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Saturday, Nov 10, 2007
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Tamil Nadu
Court declines to direct refund of tender amount to Delhi-based company “Dispute relating to facts is a matter to be decided by a civil court” CHENNAI: Holding the Neyveli Lignite Corporation (NLC) responsible for concealing certain relevant facts while inviting tenders to dispose of an old fertilizer plant, the Madras High Court has said that the auction sale of the plant, “could be declared as a contract void ab initio.” Justice M. Chockalingam declined to direct refund of the tender amount to the Delhi-based company on the ground that the factual position was under dispute. While the NLC claimed that about 75 per cent of the total machinery had been removed by the company, the latter said machinery worth only about Rs.38 crore had been removed. The matter related to the sale of an old fertilizer plant imported by the NLC in 1999 after availing itself of certain customs and excise duty concessions. In 2005, the NLC sought to sell the plant, despite the fact that it was mandated to use the machinery only for the purpose for which it had been imported. If it was to be sold, then the differential duty amount had to be paid and prior permission obtained from the Department. The Delhi-based Metro Machinery Traders, which had quoted the highest amount, started dismantling and transporting the plant after being asked to complete the process in 370 days. The company had sourced Rs.149 crore from the State Trading Corporation, a Public Sector Undertaking. While the company’s agreement with the STC was a subject matter of a litigation pending before the Delhi High Court, the company filed the present petition here on the ground that the NLC had deliberately suppressed the details regarding its commitment to the Customs and Excise Department, and had committed a fraud on the successful bidder. Assistant Solicitor-General and counsel for the Directorate of Revenue Intelligence (DRI) P. Wilson said the differential duty had been quantified at over Rs.10 crore and penalty was also contemplated. Mr. Justice Chockalingam, concluding that the NLC had thoroughly suppressed details relating to exemption, said the contract was prohibited by law and hence it had to be declared as void ab initio. He refrained from directing the NLC to refund the tender amount stating that the dispute relating to facts was a matter to be decided by a civil court. As per the books of accounts, the value of the entire plant and machinery was only Rs.17.75 crore, he noted.
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