TaxTMI 
TaxTMI 
2008 (4) TMI 432
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....of law by adducing sufficient proof and that the writ court cannot grant the relief sought for. But, while dismissing the writ petition, the learned single Judge gave findings that the contract between the parties was void ab initio, that the appellant in W.A. No. 1488 of 2007 (respondent in the writ petition) had committed fraud and answered these questions in favour of the writ petitioner. Aggrieved by that, W.A. No. 1488 of 2007 has been filed on the ground that even if the appellant were to go before a forum where a decision on fact could be obtained, these findings would operate against them. W.A. No. 1502 of 2007 has been filed for restitution of the money invested by the appellant in the said appeal. W.A. No. 1562 of 2007 has been filed by the writ petitioner against rejection of monetary relief as prayed for. 2. The facts of the case are briefly stated hereunder : The appellant in W.A. No. 1488 of 2007, Neyveli Lignite Corporation Limited, 'NLC' for short, intended to set up and install a fertilizer plant some time in the 1960s and for installation of the fertilizer plant, some input machineries were imported. Some time in the 1990s, the plant had to be revamped and t....
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....2005, MMT obtained factory licence and on 18-5-2005, NLC issued the delivery order. The delivery period was 370 days, i.e. from 19-5-2005 to 23-5-2006. NLC also informed the Superintendent of Central Excise about the e-auction and the fact that MMT had purchased the plant and machinery. This was on 30-6-2005. On 23-4-2006, MMT requested NLC to extend the time for finishing the work stating that almost 75% of the dismantling work had been completed. On 25-4-2006, MMT sent a legal notice to STC calling upon them to refund the cheque for the sum of Rs. 150 Crores which was given as a security by MMT. On 1-5-2006, MMT issued a legal notice to STC and called upon them to remove the dismantled plant and machinery and continue to remove whatever stands dismantled from time to time and go ahead with the sale. 4. On 19-5-2006, STC filed a petition under the Arbitration and Conciliation Act before the Delhi High Court. An ex parte interim order was passed by the Delhi High Court restraining NLC from paying any amount to MMT and appointed an Advocate Commissioner. On 7-6-2006, the Director of Revenue Intelligence (DRI), Trichy informed NLC to arrange for an on-the-spot verification. The Ad....
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....nd of EMD etc. On 19-10-2006, the Delhi High Court passed an order restraining MMT from transferring, alienating or encumbering the properties of respondents 1 to 8 as per Annexure 'C' to that application. On 4-11-2006, NLC replied to MMT's notice dated 1-9-2006. On 6-11-2006, MMT filed the present writ petition for quashing the sale notice and for the monetary relief as stated earlier. 6. Before the learned single Judge, NLC contended that the writ petition was not maintainable since there were disputed questions of fact and that there was an arbitral clause in the agreement entered into between the parties and the same has to be invoked. The learned single Judge accepted the case that there were two independent transactions, one between MMT and NLC, which culminated in the auction sale and the other between MMT and STC, which was sub judice. The learned Judge, however, with regard to the transaction between MMT and NLC, held that NLC had knowledge about the importation of the goods subject to the Notification and that it could be sold only after the duties are cleared and otherwise, the stringent provision under the law would follow. The learned Judge held that the machi....
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....G.L. Rawal, Mr. D. Roy Choudhuri and Mr. A.L. Somayaji, learned senior counsel appearing for the respondents as well as Mr. V.T. Gopalan, learned senior counsel and Mr. P. Wilson, learned Assistant Solicitor General appearing for the Union of India. 8. Learned counsel appearing for NLC filed in Court, brief Notes on the factual aspects of the case. Learned senior counsel appearing for MMT filed written submissions. Learned senior counsel appearing for STC also filed written submissions. 9. Learned counsel appearing for NLC would submit that the impugned order suffers from severe infirmities : (a) when the learned single Judge had come to the conclusion, and rightly so, that there were disputed questions of fact, he ought not to have given any findings regarding factual issues. (b) The finding that the goods were prohibited goods and therefore, the contract was void ab initio is ex facie wrong since the goods at the worst are only dutiable goods. As per the Government Notification, NLC could import the goods subject to certain conditions and according to NLC, those conditions were complied with. The DRI has presently initiated proceedings where this issue would be adjudi....
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....ous dispute with regard to the value of the quantity of goods removed. (g) Learned counsel submitted that it is difficult to believe that the writ petitioner, which is a business firm, should now complain that a commercial transaction should be quashed as void, invoking writ jurisdiction and also seeking refund, when all these matters must only be proved by evidence. 10. Learned counsel relied on the following decisions : Har Shankar v. Dy. Excise & Taxation Commissioner, (1975) 1 SCC 737; State of Orissa v. Narain Prasad, (1996) 5 SCC 740; Kerala State Electricity Board v. Kurien E. Kalathil, J.T. 2000 (8) SC 167; State of Bihar v. Jain Plastics and Chemicals Limited, J.T. 2001 (9) SC 582; Lexicon Finance Limited v. Union of India, 2002 (3) Arb. LR 60 (Karnataka) (DB); NIIT Limited v. Ashish Deb, 2004 (2) L.W. 244; Kvaerner Cementation India Ltd. v. Bajranglal Agarwal, 2001 (6) Supreme 265; and Shree Ram Mills Ltd. v. Utility Premises (P) Ltd., (2007) 4 SCC 599. 11. Learned senior counsel appearing for MMT submitted that in spite of a recommendation by the Disinvestment Commission that the fertilizer plant was not financially viable and had to be disp....
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....single Judge on the crucial issues, viz. the fact that the contract is void and that there was fraud on the part of NLC. Once these findings have been arrived at, there is no difficulty at quantifying the monetory value of the claim of MMT. Therefore, the learned senior counsel submitted that the appeal preferred by MMT should be allowed and monetary relief should also be granted. 12. Learned senior counsel relied on AIR 1974 SC 2105 [Babubhai Muljibhai Patel v. Nandlal Khodidas Barot], AIR 1970 SC 802 [Gunwant Kaur v. Bhatinda Municipality] and AIR 1986 SC 825 [Chaitanya Kumar v. State of Karnataka] to support his case that even in exercising its jurisdiction under Article 226, it is possible for the Court to grant the relief, especially when arbitrariness and perversion are writ large. Learned senior counsel also relied on 1989 (39) E.L.T. 316 [R.K. Industries v. Commissioner of Customs & Excise], where it has been held that once goods are permitted to be cleared with conditions, they will continue to be prohibited goods unless the conditions laid thereto are complied with. The decision in 1983 (13) e.l.t. 1321 (S.C.) [Amba Lal v. UOI] was also relied on to show that the contr....
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....sent is vitiated by fraud. 16. Section 2(14) of the Customs Act deals with dutiable goods. Section 2(33) deals with prohibited goods. As per Section 11 of the Customs Act, the Central Government may by notification in the Official Gazette prohibit, absolutely or subject to conditions, the import or export of goods of any specified description. Section 25 deals with the power to grant exemption from duty, and the Central Government does so if it is satisfied in public interest so to do, by notification in the Official Gazette, either absolutely or subject to conditions, goods of any specific description specified in the notification, from whole or part of the duty or excise leviable. Section 111 deals with confiscation of improperly imported goods and Section 125 deals with action to pay fine in lieu of confiscation. 17. The relevant portion of Notification No. 20/1999-Customs dated 28-2-1999 and the Annexure thereto reads as follows "Effective rates of customs duty for goods of Chapters 1 to 99 In exercise of the powers conferred by sub-section (1) of section 25 Customs Act, 1962 (52 of 1962), the Central Government, being satisfied that it is necessary in the public in....
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....learance by the said Department; (ii) recommends, in each case, the grant of exemption under this notification to,- (a) Machinery, instruments, apparatus and appliances, as well as components (whether finished or not) or raw materials for the manufacture of aforesaid items and their components, required for renovation or modernisation of a fertiliser plant; and (b) spare parts, other raw materials (including semi-finished material) or consumable stores, essential for maintenance of the fertiliser plant mentioned above, (hereinafter referred to as the said goods), for such scheme; and (iii) certifies in each case, that the said goods are, or will be, required for the purposes specified above; (2) the value of import of the goods specified in sub-clause (b) of clause (ii) of sub-condition (1) shall not exceed 10% of the value of imported goods specified in sub-clause (a) of the said clause; (3) if the importer furnishes an undertaking to the Assistant Commissioner of Customs to the effect that the said imported goods shall be used for the purposes specified above and in the event of his failure to use the goods for such purposes, he shall pay an amount equal to t....
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....of judgment in the initial assessment of profitability of the adventure but that is a normal incident of all trading transactions. Those who contract with open eyes must accept the burdens of the contract along with its benefits. The powers of the Financial Commissioner to grant liquor licences by auction and to collect licence fees through the medium of auctions cannot by writ petitions be questioned by those who, had their venture succeeded, would have relied upon those very powers to found a legal claim. Reciprocal rights and obligations arising out of contract do not depend for their enforceability upon whether a contracting party finds it prudent to abide by the terms of the contract. By such a test no contract could ever have a binding force. …….. The appellants have displayed ingenuity in their search for invalidating circumstances but a writ petition is not an appropriate remedy for impeaching contractual obligations. ... The writ jurisdiction of High Courts under Article 226 of the Constitution is not intended to facilitate avoidance of obligations voluntarily incurred. That, however, will not estop the appellants from contending that the amended Rules are not....
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....dication by the Customs Authorities and the DRI is complete, it would be seen that even the differential duty need not be paid. There was no bar on the sale and in any event, NLC bona fide was of the opinion that on receipt of its clarifications, the DRI had dropped further course of action and that is how NLC proceeded with the e-auction. On the other hand, according to MMT, there was deliberate suppression of the post-importation conditions, which amounts to fraud. According to STC, NLC had no title to sell the goods that were e-auctioned and they had suppressed the fact that the goods were imported subject to conditions and MMT, being an expert in disposal of scrap materials, had induced NLC to suppress the real valuation and there was connivance between NLC and MMT, to deceive STC and induce STC to part with Rs. 150 Crores. 23. Next, according to NLC, MMT had entered into a MoU contrary to the terms of the contract, for which STC had advanced Rs. 150 Crores, which was utilised by MMT for making the deposit as sale proceeds. On the other hand, according to MMT, the arrangement with STC was purely a financial arrangement and nothing more. There was no sale and there was no vio....
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....ients : (a) A suggestion of that which is not true by one who does not believe it to be true as if it were a fact. (b) Active concealment of a fact by one who has knowledge or belief of the fact. (c) A promise made by one without any intention of performing it. (d) Any other act which intended to deceive or any act which the law specifically declares to be fraudulent. 30. The learned single Judge, after extracting Section 17 of the Contract Act, has held that a reading of the said section would make it abundantly clear that not only the representation, either oral or written, but also the active concealment would constitute fraud and that in the instant case, the officials of NLC "should have got the clear knowledge". It is clear that the Court had presumed that the officials had the knowledge of the vitiating circumstance. On the other hand, according to NLC, since they had addressed a communication to the Department, they presumed that there was no duty payable and the e-auction notice was issued bona fide. The question whether this can be accepted would depend upon the documentary and oral evidence and not on presumption or merely on the basis of available records....
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....n or modernisation of a fertiliser plant, and spare parts, other raw materials (including semi-finished material) or consumables stores, essential for maintenance of the fertilizer plant mentioned above. Now, the goods in question are exempt from duty wholly or partially, in exercise of the powers conferred under Section 25(1) of the Act. Therefore, it is clear from this that the import of the goods is not prohibited, but partial or whole exemption from duty is granted subject to certain conditions. According to NLC, it had complied with the conditions inasmuch as the imported goods were 'used' while revamping the fertilizer plant. The fact that subsequently a decision was taken because of the policy of the Government, which rendered the fertilizer plant unviable, would not justify a conclusion that the condition subject to which exemption from duty was granted had been violated. On the other hand, it is the case of the DRI that this issue has to be adjudicated upon. As per Section 125 of the Customs Act, if the goods are not prohibited, then the adjudicating officer shall give to the owner of the goods an option to pay in lieu of confiscation, such fine as the officer thinks it fi....
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....ontract and Article 226 is not the forum where a decision can be rendered. 34. (1985) 3 SCC 267 (Ram and Shyam Company v. State of Haryana) was a case where a private deed secretly offered was accepted and the highest bidder was thrown out. In that case, the Supreme Court held that it is not necessary for the party to be sent to avail of the alternate remedy and that even in the writ court, the relief sought for can be granted. In ABL International Ltd. v. E.C.G.C. of India Ltd., 109 (2004) Delhi Law Times 415 (S.C.), the Supreme Court held that in a given case, it was open to the writ court to give monetary relief also, but that would depend on the facts of the case and where there is no dispute on the factual issues. Here, at every stage, there seems to be a dispute between the parties and not merely minor disputes which are raised only to throw out the writ jurisdiction, but real basic disputes. Therefore, monetary relief cannot be granted in exercise of writ jurisdiction. 35. The other ground on which the impugned order suffers from an error is where it holds that because the agreement is void ab initio and the contract is prohibited by law, the arbitration clause cannot ....
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....such void contract cannot be referred to arbitration. The said judgment was rendered while interpreting the provisions of the Arbitration Act of 1940. It is seen that the new Arbitration Act has come into force. Probably taking note of the law declared by the Supreme Court, the Parliament in its wisdom has tried to remedy the situation by enacting Section 16(1) of the new Act. It will be appropriate to reproduce Section 16 of the Act, which reads as follows : '16. Competence of Arbitral Tribunal to rule on its jurisdiction.- (1) The Arbitral Tribunal may rule on its own jurisdiction ruling on any objections with regard to the existence or validity of the arbitration agreement, and for the purpose - (a) an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract; and (b) a decision by the Arbitral Tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause." A perusal of the aforesaid provision makes it clear that an arbitration clause in an agreement shall be treated an agreement independent of other terms of the contract and even if the Arbitral ....
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....hether the parties are still at issue on any such matter. If the chief Justice does not, in the strict sense, decide the issue, in that event it is for him to locate such issue and record his satisfaction that such issue exists between the parties. It is only in that sense that the finding on a live issue is given. Even at the cost of repetition we must state that it is only for the purpose of finding out whether the arbitral procedure has to be started that the Chief Justice has to record satisfaction that there remains a live issue in between the parties. The same thing is about the limitation which is always a mixed question of law and fact. The chief Justice only has to record his satisfaction that prima facie the issue has not become dead by the lapse of time or that any party to the agreement has not slept over its rights beyond the time permitted by law to agitate those issues covered by the agreement. It is for this reason that it was pointed out in the above para that it would be appropriate sometimes to leave the question regarding the live claim to be decided by the Arbitral Tribunal. All that he has to do is to record his satisfaction that the parties have not closed th....