Case: Joint Chief Controller Of Imports And Exports, Madras Vs. M/S. Aminchand Mutha Etc

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 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 Nathumull 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 Book, 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 be made before the 31st of March of the January-June 1957 period.2. 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 had 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 in December 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 Controllers 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 of Imports and Exports Madras 1 v. H. V. Jain, ILR (1959) Mad 850: (AIR 1959 Mad 534  ), that the approval of the Chief Controller to the provision 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.

Court's reasoning:
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 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 Controllers approval dates back to the date of agreement so that such persons may not suffer on account of the delay in the Chief Controllers office in the matter of accordingthe approval of the Chief Controller under instruction 71 is a mere recognition of the division made by the partners of 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 isthe 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 been produced to histhere 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 pensunless 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.