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Dena Bank Vs. G.S. Sawhney and ors. - Court Judgment

LegalCrystal Citation
SubjectCustoms;Commercial
CourtMumbai High Court
Decided On
Case NumberMisc. Petn. No. 748 of 1972
Judge
Reported inAIR1981Bom161
ActsImport (Control) Order, 1955; Import Trade Control Rules
AppellantDena Bank
RespondentG.S. Sawhney and ors.
Appellant AdvocateA.M. Setalvad and;F.H.J. Talyarkhan, Advs., i/b., Mulla & Mulla
Respondent AdvocateD.M. Mehta and;R.L. Dalal, Advs.
Excerpt:
.....otherwise had been tampered with. , 1968. the said firm failed to clear up the goods and hence the petitioners as bankers were obliged to deal with the matter. that the petitioners, according to the import trade control rules and procedure bad hence become joint owners of the said licence. mehta clearly show that when a party approaches a bank for opening bank credit and the bank obliges, there would be an endorsement made on the exchange copy of the licence, which in this case has been done and this is not in dispute. clearly spell out that in the circumstances, the bank and/or such other party would be-come a joint holder of the licence. the contention, therefore, that the petitioners had or have no locus standi to maintain this petition, must fail and so also the contention that the..........to the said firm duly amended and revalidating the same up to 7th june, 1968. thereafter the said firm by a letter dated 12th feb., 1968 addressed to the office of the chief controller of imports and exports acknowledged the amendment of the licence to cover mutton tallow as also revalidating of the licence up to 7th june, 1968. by the said letter the said firm requested the authority to confirm the amendment and the revalidation of the licence, since this confirmation was required by messrs. godrej soaps pvt. ltd. in whose favour a letter of authority had been issued by the said firm. by a letter dated 23rd feb., 1968 the office of the chief controller of imports and exports confirmed the said position.3. it appears that during the course of the correspondence, the said firm applied to.....
Judgment:
ORDER

1. The petition is to quash the orders dated 8lh May, 1968, 30th July, 1968, 19th Nov., 1968, 13th Jan., 1971 and 21st Jan., 1972 and for an order for the refund of fine of Rs. 3,99,000/- paid by the petitioners to the Customs Authority, and for costs of the petition.

2. The facts that give rise to the petition are that on or about 7th Apr., 1967 an Import Licence was issued to the firm known as Messrs. Industrial Engineering Co. (for brevity's sake hereinafter referred to as 'the said firm)' On 14th Oct., 1967 the said firm applied to the licensing authority for amending the licence to cover the import of mutton tallow. By a letter dated 8th Nov., 1967 the section officer of the office of the Chief Controller of Imports and Exports returned the licence to the said firm duly amended and revalidating the same up to 7th June, 1968. Thereafter the said firm by a letter dated 12th Feb., 1968 addressed to the office of the Chief Controller of Imports and Exports acknowledged the amendment of the licence to cover mutton tallow as also revalidating of the licence up to 7th June, 1968. By the said letter the said firm requested the authority to confirm the amendment and the revalidation of the licence, since this confirmation was required by Messrs. Godrej Soaps Pvt. Ltd. in whose favour a letter of authority had been issued by the said firm. By a letter dated 23rd Feb., 1968 the office of the Chief Controller of Imports and Exports confirmed the said position.

3. It appears that during the course of the correspondence, the said firm applied to the Dena Bank (i. e. the petitioners in this case) to open letters of credit and this was done on 16th Jan., 1968. Thereafter the petitioners obtained an irrevocable letter on 191h Mar., 1968.

4. It appears that on 19th Feb., 1968 the Deputy Chief Controller of Imports and Exports addressed a letter to the said firm inter alia stating that information had been received that the licence issued to the said firm was unauthorisedly amended and/or tampered with, and calling upon the said firm to produce the exchange copy of the said licence for his inspection within seven days, failing which the office of the Chief Controller of Imports and Exports would institute proceeding under Clause 8 (S) and Clause 9 read with Clause 10 of the Imports (Control) Order, 1955. By its letter dated 28th Feb., 1968 the said firm acknowledged receipt of the aforesaid letter and forwarded a xerox-copy of the licence to the office of the Chief Controller of Imports and Exports; New Delhi. By the said letter the said firm also informed the Chief Controller that the exchange copy of the licence was lying with Messrs. Godrej Soaps Pvt. Ltd. and that they would produce the same.

5. Thereafter it appears that the Godrej Soaps Pvt. Ltd. produced the exchange copy of the licence before the authorities and the authorities perused the same. After a perusal of the said exchange copy of the licence, the Deputy Chief Controller of Imports and Exports passed an order dated 6th Mar., 1968 inter alia stating and holding that he had perused the exchange copy of the said licence and was satisfied that the same was unauthorisedly altered or otherwise had been tampered with. By the said letter the Deputy Chief Controller cancelled the said licence.

6. It appears that in the meantime what had happened was that goods were imported on the footing of the said licence. The first consignment arrived on or about 19th Mar., 1968. The said firm failed to clear up the goods and hence the petitioners as Bankers were obliged to deal with the matter.

7. In respect of this consignment the petitioners received a notice on or about 8th Apr., 1968 from the Customs Authorities inter alia contending that the goods were imported without a licence and asking the petitioners to show cause why these goods should not be confiscated.

8. By an order dated 8th May, 1968 the Collector of Customs held that since the licence was cancelled, the goods were imported without a licence and unauthorisedly' and were liable to be confiscated. He, however, imposed a fine of Rs. 2,50,000/- in lieu of confiscation. The petitioners paid this fine under protest.

9. It appears that the second consignment imported under this licence arrived in Apr., 1968. Here again, the Customs Authority issued to the petitioners a similar notice dated 3rd June, 1968 in respect of this consignment. By an order dated 30th July, 1968 passed by the Collector of Customs the Collector held that since the licence was cancelled, the goods forming part of the consignment were imported without a licence and unauthorisedly. The said Collector of Customs proceeded to levy a fine of Rupees 1,50,000/- in lieu of confiscation.

10. In or about March (May?) 1968 the third consignment landed. Thereupon the Customs Authority issued a show cause notice dated 20th June, 1968 to the petitioners. After hearing the contentions of the petitioners the Collector of Customs by his order dated 19th Nov., 1968 held that the goods forming part of the consignment were imported without a licence, inasmuch as the licence itself had been cancelled and proceeded to levy a fine of Rs. 1,48,000/- and further fine of Rs. 46,000/-.

11. It appears that the petitioners being aggrieved by the said orders passed by the said Collector, preferred an appeal against the same. By an order dated 13th January, 1971 passed by the Central Board of Excise and Customs, the finding of the Collector was confirmed. Thereupon the petitioners filed a revision. By an order dated 21st Jan., 1972 passed by the Secretary to the Government of India the finding was again confirmed. However, the quantum of the fine was reduced.

12. Being aggrieved by these proceedings the petitioners filed the present petition challenging the said orders on the several grounds mentioned in the petition.

13. The petition has been resisted by the respondents. The respondents have contended that (a) the petitioners are Bankers and they did not take interest in the licence and had no locus standi to file the petition, (b) the office of the Chief Controller of Imports and Exports had held that the licence was a false document or was otherwise forged and hence there could be no question of the Bank (i. e. the petitioners herein) claiming any interest on the basis of this licence or of the Bank (i. e. the petitioners) complaining that any of their rights emanating from this licence were affected, (c) that there was no question of the licensing Authority issuing a show cause notice whatsoever to the petitioners at any stage since they the petitioners did not take any interest in the licence, and (d) in any event since the office of the Chief Controller of Imports and Exports held that the licence was a false document, the issuing of show cause notice to the petitioners was merely an empty formality. The respondents have contended that since the said licence was cancelled by the licensing authorities, the Customs Authorities were right in holding that the 3 consignments had been imported without a licence and that the customs authorities were right in passing the said orders and recovering fines. The respondents have contended that in view of this, the petitioners would be entitled to no reliefs.

14. Now in view of the rival contentions, the first question that arises is, did the petitioners take or have any interest in the licence ?

15. Mr. Setalvad, the learned Counsel for the petitioners argued that Clause 5 of the Import (Control) Order, 1955 provided that it was open to the licensing authority to issue a licence subject to one or more of the conditions stated in the said clause. That these conditions that came to be imposed were incorporated in the licence itself and a perusal of this licence shows that one of the conditions reads as follows:

'It is also the condition of the licence that:-- (a) Where an irrevocable letter of credit is opened by the holder of the licence to finance the import of any goods covered thereby, then the 'authorised dealer in. foreign exchange through whom the credit is opened, shall be deemed to be a joint holder of this licence to the extent of the goods covered by the credit'.' (underlining hereinto ' ' mine)

That after the licence was issued to the said firm, they applied to the petitioners for opening the necessary I/C. Accordingly, the I/C was opened by the petitioners and the necessary endorsement was made on the exchange copy of the licence, and which endorsement shows the name of the petitioners on the copy. That the petitioners, according to the Import Trade Control Rules and Procedure bad hence become joint owners of the said licence.

16. Mr. Setalvad contended that if any rights emanating from the licence were to be curtailed or abrogated, it was incumbent on the authorities to issue a show cause notice to the petitioners and the authorities could not have proceeded to cancel this licence without giving the petitioners an opportunity to show cause against the proposed action.

17. Mr. Mehta, the learned Counsel for the respondents argued that this licence was issued to the said firm and not to the petitioners. Hence the petitioners took no interest in the licence. In any event, even if the petitioners were io be considered as joint holders of the licence, then their rights would be governed by Clause 304 of the Import Trade Control Hand Book of Rules and Procedure, which reads as follows :

'304. (1) It has been observed that when an importer opens an irrevocable letter of credit through a bank and later fails to honour his bills., the bank concerned, which is committed for the payment of the exchange to the foreign suppliers, finds itself in difficulty to import as it is not the licence holder. As a safeguard against this contingency, the exchange bank or authorised dealer through whom the letter of credit is opened is considered as a joint holder of the licence to the extent of the goods covered by the credit which would thus enable the Bank to honour its commitments with foreign supplier. The procedure in this respect is contained in Public Notice No. 50-ITC(PN)50, dated the 21st July, 1950, reproduced in Appendix 29.'

That a plain reading of this clause makes it dear that the name of the Bank, i. e. the petitioners in this case was added only to enable the petitioners to recover their money to the extent of the advance and no more. That the Bank i.e. the petitioners were to be regarded as joint holders of the licence only for the said purpose and no more That in any event the petitioners would not be concerned with any of the proceedings that were to be taken with relation to this licence by any of the authorities. That in view of this, since the petitioners took no other interest in the licence, they had no locus standi and the petition was not maintainable.

18. I am unable to accept the contentions of Mr. Mehta. A reading of the provisions pointed out by Mr. Setalvad and a reading of Clause 304 referred to by Mr. Mehta clearly show that when a party approaches a bank for opening bank credit and the Bank obliges, there would be an endorsement made on the exchange copy of the licence, which in this case has been done and this is not in dispute. A reading of the said provisions; clearly spell out that in the circumstances, the Bank and/or such other party would be-come a joint holder of the licence. If their rights in respect of such licence are to be abrogated or the licence is to be cancelled, then certainly the joint holder (in this case the petitioners) would be entitled to a show cause notice before any action is taken in respect of this licence. The contention, therefore, that the petitioners had or have no locus standi to maintain this petition, must fail and so also the contention that the authorities were entitled to cancel the licence without issuing a show cause notice to the joint holders, in this case the Bank must be negatived.

19. In this connection, it may be stated that my attention was drawn to a judgment of my brother Judge Pendse in Misc. Petition No. 165 of 1976, Bank of Baroda v. Union of India, disposed of on 10th Oct., 1979, wherein my brother Judge was dealing with a similar contention canvassed by the respondents and which contention was negatived, and it was held that the Bank bad an interest in the licence and was entitled to a show cause notice if the rights under the licence were to be affected.

20. Since the licence in question was cancelled without calling upon the petitioners (the joint owners) to show Cause, the property right of the petitioners must be held to have been directly affected and in the light of this the order dated 6th March, 1968 cancelling the licence must now be struck down.

21. This takes me to the orders dated 8th May, 1968, 13th July, 1968 and 19th Nov. 1968 passed by the Collector of Customs and the order dated 13th Jan., 1971 passed by the Central Board of Excise and Customs and the order dated 2Ist Jan., 1972 passed by the Secretary to the Government of India. I have already set out the circumstance under which these orders were passed and the same bears no repetition. What is essential to note is that the orders dated 8th May, 1968, 13th July, 1968 and 19th Nov., 1968 passed by the Collector of Customs were passed on the basis that since the Controller of Imports and Exports had cancelled the licence, the goods imported under the so-called licence were imported unauthorisedly and hence they were liable to be confiscated or in lieu thereof the parties were to pay a fine. If the order dated 6th Mar., 1968 passed by the licensing authorities itself does not survive, the very hypothesis on which the Customs Authorities proceeded must fail, and these orders passed by the Collector of Customs must also fail.

22. Furthermore the order dated 13th Jan., 1971 passed by the Central Board of Excise and Customs and the order dated 21st Jan., 1972 passed by the Secretary to the Government of India also admit of the same infirmities and these also must fail.

23. In the result, the said orders dated 6th March, 1968, 8th May, 1968, 13th July, 1968, 19th Nov., 1968, 13th Jan., 1971 and 21st Jan., 1972 are quashed. The respondents are further directed to refund the amount of fine to the petitioners. The respondents shall pay to the petitioners the said amount within three months from today. the rule is made absolute accordingly. However, in the circumstances of the case there will be no order as to costs.

24. Petition allowed.


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