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PETITIONER: UNION OF INDIA

       Vs.

RESPONDENT: SAMPAT RAJ DUGAR AND ANR.

DATE OF JUDGMENT21/01/1992

BENCH: JEEVAN REDDY, B.P. (J) BENCH: JEEVAN REDDY, B.P. (J) RANGNATHAN, S. RAMASWAMI, V. (J) II

CITATION:  1992 AIR 1417            1992 SCR  (1) 269  1992 SCC  (2)  66        JT 1992 (1)   554  1992 SCALE  (1)167

ACT:                Imports (Control) Order, 1955:      Clasuse 5(3)  (ii)-Object and interpretation  of-Import licence-Condition  deeming  goods imported  as  property  of licensee  at the time of import and upto  clearance  through Customs-When not applicable-Goods imported-Importer  failing to clear goods from Customs by making payments and receiving documents  of  title  sent by  seller-Whether  goods  remain property of seller-Whether seller entitled to re-export such goods-Custom  Act, 1962 : Section 2 (26)-Import  and  Export Policy, 1985-86 : Para 26(iv).      Customs Act, 1962 :      Section  III (d)-Applicability of-Goods imported  under valid   licence   and   not   contrary   to   law-subsequent cancellation  of licence-Whether renders import contrary  to law and goods imported liable for confiscation.      Section III (o)-When applicable-Import licence  granted subject   to  conditions-Non-observance  of  conditions   by importer  in  earlier  consignments-Whether  indicative   of similar  non-observance  in  subsequent  consignments  also- Confiscation of goods-Whether justified-Imports and Exports (Control) Act, 1947 : Section 4-G.      Interpretation  of  Statutes-Words  and  phrases   take colour from the context in which they are used.      Words and phrases-’Property of’ and ’Vest’-Meaning of.

HEADNOTE:     The second respondent doing business in India,  obtained an  advance  import  licence for importing  raw  silk.   The licence  was granted subject to the condition that raw  silk imported  would be utilised for manufacturing and  exporting garments.    Sometime  thereafter,  the  second   respondent received   three  consignments  but  did  not  fulfill   the stipulated  condition.  Subsequently, the first  respondent, an Indian                                                   270 national  residing abroad, and doing business, sent  certain quantities  of  raw silk in four lots,  deliverable  to  the second respondent.  The requisite documents were sent to the first respondent’s bankers with instructions to deliver  the

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same  to  the second respondent on  receiving  the  payment. When  the  four consignments arrived in  India,  the  second respondent  appeared  before  the  customs  authorities  and claimed  the  right to take delivery of the goods,  but  the authorities,  who  had  come to know by  then  of  the  non- compliance  of the stipulated condition with respect to  the three   earlier  consignments  and  also  of   the   alleged misrepresentation  made by her while obtaining  the  Advance import  licence, initiated proceedings against her  and  two other  persons.   In  view of the  proceedings,  the  second respondent  failed  to  make the  payment  and  receive  the documents; she did not take any steps to clear the goods, in effect abandoning them.      The first respondent appeared in the proceedings on his own and submitted that title to the goods had not passed  to the  second  respondent and he was still the  owner  of  the goods,   and  therefore,  the  said  goods  could   not   be confiscated  or  proceeded against for violations,  if  any, committed  by the second respondent, and that he was  not  a party  to  the misuse of the earlier imports,  nor  was  the aware   of  the  alleged  fraud  practised  by  the   second respondent in obtaining the advance import licence, and that he may be permitted to re-export the goods in question.      While  the  proceedings  were  pending,  the  competent authority  cancelled the advance import licence  granted  to second respondent.      The  Collector of Customs was of the view that  as  the advance  import  licence  had since been  cancelled  by  the competent  authority there was no valid import  licence  for clearance  of  those goods, and since for  re-exporting  the said goods, a valid import licence was necessary and because it was not there, and also because the second respondent had abandoned  the goods, permission for re-export could not  be granted.   Accordingly, he rejected the claims of the  first respondent,  imposed a penalty of Rs. 5 lakhs on the  second respondent and ordered confiscation of the four consignments in question.      Aggrieved,  the first respondent filed a Writ  Petition before  the  High Court directly. The  appellants  contended that the second respondent must be deemed to be the owner of the four consignments                                                   271 by virtue of the definition of ’importer’ in Section 2  (26) of  the  Customs  Act read with Clause 5  (3)  (ii)  of  the Imports  (Control) Order 1955.  Reliance was also placed  on para 26 (iv) of the Import and Export Policy issued for  the year  1985-86,  and  it  was submitted  that  the  goods  in question  were  liable to be confiscated for  the  acts  and defaults  of the second respondent.  It was  also  submitted that  by  virtue of the non-compliance  with  the  condition (relating  to  export of garments manufactured  out  of  the imported  raw silk yarn) the second respondent had  rendered all  the  goods  covered by the  import  licence  liable  to confiscation.      Allowing the Writ Petition, a Single Judge of the  High Court  held that on the date the goods were  imported,  they were  covered by a valid import licence, and the  subsequent cancellation  thereof was of no consequence, that since  the second  respondent  had  failed  to  pay  and  receive   the documents  of title, the title to the goods did not pass  to her,  and as the first respondent continued to be the  owner of  the  goods,  he  was entitled  to  re-export  the  same. Accordingly,  he  quashed  the  confiscation  order  of  the Collector  under  Section III (d) of the  Customs  Act,  and directed   the  appellants  to  (1)  hand  over   the   four

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consignments  in  question to the first  respondent  or  his clearing  agent, for reshipment, and (2) issue  a  detention certification for the period the goods were detained.      The  Division  Bench  of the High  Court  rejected  the appeals  of the Union of India and the Customs  authorities. Hence the appeal before this Court.      Dismissing the appeal, this Court,      HELD : 1.1 Condition (ii) of sub-clause (3) of Clause 5 of the Imports (Control) Order, 1955 says that the goods for the  import  of  which a licence is granted  "shall  be  the property  of  the  licensee  at  the  time  of  import   and thereafter upto the time of clearance through customs."  The Rule-making authority (Central Government), which issued the order, must be presumed to be aware of the fact that in many cases,  the importer is not the owner of the goods  imported at the time of their import and that he becomes their  owner only  at a later stage, i.e., when he pays for  and  obtains the  relevant  documents.   Still  the  Central   Government declared  that  such  goods shall be  the  property  of  the licensee from the time of import. [282 D; E-F]      1.2 The interpretation to be placed upon the  provision should be consistent with and should be designed to  achieve the object.  The                                                   272 expressions  like  ‘Property of’ and ‘Vest’ do  not  have  a single  universal  meaning.  Their content varies  with  the context.  The aphorism that a word is not a crystal and that it takes its colour from the context is no less true in  the case of these words. [282 G-H; 283 A]      1.3 The object underlying condition (ii) in Clause 5(3) is  to  ensure  a  proper  implementation  of  the   Imports (Control) Order and the Imports and Exports (Control) Act, 1947.   The  idea is to hold the  licensee  responsible  for anything and everything that happens from the time of import till  they  are cleared through Customs.   The  exporter  is outside the country, while the importer, i.e., the  licensee is in India.  It is at the instance of the licensee that the goods are imported into this country.  Whether or not he  is the owner of such goods in law, the Imports (Control)  Order creates a fiction that he shall be deemed to be the owner of such  goods  from  the time of their import  till  they  are cleared  through Customs.  This fiction is created  for  the proper  and effective implementation of the said  order  and the Import and Exports (Control) Act.  The fiction, however, cannot  be  carried beyond that.  It cannot be  employed  to attribute  ownership of the imported goods to  the  importer even  in  a  case  where he abandons  them,  that  is  in  a situation  where  he  does  not  pay  for  and  receive  the documents of title.  For such act of abandonment, action may be taken against him for suspension/cancellation of licence, and  some other proceedings can also be taken  against  him. But certainly he cannot be treated as the owner of the goods even  in  such a case.  Holding otherwise  would  place  the exporter  in a very difficult position; he loses  the  goods without receiving the payment and his only remedy is to  sue the  importer for the price of goods and for such damage  as he  may  have  suffered.  This would  not  be  conducive  to international trade. [283 A-E]      1.4  As in the instant case, where an importer  chooses or fails to pay for and take delivery of the imported  goods and  just abandon them, condition (ii) in sub-clause (3)  of Clause  5  does not operate to deprive the exporter  of  his title to the said goods, provided the import is not contrary to law. [283 E-F]      1.5  However,  where  the importer opens  a  letter  of

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credit     and     makes     some     other      arrangement ensuring/guaranteeing payment of price of imported goods, it will  be  open to the exporter, in case  of  non-payment  of price  or abandonment by the importer, to collect the  price by invoking such arrangement.  In such a case, the  exporter will  not be allowed to claim title to and/or  to  re-export                                                    273 the  goods. In all such cases, the authority should issue  a notice to the importer and/or his agent before allowing  the exporter  to deal with or seek to re-export the  goods.   In the  instant  case,  both the  importer  and  exporter  were present before the Collector (Customs) as well as before the High   Court.    The  importer  did  not  plead   any   such arrangement. [283 F-H]      1.6  None of the clauses (d) and (o) in Section III  of the  Customs Act is attracted in the instant  case.   Clause (d)  contemplates  an  import  which  is  contrary  to   any prohibition  imposed either by the Customs Act or any  other law for the time being in force.  No such prohibition can be pleaded in the instant case since on the date of the  import the said goods were covered by a valid import licence.   The subsequent  cancellation of licence is of no  relevance  nor does it retrospectively render the import illegal. [284 A-B]      East  India  Commercial Co. Ltd. v.  The  Collector  of Customs, Calcutta, [1963] 3 S.C.R. 338 at 372, relied on.      1.7 Clause (o) contemplates confiscation of goods which are  exempted  from  duty  subject  to  a  condition,  which condition  is  not observed by the importer.   Occasion  for taking  action  under  this  clause  arises  only  when  the condition  is not observed within the period prescribed,  if any,  or  where  the period is not so  prescribed  within  a reasonable  period.  It, therefore, cannot be said  that  in the instant case the goods were liable to be confiscated  on the date of their import under Clause (o).  Further,  merely because  the  second respondent had not  complied  with  the condition   imposed   with   respect   to   three    earlier consignments,  it  may not be possible to  presume  that  it would  not  be  observed  even  with  respect  to  the  four consignments in question.  Section 4-G of the  Import-Export (Control) Act, 1947, which is also conceived to meet such  a situation,  says that non-compliance with any  condition  of licence  relating to utilisation of such goods  renders  the said goods liable to confiscation notwithstanding that  such goods  are  mixed up with other goods or material.   In  the instant  case, even though a period of more than five  years has  passed  by, no action has been taken either  under  the Customs  Act  or under Section 4-G  of  the  Imports-Exports (Control)  Act,  though  the import licence  of  the  second respondent has been cancelled.  In the circumstances it must be  presumed  that no such action was  or  is  contemplated. Hence,  the title of the first respondent to the said  goods remains free of any cloud. [284 C-G]                                                   274      1.8  The definition of ‘importer’ in Section 2 (26)  of the  Customs Act is not really relevant to the  question  of title.   It  only defines the  expression  ‘importer’.   The first respondent does not claim to be the importer. [281  H; 282 A]      1.9  Para 26 (iv) of the Import-Export Policy  for  the year  1985-86 says that an import is valid if  it  fulfills, inter-alia,  all the terms and conditions contained  in  the licence  and all other connected matters.  This para has  no relevance  to the question of title to goods in a  situation arising in the instant case. [285 B]      1.10   In  the  circumstances, there is  no  reason  to

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interfere with the direction for re-export.  The same  shall be permitted and allowed in accordance with law and  subject to payment of such dues or other charges as may be  leviable in that behalf. [285 C-D]

JUDGMENT:      CIVIL APPELLATE JURISDICTION : Civil Appeal No 223 (NM) of 1992.      From  the  Judgment and Order dated  10.1.1991  of  the Bombay High Court in Appeal No. 807 of 1987 in Writ Petition No. 85 of 1987.      G.V. Rao and P. Parmeshwaran for the Appellants.      Harish  N.  Salve, Vikram Nankani, Jaideep  Patel,  Ms. Monika Mohil and MS. Bina Gupta for the Respondents.      The Judgment of the Court was delivered by      B.P. JEEVAN REDDY, J. Leave granted.      This appeal is directed against the Judgment and  Order of a Division Bench of the Bombay High Court dismissing  the Letters  Patent Appeal No.807 of 1987 preferred by Union  of India  and  the Collector of Customs.  The said  appeal  was preferred against the judgment and order of a Learned Single Judge  allowing the Writ Petition (85 of 1987) filed by  the first  respondent herein.  The learned Single Judge had,  by his  judgment, quashed the order dated 15.9.1986  passed  by the  Collector of Customs, Bombay confiscating the goods  in question under Section III (d) of the Customs Act, 1962, and directed the Collector of Customs and the Union of India  to hand  over  the said goods (four consignments  of  raw  silk yarn)  to  the first respondent of his clearing  agent,  for reshipment  to  Hong Kong in terms solicited  by  him.   The learned Judge granted a further direction to                                                   275 the  effect  that for the period the  goods  were  detained, rendering  the first respondent liable to pay  demurrage  to Bombay Port Trust, the Collector of Customs and the Union of India shall issue a detention certificate in his favour.      The  second  respondent  Ms.  Renu  Pahilaj  is   doing business at Delhi in the name and style of "Acquarius".  The first respondent is an Indian national resident abroad doing business at Hong Kong in the name and style of UNISILK.  The second  respondent  obtained an advance  import  licence  on 20.5.1985  for importing raw silk valid for a period  of  18 months  from the date of its issue.  The import licence  was granted  subject  to the condition that  raw  silk  imported should be utilised for manufacturing garments which ought to be  exported  by the second respondent. Some time  prior  to October   1985,   the  second  respondent   received   three consignments but she did not fulfil the aforesaid condition. During October-November 1985, the first respondent  exported certain quantities of raw silk in four lots, deliverable  to the second respondent.  The requisite documents were sent to the first respondent’s bankers with instructions to  deliver the same to the second respondent on receiving the  payment. When  the  said  four consignments arrived  at  Bombay,  the second  respondent appeared before the  customs  authorities and claimed the right to take delivery of the goods. By this time,  however, the customs authorities had come to know  of the  non-compliance of the aforesaid condition with  respect to  the three earlier consignments and also of  the  alleged misrepresentation  made by her while obtaining  the  Advance import  licence.   Proceedings  were  accordingly  initiated against  her  and  two other persons  by  the  Collector  of Customs, Bombay.  The first respondent appeared in the  said

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proceedings  on his own and was heard.  Probably in view  of the  proceedings  taken  against her - or  otherwise  -  the second respondent failed to make the payment and receive the documents.   She took no steps whatever to clear the  goods. In effect, she abandoned them.      The  first  respondent submitted before  the  Collector that  title  to  the  goods has not  passed  to  the  second respondent, that he is still the owner of the goods and that therefore the said goods cannot be confiscated or  proceeded against for the violations, if any, committed by the  second respondent.   He  submitted that he was not a party  to  the misuse  of  the  earlier imports nor was  he  aware  of  the alleged   fraud  practiced  by  the  second  respondent   in obtaining the advance import licence.  He requested that  he may be permitted to re-export the said goods to Hong-Kong.      While  the  said proceedings were  pending  before  the Collector of Customs, the advance import licence granted  to second respondent was                                                        276 cancelled  by  the Competent Authority on May 12,  1986.  No orders were passed with respect to the said goods.      The  Collector  of  Customs, Bombay  passed  orders  on September 9, 1986, whereunder he imposed a penalty of rupees five  lacs  on the second respondent.  Penalties  were  also levied upon two other persons, said to be associates of  the second respondent.  So far as the first respondent’s  claims were concerned, they were rejected on the following  ground: the  advance  import  licence against which  the  said  four consignments  were imported has since been cancelled by  the appropriate  authority  which means that there is  no  valid import licence for clearance of those goods; since, for  re- exporting  the  said  goods,  a  valid  import  licence   is necessary  and because it is not there-and also because  the second respondent has abandoned the goods-permission for re- export cannot be granted.      The  first respondent did not prefer an appeal  against the  said  order.  He directly challenged the  same  in  the Bombay  High Court by way of a Writ Petition. He  reiterated his contention viz., since the second respondent has  failed to  pay  and receive the documents regarding the  said  four consignments, he himself continues to be the owner  thereof; if  so,  the said goods cannot be confiscated  or  proceeded against  in any manner for any act or default of the  second respondent.  He claimed to be entitled to re export the same to  Hong Kong. The case of the Collector of Customs and  the Union of India was that the second respondent must be deemed to  be the owner of the said four consignments by virtue  of the  definition  of  ‘importer’ in Section  2  (26)  of  the Customs  Act  read  with Clause 5(3)  (ii)  of  the  Imports (Control)Order  1955. Reliance was also placed upon para  26 (iv)  of  the Import and Export Policy issued for  the  year 1985-86.   It was accordingly submitted that the said  goods are  liable to be confiscated for the acts and  defaults  of the second respondent.  It was also submitted that by virtue of the non-compliance with the condition (relating to export of garments manufactured out of the imported raw silk  yarn) the second respondent has rendered all the goods covered  by the import licence liable to confiscation.      The learned Single Judge allowed the Writ  Petition  on the  following  findings:   On  the  date  the  goods   were imported, they were covered by a valid import licence.   The subsequent   cancellation  thereof  is  of  no   consequence inasmuch as Section III (d) of the Customs Act provides  for confiscation  of  the  imported goods only  where  they  are imported contrary to law.  Even if the second respondent was

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guilty  of any misuse or of non-compliance with any  of  the conditions  of  licence,  it only  furnished  a  ground  for cancellation/suspension  of licence; so long as the  licence                                                    277 was not suspended or cancelled, it was valid and  effective. The  importing of the goods was thus under a  valid  licence and  was not contrary to law.  Since the  second  respondent has  failed to pay and receive the documents of  title,  the title  to the goods did not pass to her.  The  provision  in Clause  5(3)  (ii)  of the Imports  (Control)  Order  is  of limited  effect.   Where  the  clearance  of  goods  through customs  is not even attempted but abandoned, such  importer cannot   be  treated  as  the  owner.   The  definition   of ‘importer’ in Section 2(26) of the Customs Act also does not avail the authorities.  Since the first respondent continued to  be the owner of the goods, he is entitled  to  re-export the same.      The Letters Patent Appeal preferred by the Collector of Customs and the Union of India was dismissed by the Division Bench affirming the reasoning of the Learned Single Judge in its entirety.      In this appeal, it is contended by the learned  counsel appearing for the Union of India that the learned Judges  of the  Bombay  High Court have not correctly  appreciated  the meaning  and  effect of the provisions contained  in  Clause 5(3) (ii) of the Imports (Control) Order and Section III  of the  Customs  Act.  He  submitted  that  by  virtue  of  the definition of the expression "importer" contained in Section 2(26)  of the Customs Act read with Clause 5(3) (ii) of  the Imports  (Control)  Order,  the second  respondent  must  be deemed to be the owner of the goods and the first respondent cannot  be heard to say that he is the owner of  the  goods. Whatever  may  be the position under the Sale of  Goods  Act and/or the Contract Act, so far as the authorities under the Customs  Act and Imports (Control) Order are concerned,  the second respondent is the owner of the said goods and no  one else.   For the acts and defaults of the second  respondent, therefore, the said goods are liable to be confiscated.  The first  respondent’s remedy is to sue the  second  respondent for damages and/or such other reliefs as he may be  entitled to in law but he cannot claim title to said goods once  they are  imported into this country.  It is also submitted  that because  of  misuse of earlier consignments  by  the  second respondent, the authorities were entitled to confiscate  the said  four  consignments, covered as they were by  the  same Import  Licence.  In any event, once the import licence  was cancelled,  the goods could not have been cleared by  anyone from  the  customs. On the other hand,  Sri  Salve,  learned counsel for the first respondent submitted that confiscation of  the said consignments has been ordered by the  Collector of  Customs  only under the provisions of the  Customs  Act, i.e., under Section III (d) thereof.  The said  confiscation is  wholly unsustainable for the reason that on the date  of import,   there  was  a  valid  licence.    The   subsequent cancellation of the import licence does not render the  said import illegal.  The provisions                                                        278 contained in Clause 5(3) (ii) of the Imports (Control) Order are  of  limited  application.  They are  designed  only  to prevent the licencee from trading in the said licence in any manner  whatsoever,  but  it  cannot  have  the  effect   of conferring  title to the said goods upon the  importer  even before  he  makes the payment and obtains the  documents  of title.   Similarly,  the definition of  the  importer  under Section  2  (26) of Customs Act is for  a  limited  purpose.

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Since the title to the goods continues to vest in the  first respondent,  he  is  entitled to re-export  the  same.   The learned   counsel  emphasised  the  fact  that   the   first respondent  is not a party nor was he aware of  the  alleged misuse  of  earlier  consignments or of  the  alleged  fraud practised  by the second respondent in obtaining the  import licence.      For  a proper appreciation of the  controversy  arising herein, it is necessary to notice certain provisions of  the Customs Act as well as of the Imports and Exports  (Control) Act, 1947 and the Imports (Control) Order, 1955.      The definition of ‘Importer’ in Clause 26 of Section  2 of the Customs Act reads as follows:          "importer’,  in relation to any goods at  any  time          between  their importation and the time  when  they          are  cleared  for home  consumption,  includes  any          owner  or any person holding himself out to be  the          importer."      Section   III  which  provides  for   confiscation   of improperly imported goods, in so far as it is relevant reads thus:          "Section  III. Confiscation of improperly  imported          goods,  etc.-  The following goods brought  from  a          place   outside   India   shall   be   liable    to          confiscation-          (d) any goods which are imported or attempted to be          imported  or are brought within the Indian  customs          waters for the purpose of being imported,  contrary          to any prohibition imposed by or under this Act  or          any other law for the time being in force;          --  --  --  --  --  --  --  --  --  --  --  --  --          (e)  any goods exempted, subject to any  condition,          from  duty  or  any prohibition  in respect  of the          import thereof under this Act or any other law  for          the  time being in force, in respect of  which  the          condition is not observed unless the                                                        279          non-observance  of the condition was sanctioned by          the proper officer."      Section  112 provides for levy of penalty for  improper importation  of goods.  For the purpose of this case, it  is not  necessary to set out Section 112. Section 120  provides that  the smuggled goods may be confiscated  notwithstanding any  change  in their form.  Section 124  provides  for  the issuance  of  a  Show  Cause Notice  before  the  goods  are confiscated  and for affording a reasonable  opportunity  of being heard in the matter to the person affected.      The  Imports and exports (Control) Act,  1947  empowers the  Central Government to prohibit, restrict  or  otherwise control import and export of goods, by an order published in the  Official Gazette Act (Section 3).  Section 4G  provides for confiscation of goods in certain situation.  The Section reads thus:          "Section  4G.  Confiscation-Any imported  goods  or          materials in respect of which-          (a)  any  condition  of the licence  or  letter  of          authority under which they were imported,  relating          to the utilisation or distribution of such goods or          materials, or          (b)  any condition relating to the  utilisation  or          distribution of such goods or materials subject  to          which  they  were  received  from,  or  through,  a          recognised agency, or          (c) any direction given under a control-order  with          regard to the sale of such goods or material,"

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        has  been,  is  being,  or  is  attempted  to   be,          contravened,  shall  together  with  any   package,          covering  or  receptacle in which  such  goods  are          found,  be liable to confiscation, and, where  such          goods  or  materials are so mixed  with  any  other          goods  or  materials that they  cannot  be  readily          separated such other goods or materials shall  also          be liable to confiscation:          Provided  that  where  it  is  established  to  the          satisfaction of the adjudicating authority that any          goods   or   materials,   which   are   liable   to          confisication under this Act, had been imported for          personal  use, and not for any trade  or  industry,          and  that  they belong to a person other  than  the          person  who has, by any act or  omission,  rendered          them  liable  to  confiscation,  and  such  act  or          omission was without the knowledge or connivance of          the  person  to  whom they  belong  such  goods  or          materials  shall not be ordered to be  confiscated;          but such other action as authorised                                                        280          by this Act mny be taken against the person who has          by  such  act of omission, rendered such  goods  or          materials liable to confiscation."      The Imports (control) Order 1955 has been issued by the Central Government under the 1947 Act. Clause 3 (1) provides that:          "Save  as  otherwise  provided in  this  Order,  no          person  shall import any goods of  the  description          specified  in  Schedule  I,  except  under  and  in          accordance,  with a licence or a customs  clearance          permit granted by the Central Government or by  any          Officer specified in Schedule II."      Clause  5 which is crucial for our purposes may be  set out in its entirety.  It reads thus:          "5.  Conditions  of  Licence.  -(1)  The  licensing          authority  issuing a licence under this  Order  may          issue  the  same  subject to one  or  more  of  the          conditions stated below :-          (i) that the goods covered by the licence shall not          be  disposed of except in the manner prescribed  by          the licensing authority or otherwise, dealt   with,          without  the  written permission of  the  licensing          authority or any person duly authorised by it;          (ii)  that  the  goods covered by  the  licence  on          importation  shall not be sold or distributed at  a          price exceeding that which may be specified in  any          direction attached to the licence;          (iii)  that  the  applicant  for  a  licence  shall          execute a bond for complying with the terms subject          to which a licence may be granted.          (2)  A licence granted under this Order shall  also          be subject to the conditions contained in  Schedule          V.          (3)  It shall be deemed to be a condition or  every          such licence that :-          (i)  no person shall transfer and no  person  shall          acquire  by  transfer  any licence  issued  by  the          licensing authority except under and in  accordance          with the written permission of the authority  which          granted   the  licence  or  of  any  other   person          empowered in this behalf by such authority.          (ii)  that  the  goods for the import  of  which  a          licence is granted                                                        281

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        shall be the property of the licencee at the time of          import  and thereafter upto the time  of  clearance          through Customs :          Provided  that the conditions under items  (i)  and          (ii) of this sub-clause shall not apply in relation          to licence issued to the State Trading  Corporation          of   India,   the  Minerals  and   Metals   Trading          Corporation of India and other similar institutions          or  agencies  owned or controlled  by  the  Central          Government    and   which   are   entrusted    with          canalisation of imports :          Provided  further that the conditions  under  items          (i)  and  (ii) of this sub-clause shall  also  not          apply  in  relation  to  (a)  licenses  issued   to          eligible export houses or trading houses for import          of  goods meant for disposal to actual users  under          the import policy for registered exporters, and (b)          licences issued to Public Sector agencies owned  or          controlled  by  Government, Central  or  State  for          disposal of goods to Actual Users under the  import          policy in force.          (iii)  the goods for the import of which a  licence          is granted shall be new goods, other than  disposal          goods unless otherwise stated in the licence.          (4) A licence granted under this Order may  contain          such  other conditions, not inconsistent  with  the          Act  or this Order, as the licensing authority  may          deem fit.          (5)  The licensee shall comply with all  conditions          imposed or deemed to be imposed under this clause."      The  Order  provides  for  cancellation/suspension   of licences  issued thereunder for reasons  specified  therein. Schedule  I to the Order mentions several goods.  It is  not disputed that raw silk yarn is one of the goods included  in the Schedule.      We may first consider the question of title to the said goods.   If we keep aside the provisions of law relied  upon by the appellants viz., definition of ‘importer’ in  Section 2(26)  of the Customs Act, Clause 5(3) (ii) of  the  Imports (Control) Order as well as para 26 (iv) of the Import-Export Policy,  the  position is quite simple.   Since  the  second respondent did not pay for and received the documents of the title she did not become the owner of the said goods,  which means  that the first respondent continued to be the  owner. How do the aforesaid provisions make any difference to  this position ?  The definition of ‘importer’ in Section 2(26) of the  Customs Act is not really relevant to the  question  of title.  It only defines the                                                        282 expression ‘importer’.  The first respondent does not  claim to  be  the  importer.   The  provision  upon  which  strong reliance  is placed by the appellants in this behalf is  the one   contained   in  Clause  5(3)  (ii)  of   the   Imports (Control)Order.   Sub-clause  (I)  of  Clause  5   specifies conditions which can be attached to an import licence at the time  of  its  grant.  Sub-clause (2)  says that  a  licence granted  under the Order shall be subject to the  conditions specified  in Fifth Schedule to the Order.   Sub-clause  (3) sets out three other conditions mentioned as (i), (ii),  and (iii)  which  shall attach to every import  licence  granted under  the Order.  First of these conditions says  that  the import  licence shall be non-transferable except  under  the written  permission  of  the Licensing  Authority  or  other Competent  Authority.   Condition  (ii)-which  is  provision relevant herein-says that the goods for the import of  which

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a licence is granted "shall be the property of the  licensee at  the  time  of import and thereafter  upto  the  time  of clearance  through customs."  This condition, however,  does not  apply  to  STC, MMTC  and  other  similar  institutions entrusted with  canalisation of imports.  It also  does  not apply to certain eligible export houses, trading houses  and public  sector   agencies mentioned in the  second  proviso. Condition  (iii) says that  the goods for which  the  import licence  is  granted  shall be new  goods  unless  otherwise mentioned  in  the licence.  Now coming  back  to  Condition (ii),  the  question is what does it mean and  what  is  the object  underlying it when it says that the  imported  goods shall  be  the  property of the licensee from  the  time  of import  till  they  are  cleared  through  customs.   It  is necessary to notice the language of the sub-clause.  It says "it shall be deemed to be a condition of every such  licence that-the  goods for the import of which a licence is granted shall be the property of the licensee at the time of  import and thereafter upto the time of clearance through  Customs." The Rule-making authority (Central Government), which issued the order, must be presumed to be aware of the fact that  in many  cases,  the  importer is not the owner  of  the  goods imported  at  the time of their import and that  he  becomes their  owner only at a later stage, i.e., when he  pays  for and  obtains  the relevant documents.  Why did  not  Central Govt.  yet declare that such goods shall be the property  of the  licensee  from the time of import ?   For  appreciating this,  one has to ascertain the object underlying  the  said provision.   The  interpretation  to  be  placed  upon   the provision  should be consistent with and should be  designed to achieve such object.  In this context, it should also  be remembered that expressions like ‘Property of’ and ‘Vest’ do not  have a single universal meaning. Their  content  varies with the context.  The aphorism that a word is not a crystal and  that  it takes its colour from the context is  no  less true in the case of these words.  In our opinion the  object underlying  condition  (ii) in Clause 5(3) is  to  ensure  a proper implementation of the Imports (control) Order and the Imports and Exports (Control) Act, 1947. The idea is to hold the                                                        283 licensee  responsible  for  anything  and  everything   that happens  from  the  time of import  till  they  are  cleared through Custom.  The exporter is outside the country,  while the importer, i.e. the licensee is in  India.  It is at  the instance  of the licensee that the goods are  imported  into this country.  Whether or not he is the owner of such  goods in  law, the Imports (Control) Order creates a fiction  that he  shall be deemed to be the owner of the such  goods  from the  time  of  their import till they  are  cleared  through Customs.   This  fiction  is  created  for  the  proper  and effective  implementation of the said order and  the  Import and  Exports (Control) Act.  The fiction however  cannot  be carried  beyond  that.  It cannot be employed  to  attribute ownership  of the imported goods to the importer even  in  a case where he  abandons them, i.e. in a situation  where  he does not pay for and receive the documents of title.  It may be  that  for such act of abandonment, action may  be  taken against him for suspension/cancellation of licence.  May be, some  other proceedings can also be taken against him.   But certainly  he  cannot be treated as the owner of  the  goods even  in  such a case.  Holding otherwise  would  place  the exporter  in a very difficult position; he loses  the  goods without receiving the payment and his only remedy is to  sue the  importer for the price of goods and for such damage  as

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he  may  have  suffered.  This would  not  be  conducive  to international  trade.  We can well imagine situations  where for one or other reason, an importer chooses or fails to pay for  and  take  delivery of the  imported  goods.   He  just abandons  them. (We may reiterate that we are speaking of  a case  where the import is not contrary to law). It  is  only with such a situation that we are concerned in this case and our  decision  is also confined only to  such  a  situation. Condition  (ii)  in  sub-clause  (3) of  Clause  5,  in  our opinion,  does  not operate to deprive the exporter  of  his title to said goods in such situation.      At  this  stage, it may be appropriate to  clarify  one aspect.   There  may be cases, where the  importer  opens  a letter   of   credit  and  makes  some   other   arrangement ensuring/guaranteeing  payment of price of  imported  goods. In such a case, it will be open to the exporter, in case  of non-payment  of  price or abandonment by  the  importer,  to collect  the price by invoking such arrangement.  In such  a case,  it  is obvious, the exporter will not be  allowed  to claim  title to and/or to re-export the goods.  (Indeed,  it is  unlikely that in such a case, the importer abandons  the goods  ordinarily speaking.) It is therefore necessary  that in  all such cases, the authority should issue a  notice  to the  importer and/or his agent before allowing the  exporter to deal with or seek to re-export the goods.  So far as this case is concerned, both the importer and exporter (RR 2  and 1 respectively) were present before the Collector  (Customs) as well as before the High Court.  R2 did not plead any such arrangement.                                                        284      The  next  question is whether the import of  the  said goods was contrary to law in any manner and whether the said goods  are liable to be confiscated under the  Customs  Act. The  only provisions relied upon the appellants are  Clauses (d) and (o) in Section 111 of the Customs Act which we  have set  out hereinabove.  In our opinion none of these  clauses are attracted in the present case.  Clause (d)  contemplates an  import  which  is contrary to  any  prohibition  imposed either  by  the Customs Act or any other law  for  the  time being  in force. No such prohibition can be pleaded in  this case  since  on the date of the import the said  goods  were covered   by   a  valid  import  licence.   The   subsequent cancellation  of  licence is of no relevance  nor  does  it retrospectively  render  the  import  illegal.  (East  India Commercial Co. Ltd. v. The Collector of Customs ,  Calcutta, [1963]  3    S.C.R. 338  at  372)  clause  (o)  contemplates confiscation  of goods which are exempted from duty  subject to  a  condition,  which condition is not  observed  by  the importer.  Occasion  for  taking action  under  this  clause arises  only when the condition is not observed  within  the period  prescribed,  if any, or where the period is  not  so prescribed,  within  a  reasonable  period.  It,  therefore, cannot  be  said  that  the said goods  were  liable  to  be confiscated  on the date of their import under  Clause  (o). Further,  merely  because  the  second  respondent  had  not complied  with the condition imposed with respect  to  three earlier consignments, it may not be possible to presume that it  would  not  be observed even with respect  to  the  four consignments  in  question.  Be  that  as  it  may,  it   is sufficient  for the present to notice that so far no  action has been taken on that account either under the Customs  Act or  under section 4-G of the Imports-Exports (Control)  Act, 1947. Section 4-G of 1947 Act is also conceived to meet such situation, as a reading thereof would disclose. It says that non-compliance  with  any condition of licence  relating  to

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utilsation  of such goods renders the said goods  liable  to confiscation  notwithstanding that such goods are  mixed  up with  other goods or material. Even though a period of  more than  five  years has passed by, no action  has  been  taken either  under  the  Customs  Act or  under  Section  4-G  of Imports-Exports (Control) Act, though the import licence  of the second respondent has been cancelled. We must presume in the   circumstances   that  no  such  action   was   or   is contemplated. In these circumstances that no such action was or is contemplated. In these circumstances the title of  the first  respondent  to  the said goods remains  free  of  any cloud.      Coming  to para 26(iv) of the Import-Export Policy  for the year 1985-86, it too; in our opinion, is or no  material relevance herein. It reads:           "26.  Import is valid if it fulfills, among  other          things the  following  conditions:-               (iv) The terms and conditions contained in the          licence/Open                                                        285                    General Licence/Customs Clearance  Permit          and   the             Import-Export   Policy    and          procedures in regard to the items           (s)  of          the  import  and all other  connected  matters  are          fulfilled."      This provision, so to speak states the obvious. It says that an import is valid if it fulfills, inter alia, all  the terms and conditions contained in the licence and all  other connected matters. This para had indeed no relevance to  the question  of title to goods in a situation dealt with by  us herein.      It  is  also significant to notice that it is  not  the case of the appellants that the first respondent was a party to any conspiracy or other fraudulent plan hatched or sought to be implemented by the second respondent. If that were the case, different considerations would have arisen.      So far as the directions for re-export is concerned, we see no reason to interfere. The same shall be permitted  and allowed  in  accordance with law and subject to  payment  of such  dues  or  other charges as may  be  leviable  in  that behalf.  The  other direction with respect  to  issuance  of detention certificate has not been assailed before us and we need express no opinion thereon.      The  appeal  is    accordingly  dismissed  but  in  the circumstances without costs. N.P.V.                                     Appeal dismissed.                                                      286