing timelines stipulated in the notification dated 05.08.2002. Petitioner's Arguments: The petitioners argued that the subsidy is a reimbursement of costs and a reasonable return, not a mere subsidy, and that the stipulated payment timelines create a legitimate expectation. They contended that the respondents' failure to adhere to these timelines without paying interest is unjust. They cited Duncan Industries Ltd. & Anr. v. Union of India and State of Bihar & Ors. v. Kalyanpur Cement Ltd. to support their claim for interest and adherence to time limits. They also argued that the policy, being an administrative order, should not prohibit interest payment in the absence of a specific provision. Respondents' Arguments: The respondents argued that the subsidy policies are economic policies framed by the executive, requiring a 'play in the joints,' and should not be interfered with unless arbitrary or unconstitutional. They contended that the claim for interest is a disputed question of fact, as it might be implicitly included in the working capital cost claimed by the petitioners. They also pointed out that Clause 7(iv) of NPS-III, while setting a time limit, does not prescribe any consequences like interest payment for delays, making it directory.