TaxTMI 
TaxTMI 
1965 (7) TMI 56
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....s a firm. The firm in the present case had three partners, namely, Amin Chand Mutha, Nainmull-Nathmull and Juthmull Mutha. On January 1, 1957, the firm was dissolved. Consequently in accordance with the instructions contained in what is known as the Red Books, application was made on March 25, 1957 by one of the partners (Amin Chand Mutha) for the grant of a licence with respect to the period January- June 1957. It was noted in the application that quota certificates had been issued in favour of the firm Nainmull Juthmull of which the applicant was a partner. That firm had been dissolved and application had been made to the Chief Controller of Imports, New Delhi for division of the quota of the firm between the three partners of the firm who had separated. It may be mentioned that application for licence had to he made before the 31st of March of the January June 1957 period. It was stated that the application had already been made to the Chief Controller on behalf of the dissolved firm on March 4, 1957 for division of the quota between the three partners and was pending when the application for licence was made by Amin Chand Mutha on March 25, 1957. The application for licence had....
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....leave from this Court; and that is how the matter has come up before us. Before we consider the point raised in the present appeals we shall briefly refer to the system of licensing which came into force after the Imports and Exports (Control) Act, No. 18 of 1947, (hereinafter referred to as the Act). By s. 3 of the Act, the Central Government was given power to provide for prohibiting, restricting or otherwise controlling in all cases or in specified classes of cases and subject to such exceptions, if any, as may be made by or under the order, the import, export, carriage coastwise or shipment as ship stores of goods of any specified description. This could be done by means of order published in the official gazette. The Act also made by S. 5 any contravention of any order made and deemed to have been made under the Act punishable and by S. 6 provided for cognizance of offences against the provisions of the Act. In pursuance of the power granted to the Central Government, the Imports (Control) Order was issued on December 7, 1955 (hereinafter referred to as the Order). This Order repealed the earlier orders issued under the Act or the Defence of India Rules 1939. It provided for ....
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....otas : (see Section 1 of the Red Book for the period January-June 1957, instruction 22). After setting out the system of granting quotas to established importers on the basis of their past imports, instructions 71 with which we are particularly concerned, laid down that quotas were granted on the pre-supposition that no change had taken place in the constitution of the firm. The expression "firm" included a partnership, a limited company and a proprietary business. It was further provided that when a change occurred in the constitution or the name of a firm or the business changed hands, the reconstituted firm would not be entitled to the quota of the original firm until the transfer of the quota rights in their favour had been approved by the Chief Controller or other licensing authority, as the case may be. Instruction 71 also provided how the transfer of quota rights would be recognised or approved. In the present case we are concerned with cl. (b) of Instruction 71, which is in these terms : - "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 us....
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....or the purpose of helping the licensing authority under the Order in the matter of grant of licence to the class of established importers with which this division is concerned. The approval of the Chief Controller is provided by these instructions in order that the licensing authorities may have a clear guidance as to how they should deal with the quota allotted to a firm consisting of a number of partners which has been dissolved. It is in the background of this position that we have to consider whether this approval granted by the Chief Controller relates back to the date of the agreement relating to the dissolution of the firm consisting of a number of partners. Two views have been expressed by the High Courts in this behalf. The Madras High Court took the view in Jain's case(A.L.R. [1961] Bom 244.) that "where a firm is dissolved and the partners agree to divide the business, assets and liabilities, the partners shall get their respective share in the quota rights according to the terms of the agreement. Such rights would accrue to each of the partners from the date of the agreement." The Madras High Court further held that even where the approval of the Chief Controller is ma....
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....al under Instructions 71 and 72 might lose the advantage that they would have before the licensing authority by delay in the approval by the Chief Controller. In this connection our attention was drawn to the opening words in Instruction 71 which provided that "the reconstituted 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." It is true that these words make it necessary that there should be approval of the Chief Controller before a partner of a dissolved firm can say that he holds a quota. But these words do not mean that such approval will not date back to the date of agreement dividing the quota rights, for the Chief Controller, as already indicated, has to divide the quota rights once he is satisfied as to dissolution on the production of evidence mentioned in Instruction 72. In such circumstances it would in our opinion be fair to hold that the Chief Controller's approval dates back to the date of agreement so that such persons may not suffer on account of the delay in the Chief Controller's office in the matter of according approval. The fact that in his letter of ....
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....rect. It was next urged that the application when it was made to the Joint Chief Controller was not complete inasmuch as it did not mention what quota the particular partner had. That is undoubtedly so for the applications in the present cases stated that the firm had been dissolved and application had been made to the Chief Controller for division of the quota of the original firm between the partners according to the agreement between them. To that extent the application was defective. It is pointed out that under Instruction 13 application for licence has to be made before a certain date and has to be complete in all respects. It was further urged that it is always open to the Joint Chief Controller to reject an application which is defective and is thus incomplete. Assuming that is so, one should have expected such a defective application being dismissed immediately after the last date for making the application had expired and the Joint Chief Controller should have given that as the reason for the rejection of the application for licence. But this was not done in the present cases and the reason for rejection of the application was not that it was not complete when made. Furt....
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....n in these appeals. The essential facts bearing on this question being more or less similar it would be sufficient to state those which give rise to Civil Appeal No. 60 of 1965. A partnership firm styled as Nainmull Juthmull carried on, amongst other things, the business of importing goods from foreign countries. As an established importer, the Joint Chief Controller of Imports and Exports Madras had granted it a quota for import of certain commodities. On the strength of this the firm used to be granted import licences every half year. There were three partners in that firm, namely, Aminchand Mutha, Nainmull Nathmull and Juthniull Mutha. On January 1, 1957 the firm was dissolved. On March 25, 1957 Aminchand Mutha made an application to the appropriate authority for the grant of an import licence in respect of the period January-June, 1957 stating in his application the facts that the firm Nainmull Juthmull held a quota certificate, that the firm was dissolved and that an application was made to the Chief Controller of Imports for the division of the quota amongst the erstwhile partners of the firm. That application had in fact been made on March 4, 1957 and was pending on the date....
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....ghts even though accorded after the expiry of the licensing period would relate back to the date of dissolution of the firm or at any rate to the date of the application for approval. It would be appropriate to advert now to the legal position pertaining to the import of foreign goods. In the first place there is the Imports & Exports (Control) Act, 1947. Sub-section (1) of s. 3 of that Act, amongst other things, provides that the Central Government may by order published in the Gazette prohibit, restrict or otherwise control in all cases or in specified classes of cases and subject to such exceptions, if any, as may be made by or under the order "(a) the import.......... of goods of any specified description". Sub-section (2) makes the provisions of s. 19, Sea Customs Act applicable to goods with respect to which any order under sub-s. (1) of s. 3 of the Imports & Exports (Control) Act, 1947 has been made. Sub-section (3) of that section provides as follows : "Notwithstanding anything contained in the aforesaid Act, the Central Government may, by order published in the Official Gazette, prohibit, restrict or impose conditions on the clearance, whether for home consumption or for....
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.... granting of licences for import of commodities into India and the allotment of the requisite foreign exchange for the purpose is regulated by the _policy framed in that behalf from time to time by the Government of India. The commodities sought to be imported by each of the respondents are those included in Schedule 1 and could be imported only under a licence. Each of them claims to be an established importer in the sense that he is entitled to a proportionate quota which had been allotted to the dissolved firm of which he was a member. The principles to be borne in mind while dealing with applications for licence for import are set out in what is known as "Red Book" which is issued by the Government from time to time with respect to each licensing period. The title of the book is "Import Trade Control Policy". The procedure to be followed by the authority while dealing with applications for import licences is given not only in this book but also in what is called the "Handbook". The Red Book in addition to the instructions, also contains the "Policy Statement" which gives details of licensing policy for the particular licensing period dealt with in that book. The instructions di....
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....are meant for the guidance of the Licensing Authority and cannot be put higher than administrative instructions. It would follow, therefore, that such instructions would not confer a legal right upon an exporter for the division of the quota rights of a dissolved firm and for treating him as an established importer though strictly speaking he was not one. Once this position is reached there would be no difficulty in answering the question which we are called upon to decide. Further, even though a firm is an established importer it cannot be said to possess a legal right to import according to its quota. If the firm itself had no legal right to import according to its quota there is no room for saying that upon its dissolution each of its erstwhile members would acquire a right to import either in proportion to their respective shares in the firm or in the proportion provided for in the agreement whereunder the dissolution was effected or be entitled to be treated as an established importer. 'Me Government, however, with a view to ensure a fair administration of the licensing system has given instructions in paragraph 71 of the Red Book to certain authorities to divide the quota rig....
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....the application was made in Form A of Appendix IV which is a form for application by an established importer. This form is reproduced at p. 319 of the Red Book for the period January-June, 1957. Item 8 of that form requires "General Information to be furnished". Sub-item 'h' is as follows : "Whether the constitution of the firm has undergone any change after the issue of the quota certificate to the firm ? If so, quote No. and date of orders issued by the appropriate authority sanctioning transfer of quota rights in favour of the applicant." This clearly shows that an application as an established importer can be made by a firm or person claiming the whole or a part of the quota only after the appropriate authority has sanctioned transfer of quota rights. For, the information required by this sub-para to be furnished cannot possibly be furnished till the recognition of the division is accorded by the Chief Controller of Imports and Exports. The consequence that would ensue, if an application is made for grant of a licence without furnishing the information required by this sub-para is that application would have to be treated as defective and would, therefore, be liable to be rej....
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....ce on the ground of its being an established importer and a grantee of a quota certificate." The decision to the contrary in Jain's case(I.L.R. [1959] Mad. 850) was also cited' in Jagannath's case(63 Bom. L.R. 1.) and in particular the following observations therein : "We are in entire agreement with this reasoning. Sub-clause (b) of paragraph 74 is quite clear that where a firm is dissolved and the partners agree to divide its business, assets and liabilities the partners shall get their respective share in the quota rights according to the provisions of the agreement. Such rights would accrue to each of the partners from the date of the agreement. The fact that approval of the agreement (assuming such approval is necessary) is given by the Chief Controller of Imports and Exports on a later date, it cannot be said that the rights of the partners would accrue only on and from the date, of such approval. The words 'in future' can be understood to mean 'from the date of the dissolution'." Dealing with them I observed as follows "With respect, we cannot accept the view taken by the learned Chief Justice and concurred in by the learned Judge. In so far as quota rights are concerned,....