TaxTMI 
TaxTMI 
2003 (1) TMI 127
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....ssues involved are identical so a single judgment will dispose of all these writ petitions. We propose to discuss the facts drawn from Writ Petition No. 3343 of 1987 (M/s. Taparia Overseas (P). Ltd. v. Union of India) as the facts involved in all other petitions are more or less similar except with some minor variations which have no bearing on ultimate decision of these petitions. 3. Brief background facts sketched from the above petition are as under: Background facts : The petitioners had acquired 2 licences both dated 2nd March, 1987 issued under the provisions of Import (Control) Order, 1955 (the 'Order' for short) in favour of one M/s. Suraj Textiles Traders, New Delhi, in terms of Appendix 21 of Import/Export Policy, Vol. I, 1985-88 by the Deputy Chief Controller of Import/Export, New Delhi, for import of 'Polyster Filament Yarn'. It had been acquired by the petitioners in terms of paras 225 and 226 of the Import Export Policy 1985-88 ('the import export Policy' for short). 4. The petitioners before acquiring these two licences had written a letter dated 9th April, 1987 furnishing full particulars to the Joint Chief Controller of Import an....
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....exercise of powers conferred under clause 9(3) of the Order (as amended). 10. In view of the aforesaid development, the Customs Authorities did not process the Bill of Entry for home consumption. They did not pass any order under section 47 of the Customs Act. In other words, the Customs Authorities had decided to withhold the clearance of the said 'Polyester Filament Yarn' imported by the petitioners holding a view that the import was without valid licence. The aforesaid action on the part of the Custom Authorities withholding clearance of goods imported by the petitioners resulted in invoking writ jurisdiction of this Court under Article 226 of the Constitution of India, contending that the goods having been validly imported under validly issued licences could not affect the imports made by them much before the suspension of the licences in question; since suspension would only operate prospectively. 11. This Court whilst granting rule, relying upon para (35) of the judgment of the Apex Court in the case of East India Commercial Co. v. Collector of Customs - 1983 (13) E.L.T. 1342 (S.C.) = AIR 1962 SC 1893 and Chemicolour Agency v. Chief Controller of I.E. 1987 (30) ....
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....etitioners had acquired licences in question for valuable consideration by paying heavy premium without notice of any fraud alleged to have been played by original licence holder. The Revenue is not disputing that the Petitioners, were the bona fide transferees for value. The licences, though were suspended on 11-9-1987, but prior to that petitioners had filed Bill of Entry for home consumption on 12th and 13th July, 1987 as such their imports cannot be said to be without licence. In his submission, suspension cannot be retroactive. Reliance was placed on Clauses (9) and (10) of the Order in support of his contention. 15. Clause (9) thereof provides that the Central Government and Chief Controller of I. & E. may cancel licence if the same is found to have been obtained by fraud or misrepresentation. Clause 10 of the said Order provides that no such action of cancellation can be taken against importer or any other person unless he has been given a reasonable opportunity of being heard. In his submission, the Joint Chief Controller ought to have given an opportunity of being heard since he was well aware that the Petitioners were transferees of the licences, in view of the two let....
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....ed for dismissal of the petition with costs. 18. In rejoinder, the learned Counsel for the petitioners contends that the judgment in case of Fedco (P) Ltd. (supra), is not applicable to the facts of the present case. In his submission in that case, petitioners M/s. Fedco (P.) Ltd. (supra) itself was involved in practising fraud on the concerned authorities while obtaining licences. In that view of the matter, the Apex Court observed that whether licencee himself or some other party is responsible for fraud or misrepresentation, the facts remains that basis of grant of licence disappears. In that light the observation was made that it would be unreasonable to allow such licences to continue. In other words, continuation thereof was snapped by the Supreme Court but till the date, it was snapped, it was allowed to operate. The submission is that the judgment of Fedco (P) Ltd. cannot be read out of context. 19. On bahalf of the Petitioners, it was pointed out that in judgment of Fedco (P) Ltd. (supra), the Apex Court has categorically ruled that if reasonable opportunity against proposed cancellation of licence has not been given, the order would be an unjustified interference wi....
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....canvassed by the respondents, that since the licences were held to be avoid ab initio, there was no necessity of giving a show cause notice, is contrary to the principles of natural justice as there is no such concept of any licence being declared void ab initio under the scheme of the order in general or under clause (9) thereof in particular. 21. The learned Counsel for the petitioners further brought to our notice that Paragraph 226 of the Handbook of Import & Export Procedure which provides that a transfer of a licence does not require any endorsement or permission from the licensing authority i.e. such transfer is to govern by the ordinary law. He further pointed out that imports against replenishment were governed by Handbook on Import Export Procedure 1985-88, which were in the nature of administrative instructions issued by the Central Government. As such transfer of the licence was not to be governed by any statutory provisions but it was to be governed by Common Law. It was thus pointed out that as a fact the principles of Law of Contract were applied by the Apex Court in the case of East India Commercial Co. (supra). In that view of the matter, the submission is that ....
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....er Section 47 is in fact administrative in nature and that the officer has only to see that the goods in question are not prohibited and that duty is paid thereon. Such an order permitting the goods to go out of the customs charge does not in any way render the Customs Authorities helpless, if any action is to be taken in future. In his submissions not only the provisions of section 28 are available for demanding duty but a notice under section 124 could be issued not only for confiscating goods but also for levying penalty under section 112. He, therefore, submitted that although there is no time limit stipulated, but, it is expected that order is to be passed within a reasonable time. In this case, since at the time when the goods were imported and the import was complete, that too of the goods of which the import was not prohibited, as such a subsequent cancellation of the licence could not make the import bad. 25. The learned Counsel for the petitioners at the cost of repetition submitted that for want of show cause notice or an opportunity of hearing to the transferees, the petitioners, order cancelling licence will have to be treated as ab initio void being in breach of pr....
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....for cases covered by para 195(2), 204, 263(2) and 265(1), a licence holder may transfer the licence in full or part in favour of any other person. The licence holder or such transferee may import the goods permitted therein but the facility of paragraphs 195(2), 196 and 202 shall not be available to any transferee, unless the transferee is himself a registered exporter and can satisfy the customs authorities at the time of clearance of the goods, of his bona fides. 226. The transfer of the licence will not226. require any endorsement or permission from the licensing authority i.e., it will be governed by the ordinary law. Accordingly, clearance of the goods covered by a REP licence issued under this policy, will be allowed by the customs authorities on production by the transferee of only the document of transfer of the licence concerned in his name. Whenever a REP licence is transferred, the transferor should give a formal letter to the transferee, giving full particulars regarding number, date and value of the licence transferred and the name and address of the transferee, and complete description of the import items for which the licence is transferred. A copy of the tr....
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....gives the party defrauded the right on discovering the fraud to elect whether he shall continue to treat the contract as binding or disaffirm the contract and resume the property. If it can be shown that "the party defrauded" has at any time after knowledge of the fraud either by express words or by unequivocal acts affirmed the contract, "his election is determined for ever. The party defrauded may keep the question open so long as he does nothing to affirm the contract." The question always is, has the person on whom the fraud has been practised, having notice of the fraud, elected not to avoid the contract?, or, has he elected to avoid it? or, has he made no election? As long as he has made no election he retains the right to determine it either way, subject to this that if in the interval whilst he is deliberating, an innocent third party has acquired an interest in the property, or if in consequence of his delay the position even of the wrongdoer is affected, he will lose his right to rescind." 30.The aforesaid well settled principle of law of Contract was applied to the licence obtained by fraud or misrepresentation by the Apex Court in the case of East India Commercial ca....
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....oration - 2000 (121) E.L.T. 577 (SC), the facts of which are similar to the facts involved in the present petition. It also involved import of Polyester Filament Yarn by the transferee of a REP licence. The contention that the cancellation of the licence by the Controller of Imports and Exports rendered it ab initio void was categorically rejected by the Apex Court in the following words: "Shri Aroop Choudhary, the learned Senior Counsel appearing in support of the appeal, has urged that the Tribunal was in error in interfering with the order passed by the Collector regarding confiscation of the goods as well as the imposition of penalty. As regards confiscation under section 111(d) of the Act the submission of the learned Counsel is that since the licences have been cancelled by Deputy Controller of Imports and Exports ab initio the Collector was right in holding that there was no valid authorisation for the import of goods and goods have been imported in contravention of the provisions of the Import (Control) Order, 1955 read with Imports and Exports (Control) Act, 1947. We are unable to accept this contention of the learned Counsel in view of the law laid down by this C....
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.... the licence holder, who was a party to the fraud proved against it. The Court ruled that the person who himself is guilty of fraud shall never be permitted to avail himself any benefit of it. The same is a principle of law of contract. If the contract founded in fraud be questioned between the parties to the contract, in that event, as against a person who has committed fraud and who endeavors to avail himself any benefit of it, the contract is to be considered as null and void but it does not lays down that fraud intended by one man shall overturn a fair and bona fide contract or transaction with others. As a matter of fact, this question did not gerame in the case of Fedco (P) Ltd. (supra). That was a case between the Licensing Authority and the licence holder and the grant of licence was governed by the provisions of the statute. No transfer of licence in favour of third person was involved. The person holding the licence itself had fraudulently obtained licences. In other words the person holding licence itself was a party to the fraud and such person could not have been allowed to rely upon principles of Law of Contract, because no contract was involved. The grant was to be g....
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....r of negotiable instruments. Take for example, if the seller has endorsed and delivered to the buyer the Bill of Leading or any other documents of title to the goods and the buyer has endorsed and delivered it to his sub buyer, then the sub buyer, provided he has taken the document in good faith, as well as for valuable consideration, is entitled to the goods free from any right in the original seller to stop them, and thus his position is better than that of the original buyer, same is a position of sales in market-overt. Without attempting to enumerate the various rights which are assignable, either by the express act of the parties, or by the operation of law, we may observe, generally, the maxim assignatus utitur jure auctoris, i.e. an assignee is clothed with the rights of his assignor is subject to many restrictions, shortly enumerated hereinbelow. (See Broom's Legal Maxiims, tenth Edition, p. 302) Assignatus utitur jure auctoris (Hal. Max, p.14) - An Assignee is clothed with the rights of his assignor. "This maxim applies generally to all property, real and personal, and refers to assigns by act of parties, as where the assignment is by deed; and to assigns b....
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....arious cases which have been founded on the proof of fraud. But still we must recollect that the principle which I have mentioned is always applied ad hominem. He who is guilty of fraud shall never be permitted to avail himself of it; and if a contract founded in fraud be questioned between the parties to that contract. I agree that as against the person who has committed the fraud, and who endeavours to avail himself of it, the contract shall be considered as null and void. But there is no case in which a fraud intended by one man shall overturn a fair and bona fide contract between two others. Even as between the parties themselves we must not forget figurative language of Lord Chief Justice Wilmot, who said that "that statute law is like a tyrant; where he comes he makes all void; but a common law is like a nursing father, and makes void only that part where the fault is, and preserves the rest." On the above canvas, having examined the well settled, established and well recognised concept of law that the effect of fraud is not to render the transaction void ab initio but renders it voidable at the instance of the party defrauded and transaction continues valid until....