Authority of India Ltd. Vs. Salem
Stainless Steel Suppliers  INSC 475 (3 November 1993)
SINGH (J) KULDIP SINGH (J) SAWANT, P.B. CITATION: 1994 AIR 1414 1994 SCC (1)
274 JT 1993 (6) 408 1993 SCALE (4)339
Judgment of the Court was delivered by KULDIP SINGH,J.-- Steel Authority of
India (the Authority),the appellant herein, issued a price circular dated March
17, 1989 (the circular)offering a discount scheme with a view to give a thrust
to the off-take of stainless steel of thinner gauges. The circular stated as
An off-take of over 400 mts. per month of thinner gauges namely 0.3,0.4, 0.5,
and 0.63 taken together by any customer from any from the judgement and October
9, 1990 of the March High Court in W.A.Nos.601 to 604 of 1990.
will entitle them for an additional discount of Rs 2000 PMT over and above the
normal monthly discount on the incremental quantity.
bonus incentive of addl. Rs 2000 PMT would be admissible at the end of 6
monthly period provided the off-take is over 400 mts.
each of the 6 months. This additional incentive will be applicable on the
incremental quantity in excess of 2400 mts.
the period of 6 months.
Benefits under (a) and (b) above will be applicable to any customer including
trade and their associate concerns both on direct dispatch from plant as well
as quantities lifted from stockyard of any region, irrespective of the region
to which the customer is attached," The circular was issued by the Calcutta
office of the Authority.
Standard Metal Trading Company, respondent 3 herein, by its letter dated November 27, 1989 sought clarifications as to whether
the subject discount would be available on the quantities lifted by a
"group of dealers not related to each other by constitution" and how
the said discount would be disbursed to the individual dealers. A request was
also made that the period of operation of scheme under the circular, be
extended to one year as against six months.
Authority by its letter dated December 2, 1989
furnished the necessary clarifications, to respondent 3, which are as under:
refer to your letter dated November 27, 1989
and December 1, 1989 on the above subject. We wish to
clarify as under:
quantity discount under the subject scheme will be paid on quantities lifted
together by a group of dealers/actual users who are not related to each other
by constitution provided they declare their intention to join together for
committing combined off-take as per the scheme.
scheme will be applicable on quantities lifted by a group of dealers not
related to each other by constituting dealing at different regions.
After the completion of the current month on the basis of actual off-take the
quantity as per the eligibility may be passed on to any one of the constituents
or alternatively on pro-rata basis to all the constituents subject to the
Guarantee for continuation of the scheme can be given for a minimum period of 6
months from the month in which off-take commences.
also expect an increase in the off-take of material by the dealers in the
also wish to make it clear that indents as per the existing procedure should be
given well in advance to enable us to complete the despatch of material."
Thereafter six traders, including respondents 1 to 4, sent a letter dated
December 4, 1989 to the Authority stating that they had formed a group and 276
wanted to avail the additional discount on the basis of their combined off-take
as a group. They also suggested a formula for the distribution of the discount,
on the basis of their combined off-take, amongst the individual members of the
proposal of combined off-take by a group of traders was not warranted by the
circular, The formula of distribution of discount amount amongst the individual
members of an unorganised group was also not envisaged under the circular. In
any case such formula was not even in accordance with the clarifications given
by the Authority in its letter dated December 2, 1989.
Authority sent a telegram dated December 19, 1989 to all the six traders including respondents 1 to 4
intimating them that the matter was still under consideration and till the time
a final decision in that respect was taken the, scheme regarding group off-take
could not operate. The relevant part of the said telegram is extracted as
SUGGESTION, INTER ALIA, FOR MANNER OF ADJUSTMENT OF DISCOUNT UNDER THE SCHEME
TO INDIVIDUAL TRADERS WAS TAKEN UP WITH SSP
AUTHORITIES AND REQUIRES FURTHER EXAMINATION (.) THIS WILL HAVE TO BE SORTED
OUT BEFORE COMMENCING OPERATION OF THE SCHEME- (.) THE MATTER IS BEING PUT UP
TO THE COMPETENT AUTHORITY FOR NECESSARY CLARIFICATIONS AND APPROVAL (.) UNTIL SUCH
TIME APPROVAL IS RECEIVED WE ARE UNABLE TO OPERATE THE
After the receipt of the telegram dated December 19, 1989 the group of traders- addressed a
letter dated December
30, 1989 to the
Authority offering to withdraw their suggestion for the disbursement of the
discount amount in the manner suggested by them in their letter dated December 4, 1989.
proposal made by the six traders as contained in their letter dated December 4, 1990 was considered by the Authority and
it was found that under the scheme contained in the circular, there was no
provision for the disbursement of discount benefits to a group of customers.
The modification of scheme, as proposed by the respondents, was not found
practicable. Accordingly, by the letter dated January 23, 1990, addressed to
each of the six traders, the Authority reiterated the contents of its telegram
dated December 19, 1989 and further informed them that the suggestion made by
the traders in their letter dated December 4, 1989 was not acceptae to the Authority,
inter alia, for the reason that the said suggestion was contrary to the scheme
contained in the circular.
respondents filed a writ petition before the Madras High Court contending that
they had started lifting material since December 4, 1989 and as such they sought a direction
from the High Court that the discount benefit be disbursed to them. The writ
petition was allowed by a teamed Single Judge of the High Court by the judgment
dated April 17, 1990 primarily on the ground that the clarifications given by
the Authority by its letter dated 277 December 2, 1989 were binding on the
Authority. The Authority filed appeals against the judgment of the learned
Single Judge. A Division Bench of the High Court by the impugned judgment dated
October 9, 1990 dismissed the appeal. These appeals
by the Steel Authority, of India are
against the judgment of the Division Bench of the High Court.
Division Bench of the High Court upheld the findings of the learned Single
Judge on the following reasoning:
the entitlement for the discount and the willingness to avail such' discount
are quite separate and distinct in the sense that while 'discount is on the
quantity lifted and thus these, dealers or actual users who qualified under the
circular automatically became entitled to discount, the claim on behalf of
those who joined in a group was required to be indicated for the purpose of
working out some formula under which the discount amount could be equitably
distributed among them. Such equitable distribution could be in the manner
indicated in the clarification as well as left to the dealers who decided how
they would inter se distribute the discount amongst themselves. They indicated
a formula in a subsequent letter dated December 4, 1989. It appears however, that nothing
was said why the formula indicated by them was not accepted by the appellants.
The learned Single Judge has rightly taken notice of this aspect of the matter
to conclude that when the writ petitioners are a group of business people who
had joined together and had in fact lifted quantities in excess of 400 metric tonnes
in the month of December 1989, and when they projected a claim for a discount
based on the scheme which is still in force, the refusal on the part of the
appellants to implement the scheme cannot be permitted. We are satisfied that
there has been no mistake committed by the learned Single Judge in accepting
the promise under the circular of the entitlement of discount as clarified
under letter dated December 2, 1989. The right under the circular was not in
the nature of a contract which depended upon the acceptance or otherwise of the
offer of the appellants by the dealers." It is obvious that the High Court
did not allow the writ petitions on the ground that a binding contract had
concluded between the parties but solely on the ground that under the price
circular dated March
17, 1989 the
respondents were entitled to the discount. We agree with the High Court that
the respondents could claim the discount only in terms of the price circular
and not on the basis of any contract purported to have been concluded as a
result of the correspondence exchanged between the parties. We are, however, of
the view that High Court fell into patent error in appreciating the scope and extent
of the circular. A bare reading of the circular makes it clear that the benefit
thereunder was available to "any customer" and not to a group of
customers. Suppose there are 20 traders in the city of Madras and each one of them lifts 300 tonnes
of steel per month. The off-take being less than 400 tonnes per month,
individually none of them would be entitled to 278 the benefit of the scheme.
Can they claim that since jointly they have lifted 6000 tonnes of steel which
is more than 400 tonnes in a particular month they are entitled to the discount
under the scheme for the off-take over and above 400 tonnes. Accepting such a
claim would be making mockery of the scheme under the circular. As mentioned
above the price discount scheme under the circular was for "any
customer" and not for "group of customers". The circular did not
permit a group of customers not related to each other by constitution to avail
the benefit of the scheme on the basis of their combined off-take. The
respondents could not have availed the benefit of the scheme jointly unless and
until the scheme as a whole was amended and made applicable to all the
customers of the Authority by issuing a fresh circular informing all concerned
about the change in the scheme.
Even otherwise there could be no concluded contract between the parties. It was
for the first time on December
4, 1989 that the six
traders made an offer and expressed their desire to avail the benefit of the
circular on the basis of their combined off-take. Prior to that there was no
communication from the traders as a group to the Authority with regard to the
admissibility of any such discount to them under the circular. The methodology
suggested by the traders to share the discount was not envisaged under the
circular. The said method was even not in accordance with the letter dated December 2, 1989 written by the Authority. The
Authority rejected the offer of the traders by its telegram dated December 19, 1989 and the letter dated January 23, 1990. No concluded contract can, thus,
be deciphered from the correspondence between the parties. Looked from any
angle, the High Court fell into patent error in directing the Authority to
extend the benefit of the circular to the respondents.
allow the appeals, set aside the judgment of the learned Single Judge dated April 17, 1990 and of the Division Bench of the
High Court dated October
9, 1990 and dismiss
the writ petitions filed by the respondents before the High Court with costs
throughout. We quantify the costs as Rs 20,000.