Collector of Customs, Madras vs Ramanan and Co.

K.A. Swami, C.J.—This appeal is preferred against the order dated 4th March, 1993 passed by the learned single Judge in writ petition

No. 2648 of 1993. The learned single Judge has allowed the writ petition and quashed the order dated 5-2-1993 passed by the appellant refusing

to renew the licence granted to the respondent. Hence, the respondent in the writ petition has come up in this appeal.

The points that arise for consideration in this appeal are as follows :

(i) Whether at the time of renewing the customs house agent''s licence, it is open to the Collector of Customs to insist upon that the applicant

should satisfy the conditions laid down in Public Notice No. 307/85.

(ii) Whether the second renewal of such licence is permissible.

The respondent was granted a customs house agent''s licence on 22-2-1982 under R/158/IMP/CHA. That licence was renewed for a period of

3 years upto 21-1-1985. Again, it was re-issued on 17-10-1984 for a period of one year from 17-10-1984 to 16-10-1985, but subsequently, it

was renewed upto 16-10-1986. The licence was further renewed upto 31-1-1993. For the purpose of renewal of the licence for a further period

of 3 years, he made an application dated 14-12-1992. That application was rejected on the ground that the petitioner did not satisfy the norms

stated in public notice No. 307/85. Aggrieved by that order, the petitioner filed the writ petition. As already pointed out, the learned single Judge

has allowed the writ petition. The reasons given by the learned single Judge are as follows :

(a) The order is not a speaking order, in as much as it does not give any reason.

(b) It is not open the Collector to insist upon complying with the norms stated in Public Notice 307/85 while granting renewal.

For the second reason, the learned single Judge has relied upon a decision of this court in W.P. No. 13722 of 1989 rendered by a learned single

Judge. At this stage itself, we may point out that in writ petition No. 13722 of 1989 (Sugesan & Co., (P) Ltd., v. The Collector of Customs), a

learned single Judge of this court has held as follows :

The next question for consideration would be as to whether at the stage of renewal, the condition visualised in regulation 10(1)(a), could be

insisted upon once over again. In my view, it cannot be, for the simple reason that there is nothing in the regulations which leaves such absolute

discretion with the authority concerned, to impose any conditions of its choice or to insist upon all or any of the conditions required for the grant of

regular licence even at the stage of renewal. It may be pointed out that wherever any particular law in respect of any permit of licence provides for

renewal and it also postulates reconsideration of the eligibility of the licence concerned once over again at the stage of renewal, it is always

specifically provided for. In the absence of any such stipulation, it may not be wrong to assume that the renewal is a matter of course unless in the

meantime, the licence is either suspended or revoked. There is yet another reason on which it could be safely assumed that the requirement under

regulation 10(1)(a) cannot be insisted upon at the stage of renewal. The requirement of quantity of value of cargo to be cleared by a licence under

the regulation referred to above, was to screen the applicants before the grant of regular licence and once licence is granted, fortunes or

misfortunes or misfortunes in business, or quantum of business should not result in permanent liquidation or elimination of the licenses concerned

from the field of business. If any such right is to be claimed, it should be specifically provided for, in the regulations themselves and there cannot be

any scope for implying such a power either in the licensing authority to impose such condition or infer an obligation and responsibility on the part of

the licensee. Having regard to the nature of the problem involved, the mere laudability of the purpose or object to insist upon such a condition

alone, cannot justify the legality or propriety of such imposition. For all the reasons stated above I am of the view that the licensing authority

committed an error in not only restricting the period of renewal to one year but also imposing the condition visualised under regulation 10(1)(a)

read with the Notification No. 307 of 1985, dated 4-12-1985 for further renewal. Consequently, there shall be a direction as prayed for in the writ

petition, directing the respondents to accord renewal of the licence for a period of three years from 14-7-1989 to 13-7-199"".

Thus, it has been held by the learned single Judge that at the stage of renewal of the licence, the norms stated in Public Notice No. 307/65 cannot

be insisted upon. In order to decide whether it is open to the collector to insist upon compliance with the norms stated in Public Notice No.

307/85 which are more or less similar to those prescribed for grant of licence, we have to refer first to the old and the present rules. The Customs

House Agents Licensing Regulations are framed u/s 146(2) of the Customs Act, 1962. The present Regulations are the Customs House Agents

Licensing Regulations, 1984 which will be hereafter referred to as the 1984 Regulations. Earlier to 1984 Regulations the Customs House Agents

Licensing Regulations, 1965 were in force. These regulations will be hereinafter referred to as 1965 regulations were as follows :

x x x x x

From the aforesaid 1965 Regulations, it is clear that before granting the licence, the Collector was required to satisfy himself that the applicant

satisfied all the conditions laid down in Regulation Nos. 6 and 9. For rejecting the application, he was required to give the reasons. Regulations

No. 13 provided that the licence granted under Regulation No. 11 was to be valid for a period of one year. It was open, to an applicant to seek

renewal of the licence before the expiry of its period and the Collector could extend the period of licence for a further period not exceeding one

year, or renew it for a period of 3 years and thereafter, every 3 years. Before renewing the licence, the Collector was required to satisfy himself

about the financial solvency of the applicant and cause the applicant to produce an income tax clearance certificate. The Collector could refuse to

renew the licence if on such inquiry as he deemed fit, he found that the volume of the business transacted by the applicant as customs house agent

during the period to which the licence related, was less than the minimum prescribed by the Assistant Collector of Customs in that behalf. Thus, the

1965 regulations provided for grant of licence as well as for renewal. The Collector could refuse to renew the licence on the grounds stated in sub-

regulation (6) of Regulation 13. Further, the renewal could be for any number of times, each renewal being confined to 3 years. 1965 Regulations

came to be repealed by 1984 Regulations.

3.1 Under the 1984 Regulations, an applicant is not entitled to grant of customs House Agent''s Licence straightaway. He has to first obtain a

temporary licence. They only he will be permitted to operate as Customs House agent at the customs station for which the application is made

initially for the period of one year which can be extended by another one year in the circumstances stated in the proviso to Regulation 8(1). During

the period he holds the temporary licence he has to pass the examination written and oral as prescribed by Regulation 9. He has to pass the

examination within a period of two years from the date of grant of temporary licence. The applicant is permitted as per Regulation 9(1) to avail

three chances to pass the examination. Then only he would be eligible to seek regular licence in Form D on payment of a fee of Rs. 5,000/-. If he

fails to pass the examination during the subsistence of a temporary licence, he would not be eligible to seek regular licence. This position emerges

from Regulations 6, 7, 8, 9 and 10. Regulation 12 deals with the period of validity and renewal of a regular licence. It is necessary to re-produce

Regulation 12, because we are now concerned with the renewal of licence, which reads thus :

Period of validity of a regular licence :- (1) A licence granted under Regulation 10 shall be valid for a period of three years.

(2) On an application made in this behalf to the Collector before the expiry of the period referred to in sub-regulation (1) he may renew the same

for a further period of three years.

(3) The fee for renewal of a licence under sub-regulation (2) shall be Rs. 3,000"".

Thus, from the aforesaid Regulation 12 of 1984 Regulations, it is clear that the validity of a Regular licence is for a period of 3 years. It is open to

the licensee to make an application for renewal of the Regular licence before the expiry of the licence period. The Regular licence can be renewed

for a further period of 3 years. There is no provision contained in Regulation 12 for renewal of the Regular licence once renewed, for a further

period of 3 years and thereafter, every 3 years as provided in sub-Regulation (3) of Regulation 13 of 1965 Regulations.

3.2 It is contended on behalf of the appellant that as the renewal of licence in effect is nothing but granting of licence and as Section 12 gives

discretion to the collector to grant or not to grant the renewal. If the Collector, in exercise of that discretion has called upon the applicant to satisfy

certain norms as stated in Public Notice No. 307/85, which are not in any way different from those prescribed for grant of licence, the Collector

cannot be held to have acted arbitrarily, in as much as the renewal cannot be held to be automatic, as such it is open to the Collector to insist upon

the licensee to satisfy the conditions or the norms as has now been done by the Collector. If only 1984 Regulations contained provisions similar to

those contained in 1965 Regulations there was no difficulty whatsoever in accepting the contention of the learned counsel or the appellant. Not

only this, the conditions prescribed or qualifications laid down for grant of regular licence are also quite different from those prescribed by 1965

Regulations. 1984 Regulations make it very stringent for obtaining a regular licence. As already pointed out, licence is not granted straightaway.

First of all, one has to obtain a temporary licence in Form 3, and during the subsistence of From B, and during the subsistence of Form B licence

he has to pass the written and oral examination as prescribed under Regulation 9 of 1984 Regulations. Thus, stringent conditions are prescribed for

obtaining Regular licence. When once the applicant is able to satisfy those conditions during the subsistence of temporary licence are prescribed for

obtaining Regular licence. When once the applicant is able to satisfy those conditions during the subsistence of temporary licence the regular licence

is granted. Therefore, the Regulation making Authority has thought it fit not to prescribe any such conditions for the purpose of renewal. At the

same time, the Authority has also considered it necessary not to provide for a further renewal. The wordings in sub-regulations (1) and (2) of

Regulation 12 of 1984 Regulations are it is clear that the licence granted under Regulation 10 shall be valid for a period of three years. The words

the same"" contained in sub-regulation (2) of Regulation 12 are very important. They are referable to the expression ""licence granted"" used in sub-

regulation (1) of Regulation 12. Licence granted is not the renewed licence. It is the licence which is granted under Regulation 10. Sub-regulation

(1) of Regulation 10 makes it clear that the licence shall be valid for a period of 3 years.

Therefore, a reading of sub-regulations (1) and (2) of Regulation 12 together makes it clear that the licence that is renewed or Regulation 12(2) is

the one granted under Regulation 10 and such licence can be renewed only once for a further period of 3 years. Thus, taking into consideration the

1965 Regulations and the change effected in the 1984 Regulations, we come to the following conclusions :

(i) Licence granted under Regulation 10 of 1984 Regulations can be renewed once is for a period of 2 years and no further renewal is permissible.

(ii) As the regular licence is granted under Regulation 10 to the holder of temporary licence who satisfies stringent conditions laid down in

Regulation 6 and Regulation 12 does not prescribe that the applicant seeking first renewal of the licence should satisfy any of the conditions laid

down in Regulation 6, 8, 9 and 10, it is not open to the Collector to insist upon that the applicant should satisfy the conditions prescribed for

granting of regular licence, while seeking renewal of the licence.

It is contested before us that as sub-regulation (2) of Regulation 12 uses the word ''may'' it is open to the Collector to renew or refuse to renew

the regular licence granted under Regulation 10 and in the event, he decides to, renew the regular licence, it is also open to him to specify certain

norms for renewal. It is true that sub-regulation (1) of Regulation 12 uses the word ''shall'' whereas sub-regulation (2) of Regulation 12 uses it is

also true that whereever the words ''may'' the word ''may'' and ''shall'' are used in same section or a statute dealing with the two aspects of the

same topic the intention of the legislature of the... making authority, as the case may be, is to make it clear that when the word ''shall'' is used, the

provision is mandatory and when the word ''may'' is used it is to indicate that it is directory. Therefore, there is no doubt that the Collector has

been given discretion to renew or refuse to renew the Regular licence. If that be so, the next question that arises for consideration is, how this

discretion should be exercised. It is no doubt true that the discretion vasted in the Collector under sub-regulation (2) of Regulation 12 cannot be

exercised arbitrarily. However it cannot also be held that the renewal of licence is automatic. At the same time, it is also clear that the collector

cannot insist upon compliance with the conditions that are prescribed for grant of regular licence, because such insistence is opposed to the vary

changes that have taken place in the 1984 Regulations, as pointed out above. But, nevertheless, there will be cases wherein at the time of renewal

of the licence, there may be a proceeding pending against the licensee or there may be such other circumstances, which make renewal of licence

undesirable or he might not have complied with the obligations of the customs house agent as enumerated in Regulation 14 of the 1984

Regulations, of his licence might have been suspended or the proceedings for suspension are pending. In such and similar other circumstances, if

the collector refuses to grant the renewal, it cannot be held that he has exercised the discretion arbitrarily. In the absence of anything said against

the applicant seeking renewal of the licence making him undesirable and unfit, refusal to grant renewal of the regular licence by the Collector can be

characterised as arbitrary exercise of discretion. Therefore, point No. (i) is answered in the negative.

Point No. (ii) :

4A. The reasons given by us while answering point No. (i) also cover this point. We have already pointed out that The words ""renew the same

used in sub-regulation (2) of Regulation 12 refer to the licence granted under Regulation 10, because sub-regulation (1) of the Regulation 12 also

refers to the licence granted under Regulation 10 and it is with reference to that licence, the renewal provision is made in sub-regulation (2) of

Regulation 12. That being so, in the instant case, after the coming into force of 1984 Regulations, the respondents'' licence has been renewed

twice. The period covered is also more than six years. Therefore, we are of the view that the further renewal of the licence under Regulation 12(2)

of 1984 Regulations is not permissible. Point No. (ii) is answered accordingly. We may also point out that the decision rendered by Raju, J., in

W.P. 13722 of 13722 of 1989 to the extent it is applicable to the renewal of licence for the first time, would accord with the view taken by us, but

the same will not be applicable for the second renewal, as we have already pointed out that there cannot be any second renewal.

In the view take the decision of the learned single Judge has to be reversed. Further, it is also not necessary to refer to the following decisions

relied upon by both sides. They are :- B. Narasimhalu v. Central Government AIR 1976 Mad. 224 East India Commercial Co. Ltd.,Calcutta and

Another Vs. The Collector of Customs, Calcutta, . 1989 (19) ECC 115 , The Siemens Engineering & Manufacturing Co. of India, Ltd., v. The

Union of India & Another 1976 ECR Cus. 980 and Chandrakant Krishnarao Pradhan & Another v. Collector of Customs, Bombay & Others

1983 ECR 2183. It is also necessary to point out that whenever a Regular licensee applies for grant to fresh licence as he cannot seek renewal of

the licence for the second time, it is not necessary for him to comply with Regulation Nos. 8 and 9 relating to temporary licence and passing of

examination prescribed therein, because before seeking licence for the first time under 1984 Regulations, an applicant for regular licence is required

to obtain a temporary licence and pass an examination as prescribed by Regulation 9. Passing of such examination holds good for seeking a fresh

Regular licence before or after the expiry of the period of renewed licence. As far as the other conditions are concerned, the same are to be

complied with, because the same are required to be fulfilled, while working as Customs House Agent during the period when the licence is current.

Accordingly, it is open to the respondent to seek fresh licence.

For the reasons stated above, the writ appeal is allowed. The order dated 4-3-1993 passed by the learned single Judge in W.P. No. 2648 of

1993 is set aside. In the facts and circumstances of the case, there will be no order as to costs.