Sha Maggajee Saremall and Brothers, Madras vs Joint Chief Controller of Imports and Exports, Madras

Srinivasan, J.—These three petitions challenge the order of the Import Control Authorities refusing the grant of licences to the petitioners in

respect of certain licensing periods W.P 566 of 1962 relates to two periods-January to July 1956 and July to December 1956. The petitioner

applied for import licence for ""Paper, other sorts"". These applications were kept pending till recognition of transfer of quota rights to the petitioner

firm and the petitioner was directed to get the changes in the constitution of the petitioner partnership and the transfer of quota rights recognised.

This was apparently approved by the Chief Controller of Imports in 1958 only, and by that order that authority stated that this recognition of the

transfer of quota rights should be effective only for subsequent periods. This was followed by the rejection of the applications of the petitioner for

the licensing periods mentioned above. This matter was brought before this court in W.P. 782 of 1959. That petition was allowed and the Chief

Controller of Imports was directed to dispose of the applications on the basis that the petitioner firm was entitled to the quota rights from the date

of the actual reconstitution of the firm and not from the date of recognition by the Chief Controller. Therefore, the Controller took up the

applications for disposal, but called upon the petitioner to show cause why the applications should not be rejected as the change in the constitution

was not disclosed. The petitioner submitted its explanation, but the authority took the view that by failing to disclose the fact that there was a

change in the constitution of the partnership, the petitioner had made certain false statements in its applications and such applications in which false

and misleading statements were made, were liable to be rejected. This order is canvassed in W.P. 566 of 1962. In the other two writ petitions,

licence was sought for the import of hinges. The order of the authority in so far as W.P. 600 of 1962 is concerned was that the import policy on

the date of consideration of the application did not permit the import of this item of goods and for that reason the application relevant to W.P. 600

of 1962 was dismissed. In respect of the application leading to W.P. 602 of 1962, the import authority relied on two grounds in dismissing it, one

was that the application was tainted by suppression of fact and the other that on the date of the consideration of the application, no import was

permissible for this item.

In the counter affidavit filed on be half of the Joint Chief Controller of Imports, it is contended that according to the instructions contained in the

import policy books, certain information is specifically called for from the parties who apply for licences with particular reference to firms the

constitution of which might have changed resulting in the alteration of the eligibility for the import quota applied for. Since this is a very necessary

piece of information in order to deal with the grant of licences, the petitioner having been found to have given false information in its application in

this regard, the application was liable to be rejected and was rightly rejected. In support of the ground that at the time of the consideration of the

applications the import of hinges was prohibited, reference has been made to paragraph 31 of the Red Book, relevant to the period April to

September 1961. According to this instruction, the Department appears to have devised certain ad hoc rules as it were for dealing with the issue of

import licences against applications for back periods. It is stated that in terms of those instructions, an import licence could not be granted for a

back period. Generally speaking, when, in a case there is a delay in dealing with an application, and the consideration of the application is taken up

beyond that period, no licences are granted against applications pertaining to periods other than the immediately preceding period. This general

rule, it is said, has been applied, and since in 1961 when this application was dealt with, the application related to a much anterior period, it was

rightly refused.

At the outset, it may be stated that it is settled law as far as this court is concerned that where a transfer of quota rights is effected as a result of

change in the constitution of the firm, the newly constituted firm becomes entitled to the transferred quota as from the date on which the

reconstitution was effected and not from the date on which the Chief Controller of Imports purports to accord recognition to such reconstitution.

That this is the law is accepted by the learned Additional Government Pleader. It almost always happens that when a transfer of quota rights is

recognised by the import control authorities, there is considerable delay in the procedure involved and if a party should lose all rights to obtain

licences for the intervening period, it will certainly result in great hardship and denial of any rights which were recognised to exist in the firm as it

stood before the reconstitution. Notwithstanding that the recognition is accorded at a subsequent date, the established importer cannot be denied

the licence for the period before such recognition, for which a valid application had been made. I am unable to see how the fact that a rule by way

of an instruction has been introduced in the Red Book, limiting the consideration of applications only to the immediately prior period can have any

value in so far as the rights of parties come in for examination. The reliance by the Department upon rule 31 said to have been introduced in the

policy book for the year 1961 to the above effect cannot therefore operate to deny the right of the established importer to the licence for the back

periods in respect of which this application had been kept pending for reasons other than laches by the applicant.

The learned Additional Government Pleader also concedes that the ground upon which the application has been rejected in the matter relevant

to W.P. 600 of 1962, viz., that at the time of the consideration of the application the import policy showed an entry ""Nil"" against the relevant item,

cannot be sustained. In W.A. No. 15 of 1960 (Mad) it was held that it is not open to the import authorities to rely upon the policy relevant to a

later period in dealing with an application for an earlier period. What the import policy lays down is only whether during that period for which the

policy is enunciated, licences for the import of the several items should be permitted or not, and if permitted, to what extent. It would not be

correct to describe the import policy book as enacting a ban on imports during that period. It deals only with the grant of licence for that period.

Actually, it may turn out that when an import licence is granted for a particular period, on the basis of the policy prevailing for the period, the actual

import is made under that licence sometimes a year or two later, and though the policy with regard to that item of import might have changed in the

meantime, the import of that item under cover of the licence already granted is not an unlawful import. The policy book does not therefore prohibit

the import. It deals only with the grant of licences during any particular period, though the import itself might be effected at a time when the policy

has changed. That apart, the decision in W.A. No. 15 of 1960 (Mad) emphasised the position that an application for a particular period must be

considered only in the light of the policy relevant to that period and cannot be refused on the basis of a later policy which might have changed the

position with regard to the licences for the import of the item applied for. This view has been reiterated in W.P. 27, 47, 48 of 1961 (Mad).

It follows that in so far as W.P. 600 of 1962 is concerned, since the only ground relied upon by the controller, that the later policy prohibited the

grant of a licence for hinges the application could not be granted, is erroneous in law, W.P. 600 of 1962 is allowed.

In W.P. 566 and 602 of 1962, the question arises whether the rejection of the applications for the reason that the petitioners had furnished false

and inaccurate particulars in their applications for the grant of licences is justified. In the order of the Joint Chief Controller, it is stated that against

column 8(h) of the applications, the petitioners had specifically indicated that there had been no change in the constitution of the firm since the issue

of the quota certificate on 14-12-1953. But the constitution of the firm had undergone a change on account of the retirement of a partner and on

account of the reconstitution of the partnership between the date of the quota certificate and the date of the application for the import licences, and

in view of the false and misleading statements, the applications were rejected. In the affidavit of the petitioner, the petitioners stated that the

petitioners were a ""Hindu joint undivided family partnership concern"" and they were under the impression that the death or retirement of one

partner and the substitution of his branch in the place of the partnership firm did not require approval of the C.C.I.E. New Delhi for fresh quota.

Virtually, therefore, the fact that there had been a change in the constitution of the firm during the period prior to the application was not denied.

What was claimed was that since the members of the partnership were also members of Hindu joint undivided family, the change in the constitution

of the firm involved in the retirement of a member of the family was only that of substitution in his place of another member of the family and that

would not require any intimation. This is obviously a misconception. When once a partnership has been formed, the petitioner is not entitled to say

that the partnership is nothing other than the Hindu joint family itself doing business. The petitioner as an established importer must have been well

aware that partnership firms and the changes in the constitution of such partnerships have been dealt with in a special manner by the Import Control

authorities. Retirement of a partner, it is expressly stated in the relevant rules, does not entitle the surviving firm to the full quota unless the retiring

partner has relinquished his interest in favour of the surviving partner. The case of death, dissolution etc., have all been dealt with severally in the

rules contained in the import control policy books. The failure to report change in the constitution of the firm and to obtain a fresh quota certificate

is certainly not in conformity with the rules and the explanation attempted in the affidavit is hardly reasonable. It is argued by Mr. Dolia, on behalf

of the petitioners that this requirement about the disclosure was introduced only 1956, but it does not appear to be denied that in so far as the

licencing periods in question are concerned, the application form did in fact contain a clause to this effect calling for disclosure of the relevant facts.

In the Import Trade Control Order 1955 issued in the exercise of the powers conferred by the Imports and Exports Control Act, an application

for the grant of a licence may be refused if the application contains any false or fraudulent or misleading statement. That the authority, if it is satisfied

that the application is tainted in that manner, has jurisdiction to reject the application can therefore admit of no denial, and if, as a fact, during the

period prior to the application a partnership, which has made the application had changed its constitution and the fact of such change had not been

incorporated in the application as required the rejection is fully justified.

It follows that the order or rejection, which is the subject matter of W.P. 566 and 602 of 1962 cannot be assailed as erroneous in law or in the

improper exercise of jurisdiction. These petitions are accordingly dismissed. There will be no order as to costs in any of these petitions.

LI/RSK/D.V.C.

Order accordingly.