Rico Gems Corporation v. Chief Controller Of Imports And Exports

1. A diamond dealer has approached the Court with a precious contention based on promissory estoppel. The Court has to assess its lustre and test its structure.

2. Mahindra T. Mehta had obtained replenishment licence Exhibit 'A' dated 17-1-1990, authorising the import of diamonds unset and uncut along with ancillary articles as mentioned therein. The licence was later transferred to M/s. Mehta Gems, who in turn transferred it in favour of the petitioner under Exhibit B-1 dated 8-5-1991. Similar transfers were obtained from M/s. Sweta Enterprises, who had obtained Exhibit B-2 licence.

3. On 14-5-1991, the Controller of Imports and Exports sent a communication Exhibit 'E' directing the licencees to submit the REP Licences to the concerned REP Sections along with realisation of the export proceeds against REP Licences obtained by them for suitable endorsement to the effect that the entire export proceeds have been realised. This was to enable the authorities to consider the request of the licencees for their import operations. Public notices had been issued by which additional provisions were incorporated as evidenced by Exhibits 'H' and 'I' dated 23-4-1991 and 9-5-1991 respectively. This was followed by a public notice Exhibit 'J' dated 16-5-1991. It is sufficient at this stage to indicate that these public notices have brought about changes in relation to the obligation of the REP licence holders, with a view to ensure that the export on the basis of which the licences had been issued, had been as a matter of fact, effected.

4. On 15-7-1991, the petitioner made a request evidenced by Exhibit 'E' for enabling him to effect the necessary import of diamonds as indicated therein. On the very next day, a letter dated 16-7-1991 was addressed by the petitioner to the Joint Chief Controller of Imports and Exports, Bombay. It refers to an advice from the 4th respondent that they could not accept the licence in view of the letter dated 14-5-1991 (Exhibit 'D') already referred. The petitioner put forward five points which, according to him, warranted a variation of the view expressed in Exhibit 'D'. The reaction was unfavourable as evidenced from Exhibit 'G', issued by the Controller of Imports and Exports, dated 18-7-1991.

5. This writ petition was filed on 21-8-1991 for quashing the offending order Exhibit 'G'. Larger reliefs were also enveloped therein, such as a declaration of the invalidity, constitutional and otherwise, of the public notices dated 23-4-1991, 9-5-1991 and 16-5-1991.

6. The arguments initially addressed in broad and general manner, were ultimately brought within the frame work of promissory estoppel.

7. According to the petitioner, he had a vested right, when he obtained the transfer of licences. The rights could not be defeated, by any change in the import policy or provisions thereof, added to or altered by any fresh public notices. He is not obliged to establish that exports, as a matter of fact, had been effected by the original holder of the licence, as he has purchased the rights under the licence, which licences were, under the public policy, transferable.

8. The contention does not have the support of either a factual foundation or legal principle.

9. The licence produced before the Court, contained a significant clause, which reads :

"This licence is granted........... under the..... order No. 17/55 dated 7th December, 1955 as subsequently amended,........ and is without prejudice to the application of any other prohibition or regulation affecting the importation of the goods which may be in force at the time of their arrival."

An absolute and inviolable right cannot be claimed, in view of the above positive provision contained in the licence itself.

10. The transferors themselves, were alive to that crucial aspect. A common sentence in the letters of transfer, is very important, and it merits being extracted :

"You may operate upon the said licence and goods thus imported in accordance with import policy in force for your sole benefit....."

"This sound and strong cautioning is effective enough to wake up even a dozing dealer. Not that such additional advice is an entitlement of those who enter the adventurous field of trade. They have necessarily to counter the risks and reap the benefits, depending upon the fluctuations of fortunes. Atmospheric changes took the wind out of the sails in the days of smaller skiffs, which set sail to distant lands in search of pearls and spices. A turn of events, including those brought about by the administrative exigencies, may make or mar the fortunes of those riding on the turbulant waves of trade.

11. Law comes to the protection of those who have a rough deal in relation to their just rights. The evolution of 'promissory estoppel' was to defeat injustice, and further justice. An analysis of judicial decisions rendered in this behalf with particular reference to the actual issues arising therein and the backdrop of facts and circumstances relevant thereto would make the idea clear. (Wide observations are bound to be there when general and broad features which do not form the subject matter of the particular case are detailed in support of the ultimate conclusion. They do not form the ratio of the decision : The trained jurist mind would not read them as if they form the words of a statute intolerant of the slightest divagation.) Even when the doctrine of promissory estoppel is attracted, there are situations where the Courts cautiously exclude and eschew them, when larger principles of justice require the same. Governmental necessity is a recognised head in that context.

12. Occasions had arisen where the object and origin of the principle had been missed. 'A representation, and a later change', became almost catch words for attracting a doctrine which had a meritorious content surcharged with justice. This human nature of grasping at any word or sign as a commitment has been noted by discerning administrators of early times. Lord Birkenhead as Secretary of State the Indian Viceroy who had planned some exploratory talks with Indian Prices in the political set up obtaining in 1926, said :

"It is always a danger in discussion with Princess that even the most informal remarks may be brought up again subsequently as pledges."

(See British Policy Towards the Indian States, 1905-1939 by S. R. Ashton, Page 113).

It is only very recently that two High Courts, Madras and Madhya Pradesh, had to grapple with actual situations where promissory estoppel was seriously pressed into service, based on the remarks as contained in a speech of Minister on the floor of the House. The Court had no hesitation to repel the contention. (see Dhar Cement Ltd. v. Union of India, 1991 (54) ELT 178 and 1991 (55) ELT 170 (Mad.). The Madhya Pradesh High Court has made a survey of all decisions on the topic, travelling in that process, from Anglo-Afghan Agencies' case [AIR 1968 SC 718] to Assistant Commissioner of Commercial Taxes (Asst.), Dharwar v. Dharmendra Dharmendra Trading Co. ]. The emphasis on a representation arising out of a course of dealings with the promisee and factual details establishing that the promisee had, acting on such representation, really altered his position, happened to be lost sight of, in an enthusiasm to apply and to extend the doctrine. Things went too far, and in very many fields. They went to such an extent that even students came to claim privileges under promissory estoppel, and an unmutability in educational pattern, from the one which worked to their advantage at particular times. The claims happened to be recognised too, by a series of decisions. This trend has been checkmated recently by an authoritative declaration of law by this Court in Ashwin Prafulla Pimpalwar v. State of Maharashtra (Full Bench) Writ Petition No. 2469 of 1990, decided on 16th September, 1991. In the present case, there is not even adequate pleading of an unqualified representation and the petitioner altering his position acting on it and his suffering a detriminent in the sense of an injustice as explained by the Supreme Court.

13. On the facts and materials of the present case, we do not find any vested right or a crystallised one which enures to the benefit of the petitioner. The rights under the licence were even at as late a stage as the time of arrival of the imported goods. That had been loudly declared in the licence itself. If the petitioner voluntarily and willingly became a transferee of such a licence; he cannot later complain about any pain. He had to be ready to face the worst operation.

14. Even from a larger perspective, the petitioner's contention has no factual base or legal force. The very foundation of the issue of REP licence was an export performance which would earn for the Nation valuable foreign exchange. It is not open to the holder of the licence to disclaim the basic liability of an export obligation underlying the issue of licence itself. It was certainly open to the Government to plug the loopholes by which greedy traders sought to disgorge for their private coffers the export entitlements in their entirety. Nor could he escape altogether the obligation to export. The public policy evidenced by Exhibit 'H', only brought out the requirement in clearer terms and specific forms. In simple language, it only required proof of the export and the receipt of the export proceeds. Paragraph 3 rightly clarified that the endorsement contained therein would be applicable to pending applications as well. Under Exhibit 'I', the requirements were extended to additional licences and special additional licences. Exhibit 'J' has only amplified the ideas, and concretised the forms of action. Clause 3(1), contains the core area. It reads :

"On surrender of said REP licences, the Licensing Authorities shall issue a fresh REP licences for that part of the unutilised c.i.f. value of the original REP licence for which an evidence of foreign exchange realisation is produced by original licencee. To that extent, the original REP licence shall accordingly be made invalid."

15. No honest dealer would be damnified by the above provision. The licence was granted on two important considerations. The basic one is that the grantee has executed an export deal. That, however, by itself, need not necessarily benefit the Nation. If the relatable foreign exchange flows through impermissible channels, that is of no use for the Nation. Hence, the second, and equally important requirement : an accountability of the export proceeds. If the basic and underlying undertaking of an export performance and accounting of the receipt of export proceeds are not established, the licence would lack its life and validity. That the licence had been handed over to a dealer, does not free him from his basic obligations. That is the position, even if he palms off the licence to another for consideration received from the transferee's hand or under it. The transferee steps into the shoes of the transferor. If the transferor cannot escape his obligations, the transferee cannot be over-ambitious of getting over them. The fate of the petitioner is thus sealed, when the trust reposed by the Government in the transferor has been grossly abused. Interests of justice do not require the invocation of the doctrine of promissory estoppel in such circumstances when a citizen attempts to give a hit below the belt as it were, to the State which acted fairly and even indulgently. A Constitutional Court will not willingly permit such sharp practices, even when veiled by garbs of attractive legal colours.

16. Counsel for the petitioner cited in support of his contention, the decisions in (i) M/s. Bharat Barrel and Drum Mfg. Co. (P) Ltd. v. The Collector of Customs, Bombay , (ii) Kaptan's Enterprises v. Union of India , and (iii) Gramin Sewa Sanstha v. State of M.P. [1986 (Supp.) SCC 578]. They are distinguishable having regard to the clearly distinct facts as present in the case and indicated in some great detail above. In the present case, it is not the State that has deviated from its promise but the trader himself. The shrewd transferor had insulated himself against possible action at the instance of the transferee by protective clauses contained in the document of transfer. The frustration of the transferee-petitioner is understandable when he says,

"... ... ... the licence holder has already transferred the licence to the transferee and would be unwilling to co-operate as he has already received his money... ... ..."

The Court cannot, and need not, help the petitioner from such a plight, brought on himself, by the course of dealings in which he voluntarily got engaged in.

17. The argument of vested right, is not of any avail to the petitioner. True that under a declared policy prevalent at a time, the State cannot make any invidious discrimination in the matter of its implementation. But, Governmental necessity would require changes in its policy. This is particularly so in the area of foreign trade. A right to bring about necessary changes, depending upon the tide of trade and the changes in the commercial clime and the political time, should certainly inhere in the Government of the day. That right has been acknowledged by the apex Court right from Glass Chaton case. If changes are brought about in a rational, reasonable and fair manner, Courts would not interfere with such lawful Governmental exercises.

18. A vigilant Government may be on the watch regarding the leaking holes. Government could act suitably and strongly on such occasions. If in the course of its dealings, the Government comes across false notes, fake coins or siphoning process, it can act and counteract; and vigorously too. It is open to the Government to devise appropriate strategy for protection of its interests in furtherance of a desire for self preservation. That was, what had been attempted under the impugned amendment of public policy. We fail to see any reason for a genuine grievance as arising from them.

19. The petitioner at one stage (group 'D') has claimed a fundamental right vested in him, "by virtue of the non-compliance of such REP licence." We feel that this claim is the result of a hasty thought or a loose expression, for one would only search in vain, the entire chapter on Fundamental Rights, for fixing anyone answering the description indicated in the aforesaid ground.

20. This Nation is not a novice in the field of dealings in diamonds. Poetic embellishment (where reference has been made to the land as 'Ratnagarbha' (pregnant with pearls and diamonds) apart, History bears true allegiance to that fact. It had many a gem of purest ray serene, even after the end of the stories of plundered pearls, hijacked jewels and dacoited diamonds. An ancient verse indicates India's approach to the diamonds and the damsels. An approximate versification - an uncut and unpolished one - would read :

"Diamonds do not, to damsels lend Graceful lustre; otherwise is the blend; Diamonds unworn, women yet rob the mind Less of feminine bond, diamond you don't find."

(Brihad Samhita 74-2 Varahamihira) Indian diamonds were bright with their ebullience even at a time when the West had just started seeing "diamond up above the sky so high". The genius in shaping and sharpening the fancied precious stones is attractively rewarded by those who have got a high frenzy and fat finance to enjoy their lustre. The Nation should be the larger beneficiary. Intermediate interception beyond permitted parameters, is to be discouraged and sternly dealt with. The impugned public policy statements had been only some soft operations in that behalf. No one should shed false tears in that situation. Courts would not be enthusiastic to puff up fraudulent faces, when it has a greater duty to wipe off many tears from very many eyes.

21. The writ petition is dismissed.