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Judgment
Roshan Dalvi, J.—This suit is filed for recovery of certain amounts from the Defendants as shown in prayers (a) to (d) of the Plaint. The suit, though filed against the seven Defendants, has, in fact, been prosecuted only against Defendant No. 3, the Commissioner of Customs. The Plaintiffs claim is essentially for refund of the amount paid to the Court Receiver for goods agreed to be sold and delivered to the Plaintiffs by the Court Receiver which could not be delivered though sold, because the goods were not found, as Defendant No. 3 had sold them wrongfully.
One W.G. Forge and Allied Industries Ltd. (the Company) had imported various goods in 1982-83 being steel parts, bars and scrap material under various Bills of Entry. The Company had not made payment of custom duty thereon. The custom duty was demanded by Defendant No. 3. The goods were not released. The Company has been ordered to be wound up by an order of this Court. The Company had taken a loan from the Industrial Finance Corporation of India (IFCI). IFCI filed Miscellaneous Petition No. 475 of 1984 for recovery of the amount and for enforcing certain charge and guarantee thereon. A Receiver came to be appointed therein on 8th October 1984.
The Receiver was given power to sell the movable and immovable properties of the Company under order dated 30th October 1984. The sale was to be free from all encumbrances as per directions passed on 5th August 1986. The Court Receiver had obtained an inventory report of the movable and immovable properties which were lying in the various bonded warehouses on 17th January 1991 and thereafter on 22nd August 1997. The Custom Authority sold the goods lying in certain bonded warehouses by auction in September 1994. The Court Receiver offered to sell the movable properties being the goods imported by the Company under an auction sale on as is where is and what is basis as per the further directions for sale passed on 27th July 1998 and 5th October 1998. The Court Receiver put up the goods for auction in various bonded warehouses on 27th September 2001. There was a further order to sell certain goods specially under lot No. 3 passed on 11th September 2002. The Court Receiver invited offers for public auction by a Public Notice on 26th September 2002.
Defendant No. 4 and the Plaintiffs bid at the said auction on 7th October 2002 and 9th October 2002. Thereafter there has been an agreement between Defendant No. 4 and the Plaintiffs under which the Plaintiffs represented the interest of Defendant No. 4 and the suit is withdrawn against Defendant No. 4.
The Court passed an order on 10th December 2002 that the auction purchaser would not be liable for the past liabilities of the Company. The Court Receiver conducted sale of various goods of which he was appointed Receiver including the goods purchased at the auction by the Plaintiff and Defendant No. 4 on 11th December 2002. Defendant No. 4 was accepted the highest bidder for Rs. 65.80 Crores. The sale was confirmed in favour of Defendant No. 4. The Plaintiffs were their nominees for lot No. 3. Consequently, the Plaintiffs were accepted by the Court Receiver as the purchaser on 24th December 2002.
The goods, which were to be sold under the public notice, were as per the terms and conditions of the Court Receiver. The terms and conditions specified that offerers were to take inspection at the bonded warehouses. The Plaintiffs filed an undertaking in respect of lot No. 3, for which they were nominated by Defendant No. 4, with the Court Receiver on 26th March 2003. The Court Receiver handed over to the Plaintiffs certain goods which were at the bonded warehouses at Thane and Manpada. The Plaintiffs had not paid custom duty on those imported goods at that time. The goods at Goregaon were not handed over as they were reported to be missing. The Plaintiffs came to learn for the first time about missing bonds at Goregaon when they sought to take delivery of the goods along with the representative of the Court Receiver on 19th April 2003.
It appears that the claim of Defendant No. 3 was brought to the notice of the Court. That was the statutory claim for payment of custom duty failed to be made by the Company at the time of the import of the goods. The Court directed Rs. 5 Crores to be set aside with the Official Liquidator towards the claim of Defendant No. 3 on 25th April 2003. It was seen that Defendant No. 3 had sold the goods to recover part of the custom duty. This was sold despite the fact that the Court Receiver was appointed in respect of the goods being the movable property of the Company with power to sell. On the premise that the goods were custodia legis, the Division Bench of this Court on 23rd June 2003 called upon Defendant No. 3 to explain the sale of the six bonds which were reported to be sold by the Mumbai Port Trust. Defendant No. 3 tendered apology for having sold the six bonds for Rs. 47,68,437/-. The Division Bench of this Court directed Defendant No. 3 to deposit the said amount in this Court along with interest amounting to Rs. 74,82,298/- on 30th September 2003. This was after Defendant No. 3 was allowed to appropriate the custom duty on certain six bonds - That amount has been deposited to the credit of this suit. These are all admitted facts.
That amount is essentially claimed by both the Plaintiffs as well as Defendant No. 3.
Mr. Ghelani on behalf of the Plaintiffs has specifically stated that the Plaintiffs give up all the claims other than refund of the said amount in this suit.
Mr. Rajguru on behalf of Defendant No. 3 claims the said amount as an adjustment towards custom duty payable in respect of the goods under the other bonds which were handed over by the Court Receiver to the Plaintiffs at Thane and Manpada, etc. without payment of custom duty.
Upon their respective claims, the Plaintiffs have been directed by the Division Bench of this Court on 19th December 2003 to file a suit which is this suit.
Defendant No. 3 is stated to have filed a claim in January 2004 before the Official Liquidator in respect of custom duty payable. The Plaintiffs filed this suit in August 2004.
The Plaintiffs claim refund of the amount deposited to the credit of this suit on the premise that the Plaintiffs had made payment to the Court Receiver who was to sell the goods to the Plaintiffs as per orders passed in Miscellaneous Petition No. 475 of 1984. The Plaintiffs claim that the goods could not be delivered because Defendant No. 3 sold them wrongfully.
Defendant No. 3 has accepted that the goods were sold when they were stated to be in the custody of the Court Receiver and has, therefore, brought the amount of the sale value of these goods to the credit of this suit. Hence the contempt of Court in selling the goods, if any, is purged. The real legal question that arises is whether the Plaintiffs or Defendant No. 3 has priority over the said amount in view of their respective claims.
Defendant No. 3 claims the amount under the statutory liability of the Company prior to it being wound up. Defendant No. 3 claims that the liability arose the moment the goods were imported and had to be discharged. If that liability was not discharged, Defendant No. 3 was entitled to confiscate the goods and sell them to recover the custom duty. Defendant No. 3 would have the first statutory charge or right in respect of such sale. Defendant No. 3 claims that, in fact, the Court Receiver could not have been appointed in respect of the goods assessable to the custom duty which should have been initially discharged. Consequently, Defendant No. 3 claims that even if the Company is wound up and goes into liquidation, the goods, which so lie confiscated by Defendant No. 3, cannot be taken to be the assets of the Company to be sold by the Official Liquidator. Similarly Defendant No. 3 claims that the Court Receiver cannot be appointed in respect of the goods representing such liability and hence the goods cannot be called custodia legis.
Mr. Rajguru on behalf of Defendant No. 3 contended that had the Court been informed of the liability of the Company in respect of the imported goods under various Bills of Entry in Miscellaneous Petition No. 475 of 1984, the Court Receiver would not have been appointed in respect of at least such value of the goods as would represent the custom duty payable and remaining unpaid.
The Plaintiffs claim is de hors the claim of Defendant No. 3. The simplicitor claim of the Plaintiffs is that they bid at the auction. They deposited the amount required by the Court Receiver. They have to be delivered the goods for which they made respective payments. They were delivered some of the goods but not others as they were reported to be missing as Defendant No. 3 had sold them to recover custom duty remaining unpaid.
The Court Receiver, who is Defendant No. 1 in the suit and against whom no relief is claimed, but who as an officer of the Court must assist the Court, is shown to have issued the terms and conditions of the sale dated 25th September 2002. The terms and conditions specifically require the bidders to inspect the goods. The goods are offered for inspection on 30th September 2002, 3rd October 2002 and 4th October 2002. Clause 11 of the Terms and Conditions specifically recites that the purchasers would be taken to have inspected the goods. The Plaintiffs claim to have requested inspection. However, the Plaintiffs did not inspect the goods themselves. They could not have inspected the goods because they were already sold. The Court Receiver has, in all cases, put up the goods on auction on as is where is and what is basis. Hence if they were offered for inspection and not inspected, the goods are sold by the Court Receiver at the risk of the auction purchaser.
The Plaintiffs claim that specifically by an order dated 10th December 2002, the Court clarified that the purchaser would not be liable for past liabilities of the Company. This clarification or order of the Court must be subject to and in accordance with the law relating to the past liabilities. If the past liabilities are statutory liabilities, which are required to be discharged and are not discharged, no Court can absolve any party of any such liability. The past liabilities, which the purchaser could be absolved of, would be the general liabilities of the Company itself or by the Official Liquidator on its behalf.
Based upon the pleadings between the parties followed by the withdrawal of the claim of the Plaintiffs against all the Defendants except Defendant No. 3 and the aforesaid claims of the respective parties, the following issues only remain to be considered as re-framed on 7th July 2008:
(1) Whether the Plaintiffs prove that they are entitled to be repaid the amount paid by them to the Court Receiver in respect of the auction sale conducted by the Court Receiver. - No
(2) What relief, if any, are the Plaintiffs entitled to? - As per final order.
Consequently, the Plaintiffs claim refund of the amount from the Court Receiver and Defendant No. 3 claims adjustment in respect of custom duty payable for the other goods purchased by the Plaintiffs in the other bonded warehouses, the custom duty for the goods under the six bonds purchased by the Plaintiffs being allowed and appropriated by Defendant No. 3.
The Plaintiffs as well as Defendant No. 3 have examined one officer each. These witnesses have been cross-examined. The question to be determined is the essential question of law based upon the admitted facts. Several of these facts have been put to the witnesses to show their admissions thereto. The essential oral evidence is only with regard to the act of the parties with regard to the goods under the bonds put up for the auction by the Court Receiver, sought to be purchased by the Plaintiffs and got sold by Defendant No. 3. Inasmuch as the questions in cross-examination relate or refer to acts of parties covered by the law, they need not even be considered.
Issue No. (1) : The goods were imported by the Company since 1982-83. The Company was liable to pay custom duty thereon. That remained unpaid. The Court Receiver came to be appointed in Miscellaneous Petition No. 475 of 1984. The Court Receiver conducted the sale of various goods under various bonds lying in various warehouses. For that sale the Court Receiver had issued his terms and conditions. The essential term was that the auction purchasers were to take inspection of the goods and to purchase them on as is where is what is basis. This is usual and has not been disputed. The Company was ordered to be wound up. That was in a separate proceeding.
The Plaintiffs must be taken to have inspected the goods. Even if the Plaintiffs do not inspect the goods offered for the inspection, the Plaintiffs would be bound by the offer made. Defendant No. 4 initially and later the Plaintiffs, as the nominee of Defendant No. 4, deposited the amounts representing the purchase price as bid by them. The Plaintiffs also filed the necessary undertaking with the Court Receiver. The Plaintiffs could be handed over the goods only upon the undertaking being filed and the amount being deposited. Yet if at all the goods are not handed over, the Plaintiffs claim for recovery and refund of the amount paid by the Plaintiffs to the Court Receiver is only on the essential rule of justice, equity and good conscience. That recovery would be subject to all the laws governing the sale of those goods. At best, the Plaintiffs could, therefore, claim under the quasi contract with the Court Receiver u/s 70 of the Indian Contract Act 1872 (the Act). Section 70 of the Act runs thus:
Obligation of person enjoying benefit of non-gratuitous act.- Where a person lawfully does anything for another person, or delivers anything to him, not intending to do so gratuitously, and such other person enjoys the benefit thereof, the latter is bound to make compensation to the former in respect of, or to restore, the thing so done or delivered.
The Plaintiffs claim to have lawfully paid for the goods under the bonds. The Plaintiffs, of course, did not intend to do so gratuitously. However, under the contract with the Court Receiver, the Plaintiffs would not be legally entitled to recover the amount paid by the Plaintiffs since the Plaintiffs were liable to take inspection of the goods before depositing the purchase price. Hence the Court Receiver cannot be taken to have enjoyed the benefit. In fact, neither did the IFCI, which had filed Miscellaneous Petition No. 475 of 984 in which it got the Court Receiver appointed with the power to sell. The Court Receiver, therefore, cannot be bound to make compensation to the Plaintiffs or to restore the amount to the Plaintiffs for the deposit made. The Court Receiver, being the officer of the Court, must only hold the property as directed by the Court.
The claim of Defendant No. 3 is that the Plaintiffs must not be handed over the amount paid by the Plaintiffs in respect of the sale of the goods even otherwise validly made because Defendant No. 3 has a prior statutory claim for payment of custom duty which was not paid on the other goods and on the other bonds similarly imported by the Company under several Bills of Entries which Defendant No. 3 can adjust towards the liability for payment of custom duty by the Company.
Upon the Plaintiffs claim relating to the knowledge of Defendant No. 3 for appointment of Court Receiver, in the otherwise lengthy and verbose cross-examination of the Defendants witness, the Plaintiffs Advocate has sought admissions with regard to the matters afore-stated, which need not be repeated.
The only aspect with regard to which there has been some cross-examination other than the afore-stated aspects between the parties is with regard to the opinion of a valuer one Kishore Parker dated 22nd August 1997 which is stated to have been bogus and which is admitted to have been so by the witness of Defendant No. 3. The valuer was also the Defendant against whom the Plaintiffs have withdrawn the suit and hence that part of the cross-examination of Defendant No. 3 cannot be considered.
Mr. Ghelani on behalf of the Plaintiffs has argued that the claim of Defendant No. 3 must be lodged with the Official Liquidator and in that behalf a question has been put to the witness of Defendant No. 3, which is answered in the affirmative. However, that question of law must be decided on the law as is laid down, the evidence of the witness of Defendant No. 3 notwithstanding and despite such claim having been made before the Official Liquidator.
Similarly the case put by the Plaintiffs Advocate to the witness of Defendant No. 3 that the Plaintiffs claim is for refund of the goods, which could not be delivered because Defendant No. 3 had wrongfully sold them having been answered in the affirmative is of little consequence.
Further stress by the Plaintiffs that despite the claim of Rs. 60 Crores by Defendant No. 3, the Court had declined such a claim and only ordered Rs. 5 Crores to be set aside with the Official Liquidator, which is answered in the affirmative, is also subject to the law relating to payment of custom duty, which no Civil Court can, by its order, alter. It may be mentioned that it matters little what the Court had directed to be set aside. The claim of Defendant No. 3 must be adjudicated upon its own merits as a question of law and whether or not Defendant No. 3 had lodged the claim with the Official Liquidator.
Further a large number of questions directed to the witness of Defendant No. 3 in cross-examination upon the goods under the six bonds being sold despite the appointment of Court Receiver as a contemptuous act has been sought to be undone by the unconditional apology admittedly given and thereafter the refund of the amount lying with the Court Receiver to one of the two parties claiming it can be only considered as a question of law.
Mr. Rajguru on behalf of Defendant No. 3 relied upon a judgment of the Supreme Court in the case of Collector of Customs Vs. Dytron (India) Ltd., , by which this case is completely covered and the parties are bound. It is held in that case that when goods are imported by the Company the Custom Authorities are entitled to claim custom duty before the goods can be sold as assets of the Company which has subsequently gone in liquidation. It is further held that the claim of Custom Authorities is outside the proceedings under Sections 529, 529-A and 530 of the Companies Act. It is, therefore, held that until and unless the statutory dues of the Custom Authorities are paid, the goods cannot be taken to be available for sale to the purchasers at all. The goods would, therefore, form a part of the assets of the Company available for distribution by virtue of liquidation only subject to the payment of custom duty, interest etc. It is observed that the Custom Authorities have a statutory right of detention and confiscation and hence that claim would be even prior to the claims under Sections 529-A and 530 of the Companies Act, which would be the claims of creditors (though preferential) in respect of sale-proceeds of the assets of the Company sold in liquidation which are to be determined. It is, therefore, held that the claim of the Custom Authorities would be outside the proceedings under the aforesaid sections.
In that case the Company had imported certain chemicals prior to its liquidation. The Official Liquidator took possession of the assets of the Company. The chemicals were stored in Bengal bonded warehouses without payment of custom duty. The Official Liquidator valued the chemicals and advertised them for sale describing them as the assets of the Company. The highest bidder made the payment of the price. The Custom Authorities made the application to the Court restraining the Official Liquidator from delivering the goods to the purchaser until and unless the custom duty was paid. The Court observed that the goods purchased by the Company prior to liquidation could not have been removed by the Company from the warehouse at all without payment of import duty and the interest accumulated thereon.
The Court considered the provisions of the Customs Act, 1962, including Section 111 relating to confiscation of improperly imported goods by the Custom Authorities, if they are removed from the customs area without the required permission of the Authority. It is held that the power of confiscation under the said section includes the power of sale. It is further held that violation of Section 111 of the Customs Act renders the importer liable for penalty. Hence if the goods are removed from the warehouse without payment of custom duty and without the permission of the Custom Authorities, the Custom Authorities can either confiscate the goods or collect the duty payable thereon.
Similarly the Court considered Sections 68, 71 and 72 of the Customs Act, under which full amount of duty chargeable under goods not removed form the warehouse at the expiration of the period during which they are permitted to remain in the warehouse can also be charged together with penalty, rent, interest and other charges payable thereon. This could be under the detention-cum-sale notice issued u/s 72(2) of the Customs Act. In that case such a notice was not given before the proceedings in the Company Court for sale of the chemicals were initiated. It was held that nevertheless statutory right of detention and confiscation by the Custom Authorities had to be met before the goods could be validly sold as the assets of the Company.
Further the purchasers of the goods in that case were held not to have stepped into the shoes of the Company as far as the liability to make payment of custom duty was concerned. It was held that the sale, if any, to the purchasers of the chemicals in that case should have taken place only after payment of custom duty by the Company or its representative in interest being the Official Liquidator upon the liquidation of the Company. The Custom Authorities were held entitled to confiscate and sell the goods.
It has been argued by Mr. Rajguru that since the Plaintiffs did not take inspection of the goods offered by the Court Receiver, the Plaintiffs are alone to blame for their contributory negligence. The Plaintiffs contract with the Court Receiver was for purchase of the bonded goods. The Plaintiffs have claimed refund of the amount paid since the goods were not delivered. The goods could not be delivered because the goods were missing. They were seen to be missing because they were sold by the Custom Authorities. It is seen that they were sold correctly by the Custom Authorities in satisfaction of their statutory right thereunder which was the duty of the Company which imported the goods to pay before the goods could be removed from the warehouse or sold by the Company or its representative, the Court Receiver. In that contract the Plaintiffs were put to notice of the goods by the offer of inspection which the Plaintiffs failed to take. The Plaintiffs should have taken inspection. If the Plaintiffs do not take inspection they must be taken to have contributed to the negligence themselves. In case of negligence of a contracting party under common law the claim of the Plaintiff would fail even if the Defendant was at fault. The rule of contributory negligence was succinctly laid down by Denning, L.J. in the case of Jones v. Livox Quarries Ltd. (1952) 2 QB 608 at page 615, which was later approved and followed in the case of Westwood v. The Post Office, (1973) 3 All ER 184 (HL) pp. 192, 193. The rule runs thus:
Although contributory negligence does not depend on a duty of care, it does depend on forseeability....
A person is guilty of contributory negligence if he ought reasonably to have foreseen that, if he did not act as a reasonable, prudent man, he might be hurt himself; and in his reckonings he must take into account the possibility of others being careless.
(See also Moor v. Nolan (1960) 94 I.L.T.R. 153.)
Similarly in the case of Boy Andrew, (1948) A.C. 140 at 148, when both the parties were negligent and claimed contributory negligence on the part of the other as the cause of the accident being the collusion of two ships the doctrine of contributory negligence was brought into play.
Consequently, the Plaintiffs made payment of the goods upon the premise that they had inspected the goods and were responsible for the payment made for the sale on as is where is what is basis. The Court Receiver, who collected the amount as the officer of the Court on behalf of the Petitioner, IFCI in Miscellaneous Petition No. 475 of 1984, was to account for the said amount to that Petition. Defendant No. 3, who is statutorily entitled to confiscate and sell the goods as custom duty was not paid thereupon. The Plaintiffs have not disputed that the custom duty has not been paid on the other bonded goods of the Company including the goods withdrawn by the Plaintiffs and taken delivery of. Defendant No. 3 is, therefore, inter alia, entitled to adjust the amount paid by the Plaintiffs as the price of six bonds in the Goregaon warehouse for the custom duty payable upon the other bonded goods in Thane and Manpada.
In the case of D. Konda Pentiah v. Chenchu Rangiah AIR 1955 AP 176 the concept of adjustment of an earlier liability is set out and distinguished form a set-off claimed in the Suit by the Defendant thus:
The plea of adjustment or satisfaction premises that the extinction of the plaintiff Section claim or satisfaction took place prior to the date on which the defence was raised in the suit. By a claim for set off, on the other hand, the defendant prays that the Court should enter satisfaction in respect of the plaintiff Section dues from the outstanding dues owed by the plaintiff to the defendant. It is implicit in such a plea that the mutual indebtedness has not been adjusted till that date and adjustment is sought in the suit itself.
(See also State of Madhya Pradesh Vs. Raja Balbhadra Singh, .)
In this case the custom duty was statutorily payable since 1982-83 when the goods were imported under various Bills of Entry. Hence the goods were lying in the bonded warehouses. Six bonds were admittedly sold to the Plaintiffs and the goods were lifted by the Plaintiffs without payment of custom duty. The liability has arisen well prior to the Plaintiffs claim even in the earlier application made in Miscellaneous Petition No. 475 of 1984. The amount of custom duty could, therefore, be adjusted by Defendant No. 3.
In fact, the amount lying with the Court Receiver to the credit of this suit is far less than the custom duty payable thereon. The cross-examination on behalf of the Plaintiffs itself suggests that Rs. 60 Crores were claimed by Defendant No. 3 out of which only Rs. 5 Crores were allowed to be kept aside with the Official Liquidator. This Court is not concerned with the calculation of the exact amount of custom duty remaining unpaid. This Suit is concerned with the adjustment of only a part of the claim of Defendant No. 3 to the extent of Rs. 74,82,298/- representing the amount of sale of goods by Defendant No. 3 towards its claim of custom duty recovered as such sale and brought back into Court upon the directions of the Division Bench of this Court to purge the contempt alleged and for which the Plaintiff has been directed to sue.
Consequently, the Plaintiffs would not be entitled to recover any part of the amount lying to the credit of this suit.
Defendant No. 3 would be entitled to be handed over the amount lying to the credit of this suit along with all accrued interest in part payment of the custom duty payable on the goods imported by the Company prior to its liquidation as held in Dytron S. case (supra). Since the amount is only an adjustment, it does not require separate Court fee to be paid or any separate action in law to be taken by Defendant No. 3.
Hence the following order:
ORDER
(i) The Plaintiffs suit is dismissed with no order as to costs.
(ii) The Registrar/Prothonotary and Senior Master of this Court, with whom the amount has been deposited and invested, shall hand over the entire amount along with all accrued interest thereon to Defendant No. 3 after 6 weeks from today.