Schengen Visa Rejected/Refunded (?)

Question

Last week, I submitted my visa to the Estonian embassy through VFS (New Delhi branch, India where I'm from). In my itinerary it was mentioned that my trip would go like:

1. London > Tallinn (Estonia)
2. Tallinn > Budapest: 7 days
3. Budapest > Paris: 7 days
4. Paris > Singapore (Have a work visa in Singapore and have been based there for past 6 years: uni+work) : return flight with tix booked

My plan was to get the Schengen visa and then apply for the UK visa. I was under the impression that the UK embassy would require a Schengen visa since I would be departing from UK to EU. Today, I got a call from the Estonian embassy where they asked me two questions:

1. Why do you want to visit Estonia? > I answered this and she seemed okay with the answer and cut me off mid-way as I was explaining to her my reasons
2. Are you flying in from London and do you have the UK visa yet?

As per my plans and because UK visa won't be possible to get w/o Schengen visa, I told her that I would apply for it after getting the Schengen visa.

She mentioned that it's a rule that I need a UK visa first if I'm flying in from London and that she will send back my application. She also mentioned that only the VFS fees will be charged and my visa fees will be refunded. I guess my questions are:

1. Is there any such rule that requires me to have a visa of the country where I'm flying in from?
2. Will this constitute a visa rejection since she mentioned that my Schengen visa fees will be refunded?
3. Will applying for UK visa be possible w/o securing an outbound visa to Schengen area?

Any other suggestions/ideas would be appreciated. Thanks!

Answer 1

Is there any such rule that requires me to have a visa of the country where I'm flying in from?

It's more of standard in India to apply for UK Visa first.

Will this constitute a visa rejection since she mentioned that my Schengen visa fees will be refunded?

No.

Will applying for UK visa be possible w/o securing an outbound visa to Schengen area?

Yes.

Ref: Which one to apply first? UK or Schengen Visa?

Answer 2

Is there any such rule that requires me to have a visa of the country where I'm flying in from?

No formal rule that I know of but consulates have quite a bit of leeway in defining how to apply those rules and can also occasionally be plain dumb.

Will this constitute a visa rejection since she mentioned that my Schengen visa fees will be refunded?

No, refunding the fee means the consulate decided the application was not admissible (Schengen visa code article 19) and no decision has been made. This is not a refusal (which is governed by article 32). You should be able to verify that by looking at the paperwork you receive and any stamps in your passport. A refusal comes with an official notification with a justification (out of a list of standard reasons) and a note about your right to appeal.

Will applying for UK visa be possible w/o securing an outbound visa to Schengen area?

No idea. If you get the chance, do point out that you have been told that you should apply for the UK visa first. Being caught between two contradictory or unreasonable interpretations of the rules is not unheard of, even between Schengen consulates and all you can do is persist and hope you encounter someone sensible at some point.