Karnataka High Court
Bangalore Bullion Traders vs Minerals And Metal Trading Corporation ... on 21 February, 2003
Equivalent citations: 2003(2)KARLJ555, 2003 AIR - KANT. H. C. R. 1255, (2003) 2 KANT LJ 555
Author: K. Ramanna
Bench: K. Ramanna
JUDGMENT
1. Writ Appeal Nos. 5569 and 5822 of 1999 are preferred against the common judgment of the learned Single Judge dated 2nd July, 1999 in W.P. Nos. 12031 and 12028 of 1999, whereas, W.A. No. 6541 of 1999 is preferred against the order of the learned Single Judge dated 5-7-1999 in W.P. No. 12074 of 1999. The appellants in these writ appeals are the petitioners in the above writ petitions. In the writ petitions, the appellants have questioned the legality of the action of the respondent-Corporation debiting certain sums of money from the appellants' accounts towards the differential customs duty for certain quantum of gold lifted by the appellants after 4-1-1999. The learned Single Judge at the stage of the admission, dismissed the writ petitions having opined that the dispute brought before the Court in the writ petitions involves disputed questions of fact and therefore, the proper course for the appellants is to seek remedy before competent Civil Court by filing civil suits. Hence, these writ appeals.
2. In the writ appeals, the respondent-Corporation has filed statement of objections in each of these writ appeals.
3. The background facts leading to the filing of the writ petitions be noted briefly as under.-
The appellants are the partnership firms engaged in the business of selling gold in the domestic market. The respondent-Corporation is a Government owned company and one of the nominated agencies of the Government of India to deal with bullion. Therefore, the respondent-Company imports gold and silver and sell the same in the domestic market.
4. According to the appellants the respondent-Corporation imported 6,000 TT bars of gold through the consignment method some time in the last week of December 1998. The said consignment of gold was cleared by the customs authorities on payment of customs duty at the rate of Rs. 250 per 10 grams of gold before 1-1-1999 and the petitioners claim that the respondent-Corporation as per its usual practice intimated its customers, including the petitioners, that a consignment stock of gold was available for sale. In response to the intimation sent up by the respondent-Corporation, the petitioner in W.P. No. 12031 of 1999 booked 1,500 TT bars of gold and lifted 201 TT bars on 4-1-1999 and the remaining TT bars were lifted after 4-1-1999. Similarly, the petitioner in W.P. No. 12028 of 1999, booked 1,500 TT bars of gold and of which, it lifted 100 TT bars on 4-1-1999 and the remaining 1,400 TT bars were lifted after 4-1-1999. The petitioner in W.P. No. 12029 of 1999 booked 299 TT bars of gold and the said quantum of gold was lifted on 5-1-1999 and 6-1-1999.
5. In the meanwhile the customs duty for gold was increased from Rs. 250 per 10 grams to Rs. 400 per 10 grams with effect from 5-1-1999 by Customs Notification No. 2 of 1999, dated 4-1-1999. In pursuance of above increase in the customs duty, the demand notices were issued to the petitioners by the respondent-Corporation seeking to enforce the customs notification, dated 4-1-1999 with regard to the quantum of gold lifted by the petitioners on or after 5-1-1999.
6. We have heard Sri K.G. Raghavan, learned Counsel for the appellants and Sri C.M. Desai, learned Standing Counsel for respondent-Corporation. Sri K.G. Raghavan, with his usual vehemence, contended that the action of the respondent-Corporation is in direct contravention of Article 265 of the Constitution of India inasmuch as it has sought to collect the customs duty without authority of law; that no legal basis exists for collecting the said amount from the petitioners as customs duty; the impugned action of the Corporation is wholly arbitrary inasmuch as the Corporation has sought to collect additional customs duty from the petitioners towards goods which themselves have not suffered that additional duty; the action of the respondent-Corporation is opposed to the public policy. Although these are the contentions of Sri Raghavan, the crux of the contention is that the respondent-Corporation being a 'State' within the meaning of Article 12 of the Constitution of India, it cannot act arbitrarily and unreasonably and collect more customs duty on the basis of the customs notification, dated 4-1-1999 which in fact the Corporation did not pay and in the process, the respondent-Corporation should not be permitted to make unlawful gain.
7. The reliefs sought for by the petitioners have been opposed by the respondent-Corporation by filing the statement of objections. In the statement of objections, a preliminary objection is raised with regard to the maintainability of the writ petitions. It is contended that though the respondent-Corporation is a 'State' within the meaning of Article 12 of the Constitution of India, since the dispute brought before the Court does not pertain to any statutory action on the part of the Corporation and no public law element is present, the writ petitions are not maintainable. It is contended that the dispute relates to purely contractual obligations under the agreements executed between the Corporation and the petitioners and therefore, the contractual obligation cannot be enforced under Article 226 of the Constitution of India. As regards the merits of the claim of the petitioners, it is contended by the respondent-Corporation that since the sale price was increased with effect from 5-1-1999 because of the increase in customs duty, the petitioners are liable to pay the increased price of the gold as per the prevalent market rates. It is stated that the sale price of the gold with effect from 5-1-1999 was fixed taking into consideration of the customs duty and other consequential increase of sales tax etc. It is also contended that though the respondent-Corporation is a public sector undertaking, it was acting as a purely trading organisation when it entered into agreements with the petitioners. It is contended that simply because the petitioners are liable to pay gold price at a higher rate consequent upon increase in the customs duty, they cannot condemn the impugned action of the Corporation as arbitrary and unreasonable.
8. Having perused the pleadings of the parties and arguments of learned Counsels, we too find factual controversies and disputed facts in these cases. In that view of the matter, it cannot be said that learned Single Judge was not justified in declining to exercise the jurisdiction under Article 226 of the Constitution of India and directing the petitioners to avail of legal remedies before the competent Civil Court by way of suits. Apart from that, we are of the considered opinion that the dispute brought before this Court under Article 226 of the Constitution arises out of a pure and simple commercial trade and we do not find any public law element in the controversy. The gold was supplied to the petitioners by the respondent-Corporation in pursuance of the agreements existing between the parties. The agreements between the parties are not statutory contracts. This is a simple case of purchase and sale of gold in the process of carrying out the commercial function of the respondent-Corporation.
9. It is true that since the guarantee of equal protection embraces the entire realm of 'State action', it would extend not only when an individual is discriminated against in the matter of exercise of his rights or in the matter of imposing liabilities upon him, but also in the matter of granting privileges. This position is well-settled by the judgment of the Supreme Court in the cases of Ramana Dayaram Shetty v. International Airport Authority of India, and Kasturi Lal Lakshmi Reddy v. State of Jammu and Kashmir and Anr., and several other decisions to follow them. Therefore, it cannot be doubted that every action of the State or instrumentality of the State must be informed by postulates of Article 14, that is to say, by reason, fairness and non-arbitrariness and that, in appropriate cases, any action uninformed by the above postulates of Article 14 may be questioned as arbitrary in a proceeding under Article 226 of the Constitution of India. Article 14 cannot be construed as a remedy for reviewing of the State actions and call upon the State to account for its actions in its manifold activities by stating reasons for such action. The following observations of the Constitution Bench of the Supreme Court in para 102 in the case of Life Insurance Corporation of India v. Escorts Limited and Ors., are quite apposite.-
"If the action of the State is related to contractual obligation or obligations arising out of the Court, the Court may not ordinarily examine it unless the action has some public law character attached to it. Broadly speaking, the Court will examine actions of State if they pertain to the public law domain and refrain from examining them if they pertain to the private law field. The difficulty will lie in demarcating the frontier between the public law domain and the private law field. It is impossible to draw the line with precision and we do not want to attempt it. The question must be decided in each case with reference to the particular action, the activity in which the State or the instrumentality of the State is engaged when performing the action, the public law or private law character of the action and a host of other relevant circumstances. When the State or an instrumentality of the State ventures into the corporate world and purchases the shares of a company, it assumes to itself the ordinary role of a shareholder, and dons the robes of a shareholder, with all the rights available to such a shareholder. There is no reason why the State as a shareholder should be expected to state its reasons when it seeks to change the management, by a resolution of the company, like any other shareholder".
10. The Supreme Court in the case of Food Corporation of India and Ors. v. Jagannath Dutta and Ors., held that the question of contractual obligation cannot be gone into in writ jurisdiction. The Apex Court held in para 5 as follows.-
"5. We are of the view that the High Court was not justified in quashing the impugned notice especially when the terms and conditions of the contract permitted the termination of the agreement by either of the parties. The High Court should not have gone into the question of contractual obligation in its writ jurisdiction under Article 226 of the Constitution. Even otherwise the High Court misread the documents on the record and grossly erred in reaching the conclusion that no policy decision was taken by the FCI to terminate the storage agencies in the State of West Bengal. We may refer to some of the documents on the record".
11. In the case of Bareilly Development Authority and Anr. v. Ajay Pal Singh and Ors., in paras 21 and 22 the Supreme Court held as follows.-
"21. There is a line of decisions where the contract entered into between the State and the persons aggrieved is non-statutory and purely contractual and the rights are governed only by the terms of the contract, no writ or order can be issued under Article 226 of the Constitution of India so as to compel the authorities to remedy a breach of contract pure and simple: Radhakrishna Agarwal v. State of Bihar, AIR 1977 SC 1496, ( 1977 ) 3 SCC 457 , Premji Bhai Parmar v. Delhi Development Authority, and Divisional Forest Officer v. Bishwanath Tea Company Limited.,
22. In view of the authoritative judicial pronouncements of this Court in the series of cases dealing with the scope of interference of a High Court while exercising its writ jurisdiction under Article 226 of the Constitution of India in cases of non-statutory concluded contracts like the one in hand, we are constrained to hold that the High Court in the present case has gone wrong in its finding that there is arbitrariness and unreasonableness on the part of the appellants herein in increasing the cost of the houses/flats and the rate of monthly instalments and giving directions in the writ petitions as prayed for".
12. Further, the Supreme Court in the case of Hindustan Petroleum Corporation Limited and Anr. v. Dolly Das, held as follows.-
"7. In the absence of constitutional or statutory rights being involved a writ proceeding would not lie to enforce contractual obligations even if it is sought to be enforced against the State or to avoid contractual liability arising thereto. In the absence of any statutory right Article 226 cannot be availed to claim any money in respect of breach of contract or tort or otherwise. In the present case, the appellants have sought to exercise their powers under Section 7 of the Act and, therefore, though the other consequences may be contractual in nature, the exercise of the right being under a statute, it cannot be said that the respondent could not approach the writ Court".
13. It is true that the respondent-Corporation is a company registered under the Companies Act, 1956 and it has separate legal entity. The Corporation could be regarded as an agent of the Government when it is performing the governmental function and not commercial function. In the instant case, the respondent-Corporation in importing gold and selling the same to the domestic buyers is performing commercial function. The Corporation while importing gold and selling the same to the domestic customers acts as an individual on its own behalf. It acts independently of the Union of India. It is true that the permission for import is given to the Corporation by the Union of India, but, the latter does not act as principal. It is in the same manner, in which any natural person or individual is authorised by the Union of India to import a commodity and sell the same to the domestic consumers.
14. What emerges from the above discussion is that the dispute brought before this Court under Article 226 by the petitioners relates to domain of contractual obligations and rights without any public law element and that such rights and obligations cannot be permitted to be enforced under Article 226 of the Constitution of India and the proper remedy for the aggrieved parties is to approach the competent Civil Courts.
15. Even otherwise, we do not find any case for the appellants- petitioners on merits. The contention of Sri K.G. Raghavan that the impugned action of the respondent-Corporation is in direct contravention of Article 265 of the Constitution of India on the assumption that what is sought to be recovered from the petitioners is nothing but customs duty and the power to collect the customs duty is not available to the respondent-Corporation, in our considered opinion, is totally misconceived as well as distorted, The Corporation like any other importer imports gold and sells the same to the domestic buyers. It may be true that the gold was imported by the Corporation before 5-1-1999. It may also be true that the Corporation paid the customs duty as per the then existing rates. But, only on that count, the Corporation cannot be denied the right to sell the gold after 5-1-1999 at the rates fixed by it taking into consideration not only the increase of customs duty, but also other consequential increase of sales tax etc. These are the attributes of any business carried on by any trading organisation. As already pointed out supra, when the Corporation established its relationship with the petitioners as supplier of gold, in pursuance of the agreements entered into between the parties, it was acting as a purely trading organisation with the risk of incurring loss or profit in the trade. It is needless to state that there is always such risk involved in every business of purchase and sale and the authorities concerned will be making profit or incurring loss due to several factors such as exchange fluctuations and other pricing methods. In the present case, the petitioners lifted the gold long time after sale price was increased in the market. Suppose, the sale price was reduced on account of decrease in the customs duty or decrease in other duties, the Corporation would not have a right to insist that though the prevalent market value is lesser than the previous rate, the buyers of the gold should pay the price of the gold at the previous higher rate. This example is given by us only to show that incurring loss or making profit in a trade like this is very much inherent in the trade itself and therefore, simply because the petitioners are required to pay the price of the gold at the higher rate, consequent upon the increase in the customs duty and consequential increase in the sales tax etc., it is not the right of the petitioners to insist that the Corporation should sell the gold to them at the rate at which the Corporation imported gold. Looking from any angle, we do not find any merit in any of the contentions of Sri K.G. Raghavan, learned Counsel for the appellants. The writ appeals are devoid of merits and they are accordingly dismissed with no order as to costs.