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CASE NO.:

Appeal (civil) 6962 2000

PETITIONER:

TATA IRON & STEEL CO. LTD.

Vs.

RESPONDENT:

UNION OF INDIA & ORS.

DATE OF JUDGMENT: 30/11/2000

BENCH:

M.J.Rao, Umesh C Banerjee

JUDGMENT:

BANERJEE, J.

Leave granted.

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This appeal against the judgment of the High Court at

Calcutta is addressed on two counts: The first involving

the true purport of International Price Reimbursement Scheme

(IPRS) as introduced by the Government of India and the

second pertains to the doctrine of estoppel by conduct.

Background Facts: By the Government Notification No. SC

(A)24 (113)/63 Dated 29.2.1964 issued by the Department of

Iron & Steel in the Ministry of Steel, Mines and Heavy

Engineering, the Government of India to give effect to the

proposal for fixation of steel prices for de-controlled

categories, constituted the Joint Plant Committee consisting

of representatives of all major producers of steel along

with Government representative. It is the Joint Plant

Committee (hereinafter referred to as JPC) with whose

concurrence, the main producers, being its members control

the prices of similar categories of steel, though however,

the same is restrictive in its application and is made

applicable to supplies effected by the main steel producers

only, viz. Tata Iron & Steel Co. Ltd., Indian Iron & Steel

Co. Ltd. and Hindustan Steel Ltd. (Presently Steel

Authority of India Ltd.) The records depict that consequent

on the increase in excise duty in steel materials under

Government of India Notification dated 17th March, 1972, the

prices of steel materials were directed to be inclusive of

JPC contribution to the re-roller Freight Differential Fund,

Equalised Freight Element and provision for JPC Engineering

Goods Export Assistance Fund. The inclusion of the above

were made applicable to various categories of materials

including Bar, Rods, Slabs Blooms, Coil, Billets etc. as

appears from JPC announcement No.81 dated March 20, 1972.

It is, however, significant to note that by reason of the

inclusion of the JPC price elements as above, the domestic

price for iron and steel materials has always been higher

than the international price of steel and resultantly demand

for imported steel rather than the indigenous manufacture

was on an ascending trend and it is to combat and curb such

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a trend and having regard to the higher domestic price

structure, the Government of India introduced the

International Price Reimbursement Scheme (hereinafter

referred to as the Scheme) so as to provide some

protection to exporters of engineering goods who would

otherwise by reason of user of domestic steel, would be

exposed to an additional expenditure and thus suffer a loss

for the price difference as noticed above. Incidentally, be

it noted that the protection scheme came into force by

reason of the price increase effected on 9.2.1981 by the

Government of India, Ministry of Commerce Notification dated

23rd July, 1981. One redeeming feature of the Scheme

however, is reimbursement (emphasised) and it is in this

context that Clauses 2.4, 2.5, 2.7 and 2.8 of the Scheme are

relevant and thus ought to be noticed in extenso and

relevant extracts of which are as below: 2.4 Supplies of

Steel made under release orders issued by Iron & Steel

Controller will be made at the prevailing plant/stockyard

price. After the export are effected, price difference

between its domestic price and the relevant international

price will be reimbursed to the exporter. Contracts

eligible for reimbursement under this scheme (including

fresh contracts) would have to be got registered with the

concerned Regional Office of the EEPC within 45 days from

the date of the contract.

2.5 For reimbursement purposes, the domestic price

for these categories would be the JPC plant price for those

categories where JPC price control exists and SAIL price for

other items prevailing on the date of exports. The domestic

price will be exclusive of taxes like sales tax, octroi,

etc.

2.7 Procedure for Reimbursement:

A) The application for reimbursement will be made to

the Regional Offices of the EEPC, with whom the exporter is

registered;

B) The following documents will be submitted by the

exporter for claiming the reimbursement of price difference

between domestic and international prices of steel;

(i) Application in the prescribed form marked Annexure

VI in triplicate;

(vi) A claim bill indicating categorywise consumption

of steel and the price difference payable based on domestic

price prevalent on the date of export and the international

prices for the second preceding month as explained in

paragraphs .(Emphasis supplied).

(vii) Sale voucher for purchase of steel/pig iron from

Main Producers in original or the following documents:

1. Auditor/chartered Accountants Certificate in the

prescribed format to the effect that no imported steel/pig

iron has been utilised in the goods exported by the company.

2. An indemnity Bond in prescribed format

indemnifying Government against any wrong payment on account

of wrong calculation and / or for use of imported steel

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materials.

C) .the reimbursement benefit may be claimed by

any one of the two parties provided the claimant is a

registered exporter and otherwise eligible to get

reimbursement benefit under this scheme; (Emphasised)

2.8 .

v) The claim for reimbursement would be made only in

respect of consumption of indigenous steel and pig iron

procured from the main producer or other sources. Claims

for reimbursement would not be admitted against consumption

of Steel / pig iron imported against Advance License under

the Duty Exemption Scheme and against imprest / REP license

or under OGL. No claims will be admitted in case Customs

duty refund has been claimed / will be claimed under brand

rate of duty drawback for such steel / pig iron.

(Emphasised)

Further facts are as below:

(a) Application paper being Annexure VI to the Scheme

pertaining to reimbursement of difference between the

domestic and international price of steel contain details

pertaining to total quantity of steel consumed for the

manufacture of the product for export during a particular

month together with a statement of the amount of claim. (b)

Annexure VI to the Scheme itself provides for furnishing of

an undertaking recording therein an obligation to refund the

amount of Bill in full or part against application for

reimbursement of price difference between domestic and

international prices in case the declaration/certificate

furnished by the appellant against the claim are found to be

incorrect at any time. The undertaking further recorded

that the refund would be effected within a period of 10 days

from the date of receipt of notice asking for the refund

failing which the amount paid erroneously or in excess shall

be recovered from the appellant or to be adjusted against

any other claim. (a) Incidentally Annexure VI also

contained an Indemnity Bond as well which records as below:

..Such payments are to be made on demand and

without demur. Our liability for payment under the bond

being irrevocable and unconditional. (Emphasized).

The Indemnity Bond further provides

Now the condition of this bond is such that if as a

result of the details scrutiny of the above said application

(s) the amount finally payable to obliger is determined to

be (the decision of the government being final and binding)

nil/less because the obliger has been paid in excess on

wrong calculations or has used imported steel/pig iron in

the manufacture of items thus exported and also received the

price difference claim from the Disbursing Authority, the

eligibility of receiving further amounts by way of

difference in the price between the domestic and

international prices for steel/pig iron used in the

manufacture of items exports, will be withdrawn and

Government shall be at liberty to claim upon the obliger to

return back the amount already paid by the disbursing

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authority within seven (7) days of the receipt of the notice

from the disbursing authority failing which the government

shall be free to take any action against the obliger without

prejudice to the Government claim including security

deposits and earnest money deposits lying with any other

department of the Government or by attachment of our assets,

shareholding and goodwill as also to stop all further

payment/assistance to the obliger as available to the

exporters.

The facts in issue: The factual score depicts that in

terms of the Scheme as above, the appellant claimed benefits

on the basis thereof and payments have also been made to the

extent of differential element involved in the price

structure. The factual score however disclose that the

appellant while exporting engineering goods did use its own

manufactured steel items without involvement of any of the

price elements as declared by JPC and as noticed above. It

is on this score however, the Engineering Export Promotion

Council subsequently by its letter dated 23rd November, 1992

refused to recognise the appellants entitlement to avail of

the benefit of the Scheme. The Council expressly

communicated that a sum of Rs.10,37,96,604/- was paid in

excess under a bona fide mistake being discovered later.

The Council in addition to the claim above-said also claimed

interest at the rate of 18% per annum. The appellant

however, in turn by its letter dated 19th January, 1993

while recording acceptance of the factum of user of own

materials placed on record that the JPC guidelines exempt

main producers from having levies on steel manufactured by

them but used for either captive consumption or for

manufacture of down stream products and this proves that the

JPC had accepted the unique position of an integrated steel

producer who also manufactures other down stream products

and by reason of such an acceptance, the appellant is not

precluded from deriving the benefits under the Scheme.

It has been the specific stand of the appellant that

the Scheme for Price Reimbursement from the time of its

introduction is applicable universally to all exporters

since the export would not have been viable without the

benefits under the Scheme. Further the appellant contended

that the EEP Council did not find any fault with the claims

lodged for all these years, evidently because the Council

was also satisfied about the eligibility of the company, nor

there was any violation or circumvention of any of the

provisions of the Scheme.

Subsequently, however, the Council by a letter dated

19th May, 1994 directed an adjustment of a sum of

Rs.10,37,96,604/- being the excess IPR - Scheme payment to

the Appellant herein and hence the Writ Petition before the

High Court which was ordered in favour of the Appellant

herein by the learned Single Judge though however, reversed

in Letters Patent Appeal by the Appellate Bench of the High

Court and hence the appeal before this Court. Contentions

in support: In support of the Appeal, the learned senior

counsel, Mr. Andhiyarujina contended that the scheme by

itself if read in its entirety does not require actual

payment of domestic price and in support thereof it has been

contended: (1) The Scheme does not require the applicant to

state the actual domestic price paid by it to make the

claim, after the 1985 amendment. (2) After the 1985

amendment it was not necessary, nor a requirement in the

matter of submission of sales voucher. (3) A claimant has

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only to state the price difference payable between the

domestic price prevalent on the date of export and the

international price of the preceding month. (4) The JPC

price is not applicable to the steel purchased from

producers other than the main producers i.e. other

sources. Exporters who obtain steel from other sources

do not have to pay JPC price or JPC levies. Nevertheless

the price difference is payable between the JPC prices and

the international prices. (5) There is no provision in the

Scheme for diminishing or altering the JPC prices to conform

to a price actually paid by the manufacturers/exporters for

the steel. (6) For non-JPC categories of steel to be used

in the manufacture, the domestic price would be the SAIL

price. SAIL prices do not include JPC levies. (7) The

Scheme disregards the actual price paid by the

manufacturer/exporter for the domestic steel. He may have

paid to the producer of steel a higher or lower price than

the JPC price. This is ignored by the Scheme and the

uniform JPC price is taken. (8) Though the Scheme uses the

word reimbursement, in the context of the Scheme, there is

no repayment to the exporter. The word reimbursement here

truly means the payment to the exporter of the price

difference between the higher domestic price and the lower

international price, i.e. to say a subsidy for exports.

Mr. Andhyarujina, learned senior counsel, very

strongly commented that after the commencement of the

Amendment on 17th of October, 1985 the exporters of the

engineering steel product could procure the indigenous steel

and pig iron from any source in the country since there was

existing no obligation to procure materials from only the

main producers but from other sources as well and it is in

this context, strong reliance was placed on clause 2.8 (v)

of the Scheme. Mr. Andhyarujina contended that the very

use of the words other sources being an alternate to the

main producer depicts the intent of the framers of the

Scheme that though primarily reimbursement would be effected

in respect of consumption of indigenous steel and pig iron

procured from the main producer but this procurement may be

had from other sources as well, such as Mukand Iron, Jindal,

Orient etc.. It has been contended rather strongly that

other sources cannot but mean other manufacturers producing

indigenous steel and contra view would run counter to the

intent of the framers of the Scheme. It has been contended

that the words procured fromother sources, as a matter of

fact, cannot but mean other sources than the main producer.

The word procure in common English parlance mean and imply

to obtain or to get possession from someone else. It is,

as a matter of fact, obtaining the possession of someone

which one has not already got. This attribution however

stands accepted by Lord Parker, C.J. in R v. Mills(1963

1All ER202: 204). Old English however, referred to the

word as a sinister move but having regard to the common

acceptation of the word, the submission of Mr. Andhyaujina

seem to be rather attractive. Incidentally, prior to 17th

October, 1985 the price protection was available to

exporters who used indigenous raw material procured from the

main producers. On 17th October, 1985 the Scheme was

amended so as to record that the production of sale

vouchers, for the purchase of steel, pig iron from the main

producers, ceased to be a requirement though, however, in

lieu thereof an Audit Certificate has been demanded by the

Union of India for certification that no foreign steel has

been used in the concerned manufactured item. During the

course of submissions Mr. Andhyarujina in no uncertain

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terms contended that JPC prices are the prices which are

announced by the JPC from time to time for supplies from

member steel plants, namely, the main producers (SAIL and

TISCO) and the JPC prices applied for purchases from the

main producers but not to purchases from other sources or

other producers as noted above. TISCO, admittedly, is a

main producer of steel in the country and admittedly further

TISCO was captively consuming steel manufactured by it in

the export product being steel tubes and it is on this score

that they claimed the benefits of the IPRS from 1985 onwards

and allowed till 1992 when the respondents said to have

illegally denied the appellant the full benefits on the

ground that it has not paid the special levies in the JPC

price structure. Contentions raised on behalf of the

Respondents: It is in this perspective that learned

Attorney General contended that IPRS was evolved to avoid

financial sufferance to the Indian manufacturer of iron and

steel products from out of indigenous steel having the four

basic price elements known in common English parlance as the

JPC price namely, (i) Engineering Goods Export Assistant

Fund (EGEAF) (ii) Steel Development Fund (SDF) (iii) Freight

Equalisation Fund (FEF) and (iv) JPC Cess. Admittedly, JPC

pricing is higher than international pricing as is available

in the steel market in the country but in order to make sure

utilisation of the indigenous steel from the main producers,

the quality of which stands tested , and to curb and combat

the financial stress on the manufacturers, the IPRS was

brought into existence as otherwise Indian manufacturers

would be completely out of the trade by reason of

availability of international steel at a lesser rate. The

IPRS leaves no manner of doubt stands attracted for

reimbursement only. The issue therefore, arises having

regard to the meaning attributed to the word reimbursement

as to whether there is any entitlement for the appellant

herein. It needs to be adverted that the

appellant-petitioner in fact have been receiving the money

in the past and the entitlement thereof is challenged only

since 1992 and this payment as stated by Mr. Attorney

General has been effected by mistake and immediately on

detection thereof and in order to rectify the mistake, a

notice was sent as to the excess payment on account of price

difference between the domestic and the international

prices. Observations: Under the International Price

Reimbursement Scheme (IPRS) supplies of steel raw materials

required by the Engineering exporters were made available at

the International prices by reimbursing the difference

between the JPC prices and the relevant international

prices. The expression used is reimbursement to the extent

of the difference between the domestic and international

prices and in the event of non-payment thereof question of

thus claiming any price difference would not arise as

otherwise it would amount to obtaining double benefit This

has been the contention of both Attorney General of India as

also the Additional- Solicitor General of India appearing

for the respondents. Admittedly, Tata Iron has not paid the

JPC price which includes a number of levies rendering it

more than the international prices but the factum of

non-payment of the levies, since the materials in question

have been consumed at the factory itself without payment of

any duty, the submissions of the respondent seems to have

been placed at a rather stronger footing. In common

acceptation the word reimburse mean and imply to pay back

or refund: As a matter of fact it denotes restoration of

something paid in excess: as regards the respondent Union

of India it cannot but mean to indemnify having regard to

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the common grammatical meaning of the word reimbursement.

Reimbursement has to mean and imply restoration of an

equivalent for something paid or expended. Reimbursement

pre-supposes previous payment. The contextual facts depict

that the intention of the Government while framing the IPRS

was to protect the interest of exporters of the engineering

goods where the JPC or the domestic price (which includes a

number of levies) was more than the international pricing.

The appellant TISCO admittedly has not paid the JPC price

which includes various levies of the raw materials used for

the product. As a matter of fact they cannot have any

reimbursement for expenses which they have never incurred.

As per the calculation made by the respondents an amount of

Rs.10,37,96,604/- is recoverable from TISCO on account of

over payment of which a sum of Rs.6,75,00,298/- stands

adjusted by the Union of India against the payments

respectively and a balance amount of Rs. 3,62,96,306/- is

yet to be recovered as contended by the respondents. On a

true reading of the Scheme and various clauses thereunder

together with the available meaning on the basis of the

language used, the IPRS Scheme cannot possibly cover a

situation as is in the present context. We are afraid that

in the event the appellant is permitted and allowed to enjoy

the benefits in terms of the scheme, the situation would be

rather not only of unjust enrichment but entertainment of a

totally wrong claim. Second Count: In support of the

Appeal, the learned senior counsel Mr. Andhiyarujina by way

of an alternative submission contended that conferment of

benefit in terms of IPRS and continuance thereof in the

matter of payment of price difference in terms of the IPRS

the conduct of the respondent is hit by the doctrine of

estoppel. by conduct. Estoppel by conduct in modern times

stands elucidated with the decisions of the English Courts

in Pickard v. Sears (1837: 6Ad. & El. 469) and its

gradual elaboration until placement of its true principles

by the Privy Council in the case of Sarat Chunder Dey v.

Gopal Chunder Laha (1898 L.R. 19 I.A.203) whereas earlier

Lord Esher in the case of Seton, Laing Co. v. Lafone

(1887: 19, Q.B.D.68) evolved three basic elements of the

doctrine of Estoppel to wit: Firstly, where a man makes a

fraudulent misrepresentation and another man acts upon it to

its true detriment: Secondly, another may be where a man

makes a false statement negligently though without fraud and

another person acts upon it: And thirdly there may be

circumstances under which, where a mis-representation is

made without fraud and without negligence, there may be an

Estoppel: Lord Shand, however, was pleased to add one

further element to the effect that there may be statements

made, which have induced other party to do that from which

otherwise he would have abstained and which cannot properly

be characterised as mis- representation. In this context,

reference may be made to the decisions of the High Court of

Australia in the case of Craine v. Colonial Mutual Fire

Insurance Co. Ltd.(1920: 28 C.L.R. 305). Dixon, J. in

his judgment in Grundt v. The Great Boulder Pty. Gold

Mines Ltd. (1938: 59 C.L.R. 641) stated that: in

measuring the detriment, or demonstrating its existence, one

does not compare the position of the representee, before and

after acting upon the representation, upon the assumption

that the representation is to be regarded as true, the

question of estoppel does not arise. It is only when the

representor wishes to disavow the assumption contained in

his representation that an estoppel arises, and the question

of detriment is considered, accordingly, in the light of the

position which the representee would be in if the

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representor were allowed to disavow the truth of the

representation. (In this context see Spencer Bower and

Turner: Estoppel by Representation 3rd Ed.). Lord Denning

also in the case of Central Newbury Car Auctions Ltd. v.

Unity Finance Ltd. (1956 (3) All ER 905) appears to have

subscribed to the view of Lord Dixon, J. pertaining to the

test of detriment to the effect as to whether it appears

unjust or unequitable that the reprsentator should now be

allowed to resile from his representation, having regard to

what the representee has done or refrained from doing in

reliance on the representation, in short, the party

asserting the Estoppel must have been induced to act to his

detriment. So long as the assumption is adhered to, the

party who altered the situation upon the faith of it cannot

complain. His complaint is that when afterwards the other

party makes a different state of affairs, the basis of an

assertion of right against him then, if it is allowed, his

own original change of position will operate as a

detriment.(vide Grundts: High Court of Australia (supra)).

Phipson on Evidence (Fourteenth Edn.) has the

following to state as regards estoppels by conduct.

Estoppels by conduct, or, as they are still sometimes

called, estoppels by matter in pais, were anciently acts of

notoriety not less solemn and formal than the execution of a

deed, such as livery of seisin, entry, acceptance of an

estate and the like; and whether a party had or had not

concurred in an act of this sort was deemed a matter which

there could be no difficulty in ascertaining, and then the

legal consequences followed. [Lyon v. Reed (1844) 13 M &

W. 285, 309] The doctrine has, however, in modern times,

been extended so as to embrace practically any act or

statement by a party which it would be unconscionable to

permit him to deny. The rule has been authoritatively

stated as follows: Where one by his words or conduct

willfully causes another to believe the existence of a

certain state of things and induces him to act on that

belief so as to alter his own previous position, the former

is concluded from averring against the latter a different

state of things as existing at the same time. [Pickard v.

Sears (1837) 6 A.& E. 469,474] And whatever a mans real

intention may be, he is deemed to act willfully if he so

conducts himself that a reasonable man would take the

representation to be true and believe that it was meant that

he should act upon it. (Freeman v. Cooke: 1848 (2) Exch.

654, 663).

Where the conduct is negligent or consists wholly of

omission, there must be a duty to the person misled.

{Mercantile Bank v. Central Bank (1938 AC 287, 304 and

National Westminster Bank v. Barclays Bank International

(1975 Q.B. 654] This principle sits oddly with the rest of

the law of estoppel, but it appears to have been reaffirmed,

at least by implication, by the House of Lords comparatively

recently. [Moorgate Mercantile Co. Ltd. v. Twitchings

(1977) AC 890 (H.L.)] The explanation is no doubt that this

aspect of estoppel is properly to be considered a part of

the law relating to negligent representations, rather than

estoppel properly so-called. If two people with the same

source of information assert the same truth or agree to

assert the same falsehood at the same time, neither can be

estopped as against the other from asserting differently at

another time. [Square v. Square (1935) P.120]

A bare perusal of the same would go to show that the

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issue of an estoppel by conduct can only be said to be

available in the event of there being a precise and

unambiguous representation and on that score a further

question arises as to whether there was any unequivocal

assurance prompting the assured to alter his position or

status.. The contextual facts however, depict otherwise.

Annexure 2 to the application form for benefit of price

protection contains an undertaking to the following effect:-

We hereby undertake to refund to EEPC Rs.---- the amount

paid to us in full or part thereof against our application

for price protection. In terms of our application dated

against exports made during In case any particular

declaration/certificate furnished by us against our above

referred to claims are found to be incorrect or any excess

payment is determine to have been made due to

oversight/wrong calculation etc. at any time. We also

undertake to refund the amount within 10 days of receipt of

the notice asking for the refund, failing which the amount

erroneously paid or paid in excess shall be recovered from

or adjusted against any other claim for export benefits by

EEPC or by the licensing authorities of CCI & C.

and it is on this score it may be noted that in the

event of there being a specific undertaking to refund for

any amount erroneously paid or paid in excess (emphasis

supplied), question of there being any estoppel in our view

would not arise. In this context correspondence exchanged

between the parties are rather significant. In particular

letter dated 30th November, 1990 from the Assistant

Development Commissioner for Iron & Steel and the reply

thereto dated March 8, 1991 which unmistakably record the

factum of non-payment of JPC price.

Opinion of the Court: The contextual facts therefore

in no unambiguous language depict that the four JPC price

elements have not been paid by the appellant herein.

Further factual score depicts recording of an undertaking to

repay in the event of excess payments and on the wake of the

findings as noticed hereinbefore, it would neither be fair

nor reasonable or in consonance with the concept of justice,

equity and good conscience directing entitlement of the

appellant as is being claimed. Doctrine of fairness and the

duty to act fairly is a doctrine developed in the

administrative law field to ensure the rule of law and to

prevent failure of justice. It is a principle of good

conscience and equity since the law courts are to act fairly

and reasonably in accordance with the law. The

correspondence unmistakably divulge an obligation to pay

certain compensation in the event there is a payment of

certain levy by the appellant herein: The appellant

admittedly has not made the payment : Doctrine of

unreasonableness is opposed to doctrine of fairness and

reasonableness will have its play, if allowed. The

happening of an event has not taken place, can it be said

irrespective of such an event reimbursement is to be

allowed? The answer, however, cannot but be in the

negative. In that view of the matter, we record our

concurrence with the Judgment of the Calcutta High Court.

The appeal therefore, fails and is dismissed. No order as

to costs.