Companies Act Case Law Steel Authority Of India Ltd Vs Shri Ambica Mills Ltd & amp; Ors.




DATE OF JUDGMENT: 17/10/1997





K. Venkataswami J.
This appeal by special leave is directed against the
Division Becnh judgment of the Gujarat High Court dated
7.2.1985. Brief facts concerning the case are given below.
The first respondent-company is engaged in the
manufacture of steel tubes through its Ambica Tubes
Division. For the purpose of manufacture of steel tubes, hot
rolled strips in coils are required as raw material. These
not rolled strips were being supplied at the relevant time
to the manufacturers of steel tubes like (Ambika Tubes
(hereinafter referred to as the importer) through the
appellant referred to as the importer) through the appellant
subject to certain conditions. The manufacture who are given
raw materials must posses the import licence and have to
carry out certain export obligations. The obligations
concerning this for the period in question, namely, April
1983 to March, 1984 were given in the import and export
policy for that period. Previously a public notice in
respect of scheme for supply of raw material by steel
Authority of India Ltd. (hereinafter called the “SAIL”)
against advance import licence was issued on the Scheme
published on 11.12.1982 would be continued. According to
that. the importer becomes eligible for supply of goods on
compliance of the conditions fixed in the scheme in
particular, the conditions of producing advance licenses,
duty exemption entitlement certificate, legal
undertaking/execution of export bond and furnishing of
irrevocable letter of credit. The appellant as an indigenous
supplier under the aforesaid announcement of the prices at
which law the raw material will be supplied. That
announcement was published in the Economic Times on
10.6.1983 under the caption “Scheme for Supply of certain
Categories of Indigenously Produced Steel Materials at
Competitive Prices against Valid Import Licences”.
Pursuant to the abovesaid announcement. the importer
submitted licenses requiring supply of about 3768 tonnes of
not rolled strips in coils. It was found that the licence
submitted by the importer (Ambica Tubes) did not mention
that it was an advance import licence nor was it accompanied
by Duty Exemption Entitlement Certificate and the bond. In
addition to the submission of licences, the said Ambica
Tubes however submitted Letter of Credit dated 19.8.1983 on
the same data, namely, 20.8.1983. In the Letter of Credit
also there were certain infirmities and when the same was
pointed out, it was rectified and submitted before
On receipt of the licence and the Letter of Credit, the
appellant by a telex message dated 23.8.1983 pointed out
the defects in the licence/release order and also stated
that in view of the defects, the appellant are not taking
any action on the Letter of Credit for the present.
In reply to the telex message, Ambica Tubes sent a
letter on the same date (23.8.1983) informing the appellant
that the original release order in duplicate and the Duty
Exemption Entitlement Certificate booklet had been submitted
to the joint Controller at Ahmedabad and would be sent to
the Bombay SAIL office on receipt of the same. The relevant
documents after carrying out the corrections were factually
furnished to the appellant by Ambica Tubes only on
26.8.1983. In the meanwhile the appellant enhanced/revised
the price of their supplies (steel materials) from Rs.2460/-
to 2750/- per M.T. on and from 25.8.1983. Since the relevant
documents after carrying out the corrections with necessary
enclosures were received by the appellant only on 26.8.1983.
the importer (Ambica Tubes) was required to pay the price
for the release of steel materials at the revised rate,
namely, Rs. 2750/- per M.T.
Ambica Tubes made representation that they having
submitted Letter of Credit and the necessary documents,
though defective, well before 25.8.1983, the revised charges
should not have been applied. The appellant gave a detailed
reply to the representation of the importer. The importer
moved the Gujarat High Court on 18.6.1984 for quashing the
announcement made by SAIL revising the price and for
directing that the supplies must have been made at the pre-
revised price and for consequential refund of difference
between the pre-revised and revised prices. The appellant
resisted the writ petition by filing a detailed reply to the
affidavit filed in support of the writ petition.
The High Court proceedings on a wrong premise, namely,
that SAIL (appellant) was a department of Union of India but
its administration is run separately in the interest of
efficiency; held that the importer (Ambica Tubes) was not
responsible for the defects pointed out in the
license/release order and it was the office of Joint Chief
controller order and it was the office of Joint Chief
Controller of imports and Exports alone responsible for the
defects for which the importer should not be punished. In
other words. the High Court was of the view that the license
though defective must be deemed to have been presented on
20.8.1983 long before the revised price was announced.
Therefore., the appellant was not entitled to charge for the
supply of raw materials at the revised rate. The High Court
also directed the refund of the difference between the pre-
revised and the revised rates. The High Court further
observed that the action of the appellant in not registering
the petitioners’ indent No. 7 of the 1986 dated 19.8.1983
latest on 24.8.1983 was an action bad at law, arbitrary an
We are not concerned with the other relief granted
against Union of India in this appeal.
Though the main relief in the writ petition was the
challenge to the right of SAIL to fix the price from time to
time, the High Court left open that issue without deciding
the same. The entire reasoning of the High Court is found in
paragraph 16 of its judgment which reads as follows:-
“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. On had 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 no
doubt 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
capitalized by another branch is
per 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 would be favorably
treated. In this sense of the term,
it could be said that possibly
inconsistent stand, and therefore,
discriminatroy stand, can be there
in the action of the 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 justification for them to sit
tight on that date 24.8.1983 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 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
the 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 price on 11.12.82, 14.3.93,
7.6.83, 25.3.83 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 the fixed for the period of
three months and they are to remain
operative for theat period, but we
are not to opinion on that point
because the ultimate relief of the
petitioners can be granted without
deciding the point.”
Aggrieved by the judgment of High Court, the present
appeal is filed by the SAIL.
Mr. Dhruv Mehta, learned counsel appearing for the
appellants submitted that the High Court erred in assuming
that the appellant was a department of the Union of India
forgetting totally that it is a company incorporated under
the Companies Act and it is a separate entity,
notwithstanding the fact that the company is entirely owned
by the Government of India. It will not be a wing/department
of the Government. In support of his contention, he placed
reliance on the judgment of this Court in Dr. S.L. Agarwal
vs. The General Manager, Hindustan Steel Ltd. (AIR 1970 SC
1150), Western Coalfields Ltd. vs. Special Area Development
Authority, Korba & Anr. (AIR 1982 SC 697). He also submitted
the power of SAIL to revise the pricelist from time to time
the relief given by the High Court would amount to refund of
money by exercising the jurisdiction under Article 226 which
is against the ruling for this Court in Suganmal vs. State
of Madhya Pradesh & Ors. (AIR 1965 SC 1740). He also
submitted that the importer being a party to the contract
and having paid the price as revised and taken delivery of
the goods cannot now turn around and challenge the action of
the SAIL by invoking the writ jurisdiction under Article 226
of the Constitution of India. In support of this submission,
he placed reliance on a judgment of this Court in Har
Shankar & Ors. The Dy. Excise & Taxation Commissioner & Ors.
(1975 (1) SCC 737).
He also placed reliance on other judgment of this Court
in M/s. Radhakrishna Agarwal & Ors. vs. State of Bihar &
Ors. (AIR 1977 SC 1946), State of Orissa & Ors. vs. Narain
Prasad & Ors. (1996 (5) SCC 740) and Assistant Excise
Commissioner & Ors. vs. Issac Peter & Ors. (1994 (4) SCC
On facts, Shri Dhruv Mehta, learned counsel for
appellant submitted that on the admitted position that the
documents, namely, licence/release order after rectification
having been furnished only on 25.8.1983, the importer cannot
claim the application of pre-revised price on the ground
that the mistake, if at all, was on the part of the office
of the joint Chief Controller of Imports and Exports and,
therefore, it should not be penalised. According to the
learned counsel, the conditions of Scheme published enable
the appellant to insist upon all the documents to be
furnished before release of the raw material. The SAIL w as
not concerned with the party responsible for the defect in
the document. Therefore, the High Court was not justified in
making certain observations against the appellant. According
to Mr. Dhruv Mehta, the appeal should be allowed.
Mr. Parekh, learned counsel appearing for the first
respondent, placing reliance on para 2.3 of the Scheme
announced on 10.6.1983 submitted that the Letter of Credit
having been furnished after `rectifying the defects before
25.8.1983, the importer is entitled to get the supplies at
the pre-revised rate notwithstanding the defects in the
licence/release order as the importer was not responsible
for the defects. He also submitted that the High Court was
well within its jurisdiction in entertaining the writ
petition and granting the relief. According to the learned
counsel, the judgment under appeal does not call for any
interference by this Court.
Before considering the rival submission, it is
necessary to set out the relevant Paragraph in the Scheme
announced on 10.6.1983.
“2.2 When a valid and eligible
import license is surrendered by an
import Licence holder to the
concerned office of SAIL for supply
of materials under this Scheme, the
approximate quantity of the
material which can be supplied
against the import licence will
first be determined keeping in view
(a) the utilised value available on
the licence, (b) the price of the
concerned item as Scheme,
Thereafter, the Import Licence
holder will be requested by the
concerned office of SAIL to make
appropriate financial arrangements
taking into account, besides (a)
and (b) mentioned above, the
approximate amount of
duties/taxes/levies, etc.
chargeable on such supplies. The
actual supply will be restricted to
the quantity which can be supplied
against the surrendered import
licence provided the amount for
which financial arrangements are
made permits the same.”
Para 2.3 reads as follows:-
“2.3 The price as announced for
supply of materials under this
Scheme shall be subjects 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 dispatches by rail and, the
date of the Delivery Challan of
SAIL’s stockyard in the case or ex-
yard delivery, except in the
following cases where in 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
a) Where the financial arrangements
made in favour of SAIL is such that
it enable SAIL to effect dispatches
on a continuing basis without any
restrictions about delivery
schedule; this will also include an
irrevocable confirmed automatic
revolving Letter of Credit (L/C)
without recourse to the drawer
which would enable SAIL to effect
dispatches on a continuing basis
without quantitative or other
b) Where the financial arrangement
made in favour of SAIL is such that
despatches have to be completed
within a period of 3 months from
the date on which the financial
arrangement became operative but is
for a quantity less than the
tonnage covered by the import
licence, the despatches shall be
restricted to the quantity covered
by the financial arrangement.
c) In all cases, the interpretation
and decisions of SAIL as to the
acceptability, adequacy,
effectiveness and operativeness of
the financial arrangement made by
eligible import licence holders in
favour of SAIL for supply of
material under this Scheme shall be
final and binding.”
Coming to the merits of the case, we accept the
contention of the learned for the appellant that the High
Court went wrong in holding that SAIL was a department of
the Union of India. In Agarwal’s case (supra), a
Constitution Bench of this Court while considering a similar
question held as follows:-
“We must, therefore, hold that the
corporation which is Hindustan
Steel Limited in this case is not a
department of the Government nor
are the servants of its holding
posts under the State. It has its
independent existence and by law
relating to Corporations, it is
distinct even from its members.”
In Western Coalfields case (supra), this Court held as
“It is contended by the Attorney
General that since the appellant-
companies are wholly owned by the
Government of India, the lands and
buildings owned by the companies
cannot be subjected to property
tax. The short answer to this
contention is that even though the
entire share capital of the
appellant-Government has been
subscribed by the Government of
India, it cannot be predicted the
Government of India. The companies
which are incorporated under the
Companies which are incorporated
under the Companies Act have a
corporate personality of their own,
distinct from that of Government of
India. The lands and buildings are
vested in and owned by the
companies, the Government of India
only owns share capital.”
In the view of the above decisions of this Court, we
have no hesitation to hold that the High Court erred in
thinking that SAIL was a department of the Union of India
and most of the reasons given in the judgment are based on
this wrong premise.
The importer in this case, it is an admitted fact, is a
register exporter of steel pipes entitled to priority
allotment of steel either through imports or from indigenous
plants like the appellant. The allotment of steel was four
manufacture of steel pipes for export against Advance
Licence granted to the importer from time to tome. During
the relevant period, hot rolled strips in coils manufactured
by plants under SAIL were available in sufficient quantity
and hence the direct imports of the raw material were banned
and the manufacturers were required to obtain the supplies
of the raw materials from the appellant against the import
licences with them and/or release orders issued by the
licensing authority, namely the Chief Controller of Imports
and Exports.
Various categories of licences are granted for the
purpose of imports to the manufacturers. One such licence
was Advance Licence. Paragraph 149 of the import policy
provided for grant of Advance Licence/imprest licences and
the relevant part of paragraph 149 reads `the term Advance
Licence refers to c ases where the import is allowed under
the Duty Exemption Scheme whereas the term imprest licence
will be used where the import is allowed outside the Duty
Exemption Scheme. The Advance Licences, it is stated, which
include release orders are intended to supply import input
or inputs in short supply for export production. It is also
stated that the licensing authority issuing the Advance
Licences will simultaneously issue the collected Duty
Exemption Entitlement Certificate. The Policy does not
provide for issuance of Advance Licence without duty
Bearing the above-said facts in mind, let us now
consider the issue raised before us.
Admittedly when the importer wanted to register the
indent for supply of hot rolled strips in coils, the
licences / Release Orders produced lacked in material
particulars and relevant enclosures. In other words, the
licence did not mention that it was an Advance Licence and
no Duty Exemption Entitlement Certificate was enclosed and
legal undertaking/exemption of export bone was also not
enclosed. It was on this admitted position, the appellant
declined to register the indent of the importer. No doubt,
the mistake was committed by the licensing authority. Does
that mean that the appellant can ignore the lacuna in the
documents and register the indent placed by the importer
contravention of the requirements of the Scheme? The High
Court held that the licensing authority and the appellant
being two different wings/departments of Union of India, the
appellant on receipt of rectified documents on 26.8.1983
must register the indent as if it was presented on
20.8.1983. We are afraid, we cannot accept the above
reasoning of the High Court as we have pointed out that the
basic error committed by the High Court was in assuming that
the appellant was a Department of Union of India. We have
already noticed that there are number of judgments of the
Court taking the view that a company though fully owned by
Union of India when incorporated takes its own
entity/identify and cannot be considered as department of
the Union of India. Further, it is seen from the records
that the importer in this case is not a new entrant to plead
ignorance though that may not be an excuse. He has presented
applications for registration before and after the
application in question and, therefore, it must be taken
that the importer new fully well about the requirements for
registering the indent. It is also relevant to note that the
appellant on receipts of the application for registration
expressly in writing replies not only pointing out the
defects but also stated that they are not taking any action
on the Letter of Credit enclosed along with the licence. it
is also an admitted fact that the indent was registered only
on 26.8.1983 when all the relevant documents after curing
the defects was presented on that date. Under these
circumstances and in the light of the Scheme published by
the appellant, we hold that the import (Ambica Tubes) cannot
claim as of right its order must be deemed to have been
registered for supply of raw materials on 20.8.1983 when the
documents with all defects were presented.
We cannot agree with the contention of Mr. Parekh that
mere presentation of an irrevocable Letter of Credit
covering the value of requirement of raw materials is
sufficient for registering the indent. We have already set
out para 2.3 Paragraph 2.3 of the paid for the indent. Mr.
Parekh placed reliance on the last part of Paragraph 2.3 to
contend that the date of presentation of irrevocable Letter
of Credit will be relevant for fixing the price. We have
seen that it says price changeable shall be the price ruling
on the date on which acceptable and operative, financial
arrangements are made in favour of SAIL by import licence
holder eligible to get supplies under this Scheme. Mr.
Parekh wants us to ignore the portion underlined above. Mere
production of Letter of Credits will not be sufficient to
determined the price ruling on the date. It must be given by
an import licence holder eligible to get the supplies under
the Scheme. In this case, we have sen that the importer will
not fall under the category of `import licence holder
eligible to get supplies under the Scheme’ as on the date
when the Letter of Credit was presented, the licence /
release order was defective. Therefore, we cannot agree with
Mr. parekh that the importer having produced the Letter of
Credit well before 25.8.1983, the price payable for the
supplies must be pre-revised one.
In view of our above conclusion, it is not necessary
for us to consider and decide the other points raised by
learned counsel for the appellant.
We have seen that the High Court has not decided but
left open the question relating to the right of the
appellant to fix the price from the time to time even though
that was the main issue raised in the writ petition before
the High Court. As we are not in agreement with the view
expressed by the High Court on other issues, it is now
necessary for the High Court to consider the issue relating
to the right of the appellant to fix the price from time to
It is open to the appellant to raise the question of
unjust enrichment when the matter is taken up by the High
Court pursuant to this remit order. The parties car place
before the High Court necessary material in support of their
respective contention on the issue of unjust enrichment.
Before parting with the case, we would like to observe
that the observations of the High Court in the judgment
condemning the appellant for not registering the order
placed by the importer on the data when the relevant
documents were presented with defects were totally uncalled
for and, therefore, we expunge all those observations from
the judgment.
In the result, the appeal is allowed and the judgment
of the High Court is set aside and the matter is remitted to
the High Court to decide the right of the appellant to fix
the price from time to time and also the question of unjust
enrichment. No costs.



Leave a Comment