M/S. Ramchand Jagadish Chand Vs. Union
of India & Ors  INSC 237 (8 August 1961)
CITATION: 1963 AIR 563 1962 SCR (3) 72
CITATOR INFO :
R 1966 SC1044 (8) E 1968 SC 718 (18) R 1971
Import Licence-Import Trade Control
Policy-Export PromotionScheme-Right of State to impose restrictions on
imports-If infringes fundamental right-Licensing Authority Powers granted under
the scheme--Whether uncanalised and arbitraryEmergency Provisions (continuance,
Ordinance, 1946 Imports and Exports (Control) Act, 1947 (18 of 1947)
s.3--Imports (Control) Order 1955, Cl. 3. Appendix 42, cl. Constitution of
India-Arts. 14, 19(1) (g).
Intervener Writ petition dismissed by High
Court-Petitioner could be heard as intervener in Supreme Court-Right of appeal
Constitution of India-Art. 226.
Government of India published a' scheme known
as the "Export Promotion Scheme" according to which the value of
import licence for raw materials in an industry depended upon the value of
specified varieties of goods exported by the applicant for an import licence.
It also empowered the Controller of Imports and Exports under cl. 2 'of
Appendix 42 of the Import (Control) order 1955 to issue a license up to 66-2/3
per cent of the export value in the case of Indian art silk sarees and up to
100 per cent in the case of other Indian art silk fabrics. The appellant firm R
of exporters and importers relying upon cl.2 of the Export Promotion Scheme
applied for an import licence equivalent to the value of the goods it had
exported and earned foreign exchange.
In view of certain malpractices the
Government of India suspended the "Export Promotion" scheme and set
up a committee for verification of the values of goods exported.
The Committee after scrutinising the firm's
claim found that rates of some of the items could not be accepted as
reasonable, and recommended an import licence approximately of the value of 45
per cent of the goods exported. The firm R after making an infructuous demand
for a licence for the full value of the goods exported filed a writ petition.
They submitted that the Controller of
Licences had arbitrarily reduced the value of their import licence and had
thereby unlawfully infringed their fundamental right.
They also claimed that the Controller was
bound to grant licence under the Export Promotion Scheme for the full value of
the goods exported by them and in failing to do so had practised discrimination
73 against them, because several other importers during the identical period
were given licences for the full value of goods exported.
Held, that the fundamental right of a citizen
to carry on any occupation, trade or business under Art. 19(1)(g) of the
Constitution is not absolute; it is subject to reasonable restrictions which
may be imposed by the State in the interest of the general public.
The right of the State to impose control in
the larger interest of the general public on imports has accordingly not been
denied; nor is the authority of the State to issue the Imports (Control) Order,
1955 in exercise of the powers conferred by the Imports and Exports (Control)
Act providing for imposition of restrictions by permitting import of certain
goods only in accordance with the licences or customs permits granted by the
Central Government, open to challenge. The authority to grant or refuse to
grant the licence is conferred upon high officers of the State and the grant of
licence is governed by the Import Trade Control Policy and detailed provisions
are made setting out the grounds on which licences may be refused, suspended or
cancelled and provision to afford a hearing before action is taken is also
made; thus the powers conferred under cl.3 of the Imports (Control) Order, 1955
are not uncanalised or arbitrary.
The power granted to the licensing authority
to grant licences only up to the maximum specified in cl.2 of the appendix 42
is by itself not an unreasonable restriction, nor will the notification
directing scrutiny of all applications amount to imposing an unreasonable
The clause invests the Controller with
authority, it does not impose an obligation upon him enforceable at the
instance of the exporter, to issue a licence for the amount (subject to the
maximum prescribed) claimed by the exporter.
The power is plainly discretionary and the
ordered by the Controller granting a licence only for 45% of the goods exported
does not infringe the fundamental right of the petitioner under Art. 19(1)(g)
of the Constitution by imposing an unreasonable restriction.
Held, further that in the absence of evidence
to show that discriminatory treatment was made between the aggrieved person and
to persons similarly circumstanced, there can be no violation of Art. 14 of the
Constitution which confers a guarantee against arbitrary discrimination between
persons similarly circumstanced-.
Held, also that where an application for writ
of mandamus, direction or order under Art. 226 of the 74 Constitution is
dismissed by the High Court, the-only remedy to the aggrieved person is to come
up by appeal and he has no right to be heard as an intervener.
CRIMINAL JURISDICTION: Writ Petition No. 1 of
Under article 32 of the Constitution of India
for the enforcement of Fundamental Rights.
A. V. Viswanatha Sastri, 'K.K. Jain and
Ganpat Raj, for the Petitioners.
C. K.Daphtary, Solicitor-General of India,
V.A. Saiyed Mohamad and T. M. Sen, for the Respondents.
1961. August 8. The Judgment of the Court was
delivered by SHAH, J.-Controls on exports and imports imposed as an emergency
measure during the last war in respect of certain commodities were kept alive
after the lapse of the Defence of India Rules by the Emergency Provisions
(Continuance) Ordinance, 1946 which was later replaced by the Imports and
Exports (Control) Act,. 1947 ( 18 of 1947), by s.(3) of the Act, the Central
Government was authorised by order published in the Official Gazette, to
provide for prohibiting, restricting or otherwise controlling, in all cases or
in specified classes of cases, and subject to such exceptions if any, as may be
made by or under the order, inter alia the import, export, carriage xxx xxx of
goods of any specified description. By sub-sec(2) of s.3., it was provided that
all goods to which an order under sub-s.(1) applied shall be deemed to be goods
of which the import or export has been prohibited or restricted under s.19 of
the Sea Customs Act. Exercising authority under s.3 of the Imports and Exports
(Control) Act, 1947, the Central Government issued notifications from time to
time prohibiting, restricting or otherwise controlling the export and import of
diverse commodities. By a consolidated order dated 75 December 7, 1955, known
as the Imports (Control) Order, 1955, restrictions on the import of certain
goods were imposed by el. 3 of the said order. By el. 3, it was provided that
save as otherwise, provided in the order, no person shall import any goods of
the description specified in Schedule I, except under, and in accordance with,
a licence or a customs clearance permit granted by the Central Government, or
by an officer specified in Schedule II. For implementing the scheme of
controlling imports, diverse provisions were made in cls. 3 to 11 of the
Imports (Control) Order.
The Government of India makes known its
import policy every six months by issuing in the Government Gazette the
procedure and the conditions for eligibility of licences and for the grant of
import licences. This policy is published for the use of the public in a
hand-book called the "Import Trade Control Policy". The policy is
obviously framed having regard to requirements for home consumption of commodities
to be imported, the foreign currency situation and the economy of the country
as a whole.
By para 51 of the Import Trade Control Policy
for the licensing period October 1958 to March 1959, a scheme of "Export
Promotion" permitting imports depending upon the value of specified
varieties of goods exported by the improper was devised. It was recited in that
paragraph that in certain items, the inter-relation between imports and exports
was direct and intimate and the ability to export some manufactured goods
depended largely on the facility with which the exporter or the manufacturer
could procure the basic raw materials required in the manufacture. With a view
to promoting the export of such goods, a scheme was therefore devised for the
grant of special import licences to 76 replace the imported raw material
component of the product exported or to provide an incentive for larger
Artsilk yarn and art silk fabrics were
covered by the Export Promotion Scheme. In Appendix 42, cl.2 of the Import
Trade Control Policy. for October 1958 to March 1959, it was stated:
"With a view to stimulate exports of
Indian art silk fabrics, sarees, garments, hosiery and other art silk manufactures,
it has been decided to grant import licences at the ports under the Export
Promotion Scheme for the import of permissible varieties of art silk yarn to
actual exporters upto the following percentage of the rupee equivalent of
foreign exchange earned on the basis of the f. o. b.
value of The art silk goods exported, or the
value assessed by customs, whichever is less.
(i) 66-2/3 per cent in the case of Indian art
silk sarees, (ii) 100 per cent in the case of other Indian art silk fabrics
including Indian art silk hosiery goods." The petitioners, M/s. Ram Chand
Jagadish Chand are a firm engaged in. business as exporters and importers. In
the period October 1958 to March 1959, the petitioners exported to Singapore,
Bush Shirt Cloth, Glass Nylon, Art silk Piece Goods and Superior Class Nylon of
the total C.I.F. value of Rs. 7,10,817/-, and relying upon cl. (2) of the
Export Promotion Scheme as outlined in the Import Trade Control Policy, called
upon the Controller of Imports to issue licences for art silk yarn for Rs.
4,04,218.62 np. and Rs.
3,03,490.93 np. respectively for the months
of February and 77 March 1959. The petitioners claimed that they had, pursuant
to the Export Promotion Scheme, exported art silk goods to Singapore and had
earned net foreign exchange of the value of Rs. 7,07,709.55 np. and that they
were entitled to import licences for art silk yarn of that amount. In September
1959, the petitioners were informed by the Assistant Controller of Imports and
Exports that a consolidated licence for the months of February and March, 1959
was granted to them for import of art silk goods of the value of Rs.
It appears that the Government of India,
having come to learn of certain malpractice by the importers of art silk yarn,
while suspending the Export Promotion Scheme as from March 9, 1959, announced
that applications which were pending with the port licensing authorities will
be scrutinised by a Committee and in May 1959, the Government of India
appointed a Committee for verification of the value of good exported. The
petitioners appeared before the Committee and furnished documentary evidence in
support of their claim for 100% of the rupee equivalent of the cloth exported.
The Committee accepted as reasonable the rates at which the exported
"'Flock Printed Nylon Dyed" cloth was exported by the petitioners,
but in their view, the rates at which ",Bush Shirt Cloth" was
exported could not be accepted as reasonable and for the purpose of the Export
Promotion Scheme, the value of that cloth should be computed at the rate of Re.
1.50 np.per yard of 36" width. The Controller of licences accepted the
recommendation of the Committee and issued to the petitioners an import licence
for Rs. 3,19,354/only. The petitioners after making, an in fructuous demand for
a licence for the value of the goods exported, filed this petition under Art.
32 of the Constitution for a writ or direction in the nature of mandamus
directing the Chief Controller of Imports and ,Exports to Avant to the
petitioners an import.
78 licence for the months of February and
March 1959 equivalent to 100% of the goods exported by them in relevant
previous months and in the alternative, to issue a writ of certiorari calling
for the records and proceedings resulting in the issue of a licence of the
value of Rs. 3,19,354/and for an order quashing the same and granting to the
petitioners a licence for the full amount claimed by them. The petitioners
submitted that the Controller of licences had arbitrarily reduced the value of
their import licence under the Export Promotion Scheme and had thereby
unlawfully infringed their fundamental right to carry on business.
They also claimed that the Controller was bound
to grant licence to import art silk yarn under the Export Promotion Scheme for
the full value of the goods exported by them, and in failing to do so, had
practiced discrimination against the petitioners, because several other
importers of art silk yarn who were the petitioners' rivals in trade during the
identical period were given licences for amounts "ranging between 85 and
100 per cent of their exports". In paragraph 22 of their petition, the
petitioners submitted a table setting out the names of eight such exporters,
the amount and the percentages granted to such exporters.
The fundamental right of a citizen to carry
on any occupation, trade or business under Art. 19 (1)(g) of the Constitution
is not absolute : it is subject to reasonable restrictions which may be imposed
by the state in the interests of the general public. The right of the State to
impose controls in the larger interest of the general public on imports has
accordingly not been denied: nor has the authority of the 'State to issue the Imports
(Control) Order, 1955 in exercise of the powers conferred by the Imports and
Exports (Control) Act providing for imposition of restrictions by permitting
import of certain goods only in accordance with,, licences or customs permits
granted by the 79 Central Government,, been challenged. It was suggested.
somewhat faintly by Mr. Viswanatha Sastri on
behalf of the petitioners that the power granted under c 1. (3) of the Imports
(Control) Order, 1955 was uncanalised power in the matter of fixing percentages
and to that extent, the authority imposed an unreasonable restriction on the
freedom to carry on business. But the authority to grant or refuse to grant
licences is conferred upon high officers of the State and the grant of licences
is governed by the Import Trade Control Policy which is issued from time to
time and detailed provisions are made in the Imports (Control) Order getting
'out the grounds on which licences may be refused, amended, suspended or
cancelled (see cls. 6 to 9 of the Order). Provision to afford a bearing to the
licence before action is taken under cls. 6 to 9 is also made. It cannot
therefore be said that the power conferred is uncanalised or arbitrary.
The argument seriously canvassed by counsel
for the petitioners was that relying upon cl. 2 of appendix 42 of the Import
Trade Control Policy, the petitioners had exported art silk fabrics, and had
earned foreign currency, and they could not, except for good and adequate
reasons, be deprived of import licence to the full extent of 100% of the value
of the art silk fabrics exported. The petitioners say that they purchased the
goods from various merchants and by exporting those goods earned foreign
exchange which was duly credited to their account by their bankers, and in
reducing the import licence to approximately 45% of the value of the goods
exported, the State has, by executive order, imposed an unreasonable
restriction upon their right to carry on business. But under el. 2 of the
Export Promotion Scheme as outlined in appendix 42 in so far as it related to
licences for import of art silk yarn, the Controller of Imports is authorised
to grant licences upto the percentages specified in that clause : there is no
right thereby 80 created to the exporter to obtain a licence for the full value
of the commodity exported. Under el. 2 of the, scheme the Controller has the
power to grant a licence for any amount upto 100% of the rupee equivalent of
the foreign exchange earned on the basis of the F.O.B. value of the goods
exported. By that clause, the exporter is not given the option to claim an
import licence for any amount not exceeding the value of the foreign exchange
earned by export of goods. The clause invests the Controller with authority, it
does not impose an obligation upon him enforceable at the instance of the
exporter, to issue a licence for the amount (subject to the maximum prescribed.
claimed by the exporter.
The power is plainly discretionary. It is
true that the discretion has to be exercised reasonably and not arbitrarily.
The, licensing authority would normally issue an import licence for 100% of the
value of the goods exported, but having regard to special considerations such
as difficult foreign exchange position or other matters which have a bearing on
the general interest of the State, import licences for a smaller percentage may
be granted to the exporters. But by the use of the expression "upto the
following percentage of the rupee equivalent" power to fix arbitrarily a
percentage of the value of the goods exported for awarding an import licence is
In granting a licence to the petitioners for
Rs. 3,19,354/-, has the authority been exercised arbitrarily or is it supported
by some reasonbly discernible principle? Ram Murth Sharma, Deputy Chief
Controller of Imports and Exports in his affidavit stated that of the Export
Promotion Scheme wrongful advantage was taken by some exporters of art silk fabrics
: it was found by the Government of India that invoice values or artificial
silk fabrics were inflated.
by the exporters by more than 100% of the
value with the object of exporting "speculative" commodities like
artificial 81 silk yarn. , Sharma stated that ",as against 381 thousand
yards of artificial silk fabrics exported during the period January-June, 1957
at a value of about Rs. 456 thousand i.e., at about Rs.2-0 L. per yard the
merchants sought to show the rise in price for the export of such goods during
October-March 1959 at Rs. 2-9-0 per yard so that for 986 thousand yards
exported, the invoice value shown was 28,799 thousand rupees, even though the
actual price of the goods in the wholesale market had not at all risen to that
extent between those two periods. The index number of wholesale price in India
in respect of "silk and rayon" fabrics during the month of June 1957
was 85 and during the month of March 1959 it rose to 95.7 only thus showing a
rise of about 11%.
Against this rise, the rise in the price
invoiced by the exporters showed a rise of over 125% during the span of the
same period. This will clearly show that the aforesaid rise was shown by
merchants merely with a view to get licences for higher value for the import of
speculative item like "Art Silk Yarn." Relying upon this evidence,
counsel for the Union contended that this perversion of the Export Promotion
Scheme had serious repercussions on the foreign exchange position, and the
scheme was suspended by notification dated March 6, 195 , and government
directed that the pending applications for import licences for art silk yarn be
scrutinised by a Committee appointed in that behalf. The Committee scrutinised
the cases of 1106 parties including the petitioners, and the petitioners were
given a, licence for Rs. 3,19,354/-, and by reducing the value of' the import
licence, no fundamental right of the petitioners under Art.
19 of the Constitution was infringed.
A scrutiny of the applications for licences
in view of the misuse of. the Export Promotion Scheme and granting of licences
on the result of such scrutiny cannot be regarded as imposing an 82 unreasonable
restriction. The State is as much concerned with earning foreign exchange as
maintaining and consolidating its export trade. if a large quantity of goods be
dumped at excessive prices foreign markets to meet a temporary demand in the
ultimate result the export trade of the State may suffer.
If taking advantage of temporary demands in
the foreign market, the exporters charge excessive prices which axe not
commensurate with reasonable profits on the real value of the goods and seek to
invest the profits earned, in speculative commodities thereby endangering the
internal economy of the country, the State may be justified in taking steps to
prevent the exporters from obtaining advantage of such excessive profits by
refusing to afford facilities for importing goods to the exporters who seek to
rely upon the export Value of the goods at inflated rates., The affidavit of
Sharma shows that in a number of cases,, the importing firm in the foreign
country was only a "'sister concerns of the exporting house, and the
exporters adopted the expedient of inflating the price with the object of
adjusting the excess value received by them. It appears therefore that some
exporters under cover of the Export Promotion Scheme by inflating the prices
were found not only to import speculative varieties of goods for very much
larger values than the real prices justified, but were suspected by the
authorities even to repatriate foreign assets without disclosing the same to
the State as required by law. It cannot therefore be said that the power
granted to the licensing authorities to grant licences only upto the maximum
specified in el. 2 of the Scheme is by itself an unreasonable restriction; nor
will the notification directing scrutiny of all applications amount to imposing
an unreasonable restriction.
Counsel for the petitioners however submitted
that the Controller had placed no evidence on the record that the petitioners
have, for the goods 83 purchased by them in the Indian market, not paid M.
7,67,709.55 np. or that any part thereof
represented foreign assets intended to be repatriated contrary to law.
Counsel submitted that M/s. V. M. S. Abdul
Razak & Company to whom the goods were consigned are not a "'Sister
concern" of the petitioners and that in the affidavit of the Deputy Chief
Controller of Imports and Exports it is not denied bat the petitioners bad
received the full value for which the goods were exported by them.
But in considering the case of the
petitioners, the Committee observed :
"The party has purchased Bush Shirt
Cloth from J. C. Vakaria & Sons, Govardhandas Iswardass International
Trading Agency, Agwarwla Brothers and Calcutta Silk Manufacturing Co., Ltd.
Rates vary from Rs. 3.87 to Rs. 3.92. x x x x neither the purchase vouchers nor
the export invoices contain any description nor give any idea as to whether the
material was Nylon, Rayon, Nynon, etc." The committee also observed that
the petitioners were "not able to produce adequate justification of the
prices of Art Silk Bush Shirting Cloth. Samples cannot be linked with the
relative purchase vouchers or export invoices." They then pointed out that
the correspondence with M/s. Abdul Razak & Company did not give any
"justification nor contained' any description to link the goods with the
materials sent," and in the light of these findings, the Committee
recommended that. the value of bush shirt' cloth for the purposes of import
licence be calculated at the rate-of Re. 1. 50 nP.
per 'Yard. It is somewhatunfortunate that the
Committed have not stated-in the reasons given by them that Re.1. 50 nP. was
the prevailing: market rate in respect of Bush Shirt Cloth at the time of the
export in the Indian market. But in paragraph 22 of the respondents' affidavit,
itis stated that "the petitioner firm has behalf granted licence equal to
84 100% of the value which has been arrived at as reasonable value of the
exports effected by the firm." The petitioners alleged that the decision
of the Committee was arbitrary the licensing authority contends that the decision
was made after ascertaining the reasonable value in the Indian market at the
material time of the goods exported by the petitioners. The petitioners have
not placed before the court any independent evidence to show that the current
market rate of "bush shirt cloth" which was exported, substantially
exceeded the rate of Re. 1. 50 nP. per yard of 36" width. In the
circumstances, we would not be justified in assuming that the Committee made an
arbitrary decision in arriving at the value of the bush shirt cloth exported
for the purpose of recommending the grant of import licence.
The contention that the order passed by the
Controller granting a licence only for 45% of the value of the goods exported
infringes the fundamental right of the petitioners under Art. 19 (1) (g) by
imposing an unreasonable restriction cannot therefore be sustained.
Does the fact that the petitioners have been
granted licence approximately for 45% of the total value of the goods exported
amount to discrimination entitling them to protection of Art. 14 of the
Constitution ? Under the Export Promotion Scheme, the petitioners have exported
art silk goods of the value of Rs. 7,07,709.55.nP. and may in the normal course
have been entitled to import licence for 100% of the value of the goods
exported unless there was a reduction in the value of the licence for imports
on account of certain circumstances such as general deterioration of the
foreign exchange position or necessity to conserve a particular currency or
other circumstances justifying a departure from the maxima set opt in cl. 2 of
85 appendix 42 of the Export Promotion Scheme. The reduction may also be
justified on grounds personal to the petitioners or to a, group to which they
belonged, Any malpractice or tinder-hand dealing may warrant such a reduction.
It was the case of the respondents that many
exporters were guilty of malpractices and with a view either to speculate in
art silk goods or to repatriate unlawfully foreign assets, the value of the
goods exported was unduly inflated. In the order passed by the Committee
appointed by the Government of India, dealing with the case of the petitioners,
it was observed that the petitioners had business relations with certain firms
and that the rates at which bush shirt cloth were purchased varied from Rs.
3.87 to Rs. 3.92 nP. The Committee was not satisfied that the documentary
evidence produced by the petitioners related to the goods exported by them.
These findings disclosed that, in the view of the Committee, there was reason
to believe that the claim of the petitioners that they had purchased goods
approximately for the prices at which they were exported, was not made out.
The Committee accordingly recommended that
the value of "bush shirt cloth" should be computed at the rate of Rs.
1.50 nP. per yard. It is true that there is
no definite evidence on the record indicating that was the current market rate,
but the court may be justified in holding that the members of the Committee who
were vitally concerned with the trade in art silk goods were conversant with
the current market rates of the cloth which was exported by the petitioners.
Counsel for the Union has placed before us in
the course of the hearing the report of the Committee in respect of seven out
of the eight exporters who the petitioners claimed had been given import
licence for the full value of the exports.
The report of the Committee with regard to
M/s. Rajasthan Exporters I and Importers, Calcutta 86 is not placed before us
on the plea that.,-it is not immediately available. On a perusal '.of the
report of the Committee with regard to, the other exporters, it may be stated
that the claim of the petitioners that Raghunath Rai Piyarilal were given
import licence for the full value of the goods exported is not correct. It appears
from the record that only 40% of 'the F.O.B. value was to be taken for
"Glass, Nylon dved" exported in respect of application No. 36.
Similar larly, in respect of application No. 35, 40% (if the F.O.B. value was
to be taken for the purpose of granting import licences. It is true that in the
cases of the other importers Premsukhdass Sitaram, Indian Exporters and
Importers Corporation, M/s. Universal Watch Emporium, M/s. Jawahar Knitting
Hosiery, M/s. Vastralaya Ltd. and M/s. Agarwala Trading Co., Ltd., the
Committee have recommended acceptance of the purchase prices submitted by the
exporters in granting import licences. It may, therefore, be assumed that these
importers were, given licence for 1000% of the export value of the goods. But
the Committee have given reasons which appear to be prima facie good for
accepting the claims of these exporters' If, on the materials placed before.
them, the Committee were satisfied that there, was some misconduct or
under-hand dealing on the part of the petitioners, or that the evidence led
before them justified the Committee in holding that the goods exported were not
of the value' claimed by the petitioners in their invoices, an order
recommending that import licence may be granted for the value of bush shirt
cloth computed on the basis of Re.1.50 nP. per yard does not. amount to
discriminatory treatment of the petitioners.
Article 14 confers a guarantee of the equal
protection of the law-a guarantee against arbitrary discrimination between
persons similarly circumstanced... On the materials placed before the
Committee. there. evidence to show that the record produced by the 87
petitioners was unsatisfactory ; they were not satisfied that the prices which
the petitioners said they had paid for purchasing the goods were in truth paid.
If there was evidence to show that in respect of other persons who were in the
opinion of the Committee found also to have inflated the prices 'in the manner
adopted by :,the-petitioners and still the Controller had granted import licences
to those persons for the full amount of the.. export value or a percentage
substantially in excess of the percentage for which import licence was granted
to the petitioners, a case of discrimination could have been made out ; but in
the absence of such evidence, we do not think that any case of discrimination
is made out.
The petition fails and is dismissed with
The application filed by M/s. M. Shaams and
Company for intervention is dismissed, because Miscellaneous Application No.
264 of 1960 which was filed by the applicants in the High Court of Judicature
at Bombay for a writ of mandamus, direction or order under Art. 226 of the
Constitution has been dismissed by the High Court and the remedy applicants is
to file an appeal to. this Court.