IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 26-10-2007 CORAM THE HONOURABLE MR.JUSTICE M.CHOCKALINGAM W.P.No.43497 of 2006 and MP Nos.2 and 3 of 2006 and 1 of 2007 M/s.Metro Machinery Traders No.42, 2nd Floor, Nishant Kunj Pitampura, Delhi 110 088 rep. By its Partner Ram Kishan .. Petitioner vs 1.Union of India rep. By its Secretary Ministry of Coal & Mines Central Secretariat, New Delhi 2.M/s.Neyveli Lignite Corporation Limited, (A Government of India Enterprises) Disposal Wing, Marketing Branch Card Complex, Office of the Dy. General Manager Chemical Units, Neyveli 607 807. 3.Neyveli Lignite Corporation Limited, having its Regd. Office at Neyveli House rep. By its Dy. General Manager Chemical Units 135, Periyar E.V.R. High Road Kilpauk, Chennai 10. 4.State Trading Corporation of India Ltd., having its Regd. Office at 1, Toistory Marketing New Delhi 3. 5.M/s.Metal Scrap Trading Corporation (A Govt. of India Enterprises) Ranka Chambers, 31, 1st Floor Cunningham Road, Bangalore 560 052. 6.The Director Directorate of Revenue Intelligence No.25, Gopalakrishna Iyer Road T.Nagar, Chennai 17. .. Respondents https://hcservices.ecourts.gov.in/hcservices/ Writ petition filed under Article 226 of the Constitution of India praying for a writ of certiorarified mandamus calling for the records relating to Sale Order/Acceptance Letter No.MSTC/S/NLC/EA-14/2005- 06/101/008 dated 1.4.2005 issued by the fifth respondent and quash the same and direct the second and third respondents to return the amount of Rs.163,49,96,511/- (Rupees One hundred and sixty three crores forty nine lakhs ninety six thousand five hundred and eleven only) after deducting the amounts already received, with interest at the rate of 18% from 30.4.2005 to the petitioner. For Petitioner : Mr.Rawal, Senior Counsel, for M/s. Murthy & Varan For Respondents : Mr.P.Wilson Assistant Solicitor General for RR1 and 6 Mr.N.A.K.Sarma for RR2 & 3 Mr.R.K.Anand, Senior Counsel and Mr.D.Roy Chondri, Senior Counsel for Mr.S.Umapathy for R4 No appearance for R5 ORDER The main writ petition itself is taken up for consideration following the request made by the Counsel on either side. 2.Invoking the writ jurisdiction of this Court, the petitioner has sought for a writ of certiorarified mandamus to call for the records relating to Sale Order/Acceptance Letter No.MSTC/S/NLC/EA-14/2005- 06/101/008 dated 1.4.2005 issued by the fifth respondent, quash the same and direct the second and third respondents to return the amount of Rs.163,49,96,511/- after deducting the amounts already received, with interest at the rate of 18% from 30.4.2005 to the petitioner. 3.The affidavit in support of the petition and the counter affidavits of the respondents 2, 3 and 4 are perused. The Court heard the learned Counsel on either side. 4.The following would emerge as facts admitted: (a) The petitioner is a partnership firm. The respondents 2, 3 and 4 are owned and managed by the Government of India while the respondents 2 and 3 are under the control of the first respondent. Likewise, the respondents 4 and 5 are under the control of the Union of India. Thus, the respondents 2 to 5 are Public Companies under the control of the Government of India. The Neyveli Lignite Corporation (hereinafter referred to as NLC) issued two communications both on 24.5.2004, one addressed to the Superintendent of Central Excise, Virudhachalam, and the https://hcservices.ecourts.gov.in/hcservices/ other to the Commissioner of Central Excise and Customs, Pondicherry, regarding the disposal of the fertilizer plant. On 7.6.2004, the Superintendent of Central Excise, Virudhachalam, requested the second respondent to inform the payment of Customs Duty and Central Excise Duty and to pay the arrears of duty/penalty/fine/demand pending as on date. On 30.6.2004, the NLC replied to the Superintendent of Central Excise, Virudhachalam, that the machinery, equipment, spares, etc., required for the fertilizer plant, were procured only after paying the Customs/Excise Duty as applicable. On 2.7.2004, the Superintendent of Central Excise, Virudhachalam, requested the second respondent to furnish the details of the machinery, imported with partial/full exemption and bills of entry for the same. The same was furnished by the second respondent on 10.7.2004. While the matter stood thus, the fifth respondent issued an advertisement for auction notice No.MST.BLR/Neyveli Lignite Corporation Ltd., 14/Neyveli/2004/05/1025(1674) alleging that the respondents 2 and 3 being owner in possession of the machinery, intended to sell the fertilizer plant, machinery etc., as installed in its factory at Neyveli within its disposal. The fifth respondent by its tender notice dated 27.1.2005, issued general terms and conditions. The petitioner made its offer, and the same was accepted by the fifth respondent at the auction held on 1.4.2005. The fifth respondent issued confirmation of acceptance of the petitioner's offer for Lot No.01(one) in its letter dated 1.4.2005 on "As is where is basis". The earnest money deposit of Rs.13,20,00,000/- paid by the petitioner, was to be kept as security deposit as per the terms and conditions against the sale value. The petitioner deposited a sum of Rs.50 lakhs which was the condition precedent for tender offer. The petitioner's bid amount of Rs.132.01 Crores was found to be the highest and was accepted by the fifth respondent. Following the same, the petitioner deposited a sum of Rs.149,79,69,511/- in favour of the second respondent payable at Neyveli on 29.4.2005 towards the full payment. The fifth respondent issued the sale order/acceptance letter whereby the auction sale was confirmed on "As is where is basis". (b) On 11.5.2005, the petitioner took factory license. A delivery order was issued in favour of the petitioner on 18.5.2005 wherein the period was mentioned as 370 days commencing from 19.5.2005 and ending with 23.5.2006. The petitioner started dismantling on 19.5.2005 itself. The second respondent sought the permission from the Chief Inspector of Boiler, Madras, to condemn the Waste Heat Boiler on 18.10.2005 and 19.12.2005 respectively. Accordingly, the Chief Inspector of Boiler permitted for scrapping the Waste Heat Boiler by a communication dated 22.12.2005. The second respondent NLC requested the Chief Inspector of Boiler to declare the Boiler as scrapped. The petitioner requested the second respondent to extend the time to finish the work. On 22.5.2006, at the instance of the fourth respondent, an interim order came to be passed by the Delhi High Court in OMP No.232 of 2006, which restrained the other party from making sale, transfer or alienation of the rights of the fertilizer plant and also restrained the second respondent from paying any amount of EMD and security deposit to the petitioner herein and also appointed an Advocate Commissioner. On 7.6.2006, the Director of Revenue Intelligence (DRI), Trichy, intimated NLC to arrange on-the-spot verification on 13.6.2006. On 12.6.2006, the Officials of the D.R.I. Visited NLC and perused certain files. The Advocate Commissioner appointed by the Delhi High Court, visited the fertilizer plant on 15.6.2006, and https://hcservices.ecourts.gov.in/hcservices/ prepared the inventory report. On 16.6.2006, the DRI conducted an enquiry and obtained a statement from the officials of the second respondent. On 20.6.2006, the DRI informed NLC that the goods imported under concessional rate of Customs Duty, and used in the revamping of the fertilizer unit, should not be disposed of or removed. (c) The second respondent filed a counter affidavit before the Delhi High Court. Following the same, the Delhi High Curt passed an order appointing the fourth respondent S.T.C. as Receiver and directed NLC to facilitate the sale proceedings. The order of the Delhi High Court was intimated to the sixth respondent DRI by the second respondent. The DRI instructed the second respondent NLC to strictly adhere to the contents of their letter dated 20.6.2006, which is referred to above. The second respondent permitted the petitioner to take delivery of the materials under the control of the Court Receiver. On 1.9.2006, the petitioner sent a legal notice to the second respondent. The second respondent informed the petitioner not to remove the imported materials and remove the remaining materials without any delay. Again, the petitioner sent a legal notice to the second respondent and requested to refund the amount as referred in the legal notice dated 1.9.2006. The Delhi High Court passed an order restraining the respondents 2 to 8 therein including the petitioner herein, from transferring, alienating or encumbering the properties. The second respondent requested the sixth respondent to release the goods detained, and undertook to furnish bank guarantee. On 4.11.2006, the NLC sent a reply to the petitioner. The second respondent furnished a bond for Rs.23 Crores and a bank guarantee for Rs.3 Crores to the sixth respondent. The NLC informed the fourth respondent who is the Receiver appointed by the Delhi High Court, that all the goods may be removed as per the orders of the Delhi High Court. Under such circumstances, the instant writ petition came to be filed before this Court for the said relief. 5.Advancing his arguments on behalf of the writ petitioner, the learned Senior Counsel would submit that in the instant case, the petitioner is entitled for the writ of certiorarified mandamus to which it is entitled to; that following a tender notice, which was issued by the fifth respondent for the sale of the fertilizer plant machinery as installed in the factory of the second respondent, the bid was made by the petitioner herein; that it is pertinent to point out that in the Tender Schedule, there was no mention that any one of the machineries found in the plant, which were part and parcel of the subject matter, was imported; that while there were notifications of the year 1999 and 2000 subject to which terms and conditions the machineries were imported, they were not also stated in the tender notice; that as per the notifications issued, which would be binding on the second respondent, the imported goods should be used only for the purpose for which it was actually imported by the second respondent; that no question of sale of the same would arise; that only on that condition, there was a concession that was given originally; that if the NLC was to sell the property in public auction, it should have obtained permission; but, it was not done so; that even without doing so, the second respondent through the fifth respondent has made the auction notice, and thus, in the instant case, if those facts were brought to the notice of the petitioner, the petitioner would not have made bid for the same, and he would have avoided purchasing the machinery; that there was https://hcservices.ecourts.gov.in/hcservices/ concealment of all the necessary facts, which could be termed only as fraud as one defined under the Contract Act; that further, it is a case where all these facts which were within the special knowledge of the second respondent, were completely suppressed; that if to be so, while there was a notification issued, in breach of the terms and conditions of the notification, the property was sold, and thus, it would be quite clear that it was a case where as per the provisions of the Customs Act, the properties could not be sold as there was a notification under the provisions of that Act; that while those provisions prohibited the sale of those goods and the sale of the machinery, such a tender notice was issued, and auction has been conducted, and hence, the entire contract itself is void ab initio; and that once the contract itself is void ab initio, to start with, the second respondent has to necessarily pay back the entire amount of Rs.163 crores which has been paid by way of earnest money which has been subsequently converted as part of consideration and the subsequent payment of Rs.143 crores which has been received. 6.Added further the learned Senior Counsel that in the instant case, after the contract was entered into, the petitioner entered into an agreement with the fourth respondent State Trading Corporation of India (hereinafter referred to as STC), on the basis of which, the entire money has flown from the hands of STC; that the officials of the DRI have issued notices and have inspected the spot; that there have been communications continuously, which would also be indicative of the fact that there was concealment of those facts, and thereby, the second respondent has committed fraud; that the same persisted continuously; that the NLC has been keeping quiet all along and has been silent spectator; that they have allowed the petitioner and the fourth respondent to act so; that under the circumstances, they have made unlawful enrichment; that it is true that as per the terms and conditions of the agreement, there is a clause namely Clause 59, speaking of the arbitration; that in the instant case, there is no question of the matter to be referred to arbitration that would arise for the reason that it is a case where the entire contract is vitiated and has got to be treated as void ab initio; that in such circumstances, no question of giving effect to Clause 59 for arbitration between the parties as put forth in their counter, would arise; and that it is not a case, where it could be referred to arbitration. 7.Added further the learned Senior Counsel that though at the first instance, the relief sought for by the petitioner, is one for a direction to the NLC to return the entire sale consideration, it cannot be considered to be as either a civil dispute or a case where the party can be directed to go to a Court of civil law and that too in a given case like this, where a fraud has been played, and it is evident; that under the circumstances, the entire contract becomes vitiated and void ab initio; that in such circumstances, there must be a direction for return of the entire sum; that in the case on hand, the facts as found in the materials available, are admitted; and that in view of the same, there is no question of referring the matter to the arbitration or directing the party to go to the Court of civil law that would arise. https://hcservices.ecourts.gov.in/hcservices/ 8.The learned Senior Counsel would further add that in this case, originally, in the year 1999 and 2000, two notifications were issued; that in breach of the notifications, the property has been brought for auction, and it has been sold; that accordingly, the entire consideration was paid; that all these proceedings have been initiated by the DRI subsequently; that the properties have actually been confiscated; that the proceedings are yet pending for assessment; that now, it would be futile on the part of the second respondent to contend that either it could be referred to arbitration or the party has to go to the Court of civil law, and under the circumstances, the petitioner is entitled for the refund of the money. 9.Added further the learned Senior Counsel that in a given case, even though it is a contractual obligation, the Court can exercise its writ jurisdiction and decide the same; that even for the monetary claim, it could be done; that in a case like this where fraud has been played, the Court must come to the rescue of the petitioner and pass suitable orders thereby setting aside the entire contract and issuing a direction for the return of the entire money; that admittedly, following the contract, the property worth about Rs.38 Crores, have been removed from the plant; that under the circumstances, that portion could be deducted from the entire consideration originally paid; that in this case, the NLC cannot be allowed to say that what was the actual goods that were removed was not known, because the goods were carried and transported from the plant; that every time when the goods were being removed, they were actually verified and countersigned by the Officials of the second respondent, and hence, they cannot plead no knowledge; that it was to the extent of Rs.38 Crores which is admitted by the petitioner; that the said amount could be deducted in the entire amount originally paid, and the rest could be ordered to be paid, and accordingly, a writ has got to be issued. 10.In support of his contention, the learned Senior Counsel for the petitioner relied on the following decisions: (i) (2005)8 SCC 618 (SBP & CO. V. PATEL ENGINEERING LTD.); (ii) (2000)4 SCC 272 (WELLINGTON ASSOCIATES LTD. V. KIRIT MEHTA); (iii) (2000)4 SCC 285 (MOLAR MAL V. KAY IRON WORKS (P) LTD.); (iv) AIR 1924 MADRAS 336 (ANGLO-PERSIAN OIL COMPANY V. P.S.PANCHAPAKESA AIYAR); (v) AIR 1924 CALCUTTA 796 (MANINDRA CHANDRA V. LOW & CO. LTD.); (vi) AIR 1981 ANDHRA PRADESH 410 (RAJA PICTURE PALACE V. M.JAGGA RAO); (vii) AIR 1978 CALCUTTA 407 (GENERAL ENTERPRISES V. JARDINE HANDERSON LTD.); https://hcservices.ecourts.gov.in/hcservices/ (viii) AIR 1977 CALCUTTA 130 (NITYA KUMAR V. SUKHENDU CHANDRA); (ix) 109 (2004) DELHI LAW TIMES 415 (SC) (ABL INTERNATIONAL LTD. V. E.C.G.C. OF INDIA LTD.); (x) 1970 U.J.(S.C.) 290 (THE D.F.O. SOUTH KHETRI & OTHERS V. RAM SANEHI SINGH); (xi) AIR 1985 SUPREME COURT 1147 (RAM AND SHYAM CO. V. STATE OF HARYANA); (xii) (1998)8 SCC 1 (WHIRLPOOL CORPORATION V. REGISTRAR OF TRADE MARKS, MUMBAI AND OTHERS); (xiii) 2002(9) SCALE 724 (HARBANSLAL SAHNIA AND ANOTHER V. INDIAN OIL CORPN. LTD. & OTHERS); (xiv) AIR 1988 SUPREME COURT 1074 (INDIRA KAUR V. SHEO LAL KAPOOR); and (xv) AIR 1984 SC 1401 (STATE OF U.P. V. DIST. JUDGE, UNNAO). 11.The learned Counsel for the second respondent would submit that in the case on hand, the writ petition has got to be dismissed as one not maintainable; that the case of the petitioner, according to its Counsel, centers round upon the fraud alleged to have been committed by the second respondent, but that is not so; that after closing the fertilizer plant and after following the procedural formalities, the Superintendent of Central Excise, Virudhachalam, and the Commissioner of Central Excise and Customs, Pondicherry, were informed by proper communications on 24.5.2004, that it has got a proposal for disposing of the fertilizer plant on "As is where is basis"; that both the authorities required the second respondent to inform whether there was any arrears of duty payable by the NLC; that a reply was given by the second respondent on 30.6.2004 stating that the fertilizer plant was procured only after paying the customs and excise duty as applicable; that a communication was addressed by the Central Excise Department directing the second respondent to furnish the details of the machinery imported, along with all details and bills of entry, etc.; that accordingly on 10.7.2004 i.e., about 9 months prior to the auction notice, all particulars and details were furnished before the department; but, the department did not pass any order whatsoever; that the case of the second respondent from the commencement of the import till today continues to be that it need not make any payment of duty, nor is it liable to pay any duty; that at the time of import of those machineries, duties were actually paid; that even before calling for an auction, the second respondent took all precautionary methods in order to ascertain certain facts from the department; that also at the first instance, it was the second respondent who addressed a communication in the month of May 2004 to both the departments informing them about the disposal of the fertilizer plant; that had it been the intention of the second respondent to conceal any fact, such a procedure could not have been followed, and thus, the second respondent put the Department of Central Excise and Customs on notice as to the disposal; that following the same, there were https://hcservices.ecourts.gov.in/hcservices/ communications between the second respondent and also the Department of Central Excise and Customs; that even the stand that was taken by the second respondent that the entire duty was actually paid at the time of the importing those machineries, was continued; that when the necessary particulars were called for, the NLC gave a reply along with all the particulars of machineries and also stated that the duties were paid; and that under the circumstances, the bonafide of the second respondent cannot even be questioned. 12.The learned Counsel would further add that the fraud in law is a very strong term; that it requires concealment; that in this case, the petitioner has rested the case on the alleged fraud; that there is no concealment of fact; that had the second respondent made an attempt to conceal all the material facts, there was no necessity for bringing the matter to the notice of the department nine months earlier to the auction notice; that after all the necessary particulars were placed before the Department of Central Excise and Customs, there was no reply from their side; that under such circumstances, the second respondent presumed that no further duty was payable, and hence, it called for the auction; that in this case, the petitioner who had got the clear knowledge about the circumstances, came forward to purchase the property; that after the same, the petitioner was allowed to remove the machinery; that 370 days was the period within which the machinery should be taken; that for 369 days, it was operated; that only one day was left; and that at that juncture, the fourth respondent moved the Hon'ble High Court of Delhi and got an interim order. 13.Added further the learned Counsel that it is not in controversy that the petitioner had removed the machinery from the plant; that even as per the affidavit filed in support of the writ petition, the petitioner has admitted that the machineries to the extent of Rs.38 Crores have been removed; that even in the communication dated 20.3.2006 addressed to the NLC seeking extension of time, it has mentioned that 75% of the machineries have been removed; that it would be indicative of the fact that major part of the machinery have also been taken; that they have performed that part of the contract and had the benefit of 75% of the removal of those machineries; that under the circumstances, now, the petitioner cannot be allowed to state that the contract is void ab initio; that in this case, there is no material to indicate that any fraud has been committed or there is any concealment of fact, and under the circumstances, the contract cannot be said to be void ab initio; that a part of the contract has also been performed, and the other part could not be done; that if the contract after the execution, cannot be performed in view of the impossibility of performance of the contract, what is available for the petitioner is to ask for compensation, and he cannot ask for the return of the entire amount; that further, a reading of the terms and conditions would clearly reveal that there is a Clause namely Clause 59, which is meant for arbitration; that in this case, a reading of that Clause would clearly indicate that it is a case where it has got to be referred to arbitration; that in view of the fact that a part of the contract has been performed and the other part could not be performed https://hcservices.ecourts.gov.in/hcservices/ because of impossibility of performance by the interference of the Department of Central Excise and Customs, now what is available for the petitioner is to go for arbitration as one found therein; and that since the contract is voidable, it cannot be said to be void ab initio. 14.Added further the learned Counsel that even under Sec.65 of the Contract Act, they can go for compensation, if they are really aggrieved; but, they cannot come forward invoking the writ jurisdiction of this Court, to direct the second respondent to return the entire amount which is the sale consideration; and that under the circumstances, the writ petition has got to be dismissed. 15.In support of his contentions, the learned Counsel relied on the following decisions: (i) JT 2003 (6) SC 515 (HYTHRO POWER CORPORATION LTD. V. DELHI TRANSCO LTD.); (ii) JT 2001 (9) SC 582 (STATE OF BIHAR AND OTHERS V. JAIN PLASTICS AND CHEMICALS LIMITED); (iii) JT 2000 (8) SC 167 (KERALA STATE ELECTRICITY BOARD AND ANOTHER V. KURIEN E. KALATHIL AND OTHERS); (iv) 2004-2-L.W. 244 (NIIT LIMITED V. ASHISH DEB AND ANOTHER);