A DEPUTY ASSTr. IRON & STEEL CONTROLLER & ANR.

L. MANICKCHAND, PROPRIETOR, KATRELLA

CORPN. MADRAS

January 5, 1972

METAL

(J. M. SHELAT, I. D. DuA, H. R. KHANNA AND G. K. MITTER, 11.J

Import Trade Control PoliGv-Appllcation for import licence-I/ <hould comidered in term. of the policy in force at the time of application or at the time of grant of licence.

In December, 1968 the respondent &plied for an import licence for importing stainless steel for the licensing period 1968-69. The registra lion certificate certified that he was engaged in the manufacture of hospital and surgical instruments and household utensils of stainless steel. Ac cording to the import policy for 1968-69 no priority was available for household utensils.

Since the number of applicants for import licences for stainless steel, which was a sensitive item, was very large instructions were issued in January 1%9 that the applications should be scrutim.ed carefully after asking for information from applicants as to details of end products to be manufactured by an applicant. In May 1969 the respondent stated that the hospital requisttes intended to be manufactured by him were surgical bowls, spittoons and trays.

The Chief Controller, Imports and Exports. issued instructions that only 'medical and surgical , equipment and appliances' should have priority and not other types of hospital equipment such as bowls, trays, jugs etc. In April 1970, after a review of the situation the Chief Controllerlissued instructions to consi .. der the respondent 9s application in terms of the licensing policy for 197t. 71.

The respondent filed an application for the issue of a writ of rnandamru and the High Court allowed it directing that .the respondent's application may be dealt with in terms of the 1968-69 import policy.

In appeal, on tho question whether the application should be considered in accordance with the policy in force when the licence was granted or when the application was made.

HELD: No case had been made out for a mandamus to consider the respondent's application in terms of 196&-69 policy, since there waa no undue !aches or delay in dealing with the respondent's application. and the instructions of the Chief Controller to consider the a~· cation in terms df 197~71 policy l\'a& in accordance with para 91 of

, IV of the Import Trade Control Handbook of Rules and Procedure. {l 168).

[18 ~· Speedy disposal of applications for import licences is of t importance in order that available foreign exchange may be utilized Without delay; but, it is also to be borne in mind, that in the pment stage of JI o1lr industrial development. imports requiring foreisn exChange hne , tO

be cootrolled and regulated to prevent abuses of. import quota. Thill. m. eviblbly f<!!Ulres proper acrutiny of variouc applications for ilDpQrt In. grantipg li<>:nces for ilnports, the authority has to keep in vi• viii.,_..

factors which may have impact on import. of other items of. relati...,.

A\ gre.ater priority in the larger interests of the overall economy of the country which must be the supreme consideration. Moreover, in view of s. 3(l)(a) of the Imports and Expdrts Control Act, 1947 and cl. 6(1)(a) of the Imports (Control) Order, 1955, an applicant has no vested right to an import licence in terms of the policy in force at the time di his applica.- tion. f9 B-E; 16 B-E; 17 A-Hl The respondent's application included household utensils which was not a priority item and since clarification Was asked for ... the application B could not be disposed of during 1968-69. The details of end-products furnished by him contained items which were non-priority end-products and hence. the application had to be kept pending until completion of its examination, and the time taken for such examination was not unreasonable. fl6 Jl..Hl ·

Glass Chaions .Importers and Users Assn. v. Union of India, [1962] 1 S.C.R. 866, referred to.

CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1053 Of 1971. '•

Appeal by special leave from the judgment and order dated March 1971 of the Madras High Court in Writ Appeal No. 120 Of 1971.

V. S. Desai, M. C. Bhandere and S. P. Nayar, for the appellant.

L. M. Singvi, A. V. Rangam, R. Krishnamoorlhi rund A. Subhashini, for respondent No. 1.

M. V. Goswami, for the intervener.

The Judgment of the Court was delivered by E

Dllll, J.

This appeal by special leave is directed against the judgment and order of the Madras High Court dated March 25, 1971 dismissing at the stage of ad!llission an appeal under cl.

(15) of the Letters Patent preferred by the appellant against the judgment and order of a learned single Judge of that Court dated F September l, 1970 allowing writ petition no. 933 of 1970' filed by the respondent praying for a writ of mandamus directing the Licensing Authority under the Imports & Exports (Control) Act, 194 7 to do his public duty and consider the applications for import licence made by the respondent.

More than 200 writ petitions were heard together and disposed of by a common G judgment of the learned single Judge, the facts in the respondent's writ petition No. 933 of 1970 being, by common consent, treated as ilJustrative of all the other cases as well.

' On December 7, 1968 Lala Manickchand, proprietor of Messrs Katrella Metal Corporation, Madras, respondent in this

Court, submitted an application, as a new unit, for the licensing 8 period 1968,69 for the grant of an import liceitce for Rs, 9,9~/- for importing stainless steel as an actual user for mamiactunng

'fRON & STEEL CONTROLLER v. MANICKCHAND (Dua, J.) 3

A hospital requisites.

The registration certificate dated December 31, 1968 issued to the respondent as a small scale industry by the Additional Assistant Director of Land Commerce, District Madras.

North, reads :

"DEPARTMENT OF INDUSTRIES & COMMERCE B

SMALL SCALE INDUSTRIES DIVISION

S. No. 571 Registration No. MS.N.SSI/506/033

CERTIFICATE

This is to certify that M/s. Katrala Metal Corpora- C tion 54 Sydenbams Road, Madras 7 office at 90 N.S.C.

Bose Road, Madras 1 is a genuine Small Scale Industry engaged in the manufacture of Hospital and Surgical Instruments, Trays, Mugs, Basins and Household Utensils out of Stainless steel.

D Sd/ S. Gopalakrisbnan Addi. Asst!. Director of Land & Commerce, District Madras North

23-12-68"

According to Import Trade Control Policy (1968-69) lndos- E tries engaged in the manufacture of "medical 'and surgical equipment and appliances" were included in the list of priority industries at sl. no. 39 of Appendix I in Section V.

The import policy is announced and published by the Government of India, Ministry of Commerce, on the eve of each financial year by means or a Public Notice which is issued in the form of a book called the- F Import Trade Control Policy, commonly known as the "Red ., Book". Prior to 1962 the import policy used to be published

on half-yearly basis.

But with effect from the financial year 1962-63 the Red Book contains the policy for the whole year.

As a supplement to the Red book is the Handbook of Rules and Procedure on Import Trade Control.

Its provisions are brought G into force by a Public Notice published in the Gazette of India-

Extraordinary. tt embodies the procedures, rules and regula tions govermng the submission of applications, grant of licences, their validity and utilisation and other matters relating to import trade control.

The instructions contained in this book are applicable subject to future amendments and to the prOvisions of tbe

H relevant import trade control policy book : vide cl. 6, qiaptet II of Handbook of Rules and Procedure, 1968. As ls obvious from the preface of the Red Book for the year 1968-69, in formulating the import policy, account is generaHy taken of all tbe

suggestions received from individuals, chambers and associations A of trade and industry, Export Promotion Councils, Commodities Boards, Board of Trade and others: It appears that according to this policy import for household utensils was not available as a priority item and this necessitated further clarification from the respondent.

In the meantime on January 30, 1969 Licensing Instruction No. 4/69 was issued from the Iro.n and Steel Con- B trol Department (I & E Division). It said :

"IRON & STEEL CONTROL (I & E DIVISION) Office Note: LICENSING INSTRUCTION No. 4/69 Dated 30-1-1969

1. It has come to the notice of the Iron & Steel Controller that a large number of applications have been received for import of Stainless Steel Sheet plates and strips from newcomer units during 1968-69. As a measure of precaution, the Regional Office and Licensing section were requested to suspend further issue of licence vide Iron & Steel Controller's telegram dated 9th January, 1969.

2. The position has been reviewed, in consultation with the Department of Iron & Steel, and it has been decided that the applications for Stainless Steel Sheets, plates and strips received from newcomer units during 1968-69 should be scrutinised by the Directors of Industries and the Regional Offii:es and Licensing Sections very carefully, before import licences are granted, with a view to e11suring that new units which are not well-equipped do not get away with import licences of this sensitive item.

3. For the purpose of scrutinising the applications, it is necessary to call for the following data from the .applicant :

.( 1) Date of registration of the unit.

(2) Date o~ which power connection was obtained. ( 3) Details of the machinery installed.

(4) Value of the machinery ed. ( 5) Whether ihe machinery is imported or indigenous. ( 6) The address of the firm from whom the machinery was purchased.

(7) Date of )'.>urchase of the machinery, '

IRON &.STEEL CONTROLLER v. MANICKCHAND (Dua, I.) s.

( 8) Date of installation of the machinery. ( 9) Details of the end products to be manufactured. ( 10) Whether the unit is fully equipped to manufacture the items in question. ( 11) Past experience of the firm in manufacturing line. ( 12) Technicians employed and their technical qualifications. ( 13) Whether any market survey has been conducted for the disposal of the products to be manufactured. If so, the results thereof.

4. Regional Offices and Licensing Sections are directed to write to all the new comers, who have sent their applications for Stainless Steel Sheets plates and strips to furnh the above information t.o the respective Directors of Industries <!irect, endorsing a copy to the Regional Offices and the Licensing Sections.

Copies of these letters may be endorsed to the respective Directors of Industries, with the request that they should scrutinise the applications with reference to the date that may be furnished by the applicants carefully, and thereafter send their recommendations (revised recommendations as the case may be) to the licensing offices.

5. Regional Office and Licensing Sections are directed to take immediate action on the lines indicated above.

Sd/ C. B. Mathur Officer on Special Duty."

It is quite clear from these instructions that stainless stdct sheets were considered a sensitive item and that a large number of newcomers had applied for import of stainless steel sheets, plates and strips whose applications required close scrutiny. Oa G May 2, 1969 the respondent, while giving information about end-products, stated in a letter that hospital requisites such as surgical bowls, spittoons and trays were intended to be manufactured by the industry. On May 19, 1969 the Chief Controller of Imports and Exports, from the Ministry of Foreign Trade and

Supply issued General Licensing Instruction No. 29/69 on the subject of import licences to units engaged in the manufacture of H hospital equipments. These instructions pertained to the import policy for April 1969-March, 1970, and referred to "medical anct surgical equipment and appliances" which was the subject matter

of Item. No. 39 in Appendix I of the Red Book for that year. In A para 2 1t was stated that some Licensing Authorities were treating the manufacture of "hospital equipment" as priority industry under the general heading ''medical and surgical equipment and appliances".. It w~ pointed out that all types of hospital equipment and hospital appliances were not classified as priority industries and it '."'as added by way of illustration that lotion bowls, kidney trays, B 1nstt:u.nent trays, wash bowls, meas!Jring jugs, ointment jars and med1cme cups as end-products were m non-priority category.

The sponsoring authorities were accordingly directed to ensure that -0nly those hospital equipment and appliances were to be treated as priority industries which would appropriately be classified as ·"medical and surgical equipment and appliances".

On May 29, 1969 the Chief Controller of Imports and Exports issued General C Licensing Instruction No. 31 of 1969 on the subject of "grant of import licence to units engaged in the manufacture of hospital equipment''.

After inviting attention to the earlier G.L.I. No. 29/69 dated May 19, 1969 it was stated in this instruction that after further consideration in consultation with the D.G.T.D. a list had been prepared in respect of the end-products which alone D would be treated as priority industries under the general heading "medical and surgical equipment and appliances." That list was enclosed for the guidance of the Licensing and Sponsoring authorities and in case of doubt those authorities were directed to refer the matter to head-quarters Special Licensing Cell.

On October 31, 1969 the Director of Industries, Madras, confirmed the Essen- E tia!ity Certificate already issued to the respondent. It was observed iu that letter that the firm had "installed machinery and taken action to obtain power supply etc. Hence the Essentiality Certificate issued to the firm already is confirmed". On Febr:uary 23, 1970 a leiteI' was written by the Dir&etor of Industries and Commerce, Madras to the Deputy Assistant Iron & Steel Controller, Madras, in which after referring to his earlier letter dated F October 31, 1969 and to the respondent's letter dated February o, 1970, it was stated :

"Jn view of the assurance iven by the firm that they would manufacture only Surgical Equipment like Sterilisers, Operation Tables, Auto-Claves etc,, I recommend that M/s. Katrella Metal Corporation, 54, Sydanhams Road, Madras for whom Essentiality Certificate has been issued for import of stainless steel sheets for the period April-March, 1969 may please be treated as PRIORITY INDUSTRY and licence issued to them on this basis."

Apparently, the Director of Industries was the sponsoring autho- H rity in this case. It was in .these circumstances that the respondent filed the writ petition in the High Court on March 30, 1970 claiming a writ of mandamus as stated earlier, the sole grievance

IllON & STEEL CONTROLLER v. MAN!CKCHAND (Dua, I.) 7

A being that the res-l'°ndent's application for import licence had during all this penod not been .taken up for final disposal.

According to the respondent's case in the High Court, the firm's factory had been manufacturing various items since 1962 by purchasing raw material from local market with the annual turnover of about 8 to 10 lacs. With regard to the iespondent's applica- B lion for import licenee for manufacturing hospital and nrgical

equipment it was added that the Director of Industries had, issued the Essentiality Certificate in April, 1969 and recommended the respondent for treating it as a priority industry on February 23,

1970. In the counter-affidavit in that Court it was not contested that the writ petitioner was entitled to have his applications considered. According to para 10 of the counter-affidavit on which C the learned single Judge of the High Court, disposing of the writ

petition, relied, it was stated inter alia :

"in the case of units engaged in the manufacture of non-priority end-products, as in the case of the petitioner, the Chief Controller of Imports and Exports had advised the department to keep the applications pending until the completion of the examination: The petitioner's application could not therefore be disposed of.

However, instructions have since been received vlde the Chief Controller of Imports and Exports, New Delhi letter dated 8-4-1970, which inter alia provides that applications received by the sponsoring authorities in time may be considered irrespective of the date on which they were forwarded to the licensing authorities and in terms of the licensing policy for 1970-71."

It was added in this para of the counter-affidavit :

"According to policy for 1970-71, the material stainless steel sheets is a canalised item for non-priority industries and release orders are to be issued on Minerals and Metals Trading Corporation."

In the judgment of the single Judge it wu stated to be G common ground that the application of the writ petitioners had to be dealt with in terms of the relevant import policy in force for the year 1968-69. However, a little lower down in that

judgment, lifter reproducing the relevant portion of paragraph 10 of the counter-affidavit, it was also observed :

"Learned counsel for the Central Government urged that the Licensing Authority whoever it is, is prepared to consider the apPlications of each of the petitioners in this tCh of wot petitions, but such appraisal of the applications would be in terms of the licensing policy

for the year 970-71.

Thus in effect, the respondents A concede the nght of the petitioners to have their applications considered and disposed of in a manner known to law, but the only opposition is that such applications filed and now pending will be considered in the light of the licensing policy for 1970-7 l."

It wasin this context that the High Court observed that it was B: practically conceded that the rule nisi had to be made absolute and that some more directions were necessary.

Relying on r. 7(2) in Chapter II of the Handbook of Rules of Procedure, Import Trade Control for the year 1968, according to which applications for licences were required to be considered in tenns ) of the relevant policy in force, the learned single Judge directed : C

"that the Licensing Authority do consider the applications now IJ\lnding before him which are the subject matter of these writ petitions within six months from this date bearing in mind the above directions and in particular deal with the said applications, applying the import trade control policy prevailing in 1968-69 or D 1969-70, as the case may be according to the dates of application for licence."

On appeal before the division Bench under cl. (15) of the Letters Patent it was complained by the appellant, the Deputy Assistant Iron & Steel Controller, that the instructions of the E learned Judge interfered with the policy introduced in 1970-71 because under the new policy import of stainless steel was canalised through the Minerals and Metals Trading Corporation for non-priority industries. The division Bench did not consider this objection to be valid because in its view had the applications been considered in time and without delay and the import licence sought granted, these complications would not have intervened.

F The Dc; partment, according to the High Court, could not take advantage of the delay in disposing of the applications for licence made earlier and then take the plea that they should be disposed of only in accordance with the curfont policy and instructions given as to canalis11tion.

On this view the appeal was dismissed but time for granting the import licence was extended by a fur- G ther period of three months from the date of the order viz. March 25, 1971.

In this Court the question .canvassed at the bar is a. very narrow one, namely, whether the application for the nnpo1t licence in question should be considered in accordance with the policy in force when the licence is granted or when the appli- H cation is made.· No point of miila {ides or. arbitrariness was argued in the High Court and no serious attempt was made on

IRON & STEEL CONTROLLER v. MANICKCHAND (Dua, I.) 9

A behalf of the respondent to sustain the impugned order of the High Court on that basis, as indeed, it is not possible for this

Cc, urt to entertain and adjudicate upon such a plea in this appeal m the absence of a considered opinion of the High Court.

Tue appellants' learned counsel Shri V. S. Desai at the outset drew our attention to s. 3 (I) (a) of the Imports & Exports (Control) B A ct, 18 of 194 7 which empowers the Central Government to prohibit, restrict or otherwise control imports and exports and to

cl. 6(l)(a) of the Imports (Control) Order, 1955 made by the Central Government in exercise of the powers conferred on it by ss. 3 and 4 of Act 18 of 1947.

Clause 6(1) of the Order emc powers the Central Goverrunent or the Chief Controller of Imports and Exports to refuse to grant a licence or direct any other licensing authority not to grant a licence if no foreign exchange is available for the purpose or if the grant of a licence to an applicant is prejudicial to the interest of the State or if it has . been decided to canalise imports and distribution thereof through special or specialised agencies or channels.

The scheme of these D provisions, according to the submission, suggests that the respondent has no absolute right to the grant of a licence merely because his application has been recommended by the sponsoring authority and that the licensing authority may decline to grant the licence on other relevant considerations affecting the larger and more vital interests of the economy of the State and also other relevanr factors beyond the control of the State.

In this connection refe- E rence was also made to para 91 of Chapter IV of the Import

Trade Control Handbook of Rules and Procedure ( 1968) which reads :

"Issue of import licences to actual users for back period 91 (I ) Where an application for import licence from an actual user is not disposed of during the licensing period concerned on account of any delay or !aches on the part of the applicant, no lice against such application will be issued after the expiry of the licensing period or after the close of the monetary ceiling.

However, if the delay in the disposal of the application is on the part of the licensing authority or sponsoring authority or any other Government Department, the application will be considered on merits.

(2) While dealing with an import application for a back period in appeal or otherwise, the authorities concerned will consider such an application having regard to the general principles laid down, that is, availability of monetary ceiling, availability of goods applied for from indigenous sources or other commercial channels, essentiality of the goods applied for, stocks held by the 2-L864Sup CI/72

applicant and expected arrivals against licences in hana, past imports and consumption of the item(s) in question by the applicant, actual production during the preceding period, estimated production and other factors considered relevant and necessary.

( 3) In case where the applications for licences are not disposed of during the licensing period concerned or before the close of the monetary ceiling on account of delay on the part of the sponsoring authority or the licensing authority or any other Goverrunent Department the value of the licences iswed in such cases will be treated as first charge on the monetary ceiling to be allocated for the next licensing period and the necessary intimation in this regard will be given to the sponsoring authority."

According to Shri Desai the entire position of monetary ceiling, availability of goods applied for from indigenous sources, essentiality of the goods applied for and other relevant factors have to D be seen for considering the question of issuing import licences to actual users for back periods.

These considerations. said Shri Desai, indicate ihat if availability of the goods applied for, from indigenous sources, improves or the position in regard to foreign exchange deteriorates or there is a change in the matter of essentiality of the goods applied for, then, .it would be and, indeed, it E should be open to the licensing authority to come to a fresh decision on the question of issuing the licence uninfluenced by the consideration that during the previous licensing period, the situation being more easy, the import licence applied for would have been more readily granted.

The import policy is influenced by the condition of foreign exchange which depends on various factors, some of which may even be wholly beyond the control of F the State and, therefore, \he licensing authority would be entitled to take ihem into account at the time when ihe licence is actually issued.

Shri Desai in support of his submission relied on the following observations from the decision of this Court in Glass Chatons Importers and Users' Association v. Union of lndia( 1) :

"It is obvious that if a decision has been made that imports shall be by particular agencies or channels the granting of licence to any applicant outside the agency or channel would frustrate the implementation of that decision. If therefore a canalization of imports is in the interests of the general public the refusal of imports licences to applicants outside the agencies or channels decided upon must necessarily be held also .in the

(I) (1%2] J. S.C.R. 862 .al 866.

IRON & STEEL CONTROLLER v. MANJCKCHAND (Dua, !.) 11

interests of the general public.

The real question therefore is : Is the canalization through special or specialized agencies or channels in the interests of the general public.

B A policy as regards imports forms an integral part of the general economic policy of a country which is to have due regard not orily to its impact on the internal or international trade of the country but also on monetary policy, the development of agriculture and industries and even 0'1. the political policies of the country

involvin& questions of friendship, neutrality or hostility with other countries." c

These observations have also been pressed into service by Shri Desai in support of his contention that canalising of applications for the import of stainless steel having been introduced since April I, 1970 it is not open now to issue the import licence to the D respondent without the application being canalised according to the prevailing procedure.

The learned counsel, however, offered, as agreed in the High Court, to consider the respondent's application according to 1970'.71 policy.

Shri Singhvi on behalf of the respondent controverted the I: appellant's argument by strongly relying on the letter dated February 23, 1970 from the Director of Industries to the Deputy Assistant Iron and Steel Controller in which reference was made to the respondent's assurance to "manufacture only surgical equipments like sterlisers, operation tables, autoclaves etc." and it was recommended that import of stainless steel sheets for the period 1968-69 be treated as priority industry and licence issued F to the respondent on this basis. As canalising policy was intro

duced only on April l, 1970, when the respondent's case, according to Shri Singhvi's argument, had already been completed as a result of the assurance contained in the letter of February 23,

1970, the respondent's industry was not governed by this policy and was entitled to get the impor't licence. Shri Singhvi placed G strong reliance on r. 7 ( 2) contained in the Import Trade Control Handbook of Rules and Procedure of 1968 and contended that the applications for licences must be considered in terms of the relevant policy in force at the time of making the application.

Reference in this connection was also made to r. 81 ( c), according to which the role of the licensing authorities is :

H "(i) To issue licences on the basis of the recommendations of the sponsoring authorities where such recommendations are in consonance with. the policy/procedure in force;

(ii) In the case of rejections, to communicate reasons thereof to the applicants;

(iii) To take penal action against the licencees or importers for violations of impart and export control regulations. -

(iv) To watch the utilisation of ceiling, if any".

It was further contended that the recommendation of the sponsoring authority has to be given due consideration by the licensing authority as provided in r. 80.

The learned counsel submitted that if the import policy prevailing in 1968-69 is not applied to the respondent, then, the respondent would ouffer in respect of the applications made for the years 1969-70 and 1970-71 though this argument was not developed and the counsel was content merely by asserting prejudice to his client. It may be recalled thatthe respondent applied for the licence as a new unit.

Para 82, sub-para 2 contained in the Handbook of Rules and. Procedure for 1968 provides :

"82(2) New Units (Priority industries) (a) The new units, both in the large and the small scale sectors, should make their first and second import applications for raw materials and components in a licensing period, through the sponsoring authority concerned, each covering their requirements for six months. Subsequent applications can be made by them on the basis of actual consumption, in the same manner as has been laid down for the existing units engaged in the priority Industries.

(b) In the case of proposed units, the sponsoring authority will recommend a licence against the second application only after the unit has gone into production. ( c) " Para 53 of the Red Book (1968-69) isin the same terms as para 82(2)(a).

Prima facie, without the new units actually going into prouction, no question of recommendation for a licence against the G second application could arise.

But the point having not been fully pursued we express no opinion on this aspect.

The respondent's learned counsel also submitted that about 163 applications for import licences had been dealt with by the licensing authority and the licences granted to the applicants.

Reference in this • connection was made to the affidavit of Lala Manickchand filed H in the High Court in support of the writ petition in which it was asserted that licences had been issued in March, 1969 to 163 .applicants for the value of Rs. 9,900 each.

These licences,

jt:

IRON "' STEEL CONTROLLER v. MANICKCHAND (Dua, /.)' 13

A according to the assertion in this paragraph, had been granted without any basis, though a little lower down it was added that those applicants were sunilarly placed as the respondent and, therefore, the issue of import licence to them showed discriminatory conduct violative of rules of natural justice and equalit)'.

It was also added that according to the respondent's informa- B tion another 321 applicants were going to get licences withc'>ut any proper basis or criteria.

The counsel also made a reierence to that part of the respondent's affidavit in the High Court where it was stated that if, as the respondent had reliably learnt, the

300 applicants who had asked for import licences were lo be granted their prayers then the ceiling limit allotted for the year c

would be exhausted and the respondent would not get any relief.

It was for this reason that prayer was made in the High Court for restraining the Joint Chief Controller of Imports and Exports from issuing any licence to any other person pending disposal of the respondent's application.

According to Shri Singhvi 011 April 9, 1970 an undertaking was given by the State in the High Court that the plea of exhaustion of the quota would not be taken by it for defeating the respondent's claim.

This submission was apparently made for the purpose of controverting the contention that the availability of foreign exchange being one of the vital considerations determining the grant of import licence, it is the prevailing position of foreign exchange at the time of granting the licence which has to be seen.

Shri Desai having denied any such undertaking in the High Court and our attention having not been drawn to any such undertaking on the record ol the High Court, we do not consider it proper to take into account this assertion made on behalf of the respondent.

Shri Singhvi relied on a decision of the Madras High Court Sha Maggajee Saremal/ & Bros v. Joint Chief Controller of Imports and Exports(') the head-noteof which reads:

"Where a transfer of quota rights is effected as a result of change in the constitution of. the firm, the new constituted firm becomes entitled to the transferred quota as from the date on which the reconstitution was effected and not from the date on which the Chief Controller of Imports purports to accord recognition to such reconstitution.

The fact that a rule by way of an instruction has

ben introduced in the Red Bock limiting the consideration of applications only to the immediately prior period cannot have any value in so far as the rihts of parties come in for examination. The rights of the established importer to the licence for the back periods cannot be

(I) A.LR. 1966 Mad. 3u9.

denied if his application had been kept pending for A reasons other than )aches on the part of the applicant.

An application for import licence for a particular period must be considered only in the light of the policy relevant to that period and cannot be refused on the basis of a later policy which might have changed the position with regard to the licences for the import of the Jl. item applied for.

Decision in W.A. No. 15 of 1960 (Mad.) and in W.P. Nos. 27, 47, 48 of 1961 (Mad.) followed."

This decision deals with a situation created by the transfer of quota rights effected as a result of change Jn the constitution of an existing firm which was an established in1porter and, there c fore, cannot lend much assistance irr dealing with the facts before us.

The unreported decision of this Court in The Municipal Corporation for Greater Bombay v. The Advance Builders India (Pvt.) Ltd.(1), also relied upori by Shri Singhvi merely lays down tht "where a statute imposes a duty the performance or non-performance of which is not a matter of discretion; a D mandamus may be granted ordering that to be done which the statute requires to be done (Halsbury's Laws of England, Third edn. Vol. II, p. 90)". Quite clearly, this decision only reiterate> the recognised rule in regard to the grant of mandamus and is of little help to the respondent.

In our view the plea of arbitrariness and ma/a {ides having £ not been pressed in the High Court it is not possible for this Court to consider it.

The material on the existing record lo which our attention was drawn is not enough to make out a prima facie case of either mala {ides or arbitrariness to justify any further scrutiny.

Indeed, in the High Court the State had agreed to consider the respondent's application' and the only controversy F th,, ere was as to the year of which the import policy was to govern the respondent's application. For this purpose, reliance was placed neither on the plea of ma/a {ides nor of arbitrariness with the result that. we decline to go into these pleas.

There is no doubt that speedy disposal of applicatio11s for import licences is of the greatest importance.

Indeed, in lhe G Import Trade Control Handbook of Rules and Procedure, 1968 paras 302 to 304 have been exclusively devoted to the subject of Checks on delays.

They provide; "302(1) Every effort is made to avoid delays in the disposal of applications for licences or correspondence.

Reminders in regard to the delayed cases are attended H to promptly by the licensing authorities.

(I) C.A. No. !l21 of 1970 decided on 2Sth August, 1971.

"11

IRON & STEEL CONTROLLER v. MANICKCHAND (Dua, I.) 15

(2) Complaints regarding delay addressed to the Chief Controller of Imports and Exports, New Delhi, should be specifically marked "Complaint against delay" at the top of the communication containing the complaint.

(3) The applicant .should also bring cases of delay to the personal notice of the Public Relations Officer 111 the Import Trade Control office concerned.

The Public Relations Officer of the rank of the Deputy Chief Controller of Imports and Exports has been appomted at the headquarters of the office of the Chief Controller of Imports and.Exports, New Delhi.

In the regional offices also, Public Relations Officers have been appointed.

Addressing of communications to import trade control organisatkms :

303. It is noticed that telegrams and jetters received tiy the licensing authorities from the trade by way of reminder do not often contain sufficient details to enable th~ licensing authorities to locate the previous papers.

With a view to avoid delay in the disposal of such communications the trade should give brief details of the reference received by those from the licensing authority concerned, the particulars of the goods sought to b~ imported and the I.T.C. classification of such goods.

The communication should also indicate its subject matter, the category of the importer, the type of the licence to which it pertains, whether it relates to the grant of the licence or amendment or revalidation thereof or an appeal, and it should also give the number and date of the relevant original application.

Enquiries regarding the position of applications.

304(a) The arrangement under which the importers could enquire the position of the import application by filling the import enquiry slip has been discontinued.

(b) The licensing authorities will make every effort to dispose of the applications as quickly as possible. If an application for an import licence is not disposed of within one month from the date of its receipt in the licensing section the licing authority will issue an interim reply to the applicant. If an applicant does not receive an interim reply even after this time limit, he can bring the matter to the notice of the Public Relations Offieer in the import e control office concerned or book an interview with the officer

SUPREME COURT REPORTS [1972] 3 s.c.R. cohcerned through the Enquiry Officer in order to know the. reasons for the delay in the disposal of his application. ·

( c) Where a licensing authority calls for certain docu!Uen.ts <;>r informa:ion. from the. applicant or any defic1enc1es m the apphcatton are comm.unicated to the applicant, and. the aplicant has furnished the required documents or mformation or made good the deficiencies but does not receive any further communication from the lic7nsing author.ity within 15 days thereafter, he can bnng the matter to the notice of the Public Relations Officer or book an interview with the Officer concerned to know the reasons for the delay in the disposal of the application.

(d) Applications for import of capital goods and heavy electrical plant will take somewhat longer time.

But m such cases also, if the applicant finds that there has been a delay in the disposal of his application, he can bring the matter to the notice of Public Relations Officer or book an interview with the concerned officer to know the reasons for delay."

This importance is justified because it is necessary for our country to utiJ!se without undue delay the available foreign exchange, the supplies of which are limited, lest due to unforeseen circumstances beyond the control of the State the position in this rgard E deteriorates.

Para 91 of this Handbook, which has already been reproduced, while properly safeguarding the right of the applicants for import licence also points out the consequences of delay and !aches on their part. In the present case, as is clear from the respondent's counter-affidavit and from what has already been stated earlier, in the advance copy of the respondent's appli- F cation, no particular end-use of the stainless steel sheets requirr.d was specified and the respondent was asked to furnish particulars of the end-use and other required information in April, 1969 . . The S.S.I. Registration Certificate was for the end-products "hospital and surgical instruments and household utensils".

As per policy, there was a ban on_ issue of licences for stainless steel sheets for manufacture of household utensils.

It was in May, G 1969 after the expiry of the period 1968-69 that the respondent firm stated that they were going to manufacture hospital requisites such as surgical bowls, spittoons and trays.

In the meantime, as is clear, there being a large number of new units who had applied for import licences, in April, 1969 the Department. considered it desirable to have a further scrutiny and fresh instruc- J; tions came into force with effect from April f 6, 1969 ( GLI No. 23 / 69). It is for these reasons, which cannot be con.sidered to be irrelevant, that the application could not be disposed of during

!RON & STEEL CONTROLLER v. MAN!CKCHAND (Dua, J.) 17

1968-69 period.

We are ignoring the fact that according to the counter-affidavit the respondent's application, along with the essentiality certificate, was received in the office of the Deputy Assistant Iron and Steel Controller on April 23, 1969 which was after the expiry of the 1968-69 period, and we are assuming without holding, that the respondent's application had reached 8 the appropriate authority during the 1968-69 period.

It is not possible for us, on the material on the record and on the arguments advanced at the bar, to hold that there was any undue delay, I aches or dilatoriness on the part of the Department in dispo; ing of the respondent's pplication during 1968-69.

The history of the correspondence between the respondent and the c

Department, as already noticed, clearly shows that the respon dent's application included items of manufacture which were not covered by the priority list and as a result of a large number of new applicants for the sensitive item of stainless steel, the Department was compelled to hold a proper scrutiny in the larger intere>ts both of the healthy growth of industry and of the balanced econo111y of the country.

Fresh instructions for this purpose issued on June 4, 1969 became operative and the respondent was naturally required to comply with these instructions.

Since the respondent's application contained items which were non-priority end-products this application was kept pending until the completion of its examination, and in our opinion this was not unreasonable.

It was on April 8, 1970 that the Chief E Controller of Imports and Exports, apparently after proper review of the situation, issued instructions providing for the consideration of applications like those of the respondent, irrespective of the date on which they were forwarded to the Department, in terms of the licensing policy for 1970-71.

Though that period has expired, Shri Desai has fairly offered on behalf of his

clients even now to consider the respondent's application in terms of the policy for that year.

Now, it has to be borne in mind that in the present stage of our industrial development imports requiring foreign exchange have necessarily to be appropriately controlled and regulated.

Possible abuses of import quota have also to be effectively checked and this inevitably requires proper scrutiny of the various applications for import licence.

In granting licences for imports. the authority concerned has to keep in view various factors which may have impact on imports of other items of relatively greater priority in the larger interest of the over-all economy of the country which has to be the supreme consideration; and an applicant has no absolute vested right to an imoort licence in terms of the policy in force at the time of his application because from the very nature of things at the time of granting the licence the authority concerned may often be in a better position to have a

clearer over-all picture of the various factors having an impor- A tant impact on the final decision on the allotment of import quota to the various applicants.

Shri Singhvi's suggestion that the responde!lt's concern may have to close down if the import licence is not granted according to 1968-69 policy is difficult to accept in view of the assertion in the writ petition claiming turnover of 8 to 10 lacs by purchasing raw material from local markets.

Jn our opinion, no case has been made out on the present record for a mandamus to the Department to consider the respondent's application for import licence in terms of 1968-69 policy.

It is not possible on the existing material to conclude that the Department is guilty of any undue !aches or delay in dealing with the respondent's application which would justify the C - Court in granting the 111andam11.1 prayed for.

The High Court was thus not right in making the impugned order.

As Shri Desai has given an undertaking that the respondent's application would be considered in the light of the import policy for 1970-71 even though that period expired long ago, we need say nothing more on, this aspect.

We would accordingly allow the appeal D with the observation that the respondent's application be considered in accordance with the import policy for the year 19,70-71 without avoidable delay.

In the circumstances of the case there would be no order as to costs.

\'.P.S.

Appeal allmred.

DEPUTY ASSTT. IRON & STEEL CONTROLLER & ANR

M. SHELAT

I. D. DuA

H. R. KHANNA

G. K. MITTER

s. 3(l)(a)

Imports and Expdrts Control Act, 1947

cl. 6(1)(a)

[1962] 1 S.C.R. 866

V. S. Desai

M. C. Bhandere

S. P. Nayar

L. M. Singvi

A. V. Rangam

R. Krishnamoorlhi rund A. Subhashini

M. V. Goswami

E

Dllll

December 7, 1968

Lala Manickchand

Government of India

cl. 6

II of Handbook of Rules

January 30, 1969

IRON & STEEL CONTROL (I & E DIVISION)

Department of Iron & Steel

May 2, 1969

May 19, 1969

Ministry of Foreign Trade and

May 29, 1969

October 31, 1969

Madras

Febr:uary 23, 1970

Katrella Metal Corporation

March 30, 1970

February 23,

1970

Minerals and Metals Trading Corporation

Central Government

Chapter II of the Handbook of Rules

March 25, 1971

V. S. Desai

s. 3

cl. 6(l)(a)

ss. 3 and 4

Clause 6(1)

Central Goverrunent

Trade Control Handbook of Rules

Desai

Singhvi

April l, 1970

Lala Manickchand

April 9, 1970

Madras High Court

England

Import Trade Control Handbook of Rules

2Sth August, 1971

New Delhi

SUPREME COURT REPORTS [1972] 3 s.c.

April f 6, 1969

April 23, 1969

June 4, 1969

April 8, 1970


GOVIND HANUMANTHA RAO DESAI

NAGAPPA ALIAS NARAHARI LAXMAN RAO DESHPANDE

AND & 7 ORS.

January 25, 1972

(K. S. HEGDE, P. JAGANMOHAN REDDY AND D. G. PALEKAR, JJ.]

Hindu Law-Adoption-Theory of relation hack-Adoption by widow of deceased coparcener-Before adoption partition of property b:y surviving coparceners-Share which adoptive son entitled to.

The appellant was adopted in 1955 by R's widow after R's death in

1912. In 1933, there was a partition between K (R's father) and his third son L, the only two coparceners existink at that time. Thereafter, K. bequeathed his properties by will to some of his relations.

Later, there was a further partition between L and his son.

L died in 1952.

A suit was filed in 1956 by the-.appellant, claiming half of the family properties. The trial court granted the appellant half share in the family properties. The High Court reduced the share awarded to the appellant

from 1/2 to 1/3 of the properties held by it to be partible. The High Court also set aside the trial court's decree awarding a sum of Rs. 1500 to the appellant as his share of the consideration received under a sale deed;

In appeal to this Court the appellant contended that hl. adoption related back to the date of death of his adoptive father; by a fiction of law, be must he deemed to have been in existence when K and L divided the properties between them; the partition, having been effected without bis joinder, the same had to be ignored; and, therefore, he wa• entitled to a half share in the properties. Alternatively, it was urged that the appellant was entitled to get by succession, half share of the properties that fell to the share elf K.

Dismissing the appeal,

HELD . ( i) The appellant must be deemed to have been adopted in 1912 when R died. Therefore, he must he deemed to have~ a co.- parccner in his adoptive father's family when. K and L partitioned the properties in 1933. The partition having been effected without his consent, 1t is not binding on him; but 'from this it cannot be said that K and L did not separate from the family. So far as the quantum of his share is concerned it must he determined after taking into consideration the fact that K & L separated from the family in 1933. The appellant can ignQre the actual partition, by meters aild bounds effected by K and L and ask for a repartition of the properties but bis adoption by itself cannot reunite

the divided family. The rights of an adopted son cannot be more than that df his adoptive father.

The fiction that an adoption relates back to tho date of the death of the adoptive lathe\'. applies only wheo the claim

of the adopted son relates to the estate of the adoptive father.

H the appellant's adoptive father was alive in 1933, when the partition took pW:e, he could not have obtained anything more than I/3rd share in the family properties. Therefore, the ap_pellant's claim for a half share in the family properties is unsustainable. l204 O; 2<YT Bl

lll

The ; uternative claim of the appellant is also not tenable because K disposed his share by a will and secondly, even if he had not disposed

of his share, tho. same would have developed on L by succession and the property once vested:, cannot be divested as in that property the plaintiff'•

adoptive father had no right of his own. The doctrine of relation back is only a legal fiction. When K. died, plaintiff's adoption father was not alive. The devolution of K's property must be held to have taken place as soon as K died. The property could not have remained in a suspended animation till the appellant was adopted. ~204 G]

Shrinivas 'Krishnarao Kango v. Narayan Devji Kango and ors., [1955] 1 S.C.R. 1; Anaizt Bhikappa Patil, Minor v. Shankar Ramchandra Patil, 70 I.A. 232; Baiirao and Ors. v. Ramkrishna, I.L.R. ~1941] Nag. 707 and K. R. Sankaraliam Pillai and Anr. v. Veluchaml Pillai, Minor, I.L.R. 119431 Mad. 309, referred to,

Ramachandra Srinivas v. Ramakrishna Krishna Rao, A.I.R. 1952 Bom. 453, disapproved.

(ii) Both the courts below found the sale in question valid as the same was effected to meet family necessities.

As the appellant did not seek an accounting from the 2nd defendant, and as no case was made out for req_uiring the second defendant to account in respect of moneys ro- D ceived by him as Karta and as the plaint did not state that there was any cash in the bands of the 2nd defendant, the High Court was justified in reversing the decree of the trial court directing the payment of Rs. 1500 to the appellant. [203 El

CML APPELLATE JURISDICTION : Civil Appeal No. 527 ot 1967.

Appeal from the judgment and decree dated August 2nd/3rd, 1965 of the Mysore Hgh Court in Regular First A.ppeal No. 14 7 of 1958.

M. Natesan and K. Jayaram, for the appeltant,

~· S. S. Shukla, for respondents Nos. 1 to 4.

The Judgment of the Court was delivered by

Hedge, J. This appeal by certificate arises from the decision of the Mysore High Court in R.A. No. 147 of 1958 on its file. The plaintiff is the appellant. The main question that arises for decision in this appeal is as to the share to which the plaintiff is entitled in the properties held to be partible by the High Court. other minor contention had also been urged which will be referrrit to and dealt with at the appropriate stage.

The facts as found by the High Court and which are no more in dispute may now be stated. '

Tlie . appellant is the adopted son of one . Ranga Rao . alias Ramachandra Rao who died in 1912. He was adopted by the

said Ranga Rao's wid'Ow Seethabai on September 18, 1955. The A gi:neo!ogy of the family of Ranga Rao is as follows :

KRISHNA RAO DESHPANDE (Died 1934) MARRIED RADHABAI (Died 1935)

Ranaa Rao alias Ramcbandra Rao

(died 1912)

. Mmied Seothabai

(Defendant No. !)

Govinda (Adopted on 1S..9-19SS)

Plaintiff

Hanumantfu.

Rao (went out of tho family by adoption).

I, aksh;,, ana Rao (died 6-9-19'2) Mmied

.. •.

venkubai ·!st wife (died 1904)

-~ ts; r· Deft. 3 Del\·. s. .

kiiuyabli Deft. 7

Hanumantha:.Rao went a.It of'the fiUmly 'havmgbeen ~

 into some other family. Then: W\IS. a lion between Krislm&' Rao 'ud 1; aJcsbiwiJla Rao, the oiily twO existiili -~ that time, in 1933. After partition Krishna Rai> IS said to have ueathed his properties to SOll)e _of , Iris reJa.tiQllS as. per bis-will: R dated November 8, 1934. Sui1sequently there W84 a er partition between Laksbmana Rao and defendant No. Z Nagappa on

February 14, 1946. Lakshmana Rao died in 1952. As mentioned earlier, the plaintiff was adopted on September 18, 1955 and the suit-from which this appeal arises was instituted in 1956 by the plaintiff-appellant represented by his natural father as his next friend as he was a minor on the date of the suit. The trial court granted the plaintiff . half share in the properties that were held to be that of the family. The High Court modified the decree of the trial court in certain respects.

It is not necessary to refer to all the modifications made by the High Court.

We shall refer only to those modifications which are challenged in this appeal.

The High Court reduced the share awarded to the plaintiff from half to l/3rd of the properties l).eld by it to be partible. The correctness of this decision is questioned. The only other question is whether the High Court was justified in setting aside the trial court's decree awarding a sum of Rs. 1500/- to the plaintiff.

Before proceeding to examine the appellant's contention that he is entitled to a half share in properties held to be partible, it would be convenient to dispose of his contention relating to the money decree.

The trial court came to the conclusion that out of the consideration of Rs. 6500/- received under the sale deed Exh. 177, the second defendant had not accounted for Rs. 3000/-. Hence the plaintiff is entitled to a half share therein. The trial court as well as the High Court have found that the sale in question is valid as the same was effected to meet family necessities. The appellant did. not seek an accounting from the 2nd defendant.

No case was made out for requiring the 2nd defendant to account in respect of the amounts received by him as the karta of the family, nor did the plaintiff aver in his plaint that there was any cash in the hands of the 2nd defendant. Hence the High Court was justified in reversing the decree of the trial court directing the defendant to pay to the plaintiff a sum of Rs. 1500/ -.

This leaves us with the question as to the share to which the plaintiff is entitled in the partible properties. Even before the plaintiff was adopted into the family, there was a partition betweea Krishna Rao and Lakshmana Rao.

The genuineness of that G partition is no more in dispute. After the partition Krishna Rao became absolutely entitled to his share of the properties and hence ' he was entitled to deal with that . property in the manner he thought best. As mentioned earlier he had beqthed his properties to others.

But it was urged on behalf of the appellant that his adoption dates back to the date of the death of his adoptive father, Ranga Rao; By a .fiction of law, he must deemed fi to have been .in .eliistence when Krishna Rao and Lakshmana ' - . .

Rao divided the properties amongst themselves. The said parti tion hav.iD.g been effected without his joinder, the same has tQ bo -

ignored. Hence he is entitled to a half share in the properties.

A Alternatively, it was contended that the plaintiff is entitled to get by suecession half share in the properties that fell to the share of Krishna Rao.

Before proceeding to examine the decided cases referred to at the time of the arguments, let us proceed to examine the question 8 on first principles. It is true that by a fiction of law-well settled by decided cases-that an adopted son is deemed to have been adopted on the date of the death of his adoptive father.. He is the continuator of his adoptive father's line exactly as an aurasa son and an adoption, so far as the continuity of the line is concerned, has a retrospective effect. Whenever the adoption may be made there is no hiatus in the continuity of the line.

From that it C follows that the appellant must be deemed to have be,,; n adopted in 1912. Consequently he is deemed to have been a coparcener in his adoptive father's family when Krishna Rao and Lakshmana Rao partitioned the properties. The partition having been effected without his consent, it is not binding on him. But from this it does not follow that Krishna Rao and Lakshmana Rao did not D separate froni the family at the time of the partition.

It was open to Krishna Rao and Lakshmana Rao to separate themselves from the family. Once they did separate, the appellant and his adoptive mother alone must be deemed to have continued as the members of the family. It is true that because the plaintiff's adoptive mother was alive, the family cannot be said to have come to an E end on the date of partition. But that does not mean that Krishna Rao and Lakshmana Rao did not separate from the family. When the partition took place in 1933, the appellant even if he was a coparcener on that day could have only got I/3rd share.

We fail to see how his position can be said to have improved merely because he was adopted subsequent to the date of partition. It is true that because he was not a party to the partition, he is e.ti- Y titled to ask for reopening of the partition and have his share worked out without reference to that partition. But so far as the quantum of his share is concerned, it must b determined after taking into consideration the fact that Krishna Rao and Lakshmana Rao separated from the family in 1933. The alternative contention of the appellant referred to earlier is also untenable firstly G because Krishna Rao disposed of his share of the properties by means of a will and secondly even if he had not disposed of his share of the property, the same would have devolved on Lakshmana Rao by succession and the property that had once. vested by succession cannot be divested as in that property the plaintiff's adoptive father had no right of his own. The doctrine of relation H back is only a legal fiction. There is no justification to logically eXtend that fiction. In fact the plaintiff had nothing to do with hfa adoptive .father's family when Krishna Rao died.

On that day

GOV!ND v. NAGAPPA ,(Heg~, /.) 205

his adoptive father was not alive.

The devolution of Krishna Rao's property must be held to have taken place at the very moment Krishna Rao died. We know of no legal fiction under which it can be said to have been in a suspended animation till the plaintifl was adopted.

This lakes us to the decided cases. A long line of decisions has finnly laid down that an adoption dates back to the date of the death of the adoptive father. It is not necessary to refer to the catena of decisions on this point. Suffice it to ;:efer to the decision of this Court in Shrinivas Krishnnrao Kango v. Narayan Devji Kango and Ors. (1).

But that fiction by itself does not help the plaintiff. That fiction merely enables him to establish that he must be deemed to have been in existence on the date of the death of his adoptive father. Division of status need not be effected by bilateral agreement. It can be effected by an unilateral declaration by a coparcener if the same is properly communicated.

Therefore it was within the power of Krishna Rao and Lakshmana Rao to separa.te themselves from the family and in fact they did so in 1933.

We see no basis for the contention of the appellant that he can ignore the events that took place in 1933. He can no doubt ignore the actual partition by metes and bounds effected by Krishna Rao and Lakslunana Rao and ask for a repartition of the properties but his adoption by iiself does not and cannot re-unite the divided family. It is one thing •to say that an adopted son can ignore a partition effected prior to his adoption, which affects his rights and it is a different thing to say that his adoption wipes out the division of status that had taken place in his family.

Reliance was placed ori the decision of the Bombay High Court in Ramchandra Shrinivas and Ors. v. Ramkrishna Krishnarao( 2 ) in support of the proposition that the plaintiff can enter into the adoptive family on the basis that the family is a joint and undivided Hindu family andhis rights in the property of the family must be decided on that basis. It is true that this decision lends some support to the argument that despite the partition effected in 1933, the plaintiff can work out his rights on the basis that the family remains joint. The conclusion of the High Court that the adopted son is entitled to enter his adoptive family on the basis that the fami)y continues as a joint and undivided Hindu family and that his rights in the family property must be decided on that basis does. not appear to be supported by any Hindu law text or by any decision of this. Court or the Judicial Committee. The decision of the Judicial Committee in Anant Bhikappa P!llil, 1,1inor

v. Slwnlcar ltamchandra Patil('), relied on by the High Court did not co!ISider that question.

It is true that some of the observations of Chief Justice Stone in Bajirao and Ors.

v. Ram-

(1) fl9SS) I S.C.R. I.

(2) A.I.R. 1952 Bam.463

(3) 70 I.A. ~32.

krishna ( 1), does support the view taken by the Bombay High Court. But the question that arose for decision in that case was whether a person adopted, after a partition in his adoptive father's family cannot divest the properties that had vested in the other coparceners. It may be noted that in the course of his judgment, the learned Chief Justice observed :

"There can, in our opinion, be no question of a partition whereby the partitioning male members take away all the family property from a joint Hindu family unless the family can be wholly disrupted and finally brought to an end. We regard it as clear that a Hindu family cannot be finally brought to an end while it is possible in nature or law to add a male member to it. The family cannot be at an end while there is still a potential mother if that mother in the way of nat•ire or in the way of law brings in a new male member. The existing male members can separate off; they can take away their share.

They caamot prejudice by partitioning the rights of the after-born male member whether the birth is natural or legal. If in point of fact, before his arrival, the existing coparceners have partitioned the new arrival can obtain a re-opening of the partition and thereby get his share. How that share is to be calculated in various circumstances need not be decided here."

These observations in our opinion lay down the ratio of the decision and that ratio does not support the conclusion reached by the Bombay High Court. The decision of the Full Bench of the Madras High Court in K. R. Sankaralingam Pillai and anr. v.

Veluchami Pillai, Minor('), relied on by Bombay High Court merely laid down that an adopted son is entitled to reopen partition entered into in the family of his adoptive father, before his adoption.

That position is no more open to question and was not questioned in this appeal. We are only concerned with the quantum of share to which the plaintiff is entitled. Our attention has not been invited to any decision which supports the view taken by the Bombay High Court. We see no justification to accept that view.

Further the interest of the society is not advanced by engrafting one more fiction to the already existing fiction that an adopted son is deemed to have been bOm on the daie of death of his 'adoptive father. Acceptance of the new fiction canvassed on behalf of the plaintiff is bjound to create various complications. . Hinu widows in the past were proverbially long lived because of the child marriage system.

Adoptions might take place and have taken place more. than half a century after the death of the adoptive

~ (1) I.L.R. [1941] Nag. 7!17.

(2) I.L.R. (1943] Mad. 309.

A father.

Meanwhile the other coparceners might have dealt with the family property on the ba8is of the then existing rights. They might have alienated the property.

We see no justification to create chaos by inventing a new fiction unknown to Hindu Jaw texts nor authorised by stare decisis.

This Court in Shrinivas Krishnarao Kango's case( 1) has laid down that the fiction that an adoption relates back to the date of the death of the adoptive father applies only when the claim of the adoptive son relates to the estate of the adoptive father. But where the succession to the property of a person other than the adoptive father is involved, the principle applicable is not the rule of relation back but the rule that inheritance once vested cannot be divested. It is true *at the question that arose for decision !n that case was whether an adoptive son can claim to succeed to a collateral's estate, divesting the property that had already vested in someone else.

But the rule laid down by this Court in that case is much wider than the limited question that arose for decision and the reasons given in support of that rule support our crmclusion. The rights of an adopted son cannot be more than that of his adoptive father. If the plaintiff's adoptive father was alive iii 1933 when the partiti9n took place, he could not have obtained anything more than I/3rd share in the family properties. It passes our comprehension how the plaintiff could acquire a greater right than his adoptive father could have had if he had been alive on the date of partition and that he could -hav-e got if he had been adopted prior to that date. In our judgment the plaintift's claim for a half share in the family properties is unsustainable.

In the result th.is appeal fails and the same is dismissed with costs. s.c. 4ppeal dismissed.

(I) [1955) l.S.C.R. I.

GOVIND HANUMANTHA RAO DESAI

K. S. HEGDE

P. JAGANMOHAN REDDY

D. G. PALEKAR, JJ.

K.

[1955] 1 S.C.R. 1

August 2nd/3rd, 1965

M. Natesan

K. Jayaram

S. S. Shukla

Mysore High Court

Ranga Rao

KRISHNA RAO DESHPANDE

Ranaa Rao alias Ramcbandra Rao

Govinda

Hanumantfu

Rao

venkubai

Hanumantha:.Rao

Krishna Rai

Laksbmana Rao

Z Nagappa

February 14, 1946

Lakshmana Rao

Krishna Rao

Lakshmana

Rao

Lakslunana Rao

Bombay High Court

Anant Bhikappa P!llil

Stone

krishna

Madras High Court

Shrinivas Krishnarao Kango


TRIBENI DEVI AND ORS.

COLLECTOR OF RANCm January 25, 1972

[K. s. HEGDE, P. JAGANMOHAN REDDY AND K; K. MATHEW, JJ.]

Land Acquisition Act (1 of 1894)-Compensation-Principles for determing.

According to the general principles set out in sections 23 and 24 of the Land Acquision Act, 1894, for determining compensaticm, the com pensation payable to the owner of the land is the market value which is detennined by reference to the price which a seller might reasonably expect to obtain from a willing purchaser; but since it _may not be possible to ascertain this with any amount of precision the authority charged wtth the duty to award compensation is bound to make an estimate judged by an objective standard. The land acquired, has, therefore, to be valued not only wtth reference to its condition at the time of the declaraticm under s. 4 of the Act, but its potential value also must be .taken into account. This Court has laid down the methods of valuation to be adopted in ascertain ing the market value of the land on the date of the notification under s. 4, which are: (i) opinion of experts (ii) the price paid within a reasonable time in bona fide transactions of the purchase of the lands acquired or the lands adjacent to the lands acquired and possessing similar advanfages and

(iii) a number of years purchase of the actual or immediately prospective profits of the lands acquired. These methods, however, do not preclude the Court from taking any other special circumstance into consideration, the requirement being always to arrive as near as possible an estimate of the market vaJue. In arriving at a reasonable correct market value it may be necessary to take even two or all these methods into account in as much as the exact valuation is not always possible as no two lands may be sarne either in respect of the situation or the extent or the potentiality, nor is it possible in alt cases to have reliable material from which that valuation can be accurately determined. f211 HJ

Special Land Acquisition Officer Bengal"re v.

T. Adinarayan Setty. (1959\ Supp, 1 S.C.R. 404, referred to.

In the present case, the High Court was not justified in adopting the sale-deed in respect of a land which was farther away not only from the land acquired, but from the town. The annual rental value of the land acquired, based on the rent fixed in 1944 when that land was not of such gI;."eat value as it had acquired at the time when section 4 notification was issued, woiild also not furnish a proper method of computation. The High Court was not justified in giv; ng 10 per cent towards potential value, be.

ca11'Se, that element was inherent in the fixation of market value of the land and could not be assessed separately .. The High Court was also not justi lied in disallowing 5 per cent awarded by the Judicial Commi~ as compensation for severance merely because there was an entrance to the land. When a portion of the land is acquired and a large portion left out there would be diminution in the value of land that is left out for which so:ne compensation has to be allowed. [214 Bl

CIVIL APPELLATE JURISDICTION: C.A. Nos. 661, 1380, 1885 & 1886 of 1967.

TRIBENI DEVI v. COLLECTOR RANCHI (!aga11moha11 Reddy, /.),209

Appeal from the judgment and order dated February 25, 1965 of the Patna High Court in First Appeals Nos. 437 and 438 of 1959.

S. V. Gupte. B. P. Rajgarhia and U. P. Singh, for the appellants .. (in C.A. Nos. 661 a:nd 1380 of 1967) and for respondent No. 1 (in C.A. Nos. 1885 and 1886 of 1967).

D. Gcburdhm1, for the respondent (in C.A. Nos. 661 and 1380 of 1967 and for the appellant (in C.A. Nos. 1885 and 1886 of 1967).

The Judgment of the Court was delivered by

P. Jaganmoltan Reddy, J. These appeals arc by certificate against the judgment of tile Patna High Court in land acquisition appea]s.

Two notifications dated 7-7-1954 under section 4 of the Land Acquisition Act 1894 (Act l of 1894) (hereinafter called 'the Act'), were issued one in respect of a portion of Plot Nos. 178 and 1784 admeasuring 2.65 acres and the other in respect of the whole of the plot No. 1783 admeasuring 2 acres situated in Ward No. 3 of Ranchi Municipality.

Section 6 notification in respect of these lands was published on 7-9-1954

MJd poswsion was taken on 23-9-1954 under section 17(1) after making a declaration under section 17 ( 4) tha•t !he provisions of section SA shall not apply.

The Col!ector awarded compensation of Rs. 1.20,419-6-11 in respect of the first acquisition and Rs. 47,648-13-6 in respect of the second. Thereafter, at the instance of 'the claimant, a reference under section 18 of the Act was made to the Judicial Commissioner of Chhota Nagpur, Ranchi who. while maintaining the market value of the land, awarded by the Collector, gave further compensation for severance at the rate of 5% and .10% in respect of potential value of the land.

The Judicial Commissioner. however, did not grant the 15% sclatium under section 23(2) of the Act.

Being dissatisfied, the claimants preferred appeals to the High Court.

The Hi.e; h Court revised the compensation and awarded Rs. 90,000/- per acre and 15% as solatium on the market value under section 23(2) of the Act bui did not g.rant them •the 5% '.owards sever

ancc. Interest at 6% per annum on the amount of enhanced compensation from 23-9-1954 together with costs was also decreed.

Against 'the judgment and decree, the claimants have filed Civil Appeals 661 & 1380/67 while the State has filed Civit Appeals 1885-86/67.

The lands in question which have been acquil"..d were earlier leased on 22-9-1944 to the Military authorities on a rem of Rs'. 600/- per montli for a period of 6 months under a registered

deed with option 'to renew for a maximum period of 10 yeari<.

which period expired on 21-9-1954.

One of ·!he conditions of the lease was that on the termination of the lease, the lessor would exercise the option given under the lease to purchase all buildings, structures, gardens and any other strudtures constructed by the lessee during their occupation of the leased property, at 75 per cent of the valuation that would be determined b)< the Superintending Engineer, Chhota Nagpur Circle; and in case the lessors refused to purchase, the lessee was entitled to dismantle and take away the materials.

Towards the end of !he lease period, the Government of Bihar decided to acquire the property for the State Soldiers, Sailors and Airmen's Board and initiated proceedings as aforesaid.

In these appeals the only question ithat has !o be determined is : What. is the market value of the property as on the date of . section 4 nQtification? In the yaluation report given by the Land Acquisition Officer, Ranchi, Ex-1, the principle of capitalisajion

on the basis of 20 times the annual rental of Rs. 7,200/- at the

rate of Rs. 600/- p.m. was adopted as the price of the lands. In D that report it was also pointed out thart the sale price of 1.085 acres out of the premises of the Ranchi Club as per registered sale-deed, Ex. C-1 dated 1-4-1953, was Rs. 41,470/- per actt, which was not fair.

Apart from these 25 other sale transactions in respect of portions of Plot No. 1789 between 1952 and 1953 were also referred in that report.

Some of those lands were g situated opposite to the Ranchi Club and the sale price came .to 'Rs. 1092/- per katha, which is about Rs .. 60,000/- per acre. I!

was further pQinted out that some, other lands a little further away from rthe main road but belonltiog to the same Plot No. P89 were sold at !he rates between Rs. 250/- to Rs. 800/- per ka .. tha.

This report formed the basis of the award.made by the Colltor. 1 ,.

The High Court took judicial notice, and in our view !ightly,,1io, that after .the termination of the Second World War in 1945 <; here was a rise in land values due to the increased demand of hOmestead lands for building purposes. It also considered various sale-deeds produced and proved O!l behalf of the .claimants along with the oral evidence to determine the market value of the land.

The o)>jections from both the appellant .and the respondent were G taken into account in respect of each oJ these and most 'of - were considered as not fumishin11; a proper or adequate valuljoli -either havin.e; regard. to the distance of .the lands wl)ich were ~

subject-matter of the sale or the inadequacy of ~·infonilallan pertaining thereto.

The Hildi Court, however, adopted ~-price in the sale deedEic.C-1 executed on 6;5·1953 by .thelbJlcbi.Oub tl Ltd., in favour of Presideni of: India in riSpec~ :.Of LOSS lcrllf 3 bighas 5 kathM 10 chhataks in Plot No •. l:n 1 for Rs .. 4f 111tJ/:. as the basis for .amving at the market vue of the acquired tat

TRIBENI DEVI v. COLLECTOR RANCHI (laganmohan.Reddy, J:) 21 )J

Though the land in question was situated on the main Ranchi- Chaibasa Road, a strong objection was taken against adopting the price as a basis because it was not only t mile away from the land under acquisition but what was sold was only the leasehold right in the land.

These objections were rejected on the ground that for all practical purposes the interest that was held or sold B . by the Ranchi Club under Ex.C-1 was not inferior to an. absolute title.

The area of the land, the subject matter of the sale, was considered .to be fairly large being more than 1 acre and the situation was also the same as the land under acquisition except that

it was farther away from it.

In these circumstances, the High Court thouii; ht, after a proper allowance is made for the difference c

in distance, the transaction yields a more acceptable guide for determining the market value of the land under acquisition and accordingly, it adopted twice the price as charged for the land in Ext.C-1 as indicating a fair market value of the land in question.

The Hi.gh Court further added Rs. 7060/- per acre as the difference between tenure rights and lease-hold rights that were held by the. President of India and awarded Rs. 90,000/- per acre. This, it did notwithstanding the fact that it was conscious that there was no definit!l data for the two additions that have been made, because in its view, in cases of this nature a certain amount of estimate has to be made which may even be arbitrary.

Accordingly, it awarded compensation for the 4.65 acres of land which was acquired by the Government at Rs. 90,000/ per acre together with 1 S % solatium payable under clause ( 2) of section 23 of the Act. 5% compensation for severance of land fro1;11. the claimants' other portion of. the land tltat remained with them after acquisition, ch wQ awarded. by the Judicial Commisioncr, Chhota Nayr, was disallowed on the ground (hat there wu an entrance to the back portion of the •land which was left with the t>wners and also because there was no evidence to show that in fact there had been any depreciation in he value of the remaining area anciif sc>, to What exnt: On the othet'hand, it l!laintained the 10% on the lharket, value of the land awlirded by the Land Accririsitiori Court on aecou, nt of' the' inerease in the). l!Otentialities of !Ile land. Tue basis adopted by the Jligh Court iS

challen~ on the ground that they are , contrary to the well established principles appliciible for determining the value of landS

acquired under the Act. ·

The 11eneral principles for determining compensation have been set out in sections .. 23 & 24 of. the Act. The compensation payable to :the owner of the landr is. the market value which is determined by f.erence to the price which a seller might reasonab)'y expect to_obtain from awillin1!;"purclwer, bat as this may not' be possible to ascertain with any .amount 1lf on, the Dllthoritv charged with the duty to award compensaion is bound to

.make an estimate judged by an objective standard.

The land A .acquired has, therefore, to be valued not only with reference to

its condition at the time of the declaration under section 4 of the Act but its potential value also must be taken into account. The sale-deeds of the lands situated in the vicinity and the comparable benefits and advantages which they have, furnish a rough and ready method of compnting the market value. This, however, is i!Ot the B only method. The rent which an owner was actually receiving at the relevant point of time or the rent which the neighbouring lands' of similar nature are fetchlng can be taken into a, ccount by capi- .talising the rent which according to the present prevailinl!l rate of interest is 20 times the annual rent.

But this also is not a conclusive method.

This Court had in Special Land Acquisition c Officer, Bang!J.lore v. T. Adinarayan Setty('), indicated at page 412 the methods of valuwtion to be adopted in ascertaining the market value of the land on the date of the notification under section 4(1) which are: (i) opinion of experts, (ii) the price paid within a reasonable time in bona fide transactions of purchase .of 'the )ands acquired or the lands adjacent to the lands acquired and possessing similar advantages; and (iii) a number of years' D purchase of the actual or immediately prospective profits of the lands acquired.

These methods, however, do not preclude the Court from taking any other special circumstances into consideration, he requirement bein111 always to arrive as near as possible an estimate of the market value.

In arriving to a reasonably correct market value, it may be necessary to take even two or all E of those methods into account inasmuch as the exact valuation is not always possible as no two lands may be the same either in Tespect of the situation or the extent or the potentially nor is it possible in all cases to have reliable material from which that valuation can be accurately determined.

Bearin1t 'these principles in. mind, we do not think that the High Court was justified in adopting the registered sale-deed, Ex.C-1 executed by ihe Ranchi Club, in favour of 1J.e President

of India, bec<iuse that land is farther away not only from the land acquired but from the town though it is on the main Ranchi- Chaibasa Road.

Even the High Court recognised that there was G no definite data for the two additions that have been made and in our view it-would not be a proper melthod of ascertaining the value of the land 'acquired.

The only two docu.ments that may be considered are Ex.10 and Exll which are in respect of the lands situated in i:he vicinity and on either side of the land acquired.

The other sale deeds are of smaller areas and do not furnish a proper basis for ascertainin1t the market value and have H been quite properly not relied upon by the learned Advocate for

(1) (19S9) (Suppl. I) S.C.R. 404."!

TR!BENI DEV! v. COLLECTOR RANCHI (Jagunmohan Reddy, J.) 213

A lhe claimants.

The annual rental value of the land acquired, namely, Rs. 7,200/- will also not furnish a proper method of computation because that was a rent fixed in 1944 when that land was not of such grea! value as it had acquired at the 1time when sec. 4 notification was issued.

A perusal of the c:Jrrespondence between the owners of the land and the Depuety Commissioner B of Ranchi would show tha!t the land owners had given it at consessional rate to the Military authorities having regard to the purpose for which it was being put to use.

On bel1alf of the claimants grea•t reliance is placed on Ex. I I which is a sale-deed executed on 16-12-1946 by the claimants the Ranchi Automobiles of an area of 1 biid1a 17 kathas equal to .617 acres for Rs. 1,45,000/ .. After deducting Rs. 15,403/- the price of the C structures according 1to the Engineer's report in 1959 (Ex.25), the net value of the land is Rs. 1,29,697 /-.

This value would work out to Rs. 2,08,135.70 per acre.

The High Court rejected this compu!_ation on the ground tha't though the knd was contiguous to the land under acquisition, neither the \alue of the pump an!l the other strutures belonging to Bunnah Shell nor the D value of the structures that might have been on the land on the date of the sale which were built by the vendees as lcsr.ees could be ascertained either from the sale-deed or the evidne. Ex.10 is a lease in respect of 1/3 acre granted by the owners to Thakur Chandra Bali Shah and others executed on 20-2-1950 on a monthly rent of Rs. 157/-. The High Court calculated the E monthly rental of the land under acquisition at that rate to be not

le~ than Rs. 2,000/- per month or Rs. 24,000/- per yar. On the basis of 20 times the annual rent ii computed R1. 4,80,000/- as the market value which works out at Rs. 1,03,226/-

per acre. It is, however, pointed out on behalf of the claimants

tha~ the High Court made a mistake in thinking that the rent for the land leased under Ex.10 was Rs. 157/- p:in. and on that F basis it calculated the annual rental value of 4.65 acres of the acquired land.

We have checked the figures from the original lease and find that in fact !he rent is Rs. 175/- and na~ Rs. 157 /-.

On this basis the rate per acre of 20 times annual rental value would come to Rs. 1,26,000/-. Even if Ex.11 is t1 be taken as the basis and it.he value of the sructures as given by the En.zineet G in Ex.25 is_ to be accepted that cannot furnish a proper basis because the land in question is a small area of .617 acres or just over t an acre.

A smaller area such as this on a main road would certainly fetch a higher price compared to a larger undeveloped area even though it may have a frontage on the main road.

In order to develop that area atleast the value of 1/3 of

H the land will have '.O be deducted for roads, draina,!!'e and other amenities.

On this basis, he value of the land at Rs. 2,08,135.70 per acre would, after deduction of 1/3 come to Rs. 1,38,757/- per acre.

On :he basis of the rental of Rs. 175/- p.m. in Ex.HJ,

the villue ~. 20 times the rental will work out as already seen at A Rs. 1,26,000/-. Allowing for an incre$e in rents from 1950

to 1954, the date of section 4 notification, say at 5% the value per acre may be Rs. 1,33,000/- or thereabout. If we take the average Qf Ex.10 and Ex.11 as computed by us the value pet acre would come to about Rs. 1,35,878/-. In our view, Rs. 1,35,000/- per acre would be a reasonable rate at which B compensation could be awarded to the claimants.

The High Court was not justified in giving 10% towards potential value because that element is inherent in the fixation of the market value of the land and couJd not be assessed separately.

The High Court was illso not justified in disallowing 5% awarded by the Judicial Commissioner, Chhotanagpur as compensation for severance

merely because there was an ence to the land. When a por- C tion left out there would be a diminution in the value of the land that is left out .for which some compensation has to be allowed.

The 5% allowed by the Judicial Commissioner, Chhotanagpur is reasonable.

In this view, the claimants would be entitled to a decree as follows in respect ot the lands acquired :-

(1) At the rate of Rs. 1,35,000 per acre for 4.65

acreS;

(2) 5% severence and 15% solatium on the market

villue computed as in (1 ) ; ( 3) Interest at 6 % from the date of taking posses.

sion.

The appeals of the claimants are allowed to the extent of the variation and those by the ent are dismissed with costs.

The claimants will be enti:led to proportionate costs on the difference between the amounts decreed and those that are now awarded in.each of the two appeals filed by them.

K.B.N.

864Su!ICI/72·2S0()-17-4-73-0IPF.

AND ORS.

COLLECTOR OF RANCm

January 25, 1972

K. s. HEGDE

P. JAGANMOHAN REDDY

K. MATHEW, JJ.

Land Acquisition Act

sections 23 and 24

Land Acquision Act, 1894

s. 4

s. 4

section 4

Patna High Court

S. V. Gupte

B. P. Rajgarhia

U. P. Singh

D. Gcburdhm1

P. Jaganmoltan Reddy

section 4

Land Acquisition Act 1894

Ranchi Municipality

Section 6

section 17(1)

section 17

section 18

Ranchi

section 23(2)

section 23(2)

Chhota Nagpur Circle

Government of Bihar

section 4

laganmohan.Reddy

India

section 23

Chhota Nayr

section 4

section 4(1)

Jagunmohan Reddy

sec. 4

Ranchi Automobiles

Bunnah Shell

Thakur Chandra Bali Shah

section 4

Chhotanagpur