The Ganganagar Sugar Mills Ltd. Vs. Delhi Cloth Mills and General Company Ltd., Etc. - Court Judgment

Dalveer Bhandari, J.

1. The plaintiff filed a suit for the recovery of Rs.24,09,839.42 against the defendants, and prayed that a decree of the said amount be passed in favor of the plaintiff and against the defendants. The plaintiff further prayed that the defendants be directed to pay interest on the decretal amount from the date of the institution of the suit till realization along with the costs.

2. According to the allegations in the plaint, the plaintiff company during the period between March, 1973 and April, 1976 imported rectified spirit from various States, including the State of Uttar Pradesh for the manufacture of country liquor at its various distilleries and warehouses situated in the State of Rajasthan.

3. In order to import the rectified spirit required by the plaintiff for its distilleries and warehouses it had to comply with the relevant provisions of the Excise Act prevalent in the State of Rajasthan relating to import and also of those prevalent in the State of Uttar Pradesh relating to export. In compliance with the law in force in the State of Uttar Pradesh, the plaintiff used to approach the Excise Commissioner, Government of Uttar Pradesh, Allahabad for allotment of supplies to the distilleries/manufacturers in Uttar Pradesh to enable the said plaintiff to make the required purchase of rectified spirit from them. The distilleries were allotted different quantities of rectified spirit during the material period for sale to the plaintiff. Apart from the price, the plaintiff was required to pay to the manufacturer all the duties/taxes, etc.

4. The plaintiff had no choice in the matter of payment of excise duty, as without paying the same, it could not obtain permission from the second defendant to export the rectified spirit purchased from the first defendant out of the State, Theplaintiff had paid a sum of Rs.24,09,839.42 as export duty by a mistake. The said sum was not due to the defendant but was paid by the plaintiff under mistaken belief that it was due. The legality and validity of the imposition of the said levy of export duty on rectified spirit was challenged by way of several petitions under Article 226 of the Constitution before the High Court of Allahabad. The Allahabad High Court by a common judgment delivered on 31.1.1977 declared the imposition of excise duty on the export of rectified spirit out of Uttar Pradesh as invalid and directed the second defendant (State of Uttar Pradesh) to refund the amount already collected. A copy of the judgment of the Allahabad High Court was circulated to the plaintiff by the All India Distillers' Association vide circular dated 25.2.1977. The plaintiff immediately thereafter requested the Excise Commissioner as well as the Secretary to the Government of Uttar Pradesh in the Excise Department for the refund of the said amount wrongly collected but to no avail. Ultimately, the plaintiff had to file a writ petition under Article 226 of the Constitution in the High Court of Allahabad. The plaintiff had also preferred an application for interim relief in which a prayer had been made that the State of Uttar Pradesh be restrained from refunding the amount of excise duty collected from the said plaintiff to the first defendant and other distillers and manufacturers through whom the said amount was paid. On 21.2.1978, the court was pleased to pass the interim order as prayed, and the said order was confirmed on 14.11.1979.

5. It is further mentioned in the plaint that the defendants have withheld and are wrongfully withholding the said amount of Rs.24,09,839.42, which is payable to the plaintiff. The plaintiff has sent a notice under Section 80 CPC to the second defendant but despite service of notice, the defendants have not paid the amount due to the plaintiff. When the defendant did not refund the amount, the present suit for recovery of the amount has been filed in this court. It is mentioned in the written statement that the export duty payable for the transit of goods from the State of Uttar Pradesh to the State of Rajasthan was the duty payable by the answering defendant as an exporter, and it, thereforee, forms a part of the price payable by the plaintiff to the defendant against the delivery of the goods by the answering defendant to the plaintiff. The mere fact that all taxes, and duties were also payable by the plaintiff does not in any way mean that the said taxes and duties did not form a part of the price payable by the plaintiff to the answering defendant. The export duty as then existing was the duty payable by the exporter, i.e. the answering defendant on the transit of goods from the State of Uttar Pradesh to another State, and the mere fact that it formed a part of the total price charged by the defendant did not and could not in law mean that the plaintiff was entitled to any benefit in that behalf. It is further alleged that the plaintiff was liable at all times to pay the price as agreed to which included the export duty as a part of the price just like any other charge or expense incurred or to be incurred by the answering defendant in relation to the export of goods and agreed to between the parties. It is denied that the defendant is liable to refund the said amount to the plaintiff.

6. After the pleadings were completed, this court on 21.4.82 framed the following issues:

'1. Whether the plaint has been signed and verified and the suit filed by a duly authorised person?

2. Whether the export duty on rectified spirit exported out of the State of Uttar Pradesh has been struck down being ultra vires? If so, to what effect?

3. What were the terms and conditions of the sale between the plaintiff and defendant no. 1, and whether the plaintiff paid any amount to defendant no.1 towards the export duty on the rectified spirit purchased from them? If so, what was the amount paid?

4. Whether the export duty alleged to have been paid was a part of the price of the rectified spirit and no export duty as such was paid to the Excise Commissioner by the plaintiff through defendant no.1?

5. Whether there was a privity of contract between the plaintiff and defendant no.2? If not, its effect?

6. Whether the suit is within limitation?

7. What is the effect of the plaintiffs' passing on the amount of the export duty paid, to their customers to whom they sold the liquor manufactured from the rectified spirit?

8. Whether the plaintiff is entitled to the refund of the export duty? If so, to what amount and from whom?

9. Whether the plaintiff is entitled to interest? If so, at what rate?

10. Whether the suit is liable to be stayed in view of the Civil Writ Petition No.1809/78 filed by the plaintiff in the Allahabad High Court?

11. What is the effect of the stay order dated September 21, 1978, passed by the Allahabad High Court in the said writ petition?

12. Whether the contract was closed and cannot be re-opened as alleged in the written statement filed by defendant no.1?

13. Relief.'

7. The plaintiff was permitted to amend the plaint, and thereafter the amended written statement was also filed by the defendants. Following additional issues were framed on 17.10.1994:

'14. Whether the plaintiff company is doing business for and on account of the State of Rajasthan?

15. Whether the price paid to the plaintiff company for the liquor manufactured by them during the relevant period was a provisional price which was subject to adjustment subsequently on the basis of any subsequent change in the taxes or duties payable on it during the relevant period?

16. Whether there was a legal arrangement between the plaintiff and the State Government by which any taxes or duties refunded for past yearscould be recovered from subsequent amounts payable to the plaintiff by the State Government? If so, its effect?'

8. The plaintiff has examined three witnesses PW1, Manohar Bhatia, Secretary of the plaintiff company, PW2, Satya Narain, Manager, Audit and Taxation of the plaintiff company, and PW-3, Mabin Ansari. The defendant cross-examined the witnesses but did not read any evidence.

9. During the course of the hearing, the learned counsels appearing for the plaintiff and the defendant agreed that issues no.1, 2, 3, 4, 5, 6, 10, 11, 12 and 16 do not arise. In this view of the matter, adjudication and finding on these issues is not warranted. thereforee, the only issues which remain for consideration and adjudication are issues no.7, 8, 9, 14 and 15. Issue no.7 and 8 are inter-connected and I deem it appropriate to deal these two issues together.

Issues No.7,8 & 9.

10. The learned counsel for defendant no.1 fairly stated that there is no dispute in the amount which has been paid by the plaintiff to defendant no.1. thereforee, what really needs to be decided in these issues is, whether the plaintiff passed on the export duty amount to the customers to whom they sold liquor or retained that amount without any justification. The question which arises for the adjudication is whether retaining the said amount in this manner amounts to unjust enrichment or not? If it is so, then the the plaintiff is entitled to the refund of the export duty

11. In the plaint, it is mentioned that the plaintiff is a Government company, wherein more than 97 per cent shares are held by the State of Rajasthan. It is mentioned that the plaintiff manufactures country liquor in accordance with an arrangement with the State Government of Rajasthan and is supplying its entire product to the State of Rajasthan only and the plaintiff has no direct dealings with the purchasers of the country liquor, be it wholesaler, retailer or a consumer. The plaintiff produced P.W.1 Manohar Bhatia, Secretary of the plaintiff company, who stated that 'we manufacture country liquor as an agent of the Government of Rajasthan and supply the entire country liquor only to the licencees appointed by the State Government on their instructions. The price of the liquor produced by us is also fixed by the State Government.

12. PW-1 mentioned that an amount of Rs. 24,09,839.42 was paid towards the export duty. This statement filed along with the plaint was prepared on the basis of the bills/invoices received by the plaintiff from defendant No. 1. He further mentioned in his evidence that out of the said amount, the amount of Rs. 15,87,270.01 are deposited by defendant No. 1 with defendant No.2 i.e. the state of U.P. The balance of Rs.8,22,569.41 were paid by the plaintiff to defendant No. 1. It is further mentioned in his statement that the plaintiff demanded a refund of the said amount from the defendant as early as in 1975. He also stated that the reply of defendant No.1 is contained in the letter dated 19.9.1975 which was received at Jaipur, on 19th September, 1975. He further stated that defendant No.1 by its two letters confirmed their liability and had undertaken to refund the amount immediately after the refund was received from the Excise Department or after the disposal of the appeal, if any, preferred by the U.P. Government. P.W.I also produced letter dated 29.10.1977 which is Exhibit P.W.1/8. The said letter sent by defendant No.1 to the plaintiff reads as under:-

The Purchase Manager,

The Ganganagar Sugar Mills Ltd.,

(A Rajasthan Government Controlled Undertaking),

P.O. Box No. 98,

17, Civil Lines,

JAIPUR-302006.

Dear Sir,

Sub: EXPORT DUTY ON RECTIFIED SPIRIT.

Ref: Your letter Nb.F.22/Spirit/68/Pur/GSM/76-77/3863 dated 29/30.8.1977.

On going through the statement submitted by you along with your letter referred to above, we have to inform you that we have so far deposited asum of Rs. 15,87,270.01 with the Excise Authorities and the amount ofRs. 8,22,569.41 is lying with us. We have already written to the ExciseCommissioner for giving us credit on the export duty on rectified spiritdeposited by us with them. As soon as this is done, we shall refund you theamount of Rs. 15,87,270.01.

As regards the amount of Rs. 8,22,569.41 is concerned we have requested our Advocate to ascertain from the High Court as to whether any appeal has been filed or not by the Excise Authorities against the judgment. You will agree that in case an appeal has been filed the question of refund would not arise. We find that there are certain discrepancies in the statement of export duty sent by you with your letter under reply, the details of which are given below:

Sr. NoBill No.DateAmount of Export duty shown by youActual amount of export duty11.1218.6.7419659.0019639.7329.1420.7.7421012.9521870.4531.1723.7.7422153.7821153.7835.2227.7.7419635.8820635.0064.17622.4.7519634.2819634.6583.22328.6.7516372.6516368.45110.419696.4319196.43 Regarding amount at S.No. 82 we have to state that the said bill does not pertain to us and in its place we have included the amount of bill No. 216 dated 23.6.75 for Rs. 19752.43 which has not been shown by you in your statement under reference.

Thanking you,

Yours faithfully,

Sd/-

General Manager.

PW.1 also refers that by another letter dated 8th February, 1978 defendant No.1 had assured us that the entire amount of excise duty will be refunded as soon as the orders of refund are received by us from the Excise Commissioner U.P. The letter dated 8th February,1978 (Exbt.P.W.1/9) reads as under:-

M/s. Ganganagar Sugar Mills Ltd.,

17, Civil Lines,

JAIPUR-302006.

Sub: Export duty on rectified spirit.

Ref: Your letter No. 12742 dated 13.1.78.

Dear Sir,

We acknowledge receipt of your above referred letter. We are vigorously perusing with the Excise Authorities for early refund of the amount of duty, but so far the amount has not been refunded to us. We may assure you that the entire amount of duty will be refunded by us as soon as orders of refund are received by us from the Excise Commissioner, U.P., Allahabad.

Thanking you,

Yours faithfully,

Sd/-

General Manager

13. The plaintiff has also produced PW-2, Satya Narain, Manager, Audit and Administration. He has also categorically mentioned that the country liquor manufactured is supplied to the State of Rajasthan and is not supplied to anyone else. The price at which the country liquor is supplied to the State Government is fixed by the State Government.

14. The plaintiff also produced PW-3, Mabin Ansari, a Company Secretary of the plaintiff company. He has stated in his evidence that the present name of the plaintiff company is the Rajasthan State Ganganagar Sugar Mills Ltd. The Stale of Rajasthan holds 98.67 per cent shares. The entire board consisting of seven members is appointed by the State of Rajasthan. All these directors are the senior IAS officers of the State Cadre.

15. PW-3 was not cross-examined by the counsel appearing for the defendants. On the basis of evidence on record, it is abundantly proved that the plaintiff is a company where 98.67 per cent holding is of the State of Rajasthan and is fully controlled by the State of Rajasthan. The company's entire product is sold only to the State of Rajasthan and to no one else, In these circumstances, there is no question of passing the amount of export duty to the wholesalers, retailers, consumers or purchasers in any manner. In this view of the matter, the issues (7,8 & 9) have to be decided in favor of the plaintiff and against the defendants.

16. I deem it appropriate to now take up issues no.14 and 15. The learned counselfor the plaintiff made a serious endeavor to demonstrate that the price paid to theplaintiff company during the relevant period was a provisional price which was subject to adjustment subsequently. This was the arrangement between the plaintiff andthe State of Rajasthan because the plaintiff company is wholly owned company ofthe State of Rajasthan, where 98.67 per cent shares are held by the State of Rajas-than. The arrangement between the plaintiff company and the State of Rajasthancannot be questioned. The plaintiff company is a wholly owned company of the Stateof Rajasthan and the entire products of the plaintiff company can be supplied to theState of Rajasthan alone and none else.

17. Mr. Daljit Singh, learned senior counsel appearing for the plaintiff strongly placed reliance on the Constitution Bench Judgment of the Supreme Court, The Sales Tax Officer vs . Kanhaiya Lal Makund Lal Saraf : [1959]1SCR1350 . The proposition of law which has been laid down was that mistake in Section 72 of the Contract Act. comprises both mistake of law and fact. The payment made under the mistake of law is repayable. In this case the court relied on earlier judgments, delivered by various High Courts. These judgments are AIR 1920 Bom. 192 : AIR 1929 Mad 177 : AIR 1934 Mad 420 and AIR 1937 Mad. 559. In these judgments, it is held that where it is once established that the payment even though it be of a tax, has been made by the party labouring under a mistake of law, the party is entitled to recover the same and the parties receiving the same is bound to repay or refund it. No distinction can be made in respect of a tax liability and any other liabilities on a plain reading of Section 72 of the Act. To hold that the tax paid under the mistake of law cannot be recovered under Section 72 will be to interpret the law against its intention and spirit of the legislation.

18. In this case, the court also examined the American doctrine and reproduced the passage from the Willoughby on the Constitution of the United States, (Vol.1, page 12) in para 13 of the judgment. Relevant portion is extracted as under:-

'The general doctrine that no legal rights or obligation can accrue under an unconstitutional law is applied in civil as well as criminal cases. However, in the case of taxes levied and collected under statutes later held to be unconstitutional, the tax payer cannot recover unless he protested the payment at the time made. This, however, is a special doctrine applicable only in the case of taxes paid to the State. Thus, in transactions between private individuals, moneys paid under or in pursuance of a statute later held to be unconstitutional, may be recovered or release from other undertakings entered into obtained.'

19. According to Mr. Daljit Singh, learned counsel appearing for the plaintiff has placed reliance on the Constitution Bench judgment and submitted that it is a good law and even according to the Supreme Court judgment in Mafatlal Industries and others 1997 (5) SCC 539, the amount of export duty deposited with defendant no.1 is liable to be refunded. Mr. Shanti Bhushan, learned Senior Advocate appearing for defendant No. 1 placed reliance on the Division Bench judgment of the Andhra Pradesh High Court; N.V. Ramaiah Vs State of Andhra Pradesh and Others AIR 1986 AP 361. In this case the Court has laid down that in a suit under Section 72 of the Contract Act for the refund of fee/tax illegally collected, it is for the plaintiff to establish that, by grant of relief, he would not be unjustly enriched. It is not for the State to establish the said fact. Their Lordships placed reliance on Section 72 of the Contract Act which reads as follows:

'A person to whom money has been paid, or anything delivered by mistake, or under coercion, must repay or return it'.

20. Their Lordships of the Supreme Court in a Constitution Bench had occasion to examine this issue in the case of the Sales Tax Officer Vs . Kanhaiya Lal : [1959]1SCR1350 . In the said judgment it was held that the tax paid under a mistake can be claimed back under the said provision.

21. In Shiba Prasad Singh Vs Srishchandra Naudi resolved the conflict of opinion among the Indian High Courts on this question. In this judgment, it was observed by their Lordships that unlike English, American and Australian law, money paid under a mistake of law can be recovered in India. In my considered opinion on the basis of the pleadings and the law issues 14 and 15 are also decided in favor of the plaintiff and against the defendants.

22. In the aforesaid Andhra Pradesh judgment(supra), the Court held that Section 72 of the Contract Act incorporates the rule of equity. It is said to be a legislative expression of the principle of equitable restitution. This Section and Section 70 can be said to be cognate Sections, both incorporating the same rule of equity in its varying facets. Section 70 says that, where a person lawfully does anything for another, or delivers anything to him, without intending to do so gratuitously, the other person who enjoys the benefit thereof is bound to compensate the former in respect of, or to restore the thing so done or delivered. A person who claims an equitable relief from the Court, has to satisfy the Court, that in equity he is entitled to such relief; a mere bald claim would not do; he must make it appear to the Court that equity demands the grant of relief to him.

23. In the said Division Bench judgment, their Lordships placed reliance on Molam chand Vs State of M.P., : [1968]3SCR214 , Bibrosa Vs Fairbaim 1943 AC 32 and Nelson Vs Larholt (1948) 1 KB 339. On the basis of these judgments, the Court arrived at the conclusion that Section 70 and 72 of the Contract Act are designed to prevent 'unjust enrichment'. They are in fact equitable rule of restitution. The ratio which has been laid down in this case that it is for the plaintiff to plead and satisfy the Court that, he would not be unjustly enriched. The provision of law designed to prevent unjust enrichment cannot be made use of precisely to gain unjust enrichment.

24. The Court observed that in order to claim restitution, the person claiming the restitution has to prove loss or injury to him. If he proves loss or injury he would be entitled to restitution to the extent of loss or injury suffered by him.

25. Learned counsel for the defendant has also relied on the judgment of Mafatlal Industries Ltd. (supra). The nine-Judge Bench of the Hon'ble Supreme Court extensively dealt with the doctrine of 'unjust enrichment'. Since reliance has been placed by the learned counsel for the plaintiff and the defendant on this judgment, thereforee, it would be appropriate to seek guidance from the said judgment so far as application of the doctrine of unjust enrichment is concerned in deciding this suit. In this judgment, their Lordships have made reference to Shiv Shankar Dal Mills vs . State of Haryana : [1980]1SCR1170 , In this case, the enhancement of market fee from two to three per cent was held to be bad, whereupon the traders demanded refund of the excess market fee collected from them. The court held that though refund of the fee so collected may be legally due to the traders, the traders may be repaid amounts only to the extent they have not passed on the burden to their customers. To the extent they have passed on, it held, they were not entitled. This principle was deduced from the concept of distributary justice underlying Articles 38 and 39 of the Constitution of India as also from the discretionary nature of the power under Article 226 of the Constitution.

26. Their Lordships also referred to Amar Nath Om Prakash v. State of Punjab : [1985]2SCR72 . This was the case arising, with reference to market fee i.e. an indirect tax. Section 23-A of the Punjab Agricultural Produce Markets Act enabled the market committees to 'retain the fee levied and collected by it from a licensee in excess of that livable under Section 23, if the burden of such fee was passed on by the licensee to the next purchaser of the agricultural produce in respect whereof such fee was levied and collected'. The validity of the said provision was called in question in that case. The court negatived the challenge holding that the primary purpose of the said section was to prevent refund of license fee to dealers who have already passed on the burden of such fee to purchasers and who want to unjustly enrich themselves by obtaining refund from the market committee. The court held that the consumer public who have borne the ultimate burden are the persons really entitled to refund and since the market committee represents their interest, it is entitled to retain the amount. It was pointed out that the provision for retention by market committee had to be made because of the practical impossibility of tracing the individual purchasers and consumers who have ultimately borne the burden. The court in the said case held as under:-

'It was really a law returning to the public what it has taken from the public, by enabling the committee to utilise the amount for the performance of services required of it under the Act. Instead of allowing middlemen to profiteer by ill-gotten gains, the Legislature has devised a procedure to undo the wrong item that has been done by the excessive levy by allowing the committees to retain the amount to be utilised hereafter for the benefit of the very persons for whose benefit the marketing legislation was enacted.'

27. In the case of State of M.P. v. Vyankatlal : [1985]3SCR561 , also, their Lordships of the Supreme Court, while following the principle of Shiv Shankar Dal Mills and Amar Nath Om Prakash held that sugar mills are not entitled to refund in case they have passed on the burden to the purchaser.

28. Professor George C. Palmer, in his work, The Law of Restitution, makes the following comment (1986 Supplement, at p.255):

'There is no doubt that if the tax authority retains a payment to which it was not entitled it has been unjustly enriched. It has not been enriched at the taxpayer's expense, however, if he has shifted the economic burden of the tax to others. Unless restitution for their benefit can be worked out, it seems preferable to leave the enrichment with the tax authority instead of putting the judicial machinery in motion for the purpose of shifting the same enrichment to the taxpayer.'

29. The Supreme Court has approved the observations made by Professor George S. Palmer in the said book. The court observed that the law of restitution is not intended to provide windfalls to plaintiffs who have suffered no loss. Its function is to ensure that where a plaintiff has been deprived of wealth i.e. either in his possession or would have accrued for his benefit, it is restored to him. Their Lordships of the Supreme Court held as under:-

'The very concept of economic justice means and demands that unless the claimant (for refund) establishes that he has not passed on the burden of the duty/tax to others, he has no just claim for refund. It would be a parody of economic justice to refund the duty to a claimant who has already collected the said amount from his buyers. The refund should really be made to the persons who have actually borne its burden - that would be economic justice. Conferring an unwarranted and unmerited monetary benefit upon an individual is the very antithesis of the concept of economic justice and the principles underlying Articles 38 and 39.'

30. Another question which their Lordships of the Supreme Court have decided in the said case is that in a case when money neither belongs to the plaintiff nor to the defendant State, it belongs really to a third party and it is not possible to trace the third party. Then, it is better that it is retained by the State. The court also held that by any standard of reasonableness, it is difficult to prefer the petitioner over the State. The court observed that the very idea of unjust enrichment is inappropriate in the case of the State which is possession of parens patria as held by their Lordships of the Supreme Court in the case of Charan Lal Sahu v. Union of India : AIR1990SC1480 . The Supreme Court has approved of the finding of the Canadian Court in the case of Air Canada (1989) 59 DLR 161. The Canadian Supreme Court held in the similar circumstances that 'It seems preferable to leave enrichment with the tax authorities instead of putting the judicial machinery in motion for the purpose of shifting the same enrichment to the taxpayers. Similarly, the United States Supreme Court in United States v. Butler 297 US 1 : (1936) 80 Ed 477, the Agricultural Adjustment Act was held unconstitutional, the result of which was refund of almost one billion dollars collected under the said statute. In such a situation, it is pointed out, the Congress passed an Act which provided that no refunds shall be allowed unless the claimant establishes that he himself bore the burden of tax. Similar provision was also made in another enactment, viz. Section 424 of the Revenue Act, 1928, the validity of which has been upheld by the United States Supreme Court in Jefferson 78 L Ed 859 : (1933) 291 US 386.

31. On analysis of various English, American, Australian and Canadian Judgments, it is revealed that where the burden of the duty has been passed on, the claimant cannot say that he has suffered any real loss or prejudice. The real loss or prejudice is suffered in such a case by the person who has ultimately borne the burden and it is only that person who can ultimately claim refund but where such person does not come forward or where it is not possible to refund the amount to him, for one or the other reason, it is just and appropriate that the amount is retained by the State i.e. by the people. There is no immorality or impropriety involved in such a proposition.

32. The doctrine of unjust enrichment is a just and salutary doctrine. No person Can seek to collect the duly from both ends. In other words, he cannot collect the duty from his purchaser at one end and also collect the same duty from the State on the ground that it has been collected from him contrary to law. The power of the Court is not meant to be exercised for unjustly enriching a person. The doctrine of unjust enrichment is however, inapplicable to the State. State represents the people of the country. No one can speak of the people being unjustly enriched.

33. When the principle of law as laid down by the Nine-Judges-Bench of the Supreme Court in the case of Mafatlal Industries (supra) is applied, then it becomes abundantly clear that in the instant case, the duty was really borne by the purchaser of liquor who are not before the court. It is extremely difficult if not impossible to trace them. The plaintiff deposited a total duty of Rs.24,09,839.42, with defendant no.1. Out of that amount, defendant no.1 deposited with the State of U.P. Rs. 15,87,270.01 only and pocketed the amount to the tune of Rs.8,22,569.41 but admittedly Rs.8,22,569.41 was not even pass on to the State of U.P. and was retained by defendant no.1 all through. In this view of the matter, by no stretch of imagination, defendant no.1 can be permitted to retain this amount. Permitting the defendants to retain the amount would clearly be vocative of the principles which have been laid down by their Lordships in the case of Mafatlal Industries (supra). The plaintiff in this case is a unit of State of Rajasthan. It has been abundantly proved that the entire produce of the company is sold to the State of Rajasthan alone. PW-1, Manohar Bhatia has clearly slated in his evidence that the plaintiff manufactures country-liquor as agent of Government of Rajasthan and supplies the country liquor to the licencees appointed by the State Government on their instructions. The price of liquor produced by the plaintiff is also fixed by the Government. This fact could not be disputed by the defendant. All the seven directors of the company are senior IAS Officers of the State. PW-2, Satya Narain, Manager, Audit and Taxation also proved that the plaintiff company manufactures country liquor in the State of Rajasthan. The country liquor manufactured is supplied to the State of Rajasthan only and is not supplied to any other private concern or individual. He has also proved in the statement that the price is worked out every year by the State on the basis of actual cost and allowing certain margin of profit. He has also mentioned that in case any refund of export duty already paid by the plaintiff company is made to the plaintiff company, adjustment of the same is given in the year of which the same is received or refunded to the plaintiff company while working out the actual cost. In case the amount of export duty refunded to the plaintiff is collected while working out the cost, obviously there will be ,a reduction in the cost in the year in which export duty is refunded lo the plaintiff-company.

34. PW-3 Mabin Ansari, Company Secretary has proved that the State of Rajas-than holds 98.67 per cent shares of the company. The entire Board of the Companyis appointed by the State of Rajasthan. There are 7 directors of the company. Theyare all senior I AS officers of the State cadre. No question was asked to PW-3. in thecross-examination. The plaintiff through these witnesses have fully proved and established its claim.

35. From the very inception, stand of defendant no. 1 was that they would refund the amount to the plaintiff. Exhibit PW-1/8, letter dated 29.10.77 and PW-1/9 letter dated 13.1.78 categorically and clearly reveals the intention of defendant no.1 to refund the duly amount to the plaintiff.

36. This aspect of the matter that when money neither belongs to the plaintiff nor to the defendant State, it belongs really to a third party and it is not possible to trace the third party. Then it is better that it is retained by the State. In Charan Lal Sahu (supra) their Lordships of the Supreme Court held that the very plea of unjust enrichment is inappropriate in the case of the state which is in possession of Parens patria.

37. The question which needs to answered is whether the defendants be permitted to retain the amount or the defendants be directed to refund the amount to the plaintiff. Defendant No. 1 is a private organization whereas plaintiff company is virtually a unit of the state of Rajasthan, the detail reasons have already been mentioned. As their lordships have held that conferring an unwarranted and unmerited benefit upon an individual is the very antithesis of the concept of economic justice and principles underlying Articles 38 and 39 of the Constitution. In this view of the matter, defendant No. 1 cannot be permitted to retain the amount of Rs.8,22,569.41/- paid by plaintiff for depositing with the defendant No. 2 and which was admittedly not deposited and retained by defendant No. 1 for all these years.

38. While keeping the principles of equity, good conscience and fairness in view defendant no.1 is directed to pay the interest at the rate of 18 per cent per annum on the amount of Rs.8,22,569.41/-, which was kept by defendant no.1 without any justification from the date when the amount was paid by the plaintiff to the defendant no.1 till payment.

39. Now, comes the amount of Rs.15,87,270.01 paid by the plaintiff to the defendant No. 2, the State of U.P. through defendant No. 1. Now defendant No.1 has taken the refund of this amount from defendant No.2 - the State of U.P. In this view of the matter, the defendant No. 1 is also directed to refund Rs.15,87,270.01 to the plaintiff with 18% interest from the date when this amount was refunded to defendant No.1 by defendant No. 2 the State of U.P.

40. The result of the above discussion is that I grant a decree for the recovery of Rs. 24,09,839.42 in favor of the plaintiff and against defendant No.1 with interest at the rate of 18% per annum in aforesaid terms. The plaintiff shall also be entitled to recover costs from defendant No.1. The suit against defendant No.2 is dismissed.