2025 (9) TMI 937 - HC - Customs

Prior order corrected to Rs.1.73 crore; petitioner given six weeks to furnish Rs.1.23 crore bank guarantee or consolidated Rs.1.73 crore

HC modified prior order: the reference to Rs.50 lakhs is corrected to Rs.1.73 crores. The petitioner is granted six weeks to furnish an additional bank ... Seeking modification of order - provisioanl release of goods upon acceptance of the bank guarantee - HELD THAT:- It is satisfied that a modification is warranted. Accordingly, the reference to Rs. 50 lakhs in order dated 23 June 2025 should be read and construed as a reference to Rs. 1.73 crores. However, at the request of Mr. Jadhav, we grant the Petitioner 6 weeks’ time to submit an additional bank guarantee for Rs. 1.23 crores or to submit a consolidated bank guarantee for Rs. 1.73 crores. If the consolidated bank guarantee is furnished, the customs authorities can return the original bank guarantee of Rs. 50 lakhs to the original Petitioners. If there is failure of compliance, then it is open to the customs authorities to take such actions as may be permissible under the law, including approaching this Court for suitable reliefs. This is because the original Petitioners cannot take advantage of an incorrect statement made on their behalf (may be bona fide) and walk away with provisional release of their goods by furnishing a bank guarantee of only Rs 50 lakhs instead of Rs 1.73 Crores. Now that the original petitioners have admitted their mistake, it is believed that there should be no resistance or hesitation in making amendments. This Interim Application is disposed of in the above terms without any costs order, considering the fair approach adopted by the learned counsel for the original Petitioners. All concerned are to act upon an authenticated copy of this order. ISSUES PRESENTED AND CONSIDERED 1. Whether the Court should modify its prior order fixing the amount of a bank guarantee for provisional release of goods where the principal basis for the quantum was an incorrect statement about the applicable duty rate. 2. Whether an incorrect (possibly bona fide) statement made by counsel for a party can be used to fix obligations of another party and whether that justifies modification of the Court's order. 3. Whether the customs authorities, having acted on the original order and accepted the lower bank guarantee, are precluded from seeking enhancement of the guarantee or otherwise prejudiced by enforcement of such modification. 4. What time-frame and mode of compliance is appropriate where the Court directs enhancement of a previously accepted bank guarantee, and what consequences should follow non-compliance. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Power to modify prior order fixing bank guarantee when premised on incorrect factual/legal basis Legal framework: Courts possess inherent and interlocutory powers to vary or modify earlier orders where material facts or legal premises underpinning the order are shown to be incorrect, or when justice requires adjustment of relief to reflect the correct legal entitlement. Precedent Treatment: The judgment does not cite specific precedents; the Court proceeds on accepted principles of judicial power to correct or modify orders in light of changed or newly-ascertained circumstances. Interpretation and reasoning: The Court identified that its earlier determination of the bank guarantee (Rs. 50 lakhs) rested principally on a representation that the relevant duty would be 6% of value. Subsequent clarification established the correct duty rate to be 20% under the governing notification, materially altering the appropriate security amount. Because the mistaken premise critically affected the quantum, modification is warranted to align the interim security with the correct legal charge. Ratio vs. Obiter: Ratio - where an interlocutory order fixing security is based on an erroneous legal/factual premise, the Court may modify that order to reflect the correct legal position. Conclusion: The Court may and should modify its earlier order to substitute the correct bank guarantee amount reflecting the 20% duty basis. Issue 2 - Effect of counsel's incorrect (bona fide) statement and the parties' ability to benefit from it Legal framework: Parties (and their counsel) are bound by representations made to the Court; an incorrect statement, even if bona fide, does not create a binding advantage allowing a party to retain benefits obtained as a result of the misstatement where correction would rectify the substantive rights of another party or public authorities. Precedent Treatment: The Court treats the principle as established and applies it without invoking contrary authority; it emphasizes equitable considerations rather than treating the misstatement as an absolute bar to correction. Interpretation and reasoning: The Court accepted counsel's admission that an incorrect statement was made. It concluded that the original petitioners cannot be allowed to 'take advantage' of that incorrect statement and retain provisional release on an inadequate guarantee. The bona fides of the misstatement mitigate the imposition of punitive consequences (court grants lenient compliance time and no costs), but do not preclude correction of the order to protect statutory revenue and public authorities. Ratio vs. Obiter: Ratio - an incorrect counsel representation that materially affects judicial relief does not estop correction; equitable relief (modification) may be granted even where the error was bona fide. Conclusion: The Court will modify the order despite the representation being bona fide; equitable treatment (time to cure, no costs) is appropriate, but the substantive correction stands. Issue 3 - Whether acceptance of the original bank guarantee by authorities constitutes waiver, estoppel, or prejudice preventing modification Legal framework: Acceptance of interim compliance by authorities pursuant to a Court order does not necessarily constitute waiver of rights where the acceptance was compelled by a time-bound judicial direction; the equities of fair conduct by authorities are relevant but do not bar restoration of correct security where the accepting party seeks to rectify the underlying error. Precedent Treatment: The Court applies established equitable principles - voluntary forbearance by authorities in obedience to a Court order does not operate as waiver of substantive statutory rights nor as estoppel against seeking relief to enforce those rights. Interpretation and reasoning: The Court recognized that customs authorities accepted the Rs. 50 lakh guarantee only because of the Court's direction and the time-sensitive nature of compliance. That fair conduct does not prejudice the authorities; nor does it amount to waiver preventing modification to align security with the correct duty rate. Accordingly, acceptance will not defeat the present modification, though the Court affords remedial time to avoid undue hardship arising from reliance. Ratio vs. Obiter: Ratio - compliance by authorities with a court direction does not create an estoppel where the underlying order is subject to correction based on a material error of fact or law. Conclusion: No waiver or estoppel arises from the authorities' provisional acceptance; modification is permissible, coupled with equitable accommodation for remediation. Issue 4 - Appropriate remedy, time-frame for compliance, and consequences of non-compliance Legal framework: When modifying interim security orders, Courts may prescribe specific compliance mechanisms and reasonable time for remedying the defect; failure to comply authorizes affected authorities to exercise statutory powers or seek further judicial relief. Precedent Treatment: The Court frames relief by balancing protection of public interest (revenue) and fairness to the party who obtained relief on account of a mistaken representation, granting a finite period to cure without imposing costs. Interpretation and reasoning: Having found modification justified, the Court substituted Rs. 1.73 crores for Rs. 50 lakhs and afforded six weeks to furnish an additional bank guarantee of Rs. 1.23 crores or a consolidated guarantee of Rs. 1.73 crores. If a consolidated guarantee is furnished, the original guarantee may be returned. The Court warned that failure to comply leaves the customs authorities free to take lawful action, including approaching the Court for suitable reliefs. The Court declined to penalize the petitioners with costs, given the admitted fair approach, but made compliance mandatory to protect statutory entitlements. Ratio vs. Obiter: Ratio - equitable augmentation of security with a reasonable cure period is an appropriate remedy where an earlier interim order was founded on an incorrect premise; non-compliance permits statutory enforcement or pursuit of further judicial remedies. Conclusion: The Court ordered enhancement of the bank guarantee to reflect the correct duty exposure, provided a six-week compliance window with options for consolidated substitution, and reserved to the authorities their statutory and judicial remedies upon non-compliance; no costs were imposed in light of counsel's fair conduct.