Madras High Court
M/S State Bank Of India vs H.Champalal Jain on 18 March, 2010
Author: R.Banumathi
Bench: R.Banumathi, M.Venugopal
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Date : 18-03-2010
Coram
THE HONOURABLE Mrs. JUSTICE R.BANUMATHI
AND
THE HONOURABLE Mr. JUSTICE M.VENUGOPAL
W.A.Nos.511 and 857 of 2009
and
M.P.Nos.1 and 1 of 2009
M/s State Bank of India
Overseas Branch
Rajaji Salai
Chennai-600 001 ..Appellant in
W.A.No.511/2009
1. Union of India
rep. by its Secretary
Department of Commerce
New Delhi.
2. Deputy Director General of Foreign Trade
for Joint Director of Foreign Trade
Peters Road, Chennai-600 014 .. Appellants in W.A.No.857/2009
vs.
1. H.Champalal Jain
2. The Union of India
rep by its Secretary
Department of Commerce
New Delhi
3. The Deputy Director General
of Foreign Trade for Joint
Director General of Foreign
Trade, Peters Road, Chennai-14 .. Respondents
in W.A.No.511/2009
1.H.Champalal Jain
2.M/s State Bank of India
Overseas Branch
Rajaji Salai
Chennai-600 001 .. Respondents
in
W.A.No.857/2009
These writ appeals are filed under Clause 15 of the Letters Patent against the order dated 23.3.2009 passed by the learned Single Judge of this Court in W.P.No.23946 of 2006 on the file of this Court.
For Appellant : Mr.K.Sankaran
in W.A.No.511/2009
For Appellants : Mr.K.Ravichandra Baabu,
in W.A.No.857/2009 Senior Central Government Standing Counsel
For first respondent : Mr.Habibulla Basha
(in both appeals) Senior Counsel
for Mr. E.S.Govindan
For Respondents 2 and 3
in W.A.No.511/2009 : Mr.K.Ravichandra Babu,
Senior Central Government Standing Counsel
For second respondent : Mr.K.Sankaran
in W.A.No.857/2009
C O M M O N J U D G M E N T
M.VENUGOPAL,J The respondents 1 to 3 have filed these two writ appeals as against the order dated 23.3.2009 passed by the learned Single Judge of this Court in W.P.No.23946 of 2006 in allowing the writ petition without costs and further directing the third respondent to pay within eight weeks , a sum of Rs.8,83,400/- together with interest at the rate of 6% per annum from the date of submission of the licence till the date of payment.
2. The 1st respondent/petitioner has filed a writ petition in W.P. No.23946 of 2006 praying for issuance of a writ of certiorarified mandamus, in calling for the records relating to file No.1(2) /ECA/AM 07/Che/35 dated 23.6.2006 of the second respondent and to quash the same and direct the third respondent to pay to the petitioner the amount of Rs.8,83,400/- being the premium for the value of the scrips surrendered to the third respondent together with interest at the rate of 18% from the date of submission of the licences to the third respondent.
3. The learned Single Judge, while passing orders in W.P.No.23946 of 2006 dated 23.3.2009 has inter alia observed that 'in the present case, the rights of the petitioner have been secured by the earlier orders of this Court to the effect that the Exim Scrips sold by them were genuine. It gives an automatic right for the petitioner to claim the premium of 20% on the Exim Scrips sold by the third respondent and hence it is bound to honour the promise held out by the earlier circular issued. The contention that the respondents are estopped from denying the right of the petitioner on the principle of promissory estoppel is well founded and resultantly allowed the writ petition without costs.
4. The learned counsel for the appellant/third respondent urges before this Court that the order of the learned Single Judge in directing the appellant/third respondent to pay a sum of Rs.8,83,400/- along with interest at the rate of 6% p.a. within a period of eight weeks etc is clearly unsustainable in the eye of law because of the fact that it is the duty of the respondents 2 and 3/respondents 1 and 2 to effect payment and more over, the learned Single Judge has not directed the 2 and 3 respondents/1 and 2 respondents to provide a sum of Rs.8,83,400/- with interest at 6% per annum as referred to supra.
5. Further, the respondents 2 and 3/respondents 1 and 2 are to provide funds to the extent of Rs.8,83,400/- together with interest at the rate of 6% per annum from the date of submission of the licence till date of payment and the appellant/third respondent Bank is a designated branch to receive the licence on behalf of respondents 2 and 3/respondents 1 and 2 and this aspect of the matter has not been noticed by the learned Single Judge, while allowing the writ petition.
6.Expatiating his submissions, the learned counsel for the Appellant/3rd respondent Bank submits that when series of licences were submitted by the second respondent/first respondent then all such transactions will have to be grouped as a single transaction, and cross claims arising between the parties can be adjusted while effecting payment but the learned Single Judge has treated the individual transaction had encashed Exim Scrips to the tune of Rs.14,11,200/- which were obtained by submitting bogus and forged documents by the first respondent's/petitioner's vendor M/s Ayisha Exports Private Ltd., and indeed, the first respondent's/petitioner's vendor M/s Ayisha exports Private Ltd., by Judgment dated 6.9.2001 in E.O.CC.100/96 on the file of Chief Metropolitan Magistrate for Economic Offences, Madras has not been taken note of by the learned Single Judge.
7. Added further, the learned Single Judge ought to have protected the public funds to the extent of Rs.14,11,200/- with interest by directing the set of Rs.8,83,400/- payable to the first respondent/petitioner and Equitable principle while directing the bank to make payment of Rs.8,83,400/- have not been pressed into service by the learned Single Judge and the extension of Equitable estoppel plea against the second respondent/Union of India by the learned Single Judge in regard to encashment of Exim Scrips by the first respondent/Bank who obtained with the forged documents by his vendor is not legally correct and therefore prays for allowing W.A.No.511 of 2009 to meet the ends of justice.
8. In regard to W.A.No.857 of 2009, the learned Senior Central Government Standing Counsel for the appellants/respondents 1 and 2 submits that the learned Single Judge has committed an error in allowing the writ petition, while directing payment to the petitioner with interest for the Exim Scrips and the same is against the law, facts and circumstances of the case and that the learned Single Judge was not correct in observing that the rights of the 1st respondent/petitioner have been secured by the earlier orders of this Court and it gives an automatic claim premium on the Exim Scrips sold by the second respondent/3rd respondent and as a matter of fact, the first respondent /petitioner was liable to pay to the appellants/respondents 1 and 2 more than what he was entitled to under the 20 Exim Scrips which was sought to be encashed and in this regard, the learned Single Judge has taken in correct view that the appellants/respondents 1 and 2 and the second respondent/ 3rd respondent are estopped from denying the rights of the first respondent/petitioner on the principles of promissory estoppel without considering that the such principle would not apply to the facts of the case.
9. Also, it is the contention of the learned Senior Central Government Standing Counsel for the appellants that the principle of promissory estoppel will only apply to an individual, who has come before this Court with clean hands and such a principle cannot be extended to the first respondent/petitioner when he has purchased Exim Scrips on earlier occasions and encashed the same to an extent of Rs.14,11,200/- considering the fact that those scrips found to have been obtained on submitting bogus and forgery documents by his vendor one Aiysha exports Private Ltd ,Chennai and instead while applying principle of Equity, the first respondent/petitioner ought to have been directed to pay the balance amount to the second appellant by making good the loss already sustained by the second appellant. But this has not been adjudicated by the learned Single Judge and in fact a criminal prosecution was launched by the CBI and after trial, the accused in C.C.No.100/96 were convicted by the learned Chief Metropolitan Magistrate for Economic Offences, Madras and as such the amount encashed by the first respondent/petitioner on the first set of Exim Scrips to the value of Rs.14,11,200/- should be repaid by him to the second appellant herein to make good the loss sustained and in that view of the matter, the first respondent/petitioner is not justifying in approaching this Court for seeking relief in regard to the payment on the set of Exim Scrips even though they are true and genuine.
10. Advancing his arguments, the learned Senior Central Government Standing Counsel for the Appellants contends that the Hon'ble Division Bench of this Court in W.A.Nos.294 and 297 of 1994 by its order dated 21.2.1994 has directed the first respondent/petitioner to furnish immovable property security for Rs.14,11,200/- for getting the payment of Rs.8,83,400/- and this order has been passed only to protect the interests of the revenue and that too during the pendency of the investigation of the criminal case and therefore, the learned Single Judge ought not to have directed payment of the money to the first respondent/ petitioner on the second set of Exim Scrips when the investigation has resulted in filing of a criminal case which ended in conviction of the vendor of the first respondent/petitioner and it was found that Exim Scrips were obtained by furnishing bogus documents.
11. That apart, it is the contention of the learned Senior Central Government Standing Counsel for the Appellants that the first respondent/petitioner has already obtained pecuniary gains by tendering licences which have been obtained by fraudulent means and therefore he has not approached this Court with clean hands in invoking jurisdiction of this Court under Article 226 of Constitution of India and if the money is paid to the first respondent as directed by the learned Single Judge in the writ petition, the appellants/respondents 1 and 2 will not have any hold on the first respondent/petitioner to recover the amount of Rs.14,11,200/- which is duty bound to pay inasmuch as the said money was realised by tendering licences which were obtained by fraudulent means and therefore prays for allowing the above writ appeal to prevent an aberration of justice.
12. Per contra, the learned senior counsel for the first respondent submits that it is incorrect on the part of the Appellants to contend that the First Respondent/Petitioner is not entitled to get the payment of Rs.8,83,400/- and as a matter of fact, the first respondent had purchased 20 Exim Scrips between 31.12.1991 and 22.9.1992 and the total premium sum of these scrips works out to Rs.8,83,400/- and when the same were presented for encashment to the appellant Bank, it refused to make payment as the second appellant (in W.A.No.857 of 2009) had directed the appellant Bank (W.A.No.511 of 2009) not to release the payment as the first set of of Exim scrips, which were encashed, were bogus Scrips amounting to Rs.14,11,200/- and consequently, the first respondent filed W.P.No.18382 of 1992 seeking direction to the Appellant/Bank to effect the payment of Rs.8,83,400/-.
13. Continuing further, the learned Senior counsel for the first respondent contends that the learned Single Judge allowed W.P.N0.18382 of 1992 by its order dated 22.12.1993 by observing that the Appellant/Bank cannot withhold the payment for the genuine 20 Exim Scrips which comes to Rs.8,83,400/- and the appellants viz, the Union of India and another had filed writ appeal in W.A.Nos. 294 to 297 of 1994 before this Court and Hon'ble Division Bench of this Court by its order dated 21.2.1994 has among other things observed that ' to safeguard the interest of the appellants and the amounts payable under the present Exim Scrips can very well direct to pay and consequently, directed the first respondent/writ petitioner to furnish adequate security of immovable property having clear and marketable title or bank guarantee whichever is convenient to him to the satisfaction of the second appellant (joint Chief Controller of Imports and Exports,Madras),the appellants also accepting the such security to pay the amounts and accordingly modified the order passed by the learned Single Judge of this Court in W.P.No.18382 of 1992.
14. It is an accepted fact that the first respondent/writ petitioner had not furnished any security. The second appellant (W.A.NO.857 of 2009) initiated a criminal complaint in E.O.C.C.No.100/1996 on the file of Additional Chief Metropolitan Magistrate E.O.-I, Madras-8 against M/s Aiysha exports(P)Ltd., and according to the learned Senior counsel for the first respondent, the first respondent is no way connected with the case or responsible and therefore, the first respondent/writ petitioner submitted representations dated 27.12.1997, 8.7.1998 and 17.9.1998 to the second appellant ( W.A.No.857 of 2009) and the second appellant furnished a reply dated 15.12.1998 rejecting the request for payment of Exim Scrips premium. Consequently, the first respondent/writ petitioner filed W.P.No.2194 of 1999 before this Court arraying the appellants as respondents and this Court by its order dated 24.2.22006 in paragraphs 2 and 3 has observed the following:
" Mr.V.T. Gopalan, learned Additional Solicitor General represented that there was a CBI enquiry in respect of the fraud committed in Exim Scrips and that was one of the reasons why the petitioner's request could not be complied with earlier. Now, the learned Additional Solicitor General submits that the investigation so far conducted does not reveal any involvement of the petitioner and in these circumstances, the request of the petitioner will be considered and necessary orders will be passed in accordance with law within a period of four weeks and therefore, the impugned order may be set aside and suitable directions may be issued to the second respondent to meet the ends of justice. The learned Senior counsel appearing for the petitioner also agrees for the same."
and therefore without going into the merits of the case, set aside the impugned order of the second respondent therein dated 15.12.1998 and directed him to pass fresh orders, after giving due opportunity to the first respondent/writ petitioner, within a period of four weeks from the date of receipt of a copy of the order.
15. Subsequently, the first respondent/writ petitioner addressed letters dated 13.3.2006 and 25.4.2006 to the second appellant (W.A.No.857 of 2009) viz., The Deputy Director General of Foreign Trade for Joint Director of Foreign Trade. The first respondent/writ petitioner has filed writ petition W.P.No.23946 of 2006 challenging the order of rejection passed by the second appellant(W.A.No.857 of 2009) on the ground that the second appellant was estopped from denying his rights and that the amount could not be withheld and as such prayed for a direction , directing the second appellant to pay the amount of Rs.8,83,400/- being the premium payable for the value of the Scrips surrendered to the third respondent together with interest at the rate of 18% p.a. etc., and also for quashing the impugned order.
16. In the said W.P.No.23946 of 2006 filed by the first respondent/writ petitioner, the appellants have filed counter affidavit taking a plea that the second appellant (W.A.No.8578 of 2009) had directed the Bank not to honour the said Scrips and pay the amounts thereto, since the Exim Scrips were found to be bogus for which the action was taken against M/s Aiysha exports Private Limited from whom the purchase of Scrips was made by the first respondent.
17. It is to be borne in mind that the first respondent/writ petitioner had not furnished security as per directions issued by the Division Bench of this Court in W.A.Nos.294 to 297 of 1994 dated 21.2.1994. Significantly, the second appellant (W.A.No.857 of 2009) in its counter in W.P.No.23946 of 2006 had inter alia stated that 'there was no involvement of the first respondent/writ petitioner in the crime committed by M/s Aiysha exports Private Limited and however, this does not mean that he is entitled to retain the amount released on the Exim Scrips obtained by submitting bogus and forged documents etc'
18. Also, the second appellant( W.A.No.857 of 2009) had taken a specific stand that even though 20 Exim Scrips were genuine and valid, it was not in a position to permit the first respondent/writ petitioner to encash the said Scrips amounting to Rs.8,83,400/- and as a matter of fact, M/s Aiysha exports Private Limited and its Directors were prosecuted after investigation conducted by the CBI and in criminal case in E.O.C.C.No.100 of 1996 on the file of the Additional Chief Metropolitan Magistrate, E.O, Chennai for the offence punishable under Sections 120 B, r/w 420,467,468 and 471 r/w 468 IPC and Section 5 of Import Act and Clause 10(d) of Import(Control) Order 1955 and A1 firm and A2 representing A1 company was convicted and sentenced besides a fine of Rs.2,25,000/- was imposed on them and in the said criminal case, the first respondent/writ petitioner was a witness as P.W.6 in the prosecution and therefore, the Exim Scrips amounting to Rs.14,11,200/- was purchased by the first respondent/writ petitioner from the said M/s Aiysha exports Private Limited was secured by submitting bogus and forged document and as such the first respondent/writ petitioner was bound to repay the said amount to it.
19. However, the learned Single Judge by his order dated 23.3.2009,while passing orders in W.P.No.23946 of 2006, had observed that the rights of the first respondent/writ petitioner were secured by the earlier orders of this Court to the effect that the Exim Scrips sold by them were genuine and it gave an automatic right for him to claim the premium of 20% of the Exim Scrips sold by the appellant and it was bound to honour the premium as per its earlier circular issued and therefore, the appellants are estopped from denying the rights of the first respondent/writ petitioner on the principle of promissory estoppel and resultantly allowed the writ petition by directing the appellant(W.A.No.511/2009)/third respondent to pay within eight weeks a sum of Rs.8,83,400/- together with interest at the rate of 6% p.a. etc.,
20. The learned counsel for the Appellant Bank submits that the Ministry of Commerce formulated a policy known as "consolidately Scrip" in February 1991 under which an Exporter is entitled to receive Exim Scrips Replenishment licence on proof of Export of goods and the Exim Scrips are issued by the Licensing authority and after verifying the particulars of export and that the claimant for Exim Scrips must produce Bank realisation certificate, relevant shipping document evidencing export of goods and the bank has to act according to the direction of the second appellant and as per the copy of the public notice No.185 ITC (PN) 90-93 dated 31.7.1991 in regard to the issue of Exim Scrips on the exports made from 4.7.1991 in Sl.No.3(a)(i) under the head physical Exports of Products falling under Appendix 17 Part II, the exports falling under Appendix 17 Part II is to file the claim for "Exim Scrip" consolidatedly of all such exports for which the foreign exchange has been realised in a particular calendar month (April,May,June, July and so on) etc and such application shall be disposed of on fast track basis and the applicant at the time of filing the application shall be given a token by the Licensing Office and the Exim Scrip shall be issued based on the claim filed by the applicant and handed over in exchange of the token to the applicant, within the time frame mentioned thereon and thereafter the application shall be subject to a post-audit and if any deficiency is found, remedial action shall be initiated for rectification, which the applicant shall have to complete within 30 days from the date of an intimation sent by the Licensing Office, failing which the entitlement already granted shall be adjusted from the pending claim of the applicant and if at the time of post-audit, it is prima facie established that the entitlement has been granted more than the due amount, the same shall be adjusted straightaway from the pending claims of the applicant under an intimation to the party etc and in the instant case, the first respondent/petitioner was successfully in getting premium from the Appellant/Bank to an extent of Rs.14,00,000/- and therefore, he had obtained a pecuniary gain since he purchased the bogus Scrips from M/s Aiysha exports Private Limited and even though the premium for 20 Exim Scrips comes to Rs.8,83,400/-, the Bank has been directed not to make premium payment against the cancelled Scrips and to recover any amount already paid on the cancelled Scrips and if necessary not to make payment on any other Scrips and therefore, the bank had withheld the payment to the first respondent and the said action of the bank is perfectly in order as per the copy of the public notice dated 31.7.1991 and resultantly the Bank is entitled to act accordingly after intimating the first respondent.
21. Also, the learned counsel for the Appellant Bank cites the decision LLOYDS BANK PLC. V. INDEPENDENT INSURANCE CO. LTD., (1999) 2 W.L.R. 734 at page 735, whereby and whereunder it is inter alia observed as follows:-
(2) That although money paid under a mistake of fact was prima facie recoverable, it was well established as a matter of principle that such repayment would not be ordered where the payment was made for good consideration, in that it discharged a debt owed to the payee by the payer or by a third party by whom he was authorised to discharge the debt; that since the payment of $1,62,387.90 made to the defendant by the plaintiff bank on W.Ltd.'s behalf was made for good consideration in that it discharged the debt owed to the defendant by W.Ltd., by whom the bank was authorised to discharge the debt and was accepted as such by the defendant, the defendant could not be said to have been unjustly enriched at the bank's expense; and that, accordingly, it was not appropriate to order restitution.
22. However, the learned Senior counsel for the first respondent/writ petitioner submits that the instruction issued by the Ministry of Commerce, Office of CCI & E , New Delhi dated 31.7.1991 in Sl.No.3(a)(iii) will not apply to the first respondent's case on hand because of the fact that there is no deficiency found and therefore as a logical corollary, there is no scope for remedial action for any rectification.
23. Admittedly, the Appellant/Bank has been authorised by the Reserve Bank of India to buy the Exim Scrips which term would also cover post paid REP Licences, issued upto 29.2.1992 after realisation of export proceeds, as per the guidelines contained in the RBI D.O. letter dated 17.3.1992 as seen from the copy of RBI Circular No.12/92 dated 27.3.1992 issued by the Ministry of Commerce Office of CCI & E, New Delhi. As per the Circular of the Licensing Authorities are advised to render all necessary assistance to the State Bank of India on priority basis .
24. It transpires from the copy of D.O.letter EC.CO.Lerms 10/4-92 dated 17.3.1992 received from Reserve Bank of India addressed to Oshri D.R.Mehta, Chief Controller of Imports and Exports along with a copy of press release dated 16.3.1992 of the RBI wherein it is mentioned that instructions have been requested to be issued to all the Regional Officers of Joint Chief Controller of Imports and Exports to render necessary assistance to the designated branch of State Bank of India in carrying out their task of purchase of Scrips smoothly and in particular, they may be advised to promptly(say, within 48 hours) attend to task of authentication of Scrips of the face value above Rs.5 Lakhs received from the designated branches of State Bank of India and these Scrips would again be returned the concerned office of Joint Chief Controller of Imports and Exports after payment etc.,
25. In regard to Exim Scrips, the Reserve Bank of India Circular No.17/92 in regard to the purchase of Exim Scrips , it is among other things observed that the bonafide holder of Exim Scrips should submit an application to the designated branch of the State Bank of India in the form prescribed by the State Bank of India and the Scrips upto the face value of Rs.5 lakhs will be straightaway purchased by the designated branch of State Bank of India and the premium amount would be paid to the holder of the Scrips and where the face value of the Scrip exceeds Rs. 5 lakhs, the concerned branch would send it to the office of the Joint Chief Controller of Imports and Exports, which had issued the Scrip, for authentication and on receipt of the Scrip duly authenticated would pay the amount of premium.
26. In another Reserve Bank of India Circular No.17/92 dated 5.6.1992 relating to the purchase of Exim Scrip/REP Licences etc by State Bank of India, it is inter alia mentioned that 'in respect of other licences also whose face value is more than Rs. 5 lakhs ,it is reiterated that the same should be verified and sent back to State Bank of India within seven days etc.
27. Even though, the Appellant/Bank has pleaded that it is entitled to adjust the sum of Rs.8,83,400/- together with interest at the rate of 6% per annum since the first respondent/Bank had earlier encashed Exim Scrips to the extent of Rs.14,11,200/- which was obtained by submitting bogus and forged documents by the first respondent's vendor Aiysha Exports Private Limited, we are of the considered view that the reliance placed on the side of the Appellant/Bank to the copy of the public notice dated 31.7.1991 which refers to Hand Book of Procedures for the period from April 90, -March 93 in respect of 'Exim Scrips claim', the same is of little assistance to the Appellant/Bank because of the fact that in the present case is not one dealing with the case of Post Audit and thereby any deficiency is found out which any remedial action is required to be taken and therefore, the aspect of 'adjustment' straightaway does not arise.
28. The learned Senior Central Government Standing Counsel appearing for Union of India and another contends that when an individual has played a fraud and obtained a pecuniary gain then he cannot plead' the Principle of Estoppel ' and to lend support to his contention, he relies on the decision of the Hon'ble Supreme Court in State of Tamil Nadu-v-A.Gurusamy 1997(II) CTC 114 at page 115 wherein it is observed that 'Principle of Estoppel' arises only when lawful promise is made or acted upon and the Principle is inapplicable when any promise was made by the State and further the promissory estoppel cannot be claimed to protect perpetration of fraud defeating constitutional objects'.
29. He also cites the decision of Hon'ble Supreme Court Gyarsi Bai-v-Dhansukh Lal AIR 1965 Supreme Court 1055 at 1056 wherein it is held thus:
"To invoke the doctrine of estoppel embodied in S.115. Evidence Act,1872, three conditions must be satisfied"(1) representation by a person to another, (2) the other shall have acted upon the said representation and (3) such action shall have been detrimental to the interests of the person to whom the representations has been made. Where the first two conditions are satisfied but the third is not, there is no scope to invoke the doctrine of estoppel'.
30. He draws the attention of this Court to the decision of Hon'ble Supreme Court in Central Airmen Selection Board-v- Surender Kumar Das 2003 (1) Supreme Court Cases 152 at paragraph 7 wherein it held hereunder:
" The question, therefore, is whether in case of this nature the principle of promissory estoppel should be invoked. It is well known that the principle of promissory estoppel is based on equitable principles. A person who has himself misled the authority by making a fake statement, cannot invoke this principle, if his misrepresentation misled the authority into taking a decision which on discovery of the misrepresentation is sought to be cancelled. The High Court has proceeded on the basis that the petitioner had not made any misrepresentation in his application to the effect that he had passed the intermediate examination. As we have found above, this finding of the High Court is erroneous, contrary to record and therefore must be set aside. In his application , the respondent had claimed that he had passed the secondary examination as well as the higher secondary +2 examination, and it is clear from the counter-affidavit filed on behalf of the appellants that his candidature was considered on the basis that he had passed the higher secondary +2 examination, as in that case he was entitled to claim relaxation in the matter of age. However, the marksheet annexed to the application disclosed that the respondent had failed in the subject Chemistry and therefore, his claim in the application, that he had passed the higher secondary +2 examination, was factually incorrect and a clear misrepresentation. In these circumstances we are satisfied that the respondent could not be permitted to invoke the principle of promissory estoppel, and the High Court has clearly erred in law in invoking the said principle in the facts of this case. The Judgment and order of the High Court therefore cannot be sustained.'
31. That apart, the learned Senior Central Government Standing Counsel for the appellants cites the decision of the Hon'ble Supreme Court in Commissioner of Customs (preventive)- v-Aafloat Textiles India Private Limited 2009 II Supreme Court Cases 18 at page 19 wherein it is observed in paragraphs 13 to 16, 15 and 17 and 18 and 19 as follows:
"It was for the buyer to establish that he had no knowledge about the genuineness or otherwise of SIL in question. The maxim " caveat emptor" is clearly applicable to a case of this nature. Caveat emptor means "let the purchaser beware". It is one of the settled maxims, applying to a purchaser who is bound by actual as well as constructive knowledge of any defect in the thing purchased, which is obvious, or which might have been known by proper diligence. Caveat emptor does not mean either in law or in latin that the buyer must take chances. It means that the buyer must take care. Caveat emptor is the ordinary rule in contract. A vendor is under no duty to communicate the existence even of latent defects in his wares unless by act or implication he represents such defects not to exist Caveat emptor qui ignorare non debuit quod jus alienum emit is a maxim meaning,' let a purchaser beware: who ought not to be ignorant that he is purchasing the rights of another'(Paras 13 to 16) Applying the maxim, it is held that it is the bounden duty of the purchaser to make all such necessary enquiries and to ascertain all the facts relating to the property to be purchased prior to committing in any manner. Upon a sale of goods the general rule with regard to their nature or quality is caveat emptor, so that in the absence of fraud, the buyer has no remedy against the seller for any defect in the goods not covered by some condition or warranty, expressed or implied. It is beyond all doubt that, by the general rules of law there is no warranty of quality arising from the bare contract of sale of goods, and that where there has been no fraud, a buyer who has not obtained an express warranty, takes all risk of defect in the goods, unless there are circumstances beyond the mere fact of sale from which a warranty may be implied. No one ought in ignorance to buy that which is the right of another. The buyer according to the maxim has to be cautious, as the risk is his and not that of the seller.'(paras 15 and 17) Whether the buyer had made any enquiry as to the genuineness of the licence was within his special knowledge. He had to establish that he made the enquiry and took requisite precautions to find out about the genuineness of SIL which he was purchasing. If he had not done that, consequences had to follow. These aspects were not considered by CESTAT in coming to the abrupt conclusion that even if one or all the respondents had knowledge that SIL was forged or fake that was not sufficient to hold that there was no omission or commission on his part so as to render silver or gold liable for confiscation. SILs were not genuine documents and were forged. Since fraud was involved, in the eye of the law such documents had no existence. Since the documents have been established to be forged or fake, obviously fraud was involved and that was sufficient to extend the period of limitation.'(paras 18 and 19)
32.He also brings it to the notice of this Court to the decision of Hon'ble Supreme Court in Sales Tax Officer-v- Shree Durga Oil Mills 1998 (97) E.L.T.202(SC) at 206 whereby and whereunder in paragraph 19 and paragraph 22 , it is observed as follows:
"In the case of Kasinka Trading and another-v-Union of India and another, 1994 (74) E.L.T.782 (S.C.) = 1995 1 SCC 274, a notification was issued by the Customs Department under Section 25(1) of the Customs Act in public interest exempting certain goods from basic import duty and specified the date up to which it will remain in force. Prior to expiry of that date another notification was issued withdrawing the exemption and imposing customs duty on import of such goods. A challenge was made to withdrawal of the notification by some importers who claimed that they had entered into agreements on the basis of the earlier notifications. It was held by this Court that the Government had issued the first notification in public interest for a certain period. But it was felt later that in public interest, exemption should not be continued even though that period had not expired. Therefore, the Government withdrew it. It was held that when exemption was granted under statutory power, it was implicit that it could also be rescinded or modified in exercise of the same power .. . . .. .. The view taken by this Court in Kasinka's case was reiterated by a Bench of three Judges in the case of Shrijee Sales Corporation & Anr.v. Union of India-1997 (89) E.L.T. 452 (S.C)= 1997 3 SCC 398 . It was laid down in that case that the determination of applicability of promissory estoppel against the Government hinges upon balance of equity or public interest. In case there is a supervening public equity, the Government would be allowed to change its stand; it would then be able to withdraw from representation made by it which induced persons to take certain steps which may have gone adverse to the interest of such persons on account of such withdrawal. Once public interest was accepted as the superior equity which can override individual equity, the aforesaid principle should be applicable even in cases where a period had been indicated for operation of the promise. In that case, a notification was issued exempting customs duty on PVC. By a second notification the exemption was withdrawn. The Court held that the facts of the case revealed that there was a supervening public interest and the Government was competent to withdraw the first notification without giving any prior notice to the respondent.'
33. The learned senior counsel for the first respondent/petitioner contends that in W.P.No.2194 of 1999 (filed by the first respondent/petitioner), learned Single Judge in his order dated 24.2.2006 in second paragraph has observed that ' the learned Additional Solicitor General represented that there was a CBI equiry in respect of the fraud committed in Exim Scrips and that was one of the reasons why the first respondent/petitioner request could not be complied with earlier and now that he has submitted that the investigation so far conducted does not reveal any involvement of him etc., and therefore, the appellants are not exempted for their liability to carry out the said representation.
34. To lend support to the said contention, the learned counsel relies on the decision of the Hon'ble Supreme Court Union of India-v- Indo-Afghan Agencies Ltd.,(1968) 2 SCR 366 : AIR 1968 SC 718 wherein at paragraph 2 it has been observed as follows:
" But in a petition under Article 226 of the Constitution moved before the High Court of Punjab by the respondents for a writ or an order directing the Union of India, the Textile Commissioner and the Joint Chief Controller of Imports and Exports, Bombay, to issue a licence" permitting import of wool-tops, raw wool, wool waste and rags of the value of Rs.3,04,012.73 n.p", the orders of the Textile Commissioner and the Central Government were set aside. The High Court held that the export promotion scheme specifically provided for granting certificates to import materials of the "value equal to 100% of the f.o.b. Value of the goods exported", and the respondents were entitled to obtain import licences for an amount equal to 100% of the f.o.b. Value, unless it was found on enquiry duly made under clause 10 of the Scheme that the respondents had by"over-invoicing" the goods disentitled themselves to the import licences of the full value; that no such enquiry was made by the Textile Commissioner and that officer merely proceeded upon his"subjective satisfaction" that the respondents had"over-invoiced" the goods exported; and that the Union Government acted on irrelevant grounds. The Union of India, the Textile Commissioner and the Joint Chief Controller of Imports and Exports have appealed to this Court with certificate granted by the High Court."
35. In short, the learned senior counsel for the first respondent/petitioner submits that the principle laid down in the aforesaid decision therein will apply to the facts of the present case on hand and therefore, the second appellant's observation dated 23.6.2006 that the first respondent/petitioner should not claim for any relief or payment from the Department as he has failed to honour the department's directions for repayment of the premium amount already made to him against the Exim Scrips issued on the basis of forged documents and consequently, rejecting the representation of the first respondent/petitioner dated 25.4.2006 is not correct in the eye of law.
36. He also relies on the decision in Commissioner of Customs(E.P)-v- Jupiter Exports 2007(213) E.L.T.641 (Bom.) at 645 wherein at paragraph 23,it is observed thus:
" With regard to the third question of law, namely, 'whether the license holder or the transferee of the license obtained by manipulation and forging the documents for creating false records are entitled to import validly and legally and exempted from payment of duty?'. This question relates to the transferee. As such it cannot be allowed to be raised in this application, since the Commissioner has held that the transferees of the license were entitled to import and no import duty could be recovered from them. However, held that the import duty could be recovered from the respondent-petitioner. The Tribunal negatived this and correctly held that duty under Section 28 could only be recovered from ' a person chargeable to duty' and that such a person would be that the importer in the case of import and the exporter in the case of exports. The definition of the term"importer" under Section 2(26) of the Customs Act defines the term"importer" and does not cover a person who has not caused the import of the goods and who does not hold himself out to be the importer or the owner of the imported goods. As the respondents are not the importer. It cannot be made chargeable to duty as the demand for duty has to be based on law and not on equity or moral considerations. The Tribunal rightly held that it was open to the department to proceed against a person who had obtained a license by fraud or misdeclaration in accordance with law."
37.The learned senior counsel for the first respondent contends that when the first respondent/petitioner is a bonafide purchaser of first set of Exim Scrips from his vendor M/s Aiysha Exports Private Limited, Chennai, then, whether he had obtained the same by forging the documents or by creating the documents cannot be raised against him inasmuch as it is open to the appellants to proceed against his vendor's who have been found guilty and convicted by the Criminal Court in EO.C.C.No.100/96 on the file of Additional Chief Metropolitan Magistrate, E.O.I, Chennai.
38. The learned senior counsel appearing for the first respondent cites the decision of the Hon'ble Supreme Court in Southern Petrochemical Industries Co.,Ltd-v- Electricity Inspector & ETIO 2007(5) Supreme Court Cases 447 at page 499 in paragraph 133, it is held hereunder:
" Legitimate expectation is now considered to be a part of the principles of natural justice. If by reason of the existing state of affairs, a party is given to understand that the other party shall not take away the benefit without complying with the principles of natural justice, the said doctrine would be applicable. The legislature, indisputedly, has the power to legislate but where the law itself recognises existing right and did not take away the same expressly or by necessary implication, the principles of legitimate expectation of a substantive benefit may be held to be applicable"
It was contended that the first respondent/petitioner is entitled to take the benefit of the representation made by the learned Additional Solicitor General before the Court in W.P.No.2194 of 1999 in and by which, it is made clear that the CBI investigation conducted has not provided to allow any involvement of the first respondent/petitioner and therefore, the Appellant/Bank may be directed to pay a sum of Rs.8,83,400/- being the premium value of genuine Exim Scrips because of the fact that the appellants now are precluded to take a plea of doctrine of 'promissory estoppel' based on the reason, the right of the first respondent/petitioner has not been destroyed and his right to claim the amount by insisting the Appellant/Bank the said amount of Rs.8,83,400/- is nothing but a legitimate expectation of a substantive benefit which is quite applicable to him by all means.
39. At this stage, we deem it appropriate to make a significant mention that 'Estoppel is a rule whereby a party is precluded some previous act to which he was party or privy from denying a fact, whether in reality it is true or not. It is a rule of exclusion, making evidence of a relevant fact inadmissible. Estoppel prohibits disproof by the party relying upon it( the estoppel; denial) and thus dispenses with proof by the party relying upon it (the estopper asserter). No wonder 'Estoppel is based on Equity and Good conscience and the object is to prevent fraud and secure justice between parties by promotion of honesty and good faith and by preventing them from approbating and reprobating at the same time(R.S.Maddanappa-v- Chandramma AIR 1965 SC 1812) .
40. It is to be borne in mind that one of the qualifications that the estoppel must be mutual ie., it applies only between the parties and privies and only in action on the deed . It does not apply to actions on collateral matter, even between the parties, nor does it apply in general to proceedings between strangers or a party and a stranger.
41. If a person makes a representation to the other about a fact, he would not be shut out a rule estoppel, if that other person knew the true state of facts and must consequently cannot be said to have been misled by the misrepresentation as per the decision of Hon'ble Supreme Court in R.S.Maddanappa-v- Chandramma AIR 1965 SC 1812. Also, that the doctrine estoppel has no application where both parties are conversant with the true state of facts as per the decision in Kishorilal-v-Chatlibai AIR 1959 SC 504.
42. We appropriately recall the observations of the Honourable Supreme Court in K.Ramanatha Pillai-v- State AIR 1973 SC 264 to the effect that 'the Doctrine of Estopppel is not applicable against the State while acting in public or soverign capacity except where it is necessary to prevent a fraud or manifest in justice. It cannot be forgotten that the Doctrine of Promissory Estoppel is an equitable Doctrine, it must yield when equity so requires, but the Government cannot to be exempt from the liability to carry out the promise onj some indefinite and undisclosed ground of necessity or expediency, nor can the Government claim to be the sold judge of its liability and repudiate it on an exparte appraisement of the circumstance. If it can be shown by the Government that having regard to the facts as they have subsequently transpired, it would be inequitable to hold the Government to the promise made by it, the Court would not raise an equity in favour of the promise and enforce the promise against the Government.'
43. At this juncture, we pertinently point out that in the decision of the Hon'ble Supreme Court in State of Bihar-v- Kalyapur cements Ltd 2010 (28) VST I SC, it is observed as follows:
" In order to invoke the doctrine of promissory estoppel (a) a party must make an unequivocal promise or representation by word or conduct to the other party,(b) the representation must be intended to create legal relations or affect the legal relationship to arise in the future, and (c) a clear foundation has to be laid in the petition before the Court with supporting documents. It has to be shown that the party invoking the doctrine has altered its position relying on the promise. It is possible for the Government, which, it is claimed, has made such a promise, to resile from its promise when public interest would be prejudiced if the Government were required to carry out the promise. The Court will not apply the doctrine in the abstract. The Government cannot claim to be exempt from liability to carry out the promise on some indefinite and undisclosed ground of necessity or expediency. The Government is required to place before the Court the entire material on account of which it claims to be exempt from inability. Mere claim of change of policy would not be sufficient to exonerate the Government from liability. It is only when the Court is satisfied that the Court would decide to enforce the promise against the Government. However, the burden is on the Government to show that it would be inequitable to hold the Government bound by the promise. The Court would insist on a highly rigorous standard of proof in the discharge of this burden.'
44. Continuing further, in the decision Bakul Cashew Co-v- Sales Tax Officer 1986 2 SCC 365, it is held thus:
" ..... In case of this nature the evidence of representation should be clear and unambiguous. It 'must be certain to every intent' . The statements that are made by ministers at such meetings, such as,'let us see', we shall consider the question of granting of exemption sympathetically.' we shall get the matter examined.' you have a good case for exemption . 'etc even if true,cannot form the basis for a plea of estoppel.'
45. Moreover, in Sharma Transport-v Government of A.P 2002 (2) SCC 188, the Hon'ble Supreme Court has among other things observed that ' ..... There is preponderance of judicial opinion that to invoke the doctrine of promissory estoppel, clear, sound and positive foundation must be laid in the petition itself by the party invoking the doctrine and that bald expressions, without any supporting material, to the effect that the doctrine is attracted because the party invoking the doctrine has altered its position by relying on the assurance of the Government would not be sufficient to press into aid the doctrine'.
46. It is not out of place for this Court to point out that in order to attract the applicability of the Doctrine of Estoppel that the promisee, acting in reliance on the promise, should suffer any detriment. What is necessary is only that the promise should have altered his position in reliance on the promise.
47. As far as the present case is concerned, it is not in dispute that the first respondent/petitioner is the purchaser of the first set of Exim Scrips from his vendor M/s Aiysha Exports Private Limited, Chennai which was obtained by submitting bogus and forged documents for which a criminal case in EO.C.C.No.100 of 1996 was filed against the 1 and 2 accused therein, wherein a fine of Rs.2,25,000/- was imposed. In the instant case, the first respondent/petitioner had figured as P.W.16. Notwithstanding the fact that the first respondent/petitioner had been a bonafide purchaser, yet he had realised a sum of Rs.14,11,200/- and derived the benefit of pecuniary advantage. More over in respect of 20 Exim Scrips to the value of Rs.8,83,400/-, though the same are genuine, the first respondent/petitioner was not permitted to realise the same on the footing that he had to repay an amount of Rs.14,11,200/- in respect of first set of Exim Scrips.
48. In this connection, a closer perusal of the orders passed by a Division Bench of this Court in W.A.Nos.294 to 297 of 1994 shows that the first respondent/petitioner had been directed to furnish adequate security of immovable property having clear and marketable title or bank guarantee which ever is convenient to him to the satisfaction of the second appellant (Joint Chief Controller of Imports and Exports, Madras) only on accepting the security, payment of Rs.8,83,400/- would have to be made. The first respondent/petitioner had not obeyed the orders passed in W.A.Nos.294 to 297 of 1994 dated 21.2.1994.
49. As against the orders passed in W.A.Nos.294 to 297 of 1994 dated 21.2.1994 to which the first respondent/petitioner who is a party in the said proceedings, he has not taken any further proceedings in the manner known to law. In our considered view, as such the said orders have become final, conclusive and binding between the parties inter se as per Section 43 of the Indian Evidence Act
50. Though, the first respondent/petitioner earlier had filed W.P.No.2194 of 1999 against the appellants wherein the learned Additional Solicitor General had made a representation to this Court that the investigation had not revealed any involvement of the first respondent/petitioner, the said representation in our considered view by any means would not be considered to be a case of promise attracting the applicability of the promissory estoppel and such representation would not form the basis for a plea of 'estoppel'. Except the said representation made by the learned Additional Solicitor General, there was no promise made by the appellants/Governments.
51. In the instant case, the first respondent/petitioner though bonafide purchaser of the first set of Exim Scrips from his vendor M/s Aiysha Exports Private Limited, Chennai, and the scrips were encashed and a sum of Rs.14,11,200/- was already realised by him by which he received unintended pecuniary gain at the cost of Public Exchequer. Therefore, in public interest, it would be inequitable to hold the appellants to the so called representation made by the learned Additional Solicitor General that the first respondent/petitioner was not involved in the criminal case and this would not raise an equity in favour of the promisee and enforce the promise against the Government and in such a contingency, the doctrine of promissory estoppel would be displaced because of the facts and circumstances of the present case, the equity does not require that the appellants ought to be held bound by the so called representation made by the learned Additional Solicitor General before this Court in W.P.No.2194 of 1999.
52. Also, that the public interest would be very much prejudiced, if the first respondent/petitioner was allowed to go scot free without the payment of Rs.14,11,200/- along with interest and therefore, the appellants are justified in not allowing the first respondent/petitioner to realise a sum of Rs.8,83,400/- . On the other hand, he was bound to pay a sum of Rs.14,11,200/- together with interest and in any event, looking at from any angle, the Appellants in W.A.No.857 of 2009 are not to be compelled to honour the representation so made by the Learned Additional Solicitor General in W.P.No.2194 of 1999 to the effect that investigation has not revealed the involvement of the first respondent/petitioner and if the Government were to honour the same public interest would certainly suffer and therefore, the appellants in W.A.No.857 of 2009 are quite right in rejecting the representation of the first respondent/petitioner, viewed in this perspective, we are not in agreement with the observation of the learned Single Judge in W.P.No.23946 of 2006 to the effect that 'the rights of the first respondent/petitioner have been secured by earlier orders of this Court to the effect that the Exim Scrips sold by them were genuine and it gives an automatic right for the first respondent/petitioner to claim the premium of 20% on the Exim Scrips sold by the third respondent/appellant in W.A.No.511 of 2009 and therefore, the bank is bound to honour the promise held out by the earlier circular and further that the appellants are estopped from denying the rights of the first respondent/petitioner on the principle of promissory estoppel is well founded' are not correct in our considered view.
53. Accordingly, we set aside the order passed in W.P.No.23946 of 2006 dated 23.3.2009 in directing the Appellant/Bank to pay a sum of Rs.8,83,400/- together with interest at the rate of 6% p.a from the date of submission of the licence till the date of the payment and allowed the writ appeals.
54. In the result, the writ appeals are allowed. The order passed by the learned Single Judge in W.P.No.23946 of 2006 dated 23.3.2009 is hereby set aside for the reasons assigned by this Court in the writ appeals. Consequently to do equitable justice,the first respondent/petitioner is directed to pay a sum of Rs.14,11,200/ together with interest against the first set of Exim Scrips to the second appellant in W.A.No.857 of 2009 and upon such payment being made and the same being intimated by the appellants in W.A.No.857 of 2009 to the Appellant/Bank][( W.A.No.511 of 2009) who in turn is directed to make effect payment of Rs.8,83,400/-(in respect of second set of genuine Exim scrips) being the value of 20 Exim Scrips to the first respondent/petitioner within a period of three weeks from the date of receipt of a copy of this order, after receiving necessary intimation from the appropriate authority. No costs. Consequently, connected M.Ps are closed.
(R.B.I.J) (M.V.J)
18-03-2010
Index:Yes/no
Internet:Yes/no
sg
To
1. The Union of India
rep by its Secretary
Department of Commerce
New Delhi
2. The Deputy Director General
of Foreign Trade for Joint
Director General of Foreign
Trade, Peters Road, Chennai-14
3. M/s State Bank of India
Overseas Branch
Rajaji Salai
Chennai-600 001
R.BANUMATHI,J
AND
M.VENUGOPAL,J.
Sg/vri
Commmon Judgment
IN
W.A.Nos.511 and 857 of 2009
18-03-2010