Mangali Enterprises Ltd. And Anr. vs Union Of India (Uoi) And Ors.
2004 Latest Caselaw 664 Del

JUDGMENT

Sanjay Kishan Kaul, J.

1. Rule.

2. Learned counsel for the respondent accepts notice of rule.

3. With the consent of learned counsel for the parties, the petition is take up for final disposal.

4. M/s Mangali Ceramics Limited was a limited company which had a certificate of importer/exporter dated 12.5.2000 issued from file No. 05/04/130/00748 /AM93 dated 04.06.1992 and was assigned IEC No. 0592005372. The petitioner along with the requisite documents filed an application dated 19.6.2004 for allotment of the said code to the petitioner. This was naturally done with the consent of M/s Mangali Ceramics Limited.

5. The petitioner did not receive any response and sent a reminder dated 5.8.2003 followed by reminders dated 25.8.2003 and 10.9.2003. It may be mentioned that in the letter dated 25.8.2003, the petitioner had mentioned that they have come to know that application of the petitioner was not processed on some misapprehension of a wrongful claim of DEPB. The letter categorically states that the petitioner had not availed of DEPB facility.

6. Since the petitioner did not receive any response, the present writ petition was filed seeking a direction against the respondents to allot the said code to the petitioner.

7. In the counter affidavit, it has been stated that the code could not be issued due to the fact that one of the Directors of the petitioner Shri Dharam Pal Goel was also Director in another company M/s Mangali Impex Limited of the same address and was placed on the Denied Entity List (DEL) as their case was investigated by DRI and the report received indicated that the said concern had obtained a DEPB against fraudulent export of goods by mis-declaring description of the goods as well as the value to claim undue benefit under the DEPB scheme.

8. The counter-affidavit states that application of the petitioner was thus not considered in view of the provisions of Foreign Trade (Regulation) Rules, 1993 (hereinafter referred to as `the Rules') framed in exercise of powers conferred by Section 19 of the Foreign Trade (Development and Regulation) Act, 1993 (hereinafter referred to as `the Act'). The relevant Rule 7 deals with refusal of license and the same is as under:

''7. Refusal of license -

(1) The Director General or the licensing authority may for reasons to be recorded in writing, refuse to grant or renew a license

... ... ... ...

(f) the applicant is or was a managing partner in a partnership firm, or is or was a Director of a private limited company, having controlling interest against which any action is for the time being pending under the Act or rules and orders made there under''

9. It is under the aforesaid Rule that the petitioner has been denied transfer of the Code.

10. In the rejoinder filed by the petitioner, it has been stated that the allegation against M/s Mangali Impex Limited relates to the period of January 1999. Shri Dharam Pal Goel was not even a Director of the said company since he became Director only of 31.12.1999 and ceased to be the Director in July, 2003. It is further stated that even when Shri Goel was Director in M/s Mangali Impex Limited, he did not hold any share in the said company and he was made Director to fill quorum of the company. It has been categorically stated that it is for the first time that the petitioner company has come to know about the aforesaid action since no order has been communicated to the petitioner company.

11. Learned counsel for the petitioner contends on the basis of the pleadings that the question of application of Rule 7(1)(f) of the Rules does not arise in the present case as requirement of the said Rule is that the person should be a Director and should further have controlling interest. It is stated that since Shri Goel was not even a shareholder or a Managing Director, there can be no question of any controlling interest of Shri Goel in M/s Mangali Impex Limited. It is further stated that the requirement ''or is or was'' for a Director must have co-relation with the period when some transaction was carried out against which action was being communicated.

12. Learned counsel for the petitioner further contends that neither the petitioner was given an opportunity to explain this position nor has any order been communicated based on records even in the present proceedings.

13. Learned counsel for the respondents, on the other hand, contends that the mere fact of Shri Goel being a Director of M/s Mangali Impex Limited is sufficient to disentitle the petitioner to transfer of the Code.

14. I have considered the submissions advanced by learned counsel for the parties.

15. In my considered view, a plain reading of the Rule shows that there are two requirements before the Rule can come into play:

i) the person should be a Director of the company and this applies in the past or in the present; and

ii) should have controlling interest.

16. The mere fact of being a Director does not suffice to bring the Rule into play.

17. It is apparent from the pleadings that Shri Goel was not even a shareholder of M/s Mangali Impex Limited. In case the respondents had any knowledge to the contrary, the respondents should have issued an appropriate notice to the petitioner for placing on record the relevant material which could have clarified the position. This has not been done. In fact, it appears that the order was passed only in the file as no order was communicated to the petitioner nor is any order on record before this court Even the original records have not been produced.

18. It is also relevant to note that the requirement is that the person may be a Director in the past or in the present. The twin criteria requires such a Director to have controlling interest. It is both the requirements of being a Director and having Controlling interest at the relevant stage of time which really bring the rule into play.

19. In view of the aforesaid, I am of the considered view that decision of the respondent to deny transfer of the code to the petitioner on the basis of the reasons contained in the counter-affidavit cannot be sustained and is hereby quashed. It is, however, open to the respondents to make necessary enquiry about the shareholding of M/s Mangali Impex Limited to confirm that Shri Goel had no controlling interest in the company. In case such an enquiry proceeds, notice must be issued to the petitioner and a decision taken within a maximum period of two months from today. If no such enquiry is made, or if nothing adverse is found in respect of the controlling interest of Mr. Goel in M/s Mangali Impex Limited, the code be transferred in favor of the petitioner on expiry of the period of two months.

20. Writ petition is allowed in the aforesaid terms leaving the parties to bear their own costs.

CM 11281/2003

No further orders are required in this application in view of the writ petition being disposed of.

The application is disposed of.