Czarnikow Group Limited Vs Senior Intelligence Officer (Madras High Court)
Facts- The issue to be decided in the present matter is thus whether the ownership of the asset vests in the petitioner or RS, which in turn, would determine, as a consequence, whether the NCLT is the appropriate forum to adjudicate the petitioner’s prayers, including for re-export, and the prayer of R5 for auction of the asset.
Conclusion-With regard to maintainability in favour of the petitioner it is held that the contract at clause 20 thereof, confirms the position that title to the goods would not pass until the buyer, i.e., R5 has made payment for the entirety of the goods. In my considered view, the petitioner thus assumes the status of an unpaid seller who continues to hold title/ownership to the asset imported.
With regard to re-export, it is held that the petitioner would bring to my notice a representation filed before the Customs Authorities as well as DRI seeking permission to re-export on the ground that the asset stands secured in the customs frontier and has not yet entered the domestic market. Let this aspect be verified by the customs as also the question of whether such goods are entitled to the benefit of the AA Scheme.
FULL TEXT OF THE JUDGMENT/ORDER OF MADRAS HIGH COURT
The petitioner is a company incorporated in England primarily engaged in trading in sugar. It had entered into a contract dated 20.10.2016 (in short ‘contract’) with Shri Ambika Sugars Limited/R5 for the supply of 29,830.50 Metric Tonnes (MT) of standard VHP cane raw sugar. A Collateral Management Agreement (in short ‘CMA’) had also been entered into providing for the simultaneous opening of a Letter of Credit for payment and supply, insofar as the sugar was to be released in instalments.
2. As and when payments were effected by R5, lease deeds were executed between R5 and the petitioner’s agent in India to protect the custody of the sugar and to ensure that title of the petitioner to the asset stood secured till such time the entirety of the sugar was released to R5 upon receipt of payment.
3. Sale consideration has been paid by R5 in respect of 9899 MT of sugar and this quantity has been released. The balance is yet to be sold as and when the consideration is received from R5. According to the petitioner, it continues to hold title to the balance of the sugar, i.e., approximately 19,537.60 MT, valued at USD 9 million (approx.) or Rs.67.5 crores (in short ‘asset’).
4. The sugar has been imported in anticipation of the sale to R5 and upon import, sugar has been retained in a bonded warehouse in the customs frontier and according to the petitioner, has not entered into the territory of India. The bonded warehouse is under lock and key, both at the instance of R5 as well as the petitioner, the latter having placed its lock above the lock placed by the petitioner. The petitioner’s agent under the CMA, Mr.Amin (in short ‘agent’) is said to be supervising the safety of the asset.
5. According to both the petitioner and R5, the latter had applied for and obtained an approval under the Advance Authorisation Scheme (in short ‘AA Scheme’) issued by R2, i.e., Additional Director General of Foreign Trade (ADGFT) and implemented by R3 and R4, i.e., Commissioner of Customs, Tiruchirappalli/R3 Commissioner of Customs, Chennai II/R4, thus entitling the import of the sugar without the payment of customs duty.
6. The eligibility of the consignment to the AA Scheme is not the concern of this Court and the Court is only concerned with the adjudication of the plea put forth on behalf of the petitioner that, the petitioner being the owner of the asset holding full title to it, should be permitted to take custody of the asset from the bonded warehouse, where it presently lies, and re-export the same.
7. The reason for the request for re-export is that R5 is presently before the National Company Law Tribunal (NCLT) where an Insolvency Petition has been filed by the Punjab National Bank, as Financial Creditor in terms of the Insolvency and Bankruptcy Code, 2016 (in short ‘code’) as against R5 and a Resolution Professional (RP) has been appointed to take control of the management and administration of R5. Corporate Insolvency Resolution Process (CIRP) is presently on-going.
8. There appears to have been non-compliance by R5 to the terms of the AA Scheme leading to coercive action by R1, i.e., Directorate of Revenue Intelligence (DRI), by attachment of the asset. Despite the petitioner having written to the official respondents that the title to the asset vests in it and thus the attachment by R1 is liable to be lifted, there has been no response to the same and also no adjudication of the request of the petitioner before the official respondents seeking re-export of the sugar.
9. The petitioner is at pains to explain to the Court that the asset, being an edible commodity, is rapidly deteriorating, particularly in the present climatic conditions. Rain water is stated to be seeping into the warehouse and damaging the asset irreversibly. The petitioner hence prays that the order of attachment by R1 dated 29.08.2019 be quashed and the official respondents, i.e., R1 to R4 be directed to permit the petitioner to re-export the asset.
10. Ajay K.Jain, learned counsel appearing for Mr.Raghav Rajeev Menon, learned counsel for the Resolution Professional appointed in the CIRP of R5 raises a preliminary and serious objection to the maintainability of this Writ Petition as according to him, the petitioner should have approached the NCLT for redressal in terms of the Code. The Resolution Professional has filed an application seeking the leave of the NCLT to auction the asset, that had been resisted by the petitioner herein who contended that the NCLT has no jurisdiction to adjudicate upon the fate of the asset. The present Writ Petition has been filed by the petitioner as a counter-blast to the aforesaid application of R5, though seeking an independent relief. During the pendency of this Writ Petition, the application filed by the Resolution Professional has come to be closed by the NCLT.
11. The first argument advanced is that there are serious differences in the facts as projected by the petitioners and R5, and these questions of fact are not liable to be addressed, adjudicated upon or resolved under Article 226 of the Constitution of India. According to R5, there are discrepancies in the language of the contract and he would draw my attention to contract dated 20.10.2016, wherein the first sentence states as follows:
We write to confirm the terms of a contract concluded between you and Czanrnikow Group Limited on 25th October 2016 under in terms set out below.
12. Though the date of contract is 20.10.2016, the parties state in the sentence extracted aforesaid that the contract is dated 25.10.2016. This, according to him, is the first serious discrepancy. The second discrepancy pointed out is that the contract at internal page 4 is not signed by the buyer, R5. The third discrepancy pointed out is that addendum No.9 attached to the contract states that ‘payment has not been made by SAS for an outstanding balance of 16847.50 MT ’ whereas the petitioner, in its pleadings, at paragraph 8, page 4 of the affidavit filed in support of the Writ Petition, would state that the balance of the sugar in custody is quantified at 19537.60 MT.
13. In response, Mr.Sivanandaraj, learned counsel appearing for Mr.Adeesh Anto, learned counsel on record for the petitioner explains away the first discrepancy as a mere typographical error pointing out that there was nothing in the voluminous pleadings to establish any discrepancy in the date of contract. Even according to the respondents, the date of contract as between the parties is only 20.10.2016 and thus no credence, according to him, must be given to the alleged difference in date.
14. With regard to the third discrepancy/difference in the quantification of the asset in custody now, he confirms the quantification as 19,537.60 MT, though initially the contract did reflect the balance as 16,847.50 MT. In this regard, I need only refer to the application filed by R5 before the NCLT seeking permission to auction the asset, that quantifies the asset as remaining in the warehouse at a figure of 19,537.50 MT, matching the quantum stated by the petitioner. Thus, and in the light of the averments in the application of R5, nothing more remains to be said on this issue as the quantification of the asset by both parties is in synchrony.
15. As far as the other two allegations go, I find no merit in the alleged discrepancies pointed out. The error in the date of contract appears to be just that, a typographical and inadvertent error. As far as the absence of signature is concerned, it is a fact that the column for the signature of R5 is indeed blank. However, nowhere is the transaction in itself disputed and in fact, R5 has admittedly effected payments for some portion of the sugar imported under the Customs Concessional Duty Rules.
16. It is also not the case of R5 that there is another contract that governs the transaction as between the parties. The defence of R5 also refers to, and is based upon the very same contract and in my view, R5 cannot be permitted to blow hot and cold in this regard.
17. The bank statements circulated by R5 upon the direction of the Court also make it clear that the remittances effected and what has been paid there for, would be in respect of 9899 MT only. The schedule of payments as per the pleadings filed by the petitioner is as under:
