2003 (2) TMI 546 - HC - Companies Law

Summary

Issues Involved:
1. Legality of the respondent-Corporation's action of debiting sums from the appellants' accounts towards differential customs duty.
2. Maintainability of the writ petitions under Article 226 of the Constitution of India.
3. Applicability of Article 265 of the Constitution of India.
4. Public law element in the dispute.

Issue-wise Detailed Analysis:

1. Legality of the respondent-Corporation's action of debiting sums from the appellants' accounts towards differential customs duty:
The appellants, partnership firms engaged in selling gold, challenged the respondent-Corporation's action of debiting sums from their accounts for differential customs duty on gold lifted after 4-1-1999. The customs duty was increased from Rs. 250 to Rs. 400 per 10 grams with effect from 5-1-1999 by Customs Notification No. 2 of 1999. The respondent-Corporation issued demand notices to enforce this increase for gold lifted on or after 5-1-1999. The appellants argued that the Corporation's action was arbitrary, lacked legal basis, and was in direct contravention of Article 265 of the Constitution of India. The Court, however, found no merit in the appellants' contentions, stating that the Corporation, as a trading organization, had the right to adjust sale prices based on market conditions, including increased customs duty and sales tax. The Court emphasized that the Corporation was acting within its commercial rights and responsibilities.

2. Maintainability of the writ petitions under Article 226 of the Constitution of India:
The respondent-Corporation contended that the writ petitions were not maintainable as the dispute was purely contractual and lacked a public law element. The Court agreed, stating that the dispute arose from commercial transactions and contractual obligations between the parties, which did not involve any statutory action or public law element. The Court cited several Supreme Court judgments, including *Food Corporation of India v. Jagannath Dutta* and *Bareilly Development Authority v. Ajay Pal Singh*, to support its position that contractual disputes should not be adjudicated under Article 226. The Court held that the proper remedy for the appellants was to approach competent Civil Courts.

3. Applicability of Article 265 of the Constitution of India:
The appellants argued that the respondent-Corporation's action violated Article 265, which mandates that no tax shall be levied or collected except by the authority of law. The Court found this argument misconceived, clarifying that the Corporation was not collecting customs duty but adjusting sale prices based on increased customs duty and other market factors. The Court noted that the Corporation, as an importer and seller of gold, had the right to set prices reflecting current market conditions, including any increases in customs duty. The Court emphasized that this was a standard commercial practice and did not constitute an unlawful collection of customs duty.

4. Public law element in the dispute:
The Court examined whether the dispute involved any public law element that would justify intervention under Article 226. It concluded that the dispute was purely commercial, arising from agreements between the parties for the sale and purchase of gold. The Court noted that the respondent-Corporation, although a government-owned entity, was acting in its commercial capacity and not performing any governmental function. The Court cited the Supreme Court's judgment in *Life Insurance Corporation of India v. Escorts Limited*, which distinguished between public law and private law domains, emphasizing that the Court would not ordinarily examine actions of the State in the private law field. The Court found no public law element in the dispute and held that the writ petitions were not maintainable.

Conclusion:
The Court dismissed the writ appeals, upholding the respondent-Corporation's right to adjust sale prices based on increased customs duty and other market factors. It found that the dispute was purely contractual, lacked any public law element, and should be adjudicated by competent Civil Courts. The Court also clarified that the Corporation's actions did not violate Article 265 of the Constitution of India.