Abdul Aziz Aminudin vs State of Maharashtra

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Criminal Appeal No. 168 of 1961

Decision Date: 7 February 1963

Coram: Raghubar Dayal, Syed Jaffer Imam, J.R. Mudholkar

In the matter Abdul Aziz Aminudin versus State of Maharashtra, decided on 7 February 1963, the Supreme Court, constituted by Judges Raghubar Dayal, Syed Jaffer Imam and J.R. Mudholkar, examined a dispute arising under the Import and Export (Control) Act of 1947, specifically sections 3 and 5, together with the Imports (Control) Order of 1955, clause 5, sub‑clauses (2) and (4). The petitioner, Abdul Aziz Aminudin, served as chairman of the Powerloom Sadi Manufacturers’ Cooperative Association, which obtained a licence to import a specified quantity of art‑silk yarn on behalf of the Association. The licence was issued subject to a condition that the imported yarn could be used only as raw material or accessories in the factory of the licence‑holder and that no portion of it could be sold to any third party. Because the Association lacked sufficient finance, it arranged for the importation to be carried out by Warden & Co., a firm that financed the transaction. Part of the yarn received was employed in accordance with the licence condition, while the balance was sold by Warden & Co.; the proceeds from that sale were subsequently paid to the Association as profit.

The petitioner and other members of the Association were prosecuted for alleged contravention of section 5 of the 1947 Act, on the ground that they had violated the Imports (Control) Order of 1935 by selling the imported yarn. The trial court acquitted all accused, but the State appealed the acquittal of the petitioner alone. The High Court allowed the appeal, convicting the petitioner and imposing a sentence of three months’ rigorous imprisonment together with a fine of Rs 2,000. The Supreme Court held that the authority conferred by section 3(1) of the Act was not confined to prohibiting or restricting imports at the point of entry; it also extended to regulating the subsequent disposal of imported goods. The Court opined that it was for the appropriate administrative authority, not the judiciary, to determine the policy governing import control, which involves diverse considerations. It further affirmed that clause 5 of the Order, which empowers the licensing authority to attach a condition prohibiting the sale of imported goods unless prescribed, is a valid exercise of the powers granted to the Central Government by section 3 of the Act. The Court observed that the earlier authorities cited, State of Bambay v. F.N. Balsara and Glass Chatons Importers and Users’ Association v. Union of India, were not applicable to the present case.

The Court cited the decision in Daya v. Joint Chief Controller of Imports and Export, reported in [1963] 2 S.C.R. 73, and held that in the instant matter the licence had been issued pursuant to the Imports (Control) Order of 1955. It observed that the wording of sub‑clause (2) of clause 5 of that Order is expansive and authorises the imposition of a condition that was not permissible under sub‑clause (5) of clause (a) of the earlier Order of 1948. Further, sub‑clause (4) of clause 5 makes it mandatory for the licence holder to obey all conditions that are imposed or deemed to be imposed under clause 5. The Court affirmed that the licensing authority, under the 1955 Order, possessed the competence to stipulate that the imported goods could not be sold to any person, thereby safeguarding the ordinary rights of the importer. Consequently, any breach of a licence condition constitutes a breach of the provisions of sub‑clause 4 of clause 5 of the Order, which in turn amounts to a violation of the order made under the Imports and Exports (Control) Act, 1947, rendering the licence holder liable to punishment under section 5 of that Act. The Court noted that the authorities cited in East India Commercial Co. v. Collector of Customs, [1963] 3 S.C.R. 338, and C. T. A. Pillai v. H. P. Lohia, A.I.R. 1957 Cal 83, were held not to apply in the present context.

The Court further held that actual physical possession of the imported goods is not a prerequisite for contravening the condition of the licence. It clarified that possession by Warden & Co. would be treated as possession by the Association, since Warden & Co. acted as the Association’s agent in importing the goods. Moreover, the Court found that the appellant intentionally assisted the Association in disposing of the goods through Warden & Co., thereby abetting the breach of the licence condition. In the Court’s view, the case represented a deliberate attempt to secure an import licence with the intention of misapplying the imported goods. Accordingly, the Court considered the sentence imposed—three months of rigorous imprisonment together with a fine of Rs 2000—though not severe, to be an appropriate sanction for the deliberate misconduct.

The judgment recorded that this appeal, numbered Criminal Appeal No. 168 of 1961, was filed by special leave against the order of the Bombay High Court dated 3 August 1951 in Criminal Appeal No. 99 of 1961. Counsel for the appellant were Shaukat Husain and P. C. Agarwala, while counsel for the respondent included C. K. Daphtary, Solicitor‑General of India, D. R. Prem and R. N. Sachthey. Delivered on 7 February 1963 by Justice Raghu Bar Dayal, the appeal challenged the High Court’s conviction of the appellant under section 5 of the Imports and Exports (Control) Act, 1947, for contravening the Imports (Control) Order, 1955, and the accompanying sentence of three months’ rigorous imprisonment and a fine of Rs 2,000. The appellant was identified as the Chairman of the Malegaon Powerloom Sari Manufacturers’ Cooperative Association Ltd., an association comprising six powerloom weaver members. As Chairman, he had applied for and obtained a licence dated 2 January 1956 for the import of a specified quantity of art silk yarn on behalf of the Association.

In this case the Association obtained a licence, dated 2 January 1956, that authorized it to import a specified quantity of art silk yarn. The licence was granted on the explicit condition that the yarn could be used only as raw material or accessories in the factory owned by the licence‑holder and that none of the yarn could be sold to any third party. Because the Association was unable to secure the necessary funds, it arranged for the importation to be financed by a firm named Warden & Co. The portion of the yarn that was received was partly used in line with the licence condition, but the remainder was sold by Warden & Co. This sale was prompted by a letter dated 13 November 1956, written by the appellant in his capacity as Chairman of the Association and addressed to Warden & Co. In the letter the appellant explained that the market price of art silk yarn had fallen sharply, making it impossible for the Association to take delivery of the remaining yarn. He requested that Warden & Co. dispose of the balance of the yarn in such a way that the Association would incur no loss and would obtain a net profit of at least four percent on the transaction. Following the disposal, Warden & Co. paid the Association a sum of Rs 5,040 as the Association’s profit from the sale.

The appellant together with the other members of the Association were subsequently prosecuted for an offence punishable under section 5 of the Imports and Exports (Control) Act, 1947. The trial court acquitted all of them, but the State appealed solely against the acquittal of the appellant. The High Court allowed the State’s appeal, convicted the appellant under section 5 of the Act and sentenced him accordingly. The appellant then appealed to this Court. In support of his appeal the appellant raised several contentions. First, he argued that the Act was intended only to prohibit or control imports and exports as defined in section 2, namely the bringing of goods into India or their removal from India by sea, land or air; consequently, a provision in the Import Control Order that imposed a licence condition restricting the subsequent disposition of imported goods could not be validly made under the powers conferred on the Central Government by section 3, because such a condition relates to conduct after the importation. Second, he contended that the Order itself does not contain any provision authorising the imposition of a condition that forbids the licensee from selling the imported goods. Third, he maintained that breaching any licence condition does not constitute a breach of the Act or of an Order made thereunder and therefore cannot be punished under section 5. Fourth, he submitted that the Association, being the licensee, should be held responsible for any breach of the licence condition, and not the Chairman personally, because the breach was committed by the Association rather than the individual.

In arguing that the alleged offence under section five of the statute should not be attributed to the chairman, the appellant contended that any wrongdoing was carried out by the Association itself and not by its chairman, and therefore the Association, rather than the chairman, ought to have been prosecuted under section five of the Act. The appellant further insisted that the goods in question had never been transferred into the possession of the Association; consequently, the Association could not be held liable for the offence. Additionally, the appellant maintained that he lacked the requisite mens rea, or guilty mind, necessary to constitute the offence, and thus could not be found guilty. The appellant also argued that the imposed sentence was disproportionately severe. To support these contentions, the appellant referred to the relevant provisions of the Act and the Order. The preamble of the Act declares: “An act to continue for a limited period powers to prohibit or control imports and exports. Whereas it is expedient to continue for a limited period, powers to prohibit, restrict or otherwise control imports and exports.” Section two of the Act defines “import” and “export” as, respectively, bringing goods into and taking goods out of India by sea, land, or air. Section three authorises the Central Government, by publishing an order in the Official Gazette, to make provisions for prohibiting, restricting, or otherwise controlling, in all cases or in specified classes of cases and subject to any exceptions, the import and export of goods of any described category. Section five, which operates as the penalty provision, stipulated at the relevant time that any person who contravened, attempted to contravene, or abetted a contravention of any order made or deemed to have been made under the Act would be liable to imprisonment for a term which could extend to one year, or to a fine, or to both. This provision was amended in 1960, and the amendment rendered the breach of any condition attached to a licence issued under the Order punishable as well; however, the amended provision does not apply to the present case. Clause five of the Order governs the conditions attached to licences. Its pertinent clauses read: (1) The licensing authority may issue a licence subject to one or more conditions, including the condition that the goods covered by the licence shall not be disposed of except in the manner prescribed by the licensing authority or otherwise dealt with without the written permission of the licensing authority or any duly authorised person; (2) A licence may contain such other conditions, provided they are not inconsistent with the Act or the Order, as the licensing authority deems fit; and (4) The licencee shall comply with all conditions imposed or deemed to be imposed under this clause. In support of the argument that the Central Government’s power to make provisions for prohibiting, restricting, or otherwise controlling imports applies only to the actual entry of goods into Indian territory and not to the subsequent control of those goods after they have been brought in, the appellant cited these statutory provisions.

In this case, reference was made to the decision reported as The State of Bombay v. F. N. Balsara (1). The Court observed that that decision concerned a completely different subject matter because it dealt with powers under the Bombay Prohibition Act, 1949. The argument before the Court was that a Provincial Legislature did not have authority to enact a law regulating the production, manufacture, possession, transport, purchase and sale of intoxicating liquor when such regulation was premised upon Entry 31 of List II in the Seventh Schedule to the Government of India Act, 1935. The contention rested on the interpretation of the term “import” in Entry 19 of List I, which, according to the argument, did not cease with the mere landing of goods on the shore or their arrival at the customs house but required that the imported goods actually reach the importer’s hands and that the importer be in a position to possess them. It was further urged that the impugned Act, by dealing with the import of goods, intruded upon the legislative competence of the Central Legislature. In support of this view, the counsel cited a passage from page 70O stating that “under the provisions of the Government of India Act, a limited meaning must be given to the word ‘import’ in entry 19 of List I in order to give effect to the very general words used in entry 31 of List II.” The Court, however, held that this observation could not be extended to the interpretation of the terms “import” and “export” as they appear in the Act that is the subject of the present dispute.

The Court then examined the authority of the Central Government under section 3(1) of the Act, relying in part on the decision in Glass Chatons Importers & Users’ Association v. Union of India (2). In that case, the petitioners challenged the validity of section 3(1) (1951) S.C.R. C82, and the accompanying citation (2) [1962] 1 S.C.R. 862, on the ground that it authorised the Central Government to make an order, specifically sub‑clause (h) of clause 6, which permitted the licensing authority to refuse a licence when it decided to canalise imports and to channel the distribution of those imports through special or specialised agencies. The Court rejected the challenge, holding that the restriction imposed on the right to carry on trade and to acquire property was not unreasonable. Although the precise issue raised before this Court was not argued in that earlier case, the decision examined a provision that concerned the distribution of imported goods through selected agencies—a step that occurs after the actual importation of the goods. The Court affirmed the validity of that provision. Subsequently, the Court considered the judgment in Daya v. Joint Chief Controller of Imports and Export‑3 (1), wherein it was held that the provisions contained in clause 6(h) of the order, which empower the Chief Controller of Imports and Exports to refuse a licence if the licensing authority has decided to canalise imports and their distribution through a special channel or agency, are within the power conferred on the Central Government by section 3(1) of the Act.

In this case, the Court observed that the authority granted to the Central Government by section 3 of the Act is not confined solely to banning or limiting imports at the point of entry; rather, the same authority also embraces the power to regulate the subsequent disposal of goods that have already entered the country. The Court emphasized that deciding the appropriate policy for import control, which must take into account a variety of considerations, is a matter for the designated authority and not for the Courts. The Court explained that import control can be achieved through several methods. When the policy objective is to prevent a particular category of goods from entering the nation altogether, the government may impose an absolute prohibition on those goods. If an absolute ban is not deemed necessary, the government may permit the goods to enter in restricted quantities. This approach requires the issuance of licences that authorize individuals to import only a specified amount of the goods. The quantum of permitted imports must be determined by assessing the genuine need for those goods within the country, a determination that depends on the intended use of the goods. Consequently, the Court reasoned, licence‑holders who are authorised to import a limited quantity must be subject to the licensing authority’s directives regarding the manner in which those goods are to be used. Without such power, the licensing authority would be unable to exercise effective control over the imported items. The Court noted that the authority may deem the import of certain goods necessary for a particular purpose; however, if it cannot supervise the subsequent use of those goods, the imports might be diverted to other purposes, thereby frustrating the very purpose for which the import was sanctioned and defeating the legislative intent to regulate imports.

The Court further held that it is impossible to confine the scope of import‑control provisions solely to the moment the goods cross the frontier; the provisions extend to every stage at which the Government deems it necessary to ensure that imported items are employed for the purpose for which their entry was justified in the national interest. Accordingly, the Court concluded that the clause 5 provision of the Order, which permits the licensing authority to attach a condition stipulating that the imported goods may not be disposed of except in the manner prescribed by that authority, falls within the powers conferred on the Central Government by section 3 of the Act and is therefore valid. In addressing the second contention—that the Order does not authorize a prohibition on the sale of imported goods—the Court referred to the decision in East India Commercial Co. v. Collector of Customs, wherein a condition was imposed in a licence that prevented the importer from selling the imported goods.

In the earlier case of East India Commercial Co. v. Collector of Customs, the court observed that a licence contained a clause that prohibited the importer from selling the imported goods. The court explained that Sub‑clause (1) of clause (a) of Notification No 2/ITC/48 dated 6 March 1948 authorised a condition stating that the importer could not dispose of or otherwise deal with the goods without the written permission of the licensing authority or any person duly authorised. The same notification also included Sub‑clause (v) of clause (a), which allowed the licensing authority to impose “such other conditions… which the licensing authority considers to be expedient from the administrative point of view and which are not inconsistent with the provisions of the said Act.” The condition actually imposed in that case, however, did not fall within Sub‑clause (1) and the authority attempted to justify it by relying on Sub‑clause (v). The court held that under Sub‑clause (v) the licensing authority could impose only those conditions that were expedient administratively. Moreover, the court observed that prohibiting an importer from disposing of the goods impinged upon the importer’s rights and therefore such a condition could not be placed in the licence unless a specific rule permitted it.

In the present matter, the licence was issued under the Order of 1955. The court noted that the wording of Sub‑clause (2) of clause 5 of that Order is broader and allows the imposition of a condition that lies outside the scope of Sub‑clause (v) of the 1948 notification. Further, Sub‑clause (4) of clause 5 makes it obligatory for the licence holder to obey all conditions that are imposed or deemed to be imposed under clause 5. On that basis, the court rejected the second contention and held that the licensing authority was competent, under the 1955 Order, to impose a condition that the imported goods could not be sold to any person, even though such a condition affected the ordinary rights of the importer. The court also rejected the third contention. Because Sub‑clause (4) of clause 5 requires compliance with every condition, any breach of a licence condition constitutes a breach of Sub‑clause (4) itself and therefore a breach of the Order made under the Act. Consequently, if the Association, as the licencee, fails to comply with the conditions regarding the use of the imported goods, it contravenes the Order and becomes liable to punishment under section 5 of the Act. The court further observed that the precedents cited – C. T. A. Pillai v. H. P. Lohia and East India Commercial Co. v. Collector of Customs – were not applicable because those cases involved licences granted under orders dated 1 July 1943 and 6 March 1948, which did not contain a provision comparable to Sub‑clause (4) of clause 5 of the 1955 Order.

The Court observed that the licences in question had been issued under orders dated July 1, 1943 and March 6, 194S, and that those orders did not contain any provision comparable to the provision of sub‑clause (4) of clause 5 of the Order of 1955. The Court accepted the fourth contention, namely that only the Association, as the licencee, could contravene a condition of the licence and thereby breach the Order. However, the Court rejected the fifth contention that the Association could not be guilty of the offence because it had not obtained actual possession of the imported goods. The Court held that actual possession of the imported goods was not required to establish a contravention of a licence condition. Moreover, the Court explained that any possession by Warden & Co. would be deemed possession of the Association, since Warden & Co. acted as the Association’s agent for importing the goods.

Regarding the sixth point, the Court noted that the appellant had asserted no intention to commit the offence. The Court referred to the earlier finding of the High Court, recorded in A.I.R. 1957 Cal. 83 and [1963] 3 S.C.R. 338, which was contrary to the appellant’s claim. The High Court had correctly held the appellant guilty of an offence under section 5 of the Act, on the basis that he had intentionally aided the Association, the licencee, in committing the offence and thus had abetted the Association’s breach of the licence condition. The Court reiterated that, as Chairman of the Association, the appellant had authorised Warden & Co. to dispose of the goods that the Association could not utilise because of a decline in price. By doing so, the appellant had intentionally assisted the Association in disposing of the goods through its agent, thereby abetting the violation of the licence condition that required the imported goods to be used solely by the licencee and not sold to any other party.

The Court further observed that the sentence imposed was not unduly severe, given the circumstances. From the outset, the appellant, as Chairman, had known that the Association would be unable to use all the yarn imported under the licence. The fact that Warden & Co. paid over Rs 5,000 to the Association demonstrated that the goods had fetched a price higher than the cost of importation. The Court therefore concluded that the case represented a deliberate attempt to obtain an import licence with the intention of misapplying the imported goods. Consequently, the Court dismissed the appeal and affirmed the conviction.