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TMI Blog1977 (1) TMI 102X X X X Extracts X X X X X X X X Extracts X X X X ..... facts which have given rise to this appeal are as under: The petitioning creditor had his dues regarding the brokerage which had remained unpaid even after the statutory notice. Therefore, a winding-up petition was presented on January 15, 1976, and a provisional liquidator was appointed on March 8, 1976. The winding-up order was made by the learned single judge on September 15, 1976, against which an appeal is pending, although the stay order which had been granted against the winding-up order has been vacated. A scheme also has been proposed for reconstruction in the application under section 391 which is also pending at this stage. The facts which have given rise to the present summons are as under : The petitioner-company had exported groundnuts and as per its past performance it was eligible for the groundnut quota. The export of groundnuts was banned from July 14, 1976, but that ban was lifted by the Government on November 9, 1976, and by the notifications which were issued as per the trade notices on November 9, 1976, and November 11, 1976, while deciding to lift the ban, exports of HPS groundnuts in shell and kernel were permitted within a limited ceiling. Exports have b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion certificate for HPS groundnuts may not be considered if the membership was not renewed for the said period. Further intimation was given that no fees would be accepted after November 1, 1976, and the names of such members would be placed before the managing committee of the Association for necessary action, and the decision of the managing committee shall be final and would be binding as per the rules of the Association. Even another circular was issued after this export quota had been released on November 10, 1976, to all members intimating that this released quota of 50,000 tonnes of HPS groundnuts for the year 1976-77 would be distributed to the members on the basis of their performance during the last three years. Even in that circular it was in terms mentioned that it had been decided that if any amount from the members was outstanding and payable to the Association, such members would not be issued any quota till the dues were cleared by them. Admittedly, there are no other dues so far as the company is concerned except the aforesaid membership fee of Rs. 1,000. The liquidator by the letter, dated November 16, 1976, informed the Association that the winding-up petition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agency and as the Joint Controller was a subordinate officer to the Chief Controller, he could not change the eligibility conditions of past performance of the established exporter by adding a further condition of the membership of the Association and, therefore, even non-members would be entitled to the quota. It is this second finding which has really disturbed the Association and that is why the Association has come in this appeal to challenge the learned judge's order. The relevant rules 8( c ) and 8( e ) provide as under : "8. A member shall ipso facto cease to be a member of the association : ...... ( c ) in the case of a member being a joint stock company, corporation or association, an effective resolution is passed or an order made by the competent court for winding up or amalgamation;.......... ( e ) if such. member fails to pay subscription within one month from the date of the same becoming due and if the same is not paid within one month after the receipt of a written notice requiring the members to make payment of the same; provided that the committee may on an application made by any person ceasing to be a member under this clause readmit such person on such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would be strictly adhered to. Under rule 1 of this canalisation rules it is mentioned that under the canalisation scheme, shippers will be able to export HPS groundnut kernels in shell only if they are ordinary or associate members of the Association. Rule 2 which is material provides as under: "2. Any two of the four office bearers of the Association, viz ., chairman, vice-chairman, hon. secretary and hon. treasurer, are authorised to enrol members on receipt of application for membership along with full fees subject to subsequent ratification of the enrolment by the managing committee of the Association". Rule 3 provides that only such applicants whose export turnover for oilseeds, and/or vegetable oils amounts to Rs. 25 lakhs or more during any one of the last three calendar years, will be eligible to become ordinary members of the Association. All other applicants will be enrolled as associate members. Therefore, this special rule was devised so that this quota benefit may not be lost by the members who had to become eligible by renewing their membership. To deal with this special contingency which has arisen, power was left to two of the four of the office bearers of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in holding that even the conduct of the Association was so eloquent to treat these rules as merely directory, and, therefore, when the liquidator had made full payment of the dues as per its letter with the bank draft of Rs. 1,000 on November 18, 1976, no question could have arisen of deciding the case of the company as a defaulter. That is why, admittedly, the managing committee has not taken any other action as intimated in those letters. Even to the three letters of the official liquidator a reply was sent on November 27, 1976, which mentions cessation not on the ground of default of the membership fees but on the ground that the company had been wound up and as such it had ceased to be a member any may not be entitled to the quota rights and so the draft was returned. Therefore, on this first ground the learned single judge was perfectly justified in coming to the conclusion that the Association by its conduct had waived or, in any event, was precluded from taking up a plea that the membership had not continued, especially as no further action was taken by the managing committee. Even as regards the second question of the effect of the order of winding up, the Explanation w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bstacles. That is why the learned single judge was right in the view that this was not a case of a new business being started. It is the same business of the company which has made it eligible by reason of its past performance to get the quota rights from its own Association on the basis of its past performance. Even the Association had justly continued membership by refusing to take any action through its managing committee. In that view of the matter when the business only temporarily stopped due to financial difficulties and when there was every possibility of the company emerging as a live concern, we cannot literally and in a penal manner interpret this provision as denuding the company of its valuable assets. Therefore, even the second contention that, on the score of the winding-up order, the company's membership had ceased can never be upheld. That leads us to the most material question which has been seriously urged by Mr. Bhatt for this Association. The whole quota system has been introduced under the relevant Exports (Control) Order, 1968. Under clause 3(1) save as otherwise provided in that Order, no person shall export any goods of the description specified in Sche ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Joint Controller were not acting on their own but under Government instructions as mentioned by the Government Secretary in the letter of November 4, 1976, as per the decision taken by the Cabinet. That is why these relevant notifications are the notifications issued by the Government of India as per instructions given to the Chief Controller and the Joint Controller's power to modify any direction given by the Chief Controller as assumed, with great respect, by the learned single, ( sic ). The Chief Controller had merely mentioned in the earlier letter of November 9, 1976, that it had been decided to lift the ban and allow exports of HPS groundnuts both in shell and kernels within a limited ceiling. Exports would be canalised only through the Association. This is only appointing a canalising agency for the released quota to the Association. The guidelines are in the next letter of November 11, 1976, which the Association earlier issued as per the instructions given by the Cabinet decision and that is why this second order of the Chief Controller in terms states that in supersession of the ban imposed on the export of HPS groundnuts both in shell and kernels, it had been decided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for successfully implementing this special export scheme. The Government thereby never created any monopoly, but only appointed such special canalising agency under the relevant rule 6(1). In Glass Chatons Importers and Users Association v. Union of India AIR 1961 SC 1514 at page 1516, their Lordships pointed out that if a decision had 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. It is in the interest of general public that such canalising agencies are appointed. Even in the decision in Daya v. joint Chief Controller of Imports and Exports. AIR 1962 SC 1796, their Lordships had pointed out that if the quantum of the export in a commodity could be restricted, the control that would effectuate this must necessarily extend to the persons engaged in or desirous of engaging in the export of that commodity and that would a fortiori be so, if the restriction took the form of a prohibition of exports in a commodity altogether. As a logical step such restrictions might take the form of classifying the persons who might participate in the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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