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Shri Ambica Mills Ltd. Vs. the Steel Authority of India Ltd. and ors. - Court Judgment

LegalCrystal Citation
SubjectCompany
CourtGujarat High Court
Decided On
Judge
Reported in(1985)2GLR664
AppellantShri Ambica Mills Ltd.
RespondentThe Steel Authority of India Ltd. and ors.
Cases ReferredAssociation of Natural Gas Consuming Industries v. O.N.G.C.
Excerpt:
- - 2. this petition raises an interesting question of constitutional law and in this judgment we are required to deal with the scope and ambit of public authorities' powers which obviously are conferred on them to enable them to serve the public better rather than to make them boss over citizens. the government is in overall charge of the import of this raw material and also is interested in the export of the final product, namely, the steel tubes, for which there is good market outside india, and which in its turn can provide the union of india with much needed foreign exchange. says is that the high courts have power, but in their discretion they should refuse to entertain the claims for refund of money alleged to have been illegally collected as tax because in a suit, many defences.....n.h. bhatt, j.1. this is a petition by one limited company and its divisional secretary in charge of one of its divisions and the respondents herein are the steel authority of india limited (popularly known as 'sail' and to be referred to as such for brevity's sake hereinafter) and the union of india and its officers.2. this petition raises an interesting question of constitutional law and in this judgment we are required to deal with the scope and ambit of public authorities' powers which obviously are conferred on them to enable them to serve the public better rather than to make them boss over citizens.3. in order to understand the controversy, a few facts are required to be slated. the petitioner company, that is, shri ambica mills ltd. running ambica tubes division, is engaged in the.....
Judgment:

N.H. Bhatt, J.

1. This is a petition by one limited Company and its Divisional Secretary in charge of one of its Divisions and the respondents herein are the Steel Authority of India Limited (popularly known as 'SAIL' and to be referred to as such for brevity's sake hereinafter) and the Union of India and its officers.

2. This petition raises an interesting question of constitutional law and in this judgment we are required to deal with the scope and ambit of public authorities' powers which obviously are conferred on them to enable them to serve the public better rather than to make them boss over citizens.

3. In order to understand the controversy, a few facts are required to be slated. The petitioner company, that is, Shri Ambica Mills Ltd. running Ambica Tubes Division, is engaged in the manufacture of steel tubes. For the purpose of manufacture of tubes, supply of raw material viz. hot-rolled strips in coils is required. The Government is in overall charge of the import of this raw material and also is interested in the export of the final product, namely, the steel tubes, for which there is good market outside India, and which in its turn can provide the Union of India with much needed foreign exchange. With this end in view, the Union of India has been handling the natural resources, particularly iron and steel, which are in short supply and more in demand, and the final control of the import of raw materials and export of the finished goods is within the hands of the Union of India. As far as the supply of this and other type of raw materials is concerned, the Union of India has floated one Division of its or one instrumentality of its, which is the present respondent No. 1, the SAIL. It was no longer in controversy before us that it is a department so to say of the Union of India, but its administration is run separately in the interest of efficiency. Being the Department of the Union of India, it has to work according to the guidelines and policies laid down by the Union of India from time to time.

4. There is The Imports and Exports (Control) Act, 1947 empowering the Central Government to prohibit, restrict or otherwise control imports and exports. In exercise of the powers conferred by this Act, the Imports (Control) Order, 1955 has been promulgated. Schedule 1 to the said Order contains the list of articles of which imports is controlled and hot-rolled strips in coils are one of them. The import of such items is prohibited except under certain circumstances with which we are not concerned. There is also the Exports (Control) Order, 1977, regulating the export of commodities subject to export licensing. The Government time and again has been issuing import and export policy declarations and the latest one with which we are concerned in this petition is such a policy of the Government of India in its Ministry of Commerce and it is styled as the Import and Export Policy, April 1983 - March 1984. It is not clear whether this policy as such is issued under the Import and Exports Control Orders of 1955 and 1977 respectively. It may be so, but even if it be not so, these policy declarations are at any rate the guidelines as per which executive functions are to be carried out by the Union of India or the Government of India by virtue of its powers recognised by Article 298 of the Constitution of India. As far as hot-rolled strips in coils are concerned, of late they are supplied to the indigenous manufacturers as if they are being allowed to be imported from outside. The manufacturers, who are given such materials under the import licence, are required to carry out certain exports obligations and the Import and Export Policy for April 1983 to March 1984 deals with all these factors very elaborately and exhaustively. In this case. 5030 tons of hot-rolled strips in coils were required by these petitioners and for that, an import licence was prayed for by them and it was actually given also to them in the month of August 1983. The said licence is to be found at Annexure E and it was transmitted to these petitioners as per the covering letter at Annexure F. The Controller of Imports and Exports for Joint Chief Controller of Imports and Exports having his office in Ahmedabad had adressed that letter, Annexure F, to Shri Ambica Tubes. The subject-matter of the letter is 'grant of import replenishment against exports'. The said letter specifically mentions as follows:

With reference to your application dated...on the above mentioned subject, I enclose herewith the following licence.

----------------------------------------------------------------------------Licence No. Date for Rs. G.C.A.ADVANCE R/o. 0024671 18-8-83 1,38,30,000/-----------------------------------------------------------------------------You are requested to check carefully the licence and if any deficiences are noticed. the same should be brought to the notice of this office along with licence for necessary action immediately on receipt of the letter....

Unfortunately for these petitioners, the licence at Annexure E, as it was given, did not specifically set out the two requirements. The first requirement was that it was with duty exemption against other export nor did it mention there that it was advance release order under duty exemption scheme. This was obviously a slip on their part. For the purpose of having the goods released, the petitioners had to approach the respondent No. 4 at its office in Ahmedabad, which is entitled to register this claim and this was handed over by the petitioners on 19-8-83 itself. Under paragraph 7 of appendix 19 of the said policy, the licensing authority issuing the advance licence has also simultaneously to issue the connected Duty Exemption Entitlement Certificate. So, the respondent No. 4's officer, namely, the Joint Controller had to issue the certificate along with the licence, but the public officers handled their affairs in a casual fashion and. therefore, that certificate was not annexed, though it was the obligation of the Joint Controller and which obligation must be to the knowledge of the respondent SAIL.

5. In order to execute these policies of the Union of India, the SAIL under the terms of the Import policy declaration has to make announcement of the price. Such a declaration by the SAIL was published in the Economic Times of 10-6-83 and it is Captioned as 'Scheme for supply of certain categories of indigenously produced steel materials at competitive prices against valid import licences'. Paragraph 1 of the said announcement mentions that in terms of the provisions of paragraph 222(1) of Chapter 20 (Special Provisions) of the Import and Export Policy, April 1983-March 1984 (Volume 1 - Imports and Export Promotions), the scheme for supply of certain categories of indigenously produced steel materials at competitive prices against valid import licences announced by the Government vide Public Notice No. 58-ITC(PN)/82 dated 11-12-82 issued by the Chief Controller of Imports and Exports (CCI & E), Ministry of Commerce, New Delhi will continue to be in force during the Import Policy period 1983-84. Paragraph 2.3 of the said announcement mentioned as follows:

2.3. The prices as announced for supply of materials under this scheme shall be subject 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 despatches by rail and the date of the Delivery Challan of SAIL'S stockyard in the case of ex-yard delivery, except in the following cases where 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 arrangement made in favour of SAIL is such that it enables SAIL to effect despatches on a continuing basis without any restrictions about delivery schedule; this will also include an irrevocable confined automatic revolving letter of credit (L/C) without recourse to the drawer which would enable SAIL to effect despatches on a continuing basis without quantitative or other restrictions.

As per the above quoted Clause (a) financial arrangements are to be made in favour of SAIL the respondent No. 1, to enable the SAIL to effect despatches on a continuing basis without any restrictions about delivery schedule and this included an irrevocable confirmed Letter of Credit (L/C) without recourse to the drawer which would enable the SAIL to effect despatches on a continuing basis without quantitative or other restrictions. The petitioners were obviously interested in availing themselves of this facility and, therefore, they had procured an irrevocable confirmed automatic revolving Letter of Credit, but in order to avoid this periodic attention to this problem, they had given an irrevocable confirmed Letter of Credit for the entire amount covered by the licence or release order which is to be found at Annexure H. Obviously, this was addressed to SAIL at Ahmedabad. There is no controversy before us that the Ahmedabad Branch of this SAIL having their head office at Calcutta is entitled to receive such requisitions. This Letter of Credit is dated 19-8-83. One Mr. Navlakha, the officer of the petitioner No. 2, was handling this subject-matter on behalf of the petitioner company. On 20-8-83, the said Letter of Credit was submitted, but certain amendments were suggested, which were duly carried out by the Bank and the Letter of Credit was resubmitted to the same Ahmedabad Office on 22-8-83. The Peon delivery book at page 193 coupled with the affidavit filed by one Mr. M. P. Bhagat, the Divisional Secretary of the petitioner company, makes it amply clear that this amended Letter of Credit was with the Ahmedabad Office of the respondent No. 1. However, as said above, the Release Order issued by the Controller of Imports and Exports, Annexure E, was defective in its make up. Though the covering letter specifically called it an advance release order, the words 'advance release order' were actually not transcribed on Annexure E. On the contrary, two possible categories were mentioned side by side without either of the two being scrapped. The words are manufacturer, exporter or exporter. The petitioner was a manufacturer and not actual user, but in one sense the petitioner was an actual user and also was a manufacturer/exporter. This also must have been known to the respondent No. 1. As said above, the endorsement about duty exemption against other export scheme was not transcribed on the release order itself. So, the local officer of SAIL, i.e. the officer at Ahmedabad picked up this point and informed the petitioners by telex message on 23-8-83 as follows vide Annexure 1 at page 90:

We have received an L/C for 1,77,26,220/- from Union Bank of India for supply of 5768 tonnes of HR coils against PN-58 Scheme. When you discussed this matter with the undersigned on Saturday the 20-8-83, we had requested you to meet our GMM at Bombay and get his clearance. This has been suggested to you since there were some lacuna in the release order produced by you. We are not taking any action on the L/C at present. However, we are keeping the same in our office.

This telex message dated 23-8-83 makes certain position very clear. The Letter of Credit was received by the first respondent's Ahmedabad Office before that date and there was nothing to pick up cudgels with in that regard. (This is required to be emphasised at this stage for the reason that belatedly in order to strike the petitioners with, all possible pleas are sought to be raised and one of such pleas was that Letter of Credit was not in full compliance with the requirements. For that purpose, reliance was sought to be placed on an endorsement made by one Mr. Navlakha of the petitioner No. 2 in the letter of the petitioner company addressed to the Zonal Manager of the respondent No. 1 at Bombay. There is an endorsement made by Mr. Navlakha, which reads as follows:

You are already in receipt of the L/C as per your message on telex No. 2 of 23-8-83. We are following up with our Bankers to amend the L/C as suggested by Mr. Utpat in your account selection.

Making row over on the basis of this statement of Mr. Navlakha, it was contended very vehemently by Mr. Desai, the Learned Counsel for the respondent No. 1, that even on 24-8-83 the Letter of Credit also was pot duly complied. Mr. Navlakha has explained this endorsement by his affidavit to be found at page 196. He says that he was not personally aware of the due amends in the Letter of Credit having been carried out and that is why he had made an endorsement because he was aware of the situation as was there on 19th and 20th August 1983 and that he was not aware of the amendments having been made by the Bank and their having handed over the amended Letter of Credit to the respondent No. l's office at Ahmedabad on 22-8-83, This affidavit of Mr. Navlakha stands uncontroverted and so has remained uncontroverted the Bank's delivery book which mentions that the Letter of Credit in connection, with the petitioner company was handed over to the SAIL'S Ahmedabad Office. After this much clarification and in the absence of any dispute regarding the Letter of Credit in the telex communication dated 23-8-83 referred to hereinabove, Mr. Desai subsequently did not pursue this question. This much clarification is necessary at this stage).

6. It is to be noted with pertinence that as per that telex communication referred to above, the only lacuna that was noticed by the Ahmedabad office of SAIL was in the release order. There is no mention about any other lacuna there. There is no mention about any undertaking not given, but these two circumstances are picked up to strike the petitioners with, when the matter came to a dispute between the parties. We have already noted above that the Controller of Imports and Exports realised his mistake and/or rather omissions in the Release order and had made due amends on 24.8.83. As the petitioners were referred to the Bombay Office, they addressed a letter to them on that day, namely, 24-8-83, and it is to be found at page 171. The petitioner company referred in that letter to their Indent No. 7/83 dated 19-8-83 given to the SAIL'S office at Ahmedabad for the supply of materials against valid import licence and they specifically gave duplicate xerox copies of the original and also duplicate xerox copy of the Duty Exemption Entitlement Certificate, which the Joint Controller as a matter of fact was required to issue simultaneously with the release order. The letter very specifically stated that the original release order in duplicate and the Duty Exemption Entitlement Certificate booklet had been submitted to the Joint Controller at Ahmedabad for last phase of procedure and would be sent to the Bombay Office of SAIL immediately on receipt and this was received on 26.8.83. A party receiving this material under this release order is also required to furnish an understanding about the import obligation. As per Annexure D, which is an extract from Appendix 19 of the Import and Export Policy for April 1983 to March 1984, paragraph 14, this export bond is to be executed by the licence holder before clearance of the first consignment. It is not required to be given along with the release order. Clause 7 of the very appendix 19 also reiterates the licensing authority's obligation to issue along with the advance licence the connected Duty Exemption Entitlement Certificate, which in this case was delayed because of the lethargy or inefficiency of the Joint Controller's Office at Ahmedabad, for which the petitioners were not to be blamed. Condition No. 2 of the Release Order, Annexure E, also reiterates the same thing. It says that in order to ensure fulfilment of the export obligation as mentioned in paragraph above, the firm before clearance of the first consignment would execute a combined bond/legal undertaking as in the proforma given. So it is clear that as per the solemn Import and Export policy declaration or announcement, this bond or legal undertaking is to be furnished before clearing the first consignment. The SAIL, the mighty public body, the agency of the Union of India, arrogating to itself the super master's power, picked up these alleged holes in the armour of the petitioners and then stated that the release order was not in order, that it had lacunas and that the party should approach for clearance to the Bombay Office; and conveniently shunted off its responsibility to the other side. It was no fault of the petitioners that the release order, though the covering letter mentioned that it was an advance release order, did not mention that it was an advance order as far as the main release order is concerned. Nor was it the fault of the petitioners that they did not describe the advance release order as the one issued under Duty exemption scheme. They made these amends on 24.8.83, as the release order, Annexure E, itself mentioned. The respondent No. 1 picked up these two circumstances and stated that the indent was not and could not be registered on 24.8.83.

7. It may appear that date 24.8.83 has assumed significance in this case and it is obviously so. On and from 25.8.83, the SAIL enhanced the prices of their supplies from Rs. 2460/- to Rs. 2750/- per metric ton. Taking shelter beneath this technical plea of the release order being not registered by the petitioners by 24.8.83 midnight, the SAIL insisted on the petitioners to pay the price at the rate of Rs. 2750/- per metric ton and not Rs. 2460/- and this is the bone of contention between the parties in this case. Under protests the petitioners paid the price of the enhanced rate.

8. The petitioners' prayers in this petition, therefore, are as follows:

(A) quashing and setting aside the announcement of SAIL published in the newspapers dated 1st September 1983 (Annexure J hereto) revising the competitive price from Rs. 2460/- to Rs. 2750/- as being ultra vires and violative of Articles 14, 19 and 300A of the Constitution;

(B) directing that the indent of the petitioner company against the Advance Release Order dated 18.8.83 should have been registered at the price of : Rs. 2460/- per metric tonne and directing the respondent-authorities to charge the said price only from the petitioner company and restraining the respondent-authorities from charging the revised enhanced price of Rs. 2750/- per metric tonne from the petitioner company in respect of the materials supplied against the abovesaid release order:

(C) directing the respondent authorities to treat the indent of the petitioner company against the Release order dated 18.8.83 as registered prior to the midnight of 24.8.83 and directing the respondent-authorities to refrain from recovering the price higher than Rs. 2460/- per metric tonne from the petitioner company in respect of the goods to be supplied under the Release Order dated 18.8.83 and further directing the respondent-authorities to refund the difference between the higher price and the said price of Rs. 2460/-per metric tonne with interest at 12% per annum;

(D) directing the respondent authorities to refrain from treating the indent of the petitioner-company for supply of goods against the Release Order dt. 24.8.83 as not governed by the price of Rs. 2460/- per metric tonne and restraining the respondent authorities from requiring financial arrangements for higher amount from the petitioner-company;

(E) restraining the respondent-authorities from requiring the petitioner-company to fulfil higher export obligation than that which it would be required to fulfil on the basis that the price of Rs. 2460/- per metric tonne was applicable to its indent in pursuance of the abovesaid Release Order placed on the Steel Authority of India Limited.

9. The petitioners' grievance is not confined to payment of larger amount alone. The export obligation is to the extent of 143% of the value of the material taken under the release order. If the value of the materials supplied goes higher, the export obligation also correspondingly goes higher and this would certainly hit hard the petitioners and that is why the various prayers that are set out above were sought for. The petitioners immediately requested the SAIL, wielding high powers, to accede to their request vide Annexure L dated 29.8.83 followed by another representation Annexure O dated 19.9.83 and another representation at Annexure R dated 10.10.83. The Respondent No. 1 was not ready to budge an inch. Annexure T dated 3.12.83 at page 131 is the reply which the petitioners received from SAIL. Even in that reply, there is no dispute that Letter of Credit was not in any way in order. This is required to be emphasised because in the affidavit-in-reply and at the time of arguments, even this alleged flaw in the Letter of Credit was initially sought to be made a mountain of. The stand of the SAIL is to be found in paragraph 5 of the said given after about four months of the controversy. The flaws that were emphasised were as follow and we reproduce their contention in their own words from that reply:

The Release Order dated 18.8.83 submitted by your representative did not indicate that it was an advance Release Order nor did it bear the usual endorsement to the effect that 'legal undertakings accepted as per condition No. 2 of the slip attached with RO of the JCCI & E. Further, the release order was issued in favour of an Actual user only and not in favour of a registered Exporter. This admitted position is further supported by the fact that admittedly the Licensing Authority corrected the release order and put the word 'advance' on the Release Order on 24/26.8.83. ,Still further, admittedly the Release Order did not indicate that it was subject to Duty Exemption. In other words, it was not accompanied with the DEEC as required under paragraph 7 of Appendix 19 of the Import Policy. Therefore, you will appreciate that for want of incomplete/incorrect (it should be complete and correct) documents, we were not sin a position to register your demand on the date when your representative called on our Branch Office at Ahmedabad on 20.8.83. The mere establishing of the L/C by you, in the above circumstances, was not in consonance/ compliance with our June Announcement and, therefore, could not be construed as deemed registration of your demand as alleged by you in your aforesaid representation....

This letter once for all shows that at least in December 1983 only lacuna they noticed, and they wanted to act on or to exploit, was the lacuna in the release order. There is no question of any defect or lacuna in the Letter of Credit. This is a belated innovation on their part. It is in the light of the above circumstances, as we have found, that the questions that are raised before us are required to be decided.

10. After Mr. Mehla had advanced his arguments, Mr. Desai rose for making submissions on behalf of SAIL authorities. It is to be noted with pertinence that Union of India, which should include the Joint Controller of Imports and Exports, have chosen not to appear and contest this petition. As a matter of fact, the Joint Chief Controller of Imports and Exports is a party before us. The Chief Controller of Imports and Exports is impleaded as the respondent No. 3. All of them have chosen not to contest this petition and the only contestant before us is this another agency of the Union of India, namely, SAIL, and it had contested this claim as if it is an independent, autonomous, sovereign body, having no moorings or links with the Union of India.

11. Mr. Desai, who argued this matter for the respondent No. 1 then, at the stage of his reply to Mr. Mehta's arguments raised a preliminary contention, so to say. His argument in a nutshell was that after having paid the price and after having taken delivery of the goods in question, it became a matter of concluded contract between the petitioners on one hand and the SAIL on the other; that it was to all intents and purposes a claim for refund of the part of the price paid voluntarily; that the petition was filed after about eight months of the alleged accrual of the cause of action to the petitioners; and, therefore, this petition raising purely a civil dispute between the two parties should be left to be decided in a proper civil forum where all pleas in defence can be properly raised and litigated. This preliminary objection of Mr. Desai deserves to be dealt with first. Five Judges of the Supreme Court in the case of Suganmal v. State of Madhya Pradesh : [1965]56ITR84(SC) held that though the High Courts have power to pass any appropriate order in the exercise of the powers conferred on them under Article 226 of the Constitution, a petition solely praying for the issue of a writ of mandamus directing the State to refund the money alleged to have been illegally collected by the State as tax is not ordinarily maintainable for the simple reason that a claim for such a refund can always be made in a suit against the authority which had illegally collected the money as a tax and in such a suit, it would be open to the State to raise all possible defences to the claim, defences which could not in most cases be appropriately raised and considered in the exercise of writ jurisdiction. It is to be noted with pertinence that the Supreme Court does not lay down an absolute rule of prohibition law. All it. says is that the High Courts have power, but in their discretion they should refuse to entertain the claims for refund of money alleged to have been illegally collected as tax because in a suit, many defences like the plea of waiver, limitation, etc. could be raised over and above the defences on facts. Before us, this not a case of mere refund. Here, the executive action of a public authority is challenged. In this case, not only the refund is claimed, but the very right of this body to fix the prices at any time at its whim and caprice is challenged, though guidelines laid down by the Union of India in the Import Policy specifically provide that 'the Steel Authority of India will supply the material upto the extent covered by the licence at competitive price, which shall be fixed on a quarterly basis for this purpose'. So, in this petition, a wider question of law regarding authority of this public agency is on the anvil. So, it is not a mere claim for refund of money allegedly unauthorisedly collected. In this case, before the matter was admitted a notice was issued by another Division Bench of this Court on 23.7.84 and thereafter another Division Bench of this Court was pleased to issue rule. It is, therefore, clear that after hearing the other side, this Court thought it fit in the facts and circumstances of the case, to exercise its powers under Article 226 of the Constitution of India, which powers are not denied even by this authority in Suganmal's case (supra).

12. To the same effect is another earlier judgment of the Supreme Court, again of five Judges, in the case of State of Madhya Pradesh v. Bhailalbhai : [1964]6SCR261 . There, the Supreme Court generally observed that the special remedy provided under Article 226 was not intended to supersede completely the modes of obtaining relief by an action in a civil court or to deny defence legitimately open in such actions. What is emphasised is that the power to give relief under Article 226 is a discretionary power and it is all the more so in the case of writs in the nature of mandamus. The learned Judges proceeded further to state that whether repayment should be ordered in the exercise of this discretion will depend in each case on its own facts and circumstances and it was not easy nor is it desirable to lay down any rule for universal application. This authority, in our view, helps the petitioners more than the respondent No. 1.

13. Then was cited before us another judgment of three Judges of the Supreme Court in the case of M/s. Radhakrishna Agarwal and Ors. v. State of Bihar : [1977]3SCR249 . There, the Supreme Court was called upon to decide the questions in the realm of Articles 226, 298 and 14 of the Constitution of India. This authority was relied more in support of the proposition that this was a case dealing with purely contractual relations. The Supreme Court held that 'at the very threshold or at the time of entry into the field of consideration of persons with whom the Government could contract at all, the State, no doubt, acts purely in its executive capacity and was bound by the obligations which dealings of the State with the individual citizens import into every transaction entered into in exercise of its constitutional powers. But after the State or its agents have entered into the field of ordinary contract the relations are no longer governed by the constitutional provisions but by the legally valid contract which determines the rights and obligations of the parties inter se'. In the case on hand, what the petitioners challenge is not something flowing from the contract, but they are challenging the executive action of the SAIL at a time when the contract was not there. As a matter of fact, this sales and purchase is not an ordinary transaction of sale and purchase between the two willing parties. The SAIL is an Agency of the Central Government having monopolistic control over all raw materials available in the import. It sells the goods under its control to the petitioners or others, not as a seller in the market. It only channels goods under its control under the orders of the mighty Union of India. The acts though ostensibly looking as importing mercantile trappings are as a matter of fact the extension of the executive power of the State and this power flows from the public power of the Union of India flowing from Article 298 of the Constitution of India, if not under the Import and Export (Control) Act, 1947 and the orders issued thereunder, namely, the Import (Control) Order, 1955 and the Export (Control) Order, 1977. If the acts of the Union of India may not be strictly falling under this Exports (Control) Order and Imports (Control) Order, then they are the executive powers in respect of the subject matters in the Union List. Other authorities also were cited by Mr. Desai in further buttress of his submissions and they are the authorities in the case of Jagdish Prasad Pannalal v. Produce Exchange Corporation Ltd. A.I.R. 1946 Calcutta 245; Laxmanprasad and Ors. v. Achutan Nair : AIR1955Mad662 ; and Adaikappa Chetiar v. Thomas Cook & Son Ltd. 1933 Privy Council 78. He had also cited the judgment of the Supreme Court in the case of G. J. Fernandez v. The State of Mysore and Ors. : [1967]3SCR636 and similar was another citation of the Supreme Court in the case of Kumari Regina v. St. Aloysius Higher Elementary School : AIR1971SC1920 . In these two cases, inter-departmental instructions, which were purely administrative instructions and not statutory Rules, were stated to be not attracting the writ jurisdiction of the High Court, if those inter-departmental or administrative instructions were violated. This proposition is too well entrenched to be questioned, but here before the contractual relationship, if at all there is any contractual relationship in this case, accrued, the Union of India and its limb. or agent, the SAIL, were exercising executive powers, which affected the working of a citizen or a company having citizens as its shareholders.

14. The cautious note that we come across in the earlier judgments of the Supreme Court were so to say diluted in the course of the development of the constitutional law. Much water flew beneath the bridge thereafter and the changing situations called for change in the outlook and this is what we find in the later judgments of the Supreme Court. The famous judgment of the Supreme Court in the case of Ramana Dayaram Shetty v. The International Airport Authority of India and Ors. A.I.R. 1979 S.C. 1928 can be referred to as the leading case on the point and what the three Judges of the Supreme Court laid down as the proposition of law in that case came to be affirmed by a Larger Bench of the Supreme Court in the case of Ajay Hasia v. Khalid Mujib Sehravardi and Ors. : (1981)ILLJ103SC . So what was a cautious approach in the earlier days came to be so to say departed from because of the growing and expanding needs of the society and the Supreme Court in Ajay Hasina's case (supra) ultimately has given the following guidelines, which are law for us because of the mandate contained in Article 141 of the Constitution of India. It cannot be controverted, nor was it controverted before us, that SAIL is an authority and, therefore, 'State' within the meaning of Article 12 of the Constitution of India. It, therefore, follows a fortiorari that it is subject to the constitutional obligation under Article 14 of the Constitution of India. The true scope and ambit of Article 14 was the subject matter of numerous decisions and in Ajay Hasia's case, the Supreme Court clearly says that 'fortunately in the early stages of the evolution of our constitutional law. Article 14 came to be identified with the doctrine of classification because the view taken was that that article forbids discrimination and there would be no discrimination where the classification making the differentia fulfils two conditions, namely, (i) that the classification is founded on an intelligible differentia which distinguishes persons or things that are grouped together from others left out of the group; and (ii) that that differentia has a rational relation to the object sought to be achieved by the impugned legislative or executive action'. The observations of the Supreme Court in the case of Maneka Gandhi v. Union of India : [1978]2SCR621 also were quoted with approval in that judgment in paragraph 16. The words are:

The principle of reasonableness, which legally as well as philosophically, is an essential clement of equality or non-arbitrariness pervades Article 14 like a brooding omnipresence.

It was, therefore, observed that:

Wherever, therefore, there is arbitrariness in State Action whether it be of the legislature or of the executive or of an 'authority' under Article 12, Article 14 immediately springs into action and strikes down such State action,

(emphasis supplied)

15. In the case of Ramana v. International Airport Authority of India (supra), in paragraph 10 it is very clearly observed as under:

It is well settled rule of administrative law that an executive authority must be rigorously held to the standards by which it professes its actions to be judged and it must scrupulously observe those standards on pain of in validation of an act in violation of them.

Elaborating the idea further, Justice Bhagwati, speaking for the Bench, is to be found to have observed as follows:

Today, the Government in a welfare State is the regulator and dispenser of special services and provider of a larger number of benefits, including jobs, contracts, licences, quotas, mineral rights etc. The Government pours forth wealth, money, benefits, services, contracts, quotas and licences. The valuables dispensed by Government take many forms, but they all share one characteristic. They are steadily taking the place of traditional forms of wealth. These valuables which derive from relationships to Government are of many kinds. They comprise social security benefits, cash grants for political sufferers and the whole scheme of State and local welfare. Then again, thousands of people are employed in the State and the Central Government and local authorities. Licences are required be fore one can engage in many kinds of business or work. The power of giving licences means power to with hold them and this gives control to the Govt. or the agents of Govt. on the lives of many people. Many individuals and many more businesses enjoy largess in the form of Government contracts. These contracts of ten resemble subsidies. It is virtually impossible to lose money on them and many enterprises are set up primarily to do business with Government. Government own sand controls hundreds of acres of public land valuable for mining and other purposes. These resources are available for utilisation by private corporations and individuals by way of lease or licence. All these mean growth in the Government largess and with the increasing magnitude and range of governmental functions as we move closer to a welfare State, more and more of our wealth consists of these new forms. Some of these forms of wealth may be in the nature of legal rights but the large majority of them are in the nature of privileges. But on that account, can it be said that they do not enjoy any legal protection? Can they be regarded as gratuity furnished by the State so that the State may withhold, grant or revoke it at its pleasure? Is the position of the Government in this respect the same as that of a private giver? We do not think so. The law has not been slow to recognise the importance of this new kind of wealth and the need to protect individual interest in it and with that end in view, it has developed new form so protection. Some interests in Government largess, formerly regarded as privileges, have been recognised as rights while others have been given legal protection not only by forging procedural safeguards but also by confining/structuring and checking Government discretion in the matter of grant of such largess. The discretion of the Government has been held to be not unlimited in that the Govt. cannot give or with hold largess in its arbitrary discretion or at its sweet will. It is insisted, as pointed out by Professor Reichinane specially stimulating article on 'The New Property' in 73 Yale Law Journal 733, 'that Government action be based on standards that are not arbitrary or unauthorised.' The Government cannot be permitted to say that it will give jobs or enter in to contracts or issue quotas or licences only in favour of those having grey hair or belonging to a particular political party or professing a particular religious faith. The Government is still the Government when it acts in the matter of granting largess and it cannot act arbitrarily. It does not stand in the same position as a private individual.

In paragraph 12, it has been very clearly stated that 'The State need not enter into any contract with anyone, but if it does so, it must do so fairly without discrimination and without unfair procedure' (emphasis supplied). In that very paragraph, it has been further observed as follows:

It must, therefore, be taken to be the law that where the Government is dealing with the public, whether by way of giving jobs or entering into contracts or issuing quotas or licences or granting other forms or largess, the Government cannot act arbitrarily at its sweet will and, like a private individual, deal with any person it pleases, but its action must be in conformity with standard or norm which is not arbitrary, irrational or irrelevant. The power or discretion of the Government in the matter of grant of largess including award of jobs, contracts, quotas, licences, etc, must be confined and structured by rational, relevant and no discriminatory standard or norm and if the Government departs from such standard or norm in any particular case or cases, the action of the Govt. would be liable to be struck down, unless it can be shown by the Govt. that the departure was not arbitrary, but was based on some valid principle which in itself was not irrational, unreasonable or discriminatory.

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. One hand 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 of 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 capitalised by another branch of the very Union of India. This action is per se 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 and a citizen like the petitioners there would be favourably treated. In the sense of the term, it could be said that possibly inconsistent stand, and therefore discriminatory stand, can be there in the action of this 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 capriciously. There was not an iota of justification for them to sit tight on that date 24.8.83 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 a rule of law. It would be denial of justice or rule of law in practical 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 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 prices on 11.12.82, 14.3.83, 7.6.83, 25.8.83 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 be fixed for the period of three months and they are to remain operative for that period, but we are not to be understood to have expressed any final opinion on that point because the ultimate relief of the petitioners can be granted without deciding that point.

17. In the course of his rejoinder to the reply to Mr. Mehta's arguments advanced by Mr. Mehta to meet the above mentioned preliminary point about the tenability or maintainability of this writ petition, Mr. Desai had casually brought to our notice by referring to paragraph 5 of the judgment of another Division Bench of this Court speaking through me vide the case of Association of Natural Gas Consuming Industries v. O.N.G.C. 1983 (2) GLR 1437 that such a matter should be heard by a single Judge of this Court.

18. After having participated in this petition for long, such a half-hearted plea about the requirement of the matter being heard ordinarily by a Single Judge of this Court and not by a Division Bench could hardly be entertained. Mr. Desai did not specifically tell us that we should leave the matter to a single Judge of this Court, but there was an indirect and covert suggestion in it. We would say that this weak objection was not taken earlier and, therefore, it is deemed to have been waived, but was sought to be revived at the fag end of the hearing. We are required to make this note, lest at some future date this aspect should come to be magnified.

19. The result is that the petition is allowed. It is declared that the action of the respondent No. 1 in not registering the petitioner' indent No. 7 of 1983 dated 19.8.83 latest on 24.8.83 was an action bad at law, arbitrary and unreasonable and we, therefore, direct the respondent No. 1 to treat the indents of the petitioners against release order dated 18.8.83 as registered prior to midnight of 24.8.83 and we, therefore, consequently direct the respondent No. 1 to refund excess price recovered from the petitioners. As a corollary, we further direct that the respondent No. 2 -Union of India is restrained from requiring, the petitioner-company to fulfill the higher export obligation than that which it. would be required to fulfil on the basis that the price of Rs. 2460/- per metric ton was applicable to its indents in pursuance of the aforesaid release order. Rule is thus and to this extent made absolute with costs.

20. Because of this petition which could not be heard earlier though fixed for final hearing on 10.9.84, we direct that the respondents Nos. 2, 3 and 5 shall consider the petitioners' applications for extension of the period for meeting the export obligation.

21. At the request of the Learned Counsel for the respondent No. 1, say of the operation of this order is granted as far as the refund of the excess price is concerned. The stay is to be operative for the period of two months after the receipt of the certified copy of this judgment of ours by SAIL who shall apply for the urgent copy.


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