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PETITIONER: STEEL AUTHORITY OF INDIA LTD.

       Vs.

RESPONDENT: SHRI AMBICA MILLS LTD. & ORS.

DATE OF JUDGMENT:       17/10/1997

BENCH: M.M. PUNCHHI, K. VENKATASWAMI

ACT:

HEADNOTE:

JUDGMENT:                       J U D G M E N T K. Venkataswami J.      This appeal  by special  leave is  directed against the Division Becnh  judgment of  the Gujarat  High  Court  dated 7.2.1985. Brief facts concerning the case are given below.      The  first   respondent-company  is   engaged  in   the manufacture  of   steel  tubes   through  its  Ambica  Tubes Division. For the purpose of manufacture of steel tubes, hot rolled strips  in coils  are required as raw material. These not rolled  strips were  being supplied at the relevant time to the  manufacturers of  steel  tubes  like  (Ambika  Tubes (hereinafter  referred  to  as  the  importer)  through  the appellant referred to as the importer) through the appellant subject to certain conditions. The manufacture who are given raw materials  must posses  the import  licence and  have to carry  out   certain  export  obligations.  The  obligations concerning this  for the  period in  question, namely, April 1983 to  March, 1984  were given  in the  import and  export policy for  that  period.  Previously  a  public  notice  in respect of  scheme for  supply  of  raw  material  by  steel Authority of  India Ltd.  (hereinafter  called  the  "SAIL") against advance  import licence  was issued  on  the  Scheme published on  11.12.1982 would  be continued.  According  to that. the  importer becomes  eligible for supply of goods on compliance  of   the  conditions  fixed  in  the  scheme  in particular, the  conditions of  producing advance  licenses, duty    exemption     entitlement     certificate,     legal undertaking/execution  of  export  bond  and  furnishing  of irrevocable letter of credit. The appellant as an indigenous supplier under  the aforesaid  announcement of the prices at which  law   the  raw   material  will   be  supplied.  That announcement  was   published  in   the  Economic  Times  on 10.6.1983 under  the caption  "Scheme for  Supply of certain Categories  of  Indigenously  Produced  Steel  Materials  at Competitive Prices against Valid Import Licences".      Pursuant to  the abovesaid  announcement. the  importer submitted licenses  requiring supply of about 3768 tonnes of not rolled  strips in  coils. It  was found that the licence submitted by  the importer  (Ambica Tubes)  did not  mention that it was an advance import licence nor was it accompanied

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by Duty  Exemption Entitlement  Certificate and the bond. In addition to  the submission  of licences,  the  said  Ambica Tubes however  submitted Letter of Credit dated 19.8.1983 on the same  data, namely,  20.8.1983. In  the Letter of Credit also there  were certain  infirmities and  when the same was pointed  out,   it  was   rectified  and   submitted  before 25.8.1983.      On receipt of the licence and the Letter of Credit, the appellant by  a   telex message  dated 23.8.1983 pointed out the defects  in the  licence/release order  and also  stated that in  view of  the defects,  the appellant are not taking any action on the Letter of Credit for the present.      In reply  to the  telex message,  Ambica Tubes  sent  a letter on  the same date (23.8.1983) informing the appellant that the  original release  order in  duplicate and the Duty Exemption Entitlement Certificate booklet had been submitted to the  joint Controller  at Ahmedabad  and would be sent to the Bombay  SAIL office on receipt of the same. The relevant documents after  carrying out the corrections were factually furnished  to   the  appellant   by  Ambica  Tubes  only  on 26.8.1983. In  the meanwhile  the appellant enhanced/revised the price of their supplies (steel materials) from Rs.2460/- to 2750/- per M.T. on and from 25.8.1983. Since the relevant documents after  carrying out the corrections with necessary enclosures were received by the appellant only on 26.8.1983. the importer  (Ambica Tubes)  was required  to pay the price for the  release of  steel materials  at the  revised  rate, namely, Rs. 2750/- per M.T.      Ambica  Tubes  made  representation  that  they  having submitted Letter  of Credit  and  the  necessary  documents, though defective, well before 25.8.1983, the revised charges should not  have been applied. The appellant gave a detailed reply to  the representation  of the  importer. The importer moved the  Gujarat High  Court on 18.6.1984 for quashing the announcement  made  by  SAIL  revising  the  price  and  for directing that  the supplies must have been made at the pre- revised price  and for  consequential refund  of  difference between the  pre-revised and  revised prices.  The appellant resisted the writ petition by filing a detailed reply to the affidavit filed in support of the writ petition.      The High  Court proceedings on a wrong premise, namely, that SAIL (appellant) was a department of Union of India but its administration  is run  separately in  the  interest  of efficiency; held  that the  importer (Ambica  Tubes) was not responsible   for   the   defects   pointed   out   in   the license/release order  and it  was the office of Joint Chief controller order  and it  was  the  office  of  Joint  Chief Controller of  imports and Exports alone responsible for the defects for  which the  importer should  not be punished. In other words. the High Court was of the view that the license though defective  must be  deemed to  have been presented on 20.8.1983 long  before  the  revised  price  was  announced. Therefore., the appellant was not entitled to charge for the supply of  raw materials at the revised rate. The High Court also directed  the refund of the difference between the pre- revised and  the  revised  rates.  The  High  Court  further observed that the action of the appellant in not registering the petitioners’  indent No.  7 of  the 1986 dated 19.8.1983 latest on  24.8.1983 was  an action bad at law, arbitrary an unreasonable’.      We are  not concerned  with the  other  relief  granted against Union of India in this appeal.      Though the  main relief  in the  writ petition  was the challenge to the right of SAIL to fix the price from time to time, the  High Court  left open that issue without deciding

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the same. The entire reasoning of the High Court is found in paragraph 16 of its judgment which reads as follows:-      "16. We  have  analysed  the  facts      above very  clearly and  held  that      the petitioners  had done  whatever      was required  to be  done by  them.      They had procured the release order      in time.  On had  of the Government      acting in  the  Joint  Controller’s      office  committed   some   blunders      because   of    the   lackadaisical      fashion in  which  the  things  are      handled there. It forgot to mention      about    the     Duty     Exemption      Entitlement Certificate.  It forgot      to mention  that it  is an  advance      release order,  though the covering      letter   did    mention   it.   The      petitioners  no   doubt  got  these      things rectified,  but  because  no      doubt       the       communication      difficulties, there  was a delay of      a  day   or  two.   How  can   that      fortuitous     circumstance      be      exploited  by  SAIL  by  seeking  a      pound of  flesh? They  should  have      seen reason  and  should  not  have      chastised  this  petitioner-company      for the  Faults of the employees of      the  very  Union  of  India,  their      masters. Such  amendments  required      to be  made later on because of the      negligence and  carelessness of the      employees of the Union of India are      to  be   legitimately  treated   as      having been effected retroactively.      This is  the  only  reasonable  and      rational  way  of  looking  at  the      things. Negligence of one branch of      the  Union   of  India   cannot  be      capitalized by  another  branch  is      per   arbitrary,   capricious   and      whimsical. Such  an illegal  action      is taken by the Ahmedabad office or      Bombay office.  Another  reasonable      office of  this very  SAIL  say  at      Madras or  Bangalore would  not  do      such things  would  be    favorably      treated. In this sense of the term,      it  could  be  said  that  possibly      inconsistent stand,  and therefore,      discriminatroy stand,  can be there      in the action of the respondent no.      1.  On   this  short   ground,  the      petition of  the petitioners can be      allowed, because  we hold that this      executive power  has been exercised      by the SAIL absolutely unreasonably      and justification  for them  to sit      tight on  that date  24.8.1983  and      all that  was required  to be  done      was done  by these  petitioners. If      such things  are allowed  to go, it      would set a very bad example in the      working of rule of law in practical

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    and final  analysis. It  is because      of this  necessity of  striking out      the action of the public authority,      namely,  the   SAIL,  that  we  are      inclined to entertain this petition      and  decide  it  and  if  for  that      purpose  we   have  to   strike   a      departure from  the normal  rule of      the  not  entertaining  even  money      claims, we  would very willingly do      so, so  that such actions would not      be repeated in future. We, however,      add  that   here  essentially   the      challenge  was   to  the  right  of      fixation of price at any capricious      time  and   that  was  the  subject      matter of  the petition, but we are      not required  to go  into  it  and,      therefore, we  do not  go into  it.      Otherwise, much  could be  said  in      favour of the petitioners when they      contend   that   the   prices   are      required to be fixed quarterly. The      term quarterly’  would  mean  every      three months and the SAIL has fixed      the  price  on  11.12.82,  14.3.93,      7.6.83, 25.3.83  and  had  we  been      required to  decide this  question,      we would  have in  all  probability      interpreted  clause   6  read  with      clause 10  to mean  that the prices      are to  the fixed for the period of      three months and they are to remain      operative for  theat period, but we      are not  to opinion  on that  point      because the  ultimate relief of the      petitioners can  be granted without      deciding the point."      Aggrieved by  the judgment  of High  Court, the present appeal is filed by the SAIL.      Mr. Dhruv  Mehta, learned  counsel  appearing  for  the appellants submitted  that the High Court erred in  assuming that the  appellant was  a department  of the Union of India forgetting totally  that it  is a company incorporated under the  Companies   Act  and   it   is   a   separate   entity, notwithstanding the  fact that the company is entirely owned by the Government of India. It will not be a wing/department of the  Government. In  support of his contention, he placed reliance on  the judgment  of this Court in Dr. S.L. Agarwal vs.   The General Manager, Hindustan Steel Ltd. (AIR 1970 SC 1150), Western  Coalfields Ltd. vs. Special Area Development Authority, Korba & Anr. (AIR 1982 SC 697). He also submitted the power  of SAIL to revise the pricelist from time to time the relief given by the High Court would amount to refund of money by exercising the jurisdiction under Article 226 which is against  the ruling  for this Court in Suganmal vs. State of Madhya  Pradesh &  Ors.  (AIR  1965  SC  1740).  He  also submitted that  the importer  being a  party to the contract and having  paid the  price as revised and taken delivery of the goods cannot now turn around and challenge the action of the SAIL by invoking the writ jurisdiction under Article 226 of the Constitution of India. In support of this submission, he placed  reliance on  a judgment  of  this  Court  in  Har Shankar & Ors. The Dy. Excise & Taxation Commissioner & Ors. (1975 (1) SCC 737).

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    He also placed reliance on other judgment of this Court in M/s.  Radhakrishna Agarwal  & Ors.  vs. State  of Bihar & Ors. (AIR  1977 SC  1946), State of Orissa & Ors. vs. Narain Prasad &  Ors. (1996  (5)  SCC  740)  and  Assistant  Excise Commissioner &  Ors. vs.  Issac Peter  & Ors.  (1994 (4) SCC 104).      On  facts,   Shri  Dhruv  Mehta,  learned  counsel  for appellant submitted  that on  the admitted position that the documents, namely, licence/release order after rectification having been furnished only on 25.8.1983, the importer cannot claim the  application of  pre-revised price  on the  ground that the  mistake, if  at all, was on the part of the office of the  joint Chief  Controller of  Imports and Exports and, therefore, it  should not  be penalised.  According  to  the learned counsel,  the conditions  of Scheme published enable the appellant  to  insist  upon  all  the  documents  to  be furnished before  release of the raw material. The SAIL w as not concerned  with the  party responsible for the defect in the document. Therefore, the High Court was not justified in making certain observations against the appellant. According to Mr. Dhruv Mehta, the appeal should be allowed.      Mr. Parekh,  learned counsel  appearing for  the  first respondent, placing  reliance on  para  2.3  of  the  Scheme announced on  10.6.1983 submitted  that the Letter of Credit having been  furnished after  ‘rectifying the defects before 25.8.1983, the  importer is  entitled to get the supplies at the pre-revised  rate notwithstanding  the  defects  in  the licence/release order  as the  importer was  not responsible for the  defects. He  also submitted that the High Court was well  within  its  jurisdiction  in  entertaining  the  writ petition and  granting the  relief. According to the learned counsel, the  judgment under  appeal does  not call  for any interference by this Court.      Before  considering   the  rival   submission,  it   is necessary to  set out  the relevant  Paragraph in the Scheme announced on 10.6.1983.      "2.2  When  a  valid  and  eligible      import license is surrendered by an      import  Licence   holder   to   the      concerned office of SAIL for supply      of materials under this Scheme, the      approximate   quantity    of    the      material  which   can  be  supplied      against  the  import  licence  will      first be determined keeping in view      (a) the utilised value available on      the licence,  (b) the  price of the      concerned    item     as    Scheme,      Thereafter,  the   Import   Licence      holder will  be  requested  by  the      concerned office  of SAIL  to  make      appropriate financial  arrangements      taking into  account,  besides  (a)      and  (b)   mentioned   above,   the      approximate        amount        of      duties/taxes/levies,           etc.      chargeable on  such  supplies.  The      actual supply will be restricted to      the quantity  which can be supplied      against  the   surrendered   import      licence  provided  the  amount  for      which  financial  arrangements  are      made permits the same."      Para 2.3 reads as follows:-      "2.3 The  price  as  announced  for

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    supply  of   materials  under  this      Scheme   shall   be   subjects   to      periodic  revisions.   The   prices      chargeable  shall   be  the  prices      ruling  on  the  date  of  delivery      which shall  be  the  date  of  the      Railway  Receipt  in  the  case  of      direct dispatches  by rail and, the      date of  the  Delivery  Challan  of      SAIL’s stockyard in the case or ex-      yard  delivery,   except   in   the      following  cases   where   in   the      chargeable  prices   shall  be  the      prices ruling  on the date on which      acceptable and  operative financial      arrangements are  made in favour of      SAIL  by   import  licence  holders      eligible to get supplies under this      scheme.      a) Where the financial arrangements      made in favour of SAIL is such that      it enable SAIL to effect dispatches      on a  continuing basis  without any      restrictions     about     delivery      schedule; this will also include an      irrevocable   confirmed   automatic      revolving Letter  of  Credit  (L/C)      without  recourse   to  the  drawer      which would  enable SAIL  to effect      dispatches on  a  continuing  basis      without   quantitative   or   other      restrictions.      b) Where  the financial arrangement      made in favour of SAIL is such that      despatches  have  to  be  completed      within a  period of  3 months  from      the date  on  which  the  financial      arrangement became operative but is      for  a   quantity  less   than  the      tonnage  covered   by  the   import      licence, the  despatches  shall  be      restricted to  the quantity covered      by the financial arrangement.      c) In all cases, the interpretation      and decisions  of SAIL  as  to  the      acceptability,            adequacy,      effectiveness and  operativeness of      the financial  arrangement made  by      eligible import  licence holders in      favour  of   SAIL  for   supply  of      material under this Scheme shall be      final and binding."      Coming to  the  merits  of  the  case,  we  accept  the contention of  the learned  for the  appellant that the High Court went  wrong in  holding that  SAIL was a department of the  Union   of  India.   In  Agarwal’s   case  (supra),   a Constitution Bench of this Court while considering a similar question held as follows:-      "We must,  therefore, hold that the      corporation  which   is   Hindustan      Steel Limited in this case is not a      department of  the  Government  nor      are the  servants  of  its  holding      posts under  the State.  It has its      independent existence  and  by  law

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    relating  to  Corporations,  it  is      distinct even from its members."      In Western  Coalfields case (supra), this Court held as follows:-      "It is  contended by  the  Attorney      General that  since the  appellant-      companies are  wholly owned  by the      Government of  India, the lands and      buildings owned  by  the  companies      cannot  be  subjected  to  property      tax.  The   short  answer  to  this      contention is  that even though the      entire   share   capital   of   the      appellant-Government    has    been      subscribed  by  the  Government  of      India, it  cannot be  predicted the      Government of  India. The companies      which are  incorporated  under  the      Companies  which  are  incorporated      under  the  Companies  Act  have  a      corporate personality of their own,      distinct from that of Government of      India. The  lands and buildings are      vested  in   and   owned   by   the      companies, the  Government of India      only owns share capital."      In the  view of  the above  decisions of this Court, we have no  hesitation to  hold that  the High  Court erred  in thinking that  SAIL was  a department  of the Union of India and most  of the  reasons given in the judgment are based on this wrong premise.      The importer in this case, it is an admitted fact, is a register  exporter  of  steel  pipes  entitled  to  priority allotment of steel either through imports or from indigenous plants like  the appellant.  The allotment of steel was four manufacture  of  steel  pipes  for  export  against  Advance Licence granted  to the  importer from  time to tome. During the relevant period, hot rolled strips in coils manufactured by plants  under SAIL  were available in sufficient quantity and hence the direct imports of the raw material were banned and the  manufacturers  were required to obtain the supplies of the  raw materials  from the appellant against the import licences with  them and/or  release  orders  issued  by  the licensing authority,  namely the Chief Controller of Imports and Exports.      Various categories  of licences  are  granted  for  the purpose of  imports to  the manufacturers.  One such licence was Advance  Licence. Paragraph  149 of  the  import  policy provided for  grant of  Advance Licence/imprest licences and the relevant  part of  paragraph 149 reads ‘the term Advance Licence refers  to c  ases where the import is allowed under the Duty  Exemption Scheme whereas the term  imprest licence will be  used where  the import  is allowed outside the Duty Exemption Scheme.  The Advance Licences, it is stated, which include release  orders are  intended to supply import input or inputs  in short supply for export production. It is also stated that  the licensing  authority  issuing  the  Advance Licences  will   simultaneously  issue  the  collected  Duty Exemption  Entitlement  Certificate.  The  Policy  does  not provide  for   issuance  of  Advance  Licence  without  duty exemption.’      Bearing the  above-said facts   in  mind,  let  us  now consider the issue raised before us.      Admittedly when  the importer  wanted to  register  the indent for  supply  of  hot  rolled  strips  in  coils,  the

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licences  /  Release  Orders  produced  lacked  in  material particulars and  relevant enclosures.  In other  words,  the licence did  not mention  that it was an Advance Licence and no Duty  Exemption Entitlement  Certificate was enclosed and legal undertaking/exemption  of export  bone  was  also  not enclosed. It  was on  this admitted  position, the appellant declined to  register the  indent of the importer. No doubt, the mistake  was committed  by the licensing authority. Does that mean  that the  appellant can  ignore the lacuna in the documents and  register the  indent placed  by the  importer contravention of  the requirements  of the  Scheme? The High Court held  that the  licensing authority  and the appellant being two different wings/departments of Union of India, the appellant on  receipt of  rectified documents  on  26.8.1983 must  register   the  indent  as  if  it  was  presented  on 20.8.1983.  We  are  afraid,  we  cannot  accept  the  above reasoning of  the High Court as we have pointed out that the basic error committed by the High Court was in assuming that the appellant  was a  Department of  Union of India. We have already noticed  that there  are number  of judgments of the Court taking  the view  that a company though fully owned by Union   of   India   when   incorporated   takes   its   own entity/identify and  cannot be  considered as  department of the Union  of India.  Further, it  is seen  from the records that the importer in this case is not a new entrant to plead ignorance though that may not be an excuse. He has presented applications  for   registration  before   and   after   the application in  question and,  therefore, it  must be  taken that the  importer new fully well about the requirements for registering the indent. It is also relevant to note that the appellant on  receipts of  the application  for registration expressly in  writing replies  not  only  pointing  out  the defects  but also stated that they are not taking any action on the  Letter of Credit enclosed along with the licence. it is also an admitted fact that the indent was registered only on 26.8.1983  when all  the relevant  documents after curing the  defects   was  presented  on  that  date.  Under  these circumstances and  in the  light of  the Scheme published by the appellant, we hold that the import (Ambica Tubes) cannot claim as  of right  its order  must be  deemed to  have been registered for supply of raw materials on 20.8.1983 when the documents with all defects were presented.      We cannot  agree with the contention of Mr. Parekh that mere  presentation   of  an  irrevocable  Letter  of  Credit covering the  value  of  requirement  of  raw  materials  is sufficient for  registering the  indent. We have already set out para  2.3 Paragraph  2.3 of the paid for the indent. Mr. Parekh placed  reliance on the last part of Paragraph 2.3 to contend that  the date of presentation of irrevocable Letter of Credit  will be  relevant for  fixing the  price. We have seen that it says price changeable shall be the price ruling on the  date on  which acceptable  and operative,  financial arrangements are  made in  favour of  SAIL by import licence holder eligible  to get  supplies  under  this  Scheme.  Mr. Parekh wants us to ignore the portion underlined above. Mere production of  Letter of  Credits will  not be sufficient to determined the price ruling on the date. It must be given by an import  licence holder eligible to get the supplies under the Scheme. In this case, we have sen that the importer will not fall  under  the  category  of  ‘import  licence  holder eligible to  get supplies  under the  Scheme’ as on the date when the  Letter of  Credit was  presented,  the  licence  / release order was defective. Therefore, we cannot agree with Mr. parekh  that the  importer having produced the Letter of Credit well  before 25.8.1983,  the price  payable  for  the

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supplies must be pre-revised one.      In view  of our  above conclusion,  it is not necessary for us  to consider  and decide  the other  points raised by learned counsel for the appellant.      We have  seen that  the High  Court has not decided but left  open  the  question  relating  to  the  right  of  the appellant to fix the price from the time to time even though that was  the main  issue raised in the writ petition before the High  Court. As  we are  not in  agreement with the view expressed by  the High  Court on  other issues,  it  is  now necessary for the High Court to consider the  issue relating to the  right of the appellant to fix the price from time to time.      It is  open to  the appellant  to raise the question of unjust enrichment  when the  matter is  taken up by the High Court pursuant  to this  remit order.  The parties car place before the High Court necessary material in support of their respective contention on the issue of unjust enrichment.      Before parting  with the case, we would like to observe that the  observations of  the High  Court in  the  judgment condemning the  appellant  for  not  registering  the  order placed by  the  importer  on  the  data  when  the  relevant documents were  presented with defects were totally uncalled for and,  therefore, we  expunge all those observations from the judgment.      In the  result, the  appeal is allowed and the judgment of the High Court is set aside and the matter is remitted to the High  Court to  decide the right of the appellant to fix the price  from time to time and also the question of unjust enrichment. No costs.