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PETITIONER: JOINT CHIEF CONTROLLER OF IMPORTS AND EXPORTS, MADRAS

       Vs.

RESPONDENT: M/S.  AMINCHAND MUTHA ETC.

DATE OF JUDGMENT: 21/07/1965

BENCH: WANCHOO, K.N. BENCH: WANCHOO, K.N. GAJENDRAGADKAR, P.B. (CJ) SHAH, J.C. MUDHOLKAR, J.R. SIKRI, S.M.

CITATION:  1966 AIR  478            1966 SCR  (1) 262  CITATOR INFO :  RF         1968 SC 718  (15)  E          1973 SC 106  (145)  RF         1974 SC1209  (7)  R          1974 SC2346  (5)  RF         1986 SC1021  (13,14,21)  RF         1987 SC1059  (15)

ACT: Imports  (Control)  Order,  r. 3 and  Import  Trade  Control Policy   Instructions,  instruction  71-Approval  by   Chief Controller of transfer of quotas-Date when effective.

HEADNOTE: By  s. 3 of the Imports and Exports (Control) Act, 1947  the Central  Government  was given power, by means of  an  Order published  in  the  Gazette,  to  provide  for   prohibiting restricting  or  otherwise controlling the import  of  goods into  India.   In  pursuance  of  that  power,  the  Central Government issued the Imports (Control) Order.  It  provided for a system of licensing and r. 3 thereof provided that  no person shall import the goods specified in Schedule I except under  a  licence granted by the proper authority.   Rule  6 gave  power to the licensing authority to refuse to grant  a licence  on the ground that the application  was  defective. In order to guide the licensing authorities in the matter of granting    licences,   the   Central   Government    issued administrative  instructions.  The instructions provide  for the  granting of licences to "established  importers",  that is,  persons  engaged  in  import trade  for  at  least  one financial year falling within a specified period called  the basic  period.  Instruction 71 of the Instructions  provided for  division of quota rights of a firm among its  partners, when the firm was dissolved.  It lays down that the partners shall get their shares in the quota rights according to  the provision of the agreement between them.  Quotas are for the purpose   of  informing  the  licensing  authority  that   a particular  person  has been recognised  as  an  established importer,  and it is for the licensing authority to issue  a licence to the quota holder in accordance with the licensing

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policy for the period with which the licence deals. The  respondent  was  a  partner of  a  firm  which  was  an established  importer.   The firm was dissolved  in  January 1957  and on 4th March 1957, an application was made to  the Chief  Controller  on behalf of the dissolved  firm,  for  a division  of  the  quota between the  partners.   Since  the application for a licence for January-June period should  be made by 31st March, the respondent applied for the grant  of licence for the period January-June 1957, on 25th March 1957 without   mentioning   his   quota  as   required   by   the Instructions,  because the Chief Controller had not by  then approved  the division of quota rights among  the  partners. Since  the  application  was defective  the  respondent  was informed in April 1957 that before a licence could be given, the respondent should get such approval.  In September 1957, the   Chief   Controller  informed   the   respondent   that instructions had been issued to the Joint Chief  Controller, who  was  the  licensing  authority;  but  the  Joint  Chief Controller informed the respondent that a licence could  not be   issued,   since  the  transfer  of  quota   rights   in respondent’s  favour was recognised by the Chief  Controller ,only after the expiry of the licensing period to which  the application  related.   After an  unsuccessful  appeal,  the respondent moved the High Court                             263 for  the  issue of an appropriate writ, and the  High  Court allowed the petition. In his appeal to this Court, the Joint Chief Controller con- tended  that,  since  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 entitled to rely upon that transfer  only for a period subsequent to such sanction or recognition  and not for any anterior period. HELD:(Per P. B. Gajendragadkar, C.J., K. N. Wanchoo, J. C. Shah and S. M. Sikri, JJ.) the licensing authority had to deal  with the application for a licence on the  basis  that the  approved  quotas  were given to  the  partners  of  the dissolved  firm  from the date of the  dissolution  and  the agreement to divide, and could not refuse the licence solely on the ground that the approval of the Chief Controller  was granted after the expiry of the import period. [269 E, G-H] Since  the Chief Controller had no power to refuse  division of  the  quota  rights  if  he  was  satisfied  as  to   the dissolution  of  a firm, it follows that when he  gives  his approval it must take effect from the date of the agreement. Otherwise, it would mean that the partners would lose  their advantage  on account of the delay of the Chief  Controller. It is true that Instruction 71 provides that there will  not be  a  right  to the quota till the transfer  of  the  quota rights  is approved by the Chief Controller, but that  would not mean that such approval will not relate back to the date of  the  agreement.   Further,  the  fact  that  the   Chief Controller  said  in his letter of approval that  the  quota rights  should  in future be divided  between  the  partners would  not  mean that the quotas were to  take  effect  only after the date of approval.  It only mean that the  original quota  of the undissolved firm would, from the date  of  the agreement of dissolution, be divided between the partners as provided thereunder. [269 H; 270 B, C, E, G; 271 A] Since  the application in the present case was  made  before the  approval  by the Chief Controller and did  not  mention what   quota  the  respondent  had,  the   application   was incomplete  and defective, but that was not the  reason  for the rejection. [271 F; 272 A]

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As no Order of the Central Government prohibiting the import of  the  articles  for which the  licence  was  applied  was published  in  the  Gazette, it was open  to  the  licensing authority  to issue a licence for the  period  January-June, 1957, even if there was a change in the import policy of the Government of India with respect to those articles. [272 G] Joint  Chief  Controller v. H. V. Jain, I.L.R.  [1959]  Mad. 850, approved. Jagannath v. Varadker A.I.R. 1961 Bom. 244, overruled. Per   Mudholkar,   J.  (Dissenting)  :   The   Joint   Chief Controller’s  action in refusing to grant a licence for  the period January-June, 1957, was well within his powers. On the  respondent’s own showing the Chief Controller  had  not recognisedthe  division of the dissolved  firm’s  quota rights by the date on which hemade   his   application. The  application  was therefore defective and liable  to  be rejected   under  cl.  (6)  of  the  Control   Order.    The respondent’s  position  was  as if,  upon  that  ground  the licensing authority refused to grant a licence for a  period antecedent  to  the  recognition of the  division  of  quota rights. [278 C, H; 279 A-B] The right to a quota is not a legal right and it is only  in pursuance  of certain administrative instructions  that  the licensing authority allots quotas to established  importers. Where a quota had been allotted to a firm 264 the  Chief  Controller was empowered to recognise  upon  the dissolution of that firm the division of the quota  allotted to  it amongst the members of that firm, but that would  not create a legal right in favour of the erstwhile partners  to a  share in the quota, because, the Chief  Controller  could refuse to recognise a division in conceivable cases. [281 H; 282 A-B, D] Further,  the instructions provide that, the division is  to be  recognised by the Chief Controller only for the  future. The plain meaning of this is that the division is to be made effective only from a date subsequent to the approval of the division by the Chief Controller. [282 H] Even  assuming  that the Instructions confer  some  kind  of right  upon  the  partners of a dissolved firm,  it  can  be exercised  only in the manner and to the extent provided  in the   instructions,   themselves.    Not   only   that   the instructions  do  not provide for any relation back  of  the recognition of the division by the Chief Controller, to  the date  of dissolution of the firm, but they  clearly  provide for the recognition of the division only in future. [282  F- G] Jagannath v. Varudker, A.I.R. 1961 Bom. 244, approved.

JUDGMENT: CIVIL  APPELLATE JURISDICTION : Civil Appeals Nos. 60 to  62 and 316 to 320 of 1965. Appeals  by  special leave from the  judgments  and  orders, dated  December  10, 1962 and March 18, 1963 of  the  Madras High Court in Writ Appeals Nos. 27, 47 & 48 of 1961, and  74 of 1963, 91 of 1960 and 26, 49 & 50 of 1961. C.   K. Daphtary, Attorney-General, R. K. P. Shankardass, R. H. Dhebarand R. N. Sachthey, for the appellant (in all  the appeals) A.   V. Viswanatha Sastri, S. Balakrishnan, B. R. Dolia,  R. K. Garg, S. C. Agarwal, D. P. Singh and M. K. Ramaurthi, for the respondents (in C.As. Nos. 60 to 62 of 1965). Lily Thomas, for respondent (in C. A. No. 316 of 1965).

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R.R.  Dolia, E. C. Agrawala and P. C. Agrawala,  for  the respondent (in C. As.  Nos. 317-320 of 1965). The  Judgment of Gajendragadkar C.J., and Wanchoo, Shah  and Sikri  JJ.,  was  delivered by  Wanchoo,  J.  Mudholkar,  J. delivered a dissenting Opinion. Wanchoo, J. These eight appeals by special leave against the judgment of the Madras High Court raise a common question of law  and will be dealt with together.  It will be enough  if we give the facts of one case (Jt.  Chief Controller v. Amin Chand  Mutha-C. A. 60 of 1965), for the facts in  the  other cases are more or less similar.  It appears that there was a partnership firm known as Nainmull Juthmull.  This firm  had a  quota  for  import  of  certain  things,  as  it  was  an "established  importer".  Established importers used  to  be given quotas every year and thereafter licences used to be                             265 issued to such importers on the basis of the quota  allotted to them.  The quota was not inheritable or transferable, but under certain circumstances to which we shall refer later it could be divided between partners where the quota-holder was 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 to be  made to the Joint Chief Controller of Imports at Madras where the partners  of the dissolved firm were carrying  on  business. The Joint Chief Controller informed the respondent on  April 8,  1957  that before any licence could be given to  him  he should  get the approval of the Chief Controller  about  the division  of  the quota rights of the  dissolved  firm.   It appears that there was some delay in the office of the Chief Controller  for reasons into which 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

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in December 266 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 made after  the period of January-June 1957 had come to  an  end. The High Court allowed the petition holding, on the basis of an  earlier  decision  of  that court  in  the  Joint  Chief Controller v. H. V. Jain(1), that the approval of the  Chief Controller to the division of the quota between partners  of a dissolved firm related back to the date of the dissolution of  the  firm and the partners would be entitled  to  import licences  on  the  basis of such  approval  subject  to  the licensing order.  Thereupon the Joint Chief Controller  went in  appeal  and the Division Bench of the High  Court  which heard  the  appeals upheld the order of the  learned  Single Judge.   The High Court having refused leave to appeal,  the appellant  obtained special 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 a system of licensing and r. 3 thereof provided that no person shall import any  goods of the description specified in Sch. 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 Sch.  IT.  Form of application for licences and fees  payable  therefore  are  provided in r.  4  and  r.  5 provides  for conditions to be imposed on a licensee at  the time of granting licences.  Rule 6 gave power to the Central Government  or  the Chief Controller to refuse  to  grant  a licence or direct any (1)  I.L.R. [1959] Mad. 850.                             267 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

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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 comers  :  (see the Red Book of Rules and Procedure for Import Trade Control for  the period January-June, 1957).  We are in the  present appeals concerned with established importers and may briefly indicate  how established importers were dealt with  in  the Red Book concerned.  "Established importers" were defined as persons  or  firms who had been actually engaged  in  import trade  of the articles comprised in the schedule  during  at least  one financial year falling within the  basic  period. The basic period out of which the established importer could select  the  best year for the purpose  of  calculating  the quota  was from April 1, 1945 to March 31, 1952.   Procedure was provided in these instructions for applications and  for establishment  or refixation of quotas : (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 268 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  use  it,  the  partners  shall  get  their               respective share in the quota rights according               to the provision of the agreement." Instruction  72  provided  for documentary  evidence  to  be produced  by  the applicants in support of  their  case  for transfer of quotas. It  will be seen that these administrative  instructions  do not create any right as such in favour of persons with  whom they deal.  They are for guidance of the authorities in  the matter  of  granting 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

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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  to  the provision of the  agreement  between  the partners.   He  cannot  refuse to divide  the  quota  rights between  the  partners  of  a dissolved  firm  where  he  is satisfied  on  the  evidence produced before  him  that  the conditions  contained in cl. (b) have been  satisfied.   The function  of the Chief Controller under Instruction 71  read with  Instruction 72 appears more or less of  a  ministerial nature  and  be  is  bound to divide  the  quota  rights  in accordance with the Provisions of the agreement between  the partners  of a dissolved firm, once he is satisfied  on  the evidence  produced  before him of such dissolution  and  the agreement  leading to dissolution provides for the  division of quota rights.  The division of quota rights according  to the  instructions is merely for the purpose of  helping  the licensing 269 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(1)  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 made after the licensing  period  for which application has  been  made  is over, the approval dated back to the time when the firm  was dissolved  and the agreement to divide the quota rights  was made.   The licensing authority therefore according to  this view  has  to deal with the application for licence  on  the basis  that the approved’ quotas were given to the  partners of  the  dissolved firm from the date of the  agreement  and cannot  refuse  the  licence 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(2).  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.

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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. (1) A.L.R. [1961] Bom 244. sup.CI/65--3 270 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 proceeding before the Chief Controller it follows that when he gives  approval to  the  division  of the quota between the  partners  of  a dissolved  firm  in accordance with  the  agreement  between them,  the  approval must take effect from the date  of  the agreement  between  the  partners.  It  might  have  been  a different  matter if the Chief Controller had the  power  to refuse   ,division   of  the  quota   rights   under   these instructions;  but he has no such power and must divide  the quota in accordance with the agreement if he is satisfied as to  the dissolution on the evidence produced  in  accordance with  Instruction  72.   If  such  approval  by  the   Chief Controller were not to date back to the date of agreement it would mean that the partners who were otherwise entitled  to approval  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 approval the Chief Controller usually  says  that  the  quota  rights  admissible  to  the dissolved  partnership should in future be  divided  between the partners would not necessarily mean that the quotas  for the  partners  were to take effect only after  the  date  of approval.  If the division of quota has to be recognised  by the  Chief Controller on production of evidence required  by Instruction  72  and this division has to be  in  accordance with the agreement 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 271 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

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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  the Act by notified order.  Thus the approval of  the Chief Controller under Instruction 71 is a mere  recognition of the division made by the partners of a dissolved firm  by agreement   between   themselves  and  in  that   view   the recognition  must  clearly relate back to the  date  of  the agreement.   Further when the Chief Controller says  in  his letter that in future the division would be recognised in  a certain ratio based on the agreement, it only means that the Chief  Controller has approved of the division made  by  the parties and such approval then must relate back to the  date of  the  agreement between the parties.  We  therefore  hold that  the  view  taken by the Madras  High  Court  that  the approval by the Chief Controller relates back to the date of agreement is correct. 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 272 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. Further it appears that it is not unusual for licences to be granted  after  the import period is over.  It is  also  not denied that it was open to the Chief Controller in his  dis- cretion  to say that the division of quota rights  would  be recognised  from the date of the agreement even  though  the approval came much later.  If that is so, it would mean that the applicant for division of quota would be entirely at the mercy  of the Chief Controller 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

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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 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. There will be one set of hearing fee. Mudholkar,  J. A common question of law arises for  decision in  these  appeals.   The essential facts  bearing  on  this question being 27 3 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 on  which  an  import licence  was  applied for by Aminchand to  the  Joint  Chief Controller  of Imports and Exports at Madras.  On  April  8, 1957  the  latter informed Aminchand that before  a  licence would  be granted to him he should get the approval  of  the Chief  Controller  for the division of quota rights  of  the dissolved firm.  For certain reasons which are not  material for  the  purpose  of the appeal, there  was  delay  in  the disposal  of the aforesaid 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

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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(1)  granted  the  application.   It  is  against   this decision  of the High Court that the Joint Chief  Controller has come up in appeal (1)  I.L.R. [1959] Mad. 850. 274 before  this Court as also against similar decisions in  the other connected appeals. The  point  which is urged on behalf of the  respondents  in these appeals is that the Joint Chief Controller is bound to grant  an  import licence for the period for  which  it  was sought even though the division of quota rights was approved by  the  Chief Controller subsequent to the  expiry  of  the licensing period provided that the application for the grant of  the licence was made within time and an application  for division  of quota rights is made before the expiry  of  the licensing  period.  The contention of Mr. Viswanatha  Sastri who appears for all these respondents is that in such  cases the  approval  of the Chief Controller of  the  division  of quota  rights 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               shipment abroad of any goods or class of goods               imported into the Provinces of India." Section  5 provides for certain penalties for  contravention of any order made or deemed to have been made under the Act. In  exercise of the powers conferred by s. 3 the  Government of  India promulgated on December 7, 1955 an Order  for  the control of import trade.  Clause (3) thereof runs thus :               "Restriction  on import of certain goods  Save               as otherwise provided in this Order, no person               shall  import  any goods  of  the  description               specified in Schedule 1,                             275 except under, and in accordance with, a licence or a customs

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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               conform to any provision of this Order;               (e)if the application for an import licence               is  defective  and doe,-, not conform  to  the               prescribed rules;               (g)if  the applicant is not eligible for  a               licence  in accordance with the  Import  Trade               Control Regulation;" Reading  the  Act and the Import Control Order  together  it would follow that no person is entitled to import into India goods  or  commodities included in Schedule 1 of  the  Order except  in accordance with the provisions of the Act and  of an  Order promulgated thereunder by the Government of  India or  as permitted by that Order.  The Import  Control  Order, save  in  case,-,  failing within cl. (11)  of  that  Order, prohibits the import of any commodity set out in Schedule  1 except under a licence issued under the Order.  The 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 276 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 divide the intending importers  into  four broad  categories  (a)  established  importers;  (b)  actual users;  (c) newcomers and (d) others who do not come in  any of the above categories (see para 22 of the Handbook).   The share  available  to the applicants in these  categories  is fixed  from  time  to  time.  We  are  here  concerned  with category  (a),  that is, with established importers.   If  a person  or a firm is recognised as an  established  importer

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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 according to the provision of               the agreement." In these appeals we are concerned only with cases which fall under   this  sub-paragraph.   Consideration  of   all   the provisions  of  the  Act  and  the  Order  along  with   the instructions  leaves no doubt that no person has a right  to import a foreign commodity into                             27 7 India  the import of which is prohibited.   Where,  however, the ban on import of foreign goods is permitted to be lifted in favour of a person who has obtained a licence for  import under  the Order he can make an application for grant  of  a licence.   But  even  then he must  comply  fully  with  the requirements  specified  in the Control Order and  make  the application  in  the  prescribed  form.   The   instructions contained  in the Handbook and the Red Book including  those in paragraph 71 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 rights of the dissolved firm in the manner provided in  sub- para  (b).  The failure of the authority concerned to  abide by  these  instructions  may  conceivably  draw  upon   that authority  certain  consequences but would  not  confer  any justiciable  right  upon any member of the  erstwhile  firm. The action of the authority concerned could be rectified  in

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an  appeal to a superior authority.  Where, however,  it  is not  so  rectified the claimant to 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 278 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  imports,   the erstwhile partner has no right to seek redress from a  court or  even the High Court under Art. 226 of the  Constitution. His  position  would be no better if upon  that  ground  the licensing  authority  refused  to  grant  a  licence  for  a licensing  period  antecedent  to  the  recognition  of  the division  of  quota  rights.   The reason  is  that  for  an application   for  grant  of  a  licence  to  be  a   proper application  it must conform to the form prescribed in  that behalf  and that where it does not do so it is liable to  be rejected.  The power conferred by cls. (a), (e) and (g) of the Control Order is available to the Licensing Authority for  this  purpose.  Here it is said that  the  respondent’s application was     defective because it does not conform to rules.  It is not disputed that 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  rejected under cl. (6) of the Control Order.   Here,  on the  respondent’s own showing the appropriate authority  had not  recognized the division of the dissolved  firm’s  quota rights by the date on which he made an application for grant

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of an import 279 licence for the period January to June, 1957.  He could  not thus  claim to have been an established importer  though  he purported to apply for a licence upon the basis that he  was one.  1, 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  what  is  provided  in  paragraph   13. Therefore,  the application made by the petitioners  to  the first  respondent  on the 27th of December, 1957  cannot  be regarded as a proper application at all.  This is made clear in they Form itself which amongst other things requires  the following to be answered :               ’Whether  the  constitution of  the  firm  has               undergone  any change after the issue  of  the               quota  certificate to the firm ? If so,  quota               No.   and  date  of  orders  issued   by   the               appropriate authority sanctioning transfer  of               quota rights in favour of the applicant.’ "It  is  clear  from this position  that  unless  the  quota certificate   in  favour  of  the  reconstituted   firm   is sanctioned  by the Chief Controller of Imports and  Exports, that firm would not be entitled to obtain an import  licence 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(2)  was  also cited’   in  Jagannath’s  case(1)  and  in  particular   the following observations therein : (1)  63 Bom.  L.R. 1.                 (2) I.L.R. [1959] Mad. 850. 280 "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’."

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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, Chagla C. J. in  an unreported  judgment  dated 17th March,  1957  in  Chimanlal Popatlal  v. B. M. Choksey (Appeal No. 12 of 1957)  observed as follows               ’But this quota has no market-value; it is not               ordinarily transferable or assignable.  It  is               merely  a  licence  or a  permit  given  to  a               particular party to enable him to import paper               into  India  and as such it  has  no  inherent               value.’ "Thus,  according  to  this Court a quota  right  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 281 grant of an import licence.  The person in whose favour such a   transfer  has  been  recognised  or  sanctioned,   would consequently be entitled to rely upon that transfer only for a period subsequent to such sanction or recognition and  not for any anterior period.  The date of dissolution of the old firm has thus no relevance whatsoever in so far as the grant of  an  import licence is concerned.  An import  licence  is granted by the Joint Chief Controller of Imports and Exports to  a  person not because he has acquired the  rights  of  a dissolved partnership firm, but because the transfer of  the quota  rights made in his favour is recognised by the  Chief Controller  of  Imports and Exports.  We,  therefore,  agree with  the learned single Judge that the transfer  sanctioned by  the second respondent could not entitle the  petitioners to obtain an import licence in respect of a period prior  to the grant of the sanction." I  shall maintain the view that I took.  I  would,  however, add  that  by saying ’the rights such as they are’,  what  I meant  was  that  even if the transfer  be  said  to  confer rights,  the  rights themselves being the  creation  of  the instructions   contained  in  para  72  of  the   Red   Book (corresponding to para 71 of the Red Book for  January-June, 1957)  would arise only upon strict compliance with the  in- structions.   It is true that here there is no  transfer  by the firm of its quota rights but upon its dissolution  there was a division of its quota rights by the erstwhile partners amongst  themselves.  Under sub-para (a) (ii) of para 71  no one would be entitled to the firm’s quota but under sub-para (b)  the  quota would be distributed  amongst  the  partners according to the provision in that behalf in the  agreement-

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of  dissolution.  The case being one of the business of  the firm changing hands as contemplated by the opening words  of para 71 the approval of the Chief Controller of Imports  and Exports  to  the division of quota  rights  was  imperative. This position has also not been challenged by Mr. Viswanatha Sastri. In support of the contention that the approval of the  Chief Controller  of Imports and Exports would relate back to  the date  of dissolution it was contended that since  the  Chief Controller of Imports and Exports had no right to refuse  to recognize  a transfer (on the division of quota rights)  the rights  of  the transferee would accrue to him as  from  the date  of the transfer.  I cannot accede to  the  proposition that in no circumstances can the Chief Controller of Imports and  Exports  refuse to recognize a  transfer.   Indeed,  in Jagannath’s  case(-’)  such recognition was refused  on  the ground that the requirements of the instructions had (1)  63 Bom.  L.R. I                             283 In  the  result  I would allow the appeals,  set  aside  the judgment  of  the High Court and dismiss the  writ  petition with  costs  in  an  the courts.  There  will  be  only  one hearing, fee in all these appeals.                            ORDER In  accordance with the opinion of the majority the  appeals are dismissed with costs.  One set of hearing fee. 284