Skip to content


The Joint Chief Controller of Imports and Exports, Madras 1 Vs. H.V. Jain - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtChennai High Court
Decided On
Case NumberWrit Appeal No. 19 of 1959
Judge
Reported inAIR1959Mad534
ActsImports and Exports (Control) Act, 1947 - Sections 3 and 4A; Imports (Control) Order, 1955; Indian Companies Act, 1956
AppellantThe Joint Chief Controller of Imports and Exports, Madras 1
RespondentH.V. Jain
Appellant AdvocateM.K. Nambiar, Adv. for Govt. Pleader
Respondent AdvocateR.M. Seshadri, Adv.
DispositionAppeal dismissed
Cases ReferredMadras v. The Deputy Chief Controller of Exports
Excerpt:
.....dissolved on 21st november 1956-- partners of dissolved firm applying for quota rights--chief controller approving transfer later--date from which partners are entitled to licence; a firm of four partners was doing business principally in the import of various articles. owning to differences between the partners the firm was dissolved as and from 21st november 1956. after dissolution the partners of the dissolved firm submitted applications individually for licences against quota rights of the dissolved firm for the periods, july to december 1956, and january to june 1957. by an order, dated 9th april 1957, the chief controller approved of the transfer of quota rights. but the licensing authority granted licence only for january to june 1957 and rejected the..........respondent and the three partners submitted their applications individually for licences against quota rights of the dissolved firm. they were informed that their applications would be considered after the approval of the chief controller of imports for transfer of quota rights. the licences applied for were for periods july to december, 1956, and january to june, 1957. by an order, dated 9th april, 1957, the chief controller approved the transfer of quota rights. the order was communicated to the firm by a letter which ran as follows:gentlemen,with reference to the correspondence resting with your telegram, dated the 1st april, 1957, on the above subject, i write to say that instructions have been issued to the licensing authorities to the effect that quota licences admissible to the.....
Judgment:
1. This is an appeal from the judgment of Balakrishna Iyer, J., disposing of two writ petitions filed by the respondent H. V. Jain (W.P. Nos. 107 and 216 of 1958). The material facts are not in dispute. The respondent was a partner in a firm named Messrs. Sha Bhagajee Sonmull, Madras. The firm consisted of four partners and was doing business principally in import of various articles. The firm was recognised as an established importer in respect of the articles which it used to import. Owing to differences between the partners the firm was dissolved on and from 21st November, 1956. After dissolution, the respondent and the three partners submitted their applications individually for licences against quota rights of the dissolved firm. They were informed that their applications would be considered after the approval of the Chief Controller of Imports for transfer of quota rights. The licences applied for were for periods July to December, 1956, and January to June, 1957. By an order, dated 9th April, 1957, the Chief Controller approved the transfer of quota rights. The order was communicated to the firm by a letter which ran as follows:

Gentlemen,

With reference to the correspondence resting with your telegram, dated the 1st April, 1957, on the above subject, I write to say that instructions have been issued to the licensing authorities to the effect that quota licences admissible to the dissolved partnership of Messrs. Sha Bhagajee Sonmull, Madras, standing in their name should, in future be divided in equal ratio, viz., 25 per cent, each between Bhagajee Sagarmal, Messrs. Sha Sonmull Vittajee, Messrs. Sha Suganraj Vittajee and Messrs. H. Jain and that no licences should be issued to the dissolved firm or to any of the newly formed proprietary concerns in excess of what they are entitled to on the basis of the above stated percentage.

You may now submit all the quota certificates of the dissolved firm before the concerned licensing authority for necessary endorsement.

Yours faithfully,

(F. Singh),

Assistant Controller,

For Chief Controller of Imports and Exports.

2. The Joint Chief Controller of Exports and Imports, Madras, who was the licensing authority granted licence to the respondent for January to June, 1957, but rejected his applications for July to December, 1956. The ground on which it was refused is contained in the communication, dated 10th January, 1958, and it runs as follows:

With reference to the above I write to say that the matter has been carefully considered in this office but it is regretted that your request for the issue of licence for the period, July to December, 1956, cannot be acceded to since the transfer of quota rights in your favour has been recognised by the Chief Controller of Imports and Exports, New Delhi, only after the expiry of the licensing period to which your application relates apart from the fact that the item is currently banned.

Thereupon the respondent filed the two writ petitions mentioned above. In W.P. No. 107 of 1958 he prayed for the issue of a writ of mandamus directing the Joint Chief Controller of Exports and Imports, Madras, to issue import licences to the petitioner on the basis of his succeeding to the share of the licences in the dissolved partnership firm of Sha Bhagajee Sonmull as and from 21st November, 1956. W.P. No. 216 of 1958 was for the issue of a similar writ of mandamus in respect of certain articles on the same basis (the date given as 21st November, 1956, is admittedly a mistake for 26th November, 1956). In the affidavit in support of the petition it was alleged that as the change in the firm consequent on the dissolution took place in November 1956, the right to succeed to the quotas accrued as and from the said date and the approval by the Chief Controller was only administrative and could not confer or create legal rights from any particular date. The Joint Chief Controller of Imports and Exports, Madras, who was the respondent filed an affidavit admitting the correctness of the facts set out in the affidavit filed in support of the petitions but denied that the order of rejection was illegal. He stated that a licence is necessarily-personal and when it is granted to a firm of partners none of the partners of the dissolved partnership could claim that he is an established importer in his own right and the partners of the defunct firm do not become automatically eligible for quota rights after the dissolution. The Chief Controller of Imports and Exports divides the quota rights of the firm and sanctions appropriate shares to such persons as appear to be entitled on the material placed before him. It is only then that the separating partner becomes eligible for licence.

3. Balakrishna Iyer, J., held that the rights of the partners on dissolution is not postponed till such time as the Chief Controller of Imports and Exports recognises the transfer. He, therefore, allowed the writ petitions. Subsequently it was brought to the notice of the learned Judge that the import of coffee machines which formed the subject-matter of W. P. No. 216 of 1958 (H.V. Jain v. The Joint Chief Controller of Imports and Exports, Madras-1) was prohibited and in view of that, that petition was dismissed.

4. The Joint Chief Controller of Imports and Exports has filed the above appeal against the order of Balakrishna Iyer, J., in so far as it allowed W.P. No. 107 of 1958 and H.V. Jain has filed Writ Appeal No. 106 of 1958 against the order dismissing W.P. No. 216 of 1958.

5. To follow the contention of the parties it is necessary to refer to certain statutory and other provisions. Imports and Exports (Control) Act, 1947, was enacted to limit, restrict, or otherwise control imports and exports. Under Section 3 of that Act the Central Government may, by order published in the Official Gazette, make provisions for prohibiting, restricting or otherwise controlling, in all cases or in specified classes of cases and subject to such exception, if any, as may be made by or under the order:

(a) the import, export, carriage coastwise or shipment as ship stores of goods of any specified description ; (b) the bringing into any port or place in India of goods of any specified description intended to be taken out of India without being removed from the ship or conveyance in which they are being carried.

In exercise of the powers conferred by Sections 3 and 4-A of the Act the Central Government made an order on 7th December, 1955, called the Imports (Control) Order, 1955. Section 3 of the order provides:

Save as otherwise provided in this order, no person shall import any goods of the description specified in Schedule I except under and in accordance with a licence or a customs clearance permit granted by the Central Government or by any officer specified in Schedule II.

6. It is common ground that the articles sought to be imported by H.V. Jain fall within the scope of Section 3. Paragraph 13 of Section 1 of Import Trade Control Policy Book for the licensing period July to December, 1956, prescribes that unless otherwise stated in the remarks column, applicants should ordinarily submit their applications complete in all respects on or before the dates specified against each category of importers. For the established importers, and admittedly Messrs. Sha Bhagajee Sonmull, Madras, came under this category, the last date was 1st October, 1956. It is further provided that

applications received after the prescribed date will not be rejected and will be considered on merits ; but in that event the period of validity will be curtailed by the number of days the application has been delayed. No application made after 30th November, 1956, will be entertained.

7. "Established Importers " are persons or firms who have been actually engaged in import trade of the articles comprised in any one serial number or sub-serial number as the case may be, of the I. T. C. Schedule during at least one financial year (1st April to 31st March) falling within the basic period specified for the particular serial number. Such importers may choose the best year from the basic period for the purpose of obtaining quota certificates certifying the value of their best year's imports.

Paragraph 74 in so far as it is material runs thus:

74. The system of granting licences to established importers on the basis of their past imports. has already been explained. Such licences are granted on the pre-supposition that no change has take a place in the constitution of the applicant firm. When a change occurs in the constitution or the name of the firm or the business changes hands, the reconstituted firm will not be entitled to the quotas of the original firm until the transfer of the quota rights in their favour has been approved by the Chief Controller of Imports and Exports or other licensing authority in cases covered by Clause (c) below. The following are the general principles followed in regard to such cases:

The expression 'firm' includes a partnership, a limited company or a proprietary business:

(a) Trarsfer of Quota Rights:

(i) Where the business of a firm is transferred together with all its assets, liabilities and goodwill to another firm so as to constitute it, its successor in all respects, the transferee firm shall get the quota rights of the transferred firm.

(ii) Where a firm is dissolved or wound up or ceases to carry on business without making provision for transfer of its business, assets, liabilities and goodwill no one will be entitled to the quota rights admissible to that firm.

(iii) Where a firm consists of several partners and its constitution undergoes change by retirement of some partners or admission of other partners, the reconstituted firm, continuing the original business in the same name and taking over all its assets and liabilities shall be entitled to get the quota rights of the original firm. But the retiring partners starling a new business whether in the same line or otherwise would not be entitled to get any quota rights.

(iv) Where a firm changes its name without any change in its constitution its quota rights will be transferred to its new name provided it has ceased to do business in the old name and title.

(b) Division of Quota Rights:

Where a firm is dissolved and the partners agree to divide its business, assets and liabilities and its goodwill is taken over by one of the partners or none of them is allowed to use it, the partners shall get their respective share in the quota rights according to the provisions of the agreement

(c) Limited Companies:

(i) Change of Managing director/directors of a limited company will not constitute a change requiring the transfer of quota rights.

(ii) Change in the name of a company made in pursuance of the Indian Companies Act, 1956 does not constitute a change involving transfer of quota rights.

Parties claiming transfer of quota rights are required to produce certain documents. This includes income-tax clearance certificate, cuttings of advertisement in two newspapers notifying claim for the transfer of quota rights and calling for objections against the proposed transfer to be sent to the Chief Controller of Imports and Exports, New Delhi, or other licensing authority, as the case may be, within three weeks from the date of advertisement.

8. In Appendix VI, the form of application for licence for established importers is given. The only relevant column in this application is Column 8(h) namely:

Whether the constitution of the firm has undergone any change after the issue of the quota certificate to the firm If so quota number and the date of orders issued by the appropriate authority sanctioning transfer of quota rights in favour of the applicant.

9. It is not disputed that there was an application for licence which was not later than 30th November, 1956, and that application was not in limine rejected, but it was kept pending till the approval of the Chief Controller of Imports and Exports was secured.

10. Balakrishna Iyer, J. held that the approval of the transfer of quota rights of the original firm was a necessary condition for obtaining licence by the transferee firm only when there was a change in the constitution or the name of the firm or the business changes hands but this condition would not apply when a firm had been dissolved and the quota rights of the firm had been divided among the quondam partners. The rules as to approval of the Chief Controller of Imports and Exports would apply, according to the learned Judge, only when there was a change in the constitution of the firm, or change in the name of the firm or the business had changed hands. Though the learned Judge was inclined to hold that the third condition has been satisfied, namely, that the business had changed hands, he stated that that alone was not sufficient. The rule further required that there should be a reconstituted firm. That condition was not satisfied in the present case. The learned Judge further held that in order to satisfy the requirement of the rule relating to division of quota rights, it is suffiicient if the four following conditions were present namely:

(1) the firm must be dissolved, (2) the partners must have agreed to divide its business, assets and liabilities, (3) its goodwill must be taken over by one of the partners or none of them should be allowed to use it, (4) the agreement must contain some provision relating to quota. He saw no justification for the argument of the learned Government Pleader who appeared for the Joint Chief Controller of Exports and Imports, Madras, that in a case of this kind when there is a dissolution of the partnership the right of the partners is postponed till such time as the Chief Controller of Imports and Exports recognised the transfer. He relied on the decision of Rajagopalan, J., in W.P. No. 569 of 1955, Itta Venkataramiah Chetty, Proprietor, Rao & Co., Madras v. The Deputy Chief Controller of Exports, Madras, to which we shall refer later.

11. Mr. M.K. Nambiar for the Joint Chief Controller of Imports and Exports, Madras, contended that Balakrishna Iyer, J., had overlooked the specific provisions in paragraph 74 of the Import Trade Control Policy according to which the expression ' firm ' includes a partnership, a limited company or a proprietary business and that the learned Judge failed to see that the business carried on by Jain after the dissolution of the old partnership firm would be a proprietary business, and, therefore, it would be deemed to be a reconstituted firm. It is not necessary for us to decide this point for the disposal of these appeals. We shall assume without deciding that the business carried on by Jain after the dissolution of the partnership was or must be deemed to be a reconstituted firm. The only question then would be whether the rights of the quondam partners could be recognised only on and from the date of the approval by the Chief Controller of Imports and Exports and not from the date of the agreement among the partners to divide the business and the assets and liabilities of the firm. We agree with Balakrishna Iyer, J., that there is no warrant for such postponement of the rights of the erstwhile partners even assuming that the approval of the Chief Controller of Imports and Exports is necessary before licence could be granted. Once such approval is made, the rights of the partners "would date from the time when the firm was dissolved and the partners had agreed to divide the quota rights. Mr. Nambiar admitted that the order of the Joint Chief Controller, dated 30th November, 1956, that the case would be considered later after the transfer had been approved by the Chief Controller related to the period July to December, 1956. Once that approval by the Chief Controller was communicated, such approval must be deemed to take effect from the date of the dissolution and the agreement between the partners. Much reliance was placed on the words " in future " occurring in the letter of the Chief Controller, dated 9th April, 1957. So far as we were able to discover from the papers placed before us by Mr. Nambiar there is nothing in the original order of approval expressly providing that the rights of the erstwhile partners to the quota would only come into existence on and after the approval of the transfer. Mr. Nambiar contended that Jain was not entitled as a matter of right to the grant of the application for licence on the footing that he became entitled to 25 per cent, of the quota rights in accordance with the terms of the dissolution agreement between the partners. The title to the proportionate quota certificate will date only from the date of the approval. So his argument ran. When Mr. Seshadri learned Counsel for Jain mentioned instances where, in spite of the communication from the Chief Controller in identical terms, that is, that the quota licence would in furture be divided in equal ratio among the partners, licence had actually been granted for periods before the date of the approval, Mr. Nambiar conceded that it was open to the Chief Controller in his discretion to say that the quota rights would be recognised even for a period anterior to the date of approval and that it was open to the Chief Controller to direct the grant of licence for periods prior to his approval because there was nothing in paragraph 74 of the Import Trade Control Policy Book to limit his powers. We are unable to agree with this interpretation of paragraph 74. That will be placing the applicants entirely at the mercy of the Chief Controller's discretion as there is no indication in what circumstances the Chief Controller could exercise such discretion. The decision of Rajagopalan, J., in W.P. No. 569 of 1959, Itta Venkataratniah Chetty, Proprietor, Rao & Co., Madras v. The Deputy Chief Controller of Exports, Madras, is in point. In that case there was a transfer of ownership of a proprietary concern by a registered sale deed dated 3rd December, 1954. On 4th February, 1955, the Chief Controller wrote to the purchaser that instructions had been issued to the licensing authorities to the effect that quota licence admissible to Messrs. Rao & Company, the original importer should in future be issued in favour of Sri Venkataramiah Chetty as its sole proprietor. The authorities declined to grant licence for the period prior to 4th February, 1955, on the ground that the transferee's rights could be recognised only with effect from 4th February, 1955. Holding that this was wrong, Rajagopalan, J., observed:

It is really a little difficult to understand the position taken by the respondent, that rights accrued to the petitioner only on 4th February, 1955. That was not a relevant date at all. The respondent was prepared to admit the devolution of the rights of Janardhana Rao on the petitioner by the sale held by the Official Assignee on s6th November, 1954. The sale-deed was registered on 3rd December, 1954. The devolution of rights was complete. It did not depend for its legal effect upon any recognition by the Chief Controller of Imports and Exports. But independent of that factor, even if 4th February, 1955, should be taken as the guiding date for which there is really no justification, the petitioner's application was on 7th February, 1955 and well within the period during which the quotas could have been issued and utilised by him. There was no real scope for misinterpreting even the letter of the Chief Controller of Imports and Exports dated 4th Februaiy, 1955, as the basis for refusing quotas.

We are in entire agreement with this reasoning. Sub-clause (b) of paragraph 74 is quite clear that where a firm is dissolved and the partners agree to divide its business, assets and liabilities, the partners shall get their respective shares in the quota rights according to the provisions of the agreement. Such rights would accrue to each of the partners from the date of the agreement. The fact that approval of the agreement (assuming such approval is necessary) is given by the Chief Controller of Imports and Exports on a later date, it cannot be said that the rights of the partners would accrue only on and from the date of such approval. The words " in future " can be understood to mean " from the date of the dissolution ".

12. Mr. Nambiar also contended that in any event no writ of mandamus could be issued to the Joint Chief Controller of Imports and Exports, Madras, because he was bound by the order of the Chief Controller of Imports and Exports, New Delhi, and if at all Jain was aggrieved, it was by the order of the Chief Controller who was not a party to these proceedings. We see no substance in this contention. The Joint Chief Controller rejected Jain's application for grant of licence on a misinterpretation of the order of the Chief Controller, New Delhi, and on account of such misinterpretation he failed to do what he was bound to do, namely, to grant the application for licence.

13. In the result Writ Appeal No. 19 of 1959 is dismissed with costs. Advocate's fee Rs. 250.


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