Skip to content


Union of India (Uoi) and ors. Vs. C. Damani and Co. and ors. - Court Judgment

LegalCrystal Citation
SubjectCustoms
CourtMumbai High Court
Decided On
Case NumberAppeal Nos. 149 and 150 to 163 of 1979 in Misc. Petition Nos. 904 of 1979
Judge
Reported in1989(25)LC216(Bombay)
AppellantUnion of India (Uoi) and ors.
RespondentC. Damani and Co. and ors.
Excerpt:
export--silver--licence granted under a given policy cannot be cancelled or revoked without following statutory procedure, even if government policy has changed in the meantime and a ban imposed on such export. prevention of shipment blatantly illegal, hence more time allowed to complete shipment. export of silver allowed subject to conditions laid down by court. export policy, 1979. - - it appears, however, that after the changes effected on 20th february, 1979 it is possible that some of the endorsements already made and orders endorsed and/or inscribed on the shipping documents may have been cancelled by various authorities of the union of india, for example the joint chief controller of imports and exports or the customs authorities under the belief that a total ban had been imposed.....orderdesai, j.1. this is an appeal from the order of the learned single judge dated 28th april 1979 in miscellaneous petition no. 904 of 1979. the observations made in this appeal will govern the decisions in the remaining appeals. the 1st respondents to this appeal are m/s. c. damani and company and in this appeal we are concerned with five contracts, three of them for the total quantity of 1200 kg. and two for the total quantity of 800 kg. in respect of the 1st group of three contracts prior to the changes with which we are concerned in this appeal and which have been noted in para 1. of the judgment appealed from, all the formalities had been completed including endorsement of the licences thereon. it appears, however, that after the changes effected on 20th february, 1979 it is.....
Judgment:
ORDER

Desai, J.

1. This is an appeal from the order of the learned Single Judge dated 28th April 1979 in Miscellaneous Petition No. 904 of 1979. The observations made in this appeal will govern the decisions in the remaining appeals. The 1st Respondents to this appeal are M/s. C. Damani and Company and in this appeal we are concerned with five contracts, three of them for the total quantity of 1200 kg. and two for the total quantity of 800 kg. In respect of the 1st group of three contracts prior to the changes with which we are concerned in this appeal and which have been noted in para 1. of the judgment appealed from, all the formalities had been completed including endorsement of the licences thereon. It appears, however, that after the changes effected on 20th February, 1979 it is possible that some of the endorsements already made and orders endorsed and/or inscribed on the shipping documents may have been cancelled by various authorities of the Union of India, for example the Joint Chief Controller of Imports and Exports or the Customs authorities under the belief that a total ban had been imposed by the Government of India on the export of silver on account of which they were compelled to act in that manner. In the remaining two contracts the shipping documents had been submitted by the 1st Respondents to the appeal (original petitioners), but no endorsement was made thereon of the export licence. It was submitted to us, however, that this should be considered to be a mere formality and that as a matter of substance there was no distinction whatever amongst these two groups of contracts. The total quantity as far as the 1st Respondents are concerned is 2000 kg. (two metric tonnes) which is covered by the five contracts or deals earlier mentioned.

2. By the impugned order which is assailed in the appeal, the learned Single Judge has granted interim relief in terms of prayer (f) excepting certain bracketed portion. The intention as would be gathered from the detailed order was to permit the export of the entire quantity of 2000 kg. covered by these five deals. During the course of arguments it appeared to us that the prayer for interim relief may not be satisfactorily worded and hence an application for amendment was made by each of the petitioners for necessary amendment of prayer (f) adding certain sentences at the end thereof. As this modification was necessary, it was allowed and the parties were directed to carry out the necessary amendments forthwith.

3. The necessary facts have been set out in the order of the learned Single Judge and we do not wish to repeat them in this order. It may be mentioned that the matter was argued on the last two days of the Court's working before the summer vacation and the arguments were over at almost 4.30 p.m. so that this order is being dictated during the vacation. Expeditious hearing was necessary inasmuch as the few days of shipment under the contracts would appear to have expired or are about to expire. It also appears from telex messages exchanged between the foreign buyers and the State Trading Corporation that the foreign buyers are still interested in obtaining the quantity of silver under these contracts and, therefore, had upto the last date of hearing viz. 27th April, 1979, treated the contracts as still subsisting.

4. In the petition the changes effected on 20th February 1979 have been assailed on several grounds and these will be found in paragraphs 12, 13 and 14 of the petition. It may be pointed out that the challenge in the petition is not merely in respect of the contracts entered into prior to 20th February 1979, but as regards the entire change of policy. In this appeal however, we are not concerned with the change in policy to be made effective after 20th February 1979 in the sense that such change of policy may prohibit entering into of contracts for the export of silver after that date In this group of appeals we are concerned with the aggregate number of 34 deals or contracts entered into prior to 20th February 1979 for the aggregate quantity of 11.100 kgs of silver to be exported from India. It may be mentioned that a statement was handed over to us which showed that out of these 34 deals or contracts, in respect of 16 deals or contracts for the aggregate quantity of 5100 kgs of silver all formalities including endorsements of export licences had been completed, whereas in respect of the remaining 18 deals or contracts for the aggregate quantity of 6000 Kgs of silver the endorsements still remained to be made.

5. On behalf of the appellants a number of contentions have been urged during the course of appeal. The principal of these contentions were that the learned Single Judge was in error in granting interim relief which implied granting of full reliefs as far as these contracts were concerned, it was further submitted that the principle of the doctrine of promissory estoppel had been erroneously applied by the learned Single Judge to these contractual deals. Finally it was contended that there was a total ban imposed on the export of silver and that this was by means of a legislative order with the result that even pending contracts could not be allowed to be carried out.

6. As far as the argument that the changes effected on 20th February 19' 9 amounted to a total ban on export of silver we had conflicting arguments advanced on behalf of the appellants before us viz. the Union oi India. Mr Dhanuka who opened the appeal, submitted that this was not a total ban in the strict legal sense but a ban in the sense in which it was understood in Customs procedure and it was submitted that a commodity of which export was somewhat freely allowed was put in the restricted list and became a commodity of which export was not normally allowed. On the other hand, Mr. Joshi who made a few submissions in rejoinder, submitted that a total ban had been imposed irrespective of what Mr. Dhanuka had earlier submitted on behalf of the Union of India. We find the same ambivalence m paragraph 7 of the affidavit of the Chief Controller of imports and Exports, Bombay, which affidavit is dated 24th April, 1979 and which was made for the purposes of this appeal.

7. It may be mentioned that in connection with the changes effected by means of necessary order, a public notice was subsequently issued in which public notice intimation has been given to the trade that the export of this commodity is totally banned with effect from 20th February 1979.

8. As far as this aspect of the matter is concerned, we are of opinion that removing the commodity from Part 'B' to Part 'A' cannot be considered in law to be a total ban, although for practical purposes that may be intended to be the manner in which the executive policy of the Government may be intended to be implemented.

9. We are in full agreement with the views expressed by the learned Single Judge as to the proper effect of the changes which are to be found in the opening part of her order. These need not be repeated in this order.

10. Once this position is realised, it must be clear that at least in respect of deals or contracts for the export of silver for which necessary endorsements of export licences have been made, all the necessary procedures must be regarded as having been complied with. We have been shown the rules, under which licences granted could be revoked or cancelled, but it is an admitted position as far as the Union of India is concerned that the said procedure for revoking the licences has not been followed in the case of the present three deals. Thus even if there is any cancellation it must be regarded as having been effected contrary to the procedure enjoined by the rules. Such cancellation must be presumed to be the purported result of any such understanding of Government policy by the J.C.C 1. or the Customs authorities or other departments of the Government of India We asked Mr. Dhanuka to show us the provisions whereby the shipments in respect of these three contracts could be prevented by the Union of India through Its officers or departments or not carried out by the State Trading Corporation, the canalising agency. All that he argued was that this power to prevent shipment must be logically regarded as implicit in the change of policy effected on 20th February, 1979. We are unable to accept any such argument. The logic which has appealed to the departments of the Union of India and on which reliance has been placed by Counsel appearing for the Union of India in this appeal does not commend itself to us. On the other hand, these are deals or contracts in respect of which all formalities have been completed. These are contracts for which all preparations have been made by the parties. These 'are contracts in respect of which export licences have been granted by endorsing on the shipping documents presented through proper channels. If this be so, then the prevention of the shipment carried out in whatever manner it may have been carried out by whatever modus operandi, amounts to an illegal exercise of power-an illegality which is patent as well as blatant-and which, in the circumstances of the case, must be checked and controlled even by interim orders.

11. Thus it is clear that in respect of the three deals of the 1st Respondents (original petitioners in Miscellaneous Petition No. 994 of 1979) there is no substance in the pleas advanced on behalf of the Union of India and the grant of interim relief in the amended form is totally in order. It must be clarified that the interim relief granted will operate qua all departments of the Union of India including the J.C.C.I. and the Customs. The interim order will also operate qua the State Trading Corporation. Thus all departments of the Union of India as well as the State Trading Corporation will be required to permit and adopt necessary measures to allow the shipments in respect of these three deals for the aggregate quantity of 1200 kg. of silver to be made on the footing that there was a valid permission to export effective for the period of fifteen days as will be indicated at the end of this order. Necessary intimation is directed to be given to the transporting agency. It is true that the original period of fifteen days or thirty days for effecting shipment mentioned in the export licence might have come to an end, but that factor must be totally ignored. If that factor is allowed to prevail, it would be tantamount to allowing the appellants to take advantage of their own wrongful actions.

12. This brings us to a consideration of the position regarding the remaining two contracts of the original petitioner in which the endorsement of the export permission or licence was not made prior to the effecting of the change on 20th February, 1979. The learned Single Judge has granted relief even in respect of these two contracts also. This has been principally done on an application of the principle of promissory estoppel.

13. Very interesting and elaborate arguments were urged before us on this principle. Recently the Supreme Court had occasion to consider the ramifications of this principle and the said judgment of the Supreme Court is reported in Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh and Ors. : [1979]118ITR326(SC) . An elaborate and full discussion of the principle or its application does not appear to be necessary for the purposes of this order. It was submitted by the appellants that the exposition of an export policy does not amount to any promise which would give rise to an estoppel of the nature contended by the 1st Respondents. It was submitted further that in any case assuming that there was a promise which could give rise to an estoppel, even then the matters will be governed by the well-recognised exceptions to the doctrine and accordingly the 1st Respondent was not entitled to any relief based on this principle.

14. As far as these exceptions are concerned, it was submitted that the change in policy was effected in the national interest. We are at this juncture not required to consider the totality of the change effected but must concentrate for the purposes of this order only on the limited position vis-a-vis the commitments entered into prior to 20th February 1979. In connection with these commitments we have before us a letter addressed by the State Trading Corporation to the Chief Controller of Imports and Exports which is dated 7th March 1979. According to that letter chore were for the entire country only 96 such pending contracts on 20th February 1979 for 39 metric tonnes of silver valued at about rupees seven crores. As far as Bombay is concerned, we are concerned with 34 contracts for the aggregate quantity of 11.1 metric tonnes. As already stated, the earlier portion of the order indicated in cases of the 1st Respondents' three contracts will also govern the remaining appeals for 12 similar contracts and will cover the aggregate quantity of 5100 kg. (5.1 metric tonnes) of silver.

15. Further, we have been informed of the Government decision to allow honouring of pre-ban commitments in two cases viz. where the silver had been handed over to the Customs authorities but where shipments had to be off-loaded and also where payments from abroad have already been received prior to 20th February 1979, Under these relaxations a few contracts effected from New Delhi have been allowed to be carried out.

16. The various points urged at the bar will have to be considered in their full amplitude as far as the total change effected on 20th February 1979 is concerned. That, however, will be at the time of final disposal of the petition. In this appeal we are concerned with the limited question as to allowing or not allowing the export of 11.1 metric tonnes of silver which is the aggregate quantity involved in all these appeals. The submissions are required to be considered in the context of this limited quantity and for the purposes of the interim order considerations such as balance of convenience and the possible harm to either side may outweigh the other considerations which would be required to be gone into at the stage of final hearing.

17. We have gone through the relevant portions of the judgments which were cited at the bar commencing, as far as this country is concerned, with The Union of India v. Indo Afghan Agencies A.I.R. 1968 SC 718, and ending with Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh and Ors. : [1979]118ITR326(SC) .

18. In our opinion, it is unnecessary for the purposes of this appellate order to consider precisely the parameters of the principles enunciated by the Supreme Court and'then seek to apply them. To some extent there is substance in the arguments advanced on behalf of the appellants that the learned single Judge has been somewhat hasty in enunciating the principle and applying it to the facts which are required to be considered in this appellate order. At this juncture we may pause to express the view that the doctrine appears to be receiving somewhat greater amplification and that is the trend which we perceive in the recent Supreme Court judgment in Mis. Motilal Padampat Sugar Mills' case. The position, however, is a little debatable as far as declaration of export policy is concerned. It is pertinent, however, to note that even in respect of these two contracts where the export licence endorsement was not made, the petitioners' contentions are not based exclusively on the doctrine of promissory estoppel. To summarize the contentions very briefly it was submitted by the learned Counsel on behalf of the 1st Respondents that under the existing circumstances the endorsement was a mere formality. These circumstances which he emphasised were that export of silver subject to the annual ceiling earlier noted was being canalised through the State Trading Corporation (admittedly a Corporation owned by the Union of India). It was further contended by him that the changes effected on 20th February 1979 must be regarded as having prospective operation only in the sense that the ban or restriction would not apply to commitments entered into through this canalising agency viz. the State Trading Corporation prior to 20th February 1979. Considerable reliance was placed on what the State Trading Corporation itself had to say in its letter dated 7th March 1979. The principle of promissory estoppel which found favour in the lower Court was not wholly abandoned but it was not put forward as the sole prop of the 1st respondent's case and it was contended that if the changes effected are to be regarded as also having an effect on commitments entered into earlier thereto, the changes with such wider ramifications will have to be regarded as being in contravention of the 1st Respondents' rights under Article 19(1)(f) and 19(1)(g) of the Constitution of India.

19. It will have to be conceded that all these several contentions cannot be straightway rejected as being frivolous in nature. They will require serious consideration, and on any of them the 1st Respondents (the original petitioner) may conceivably succeed. However, as contrasted with the position as brought out in respect of the three contracts earlier dealt with, where in our opinion the original petitioner's case is almost unassailable, as far as these two contracts are concerned, the original petitioner's case will have to be regarded as highly arguable though not unassailable.

20. It was in this background that we asked the learned Counsel appearing for the Union of India to suggest whether export of this limited quantity could be permitted subject to certain safeguards as may be suggested at the Bar. To recapitulate, as far as this appeal and the companion appeals are concerned, we are concerned with 34 contracts for the export of the aggregate quantity of 11,100 kg. (11.1 metric tonnes) of silver. Of these, sixteen contracts are covered by the earlier part of this order in which we have prima facie considered the action in preventing shipment as patently and blatantly illegal. The quantity covered by the 16 deals of contracts is 5100 kgs. (5.1 metric tonnes) of silver. It was submitted by the learned Counsel on behalf of the 1st Respondent that even bearing in mind the total number of deals of the latter type (where the export licence is not endorsed), the balance of convenience was totally in favour of the exporting merchants and no consideration had been submitted as to what harm or danger could befall the Union of India if this relatively small quantity of silver was allowed to be exported bearing in mind the earlier annual ceiling of 1000 metric tonnes of silver which was allowed to be exported prior to 20th February 1979.

21. Both on the question of alleged national interest and safeguards we found the approach and submissions of the Counsel on behalf of the Union of India to be totally unsatisfactory. In this connection Mr. Dhanuka referred us to the affidavit of the Chief Controller of Imports and Exports to which earlier reference was made in connection with its ambivalence. The considerations in respect of the changes effected on 20th February 1979 are to be found in para 11 of the said affidavit.

22. With respect to the draftsman of the said affidavit and the deponent thereof, it must be observed that the entire purpose of the affidavit appears to us to be misdirected. In this appeal and for the purposes of the notice of motion therein (in support of which the affidavit is made) we are not concerned with the broad reasons for the change in policy but we are concerned with limited considerations for allowing or not allowing the export of silver in respect of which commitments had been made prior to 20ih February 1979 which commitments the Indian contracting parties were keen on honouring. If they were not honoured, it has been pointed out by the 1st Respondents in this appeal, each of the Indian merchants would suffer a great financial loss, not merely a loss of profit. It was pointed out that under the terms of the contract between the S.T.C. and the foreign buyers damages in foreign exchange would be required to be paid by the State Trading Corporation to the foreign contracting parties which would later on be required to be reimbursed in rupees by the Indian parties. On the other hand, the affidavit does] not deal with why it is necessary not to allow the so-called pre-ban commitments to be honoured although that was the very purpose for which the affidavit was required to be made. Even orally, despite repeated questions being put both to Mr. Dhanuka and to Mr. Joshi, no illumination was forthcoming. All that we heard was that it was a matter of policy. Catch-words like 'national interests' and 'governmental policy' have little relevance and cannot be regarded as conclusive of the rights of the parties. In any case, as far as these two deals are concerned, the Court is being required to exercise its discretionary powers and it would appear to us that various circumstances by reason of which the discretion is required to be exercised in favour of the original petitioners (the 1st respondent before us) have been brought on record and have been mentioned at the Bar. On the other hand, on behalf of the Union of India who are the appellants before us, we have not heard any single satisfactory reason for not exercising the discretion in favour of the 1st respondent.

23. Thus even in respect of the remaining two deals we are inclined to, make the same order as is made hereunder in respect of the three contracts ignoring the formality of endorsement of the export licence. This must not be construed as indicative of our acceptance of the argument in this respect by the learned advocate for the 1st Respondent.

24. We are of opinion, however, that some restrictive safeguard will be required to be put on the 1st Respondents qua these two deals or contracts in which the quantity involved is 800 kg. of silver and the safeguard or restriction which we are inclined to consider is a restriction on these parties' rights to appropriate the entire amount of the price paid by the foreign buyers less the commission and charges as are payable to the State Trading Corporation. We are inclined to consider that as far as the three contracts for 1200 kg. of silver are concerned, the 1st Respondents will be entitled to export them though the S.T.C. irrespective of the change provided all other commercial modalities are carried out by the foreign buyer in terms of the contract and as modified by this Order. The period within which the shipment is to be effected is the period of fifteen days as will be indicated at the end of the order. From the price payable by the foreign buyers in respect of this quantity of 1200 kg. the 1st Respondents, in our opinion, must be allowed to withdraw the full amount after retaining the necessary commission, charges and expenses of the State Trading Corporation as are ordinarily payable to the State Trading Corporation. Shipments are similarly permitted in respect of the two deals or contracts for 800 kg. of silver. However, we are inclined to impose one restriction and condition on the 1st Respondents. It is only if the 1st Respondents are accepting that restriction and condition that they are being permitted to carry out the shipments in respect of these two deals (where the export licence endorsement is not made). The manner in which the shipment is to be effected and the modalities to be observed by the Indian merchants, the State Trading Corporation and the foreign buyers will be identical as the other three contracts but it is directed that out of the amount of price realised from the shipment to be effected, an amount at the rate of Rs. 200/- per kg. will be retained with the S.T.C. for the shipment effected and not withdrawn by the Indian merchants. This amount which for these two contracts will come to Rs. 1,60,000/- will be retained till the final disposal of the petition. If in the petition the original petitioners fail in respect of their pleas as to the contracts or commitments or deals entered into previous to these changes effected on 20th February 1979 the condition which they must accept is that the entire amount or such part thereof as would be determined by the Court finally disposing of the petition, may be paid over to the Union of India. We have broadly fixed the amount of Rs. 200/- per kg. bearing in mind the difference between the contractual price and the subsequent market price in India after the changes were effected on 20th February 1979. It is only if this restriction and condition is accepted by the 1st Respondent that the 1st Respondent will effect the shipment for these two deals for the aggregate quantity of 800 kgs. of silver.

25. It may be mentioned that the position in each of the other companion appeals is similar. In one appeal we have a case of only two contracts or deals where the endorsement of the licence has been made on the shipping documents. In some of the other appeals we have to consider cases of deals similar to the latter type of deals as are found in our order where shipment is permitted on the restriction and acceptance of condition earlier indicated. In a few of the appeals there are deals or contracts of both types. The deals where the licences have been endorsed will be cases where shipment is permitted unconditionally. Where the licences are not endorsed on the shipping documents, shipment is being permitted under this order subject to the restriction and acceptance of condition earlier indicated. In our opinion, this order disposes of the appeal from the interim order of the learned Single Judge. The appeal is rejected totally as far as the three contracts for the aggregate quantity of 1200 kg. of silver is concerned and the interim order continued in the amended form with the clarifications herein made, There will be a similar order as far as the balance of the two deals for the aggregate quantity of 800 kg. is concerned, but the 1st respondents will effect shipment only through the S.T.C. on the basis of restriction and condition earlier indicated.

26. Certain directions are required to be given regarding the period during which the Indian merchants are permitted to effect shipments under this order. It is made clear that this period is not for the purpose of Union of India carrying out the necessary formalities. These will have to be completed before the 1st day of the periods hereinafter indicated. As far as the three contracts in respect of which endorsement had been made of the export licence prior to 20th February 1979 are concerned, we direct that the shipment should be permitted to be effected by the State Trading Corporation as the canalising agency on behalf of the 1st respondents during the period 7th May to 21st May 1979 (both inclusive). As far as the two contracts in which the necessary endorsement of export licence has not been made are concerned the period will be between 11th to 25th May 1979 (both inclusive).

27. Mr. Talegaonkar on behalf of the State Trading Corporation has told us that a change should be ordered in respect of the method of payment by the foreign buyers. He has mentioned that hitherto shipment was being made to the foreign buyers by the State Trading Corporation and the price was paid by means of telegraphic transfer after receiving the shipment Under our order the State Trading Corporation will effect shipments to its branch in London or at other places to which silver is to be sent and the foreign buyers will make payment against documents entitling them to take delivery of the goods. It is essential that this change in the method of shipment and payment should be confirmed by the foreign buyers before the goods are shipped. It is clarified further that in case payment is received from the foreign buyers prior to the shipment being made, then in that case there will be no objection to the State Trading Corporation effecting shipment under this order directly to the foreign buyers. There will be liberty to the parties to apply in case of any difficulty in effecting shipment within this period. Parties may also seek necessary directions or modifications if there are any difficulties created by the foreign buyers.

28. Mr. Sethna on behalf of the Union of India wants a stay of this order till 14th May 1979. In our opinion there is urgency in effecting shipment; hence stay application is rejected. He also applied for leave to appeal to the Supreme Court. The said application is also refused.

29. As far as the amounts which are to be retained at the rate of Rs. 200/- per kg. of silver under this order and similar orders in the various appeals are concerned, counsel for the Indian merchants applies that the Indian merchants may be paid the said amounts on their furnishing necessary bank guarantee in favour of the State Trading Corporation or the Union of India or in favour of the Prothonotary as the Court may direct. We think the necessary application should be made before the learned single Judge hearing writ matters after the re-opening. The original petitioners are directed to make necessary application for this purpose to the learned single Judge after 11th June 1979. Till that time amount to remain under the control of the State Trading Corporation and not to be paid over to the original petitioners.

30. Parties are directed to bear their own costs of this appeal.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //