IN THE HIGH COURT OF JUDICATURE AT MADRAS Date : 18-03-2010 Coram THE HONOURABLE Mrs. JUSTICE R.BANUMATHI AND THE HONOURABLE Mr. JUSTICE M.VENUGOPAL W.A.Nos.511 and 857 of 2009 and M.P.Nos.1 and 1 of 2009 M/s State Bank of India Overseas Branch Rajaji Salai Chennai-600 001 ..Appellant in W.A.No.511/2009 1. Union of India rep. by its Secretary Department of Commerce New Delhi. 2. Deputy Director General of Foreign Trade for Joint Director of Foreign Trade Peters Road, Chennai-600 014 .. Appellants in W.A.No.857/2009 vs. 1. H.Champalal Jain 2. The Union of India rep by its Secretary Department of Commerce New Delhi 3. The Deputy Director General of Foreign Trade for Joint Director General of Foreign Trade, Peters Road, Chennai-14 .. Respondents in W.A.No.511/2009 1.H.Champalal Jain 2.M/s State Bank of India Overseas Branch Rajaji Salai Chennai-600 001 .. Respondents in W.A.No.857/2009 https://hcservices.ecourts.gov.in/hcservices/ These writ appeals are filed under Clause 15 of the Letters Patent against the order dated 23.3.2009 passed by the learned Single Judge of this Court in W.P.No.23946 of 2006 on the file of this Court. W.P.No.23946 of 2006:-Petition filed under Article 226 of the Constitution of India praying to the issuance of a writ of certiorarified mandamus Calling for the records relating to order in File No.1(2)/ECA/AM 07/Che/35 dated 23.06.2006 of the Second respondent and quash the same and direct the third respondent to pay to the petitioner the amount of Rs.8.83 400/- being the premium for the value of the scrips surrendered to the third respondent the details of which have been set out above in para 6 together with interest at the rate of 18% from the date of submission of the Licences to the 3rd respondent. For Appellant : Mr.K.Sankaran in W.A.No.511/2009 For Appellants : Mr.K.Ravichandra Baabu, in W.A.No.857/2009 Senior Central Government Standing Counsel For first respondent : Mr.Habibulla Basha (in both appeals) Senior Counsel for Mr. E.S.Govindan For Respondents 2 and 3 in W.A.No.511/2009 : Mr.K.Ravichandra Babu, Senior Central Government Standing Counsel For second respondent : Mr.K.Sankaran in W.A.No.857/2009 C O M M O N J U D G M E N T M.VENUGOPAL,J The respondents 1 to 3 have filed these two writ appeals as against the order dated 23.3.2009 passed by the learned Single Judge of this Court in W.P.No.23946 of 2006 in allowing the writ petition without costs and further directing the third respondent to pay within eight weeks , a sum of Rs.8,83,400/- together with interest at the rate of 6% per annum from the date of submission of the licence till the date of payment. 2. The 1st respondent/petitioner has filed a writ petition in W.P. No.23946 of 2006 praying for issuance of a writ of certiorarified mandamus, in calling for the records relating to https://hcservices.ecourts.gov.in/hcservices/ file No.1(2) /ECA/AM 07/Che/35 dated 23.6.2006 of the second respondent and to quash the same and direct the third respondent to pay to the petitioner the amount of Rs.8,83,400/- being the premium for the value of the scrips surrendered to the third respondent together with interest at the rate of 18% from the date of submission of the licences to the third respondent. 3. The learned Single Judge, while passing orders in W.P.No.23946 of 2006 dated 23.3.2009 has inter alia observed that 'in the present case, the rights of the petitioner have been secured by the earlier orders of this Court to the effect that the Exim Scrips sold by them were genuine. It gives an automatic right for the petitioner to claim the premium of 20% on the Exim Scrips sold by the third respondent and hence it is bound to honour the promise held out by the earlier circular issued. The contention that the respondents are estopped from denying the right of the petitioner on the principle of promissory estoppel is well founded and resultantly allowed the writ petition without costs. 4. The learned counsel for the appellant/third respondent urges before this Court that the order of the learned Single Judge in directing the appellant/third respondent to pay a sum of Rs.8,83,400/- along with interest at the rate of 6% p.a. within a period of eight weeks etc is clearly unsustainable in the eye of law because of the fact that it is the duty of the respondents 2 and 3/respondents 1 and 2 to effect payment and more over, the learned Single Judge has not directed the 2 and 3 respondents/1 and 2 respondents to provide a sum of Rs.8,83,400/- with interest at 6% per annum as referred to supra. 5. Further, the respondents 2 and 3/respondents 1 and 2 are to provide funds to the extent of Rs.8,83,400/- together with interest at the rate of 6% per annum from the date of submission of the licence till date of payment and the appellant/third respondent Bank is a designated branch to receive the licence on behalf of respondents 2 and 3/respondents 1 and 2 and this aspect of the matter has not been noticed by the learned Single Judge, while allowing the writ petition. 6.Expatiating his submissions, the learned counsel for the Appellant/3rd respondent Bank submits that when series of licences were submitted by the second respondent/first respondent then all such transactions will have to be grouped as a single transaction, and cross claims arising between the parties can be adjusted while effecting payment but the learned Single Judge has treated the individual transaction had encashed Exim Scrips to the tune of Rs.14,11,200/- which were obtained by submitting bogus and forged documents by the first respondent's/petitioner's vendor M/s https://hcservices.ecourts.gov.in/hcservices/ Ayisha Exports Private Ltd., and indeed, the first respondent's/petitioner's vendor M/s Ayisha exports Private Ltd., by Judgment dated 6.9.2001 in E.O.CC.100/96 on the file of Chief Metropolitan Magistrate for Economic Offences, Madras has not been taken note of by the learned Single Judge. 7. Added further, the learned Single Judge ought to have protected the public funds to the extent of Rs.14,11,200/- with interest by directing the set of Rs.8,83,400/- payable to the first respondent/petitioner and Equitable principle while directing the bank to make payment of Rs.8,83,400/- have not been pressed into service by the learned Single Judge and the extension of Equitable estoppel plea against the second respondent/Union of India by the learned Single Judge in regard to encashment of Exim Scrips by the first respondent/Bank who obtained with the forged documents by his vendor is not legally correct and therefore prays for allowing W.A.No.511 of 2009 to meet the ends of justice. 8. In regard to W.A.No.857 of 2009, the learned Senior Central Government Standing Counsel for the appellants/respondents 1 and 2 submits that the learned Single Judge has committed an error in allowing the writ petition, while directing payment to the petitioner with interest for the Exim Scrips and the same is against the law, facts and circumstances of the case and that the learned Single Judge was not correct in observing that the rights of the 1st respondent/petitioner have been secured by the earlier orders of this Court and it gives an automatic claim premium on the Exim Scrips sold by the second respondent/3rd respondent and as a matter of fact, the first respondent /petitioner was liable to pay to the appellants/respondents 1 and 2 more than what he was entitled to under the 20 Exim Scrips which was sought to be encashed and in this regard, the learned Single Judge has taken in correct view that the appellants/respondents 1 and 2 and the second respondent/ 3rd respondent are estopped from denying the rights of the first respondent/petitioner on the principles of promissory estoppel without considering that the such principle would not apply to the facts of the case. 9. Also, it is the contention of the learned Senior Central Government Standing Counsel for the appellants that the principle of promissory estoppel will only apply to an individual, who has come before this Court with clean hands and such a principle cannot be extended to the first respondent/petitioner when he has purchased Exim Scrips on earlier occasions and encashed the same to an extent of Rs.14,11,200/- considering the fact that those scrips found to have been obtained on submitting bogus and forgery documents by his vendor one Aiysha exports Private Ltd , Chennai and instead while applying principle of Equity, the first respondent/petitioner ought to have been directed to pay the https://hcservices.ecourts.gov.in/hcservices/ balance amount to the second appellant by making good the loss already sustained by the second appellant. But this has not been adjudicated by the learned Single Judge and in fact a criminal prosecution was launched by the CBI and after trial, the accused in C.C.No.100/96 were convicted by the learned Chief Metropolitan Magistrate for Economic Offences, Madras and as such the amount encashed by the first respondent/petitioner on the first set of Exim Scrips to the value of Rs.14,11,200/- should be repaid by him to the second appellant herein to make good the loss sustained and in that view of the matter, the first respondent/petitioner is not justifying in approaching this Court for seeking relief in regard to the payment on the set of Exim Scrips even though they are true and genuine. 10. Advancing his arguments, the learned Senior Central Government Standing Counsel for the Appellants contends that the Hon'ble Division Bench of this Court in W.A.Nos.294 and 297 of 1994 by its order dated 21.2.1994 has directed the first respondent/petitioner to furnish immovable property security for Rs.14,11,200/- for getting the payment of Rs.8,83,400/- and this order has been passed only to protect the interests of the revenue and that too during the pendency of the investigation of the criminal case and therefore, the learned Single Judge ought not to have directed payment of the money to the first respondent/ petitioner on the second set of Exim Scrips when the investigation has resulted in filing of a criminal case which ended in conviction of the vendor of the first respondent/petitioner and it was found that Exim Scrips were obtained by furnishing bogus documents. 11. That apart, it is the contention of the learned Senior Central Government Standing Counsel for the Appellants that the first respondent/petitioner has already obtained pecuniary gains by tendering licences which have been obtained by fraudulent means and therefore he has not approached this Court with clean hands in invoking jurisdiction of this Court under Article 226 of Constitution of India and if the money is paid to the first respondent as directed by the learned Single Judge in the writ petition, the appellants/respondents 1 and 2 will not have any hold on the first respondent/petitioner to recover the amount of Rs.14,11,200/- which is duty bound to pay inasmuch as the said money was realised by tendering licences which were obtained by fraudulent means and therefore prays for allowing the above writ appeal to prevent an aberration of justice. 12. Per contra, the learned senior counsel for the first respondent submits that it is incorrect on the part of the Appellants to contend that the First Respondent/Petitioner is not entitled to get the payment of Rs.8,83,400/- and as a matter of https://hcservices.ecourts.gov.in/hcservices/ fact, the first respondent had purchased 20 Exim Scrips between 31.12.1991 and 22.9.1992 and the total premium sum of these scrips works out to Rs.8,83,400/- and when the same were presented for encashment to the appellant Bank, it refused to make payment as the second appellant (in W.A.No.857 of 2009) had directed the appellant Bank (W.A.No.511 of 2009) not to release the payment as the first set of of Exim scrips, which were encashed, were bogus Scrips amounting to Rs.14,11,200/- and consequently, the first respondent filed W.P.No.18382 of 1992 seeking direction to the Appellant/Bank to effect the payment of Rs.8,83,400/-. 13. Continuing further, the learned Senior counsel for the first respondent contends that the learned Single Judge allowed W.P.N0.18382 of 1992 by its order dated 22.12.1993 by observing that the Appellant/Bank cannot withhold the payment for the genuine 20 Exim Scrips which comes to Rs.8,83,400/- and the appellants viz, the Union of India and another had filed writ appeal in W.A.Nos. 294 to 297 of 1994 before this Court and Hon'ble Division Bench of this Court by its order dated 21.2.1994 has among other things observed that ' to safeguard the interest of the appellants and the amounts payable under the present Exim Scrips can very well direct to pay and consequently, directed the first respondent/writ petitioner to furnish adequate security of immovable property having clear and marketable title or bank guarantee whichever is convenient to him to the satisfaction of the second appellant (joint Chief Controller of Imports and Exports,Madras),the appellants also accepting the such security to pay the amounts and accordingly modified the order passed by the learned Single Judge of this Court in W.P.No.18382 of 1992. 14. It is an accepted fact that the first respondent/writ petitioner had not furnished any security. The second appellant (W.A.NO.857 of 2009) initiated a criminal complaint in E.O.C.C.No.100/1996 on the file of Additional Chief Metropolitan Magistrate E.O.-I, Madras-8 against M/s Aiysha exports(P)Ltd., and according to the learned Senior counsel for the first respondent, the first respondent is no way connected with the case or responsible and therefore, the first respondent/writ petitioner submitted representations dated 27.12.1997, 8.7.1998 and 17.9.1998 to the second appellant ( W.A.No.857 of 2009) and the second appellant furnished a reply dated 15.12.1998 rejecting the request for payment of Exim Scrips premium. Consequently, the first respondent/writ petitioner filed W.P.No.2194 of 1999 before this Court arraying the appellants as respondents and this Court by its order dated 24.2.22006 in paragraphs 2 and 3 has observed the following: " Mr.V.T. Gopalan, learned Additional Solicitor General represented that there was a CBI enquiry in respect of the fraud committed in https://hcservices.ecourts.gov.in/hcservices/ Exim Scrips and that was one of the reasons why the petitioner's request could not be complied with earlier. Now, the learned Additional Solicitor General submits that the investigation so far conducted does not reveal any involvement of the petitioner and in these circumstances, the request of the petitioner will be considered and necessary orders will be passed in accordance with law within a period of four weeks and therefore, the impugned order may be set aside and suitable directions may be issued to the second respondent to meet the ends of justice. The learned Senior counsel appearing for the petitioner also agrees for the same." and therefore without going into the merits of the case, set aside the impugned order of the second respondent therein dated 15.12.1998 and directed him to pass fresh orders, after giving due opportunity to the first respondent/writ petitioner, within a period of four weeks from the date of receipt of a copy of the order. 15. Subsequently, the first respondent/writ petitioner addressed letters dated 13.3.2006 and 25.4.2006 to the second appellant (W.A.No.857 of 2009) viz., The Deputy Director General of Foreign Trade for Joint Director of Foreign Trade. The first respondent/writ petitioner has filed writ petition W.P.No.23946 of 2006 challenging the order of rejection passed by the second appellant(W.A.No.857 of 2009) on the ground that the second appellant was estopped from denying his rights and that the amount could not be withheld and as such prayed for a direction , directing the second appellant to pay the amount of Rs.8,83,400/- being the premium payable for the value of the Scrips surrendered to the third respondent together with interest at the rate of 18% p.a. etc., and also for quashing the impugned order. 16. In the said W.P.No.23946 of 2006 filed by the first respondent/writ petitioner, the appellants have filed counter affidavit taking a plea that the second appellant (W.A.No.8578 of 2009) had directed the Bank not to honour the said Scrips and pay the amounts thereto, since the Exim Scrips were found to be bogus for which the action was taken against M/s Aiysha exports Private Limited from whom the purchase of Scrips was made by the first respondent. 17. It is to be borne in mind that the first respondent/writ petitioner had not furnished security as per directions issued by the Division Bench of this Court in W.A.Nos.294 to 297 of 1994 dated 21.2.1994. Significantly, the second appellant (W.A.No.857 https://hcservices.ecourts.gov.in/hcservices/ of 2009) in its counter in W.P.No.23946 of 2006 had inter alia stated that 'there was no involvement of the first respondent/writ petitioner in the crime committed by M/s Aiysha exports Private Limited and however, this does not mean that he is entitled to retain the amount released on the Exim Scrips obtained by submitting bogus and forged documents etc' 18. Also, the second appellant( W.A.No.857 of 2009) had taken a specific stand that even though 20 Exim Scrips were genuine and valid, it was not in a position to permit the first respondent/writ petitioner to encash the said Scrips amounting to Rs.8,83,400/- and as a matter of fact, M/s Aiysha exports Private Limited and its Directors were prosecuted after investigation conducted by the CBI and in criminal case in E.O.C.C.No.100 of 1996 on the file of the Additional Chief Metropolitan Magistrate, E.O, Chennai for the offence punishable under Sections 120 B, r/w 420,467,468 and 471 r/w 468 IPC and Section 5 of Import Act and Clause 10(d) of Import(Control) Order 1955 and A1 firm and A2 representing A1 company was convicted and sentenced besides a fine of Rs.2,25,000/- was imposed on them and in the said criminal case, the first respondent/writ petitioner was a witness as P.W.6 in the prosecution and therefore, the Exim Scrips amounting to Rs.14,11,200/- was purchased by the first respondent/writ petitioner from the said M/s Aiysha exports Private Limited was secured by submitting bogus and forged document and as such the first respondent/writ petitioner was bound to repay the said amount to it. 19. However, the learned Single Judge by his order dated 23.3.2009,while passing orders in W.P.No.23946 of 2006, had observed that the rights of the first respondent/writ petitioner were secured by the earlier orders of this Court to the effect that the Exim Scrips sold by them were genuine and it gave an automatic right for him to claim the premium of 20% of the Exim Scrips sold by the appellant and it was bound to honour the premium as per its earlier circular issued and therefore, the appellants are estopped from denying the rights of the first respondent/writ petitioner on the principle of promissory estoppel and resultantly allowed the writ petition by directing the appellant(W.A.No.511/2009)/third respondent to pay within eight weeks a sum of Rs.8,83,400/- together with interest at the rate of 6% p.a. etc., 20. The learned counsel for the Appellant Bank submits that the Ministry of Commerce formulated a policy known as "consolidately Scrip" in February 1991 under which an Exporter is entitled to receive Exim Scrips Replenishment licence on proof of Export of goods and the Exim Scrips are issued by the Licensing authority and after verifying the particulars of export and that https://hcservices.ecourts.gov.in/hcservices/ the claimant for Exim Scrips must produce Bank realisation certificate, relevant shipping document evidencing export of goods and the bank has to act according to the direction of the second appellant and as per the copy of the public notice No.185 ITC (PN) 90-93 dated 31.7.1991 in regard to the issue of Exim Scrips on the exports made from 4.7.1991 in Sl.No.3(a)(i) under the head physical Exports of Products falling under Appendix 17 Part II, the exports falling under Appendix 17 Part II is to file the claim for "Exim Scrip" consolidatedly of all such exports for which the foreign exchange has been realised in a particular calendar month (April,May,June, July and so on) etc and such application shall be disposed of on fast track basis and the applicant at the time of filing the application shall be given a token by the Licensing Office and the Exim Scrip shall be issued based on the claim filed by the applicant and handed over in exchange of the token to the applicant, within the time frame mentioned thereon and thereafter the application shall be subject to a post-audit and if any deficiency is found, remedial action shall be initiated for rectification, which the applicant shall have to complete within 30 days from the date of an intimation sent by the Licensing Office, failing which the entitlement already granted shall be adjusted from the pending claim of the applicant and if at the time of post-audit, it is prima facie established that the entitlement has been granted more than the due amount, the same shall be adjusted straightaway from the pending claims of the applicant under an intimation to the party etc and in the instant case, the first respondent/petitioner was successfully in getting premium from the Appellant/Bank to an extent of Rs.14,00,000/- and therefore, he had obtained a pecuniary gain since he purchased the bogus Scrips from M/s Aiysha exports Private Limited and even though the premium for 20 Exim Scrips comes to Rs.8,83,400/-, the Bank has been directed not to make premium payment against the cancelled Scrips and to recover any amount already paid on the cancelled Scrips and if necessary not to make payment on any other Scrips and therefore, the bank had withheld the payment to the first respondent and the said action of the bank is perfectly in order as per the copy of the public notice dated 31.7.1991 and resultantly the Bank is entitled to act accordingly after intimating the first respondent. 21. Also, the learned counsel for the Appellant Bank cites the decision LLOYDS BANK PLC. V. INDEPENDENT INSURANCE CO. LTD., (1999) 2 W.L.R. 734 at page 735, whereby and whereunder it is inter alia observed as follows:- “ (2) That although money paid under a mistake of fact was prima facie recoverable, it was well established as a matter of principle that such repayment would not be ordered where the payment was made for good consideration, in that https://hcservices.ecourts.gov.in/hcservices/ it discharged a debt owed to the payee by the payer or by a third party by whom he was authorised to discharge the debt; that since the payment of $1,62,387.90 made to the defendant by the plaintiff bank on W.Ltd.'s behalf was made for good consideration in that it discharged the debt owed to the defendant by W.Ltd., by whom the bank was authorised to discharge the debt and was accepted as such by the defendant, the defendant could not be said to have been unjustly enriched at the bank's expense; and that, accordingly, it was not appropriate to order restitution.” 22. However, the learned Senior counsel for the first respondent/writ petitioner submits that the instruction issued by the Ministry of Commerce, Office of CCI & E , New Delhi dated 31.7.1991 in Sl.No.3(a)(iii) will not apply to the first respondent's case on hand because of the fact that there is no deficiency found and therefore as a logical corollary, there is no scope for remedial action for any rectification. 23. Admittedly, the Appellant/Bank has been authorised by the Reserve Bank of India to buy the Exim Scrips which term would also cover post paid REP Licences, issued upto 29.2.1992 after realisation of export proceeds, as per the guidelines contained in the RBI D.O. letter dated 17.3.1992 as seen from the copy of RBI Circular No.12/92 dated 27.3.1992 issued by the Ministry of Commerce Office of CCI & E, New Delhi. As per the Circular of the Licensing Authorities are advised to render all necessary assistance to the State Bank of India on priority basis . 24. It transpires from the copy of D.O.letter EC.CO.Lerms 10/4-92 dated 17.3.1992 received from Reserve Bank of India addressed to Oshri D.R.Mehta, Chief Controller of Imports and Exports along with a copy of press release dated 16.3.1992 of the RBI wherein it is mentioned that instructions have been requested to be issued to all the Regional Officers of Joint Chief Controller of Imports and Exports to render necessary assistance to the designated branch of State Bank of India in carrying out their task of purchase of Scrips smoothly and in particular, they may be advised to