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M/S. Sha Maggajee Sa... v. Joint Chief Controll...
Structured Summary of the Opinion
Factual and Procedural Background
Three writ petitions challenged orders of the Import Control Authorities refusing to grant import licences for certain past licensing periods. W.P. 566 of 1962 related to two licensing periods (January–July 1956 and July–December 1956). The petitioner in that matter applied for licences for "Paper, other sorts." Those applications were kept pending pending recognition of transfer of quota rights and directions to effect changes in the constitution of the partnership. The Chief Controller of Imports purported to recognise the transfer only in 1958 and stated that recognition would be effective only for subsequent periods. The applications for the earlier periods were then rejected. Previously this matter had been before the court in W.P. 782 of 1959; that petition was allowed and the Chief Controller was directed to dispose of the applications on the basis that the petitioner firm was entitled to quota rights from the date of actual reconstitution and not from the recognition date.
Two other petitions concerned licences for the import of hinges. In W.P. 600 of 1962 the authority dismissed the application on the ground that the import policy at the time of consideration listed the item as prohibited ("Nil"). In W.P. 602 of 1962 the authority relied on two grounds for dismissal: (1) the application was tainted by suppression of fact (failure to disclose change in partnership constitution), and (2) the applicable policy at the date of consideration prohibited import of the item.
The Joint Chief Controller of Imports filed a counter-affidavit contending that the application forms require specific disclosure of changes in constitution for firms because such changes affect eligibility for quota; where false or misleading statements are made the applications are liable to rejection. The Department also relied on paragraph 31 of the Red Book (April–September 1961) and an ad hoc practice limiting grant of licences for back periods when applications are considered late.
Legal Issues Presented
- Whether the established importer (a firm that has been reconstituted) is entitled to quota rights from the date of actual reconstitution and not from the date of later recognition by the Chief Controller of Imports.
- Whether an import authority may refuse an application for an earlier licensing period on the basis of an import policy in force at a later date (i.e., whether a later policy can be applied to an application for an earlier period).
- Whether an application may be rejected where the applicant failed to disclose a change in the partnership constitution and thereby made false or misleading statements on the application form.
- Whether departmental instructions (e.g., paragraph 31 of the Red Book and ad hoc rules) limiting consideration of back-period applications can defeat the rights of an established importer whose application was kept pending for reasons other than laches.
Arguments of the Parties
Petitioners' Arguments
- In W.P. 566 the petitioners acknowledged that there had been a change in the firm's constitution (retirement of a partner and substitution by a branch member) but asserted they were a "Hindu joint undivided family partnership concern" and believed that such substitutions did not require approval of the Chief Controller or intimation for fresh quota rights.
- Implicitly, the petitioners relied on the earlier direction in W.P. 782 of 1959 that recognised entitlement to quota from the date of reconstitution rather than recognition by the Chief Controller.
Respondent / Joint Chief Controller of Imports (Department)
- The Department argued that application forms specifically require disclosure of any changes in the constitution of firms because such changes may alter eligibility for quota; failure to disclose such information constitutes a false or misleading statement and authorises rejection of the application.
- With respect to hinges, the Department relied on paragraph 31 of the Red Book (April–September 1961) and departmental practice that generally precludes grant of licences for back periods when the consideration occurs long after the relevant period; because these applications were dealt with in 1961 for much earlier periods, they were denied in accordance with that practice.
- The counter-affidavit invoked the Import Trade Control Order 1955 and the rule that licences may be refused where applications contain false, fraudulent or misleading statements.
Additional Government Pleader / Concessions by Government Counsel
- The learned Additional Government Pleader conceded the settled legal position that when quota rights transfer by reconstitution of a firm, the newly constituted firm is entitled to those rights from the date of reconstitution and not from the date of subsequent recognition by the Chief Controller.
- The Additional Government Pleader also conceded that the ground relied upon in W.P. 600 of 1962 — that a later policy showing "Nil" for the item at the time of consideration could be relied upon to refuse an earlier-period application — could not be sustained.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| W.P. 782 of 1959 | Directs that the Chief Controller should dispose of applications on basis that a firm is entitled to quota rights from date of actual reconstitution (not from date of recognition). | The court recited that this earlier petition was allowed and used it as context for the present disputes about entitlement from reconstitution date. |
| W.A. No. 15 of 1960 (Mad) | Establishes that import authorities cannot rely upon the policy relevant to a later period in dealing with an application for an earlier period; applications must be considered in light of the policy relevant to the period applied for. | The court relied on this authority to hold that the Department could not refuse an earlier-period application on the basis of a later policy (applied to allow W.P. 600 of 1962). |
| W.P. 27, 47, 48 of 1961 (Mad) | Reiterates the position that an application for a particular period must be considered in the light of the policy relevant to that period and not refused on the basis of a later policy. | The court cited this series of writ petitions as reaffirmation of the principle applied in disposing of W.P. 600 of 1962. |
Court's Reasoning and Analysis
The court's analysis proceeded in discernible steps, each based on material contained in the record and on established principles:
- On entitlement after reconstitution: The court stated that it is settled law that when quota rights transfer due to a change in the constitution of a firm, the newly constituted firm is entitled to those transferred quota rights from the date of the actual reconstitution, not from the later date on which the Chief Controller purports to recognise the reconstitution. The court accepted the Additional Government Pleader's concession of this settled position. The court observed that recognition by the Controller at a later date, and any departmental rule (e.g., paragraph 31 of the Red Book) limiting consideration of back-period applications, cannot defeat the rights of an established importer whose application was kept pending for reasons other than the applicant's laches.
- On application of later policy: The court analysed the Department's attempt to rely on a later policy (policy in force at time of consideration) to refuse earlier-period applications. Relying on W.A. No. 15 of 1960 (Mad) and subsequent writs, the court held that it is not open to import authorities to apply a later policy to an application relating to an earlier period; the policy book governs grant of licences during the period for which it is enunciated and cannot be treated as a ban on import for other periods. Therefore, the Controller's reliance on the later policy to refuse the hinges application in W.P. 600 of 1962 was erroneous.
- On false or misleading statements and nondisclosure: The court addressed whether the rejections in W.P. 566 and W.P. 602 were justified on the ground that the applications contained false and misleading statements (failure to disclose change in partnership constitution). The court noted that petitioners did not deny the change in constitution but asserted a belief that substitution within a Hindu joint family did not require intimation. The court rejected that legal characterization, explaining that once a partnership is formed its constitution and any change (including retirement of a partner or substitution) must be reported as required by the rules in the import policy books. The court cited the Import Trade Control Order 1955 (exercising powers under the Imports and Exports Control Act) which authorises refusal of a licence where an application contains false, fraudulent or misleading statements. Given the admitted change in constitution and failure to disclose it on the application, the court found the authority had jurisdiction to reject the application and that the rejection was justified.
- Resulting disposition: Applying these principles, the court concluded that the Controller's singular reliance on a later policy to refuse W.P. 600 was legally unsustainable and that the rejections in W.P. 566 and W.P. 602 for nondisclosure/false statements were properly founded on the statutory/regulatory authority to refuse tainted applications.
Holding and Implications
Holding: W.P. 600 of 1962 is allowed; W.P. 566 and W.P. 602 of 1962 are dismissed.
Implications and direct effects:
- The order in W.P. 600 of 1962 was set aside because the Controller could not lawfully refuse an application for an earlier period by relying on a later import policy that showed the item as "Nil." The court applied the established principle that an application must be considered in light of the policy relevant to the period applied for.
- The rejections in W.P. 566 and W.P. 602 of 1962 were upheld because the applications contained false or misleading statements by failing to disclose the change in the constitution of the partnership; under the Import Trade Control Order 1955 an authority may refuse such tainted applications and the court found the rejection justified.
- The court emphasised the settled law that quota rights arising from reconstitution vest from the date of reconstitution and that departmental recognition at a later date cannot be used to defeat those rights where the application was kept pending for reasons other than laches by the applicant.
- There will be no order as to costs in any of these petitions (explicitly stated in the opinion).
Order: The opinion concludes with the direction "Order accordingly" consistent with the holdings summarized above.
1. These three petitions challenge the order of the Import Control Authorities refusing the grant of licences to the petitioners in respect of certain licensing periods W.P 566 of 1962 relates to two periods-January to July 1956 and July to December 1956 the petitioner applied for import licence for “Paper, other sorts” These applications were kept pending ??? recognition of transfer of quota rights to the petitioner firm and the petitioner was directed to gel the changes in the constitution of the petitioner partnership and the transfer of quota rights recognised. This was apparently approved by the Chief Controller of Imports in 1958 only, and by that order that authority stated that this recognition of the transfer of quota rights should be effective only for subsequent periods. This was followed by the rejection of the applications of the petitioner for the licensing periods mentioned above. This matter was brought before this court in W.P 782 of 1959. That petition was allowed and the Chief Controller of. Imports was directed, to dispose of the applications on the basis that the petitioner firm was entitled to the quota rights from the date of the actual reconstitution of the firm and not from the date of recognition by the Chief Controller. Therefore, the Controller took up the applications for disposal, but called upon the petitioner to show cause why the applications should not be rejected as the change in the constitution was not disclosed. The petitions submitted its explanation, but the authority took the view that by tailing to disclose the fact that there was a change in the constitution of the partnership, the petitioner had made certain false statements in its applications and such applications in which false and misleading statements were made, were liable to be rejected. This order is canvassed in W.P 566 of 1962. In the other two writ petitions, licence was sought for the import of hinges. The order of the authority in so far as W.P 600 of 1962 is concerned was that the import policy on the date of consideration of the application did not permit the import of this item of goods and for that reason ??? application relevant to W.P 600 of 1962 was dismissed. In respect of the application leading to W.P 602 of 1962, the import authority relied on two grounds in dismissing it, one was that the application was tainted by suppression of fact and the other that in the date of the consideration of the application, no import was permissible for this item.
2. In the counter affidavit filed on be half of the Joint Chief Controller of Imports, it is contended that according to the instructions contained in the import policy books, certain information is specifically called for from the parties who apply for licences with particular reference to firms the constitution of which might have changed resulting in the alteration of the eligibility for the import quota applied for. Since this is a very necessary piece of information in order to deal with the grant of licences, the petitioner having been found to have given false information in its application in this regard, the application was liable to be rejected and was rightly rejected. In support of the ground that at the time of the consideration of the applications the import of hinges was prohibited, reference has been made to paragraph 31 of the Red Book, relevant to the period April to September 1961. According to this instruction, the Department appears to have devised certain ad hoc rules as it were for dealing with the issue of import licences against applications for back periods. I is stated that in terms of those instructions, an import licence could not be granted for back period. Generally speaking, when, in a case there is a delay in dealing with an application, and the consideration of the application is taken up beyond that period, no licences are granted against applications pertaining to periods other than the immediately preceding period. This general rule, it is said, has been applied, and since in 1961 when this application was dealt with, the application related to a much anterior period, it was rightly refused.
3. At the outset, it nitty be stated that it is settled law as far as this court is concerned that where a transfer of quota rights is effected as a result of change in the constitution of the firm, the newly constituted firm becomes entitled to the transferred quota as from the date on which the reconstitution was effected and not from the date on which the Chief Controller of Imports purports to accord recognition to such reconstitution. That this is the law is accepted by the learned Additional Government Pleader if almost always happens that when a transfer of quota rights is recognised by the import control authorities, there is considerable delay in the procedure involved and if a party should lose all rights to obtain licences for the intervening period, it will certainly result in great hardship and denial of any rights which were recognised to exist in the firm as it stood before the reconstitution. Notwithstanding that the recognition is accorded at a subsequent date, the established importer cannot be denied the licence for the period before such recognition, for which a valid application had been made. I am unable to see how the fact that a rule by way of an instruction has been introduced in the Red Book, limiting the consideration of applications only to the immediately prior period can have any value in so far as the rights of parties come in for examination. The reliance by the Department upon rule 31 said to have been introduced in the policy book for the year 1961 to the above effect cannot therefore operate to deny the right of the established importer to the licence for the back periods in respect of which this application had been kept pending for reasons other than laches by the applicant.
4. The learned Additional Government Pleader also concedes that the ground upon which the application has been rejected in the matter relevant to W.P 600 of 1962, viz., that at the time of the consideration of the application the import policy showed an entry “Nil” against the relevant item, cannot be sustained. In W.A No. 15 of 1960 (Mad) it was held that it is not open to the import authorities to rely upon the policy relevant to a later period in dealing with an application for an earlier period. What the import policy lays dowr is only whether during that period for which the policy is enunciated, licences for the import of the several Items should be permitted or not, and if permitted, to what extent. It would not be correct to describe the import policy book as in acting a ban on imports during that period. It deals only with the grant of licence for that period. Actually, it may turn out that when an import licence is granted for a particular period, on the basis of the policy prevailing for the period, the actual import is made under that licence sometimes a year or two later, and though the policy with regard to that item of import knight have changed in the meantime, the import of that item under cover of the licence already granted is not an unlawful import. The policy book does not therefore prohibit the import. It deals only with the grant of licences during any particular period, though the import itself might be effected at a time when the policy has changed. That apart, the decision in W.A No. 15 of 1960 (Mad) emphasised the position that an application for a particular period must be considered only in the light of the policy relevant to that period and cannot be refused on the basis of a later policy which might have changed the position with regard to the licences for the import of the item applied for. This view has been reiterated in W.P 27, 47, 48 of 1961 (Mad).
5. It follows that in so far as W.P 600 of 1962 is concerned, since the only ground relied upon by the controller, that the later policy prohibited the grant of a licence for hinges the application could not be granted, is erroneous in law. W.P 600 of 1962 is allowed.
6. In W.P 566 and 602 of 1962, the question arises whether the rejection of the applications for the reason that the petitioners had furnished false and inaccurate particulars in their applications for the grant of licences is justified in the order of the Joint Chief Controller, it is stated that against column 8(h) of the applications, the petitioners had specifically indicated that there had been no change in the constitution of the firm since the issue of the quota certificate on 14-12-1953. But the constitution of the firm had undergone a change on account of the retirement of a partner and on account of the reconstitution of the partnership between the date of the quota certificate and the date of the application for the imnprt licences, and in view of the false and misleading statements, the appl cations were rejected. In the affidavit of the petitioner, the petitioners stated that the petitioners were a “Hindu joint undivided family partnership concern” and they were under the impression that the death or retirement of one partner and the substitution of his branch in the place of the partnership firm did not require approval of the C.C.I.E New Delhi for fresh quota Virtually, therefore, the fact that there had been a change in the constitution of the firm during the period prior to the application was not denied. What was claimed was that since the members of the partnership were also members of Hindu joint undivided family, the change in the constitution of the firm involved in the retirement of a member of the family was only that of substitution in his place of another member of the family and that would not require any intimation. This is obviously a misconception. When once a partnership has been formed, the petitioner is not entitled to say that the partnership is nothing other than the Hindu joint family itself doing business the petitioner as an established importer must have been well aware that partnership firms and the changes in the constitution of such partnerships have been dealt with in a Special manner by the Import Control authorities. Retirement of a partner, it is expressly stated in the relevant rules, does not entitle the surviving firm to the full quota unless the retiring partner has relinquished his interest in favour of the surviving partner the case of death, dissolution etc. have all been dealt with severally in the rules contained in the import control policy books the failure to report change in he constitution of the firm and to obtain a fresh quota certificate is certainly not in conformity with the rules and the explanation attempted in the affidavit is hardly reasonable it is argued by Mr. Doha, on behalf of the petitioners that this requirement about the disclosure was introduced only in 1956, but it does not appear to be denied that in so far as the licencing periods in question are concerned, lire application form did in fact contain a clause to this effect calling for disclosure of the relevant facts.
7. In the import Trade Control Order 1955 issued in the exercise of the powers conferred by the Imports and Exports Control Act an application for the grant of a licence may be refused if the application contains any false or fraudulent or misleading statement.
8. That the authority, if it is satisfied that the application is tainted in that manner has jurisdiction to reject the application can therefore admit of no denial, and if as a fact, during the period prior to the application, a partnership, which has made the application had changed its constitution and the fact of such change had not been incorporated in the application as required, the rejection is fully justified.
9. It follows that the order or rejection which is the subject matter of W.P 566 and 602 of 1962 cannot be assailed as erroneous in law or in the Improper exercise of jurisdiction. These petitions are accordingly dismissed. There will be no order as to costs in any of these petitions.
LI/RSK/D.V.C
10. Order accordingly.
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