WP(C)No.4552/2008 Page 1 of 31 IN THE HIGH COURT OF DELHI AT NEW DELHI % Judgment dated 16.4.2010 + WP(C)No.4552/2008 # M/S AJANTA ARTS COMPANY ..... Petitioner Through : Mr. C. Hari Shankar and Mr. Tushar Kr., Advs. versus UNION OF INDIA & ORS. ..... Respondents Through : Mr. Satish Aggarwala, Adv. for respondents no.1 and 4. Mr. D.D. Singh, Adv. for respondent no.2. Mr. M.Devnath, Adv. for respondent no.3 CORAM: HON'BLE MR. JUSTICE G.S. SISTANI 1. Whether reporters of local papers may be allowed to see the Judgment ? 2. To be referred to the Reporter or not? 3. Whether the Judgment should be reported in the Digest? G.S. SISTANI, J. (ORAL) 1. The present petition has been filed under Article 226 of the Constitution of India for issuance of a writ of mandamus directing respondent no.2 (Container Corporation of India Ltd.) to hand over the delivery of a consignment of Pig Bristles (imported in Container No. HDMU 2368478 (LOT No. – 106)) to the petitioner as well as a writ of prohibition, restraining respondent no.2 from handing over the delivery of the said goods to any other person. WP(C)No.4552/2008 Page 2 of 31 2. The facts leading to the filing of this writ petition are that a consignment of „pig bristles‟ arrived at Inland Container Depot (ICD), Tuglakhabad on 11.08.07, in Container No. HDMU 2368478. Learned counsel for the petitioner submits that under Section 46 of the Customs Act, 1962 (hereinafter referred to as “the Customs Act”) the importer of any goods is required to file a Bill of Entry and present it to the officer concerned in the prescribed format. Once such Bill of Entry is filed, if the goods are imported, and duty payable has been paid thereon, clearance may be given thereof under Section 47 of the Customs Act. 3. Learned counsel for the petitioner submits that, no Bill of Entry (hereinafter referred to as “B/E”) was filed in respect of the said consignment of „pig bristles‟ that had arrived in the Container No. HDMU 2368478, by any person, neither was the said consignment claimed by any importer and it remained un-cleared in the warehouse of respondent no.2, who was the custodian of the said goods. It is submitted that Section 48 of the Customs Act deals with procedure in cases where goods are not cleared from the warehouse or transit within 30 days after they are unloaded. Section 48 reads as under: “Procedure in case of goods not cleared, warehoused, or transhipped within [thirty days] after unloading. – If any goods brought into India from a place outside India are not cleared for home consumption or warehoused or transhipped within [thirty days] from the date of the unloading thereof at a customs station or within such further time as the proper officer may allow or if the title to any imported goods is relinquished, such goods may, after notice to the importer and with the permission of the proper officer be sold by the person having the custody thereof : Provided that - WP(C)No.4552/2008 Page 3 of 31 (a) animals, perishable goods and hazardous goods, may, with the permission of the proper officer, be sold at any time; (b) *****” 4. Section 150 of the Customs Act deals with the procedure for sale of goods, the same reads as under: “Procedure for sale of goods and application of sale proceeds. – (1) Where any goods not being confiscated goods are to be sold under any provisions of this Act, they shall, after notice to the owner thereof, be sold by public auction or by tender or with the consent of the owner in any other manner. (2) The proceeds of any such sale shall be applied - (a) firstly to the payment of the expenses of the sale, (b) next to the payment of the freight and other charges, if any, payable in respect of the goods sold, to the carrier, if notice of such charges has been given to the person having custody of the goods, (c) next to the payment of the duty, if any, on the goods sold, (d) next to the payment of the charges in respect of the goods sold due to the person having the custody of the goods, (e) next to the payment of any amount due from the owner of the goods to the Central Government under the provisions of this Act or any other law relating to customs, and the balance, if any, shall be paid to the owner of the goods.” 5. Counsel for the petitioner submits that respondent no.2 auctioned several consignments lying uncleared with it, to tender-cum-online auction sale, which included the goods under consignment of „pig bristles‟ imported under container No. HDMU 2368478 as described in the notice of auction as “General Cargo”. The terms and conditions of the auction were contained in the Notice issued by respondent no.2 in this regard. 6. It is the case of the petitioner that petitioner had offered a tender amount of Rs.41,42,435 for the consignment of „pig bristles‟ which had arrived in container No. HDMU 2368478, in response to the WP(C)No.4552/2008 Page 4 of 31 above auction notice issued by respondent no.2, a part of tender money was paid by the petitioner along with the tender itself. As the petitioner was the highest bidder for the said consignment, and the same being manifest from the final result of the auction notified by respondent no.2 on 10.4.08 which specifically approved the petitioner‟s bid, the petitioner applied for further necessary clearance, as per Circular No.13/2007-Cus dated 02.03.07 issued by the Central Board of Excise and Customs (hereinafter referred to as “CBEC”) and the same required that all consignments of live stock products be cleared by the Animal and Quarantine Departments. Learned counsel for the petitioner submits that vide letter dated 25.04.2008, the sample was forwarded by respondent no.2 to the Animal and Quarantine Departments and a bare reading of the said letter itself discloses that respondent no.4 had acknowledged the fact that the goods even on that date stood sold to the petitioner. 7. It is submitted by the counsel for the petitioner that even otherwise, in accordance with the Bill of Entry Regulations, a consolidated Bill of Entry prepared by respondent no.2 and submitted to Customs Authorities, by virtue of Regulation 3 the said Bill of Entry filed by the custodian of the goods was deemed to be a Bill of Entry filed under Section 46(1) of the Customs Act. 8. It is the case of the petitioner that on 29.05.2008, respondent no.3, the original importer of the goods, illegally filed a Bill of Entry for clearance, for home consumption in respect of the goods imported in container No. HDMU 2368478. As Bill of Entry in respect of the goods imported vide consignment No. HDMU 2368478, has already WP(C)No.4552/2008 Page 5 of 31 been filed by respondent no.2 as per Section 46 of the Customs Act, there is no question of any Bill of Entry being filed by any other party in respect of the same goods, and any such Bill of Entry filed by respondent no.3 would be null and void. 9. It is contended by counsel for the petitioner that it is undisputed that respondent no. 3 was given a notice regarding the auction of the said consignment of „pig bristles‟ and despite notice having been served, the petitioner decided not to participate in the auction. Learned counsel for the petitioner submits that the petitioner has not only participated in the auction but has been officially declared as the highest bidder. The petitioner has also paid the requisite payment as stipulated in the terms and conditions relating thereto, and after having secured the necessary certification in accordance with Circular No.13/2007 dated 02.03.07 issued by the CBEC, petitioner is entitled as of right to the delivery of the goods imported under Consignment No. HDMU 2368478, LOT No. 106. It is further submitted that on 11.06.08 and 13.06.08, the petitioner had also addressed a representation to respondent no. 4, inter alia stating that petitioner was entitled to the delivery of the goods, however no response was received from the department. 10. It is further contended by counsel for the petitioner that the title in the goods in question has already passed to the petitioner. The petitioner‟s bid has been finally accepted and the petitioner has also submitted the requisite certification, as required vide Circular No.13/2007 issued by the CBEC. Thus counsel contends that it is not open to any of the respondents to take a stand that the final WP(C)No.4552/2008 Page 6 of 31 confirmation is yet to take place. Once the payment has been made by the petitioner and the requisite certificates produced, the petitioner is entitled to receive the goods released in its favour. The only exercise remaining to be carried out was the grant of the final confirmation by the custom authorities and the payment of the balance amount by the petitioner thereafter, which petitioner undertakes to pay. It is next submitted by counsel for the petitioner that the petitioner cannot be divested of its right to the possession and delivery of the goods in issue. It is submitted that ex facie, the filing of the „Bill of Entry‟ by respondent no.3 is not bonafide, especially keeping in view the period of almost one year which has elapsed between the arrival of goods and the filing of the Bill of Entry. Counsel for the petitioner submits that it appears that officials of respondents no.2 and 4 are permitting such belated filing of the Bill of Entry to suit their own ends. Learned counsel for the petitioner submits that it is not permissible, in the present circumstances, for respondents no.2 and 4 to even delay the delivery let alone deny the delivery of the goods to the petitioner for which the petitioner has submitted the highest bid and fulfilled all requisite formalities. 11. While opposing the present petition, learned counsel for respondent no. 2 submits at the outset that the present petition is not maintainable since it involves disputed question of facts which cannot be adjudicated upon by this Court exercising its jurisdiction under Article 226 of the Constitution of India and thus the petition is liable to be dismissed with costs. WP(C)No.4552/2008 Page 7 of 31 12. Learned counsel for respondent no. 2 submits that even otherwise, there is no merit in the case of the petitioner, as the original importer-respondent no.3 had approached the Custom Authority for release of the Cargo/consignment and the Custom Authority had allowed respondent no.3 to file its Bill of Entry on 29.05.2008 to facilitate the clearance of the same. Respondent no.3 was allowed to submit his Bill of Entry on the basis of the policy of the Government to encourage importers and to safeguards their interest by allowing the said cargo to be lifted by the importer himself, instead of it being sold in auction to a third party to the detriment of the importer, in case the importer is ready and willing to pay the Customs Duty, terminal service charges and other miscellaneous charges. Learned counsel submits that the importer has a right in law to file a Bill of Entry in case the consignment has not been sold and goods physically not handed over to the bidder, subject to the importer paying the various dues and custom duties as contemplated under the law. It is submitted that in this case, the importer-respondent no.3, has paid Rs.2,29,000.00 as ground rent and Rs.28,500/- as terminal service charges as on 17.06.2008. In addition, respondent no.3 has also paid Customs Duty on the consignment. The consignment being in possession of respondent no. 2 and the importer-respondent no.3 having deposited the ground rent, terminal service charges customs duty and also having deposited Rs.4,14,243.00 on 18.06.2008 i.e. auction expenses which are 10% of the auction bid amount as contemplated by the circular issued by respondent no.3 vide notification bearing WP(C)No.4552/2008 Page 8 of 31 no.CON/CT/2/V12AUCTION/2005/17 dated 20.09.2005, the said respondent no. 3 therefore became entitled to the delivery of the said consignment of pig bristles. Counsel for respondent no. 2 has denied that the petitioner has addressed any representation dated 11.6.2008 and 13.6.2008 to respondent no.4. 13. It is further submitted by learned counsel for respondent no. 2 that moreover as per Clause 3 (ix) of the terms and conditions of the tender-cum-online-auction sale, respondent has the discretion to withdraw from the sale, a lot or part thereof at any time before the goods are actually, physically delivered out of the campus and without disclosing any reasons for such withdrawal. Learned counsel for respondent no. 2 submits that respondent no.4 vide letter dated 13.06.08 withdrew the lot of „pig bristles‟ in question, in accordance with Clause 3 (ix) of the terms and conditions of the auction and in view of the said withdrawal, respondent no. 2 could not have given delivery of the shipment to the bidder/petitioner inasmuch as the instructions of the Customs Authorities are binding on respondent no.2. Therefore, the petitioner lost its right to take delivery of the lot/consignment in question. 14. Learned counsel for respondent no. 2 has further vehemently submitted that even otherwise, mere confirmation of a bid does not cloth the petitioner with the title of the consignment, till the physical possession of the consignment is handed over to the bidder i.e. the present petitioner in the case. It is submitted that the petitioner has not even exhausted the alternative remedies as provided for within the meaning of Clause 12 of the terms and conditions of the tender- WP(C)No.4552/2008 Page 9 of 31 cum-online auction sale and that the present petition is premature since no cause of action has arisen in favour of the petitioner inasmuch as the petitioner has no lien on the said consignment. 15. Learned counsel for respondent no.3 submits that, the writ petition filed by the petitioner is not maintainable as per the terms and conditions agreed upon between the petitioner and respondent no.4, at the time of the tender-cum-auction sale, inasmuch as, any dispute that arises under the contract has to be placed before an arbitrator. In other words, if the petitioner is aggrieved by any clause of the contract entered with respondent no.4, the petitioner being bound by the contract cannot ignore the arbitration clause. In support of this contention, learned counsel relies upon Prasanna Kumar & Others Vs. The Deputy Commissioner, reported at 2006 (203) ELT 375, more particularly paras 7 and 8, which are reproduced below:- “7. The learned counsel further submitted that though the impugned order refers to condition No.11 of the general conditions of sale, which reads as follows: “Any lot or part thereof may be withdrawn from the sale at any time before it is actually physically delivered out of the campus without disclosing the reasons for such withdrawal. However, if any payment has been made it would be refunded without any interest”, that will not entitle the respondents to refrain from disclosing the reasons for such withdrawal. 8. I am unable to accept the said contention of the learned counsel for the petitioner. The impugned order cannot be said to be arbitrary or opposed to the principles of natural justice. It is categorically stated in condition No.11 that any lot or part thereof may be withdrawn from the sale at any time before it is actually physically delivered out of the campus without disclosing the reasons for such withdrawal. It is not the case of the petitioner that the goods were actually physically delivered out of the campus. WP(C)No.4552/2008 Page 10 of 31 Further, the petitioner has been advised to approach Sanco CFS to get the amount paid by him refunded, which is strictly in accordance with the above said condition. The petitioner may not be put to any financial loss. The petitioner had taken part in the E- Auction only after fully knowing about the general conditions of sale including condition No.11 of the general conditions of sale. Having accepted the conditions of sale and having taken part in the E Auction, accepting to abide by the general conditions of sale, it is not open to the petitioner to question the right of the respondents to withdraw the auctioned goods from the sale. In the impugned order, it is clearly stated that due to administrative reasons, the auctioned goods have been withdrawn from the sale. Condition No.11, as extracted above, clearly shows that the respondents are entitled to withdraw the auctioned goods from sale without disclosing the reasons for such withdrawal.” 16. Learned counsel for respondent no.3 further submits that the petitioner has not presented the correct factual position before this court. Learned counsel submits that correct facts of the case are that respondent no.3 entered into a sales contract with M/s CHONG QING SHENGCHENG ANIMAL BY-PRODUCTS (hereinafter referred to as “M/s CHONG QING”) for a consignment of „white boiled bristles‟ with certain specifications. Accordingly, the sales invoice and a Bill of Lading was drawn. M/s CHONG QING confirmed the receipt of an advance payment of US $ 2000 from respondent no.3 and in pursuance of the said agreement, respondent no.3 received pig bristles from M/s CHONG QING in the month of August, 2007. The consignment consisting of pig bristles arrived at ICD, Tughlakabad, New Delhi in August 2007 in container No.HDMU 2368478. Prior to the arrival of the container in June, 2007, and 1.8.2007, the import of pig bristles was prohibited as per Notification dated 2.2.2007 of the Department of Animal Husbandry as well as the Government of WP(C)No.4552/2008 Page 11 of 31 India, Ministry of Commerce, further vide Notification dated 13.3.2007 issued a similar notification prohibiting the entry of live pig and pig meat products. Learned counsel for respondent no.3 further submits that, however, there was an embargo on the import of processed pig bristles which embargo was removed only in November, 2007 and notified on 23.5.2008, subject to a No Objection Certificate being granted by the Department of Animal Husbandry as well as the Quarantine Department. 17. Mr. M.P. Devnath, learned counsel for respondent no.3, submits that Department of Animal Husbandry has been issuing notifications from time to time starting from 2.2.2007; June, 2007; and August, 2007, onwards. Simultaneously, Ministry of Commerce has also been issuing the notification Codes. As per the notification issued, originally the prohibition for import was with respect to live pig and pig meat. Subsequently in June, 2007, pig bristles were included. By a subsequent notification issued in November, 2007, pig bristles were excluded from the order of prohibition subject to the condition that they would require a passage by the Department of Animal Husbandry as also by the Quarantine Department. Counsel further submits that in view of the above notifications, the consignment could not be cleared on arrival and remained with the Customs. The notification of November, 2007, would not have been applicable to the consignment, in question, as the import, had been carried out earlier. Meanwhile, the Custom authorities initiated auction proceedings under Section 48 of the Act. Counsel for respondent no.3 also submits that the auction per se is bad in law and the goods WP(C)No.4552/2008 Page 12 of 31 could not have been auctioned nor auction proceedings could have been initiated as per the Customs Manual read with CBEC clarifications as the prohibited goods can only be absolutely confiscated and thereafter would either have been re-exported or destroyed. Counsel for respondent no.3 next submits that in similar circumstances a letter was addressed to M/s Seiko Bristle Corporation, by the Ministry of Agriculture, a copy of which has been placed on record, wherein the Regional Officer, Department of Animal Husbandry, had informed the Assistant Commissioner, Customs, that the products may either be deported back to the port of origin or destroyed at the owners cost. 18. Counsel for respondent no.3 submits that when the auction was initiated in March, 2008, respondent no.3 did not participate because Sh. Deepak Gaba, the concerned person, was unwell for a long time and even otherwise respondent no.3 was under the impression that the goods could not have been auctioned being prohibited goods. It is next contended by counsel for respondent no.3 that it is only by a notification dated 23.5.2008 that the earlier notification was amended and the terms thereof relaxed by allowing import of pig bristles subject to clearance by Quarantine and goods free from any virus infection by the Animal Husbandry Department, subject to the condition that the relaxation would follow for imports made post 5.6.2007 but prior to 11.11.2007 in a situation where either advance payment has been made, LC opened and shipment is prior to 5.6.2007. Despite the fact that prohibited goods could not have been put to auction the same were auctioned in March, 2008, WP(C)No.4552/2008 Page 13 of 31 through the instrumentality of the Container Corporation of India, subject to the condition of final approval of the Custom of the auction proceedings. The consignment was put to auction and a bid for Rs.41.0 lakhs was made inclusive of Custom Duty of Rs.19.66 lakhs, Rs.3.37 lakhs payable to respondent no.2 and de-auction charges of Rs.4.00 lakhs. Counsel for respondent no.3 further submits that keeping the aforesaid calculations in mind, respondent no.3 would only receive approximately Rs.14.00 lakhs. Counsel for respondent no.3 also submits that petitioner has only deposited a sum of Rs.8.00 lakhs and the balance payment has to be made only after the Custom Authorities finally approve the auction and allow the clearance. 19. It has been strongly urged by learned counsel for respondent no.3 that the goods could have not been auctioned being prohibited goods, however, due to prevalent situation of Bird Flu, etc., after the auction, a condition was put for seeking clearance from the Animal Husbandry Department, Ministry of Agriculture and Quarantine Department. Learned counsel for respondent no.3 submits that if the goods could be released to the petitioner based on this criteria, then respondent no.3, who was original importer, could also have cleared the goods unaffected by the notifications. Subsequently, in the end of May, 2008, the Certification was given by the Ministry of Agriculture as also by the Wildlife Authorities with regard to consignment. More so when the certificate was issued, the notification had already come into effect on 23.5.2008 providing relaxation to consignments paid for and imported by respondent WP(C)No.4552/2008 Page 14 of 31 no.3. Consequently, Custom Authorities did not approve the delivery of auction to the petitioner as the consignment had been paid for and imported by respondent no.3 from China and due to intervening spread of Bird Flu, the consignment could not be cleared either by respondent no.3 or by the auction purchasers. The Custom Authorities took into consideration the fact that the advance payment had been made by respondent no.3 to the seller, respondent no.3 would be covered by notification dated 23.5.2008, and took a conscious decision in the interest of justice, equity and fair play in favour of respondent no.3, the original importer, by permitting him to file Bill of Entry and allowing clearance of goods. Counsel for respondent no.3 further submits that respondent no.3 has paid Custom Duty of Rs.19.66 lakhs with interest accrued thereon; the land retention charges of CONCOR, respondent no.2, of Rs.3.37 lakhs; paid auction / de-auction charges of Rs.4.00 lakhs to the Container Corporation, as also Rs.1.77 lakhs to the Shipping Line, besides roughly Rs.52.00 lakhs to the foreign supplier, totaling approximately Rs.81.00 lakhs, as against which the petitioner has only paid a sum of Rs.8.00 lakhs i.e. the 20% of the auction amount. Counsel for respondent no.3 also submits that respondent no.3, the original owner of the Cargo, had never abandoned or relinquished title of the goods, which could only have been acquired after the Ministry of Agriculture took a conscious decision that imports which had been made after 5.6.2007 should also be entitled to be cleared subject to the conditions. WP(C)No.4552/2008 Page