TMI Blog1965 (7) TMI 56X X X X Extracts X X X X X X X X Extracts X X X X ..... ew taken by the Madras High Court is correct as the grant of approval in accordance with the agreement is obligatory on the Chief Controller if the evidence required under Instruction 72 has been produced to his satisfaction. The High Court has found that no such order under S. 3 of the Act has been published. Nor has any such order by the Central Government been brought to our notice. All that has been said is that in the declaration of policy as to import, the word "nil" appears against fountain pens. That necessarily does not amount to prohibition of import of fountain pens unless there is an order of the Central Government to that effect published in the official gazette. We therefore agree with the High Court that unless such an order is produced it would be open to the licensing authority to issue a licence for the period of January-June 1957 even after October 1, 1957. The appeals therefore fail and are hereby dismissed with costs. - Civil Appeals Nos. 60 to 62 and 316 to 320 of 1965 - - - Dated:- 21-7-1965 - P.B. GAJENDRAGADKAR, K.N. WANCHOO, J.C. SHAH, J.R. MUDHOLKAR AND S.M. SIKRI, JJ. JUDGMENT: These eight appeals by special leave against the judgment of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich it is unnecessary to go, and the Chief Controller informed the partner concerned in September 1957 that instructions had been issued to the licensing authority to the effect that quota certificates admissible to the dissolved partnership firm should in future be divided between the three partners in certain proportions which it is unnecessary to set out. Thereafter the Joint Chief Controller was approached to grant a licence. But on January 9, 1958, the Joint Chief Controller informed the partner concerned that it was regretted that his request for the issue of licence for the period January- June 1957 could not be acceded to since the transfer of quota rights in his favour bad been recognised by the Chief Controller only after the expiry of the licensing period to which the application related. It appears that there was then an appeal from this order of the Joint Chief Controller which failed. Then came the writ petition to the High Court in December 1958 or January 1959, and the main contention on behalf of the respondents was that the Joint Chief Controller could not refuse the issue of licences on the ground that the Chief Controller's approval as to the division had been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Rule 6 gave power to the Central Government or the Chief Controller to refuse to grant a licence or direct any licensing authority not to grant licence for certain reasons. One of the reasons for such refusal was if the application for import licence was defective, and did not conform to the prescribed rules. Rule 7 provided for amendment of licences and r. 8 gave power to the Central Government or the Chief Controller to suspend the issue of licences or debar a licencee from using a licence for certain reasons. Rule 9 provided for cancellation of licences by the Central Government or any other officer authorised in this behalf. The power under rr. 7, 8 and 9 was to be exercised after giving a reasonable opportunity of being heard to the licencees. These are the statutory provisions under the Act and the Rules for granting licences. In order however to guide the licensing authorities in the matter of granting import licences, the Central Government issued certain administrative instructions to be followed by the licensing authorities. These instructions provided for grant of import licences to three kinds of persons-(i) established importers, (ii) actual users, and (iii) new co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g quotas for the purpose of the Order. That is why when cl. (b) of Instruction 71 provides for division of quota rights it lays down that the partners shall get their respective share in the quota rights according to the provision of the agreement between them. Once the Chief Controller is satisfied, on the evidence produced before him that the firm bad certain quota rights and had been dissolved, he has to divide the quota rights between partners in accordance with the provisions of the agreement between them. As we read cl. (b), it is clear that where the conditions contained in Instruction 71 are fulfilled, the Chief Controller must divide the quota rights in accordance with the provisions of the agreement between the partners of the firm that has been dissolved. Clearly therefore these administrative instructions provide a machinery for division of quota rights in certain cases including the dissolution of a firm consisting of a number of partners and all that the Chief Controller has to do is to satisfy himself that there has been a dissolution in accordance with the provisions in cl. (b) and thereafter he is bound to accord approval to the division of quota rights according t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only on the ground that the approval was granted after the import period had expired. The other view is taken by the Bombay High Court in Jagannath v. Varadkar. It was held in that case that the transfer of quota rights was a condition precedent to the grant of an import licence. The person in whose favour such a transfer had been recognised or sanctioned was consequently entitled to rely upon that transfer for a period subsequent to such sanction or recognition and not for any anterior period, even though the application for licence might have been made in proper time before the import period expired. We have given the matter careful consideration and are of opinion that the view taken by the Madras High Court is correct. We have already pointed out that on a proper interpretation of Instruction 71, there is no doubt that the Chief Controller is bound to divide the quota of a firm consisting of partners which has been dissolved in accordance with the provisions of the agreement (1) I.L.R. [1959] Mad. 850. sup.CI/65 3 between the partners provided the necessary evidence has been produced before him, as required by Instruction 72 in that behalf. Such being the nature of the proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... greement between the partners of a dissolved firm, the approval must relate back to the date of agreement, for it is the agreement that is being recognised by the Chief Controller. In such a case the fact that the Chief Controller says that in future the quota would be divided, only means that the original quota of the undissolved firm would from the date of the agreement of dissolution be divided between partners as provided thereunder. Further we would like to make it clear that quotas should not be confused with licences. Quotas are merely for the purpose of informing the licensing authority that a particular person has been recognised as an established importer for import of certain things. Thereafter it is for the licensing authority to issue a licence to the quota holder in accordance with the licensing policy for the half year with which the licence deals. For example, if in a particular half year there is an order of the Central Government prohibiting the import of certain goods which are within the quota rights, the licensing authority would be entitled to refuse the issue of licence for import of such goods whose import has been banned by the Central Government under th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... because there is nothing in the Red Book to show under what circumstances the Chief Controller can grant recognition from the date of the agreement even though the approval comes much later. On the whole therefore we are of opinion that the view taken by the Madras High Court is correct as the grant of approval in accordance with the agreement is obligatory on the Chief Controller if the evidence required under Instruction 72 has been produced to his satisfaction. The last point urged was that subsequent to October 1957, Government of India changed its policy with respect to import of fountain pens with which some of the present appeals are concerned. This it was urged amounted to a ban on the import of fountain pens and it would not be open to the Joint Chief Controller to issue any licence for any period, be it January-June 1957, after the import of fountain pens had been banned from October 1957. Now there is no doubt that it is open to the Central Government under s. 3 to prohibit the import of any article but that can only be done by an order published in the official gazette by the Central Government under S. 3. The High Court has found that no such order under S. 3 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said application. In September 1957 the Chief Controller informed Aminchand that instructions would be issued to the Licensing Authority to the effect that quota certificates admissible to the dissolved firm should in future be divided between the three partners in certain proportions. Aminchand thereupon approached the Joint Chief Controller for grant of a licence and on January 9, 1958 the latter informed him that no licence could be issued to him for the period January-June, 1957 since the division of quota rights of the firm was recognised by the Chief Controller only after the expiry of the licensing period to which the application related. Aminchand then preferred an appeal from the decision of the Joint Chief Controller but failed. Thereupon he moved a writ petition in the High Court of Madras for the issue of a writ of mandamus or any other appropriate writ to the Joint Chief Controller for the issue of an import licence to him for the period January-June, 1957. The High Court following its earlier decision in the Joint Chief Controller v. H. V. fain( I.L.R. [1959] Mad. 850) granted the application. It is against this decision of the High Court that the Joint Chief Controll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise provided in this Order, no person shall import any goods of the description specified in Schedule 1, except under, and in accordance with, a licence or a customs clearance permit granted by the Central Government or by any officer specified in Schedule II." Clause 4(1) provides for making an application for grant of a licence to import. Clause (5) provides for attaching conditions to a licence issued under the Order. Clause (6) confers power on the Government of India or the Chief Controller of Imports Exports to refuse to grant a licence for any of the reasons specified in that clause. Clause 8 empowers these authorities to suspend the issue of licences or debar a licensee from receiving licences and clause 9 provides for cancellation of licences. The grounds on which action can be taken under either of these clauses are also specified in them. It is not necessary to refer to the other clauses of this Order. Appended to the Order are schedules contemplated by cl. (3) of the Order. Amongst the grounds for refusal of licence under cl. (6) the following are relevant for the purpose of deciding the point which arises before us "(a) if the application for a licence does not c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er certain quota of imports is made available to that person or firm for the particular licensing period from out of the share in imports allotted to established importers. The expression "firm" used in the instructions is a wide one and includes a partnership, a limited company or a proprietary business The business of an exporter of a dissolved firm would thus fall within the definition. Paragraph 71 of the Red Book provides that where a change occurs in the constitution or the name of a firm or the business changes hands the re-constituted firm will not be entitled to the quotas of the original firm until the transfer of the quota rights in their favour has been approved by the Chief Controller of Imports Exports. Sub-para (a) of para 71 deals with transfer of quota rights. With this sub- paragraph we are not concerned. Subparagraph (b) deals with division of quota rights and reads thus "(b) Division of Quota Rights.-Where a firm is dissolved, and the partners agree to divide its business, assets and liabilities, and its goodwill is taken over by one of the partners or none of them is allowed to use it, the partners shall get their respective share in the quota rights accord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the quota right has no remedy in law. However, in none of the cases before us has there been an arbitrary or unfair refusal to apply the instructions contained in sub-para (b). Now, what has happened here is that though the applications for licences were made for a specified period within the time allowed they were rejected and the applicants were informed by the licensing authority that the division of quota rights would be given effect to only for future periods inasmuch as the divisions were recognised by the appropriate authority after the expiry of the particular periods to which the applications for import licences related. As rightly pointed out by my brother Wanchoo J. a quota right is not something which is transferable or heritable in law. It would follow therefore that recognition of a division of quota rights and thus treating him as an established importer, though he was not one, is no more than a concession given by the appropriate authority in pursuance of administrative instructions. Where, therefore, the recognition of a division of quota rights is accorded by the Chief Controller of Imports and Exports, as was done in these cases, only in respect of future impo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore, hold that the Joint Chief Controller's action in refusing to grant a licence for that period was well within his powers. It is said that in some other similar cases licences were issued by that authority. That may or may not be a fact; but even if it is a fact it is not relevant for the purpose of determining whether the action of the authority was lawful or not. For, the respondent's petition is not based upon the ground that he has been unfairly discriminated against. It is, however, said that the recognition of the division must relate back to the date of the mutual dissolution of the firm or at least to the date of the application to the Chief Controller for recognition of the division. A similar argument was advanced before a Bench of the Bombay High Court of which I was a member in Jagannath Prabhashankar Joshi v. Varadkar(1) and in rejecting it I observed as follows : "There is one more thing which we would like to point out and that is that an application for the grant of an import licence to a firm, which has undergone a change in its constitution, could be made only after the sanction regarding transfer of the quota, rights is issued in its favour. 'Mat is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght is not a 'property' which is transferable in law. If that view is correct--and with respect we think it is,-it follows that by reason of the dissolution of the partnership, no transfer takes place with respect to quota rights. It is true, that the Import and Export Authorities are required to take into account a transfer of quota rights, but that is so, because of the instructions specifically issued in this regard by the Central Government and which are to be found in the Book entitled 'Import Trade Control Policy'. These rights, such as they are, must be said to be a creation of the Government notifications and would necessarily be exercisable to the extent and in the manner provided in those notifications. In paragraph 72 of the 'Import Trade Control Policy' Book it is clearly laid down that when a change occurs in the constitution of a firm the re-constituted firm will not be entitled to the quotas of the original firm until the transfer of the quota rights in their favour has been approved by the Chief Controller of Imports and Exports. It, therefore, follows that this transfer is a condition precedent to the grant of an import licence. The person in whose favour such a tr ..... 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