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2003 Supreme(Bom) 6
IN THE HIGH COURT OF BOMBAY
Daga V.C. Devadhar J.P., JJ.
Taparia Overseas (P.) Ltd. others .... Petitioners.
Versus
Union of India others.... Respondents.
Writ Petition Nos. 3343, 3501, 3603 3695 of 1987, decided on 7-1-2003.
Advocates appeared :
M. Jaykar with S.R. Garud i/b Gagrat Co. for petitioners in W.P. Nos. 3343, 3501 3603/87.
Shiraj Rustomji with T.N. Tripathi, for petitioners in W.P. No. 3695/87.
M.I. Sethna, Sr.C. with R. Asokan K.R. Chaudhari i/b T.C. Kaushik, for respondents in all matters.
Headnote:Customs Act, 1962 - Section 46 - Import - Relevant date of - Held - Relevant date of import would be one on which the bill of entry is presented under Section 46. - Alternatively, let us consider it from another angle assuming that licence comes to an end upon it is suspension and/or cancellation, in catena of cases, it is laid down that the date of import of goods would be the date on which the bill of entry was presented under Section 46. This legal position is clear from the decision of the Apex Court as laid down in Union of India v. Apar Ltd., 1999 (112) ELT 3 (SC) and Garden Silk Mills v. Union of India, 1999 (113) ELT 358 (SC) : 1999 (8) SCC 744. The same is the view taken by of the Apex Court in Sampat Raj Dayar s case (supra). Imports against replenishment licences were permitted duty free if the importers produced an import replenishment licence the goods or the materials were imported into India. In the instant cases when the goods were imported into India, and even when the bills of entry were filed, neither were the licences suspended nor the same cancelled. In all these cases, bills of entry were filed by the petitioners well before the suspension and/or cancellation of the licences in question. Thus the imports were made under valid licences, the goods could not be subjected to levy of customs duty in the peculiar facts and circumstances of the cases in hand. In the circumstances, we hold that in all cases at hand, the goods were imported, under valid licences. The goods imported were neither prohibited nor restricted by or under the Customs Act, as such, it was not open for the Customs authorities to withhold clearance thereof.
Customs Act, 1962 - Section 47 - Effect of limitation for exercise of powers - Reasonable period is gist to exercise powers in proper manner - Depending upon facts and circumstances of each case - No specific hard and fast rule and be chalked out regarding exercise of powers. - Before closing few more contentions raised by the petitioners can be noticed. It is canvassed that principles of natural justice and reasonable opportunity of being heard within the meaning of clause 10 of the Order have not been extended to the petitioners while suspending the operation of the licences or rendering them ineffective, especially when the same were held by them as transferees in good faith for value without notice as such the impugned action of suspension and/or cancellation of licences is not only bad, illegal but ab initio void. Court does not think on the canvas of the view, this issue canvassed by rival parties needs any consideration in the facts and circumstances of the cases in hand. Court does not propose to dwell on this issue, but need not be understood to have rejected the contention of the petitions in this behalf. It is not necessary to consider this issue as the imports in all these cases are much prior to making the licences ineffective. Court does not express any opinion on this question canvassed before it. So far as the exercise of powers under Section 47 are concerned, Court only express that the same required to be exercised in a reasonable period depending upon the facts and circumstances of each. No hard and fast rule in this behalf can be laid down. Other questions raised need no consideration in the light of the view taken in these petitions.
Customs Act, 1962 - Section 47 - Witholding of clearance as licence was suspended - Validity of - Licence alleged to be issued on fraud - It does not create any valid right in favour of any body - Held - Fraud vitiates everything does not hold good here - It shall not be applicable in cases where transaction for transfer of licence is for value without notice - Imports were made under valid licence - Goods could not be subjected to levy of Custom duty - Customs authorities cannot withhold clearance thereof. - It is true that legal fraud vitiates everything even judgments and orders of the Court, but the question is : as to what extent this concept can be imported in commercial transactions, where question of transfer of properties is life and soul of trade. In a mercantile transaction, as well as in those connected with real properties, the general rule undoubtedly is, that a person cannot transfer to another a right which he does not himself possess. The rule of cavest emptor spells out two exceptions to the rule, one in cases for encouragement of commerce such as sales in market overt, and other to the transfer of negotiable instruments. Take for example, if the seller has endorsed and delivered to the buyer the bill of leading or any other documents of title to the goods and the buyer has endorsed and delivered it to his sub- buyer, then the sub buyer, provided he has taken the document in good faith, as well as for valuable consideration, is entitled to the goods free from any right in the original seller to stop them, and thus his position is better than that of the original buyer, same is a position of sales in market-overt. It is thus no doubt true that as a general rule, if a transaction has been originally founded on fraud, the original vice will continue to taint it, and not only is the person who has committed fraud is precluded from deriving any benefit under it, but an innocent person is so likewise, unless there has been some consideration moving from himself. In the cases at hand, it is not in dispute that all the petitioners had obtained licences for valuable consideration without any notice of the fraud alleged to have been committed by the original licence holders while obtaining licences. If that be so, the concept that fraud vitiates everything would not be applicable to the cases where the transaction of transfer of licence is for value without notice arising out of mercantile transactions, governed by common law and not by provisions of any statute. In the circumstances, in all cases at hand, the goods were imported, under valid licences. The goods imported were neither prohibited nor restricted by or under the Customs Act, as such, it was not open for the Customs authorities to withhold clearance thereof.
Import (Control) Order, 1955 - Paras 225 and 226 - Withholding of clearance as licence was suspended - Validity of - Licence alleged to be issued on false representation - Licence obtained by fraud - It does not create any valid right in favour of anybody - Held - Fraud vitiates everything - It shall not be applicable in cases where transaction for transfer of licence is for value where transaction for transfer of licence is for value without notice - Imports were made under valid licence - Goods could not be subjected to levy of custom duty - Custom authorities cannot withhold clearance thereof. - It is true that legal fraud vitiates everything even judgments and orders of the Court, but the question is : as to what extent this concept can be imported in commercial transactions, where question of transfer of properties is life and soul of trade. In a mercantile transaction, as well as in those connected with real properties, the general rule undoubtedly is, that a person cannot transfer to another a right which he does not himself possess. The rule of cavest emptor spells out two exceptions to the rule, one in cases for encouragement of commerce such as sales in market overt, and other to the transfer of negotiable instruments. Take for example, if the seller has endorsed and delivered to the buyer the bill of leading or any other documents of title to the goods and the buyer has endorsed and delivered it to his sub-buyer, then the sub-buyer, provided he has taken the document in good faith, as well as for valuable consideration, is entitled to the goods free from any right in the original seller to stop them, and thus his position is better than that of the original buyer, same is a position of sales in market-overt. It is thus no doubt true that as a general rule, if a transaction has been originally founded on fraud, the original vice will continue to taint it, and not only is the person who has committed fraud is precluded from deriving any benefit under it, but an innocent person is so likewise, unless there has been some consideration moving from himself. In the cases at hand, it is not in dispute that all the petitioners had obtained licences for valuable consideration without any notice of the fraud alleged to have been committed by the original licence holders while obtaining licences. If that be so, the concept that fraud vitiates everything would not be applicable to the cases where the transaction of transfer of licence is for value without notice arising out of mercantile transactions, governed by common law and not by provisions of any statute.
2. The petitioners are different but the issues involved are identical so a single judgment will dispose of all these writ petitions. We propose to discuss the facts drawn from Writ Petition No. 3343 of 1987 (M/s. Taparia Overseas (P.) Ltd. v. Union of India) as the facts involved in all other petitions are more or less similar except with some minor variations which have no bearing on ultimate decision of these petitions.
3. Brief background facts sketched from the above petition are as under:
BACKGROUND FACTS:
The petitioners had acquired 2 licences both dated 2nd March, 1987 issued under the provisions of Import (Control) Order, 1955 (the 'Order' for short) in favour of one M/s. Suraj Textiles Traders, New Delhi, in terms of Appendix 21 of Import/Export Policy, Vo.I, 1985-88 by the Deputy Chief Controller of Import/Export, New Delhi, for import of 'Polyster Filament Yarn'. It had been acquired by the petitioners in terms of paras 225 and 226 of the Import Export Policy 1985-88 ('the import export policy' for short).
4. The petitioners before acquiring these two licences had written a letter dated 9th April, 1987 furnishing full particulars to the Joint Chief Controller of Import and Export, Delhi and informing him that they have negotiated for the purchase of the same and sought confirmation as to whether the licences were issued as per ITC Regulations. It was also made clear that in the event of no reply within 7 days they would finalise transactions and proceed to open letter of credit. The correspondence made in this behalf is not in dispute.
5. The petitioners did not hear anything contrary from the Joint Controller of I. E., New Delhi, for quite a long time. Consequently, the petitioners went ahead and purchased the said licences from M/s. Suraj Textile Traders, New Delhi, and got the same transferred in their name.
6. The office of the Joint Chief Controller of Imports and Exports, New Delhi vide its letter dated 31st July, 1987 confirmed the issuance of the licences as per Appendix 21 of the Import Export Policy 1985-88. By other letters dated 29th June, 1987 and 10th August, 1987 the office of the Joint Chief Controller of I. E., New Delhi, expressly confirmed that two licences were issued to M/s. Suraj Textile Traders, New Delhi, for import of Polyster Forament Yarn. These letters and contents thereof are not in dispute.
7. The petitioners had placed orders with foreign suppliers and opened letter of credit in their favour through their bankers Central Bank of India. The said suppliers caused 3 consignments of 8000 Kgs., 2400 Kgs. and 445 Kgs. of Polyster Filament Yarn and shipped the same on the board of two vessels under the different Bills of Leading issued by the Shipping Companies. The said vessels arrived at Bombay some time in the month of July 1987. The petitioners filed prior IAM along with three prior bills of entry dated 12th and 13th July, 1987 in respect of the three consignments.
8. The goods remained to be unloaded for some time but ultimately goods were unloaded somewhere in the month of August 1987. The Customs Authorities inspected these goods on 26th August, 1987 and 7th September, 1987, but did not clear the same, though they found that the goods imported were as per specification.
9. On 18th September, 1987 the petitioners came to be served with the copy of the order dated 11th September, 1987 addressed to the original licence holders; whereby the Deputy Chief Controller of I E, Ne
