Madras High Court
Additional Collector Of Central Excise vs Kathiresan Pillai on 24 January, 1989
Equivalent citations: 1989(42)ELT189(MAD), AIR 1990 MADRAS 11, (1989) 21 ECC 152, (1989) 42 ELT 212, (1989) 42 ELT 189
Author: S. Mohan
Bench: S. Mohan
ORDER
1. These Writ Appeals coming on for hearing on this day, upon perusing the Grounds of Appeals the Order of the Honourable Mr. Justice S. A. Kader dated 21-9-1988 and made in the exercise of the Special Original Jurisdiction of the High Court in Writ Petition Nos. 2012 to 2016 of 1988 respectively and all other papers materials to these cases and upon hearing the arguments of the Advocate General for Mr. N. Jothi, Additional Central Government Standing Counsel on behalf of the appellant in all appeals and of Mr. Habibullah Basha for Mr. K. A. Jabbar, Advocate for the Respondents in each of the Appeals, the Court made the following Order :-
(The Judgment of the Court was delivered by the Hon'ble the Officiating Chief Justice).
These Writ appeals arise out of the judgment of learned Brother Kader, J. rendered in W.P. Nos. 2012 to 2016 to 1988. All of them came to be dealt with by a common judgment dated 21st September, 1988. The facts do not admit much of controversy. The petitioners in W.P. Nos. 2012 to 2016 of 1988 the respondents herein are partners of the first Sujatha Jewellers No. 105-A South Avani Moola street Madurai. They filed individual writ petitions for mandamus directing the Additional Collector of Central Excise, Madurai, to dispose of their application dated 18-11-1985 for renewal of their licence under the Gold Control Act, hereinafter to as 'the Act', without reference to his order dated 16-10-1987 made in C.No. XVII/7/59 Order No. 11/87. W.P. 2012 of 1988 was to quash the aforesaid order of the Additional Collector of Central Excise. Kathiresan, the petitioner in W.P. No. 2012 of 1988 was the holder of licence No. VII/77, dated 3.9.1977 issued to him by the Assistant Collector of Central Excise, Madurai. The licence enabled the holder to carry on the business of making, manufacturing, preparing, repairing, polishing, buying, selling, supplying, distributing, melting, processing or converting gold. This licence has been periodically renewed. In and by a partnership dated 6th May, 1982, he entered into a partnership with Savitri, Kumaragurubaran and Shanmughavelayutham to continue the said business under the name and style of Sujatha Jewellers. Even after this the licence was issued not in the name of the firm, Sujatha Jewellers, but in the name of the four individuals, namely, Kathiresan, Savitri, Kumaragurubaran and Shanmughavelayutham, the petitioners in W.P. Nos. 2012, 2013, 2014 and 2015 of 1988. The issue of licence was on 18.5.1982. The renewal also took the same pattern in the mane of individuals, for the year 1983-85.
2. On 18.11.1985 all these four individuals who figured as writ petitioners applied to the Assistant Collector of Central Excise, Madurai, for renewal of their licence. The Collector curiously enough issued a show cause notice to M/s. Sujatha Jewellers on 31.5.1987. Unfortunately the licence holders did not take up objections at the initial stage itself that they were not concerned with a show cause notice issued to Sujatha Jewellers. They raised various other defence, more perhaps with an anxiety to defend their case. Whatever it may be, their defence was overruled and the impugned order dated 16.10.1987 was passed refusing renewal. This was on the ground that there were certain contravention of the Act and the Rules framed there under. Against this order of rejection, an appeal was filed to the Collector of Central Excise. However, as parallel proceedings W.P. No 11510 of 1987 was filed before this Court. That was dismissed by the learned single judge of this Court holding that in as much as the remedy of appeal had been availed of the writ petition was not maintainable. The appeal to the Collector of Central Excise was dismissed on 29.12.1987. Against this order, the matter was taken up to the Tribunal. Before the Tribunal, leave was sought to withdrawn the appeal on the ground that the impugned order was non set and without jurisdiction. The Tribunal granted the desired permission stating :-
"Without expressing any opinion on there merits of the issue we accord permission to the appellant to withdrawn the appeal and the appeal is accordingly discussed a withdrawn".
It was under these circumstances; the writ petitions came to be filed.
3. The contention advanced on behalf of the writ petitioners - Respondents herein broadly was that the licence stood in the name of four individuals and not in the name of the firm. Therefore any notice issued to the firm would not bind the individual. In support of the same reliance was placed on the decision reported in Talwar Diamonds v. Union of India (1987 Excise and Customs Cases 122). This argument found favour with the learned judge and accordingly he allowed the writ petitions quashing the impugned order dated 16.10.1987 with a direction to reconsider the renewed in accordance with law without reference to the order which had been quashed. Thus the writ appeals.
4. The learned Advocate General prefaces his argument saying that in so far as the Managing Partner of the firm Kathiresan Pillai had chosen to file reply to the show cause notice in a detailed fashion, it cannot be contended that against there must be individual notices. Therefore, one cannot disregardful of the fact, press that line of argument into service and take advantage of the situation or drive a hard bargain. This exactly what the petitioner/respondents want to do in these cases.
5. In opposing this, Mr. Habibullah Basha, learned counsel for the respondents would urge that the categoric finding of the learned Judge is that under the Act and the Rules made thereunder, a firm could be a licence. Where therefore a licence came to be issued in the name of four individuals albeit the fact that in column 7 of the Schedule to the application form, the names of the partners were given as partners of Sujatha Jewellers, the licensing authority cannot turn round and say that the licence issued in the name of four individuals was meant to be that of the firm. If really therefore the four individuals are the licences as has been found by the learned single Judge, the issue of show cause notice to the firm has no legal consequence whatever. Thus the findings of the learned single Judge cannot be assailed at all.
6. We are more than surprised to see that the licencing authority has not even cared to properly scrutinise the application of renewed. Whatever might have been the original position with reference to the issue of licence at the earliest point of time, namely 3-9-1977, when Kathiresan was issued the licence individually wherein it is stated that the applicant described the business premises as Sujatha Jewellers, 105-A, South Avani Moola Street Madurai that was not taken note of. The licence was renewed in 1979, 1980, 1981 and 1982. It was at that stage, he entered into a partnership in which Savitri, Kumaragurubaran and K. Shanmugavelayudam were taken as partners. Even after this, the application in Form No. G.S. 6 as prescribed under rule 5(2) was in the name of four individuals residing at No. 150, South Avani Moola Street, Madurai, as far as Kathiresan is concerned, and at No. 14, Subramanyapuram, Madurai, with respect to the other three partners. They were to carry on business at No. 105A, South Avani Moola Street, Madurai as seen from the Schedule. Then again, for the subsequent year licence was issued under Licence No. 17/77 on 18.5.1982 in the name of four individuals. That was renewed on 22.10.1984 for the year 1983 to 1985 and for the years 1986 to 1988 a sum of Rs. 25/- has been paid towards renewal fee along with application dated 18.11.1985. In the application dated 18.11.1985 under Column 7 is stated thus :-
"7. Name and addresses of partners
1. M. Kathiresan Pillai and others having financial
2. K. Savithiri interest in the business
3. M. S. Kumaragurubaran
4. K. Shanmugavelayutham ..... Partners.
Here again, the applicants were only the four individuals But without noting these partners, a show-cause notice comes to be issued on 31.3.1987 as follows :
"M/s. Sujatha Jewellers have applied for renewal of their GDL No. 17/17 for three years 1986-88 enclosing therewith a G.S. Application dated 18.11.1985, Original GDL, proforma and a paid-up challan dated 24.10.1985 towards renewal fee"
This is the reason why we remarked even at the beginning of the judgment after the narration of the fact that there has not been a proper scrutiny by the Licencing authority concerned. Nowhere did the Sujatha Jewellers apply for renewal. Nor did at any relevant point of time the licence stand in the name of Sujatha Jewellers. Where from this information was obtained as though Sujatha Jewellers is the holder of a licence or again had applied for renewed in GDL No. 17/17 passes our comprehension. As a matter of fact, as just now we pointed out, Sujatha Jewelers never applied for renewal at all. It is only the four individuals who went on repeatedly applying for renewed. If really the intention of the licensing authority was to issue the licence in favour of Sujatha Jewellers, nothing would have been easier to look into the application form carefully and call upon the applicants as to what exactly is meant by column 7 which we have extracted above. Nothing of that sort was done. Therefore, the very basis of the show cause notice tends to ignore the well accepted position of a firm under the law of partnerships. We will quote the relevant passage from 'Law of partnership in India' by S. D. Singh and J. P. Gupta (2nd Edition).
"The Indian Partnership Act goes further than the English Partnership Act, 1890 in recognising that a firm may possess a personality distinct from the persons constituting it and is thus more in accordance with the Law of Scotland than with that of England. But the fact, that a firm possess a distinct personality does not involve that the personality continues unchanged so long as business of firm continues. The Indian Act like the English Act avoids making a firm a corporate body enjoying the right or perpetual succession.
It may be noted that a firm is not a juristic person but it is only compendious expressions of the names of individuals who for the time being are is partners. A firm is entitled to filed a suit either in its name or in the names of its partners. Under Order 30, Rule 1, Civil Procedure Code, it is the partnership firm alone which is entitled to file a suit in firm name.
Therefore, this well laid distinction cannot be obliterated as is sought to be done now. Under these circumstances, we are in entire agreement with the findings of the learned Single judge who held that under Section 2(h) of the Act, 'dealer' includes a Hindu undivided family, a local authority, company, society registered under the Societies Registration Act, a Co-operative Society, Club, firm or other association of persons, Section 52 also had been rightly referred to. Therefore, it is clear that a firm can be the holder of a licence under the Act. In this case, only the four individuals have applied for renewal of the licence and not the firm. Therefore, the show cause notice issued to the firm non est in law. The fact that such a ground was not taken in the reply to the show cause notice cannot be put against the respondents. May be, as pointed out by the learned counsel for the respondents Mr. Habibulla Basha, in an anxiety to defend the cases, several defences might have been put forth on merits. But that does not detract from the position that the show cause notice had come to be issued to the firm. Under these circumstances, we find little hesitation in confirming the order of the single Judge and dismiss these writ appeals. Accordingly they are dismissed with costs. Counsel fee - Rs. 1000/- one set.
7. Now that we have dismissed the writ appeals, the question arises as to what is to be done till the application for renewal is considered and orders passed. The learned Advocate General represents to us that at the shortest possible time the application for renewal will be disposed of on merits after issue of show cause notice a fresh. However Mr. Habibulla Basha would say that the respondents must be enabled to run their business. We find from the records that the business had actually been stopped by the respondents on 28.2.1988. Though an inter direction was obtained pending the writ petition before the learned single Judge, that had come to be stayed because the licencing authority had taken up the matter in appeal in W.A. No. 740 of 1988. Therefore, virtually the business was not run from that date. Under these circumstances, to permit the respondents to run the business will only complicate the issue. To us the proper and just course appears to be to give a direction to dispose of the renewal application in accordance with the following time schedule.
8. The application dated 18th November 1985 received for the years 1986, 1987 and 1988 will be taken up for consideration. Should the licencing authority think that a show cause notice is necessary about which we say nothing, such a show cause notice shall be issued on or before the 3rd of February 1989, for which the reply shall be filed by the respondents by 10th of February 1989. The disposal of the application shall take place in the manner indicated in the judgment on or before 22nd February 1989 in accordance with the reply to the show cause notice after affording a personal hearing to the respondents. Should the respondents succeed in obtaining renewal for the period, they will make the application for renewal within one week from the date of receipt of the order for the years 1989, 1990, and 1991. Should they fail to get the renewal, it is open to them to file a fresh application also.
9. Memo of costs will follow.