Isabella Mariam

The High Court of Madras Single Bench of Justice D. Bharatha Chakravarthy held that the rejection of subsidy claims under the Orthodox Tea Production and Tea Bush Replanting Schemes by the Tea Board of India lacked any rational or transparent criteria and was thus unconstitutional. The Court quashed the rejection orders issued to multiple petitioners and directed the authorities to disburse the claimed subsidies within three months. It found that arbitrary inspection schedules and non-compliance with stated criteria led to a discriminatory treatment of similarly situated claimants.

In a consolidated decision covering twenty-eight writ petitions filed by various tea growers and manufacturers, the Court ruled that the Tea Board acted contrary to the scheme's guidelines and violated Article 14 of the Constitution. The Court dismissed the Tea Board's contention of non-availability of funds as a legally acceptable defense, especially after having distributed substantial subsidies to selected applicants under the same scheme.

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The directive mandates payment of the full claimed subsidies to all petitioners, amounting to Rs.19,51,94,086/-, irrespective of prior rejection orders. The judgment reflects a strong judicial disapproval of arbitrary state action in administering financial assistance programs.

The petitioners, tea growers and manufacturers, challenged the rejection of subsidy claims issued by the Tea Board of India under the Orthodox Tea Production and Tea Bush Replanting Schemes for the years 2018 to 2020. These subsidies were part of the Tea Development and Promotion Scheme implemented under the 15th Finance Commission for the Medium-Term Framework period 2017-2020, later extended till March 2021.

The subsidy claims were rejected by individual orders citing lack of budgetary allocations and stating that submission of applications does not guarantee financial assistance unless fully compliant with guidelines and subject to fund availability. The Tea Board’s rejection was challenged under Article 226 of the Constitution seeking a writ of certiorarified mandamus to quash the rejection and to direct payment of due subsidies.

The Tea Development and Promotion Scheme was framed with seven components, including Plantation Development and Orthodox Tea Production. The scheme required the applicants to follow specific tea production and replanting methods to improve quality. Under the Orthodox Tea Production Scheme, tea growers were to adopt the orthodox method over a six-month cycle, post which inspections would be conducted, and subsidies sanctioned based on production figures. Similarly, the Tea Bush Replanting Scheme involved inspections and a two-stage subsidy release process.

The petitioners submitted applications and undertook inspections in time. Inspection reports confirmed compliance for large parts of the subsidy claims. However, the Board did not disburse the subsidies and eventually rejected the claims. A tabular summary of each petitioner's subsidy claims and inspection status was presented before the Court. The total amount across 28 writ petitions was Rs.19,51,94,086/-.

The petitioners contended that similarly situated entities were granted subsidies without following any uniform rule or seniority, while they were arbitrarily denied the benefit despite fulfilling conditions. They alleged violations of Article 14 and 19(1)(g) of the Constitution and invoked the doctrines of Promissory Estoppel and Legitimate Expectation.

The Tea Board and Union of India, in their counter, denied any guarantee of subsidy based on application submission alone. They justified rejections based on exhaustion of the scheme's funds and compliance with Rule 26 of the General Financial Rules, 2017. They submitted that inspections and sanctions were done based on seniority and subject to fund availability.

However, they could not demonstrate any consistent policy or procedure in prioritizing applications for inspection and sanction. The Court was also informed that substantial funds were earmarked and disbursed under the scheme but without explaining how recipients were selected.

The Court stated that it was not dealing with a scenario where the scheme was not framed or withdrawn. "Admittedly, the scheme was formulated by the respondents, and the relevant portions are extracted supra. Budgetary allocations were made. The scheme was operational, and the subsidies were disbursed to similarly situated tea growers/manufacturers as those of the petitioners."

"Therefore, the only question to be determined in this case is whether any rationale or criteria were followed while disbursing the funds allocated towards the subsidy scheme."

The Court examined the process outlined in the counter-affidavit and noted: "They claimed that the funds were disbursed strictly on a seniority basis... However, the respondents did not follow any criteria during the inspection, and they now categorically state that the date of inspection is considered the seniority afterwards..."

It concluded: "This case demonstrates a complete lack of criteria and, as such, is a grave case of nepotism and arbitrariness. Therefore, the petitioners' claim should be allowed."

Addressing the defense of non-availability of funds, the Court stated: "Rule 26 establishes the responsibility of the first respondent to ensure that their expenditure does not exceed the budget allocation... This does not in any way authorize the first respondent board to spend money in violation of the law and then deny the claims of the petitioners based on the budget."

Quoting extensively from the Supreme Court's decision in Sivanandan C.T. v. High Court of Kerala, the Court observed:

"The underlying basis for the application of the doctrine of legitimate expectation has expanded and evolved to include the principles of good administration. Since citizens repose their trust in the State, the actions and policies of the State give rise to legitimate expectations..."

On the issue of budgeted resources, the Court cited the counter-affidavit: "A provision of Rs.298.76 crore was made... only Rs.127.65 crores has been paid during the financial years 2020-21 and 2021-22."

"When the learned Senior Counsel argued that the remaining funds are more than sufficient to satisfy the total claim in all 28 Writ Petitions, the learned Additional Solicitor General of India submitted that even though the remaining funds are not disbursed, they are earmarked for various sanctioned subsidies. It may be so. It is the responsibility of the first respondent..."

"Having arbitrarily distributed the same, it is now up to the respondents to pay the petitioners as is done for similarly situated claimants."

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The High Court issued the following binding directions: "The respective orders that were passed, rejecting the petitioners' applications for subsidy claims, stand quashed."

The Court further directed: "The respondents are directed to pay the subsidy amounts for Orthodox Tea Plucking as well as Replanting, as claimed by the petitioners, within a period of three months from the date of receipt of a web copy of this order."

Additionally: "There shall be no order as to costs. Consequently, the connected miscellaneous petitions are closed."

Advocates Representing the Parties:
For the Petitioners: Mr. Srinath Sridevan, Senior Counsel for Mr. Roshan Balasubramanian

For the Respondents: Mr. AR.L. Sundaresan, Additional Solicitor General of India assisted by Mr. Prasad Vijayakumar, Senior Panel Counsel

Case Title: Stanes Amalgamated Estates Ltd. v. Tea Board of India & Ors. & Connected Matters

Neutral Citation: 2025: MHC: 1229

Case Number: W.P.No.12963 of 2024 etc.

Bench: Justice D. Bharatha Chakravarthy

[Read/Download order]