Allahabad High Court
M/S Sarvottam Rolling Mills (P) Ltd And ... vs State Of U.P. And 2 Others on 19 February, 2020
Bench: Ramesh Sinha, Ajit Kumar
HIGH COURT OF JUDICATURE AT ALLAHABAD Court No. - 1 Case :- WRIT - C No. - 38942 of 2018 Petitioner :- M/S Sarvottam Rolling Mills (P) Ltd And Another Respondent :- State Of U.P. And 2 Others Counsel for Petitioner :- Mayank Kumar Agrawal Counsel for Respondent :- C.S.C.,Awadhesh Kumar Saxena With Case :- WRIT - C No. - 26634 of 2019 Petitioner :- M/S Ved Cellulose Limited And Another Respondent :- State Of U.P. And 3 Others Counsel for Petitioner :- Mayank Kumar Agrawal Counsel for Respondent :- C.S.C.,Chandan Agarwal,Rajesh Kumar Sachan,Saurabh Srivastava With Case :- WRIT - C No. - 38961 of 2019 Petitioner :- M/S Benara Udyog Limited Unit-Ii Respondent :- State Of U.P. And 2 Others Counsel Petitioner:Anshul Kumar Singhal,Vinod Kumar Singh Counsel for Respondent :- C.S.C.,Baleshwar Chaturvedi With Case :- WRIT - C No. - 26503 of 2019 Petitioner :- M/S Swarup Rolling Mills Limited And Another Respondent :- State Of U.P. And 3 Others Counsel for Petitioner :- Mayank Kumar Agrawal Counsel for Respondent :- C.S.C.,Awadhesh Kumar Saxena,Chandan Agarwal,M C Chaturvedi With Case :- WRIT - C No. - 35015 of 2019 Petitioner :- M/S Suchi Paper Mills Limited And Another Respondent :- State Of U.P. And 3 Others Counsel for Petitioner :- Mayank Kumar Agrawal Counsel for Respondent :- C.S.C.,Krishna Agarawal Hon'ble Ramesh Sinha,J.
Hon'ble Ajit Kumar,J.
1. All these petitions raise common question of law and assail Clause 7(vi) of the notification no.271/24-2-22418, Lucknow dated 5.2.2018, therefore, are being heard and decided together. The leading petition is taken to be Sarvottam Rolling Mills (P) Ltd and as a leading writ petition and the judgment passed in it shall govern all other connected writ petitions.
2. Heard Sri Shashi Nandan, learned Senior Advocate assisted by Sri Mayank Kumar Agarwal and Sri Anshul Kumar Singhal, learned counsel for the respective petitioners, Sri M.C. Chaturvedi, learned Senior Advocate and Additional Advocate General, assisted by Sri Chandan Agarwal, Sri A.K. Saxena, Sri Baleshwar Chaturvedi and Sri Krishna Agarwal, learned counsel for the State respondent as well as Corporation and perused the record.
3. The petitioner no.1 is a registered Company having industrial set-up in the State of U.P. It is claimed by the petitioner no.2 that he is the Director of the Company. The petitioners relying upon the U.P. Industrial Service Sector Investment Policy, 2004 (for short policy, 2004) set-up a steel manufacturing unit at Meerut. Though various incentives were offered by the Government under its Policy, 2004 but one major incentive was exemption from electricity duty to the newly set-up industries after the year 2004. The policy with regard to the exemption in electricity duty, however came to be enforced only in the year 2010 vide notification dated 21.1.2010. The notification, 2010 provides for the benefit to those covered under the policy of 2004. However, the State Government provided this benefit by interpreting the notification to the effect that the benefit is to be conferred upon those who got their unit established after the date of notification. The petitioners herein and many others in the State of U.P. felt betrayed and so approached this Court vide separate writ petitions. All those writ petitions were heard together with writ petition No. 19842 of 2013 M/s Gallant Ispat Ltd. Vs. State of U.P. and others as leading one and finally came to be decided on 7.11.2014 with the conclusion drawn that the manufacturing units that were established on or after 21.1.2010, the date of issuance of the notification under Section 3 of the Act, 1952, shall only be entitled for exemption from the electricity duty whereas the others who had their unit established prior to 21.1.2010 shall not be entitled. Under the circumstances those industrial units and the Companies that had been set-up prior to 21.1.2010 approached the Apex Court assailing the judgment of the High Court on the ground that once the Government had floated a policy in the year 2004 and the industrial units were set-up on such assurance of exemption in electricity duty, and the fact that the notification was issued per policy of 2004, it was not correct to hold that those who had got the industrial unit established prior to the date of notification of the year 2010 shall not be entitled, may be they had set-up their industrial unit as per policy of 2004. The Apex Court finally in it's order dated 11.8.2017 granted leave and reversed the judgment of the High Court and allowed the writ petitions holding that once the Government had promised exemption under its policy decision and industrial units came to be set-up on the basis of such assurance and that the notifications was as per industrial policy of 2004, such industrial units were entitled to the exemption for the period, exemption had been promised and they cannot be denied the exemption merely because they had unit established prior to the date of notification. So the path is made clear for the refund of the amount for granting exemption benefit in the electricity duty by the respondent State to the petitioners. The Corporation thereafter, filed a review petition but the review petition came to be dismissed by the Apex Court on 23.11.2017. As a consequence to the aforesaid judgment by the Apex Court, the notification dated 5.2.2018 was issued by the State Government that the credit amount that has accrued to the petitioner's industrial unit and the Companies on account of policy of 2004 and the notification of 21.1.2010 granting exemption from electricity duty, such credit amount would be adjusted against the electricity duty only after 21.1.2020. So the period of conferment of benefit virtually got deferred by the State Government under the notification vide Clause 7(vi). This notification came to be challenged before this Court as well as before the Lucknow Bench of this Court and the Lucknow Bench has finally set-aside Clause 7(vi) of the notification vide order dated 7.8.2019 in following terms:-
16. An argument of discrimination has been raised. It has been argued by learned Additional Advocate General that adjustment of the amount could not have been made for the industries already closed. It is in absence of a bill towards electricity charges. We find some justification therein, but no justification in the notification dated 05.02.2018 to defer the compliance of judgment of the Apex Court and that too with arrangement of adjustment instead of refund of the amount. The issue of financial crunches has been raised in reference to the Uttar Pradesh Power Corporation Limited though, the amount is to be refunded by the State Government, which is not under financial crunches. Thus, the only excuse taken by the respondent for denial of refund of the amount collected towards electricity duty and now is to be adjusted, cannot be accepted.
17. Accordingly, we cause interference in clause 7 (vi) of the notification dated 05.02.2018 and accordingly, it is set aside to the extent it provides for adjustment of the electricity duty so collected from the petitioners but w.e.f. 21.01.2020. The amount of electricity duty collected from the petitioners after the notification dated 21.01.2010 should have been refunded immediately after the judgment of the Apex Court.
18. It was stated by the respondents that the amount of electricity duty was invested. Thus, the amount aforesaid is not lying with the State Government. If that is so, then State Government wants to earn out of the refundable amount. The aforesaid cannot be accepted rather once the judgment came on the issue from the Apex Court, it was obligatory on the respondents to extend the benefit of the Policy of 2004 and thereby to refund the amount of electricity duty so collected from the petitioners.
19. Accordingly, writ petitions are allowed. It is with a direction to the respondent-State Government to refund the amount of electricity duty collected after the notification dated 21.01.2010 and would be in reference to the period of the benefit i.e. 10 years or 15 years, as the case may be. The amount would be refunded within a period of six months from today. If, the amount is not refunded within the period given above, it will carry interest @ 10% for the period subsequent to it. Direction of the refund has been given keeping in mind the prayer in the connected writ petitions and the oral prayer made in the present writ petition.
4. Against the above order, the State of U.P. approached Supreme Court in Special Leave to Appeal No.29175-29178 of 2019 which was finally disposed off on 7.1.2020 with following directions:-
However, Ms. Aishwarya Bhati, learned senior counsel appearing on behalf of the State, submits that as a result of the operative directions contained in paragraph 19 of the judgment of the High Court, the period of six months for effecting refund will expire on 7 February, 2020. Learned senior counsel submits that an extension by a further period of six months may be granted so as to obviate the consequence of interest being required to be paid at the rate of 10% per annum.
We are of the view that while a reasonable extension should be granted to the State to comply with the order of the High Court, a period of six months would be excessive. We accordingly extend the period granted by the High Court until 15 April 2020 failing which the consequence envisaged in the order of the High Court shall ensue.
Pending application, if any, stands disposed of.
5. Thus the judgment of the High Court stands modified to the extent that the question of payment of penalty would arise only if the refund is not made by 15.4.2020.
6. This petition and the connected petitions, therefore, deserve to be disposed off finally in terms of the judgment of this Court as well as of the Apex Court (supra). However, at this stage learned counsel for the petitioners argues that the petitioners are entitled for interest also because all those companies and industrial units who had been enjoying the stay order, were directed to pay electricity duty with 18% interest. As the writ petitions before the High Court came to be dismissed on 7.11.2014 and the petitioner had to pay the same. A chart of realization of bill has been annexed along with the writ petition to demonstrate as to how the 18% interest has been charged taking the unpaid amount as the outstanding dues though it was not paid on account of stay order operating in the writ petition pending before the High Court as the petitioners claimed benefit for exemption from the electricity duty as per policy 2004 and notification of the year 2010. This chart shows that out of the total original dues towards electricity of recovery, raised of Rs.15 crores and odd, was Rs.9 crores and odd whereas Rs. 6 crores has been realized as interest.
7. This annexure no.10 that shows the chart, has been referred to in para no.20 to the writ petition, which has not been denied in the counter affidavit. Therefore, the petitioners claim that if they have been saddled with the interest of 18% despite of no fault on their part, they are equally legally entitled for the refund of the same along with 18% interest, they are equally entitled for the interest, so the petitioner claim quid pro quo in this matter.
8. From the arguments advanced by learned counsel for the petitioners, it is clearly reflected that they are claiming the benefit of law of restitution and in this connection, they have relied upon the judgment of the Apex Court in the case of U.P.S.E.B Vs. Atma Steel and others reported in (1998) 2 SCC 597 and Union of India and others Vs. Mafatlal Fine Spinning & Manufacturing Co. Ltd. and another reported in (1998) 8 SCC 462, South Eastern Coalfields Ltd. Vs. State of M.P and others reported in (2003) 8 SCC page 648, Clariant International Ltd. and another Vs. Securities & Exchange Board of India reported in (2004)8 SCC page 524, Sandvik Asia Ltd. Vs. Commissioner of Income Tax I, Pune and others reported in (2006)2 SCC page 508, Union of India Vs. Tata Chemicals Ltd. reported in (2014)6 SCC 335, Ansal Housing & Construction Ltd. Vs. State of U.P and others reported in (2014) 10 ADJ 348.
9. Instead of going through all the authorities cited above, we refer to the South Eastern Coalfields Ltd. Vs. State of M.P (supra) in which principle of restitution has come to be discussed vide paragraph nos.26, 27, 28 thus:-
26. In our opinion, the principle of restitution takes care of this submission. The word 'restitution' in its etymological sense means restoring to a party on the modification, variation or reversal of a decree or order, what has been lost to him in execution or decree or order or the court or in direct consequence of a decree or order (See : Zafar Khan and Ors. v. Board of Revenue, U.P., and Ors., . In law, the term 'restitution' is used in three senses; (i) return or restoration of some specific thing to its rightful owner or status; (ii) compensation for benefits derived from a wrong done to another; (iii) compensation or reparation for the loss caused to another. (See Black's Law Dictionary, Seventh Edition, p.1315). The Law of Contracts by John D. Calamari & Joseph M. Perillo has been quoted by Black to say that 'restitution' is an ambiguous term, sometimes referring to the disgorging of something which has been taken and at times referring to compensation for injury done.
"Often, the result in either meaning of the term would be the same. ..... Unjust impoverishment as well as unjust enrichment is a ground for restitution. If the defendant is guilty of a non-tortuous misrepresentation, the measure of recovery is not rigid but, as in other cases of restitution, such factors as relative fault, the agreed upon risks, and the fairness of alternative risk allocations not agreed upon and not attributable to the fault of either party need to be weighed."
The principle of restitution has been statutorily recognized in Section 144 of the Code of Civil Procedure, 1908. Section 144 of the C.P.C. speaks not only of a decree being varied, reversed, set aside or modified but also includes an order on par with a decree. The scope of the provision is wide enough so as to include therein almost all the kinds of variation, reversal, setting aside or modification of a decree or order. The interim order passed by the Court merges into a final decision. The validity of an interim order, passed in favour of a party, stands reversed in the event of final decision going against the party successful at the interim stage. Unless otherwise ordered by the Court, the successful party at the end would be justified with ail expediency in demanding compensation and being placed in the same situation in which it would have been if the interim order would not have been passed against it. The successful party can demand (a) the delivery of benefit earned by the opposite party under the interim order of the court, or (b) to make restitution for what it has lost; and it is the duty of the court to do so unless it feels that in the facts and on the circumstances of the case, the restitution would far from meeting the ends of justice, would rather defeat the same. Undoing the effect of an interim order by resorting to principles of restitution is an obligation of the party, who has gained by the interim order of the Court, so as to wipe out the effect of the interim order passed which, in view of the reasoning adopted by the court at the stage of final decision, the court earlier would not or ought not to have passed. There is nothing, wrong in an effort being made to restore the parties to the same position in which they would have been if the interim order would not have existed.
27. Section 144 of the C.P.C. is not the fountain source of restitution; it is rather a statutory recognition of a pre-existing rule of justice, equity and fair play. That is why it is often held that even away from Section 144 the Court has inherent jurisdiction to order restitution so as to do complete justice between the parties. In Jai Berham v. Kedar Nath Marwari, Their Lordships of the Privy council said:
"It is the duty of the Court under Section 144 of the Civil Procedure Code to place the parties in the position which they would have occupied but for such decree or such part thereof as has been varied or reversed. Nor indeed does this duty or jurisdiction arise merely under the said section. It is inherent in the general jurisdiction of the Court to act rightly and fairly according to the circumstances towards all parties involved.
Cairns, L.C., said in Rodger v. Comptoir d'Escompte de Paris, (ER p.125) "One of the first and highest duties of all Courts is to take cars that the act of the Court does no injury to any of the suitors and when the expression, the act of the Court is used, it does not mean merely the act of the primary Court, or of any intermediate Court of appeal, but the act of the Court as a whole from the lowest court which entertains jurisdiction over the matter up to the highest Court which finally disposes of the case".
This is also on the principle that a wrong order should not be perpetuated by keeping it alive and respecting it, A.A. Nadar v. S.P. Rathinasami. In the exercise of such inherent power the Courts have applied the principles of restitution to myriad situations not strictly falling within the terms of Section 144.
28. That no one shall suffer by an act of the court is not a rule confined to an erroneous act of the court; the 'act of the court' embraces within its sweep all such acts as to which the court may form an opinion in any legal proceedings that the court would not have so acted had it been correctly apprised of the facts and the law. The factor attracting applicability of restitution is not the act of the Court being wrongful or a mistake or error committed by the Court; the test is whether on account of an act of the party persuading the Court to pass an order held at the end as not sustainable, has resulted in one party gaining an advantage which it would not have otherwise corned, or the other party has suffered an impoverishment which it would not have suffered but for the order of the Court and the set of such party. The quantum of restitution, depending on the facts and circumstances of a given case, may take into consideration not only what the party excluded would have made but also what the party under obligation has or might reasonably have made. There is nothing wrong in the parties demanding being placed in the same position in which they would have been had the court not intervened by its interim order when at the end of the proceedings the court pronounces its judicial verdict which does not match with and countenance its own interim verdict. Whenever called upon to adjudicate, the court would act in conjunction with what is the real and substantial justice. The injury, if any, caused by the act of the court shall be undone and the gain which the party would have earned unless it was interdicted by the order of the court would be restored to or conferred on the party by suitably commanding the party liable to do so. Any opinion to the contrary would lead to unjust if not disastrous consequences. Litigation may turn into a fruitful industry. Though litigation is not gambling yet there is an element of chance in every litigation. Unscrupulous litigants may feel encouraged to approach the Courts, persuading the court to pass interlocutory orders favourable to them by making out a prima facie case when the issues are yet to be heard and determined on merits and if the concept of restitution is excluded from application to interim orders, then the litigant would stand to gain by swallowing the benefits yielding out of the interim order even though the battle has been lost at the end. This cannot be countenanced, we are, therefore, or the opinion that the successful party finally held entitled to a relief assessable in terms of money at the end of the litigation, is entitled to be compensated by award of interest at a suitable reasonable rate for the period for which the interim order of the court withholding the release of money had remained in operation.
10. We have also occasion to go through the decision of the House of Lords of the United Kingdom in Sempra Metals Ltd. Vs. Revenue & another decided on 8.7.2007 reported in (2008) 1 AC 561 in which vide para no.17, 18, 19 and 20 Lords House observed thus:-
17. I also agree with Lords Nicholls that the loss on the late payment of a debt may include an element of compound interest. But the claimant must claim and prove his actual interest losses if he wishes to recover compound interest, as is the case where the claim is for a sum which includes interest charges. The claimant would have to show, if his claim is for ancillary interest, that his actual losses were more than he would recover by way of interest under the statute. In practice, especially where the period over which interest is sought is short or where the claimant does not have to borrow money to replace the debt, simple interest under Section 35A of the Supreme Court Act, 1981 is likely to be the more convenient remedy.
18. I wish to concentrate on the approach that should be taken to the restitutionary cause of action on which Sempra prefers and is entitled to rely, which is its claim that the money was paid under a mistake. The conclusion that the court has jurisdiction to award compound interest as damages at common law is, however, a valuable one. It provides us with a building block which was missing when the House rejected the use of compound interest as a possible solution in equity in Westdeutsche Landesbank Girozentrale V Islington London Borough Council (1996) AC 669. Ancillary interest was sought on a sum for which the court was to give judgment in satisfaction of the council's restitutionary claim against the bank. It was common ground that there was no jurisdiction to award compound interest in such a case at common law or by statute: per Lord Goff of Chieveley, p 690H.
19. Four sample payments of ACT have been agreed upon for the purposes of this test case all of which were, sooner or later, set off against MCT. The earliest ACT payment was made on 12 October 1981, and the latest was made on 18 July 1994. The longest interval was almost ten years, and the shortest was just under one year. Tax paid in response to an unlawful demand is recoverable under the Woolwich principle: Woolwich Equitable Building Society V Inland Revenue Commissioners [1993] AC 70. But the limitation period of six years which applies to unlawful demands runs from the date of payment. Sempra wish to take advantage of the extended limitation period that is available under Section32 (1)(c) of the Limitation Act 1980. It provides that, where the action is for relief from the consequence of a mistake, the period of limitation shall not begin to run until the claimant has discovered the mistake or could with reasonable diligence have discovered it. As Part J observed in para 11 of his judgment, one of the bases on which Sempra's claim is pleaded is for restitution by reason of the ACT having been paid under a mistake of law. The effect of your Lordships' decision in Deutsche Morgan Grenfell Group plc v IRC [2007] 1 AC 558 is that it is open to Sempra to base its claim on this ground, as the longer limitation period is in its best interest: see para 51. If this is done, the claim for interest on none of the sample payments will be statute-barred.
20. It appears to have been assumed until the proceedings reached this House that the choice of claim is immaterial to the way in which the principal sum is to be calculated. But the observation by the Court of justice in para 88 of its judgment that the principal sum due is none other than the amount of interest which would have been generated by the sum the use of which was lost as a result of the premature levy of the tax invites the question whether an award on this basis is available in domestic law as a restitutionary remedy. Park j referred to this passage in para 16 (ii) of his judgment, after noting in para 16 (I) that Sempra had formulated its claim in both ways in the alternative. He then added this comment in para 16(iii), after referring to the Court's observation in para 89 of its judgment that the sum which may be claimed by way of restitution was the interest accrued on the ACT between its payment and the date on which the MCT became payable.
11. Applying the above principle of law as discussed in the aforesaid two judgements to the present case where the petitioners have been held to be entitled to the benefit of exemption in electricity duty under the policy of 2004 though the said exemption in terms of rebate came to be introduced for the first time vide notification dated 21.1.2010, we find that the petitioners were made to suffer only on account of delayed notification, though they had, as a matter of fact, set-up their respective units on the representation and the assurance given under the industrial policy, 2004 of the State that they would be granted benefit of exemption from electricity duty. The State Government took the advantage of the date of issuance of notification to deny the benefit to those who had already set-up their unit prior to 2010 and who would have been otherwise entitled as per assurance given under the industrial policy. The petitioners like other industrial units had approached this Court in the earlier round of litigation and they were granted interim order on 3.7.2013 passed in writ-C No.35154 of 2013 to the following effect:-
"For the reasons so given in the order of this Court we direct that the respondents will not withdraw the benefit of the petitioner on the ground that connection is not provided after 21.1.2010 on petitioner's furnishing adequate security other than cash and bank guarantee."
12. Thus the petitioners were not put to coercive measures by the respondents to pay electricity duty. However, the moment the writ petition got dismissed on 7.11.2014 they were forced to pay electricity duty with interest @ 18%. Ultimately the Apex Court held the petitioners entitled to the exemption as per policy of 2004 even if the industrial unit was set-up prior to 21.1.2010.
13. The law is well settled that the Apex Court declares the law and a law declared means that it has always been so. Once the Court has declared the law that the petitioners were entitled to be exempted from the electricity duty under the notification, it would be deemed that they were always entitled for the same. Now since the petitioners had to pay the electricity duty with 18% interest so that the electricity is supplied uninterruptedly to the industrial unit, they became entitled for the refund of the same in the same manner as they were forced to pay. The State and the Corporation approached the Apex Court for the review of the judgment and that also came to be dismissed and thus the State Government resultantly issued notification for the refund but the Clause contained provided for the adjustment in the future bills and that too beyond 2020. The said clause though got quashed with the direction to the respondents to pay 10% as a penalty for delayed payment, in the Apex Court the said judgment came to be challenged by the State Government and the plea taken was that they had invested the money and so some breathing period may be provided for. This is how, it appears, the Apex Court fixed now 10th April as a cutt off date to ensure payment.
14. The argument advanced by learned counsel for the petitioners is that if the respondents had charged the electricity duty with 18% interest after the writ petitions were dismissed by the High Court and then invested the money due to this sudden wind fall, they should refund the amount forthwith along with interest.
15. The question of interest could have been independently considered by us as it appeals to us also but we find that in the writ petition before the Lucknow Bench, the plea of interest was taken in the prayer clause. The prayer of writ petition being Misc. Bench No.11312 of 2019 decided by the Lucknow Bench is reproduced hereunder:-
a) Issue a Writ, order or direction in the nature of certiorari partially quashing the notification dated 5.2.2018 to the extent that it devises a formula of future adjustment of electricity duty illegally collected and retained by the respondents instead of immediate refund.
b) Issue a Writ, order or direction in the nature of mandamus directing the respondents to immediately refund the electricity duty amounting to Rs.16,14,52,074.00/- (Sixteen Crore fourteen lakh fifty two thousand seventy four only) collected and retained by the respondent for the period March 2011 to January 2018.
c) Issue a Writ, order or direction in the nature of mandamus directing the respondents to issue a fresh order/notification for immediate refund of the electricity duty illegally collected and charged from the petitioner for the period March 2011 to January 2018.
d) Issue a Writ, order or direction in the nature of mandamus directing the respondents to refund the electricity duty collected and retained from the petitioner with an interest of 15% per annum along with damages for illegal retention of the amount by the respondents.
(Emphasis added)
16. Concurrent Bench of this Court, though being conscious of the prayer did not allow the same or if the prayer was there and it was not pressed and so under both the circumstances the judgment ought to have been questioned. However, we find that even that part of penal interest as directed by the High Court in the event refund was not made within certain time, came to be modified by defering its effect to a limited extent in favour of the State by the Apex Court fixing 10th April as cutt-off date. Since the judgment of the Lucknow Bench quashing the Clause 7(vi) has come to be affirmed by the Apex Court and the order of penalty of 10% interest by way of penalty has come to be modified, in our opinion, the controversy has been put to rest. Though we may observe that the question of restitution has not come up in the judgment of the Lucknow Bench but in propriety, we refrain ourselves from allowing this plea now in the writ petition as the matter of refund stands concluded by the judgment of the Division Bench (Lucknow Bench) and affirmed by the Apex Court by modifying the penalty part by making it effective only after 10th April, 2020.
17. Thus these writ petitions stand disposed off in terms of the judgment of the concurrent Bench of this Court dated 7.8.2019 passed in leading case being Misc. Bench No.5055 of 2019 and the judgment of the Apex Court dated 7.1.2020 passed in S.L.P. No(s). 29175-29178/2019.
(Ajit Kumar, J.) (Ramesh Sinha, J.)
Order Date :- 19.2.2020
Gaurav