2010 (3) TMI 651 - HC - Indian Laws

Exim Scrips - obtained on submitting bogus and forgery documents - Promissory estoppel - only apply to an individual who has come before this Court with clean hands - estoppel must be mutual i.e. it applies only between the parties and privies and only in action on the deed. It does not apply to actions on collateral matter even between the parties nor does it apply in general to proceedings between strangers or a party and a stranger - honour the promise held out by the earlier circular and further that the appellants are estopped from denying the rights of the first respondent/petitioner on the principle of promissory estoppel is well founded

Issues Involved:
1. Validity of the learned Single Judge's order directing payment of Rs. 8,83,400/- with interest.
2. Application of the principle of promissory estoppel.
3. Obligation to repay the amount encashed through bogus Exim Scrips.
4. Entitlement to the premium for genuine Exim Scrips.
5. Impact of the criminal case on the financial obligations of the parties.

Issue-wise Detailed Analysis:

1. Validity of the learned Single Judge's order directing payment of Rs. 8,83,400/- with interest:
The learned Single Judge directed the third respondent (Bank) to pay Rs. 8,83,400/- with interest at 6% per annum within eight weeks. This order was challenged on the grounds that it was unsustainable because the duty to effect payment lay with respondents 2 and 3 (Union of India and another), and not the Bank. The Bank argued that it was merely a designated branch to receive the license on behalf of respondents 2 and 3, a fact overlooked by the learned Single Judge.

2. Application of the principle of promissory estoppel:
The learned Single Judge applied the principle of promissory estoppel, stating that the respondents were estopped from denying the petitioner's right to claim the premium on the Exim Scrips. The respondents contended that this principle should not apply as the petitioner had previously encashed Exim Scrips obtained through fraudulent means. The appellate court found that the learned Single Judge's reliance on promissory estoppel was incorrect, especially given the fraudulent context.

3. Obligation to repay the amount encashed through bogus Exim Scrips:
The respondents argued that the petitioner had previously encashed Exim Scrips worth Rs. 14,11,200/- using forged documents and was thus obligated to repay this amount. The appellate court emphasized that public interest would be prejudiced if the petitioner was allowed to retain this sum without repayment. The court held that the petitioner must repay Rs. 14,11,200/- with interest before claiming any further amounts.

4. Entitlement to the premium for genuine Exim Scrips:
The petitioner claimed entitlement to Rs. 8,83,400/- for genuine Exim Scrips. The appellate court noted that although these scrips were genuine, the petitioner could not claim the premium without first repaying the amount obtained through fraudulent means. The court directed that upon repayment of Rs. 14,11,200/- with interest, the petitioner would be entitled to receive Rs. 8,83,400/- for the genuine Exim Scrips.

5. Impact of the criminal case on the financial obligations of the parties:
The appellate court considered the criminal case against M/s. Aiysha Exports Private Limited, from whom the petitioner had purchased the Exim Scrips. The court noted that the petitioner, although a bona fide purchaser, had benefited from the fraudulent actions of his vendor. The court held that the petitioner's financial obligations were influenced by the outcome of the criminal case, which necessitated the repayment of the fraudulently obtained amount before any further claims could be honored.

Conclusion:
The appellate court set aside the learned Single Judge's order directing the Bank to pay Rs. 8,83,400/- with interest. The court allowed the writ appeals, directing the petitioner to repay Rs. 14,11,200/- with interest to the second appellant. Upon such repayment, the Bank was directed to pay Rs. 8,83,400/- to the petitioner within three weeks. The principle of promissory estoppel was deemed inapplicable in this context due to the fraudulent circumstances surrounding the initial transactions.

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