The Joint Chief Controller of Imports and Exports vs H.R. Trading Co.

Anantanarayanan, J.—Messrs. Haji Sattar Haji Pir Mohammad, hereafter referred to as the Evacuee Firm, conducted business as importers under the name and style of Messrs. H.R. Trading Company, at No. 170, China Bazaar Road of Madras. Under the relevant provisions of the Administration of Evacuee Property Act (XXXI of 1950). the Custodian of Evacuee Property took possession of the business and properties of the Evacuee Firm, which included certain imports of betelnuts from foreign countries. After certain correspondence, to which we shall make later reference, concerning the volume of the imports of betelnuts by the Evacuee Firm during prior years, the Custodian granted a lease of the rights of that Firm to the present Respondent, for a period of one year from 24th November 1956 to 21st December 1957. The lease was then renewed for another year, and, subsequent to an alteration of the licensing period to the financial year from the calendar year, the Respondent-firm obtained licences from the Custodian on 9th June 1957, 9th January 1958 and 7th February 1959 In the meantime, the State itself conveyed the right, title and interest of the Evacuee Firm, including the goodwill in the business, to the Respondent under a sale deed, dated 5th February 1958, which was executed by the President of India. The statement marked as exhibit ''D'' in the typed papers for the Appellant, (The Joint Chief Controller of Imports and Exports), shows that the licences were issued, upon the basis of the quota for which the Evacuee Firm had originally qualified, in favour of the Respondent, prior to October 1958. But, when the Respondent applied for licences for import of betelnuts for the periods October 1958 to March 1959 and April 1959 to September 1959, by orders, dated 11th June 1959 and 25th June 1959, the Respondent was granted import licences only for fifty per cent of what it could have obtained as an Established Importer, or what the Evacuee Firm could have obtained, upon the foundation of the quota originally recognized by the Authorities. In regard to the period April to September 1959, there was a further issue of licence for Rupees five hundred and fifty-nine in favour of the Respondent, but that still left a deficiency in the permitted volume of imports.

Under those circumstances, the Respondent-firm applied in Writ Petition No. 801 of 1959 for a writ of mandamus directing the Joint Chief Controller of Imports and Exports to issue import licences in its favour for the differences, upon the basis of the quota for which the Evacuee Firm had originally qualified. The writ petition came up before Ramachandra Ayyar J., (as he then was) and the learned Judge held that the Respondent-firm was entitled to a licence for import of betelnuts for an additional amount of Rs. 1,679 for the period October 1958 to March 1959, and likewise for a sum of Rs. 1,120 for the period April to September 1959. The writ was accordingly directed to issue, and the Joint Chief Controller has now appealed.

Before proceeding into the grounds upon which the learned Judge (Ramachandra Ayyar J.,), held that the issue of a writ was justified, it is important to note the developments which led to the diminution of permitted imports in the subsequent licences issued for the period October 1958 to March 1959 and April to September 1959. In essence, what the Joint Chief Controller (Appellant) claimed was that the Respondent-firm was not entitled to the grant of a licence at all, in the context of the import policy of the Government, and that what was granted really amounted to concessions or acts of grace, on the part of the Government, in accordance with certain administrative instructions issued by the Controller from time to time. The reason for the sudden and sharp diminution of the permitted imports, will be clear from the two confidential documents (Annexure ''A'' and Annexure ''B'') styled General Licensing Instruction No. 81 of 1958 and No. 36 of 1959, at pages 18 and 20 of the typed papers of the Appellant. As will be clear from paragraph (vi) of Annexure ''A'', the Authorities became aware that an Evacuee firm might have branches in more than one place, and that those branches might have been allotted to different parties who, as allottees from the Custodian, might individually apply for import licences. An unfortunate result might be, where these different allottees claimed quotas on different basic year imports, that between them they might get larger benefits than what the original evacuee firm itself could have obtained. In order to prevent this development, which would place allottees of Evacuee Firms upon a position of unfair advantage, as against the other Established Importers, the Chief Controller insisted that Custodians of Evacuee Property should first ascertain whether there were different branches of the original firm, and then insist on the requirement that they should all claim imports for quota entitlement, only upon a common basic year. Under Subparagraphs (ii) and (iii) of Paragraph B of General Licencing Instruction No. 36 of 1959 (Annexure ''B''), where the branches of the Evacuee Firm were allotted to different parties, or where there was only indirect evidence of past imports of the Evacuee Firm, the quota entitlement had to be worked out by accepting fifty per cent of the value of past imports. It is because of these instructions that the subsequent licences in favour of the Respondent-firm exhibited the diminution of permitted imports to fifty per cent, that we have referred to. The counter-affidavit on behalf of the Joint Chief Controller also stresses this, and claims that the allottee (Respondent-firm) did not produce direct evidence of past imports of the Evacuee Firm.

Before the learned Judge (Ramachandra Ayyar J.), these aspects were no doubt referred to, but the main argument appears to have been that an Established Importer, as defined in paragraph 15 of the Policy Book, also generally designated as the Red Book, would alone be entitled to the grant of licence for imports. Admittedly, paragraph 15 contains the definition that an Established Importer is a person, who has been actually engaged in import trade of the article comprised in the relevant entry to the Schedule, during at least one financial year falling within the basic period. Strictly, in the context of these terms, neither the Custodian of Evacuee Property nor his allottee and lessee, the Respondent-firm, would be entitled to import licence. Such licences were being granted only under departmental instructions, and not as a matter of right. This argument was repelled by the learned Judge, after a discussion of certain relevant authorities of this Court, which we shall notice hereafter. The learned Judge also emphasised that, though the transfer of the entire business in favour of the Respondent-firm, under the sale deed, dated 5th February 1958, was recognized by the Controller only on 12th August 1960, the rights of the Respondent-firm had to be adjudged on the date of sale, and not merely as on the date of recognition by the Chief Controller. We might here conveniently observe that the Respondent-firm,, in Writ Petition No. 801 of 1959, took up the stand that it (firm) was entitled to import licences on the basis of the quota for which the Evacuee Firm had qualified, namely, the value of Rs. 1,34,304 during the basic year, according to the Policy Book or Red Book. The General Licencing Instructions subsequently issued, could not override the instructions contained in the Red Book, which are binding upon the Chief Controller, and have a legal basis. The subsequent reduction of the quota, for the purpose of licence, was illegal and an infringement of the fundamental rights of the Respondent-firm. As we saw earlier, the learned Judge (Ramachandra Ayyar J.,) upheld the rights of the Respondent-firm, as against the Joint Chief Controller.

It is necessary to make a preliminary clarification upon the vital aspect that has been pressed before us by the learned Attorney-General for the State (Appellant), in the light of certain decisions of this Court, and the specific instructions of the Policy Book. The learned Attorney-General does not now seek to sustain the view that, either because the Respondent-firm is merely an allottee from the Custodian, and not an Established Importer within the strict terms of paragraph 15 of the Red Book, or because the transfer was recognised by the Controller only on 12th August 1960, the Respondent-firm has no cause of action to claim the deficiency in the permitted imports, by a writ of mandamus. On the contrary, what is now pressed is that the very Red Book relied upon by the Respondent-firm, vested a right in the Chief Controller to refuse the quota, where there was only indirect evidence produced by the allottee of the volume of imports of the Evacuee Firm, for the assessment of the quota right to which that firm might be entitled in the basic year. Not merely this; but the same instructions also cast an obligation on the allottee to produce the necessary material as direct evidence and to obtain a refutation of the quota by a fresh quota certificate engrossed upon Security Papers. The Respondent-firm has never fulfilled these duties, and, in the context of this default, the Chief Controller had every right to reduce the permitted volume of imports, upon the issued licences, to fifty per cent. Indeed, even this was an act of grace on the part of the Authorities. It has to be frankly conceded that this was not the focus of the facts before the learned Judge (Ramachandra Ayyar J.,) and that, in this sense, it could well be claimed that this is a new aspect of the matter, which has been pressed before us in the appeal, though the facts upon which the argument is raised are already there in the record. But. before proceeding to deal with this crucial aspect, we think it is essential to show how, upon the considerations that were actually pressed before the learned Judge, he really could not arrive at any other conclusion than the one he arrived at, both because of the established facts, and because of the binding decisions of this Court.

The argument that an allottee from the Custodian of Evacuee Property, in respect of the rights of an- Evacuee Firm, would not be entitled to an import licence at all, such allottee not being an Established Importer any more than the Custodian himself, appears to be fallacious and unsustainable. u/s 2(i) of the Act XXXI of 1950 property is defined as including.

property of any kind and includes any right or interest in such property;

when this is read with Section 2(f), which defines evacuee property, it is very clear that the right to import betelnuts, originally possessed by the Evacuee Firm, and the quota right to which it had qualified, would be property of the firm, vesting in the Custodian u/s 8(1) of the same Act. u/s 10 of the Act, the powers of the Custodian include Section 10(2)(o), the right to transfer evacuee property.

notwithstanding anything to the contrary contained in any law or agreement relating thereto.

There can be no doubt whatever, therefore, that this right to import betelnuts, upon the quota for which the Evacuee Firm had qualified, vested in the Custodian, and, in due course, in the Respondent-firm. The very policy embodied in the Red Book is to recognize the rights of such transferees, who may not themselves be established importers. This is abundantly clear from the following authorities. In Lukshmichand Mehta and Ors. v. The Joint Chief Controller of Imports and Exports (Writ Petition Nos. 307, etc. of 1959), Rajagopalan J., had occasion to consider this particular aspect, in some detail. The learned Judge referred to Rule 78 of the Red Book, which laid down the principles to be followed in regard to transfers of quota rights to persons who might not be established importers, and, to partners after a dissolution of partnership, and observed:

It is no doubt true that Rule 15 of the Red Book did not in express terms, include within the scope of the expression ''established importers'' persons on whom the quota rights of established importers devolved under Rule 78(a) or Rule 78(b). Nor was there anything express in Rule 78 to include such persons within the scope of Rule 15.... If, however, the whole scheme of the Red Book is examined and tested by the usage of the department, it seems clear that persons on whom quota rights of established importers devolved under Clauses (a) and (b) of Rule 78 were importers to whom all the rules that applied to established importers also applied, and to whom they were all along applied and are continuing to be applied.

In another context the learned Judge said:

Despite the absence of any express provision in Rule 15, transferees of quota rights of established importers were also established importers.

The general principles with regard to the transfer of division of quotas will be found set forth both in Rule 74 and in Rule 78(a) and (b) of the Red Book: we are here referring to the edition, October 1958 to March 1959. Under Rule 74,

When a change has occurred, in the constitution or the name of a firm or the business has changed hands, the reconstituted firm will not be entitled to the quotas of the original firm, until the transfer of quota rights in its favour has been approved by the Chief Controller.

Under Rule 78(a), where the business assets, liabilities and goodwill of a firm, which might be an established importer, are transferred to another firm,

so as to constitute it as its successor in all respects.

the transferee firm gets the quota rights of the transferred firm. Rule 78(b) relates to division of quota rights, upon the dissolution of a partnership firm. It is because there is no stipulation in Rule 78 that the transferee firm must also be an established importer per se, that Rajagopalan J., held that the transferee firm would be entitled to the quota right, irrespective of Rule 15. The question whether, with regard to a dissolution of partnership, the rights of the quondam partners would commence from the date of the agreement of division, or would only commence from the date of approval or recognition under Rule 74 by the Chief Controller, came up for decision before Balakrishna Ayyar J., in Jain v. Joint Chief Controller of Imports and Exports ILR (1959) Mad. 271, and as was dealt with in appeal by Rajamannar C.J., and Ganapatia Pillai J., in Joint Chief Controller of Imports and Exports v. Jain ILR (1959) Mad. 850, 858. The learned Attorney-General states that an appeal to the Supreme Court, from this decision, was contemplated and actually filed but later withdrawn, under circumstances that we need not refer to here. The situation, therefore, is that this Bench decision prevails, as the correct exposition of the law. The learned Judges have also approved the view adopted by Rajagopalan J., in Writ Petition No. 569 of 1955 (Itta Venkatramiah Chetty, Proprietor, Rao and Co. Madras v. The Deputy Chief Controller of Exports, Madras), and held that the approval of the agreement by the Chief Controller on a later date did not at all determine the commencement of the rights of parties, but that the material date was the date of the agreement of the partners to divide the business. This Bench decision was also adopted by this Court in the judgment in Writ Appeal Nos. 27, 47 and 48 of 1961, to which one of us was a party. It is true that in Jagannath Prabhashankar Joshi and Another Vs. Varadkar and Others, a Bench of that Court held that the date of the dissolution of the old firm had no relevance to the grant of the import licence in favour of the successor firm, and that the successor firm could only rely upon the recognition of the transfer by the Chief Controller, as the date from which it would be entitled to the quota rights of the original firm. This was a case of dissolution of partnership of an importing firm, entitled to quotas and licences. But this view is not in line with the perspective of approach in Jain''s Case ILR (1959) Mad. 850, 858. As Rajamannar C.J., observed in that case, any view other than one adopted by the Division Bench:

...will be placing the applicants entirely at the mercy of the Chief Controller''s discretion....

Actually, it appears to be fairly clear that the policy of the Red Book is to recognize the rights of such reconstituted firms after dissolution of partnership or the quondam partners, or transferees from established importers, to the identical quotas of the predecessors, the recognition being an administrative act which should not be withheld, when the necessary formalities have been complied with. For this reason, we are clear that the learned Judge (Ramachandra Ayxar, J.) rightly upheld the contention on behalf of the Respondent-firm that it could not be deprived of the right to import licences, upon the quota for which the Evacuee Firm had qualified on the ground that it (Respondent-firm) was not an established importer per se, upon any independent volume of business conducted by itself, prior to the transfer. Nor could such a right be frustrated, merely because the Chief Controller had recognized the transfer only on 12th August 1960.

But this brings us to the new aspect that we have earlier referred to, which is the crux of the arguments as now presented before us. It seems to be true that the Respondent-firm did not produce any direct evidence relating to the quota for which the Evacuee Firm had originally qualified; presumably, it was not in possession of such evidence. In more than one context, in his judgment, the learned Judge (Ramachandra Ayyar J.) refers to a quota certificate issued in favour of the Custodian of Evacuee Property. But, as the learned Attorney-General claims, this seems to be a factual error; there is nothing to show that the Custodian had ever obtained any such certificate. On the contrary, the correspondence merely shows that the Chief Controller issued import licences to the allottee of the Custodian, upon the basis of certain figures, and of a letter of authority from the Custodian himself; that seems to have been the usual practice. We glean the quota right for which the Evacuee Firm itself had qualified, only from two important admission in the record, namely, (i) in the letter of the Deputy Chief Controller of Imports and Exports to the Deputy Custodian of Evacuee Property, dated 10th August 1963 and (ii) in the letter of the Joint Chief Controller of Exports and Imports to the Respondent firm, dated 26th June 1957.

The material part of the first communication is to the effect that the Evacuee Finn had established quota only for betelnuts, on the basis of past imports, to the extent of Rs. 1,34,304. The Controller adds:

I may add that licences will be issued by this office to the allottees of the evacuee firms on the basis of past imports of those firms on application, subject to the policy as per the Red Book for July-December 1953 period.

In the letter, dated 26th June 1957. the Joint Chief Controller writes to the Respondent firm-

...I write to say that the past imports of Betelnuts (30-IV) of Messrs. Haji Sattar Haji Pir Mohamed, to 4he value of Rupees 1,34,304 have been certified for consideration of quota licence.

The main issue now becomes clear. Since the Respondent firm itself relies upon the Red Book, and not upon any subsequent departmental instructions which are actually assailed as ultra vires, is the Chief Controller bound by these averments of fact or admissions, or can he insist, in terms of the Red Book, that the Respondent-firm should get the quota refixed, with reference to the criteria that we have earlier set forth, and should obtain a fresh quota certificate upon Security Paper Mr. Seshadri for the Respondent firm argues that, in any event, the refixation of quota not having been determined, and though the original quota might be based on the indirect evidence of these admissions, the Chief Controller ought not to have reduced the quotas by fifty per cent. He also relies upon the application of the doctrine of estoppel to the facts. According to the learned Attorney-General, there is an obligation upon the Respondent-firm to obtain a refixed quota certificate on Security Paper, as the original figure of Rs. 1,34,304 might well relate to an Evacuee Firm which had different branches or allottees, who quoted imports for different basic years, and not a common basic year. Since the Respondent-firm did not obtain the refixation, the Chief Controller had every authority to refix the quota at fifty per cent. Under paragraph 31 of the Handbook of Rules and Procedure, 1956, the applications for establishment or refixation of quotas had to be made in Form X of Appendix III, accompanied by the statements and certificates specified in Clauses (1) to (4) of Rule 31. The need for obtaining these certificates, as engrossed on Security Paper, arose from the explicit requirements in the Red Books relating to January to June 1954 and July to December 1954. According to the learned Attorney-General, when the Respondent-firm defaulted, the Chief Controller had an absolute discretion in this matter.

The entire rationale behind this requirement for refixation of quotas for which Evacuee Firms might have originally qualified, because such firms might have different branches or allottees, who might have quoted figures for different basic years and thus have obtained a quota right which constitutes an unfair advantage over other established importers, is expounded in paragraph 25 of the Red Book. We extract and set forth below the relevant portion of this paragraph from the Red Book for October 1958 to March 1959, as follows:

The nota bene to paragraph 4 of Chapter II of the Hand Book, 1952 permitted established importers having more than one office in India to make separate applications to different licensing authorities on the basis of the location of the particular branch whose name appeared on the documents submitted for establishing the import quota. In a number of cases, these separate quotas were claimed and obtained on the basis of imports in different basic years. This procedure resulted in inflation of quotas and caused many difficulties and considerable inconvenience. Consequently, provision had to be made in paragraph 11 of Section I of the Policy Book for the licensing period January-June 1953, to the effect that the basic year for the Head Office and all its branches should be one and the same. The firms affected by this provision must already have selected a particular financial year as the common basic year and the quota certificate an the common basic year, and must also have obtained revised quota certificates certifying the value of imports in that year. The Head Office and Branches of these firms should, when applying to different licensing authorities, append to their application a certificate as in Appendix VII to this Book, certifying that all the Branches of the firm throughout the country have selected a particular financial year as the common basic year and the quota certificate on the basis of which the import licence is claimed, giving the certified particulars of previous imports in that common basic year. Where a consolidated application is made by the Head Office or the Branch of a firm on the basis of past imports standing in the name of the Head Office and all the branches, a certificate to the effect that the other branches of the firm have not made any application for the same item to any other licensing authority, should be attached to the application.

We have no doubt whatever that this salutary power is vested in the Chief Controller, and that the due exercise of this power is part and parcel of the policy of the very Red Book upon which the Respondent-firm relies. But what is not so clear is, whether the Chief Controller can proceed to refix the quota at fifty per cent of the original quota for which the Evacuee Firm had qualified, without any explicit finding relating to the criteria of Rule 25. It is true that the Respondent, firm relied purely upon indirect evidence; actually, the firm has relied purely upon the admissions in the correspondence, since, according to the firm the material for determining the quota is either with the Chief Controller or the Custodian, and is not with the firm at all. In any event, it seems fairly clear to us that the admissions in the correspondence were the basis of the import licences up to the period when the controversy arose. It would have been a far different matter, if, at that time, the Chief Controller had called upon the Respondent-firm to produce information concerning the different branches or allottees of the original Evacuee Firm, or whether they had furnished figures for imports for a common basic year, or different basic years. Equally, it would have been a different matter if the Chief Controller had himself collected or obtained such information, and, on that basis, had proceeded to refix the quota at fifty per cent. But we are entirely in the dark on this aspect, and we can only assume that the reductions effected were in pursuance of departmental instructions, and which were by their very character, provisional. Actually, we do not know if this Evacuee Firm had other branches or allottees anywhere else. We do not know if such branches or allottees had furnished figures of past imports of this commodity (betelnuts); again, we are ignorant if those figures related to the same basic year, or different years. We must add that the learned Attorney-General concedes that, even now, it is open to the Respondent-firm to adduce material to show that, in the context of the criteria in Rule 25 extracted above, the firm is still entitled to the basic quota of Rs. 1,34,304 for grant of import licences for betelnuts. Obviously, we cannot now go into the question of what the mutual rights and obligations of the parties now are, in the context of these instructions. All that we are clear about is that the Chief Controller cannot purport to make a refixation of quotas ex parte, without at least affording an opportunity to The Respondent-firm, to satisfy him upon the relevant conditions. Indisputably, he is all the more inhibited from adopting such a procedure, having regard to the earlier admissions in the correspondence.

We propose to make a brief reference to the plea of estoppel, which was but faintly adumbrated by Mr. Seshadri during the course of his arguments. In Halsbury''s Laws of England (third edition), volume XV, paragraph 344, the law is staled in the form that where there is a promise or assurance intended to affect the legal relations between the parties, if the opposite party has acted upon it-

one who gave the promise or assurance cannot afterwards be allowed to revert to their previous legal relations, as if no such promise or assurance had been made by him.

A case of great interest, upon the applicability of this principle is Robertson v. Minister of Pensions (1949) 1 K.B. 227. 231. That was a case where a serving Army Officer wrote to the War Office regarding a physical disability, and received an assurance that his disability had been accepted as attributable to Military Service and hence not affecting his pension. Later, the Minister of Pensions decided otherwise, and Denning J., held that the assurance was binding on the Crown, and that the estoppel operated. The Court observed:

The case falls within the principle that if a man gives a promise or assurance which he intends to be binding on him. and to be acted on by persons to whom it is given, then, once it is acted upon, he is bound by it.

It is true that in Howell v. Falmouth Boat Construction Co. Ld. (1951) A.C. 837 certain dicta of Lord Denning in Robertson v. Minister of Pensions (1949) 1 K.B. 227. 231 has been doubted with regard to the correctness of the exposition of the law; but that concerned a different aspect, of the extent to which the Crown could be bound by an averment by a person in authority under the Crown, in relation to a subject, which might be inaccurate or erroneous, and did not affect the principle of estoppel stated above. Also see: Commrs. of Crown Lands v. Page (1960) 2 Q.B. 274.

In the present case, these admissions might well constitute a kind of estoppel, but that can only be with regard to the period to which those averments of fact were intended to apply. There is absolutely nothing to show that the Chief Controller was of the view that, even in the context of the refixation of quota, which might be necessitated by paragraph 25 of the Red Book, the basic quota (Rs. 1,34,304) would still be the same. It is clear that the exercise of the power in paragraph 25 was not in question at all, and the admissions cannot he pressed into service further than their scope, namely, that the Evacuee Firm had originally qualified for such basic quota prior to 1953. But equally, it should be made clear that the principle of estoppel would operate to bar the authorities from making any diminution of the permitted volume of imports in the licences, until and unless the specific power under paragraph 25 is exercised and, on good grounds, in terms of that paragraph, the authorities re-determine the quota at some lower figure, either because of some error in the basic quota (Rs. 1,34,304) as cited in the earlier admissions, or some established fact which makes such revision essential. Even then, all this can be done only after the fullest hearing of the case of the party affected (Respondent-firm), and, generally speaking, the burden of making out a justification for a lower figure would appear to lie on the Government, in view of earlier specific admissions, and as the Government alone might be in possession of the required material.

Having regard to the foregoing considerations, we do not think that there is any justification for interference with the writ of mandamus actually issued in the case. As the learned Attorney-General admits, the deficiencies have been made good by the grant of subsequent import licences to the Respondent-firm, and the grievance of the Respondents that there has been a reduction without any justification, and made ex parte has been redressed. But a qualification has to be necessarily introduced with regard to the rights of the Chief Controller vis-a-vis the transferee firm (Respondent). It is always open to the Chief Controller to implement paragraph 25 of the Red Book, as it is equally open to the Respondent-firm to show that the stipulations of that paragraph are satisfied, and that, either because the Evacuee Firm had no other branches or allottees, or because the basic year was common to all the branches, the original figure for import of betelnuts has still to be retained. The requirement that the refixed quota certificates should be obtained upon security paper, is comparatively formal, and an administrative stipulation; if the Respondent-firm is entitled to the original quota, it is always open to the firm to obtain the certificate on that paper, even at the present stage. We are further unable to uphold the view that the Chief Controller has already refixed the quota at fifty per cent of the original figure in implementing paragraph 25. He can do so only after notice to the Respondent-firm, and after he finds a case established for alteration of the original figure, on the facts; he cannot proceed virtually ex parte, whatever the departmental instructions might be. Subject to the above clarification, the writ of mandamus will be sustained, and this appeal dismissed. The parties will bear their own costs.

Ramamurti J.

I have perused the judgment of my learned brother and I entirely agree that there is no substance in the writ appeal, and that the same should be dismissed as devoid of merits. In view of the importance of the points raised and argued, I desire to give my reasons while coming to the same conclusion.

My learned brother has referred to the facts in full detail, and it is unnecessary to set out the same here. The main point in controversy relates to the value for which the Respondent is entitled for the issue of an import licence for the licensing periods, October 1958 to March 1959 and April 1959 to September 1959. In the earlier periods as a result of an allotment by the Custodian of Evacuee Property, the Respondent carried on the import business of the evacuee for the period 24th November 1956 to 31st September 1957 and the same was renewed in his favour for the next year. In the meanwhile the Respondent purchased for a price of rupees six thousand under a deed of conveyance, dated 5th February 1958, the entire interest of the evacuee, Messrs. Haji Sattar Haji Pir Mohamed including the good-will of the business. This transfer in favour of the Respondent was formally recognized by the Controller of Imports in August 1960. In view of the uniform view taken in the several Bench decisions of this Court the learned Attorney-General, appearing for the Appellant did not contend before us that the right of the Respondent to the issue of a licence should be recognized only from the date of the approval of the sale in his favour by the Chief Controller of Imports, and not from 5th February 1958, the date of purchase.

He raised two main contentions: (i) Uptill now as no quota certificate has been issued in favour of the Respondent, he is not entitled to the grant of a licence for any value, as of right, and that the licences issued till now are something in the nature of ex gratia. In other words the grant of a quota certificate is an essential preliminary and constitutes the main foundation for the issue of a licence, (ii) In the case of established importers having a head office and branches in several places separate basic years were chosen by the several offices resulting in inflation of quotas and leading to considerable difficulties in the issue of licence, besides conferring a special and undue benefit upon importers having various branches (when compared to importers having only one place of business and no branches). With a view to avoid this invidious distinction and resultant undue discrimination certain safeguards and precautionary steps were taken from the year 1954. Except for small changes introduced the procedure adopted from 1954 required the importers having several branches to apply to the Controller and get the quotas refixed choosing the same year as the basic year, for the head office and all the branches and get it engrossed in a security paper. At the time of refixation the importers must adduce direct evidence of the imports of the head office and the branches during the same common basic year and satisfy the Controller. Unless this is done an importer is not entitled to the issue of a licence, and in this case, as this procedure of the refixation of the quota and the engrossing the same on a security paper had not been followed the Respondent is not entitled to the issue of a licence, and that the licences issued up till now are on an ad hoc basis by way of mere concession and essentially ex gratia in character. Despite the fact that this procedure had not been followed till now, it is open to the Controller to justify the refusal of issue of the licence even at this belated stage on the ground of non-compliance with this rule. In support of this contention the learned Attorney-General placed reliance upon Rules 22 to 25 of the Policy Book for the period October 1958 to March 1959 besides drawing our attention to the corresponding rules from the years 1953 to 1954 up to date.

For a proper and correct decision of the points in controversy in the instant case, it is necessary to have a precise idea of the impact of the provisions of the Administration of Evacuee Property Act, Central Act XXXI of 1950 (hereinafter called the Act) upon the rule''s and instructions relating to the Import Policy contained in the Red Book issued every half year by the Government. Section 2(f) defines evacuee property as meaning any property of an evacuee whether held by him as owner or as trustee or as beneficiary or as tenant or in any other capacity (portion not relevant omitted). Section 4 provides that the provisions of this Act and the rules shall have effect, notwithstanding anything inconsistent therewith contained in any other law for the time-being in force. Section 8 provides that all property declared to be evacuee property shall be deemed to have vested in the Custodian for the State as and from the several dates mentioned thereunder. Section 10 deals with the rights, power and duties of the Custodian in the matter of securing, administering, preserving and managing any evacuee property. Section 10(2)(a) expressly provides that without prejudice to the generality of the powers, the Custodian shall have power to carry on the business of the evacuee and Section 10(2)(o) specifically provides that the Custodian shall have the power to transfer in any manner whatsoever any evacuee property notwithstanding anything to the contrary contained in any law or agreement relating thereto. It is clear, therefore, that the Custodian may either carry on the business or grant a lease of the business of the evacuee or sell the business outright, and that as a necessary integral incident of that right and property the custodian must have a right and the facility of obtaining an import licence from the Import Controller if any item of evacuee property consisted of an import business carried on by the evacuee. The question is whether there is anything in the import Trade Control Policy Book (Red Book) which, would deny to the Custodian this valuable right to obtain a licence.

At the threshold of his arguments the learned Attorney-General contended that only established importers are entitled to an import licence, and that a Custodian is not an established importer, satisfying the requirements of Rule 15r as he is not a person who is actually engaged in import trade of any particular article or articles. The same argument was advanced before Ramachandra Ayyar J., (as he then was) and was rightly rejected. A bare perusal of Rules 74 to 78 (Red Book 1958) dealing with the transfer of division of quotas would show that there is no substance in this point. After dealing with other changes in the constitution of firm Rule 78 provides that where the business of a firm is transferred together with all its assets, liabilities and good will to another firm so as to constitute it as its successor in all respects, the transferee firm shall get the quota rights of the transferor firm. Rule 77 defines a firm as including a sole owner or proprietor of a business. By reason of the all-embracing vesting provision, in Section 8 of the Central Act XXXI of 1950, it is clear that there has been a statutory transfer by operation of law of all the assets, liabilities and good-will of the evacuee in favour of the Custodian. There can possibly be no doubt that the outright transfer referred to in Rule 78 (a) would take in both a transfer by act of parties and one by operation of law. In my opinion, it is impossible to contend otherwise. The learned Attorney-General did not pursue this point further, and he accepted the position that by reason of Section 8 of the Act the Custodian not only became the owner of the business but also clearly became entitled to the right to obtain the import licence based upon past imports of the evacuee concerned.

The other two main points urged by the learned Attorney-General may now be taken up for consideration. Point No. 1. He contended that the Respondent in his affidavit filed in support of the writ petition, had not stated that a quota certificate had been issued in favour of the Custodian and that the statements in the order of Ramachandra Ayyar J., (as he then was) suggestive of the grant of a quota certificate to the Custodian are inaccurate and that as the Respondent has not been in a position to produce a quota certificate no writ can be issued in his favour directing the Controller to issue an import licence. It is true, that in the records now produced in this proceeding, the Respondent has not produced any document bearing the label of a quota certificate. But, in my opinion, that cannot affect the real position. In the first place, it must be noticed that this point was not raised in the counter-affidavit filed by the Appellant nor was any argument advanced'' before the learned Judge. It must be borne in mind that the Red Policy Book while prescribing numerous forms in respect of several matters concerning the administration of the import and export policy of the Government does not prescribe any specific form for a quota right or certificate. If the licensing system in regard to the grant of an import licence is appreciated from its proper perspective in the light of the rules printed in the Red Book, it will be apparent that a quota certificate is merely a declaration by the Controller that he is satisfied that a particular importer has been importing a particular commodity of a particular value in the basic year. Armed with that quota Certificate the importer is granted the particular percentage of the licence every half year as per the policy declared by the Government. The quota certificate does not serve any other purpose, except establishing to the satisfaction of the Controller the total value of the imports effected by the importer in the basic year. A scrutiny of the records shows that in the case of evacuees who were established importers the Controller after verifying from the records, communicates to the Custodian the quota which a particular evacuee had established as an established importer with a view to facilitate the Custodian to administer and manage the Evacuee property consisting of a business in imports.

The first letter, dated 10th August 1953, whole of which has been extracted in the judgment of my learned brother proves beyond doubt that the Controller has been satisfied that the evacuee was an established importer having an established quota for betelnuts for the value of Rs. 1,34,301. That letter is explicit and unambiguous in its terms and contains a clear recognition and acknowledgment that the evacuee had established a quota as mentioned above. When the Respondent obtained a lease or allotment of this business from the Custodian, he was re-assured by the Controller by the letter, dated 26th June 1957, that the evacuee, Messrs. Haji Sattar Haji Pir Mohammed had established quota for the import of betelnut for the value of Rs. 1,34,304. Again the last letter, dated 12th August 1960 addressed by the Controller to the Respondent proceeds on the footing that the evacuee had established the quota. In view of the correspondence referred to above, the conclusion clearly follows that the evacuee had established his quota already and the Chief Controller had on a scrutiny of the record accepted that factual position. It must also be borne in mind, that it was a communication from one Government department to another, between two responsible Government Officers of high rank and the Custodian was realising and managing the properties of thousand of evacuees who have run away leaving no means of ascertaining the details of their properties. Every presumption should be made that in August 1953 the Controller made all the investigation and necessary scrutiny, and was perfectly satisfied that the evacuee while carrying on his own import business had an established quota for Rs. 1,34,304 and odd, and that the custodian was assured and invited to rely and was also entitled to rely upon this assurance.

Any other view at this distance of time would introduce serious complications, uncertainty and unjust disturbance in the rights of these unfortunate persons who have entered into dealings and transactions with the Custodian for valuable consideration relying mainly upon the explicit and unambiguous written assurance conveyed by the Controller. I am of opinion that this is a case in which the maxim Omina Praesumuntur rite esse ccta, should apply and every reasonable presumption should be made that the Controller had verified from the records of his office and was satisfied that the evacuee had an established quota for the value in question. I am of opinion that it will be opposed to all principles of natural justice and fair play to allow the Appellant to rake up, at this stage, the question of a quota certificate.... The position is afortiori clear when the Appellant has not raised this point in his counter or before the learned Judge.

It only remains to dispose of the second point, regarding the refixation of quota, raised by the learned Attorney-General who, conceded that this aspect in this form, was being raised for the first time, only now before as in the course of the arguments. Even so, this point utterly Jacks substance. When the importer, the Respondent, had been granted licence on the basis of an established quota of a particular figure, if the department desires to reduce it. it could be done only after notice is given to him and his objections are heard. There is no pretence that in this case anything of the kind was done. The two licensing instructions, dated 25th September 1958, and 5th May 1959, on the basis of which the reduction of the licence was sought to be made, are admittedly confidential communications from one section to another section of the office of the Chief Controller of Imports. It is not a public notification; nor is it incorporated in the Red Policy Book. When the Respondent desired to know the reasons why, and the basis on which such a reduction was sought to be made, the department sent a curt reply, dated 29th July 1959, that the reduced licence was granted in terms of the existing instructions and this was followed by another equally curt reply, dated, 22nd October 1959, except with the change that the matter was reviewed and the quota allotment was increased from 50 per cent to 66-213 per cent. In my opinion, this attitude of the Controller cannot but be characterised as quite unfair and unjust besides being opposed to elementary principles of natural justice. It was the clear duty of the Controller to give notice to the Respondent and give him necessary opportunities and hear his objections before his rights are taken away, even if it be assumed for purposes of argument that the Controller has a right to reduce the value of the licence. Nobody knows whether the evacuee firm had other branches or allottees or whether the branches furnished figures of past imports choosing different basic years. I have no hesitation in holding that this objection as to absence of notice goes to the very root of the matter and is quite sufficient to reject the contention. The unilateral and one-sided procedure adopted by the Controller cannot be justified from any point of view.

Even otherwise, I am of the opinion that having regard to the prior actings of the parties, it would not be open to the Controller to rake up this question of refixation of quota. The rule providing for the refixation of quota came into vogue about the year 1954, and long afterwards, the Controller has accepted the position that the evacuee concerned had been certified for consideration of quota licence for Rs. 1,34,304. The Respondent has been granted licence only on that basis, after the rule came into force. The Respondent has been induced to enter into the transaction with the Custodian relying upon the assurance by the Controller, and the former was entitled to assume that at that time, the Controller has correctly decided the value of the licence. It seems to me, the representations by conduct, which the Controller made, were perfectly clear and unambiguous and were intended to induce the course of conduct on the part of the Respondent, who altered his position to his detriment. Under the peculiar facts of the instant case, principles of estoppel by conduct would undoubtedly operate as against the Controller.

The principle of estoppel by conduct is well settled and it is only a question of application of the rule to the particular facts of the case. The law is best stated in XV Halsbury''s Laws of England, third edition, page 175, paragraph 344 in these terms:

When one party has, by his words or conduct, made to the other a promise or assurance which was intended to effect the legal relations between them and to be acted on accordingly then, once the other party has taken him at his word and acted on it, the one who gave the promise or assurance cannot afterwards be allowed to revert to their previous legal relations as if no such promise or assurance has been made by him, but he must accept their legal relations subject to the qualification which he himself has so introduced.

This doctrine of estoppel by conduct is derived from broad principles of equity and has been the subject of considerable recent development though its limits are not yet finally settled. The statement of the law by DENNING J., in Robertson v. Minister of Pensions (1949) 1 K.B. 227 as to when the principles of estoppel by conduct would operate against Officers of Government department has been the subject of criticism in later decisions. Vide Howell v. Falmouth Boot Construction Co. Ltd.(1951) A.C. 837; Commrs. of Crown Lands v. Page (1960) 2 Q.B. 274. The view indicated in the later decisions is that this doctrine cannot create any new cause of action and that it cannot be invoked to render valid a transaction which the Legislature on grounds of general public policy enacted shall be invalid, or to give the Court a jurisdiction which is denied to it by the statute. Vide XV Halsbury, page 176, paragraph 345. Reference may be made to the case in 56 Denton Road, Twickenham In re (1953) Ch. 57, 58 as the principle of equitable estoppel by conduct was applied in circumstances highly relevant to the instant case. Under the War Damage Act of 1943 Parliament had constituted a body conferring upon it powers and duty of deciding and determining the compensation in respect of the War Damages caused to properties of the subjects of the realm. By a letter, dated 12th November 1955, the War Damage Commission through their manager informed the Plaintiff that the building (with regard to damages sustained) was classified not on a total loss basis but on the basis of actual costs of works payments and the Plaintiffs agreed to this classification. Later on, it was found that under the actual costs of works payment basis the Plaintiff would receive a considerably. larger sum by way of compensation and so, War Damage Commission department sent a letter to the Plaintiff that the Commission had determined that the damage suffered by the Plaintiff''s property should be on total loss basis. It was held that the Commission had determined finally and irrevocably that the damage that the Plaintiff''s property suffered was on actual costs of works payment basis and that such determination was binding upon the Commission. Rejecting the argument on behalf of the War Damage Commission that the Commission had a perfect right to change their mind as their policy changes or as fresh evidence comes to light or further advice is given to them by their technical advisers and to go on altering as often as occasion arises, the learned Judge observed as follows at page 58:

Where, it may be asked, is this process to stop? Is the matter to be referred to a sequence of officers, each one superior to the one immediately before him? If an officer (superior or not) gives advice to the Defendants which, having been reported to the person affected, turns out to be embarrassing, can the Defendants, without any notice to such person, go on from officer to officer until they obtain advice which is more to their liking? I cannot think that this is what the War Damage Commission ought to do. I think they should at least refrain from buoying up the hopes and expectations of those with whom they deal by reporting ''determinations'' in terms which make them appear to be, although they are not in fact, final, fixed and conclusive.

Reference may also be made to the case in Lyle-Meller v. A. Lewis and Co. Ltd. (1996) 1 All. E.R. 247, 251, 253. In that case the Plaintiff, the owner of a patent for the invention concerning gas lighters and parts agreed to grant to the Defendants the sole right of exploiting the Plaintiff''s inventions in return for royalties on the sales. Two years later, the Defendants who had paid royalties as agreed, repudiated their liability on the ground that the gas lighters and refills did not embody the Plaintiff'', inventions. It was held that the Defendants had by their conduct given an assurance that the lighters and refills embodied the Plaintiff''s inventions, and that they were liable to pay royalties thereon as it was intended that the Plaintiff should act on the assurance and had acted on it, and that the Defendants could not by virtue of the new estoppel affecting the legal relations go back on their assurance, whether it was a representation of fact or mixed representation of law and fact. LORD DENNING observed as follows at page 251:

The statement was not in either case a contract and not regarded as such, but it was an assurance as to legal position-as to the legal consequences of the facts known to both- which was intended to be acted on, was acted on, and was held to be binding. It did not give rise to a cause of action in itself, but it did prevent the party making it from setting up a defence which would otherwise be open to him. In that sense it gave rise to an estopped, but it was not the old kind of estoppel, which was only a rule of evidence. It was the new kind of estoppel which affects legal relations.

Hodson L.J., put the matter thus:

There was a representation, or conduct amounting to representation, which was intended to induce a course of conduct on the part of the person to whom the representation was made-those last words are a citation from Lord Tomlin''s speech and finally there was a detriment to such person as the consequence of the Act. Here there is no doubt (and Counsel for the Defendants had not argued to the contrary) that, if there was a representation creating an estoppel, the Plaintiff did alter his position by holding to the agreement and not by looking round for fresh licensees.

I shall now refer to the relevant decisions in India in which the rule that like all other individuals the Government may be brought within the grip of estoppel was applied. In Dadoba v. Collector of Bombay ILR (1901) 25 Bom. 714, 746 three separate plots of land in a particular area in Bombay were held by the trustees of the Free Church of Scotland Mission under a grant from Government for the purposes of a school for native girls (no deed of grant, however, having been executed). The trustees of the school wanted to shift the school to some other locality and so to facilitate the sale of the land, the consent of the Government was obtained. The Government also executed certain indentures, conveying the property to the trustees of the school, their heirs and assigns, in the case of one plot, without any mention of assessment, and in the case of the other two plots subject to the payment of all taxes, rates, charges, etc., leviable in respect of the premises. One Janardhan offered to buy the whole property for a sum of Rs. 32,500 on condition that the whole property should be conveyed to him as free-hold tenure or for a nominal Government tax. Thereupon correspondence ensued between the trustees and the Government and the latter agreed that the land in question will be liable in the purchaser''s hands to be assessed under the rules ordinarily applicable to the land of the same description. The Attorneys of the purchasers and the trustees wrote to the Collector asking him to let them know the assessment that would be levied on the lands proposed to be sold. The Collector replied:

I have the honour to inform you that the land will be assessed at the rate of nine pies per square yard per annum. This is the rate of assessment which is charged for Government land in this locality...which has been followed for the last six years.

The land was conveyed later on to Janardhan Gopal and in 1893 at a family partition Dadoba, the Plaintiff in the action, got these properties. In 1899, the Plaintiff received from the Collector a notice that u/s 8 of the Bombay Act II of 1876, the assessment was enhanced to Re. 0-6-6 per square yard per annum and the Plaintiff filed the suit contesting the legality of the enhancement. Dealing with the question of estoppel, Jenkins C.J., observed as follows at page 746:

While, if the matter be regarded from the point of view of estoppel the legal result is the same. In my opinion the conduct of Government, coupled with the statement of the Collector, made on their behalf for the purposes of the purchase, was, under the circumstances such as to create and encourage in the purchaser as a reasonable man the belief that he was purchasing property substantially worth Rs. 33,000 and that Government were not silently reserving to themselves an unfettered right to destroy the value of that property and practically to confiscate that which had been sold.

The situation is exactly similar in the instant case.

It is unnecessary to refer to other cases on the point except the decision of the Supreme Court in Collector of Bombay Vs. Municipal Corporation of The City of Bombay and Others, in which the statement of the law in Dadoba v. Collector of Bombay ILR (1901) 25 Bom. 714, 746 was applied and referred to with approval. In that case the Corporation of Bombay which was having a fish and vegetable market had to vacate the site as the same was required by the Government for the construction of a Bouleward. The then Municipal Commissioner applied to the Government for the allotment of some other site for constructing a new market and in 1865 the Architectural Improvement Committee informed the Government of Bombay that it .had no objection to the proposed site measuring about seven acres being allotted to the Bombay Municipality on a rental basis. The Government approved the site and authorised the grant but at the same time did not consider that any rent should be charged against the Municipality as the markets would be like all other public buildings for the benefit of the whole community. Possession of the site was made over to the Municipal Commissioner but without any formal grant being executed as required by the statute. The Municipal Commissioner had the site filled up, levelled at a huge expense of the Corporation and put up the buildings, now known as Crawford Market, Bombay. In 1938, the Collector of Bombay informed the Municipal Commissioner that it was proposed to assess the land occupied by the Crawford Market under Sections 8 of the Bombay City Land Revenue Act. It was held that the principle of estoppel by conduct clearly applied as against the Government. Dealing with the question of equitable estoppel Chandrasekhara Ayyar J., observed as follows at page 63:

Can the Government be now allowed to go back on the representation, and if we do so, would it not amount to our countenancing the perpetration of what can be compendiously described as legal fraud which a Court of equity must prevent being committed? If the resolution can be read as meaning that the grant was of rent-free land, the case would come strictly within the doctrine of estoppel enunciated in Section 115, Evidence Act. But even otherwise, that is, if there was merely the holding out of a promise that no rent will be charged in the future, the Government must be deemed in the circumstances of this case to Have bound themselves to fulfil it. Whether it is the equity recognized on Ramsdev''s case (1866) L.R.1 H.L. 129, or it is some other form of equity, is not of much importance. Courts must do justice by the promotion of honesty and good faith, as far as it lies in their power. As pointed out by Jenkins CJ., in Dadoba v. Collector of Bombay ILR (1901) Bom. 714 a different conclusion would be opposed to what is reasonable, to what is probable, and to what is fair.

In University of Madras v. Sundara Shetti ILR (1956) Mad. 402 a Bench consisting of Rajaaiannar C.J., and Somasundaram J., had to deal with the applicability of the rule of equitable estoppel by conduct as against the University of Madras. Under the rules of the Madras University the student is eligible for admission into the University course of studies only if he is declared eligible and the list of candidates declared eligible is published in the Fort St. George Gazette. But due to the exigencies of the situation such as time and convenience the practice of affixing the stamp of eligibility on the S.S.L.C. certificate was adopted. A candidate on the basis of such eligibility stamp in the S.S.L.C. book has obtained admission to the University and undergone the course to a great extent. A few months before the termination of the course and before the University examination it was discovered that some mistake had occurred and that the student had not been declared eligible for admission to the University course. It was held that even though the endorsement of eligibility in the S.S.L.C. book may not be strictly authorised by the rules, still the candidate having expended time; and money in pursuing a course of study on the strength of the endorsement even though wrongly made by the Secretary, acting presumably on behalf of the University, it was a case of legal and equitable estoppel satisfying all the conditions embodied in Section 115 . Repelling the argument that the student was wrongly admitted and now that the mistake had been discovered he cannot be permitted to continue the course any longer the Bench held that the student having expended time and money for nearly two years should not now be told that there was a mistake and all the two years of his study should go waste. The ratio of this case is clearly applicable to the instant case.

Having regard to the foregoing considerations, I am of the opinion that the Controller cannot decline to issue the licence on the ground that the Respondent had not taken steps to have the quota refixed. The representation by conduct on the part of the Controller adverted to above relates to a factual position and not even to any questions of law. It is again not a question of the Controller transgressing and exceeding the powers and authority conferred upon him under the statute. It was essentially a matter within his jurisdiction to accept and to declare that he was satisfied that a particular importer had established quota for a particular value in respect of a particular commodity on a scrutiny of the records. If the Controller makes a representation to a prospective purchaser of an import business and the latter invests capital, the Controller must in fairness be compelled to honour his representation.

Barring cases of illegal or ultra vires acts, rights of innocent third parties should be protected whenever they are induced to act upon the decision of Governmental authorities acting well within their jurisdiction.

I reserve my opinion as to how far it would be competent to the Controller to reconsider and modify his prior decision on the ground of discovery of fresh facts or materials. It is sufficient to say that in such a situation, the burden will be clearly upon the Controller to establish and make out a ground for refixation of the quota. Till then, the present state of affairs will and must continue and the Respondent will be entitled to the issue of a licence on the basis of established quota of Rs. 1,34,304. Any move to refix the quota, on the facts of the instant case, must emanate only from the Controller after laying the foundation on facts that the evacuee had several places of business in India and had selected different basic years. In other words, I am of the clear opinion, that it is not for the Respondent to get the quota refixed as though some wrong or mistake had occurred in the past. It must not be forgotten, that the Respondent is an utter stranger and the records show that except, the sale-deed executed in his favour, he never obtained possession of any of the records of the business of the evacuee. It will be imposing upon him an almost intolerable and impossible burden if it should be insisted that he should have the quota refixed, on peril of not being entitled to any licence at all, Any other view would result in serious injustice and inequity.

It is needless to observe, that if the Controller takes steps to alter or refix the quota, on any future occasion, he must give notice to the Respondent informing the latter of the grounds of the proposed action and it will be equally open to the Respondent to urge all his objections including the question of estoppel.

For all these reasons the writ of mandamus issued by the learned Judge will be sustained and this Appeal shall stand dismissed.