Union of India & Ors Vs. M/S.
Indo-Afghan Agencies Ltd.  INSC 267 (22 November 1967)
22/11/1967 SHAH, J.C.
CITATION: 1968 AIR 718 1968 SCR (2) 366
CITATOR INFO :
R 1971 SC1021 (11) D 1971 SC1997 (8) D 1971
SC2399 (13) D 1972 SC1126 (5) R 1972 SC1311 (24) R 1972 SC2112 (18) RF 1973 SC
106 (145) R 1973 SC 303 (10) RF 1973 SC 381 (16) RF 1973 SC2232 (15) RF 1976 SC
386 (15) RF 1977 SC1496 (13) D 1977 SC2149 (14) R 1978 SC 803 (11) E&R 1979
SC 621 (20,21,22,24,25,26,29,30,31) RF 1980 SC1285 (13,20,26,36,37,41,42,44) F
1985 SC 941 (4) RF 1986 SC 806 (10) RF 1986 SC 872 (179,180) RF 1986 SC1021
(13,21) RF 1988 SC1247 (3) E&F 1991 SC 14 (11) RF 1992 SC1075 (3)
Imports and Exports (Control) Act (18 of
1947), s. 3--Import Trade Policy--Notifications under--If executive
instructions--Whether enforceable--Representation to exporters that they will
be given certificates to import material equal to 100% of the value of the
exports--When quantum in import certificate can be reduced--Claim of exporters
if founded on equity.
Section 3 of the Imports and Exports
(Control) Act, 1947, authorises the Central Government to make, by order,
provisions for prohibiting, restricting or otherwise controlling import, export,
carriage etc. of goods of specified description. In exercise of this power, the
Central Government issued the Imports (Control) Order, 1955, and other orders
setting out the policy governing the grant of import and export licences. The
Central Government also evolved an Import Trade Policy to facilitate the
mechanism of the Act and the orders issued there under. and it was modified
from time to time by issuing fresh Schemes in respect of new commodities. In
1962, the Central Government promulgated the Export Promotion Scheme providing
incentives to exporters of woolen textiles and goods. It provided for the grant
to an exporter, certificates to import raw materials of a total amount equal to
100% of the F.O.B.
value of his exports. Clause 10 of the Scheme
provided that the Textile Commissioner could grant an import certificate for a
lesser amount if he is satisfied, after holding an enquiry, that the declared
value of the goods exported is higher than the real value of the goods. The
Scheme was ex.tended to exports of woolen textiles and goods to Afghanistan.
The respondents exported woolen goods to
Afghanistan and were issued an Import Entitlement Certificate by the Textile
Commissioner not for the full F.O.B. value of t,he goods exported, but for a
reduced amount. In doing so, the Textile Commissioner collected evidence ex
parte and acting upon the report of a Committee appointed by him passed orders
without informing the respondents or giving them an opportunity to explain the
materials on the basis of which the 'import entitlement' of the respondents was
reduced. Some of the exporters had appeared before the Committee and explained
the circumstances in which they made the exports, but the report of the
Committee was not made available to them. The respondents made representations
to the Central Government but the Government confirmed the orders. The
respondents then filed writ petitions in the High Court. The High Court set
aside the orders of the Textile Commissioner and Government, and held that the respondents
were entitled under the Scheme to obtain import licences for an amount equal to
100% of the F.O.B. value of their exports, unless it was found on enquiry duly
made under el. 10 of the Scheme that the respondents had by 'over-invoicing'
the goods disentitled themselves to the import licences of the full value; and
that the Textile Commissioner without making any such enquiry. proceeded upon
his subjective satisfaction' that the respondents had 'over invoiced' the goods
exported; and that Government also acted in a similar manner in dealing with
the representation of the respondents.
367 In appeal to this Court, it was
contended: (1 ) that the Export Promotion Scheme was administrative in
character, that it contained mere executive instructions issued by the Central
Government to the Textile Commissioner. and created no enforceable rights in
the exporters who exported their goods in pursuance of the Scheme and that it
imposed no obligations upon the Government to issue import certificates, (2)
that the textile Commissioner was the sole judge of the reasons for reducing
the import entitlement, that the Scheme did not require him to set out the
reasons for reducing the import entitlement, or to give an opportunity to the
respondents because, the exercise of the power to reduce, conferred upon the
Textile Commissioner, was not limited by the terms of el. 10 of the Scheme, and
was not, except on proof of mala fide exercise, open to judicial review; (3)
that the Government on grounds of 'executive necessity' was the sole judge of
the validity of its action in matters relating to import and export policy,
because the policy depended upon the economic climate and other related matters
and had to be in its very nature flexible with power in the Government to modify
or adjust it as the altered circumstances necessitate; and (4) that if the
Government is held bound by every representation made by it regarding its
intentions, the Government would be held bound by a contractual obligation even
though no formal contract in the manner required by Art. 299 of the
Constitution was executed.
HELD: The Government is not exempt from
liability to carry out the representation made by it as to its future conduct
and it cannot on some undefined and undisclosed ground of necessity or
expediency fail to carry out the promise solemnly made by it, nor claim to be
the judge of its own obligation to the citizen on an ex parte appraisement of
the circumstances in which the obligation had arisen. [385 E-F] (1) Whether the
Schemes for implementing the Import Trade Policy are merely executive or
administrative instructions, or are legislative directions as well, depends not
on their form, or the method of publication or the source of their authority.
but it is their substance that determines their true character. It cannot be
assumed merely because the policy is general in terms and deals with the grant
of licences for import of goods and related matters, that it is statutory in
character. But even if it is only executive or administrative in character,
courts have power in appropriate cases to compel performance of the obligations
imposed by the Schemes upon the departmental authorities. [376 H; 377 B--C,
F--G] (2) The Textile Commissioner was not the sole judge of the quantum of
import licence to be granted to an exporter and courts are competent in
appropriate cases to grant relief, if, contrary to the Scheme, the Government
and its officers at their mere whim ignore the promises made by the Government
and arbitrarily decline to grant the promised import licence to an exporter who
has acted to his prejudice relying upon the representation r381 C--D] Where a
person has acted upon representations made in an Export Promotion Scheme that
import licence upto the value of the goods exported will be issued, and had
exported goods, his claim for the import licence for the maximum value
permissible by the Scheme cannot be arbitrarily rejected. In such a case
reduction in the amount of import certificate may be justified on the ground of
misconduct of the exporter in relation to the goods exported or on special
considerations such as difficult foreign exchange position, or other matters
having a bearing on the general interests of the State. But, where, as in the
present case, the Scheme provided for the rant of import entitlement of the
value and not 368 up to the value, of the goods exported, the Textile
Commissioner should in the ordinary course, grant import certificate for the
full value of the goods exported: he may reduce that mount only after the
enquiry contemplated by cl.
10 of the Scheme, that is, enquiry made after
giving an opportunity to the respondents and held in a manner consistent with
the rules of natural justice and the basic concepts of justice and fair-play.
[379 H: 380 A--C] Ramchand Jagadish Chand v. Union of India & Ors.  3
S.C.R. 72, Probhudas Morarjee Rajkotia & Ors. v. Union of India & Ors.
A.I.R. 1966 S.C. 1044- and Joint Cheil Controller of Imports and Exports,
Madras v. M/s.Amin Chand Mutha,  1 S.C.R. 262, followed.
(3) Executive necessity, if any, does not
release the Government from honoring its solemn promises relying on which
citizens have acted to their detriment especially when the representation in
the Scheme was not' subject to any implied term that the Government will not be
bound to grant the import certificate for the full value of the goods exported
if they deem it inexpedient [376 A--C] Rederiaktiebolaget Amphitrite v. The
King,  3 K.B. 500 and Robertson v. Minister of Pensions,  1 K.B.
227, referred to.
(4) The respondents were not seeking to
enforce any contractual right: they are seeking to enforce compliance with the
obligation which is laid upon the Textile Commissioner by the terms of the
Scheme. The claim of the respondents was rounded upon the equity which arose in
their favour as a result of the representation made on behalf of the Government
in the Export Promotion Scheme, and the action taken by the respondents acting
upon the representation. Even though the case did not fall within the terms of
s. 115 of the Evidence Act, it was still open to a party who had acted on a
representation made by the Government to claim that the Government should be
hound to carry out the promise made by it, though not recorded in the form of a
formal contract as required by the Constitution.
[382 D-G, 383 H] Ahmad Far Khan & Ors. v.
Secretary of State for India in Council and Anr. L.R. 28 I.A. 211, The
Municipal Corporation of the City of Bombay, v. The Secretary of State for
India in Council, I.L.R. 29 Born. 580 and The Ganges Manufacturing Co. v.
Surujmull, I.L.R. 5 Cat. 669, applied.
Collector of Bombay v. Municipal Corporation
of the City of Bombay & Ors.  S.C.R. 43. referred to.
CIVIL APPELLATE JURISDICTION: Civil Appeals
Nos. 885893 of 1967.
Appeals from the judgment and order dated
February 2, 1967 of the Punjab and Haryana High Court in Civil Writs Nos. 1947,
1921 to 1927 and 1949 of 1965.
AND Civil Appeals Nos. 973 to 975 of 1967.
Appeals from the judgment and order dated
April 26, 1967 of the Punjab High Court in Letters Patent Appeal Nos. 127 to
129 of 1967.
369 B.R.L. lyengar, R.N. Sachthey and S.P.
Nayar, for the appellants (in all the appeals).
Bhagirath Dass, Sobhag Mal Jain and B.P.
Maheshwari, for the respondents (in C.As. Nos. 885 and 893 of/967).
O.P. Varma, for the respondents (in C.As.
Nos. 886 to 890 and 892 of 1967).
A.K. Sen and O.P. Varma, for the respondent
(in C.A. No. 891 of 1967).
K.L. Arora and H.K. Puri, for the respondents
(in C.As. Nos. 973 and 974 of 1967).
A.K. Sen, H.L. Anand and K.B. Mehta, for the
respondent (in C.A. No. 975 of 1967).
The Judgment of the Court was delivered by
Shah, J. The facts which give rise to Appeal No. 885 of are these: The Textile
Commissioner published on October 10, 1962, a scheme called the Export
Promotion Scheme providing incentives to exporters of woollen goods. The scheme
was extended by a Trade Notice dated January 1, 1963, to exports of wooden
goods to Afghanistan. Messrs. Indo-Afghan Agencies-hereinafter called the
respondents--a firm dealing in woollen goods at Amritsar exported to
Afghanistan in September, 1963, woollen goods of the f.o.b. value of Rs.
5,03,471-73 nP. The Deputy Director in the
office of the Textile Commissioner, Bombay issued to the respondents an Import
Entitlement Certificate for Rs. 1,99,459 only/-.
Representations made by the respondents to
the Deputy Director and to the Union Government that they be granted Import
Entitlement Certificate for the full fob value- of the goods exported failed to
produce any response.
But in a petition under Art. 226 of the
Constitution moved before the High Court of Punjab by the respondents for a
writ or an order directing the Union of India, the Textile Commissioner and the
Joint Chief Controller of Imports and Exports, Bombay, to issue a licence
"permitting import of wool-tops, raw wool, waste and rags of the value of
Rs. 3,04,012-73 nP", the orders of the Textile Commissioner and the
Central Government were set aside.
The High Court held that the Export Promotion
Scheme specifically provided for granting certificates to import materials of
the "value equal to 100% of the f.o.b. value of the goods exported",
and the respondents were entitled to obtain import licences for an amount equal
to 100% of the f.o.b. value, unless it was found on enquiry duly made under el.
10 of the Scheme that the respondents had by "over- invoicing" the
goods disentitled themselves to the import licences 370 of the full value; that
no such enquiry was made by the Textile Commissioner and that officer merely
proceeded upon his "subjective satisfaction" that the respondents had
'over-invoiced" the goods exported; and that the Union Government acted on
irrelevant grounds. The Union of India, the Textile Commissioner and the Joint
Chief Controller of Imports and Exports have appealed to this Court with
certificate granted by the High Court.
The genesis of the export control scheme may
first be noticed. The Imports and Exports (Control) Act 18 of 1947 was enacted
on March 24, 1947 with the object of enabling the Central Government to
continue to exercise the power to prohibit, restrict or otherwise control
imports and exports which had till then been controlled by orders issued in
exercise of the powers conferred by r. 84 of the Defence of India Rules, 1939,
as extended by the Emergency Provisions (Continuance) Ordinance 20 of 1946. By
s. 3 of that Act it was provided:
"(1) The Central Government may by order
published in the Official Gazette, make provisions 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 :-- (a)
the import, export, carriage coastwise or shipment as ships stores of goods of
any specified description;
(b) the bringing into any port or place in
India of goods of any specified description intended to be taken out of India
without being removed from the ship or conveyance in which they are being
By s. 4 the orders made under r. 84 of the
Defence of India Rules, 1939, or under that rule as continued in force by the
Emergency Provisions (Continuance) Ordinance, 1946, and in force immediately
before the commencement of the Act were, insofar as they were not inconsistent
with the provisions of the Act, to continue to remain in force and to be deemed
to have been made under the Act.
In exercise of the powers conferred on the
Central Government by s. 3, the Central Government issued the Imports (Control)
Order, 1955. By paragraph-3 of the Order it was enacted that:
371 "(1) Save as otherwise provided in
this 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 any officer specified
in (2) If, in any case, it is found that the goods imported under a licence do
not conform to the description given in the licence or were shipped prior to
the date of issue of the licence under which they are claimed to have been
imported, then, without prejudice to any action that may be taken against the
licence under the Customs Act, 1962 (52 of 1962), in respect of the said
importation, the licence may be treated as having been utilised for importing
the said goods." The Central Government also issued periodical orders
which were published in biannual official publications setting out the policy
governing the grant of import and export licences. By paragraph 52 of the
notification published in the Gazette Extraordinary dated December 29, 1954, it
was declared that in certain items there was "direct and intimate"
inter-relationship between imports and exports, and since the ability to export
some of those manufactured goods depended largely on the facility with which
the exporter or the manufacturer could procure the basic raw materials required
in the manufacture, a scheme had been devised with a view to promote export of
such goods for the grant of special import licences to replace the imported raw
material content of the exported product, and to provide an inducement for
larger exports. The details of the Scheme were set out in Appendix-23 to the
The Scheme covered a number of commodities of
which export was permitted. From time to time this Appendix was modified and
fresh schemes were issued in respect of new commodities.
On October 10, 1962, the Government of India
promulgated the Export Promotion Scheme for woollen textiles and woollen goods.
Clause 2 of that Scheme provided, insofar as it is material:
"It has been decided that
manufacturers--exporters and merchants--exporters of the above woollen textiles
and woollen goods will be entitled to import raw materials, namely, raw wool,
wool tops, shoddy, man-made fibres and tops, permissible types of dyes and
chemicals and machinery and machinery parts and spare parts for woollen
industry for a total amount equal to 100% of the f.o.b. value of the
exports." 372 Clause 4 provided:
"Only such exporters who satisfy the
Textile Commissioner that they are interested in export (either by past
performance or by showing proof of action taken to obtain firm order etc.) will
be registered by the Textile Commissioner." Clause 6 imposed certain
obligations upon the registered exporters, such as adherence to the code of
conduct as and when evolved; adoption of the standard contract form with
suitable clauses for arbitration and settlement of disputes;
abiding by the decision of the Textile
Commissioner in the matter of dispute between the exporter and his foreign
customers; forwarding figures of exports of woollen goods made by him every
month to the Textile Commissioner and abiding by such quality control and
pre-shipment inspection procedures as may be evolved Clause 7 provided for the
application for grant of import licences against actual exports effected on a
monthly or on a quarterly basis.
Clause 9 provided:
"After scrutiny of the applications, the
Textile Commissioner shall issue an entitlement certificate indicating the
items and value for which licence should i ssued to the applicant. On receipt
of the application and entitlement certificate, the Joint Chief Controller of
Imports and Exports, Bombay, shall issue the license." Clause 10 provided:
"In case where the Textile Commissioner
considers that the declared value of the goods exported is higher than the real
value of the goods, the matter may be investigated further by calling for
further evidence, e.g.
purchase vouchers and any other corroborative
evidence to facilitate scrutiny.
It shall be the duty of the registered
exporter to furnish such evidence as is called for in this connection. On the
basis of his enquiry, the Textile Commissioner may assess the correct value of
the goods exported and issue an entitlement certificate on the basis of such
assessed value." By notification dated January 1, 1963, the Scheme was
extended to exports of woollen textiles and woollen goods to Afghanistan with
effect from October 1, 1962.
It was urged on behalf of the Union of India
that the Export Promotion Scheme was administrative in character and the
recital therein that the exporters will be entitled to import certificates
equal to 100% of the f.o.b. value of the exports was a 373 mere instruction
issued by the Union Government to the Textile. Commissioner: it created no
rights in the public generally or in the exporters who exported their goods in
pursuance of the Scheme and imposed no obligations upon the Government to issue
the import certificates. On behalf of the respondents it was contended that the
Scheme was statutory in character and obliged the Textile Commissioner, unless
the exporter was after due investigation under cl. 10 of the Scheme, shown to
have "over invoiced" the goods exported, to issue import certificates
of the full value of the exports, and a person exporting goods in pursuance of
the Scheme who was denied an import certificate of the full f.o.b. value could
seek the assistance of the High Court by a petition for the issue of a writ
under Art. 226 of the Constitution, for an order compelling the Textile
Commissioner to carry out the obligations imposed upon him by the Scheme.
The Textile Commissioner in the present case
made his order without informing the respondents and giving them an opportunity
to explain the materials on the basis of which the "import
entitlement" of the respondents was proposed to be reduced. It was stated
in the affidavit of the Union of India that it was not a necessary requirement
of the Scheme to set out the reasons for reducing the import entitlement: that
under paragraph 20(d) to Appendix 23 of the Import Trade Control Policy for the
year April 1962 to March 1963 the licensing authority was authorised to refuse
the issue of a licence or "to reduce the value of the licence to such
amount as he deemed fit" in cases where he considered the value of the
goods exported was over- invoiced, and the Trade Notice having been issued in
exercise of the executive power of the State, attack by the respondents on the
ground set up was "completely misplaced and without any foundation in
In passing the orders impugned by the
respondents, the Textile Commissioner did not hold an enquiry consistent with
the rules of natural justice. Counsel for the Union of India submitted that for
good reasons of which the Textile Commissioner was the sole judge, it was open
to that Officer to reduce the import entitlement below the f.o.b.
value of the goods exported, and exercise of
the power conferred upon him is not limited by the terms of cl. 10 of the
Scheme, and is not, except on proof of mala fide exercise open to judicial
review. This exalted claim about the nature of the authority conferred upon the
Textile Commissioner as representative of the Government may first be examined.
Counsel for the Union said that the import
and export policy of the Government is based on availability of foreign
exchange requirement of goods of foreign origin for internal consumption, 374
economic climate in the country, and other related matters, and has in its very
nature to be flexible, and on that account the power of the Government to
modify or adjust it as the altered circumstances necessitate, cannot be
restricted on the ground that promises made by the Government in different
situations are not carried out, however amoral that claim may appear to be
According to Counsel the Government is the sole judge of the validity of its
actions in matters relating to Import and Export Policy, and the citizens who
have acted on the representations of the Government have only such rights as
the Government in its wisdom chooses to recognise or accept at any given time.
He relied in support of his submission upon the doctrine of "executive
necessity" on which Rowlatt J, relied in Rederiaktiebolaget Amphitrite v.
The King.(1) In that case during the First World War certain neutral shipowners
obtained an undertaking from the British Government that if the shipowners sent
a particular ship to the United Kingdom with a specified cargo, she shall not
be detained. On the faith of that undertaking, the owners sent the ship to a
British port with that specified cargo. The British Government withdrew their
undertaking and refused her clearance. On a petition of right for damages for
breach of contract it was held that the Government's undertaking was not
enforceable in a Court of law, it not being within the competence of the Crown
to make a contract which would have the effect of limiting its power of
executive action in the future. Rowlatt, J., observed at p.
" ...... what I have to consider is
whether this was a contract at all. I have not to consider whether there was
anything of which complaint might be made outside a Court, whether that is to
say what the Government did was morally wrong or arbitrary that would be altogether
outside my province." He then proceeded to state:
"No doubt the Government can bind itself
through its officers by a commercial contract, and if it does so it must
perform it like anybody else or pay damages for the breach.
But this was not a commercial contract, it
was an arrangement whereby the Government purported to give an assurance as to
what its executive action would be in the future in relation to a particular
ship in the event of her coming to this country with a particular kind of cargo.
And that is, to my mind, not a contract for the breach of which damages can be
sued for in a Court of law. It was merely an expression of intention to act in
a particular way m a (1)  3 K.B. 500.
375 certain event. My main reason for so
thinking is that it is not competent for the Government to fetter its future
executive action, which must necessarily be determined by the needs of the
community when the question arises. It cannot by contract hamper its freedom of
action in matters which concern the welfare of the State." This
observation is, "clearly very wide and it is difficult to determine its
proper scope": Anson's "English Law of Contract", 22nd Ed., p.
174. It may also be noticed that before Rowlatt, J., the applicants Claimed
enforcement of a contract against the Crown, and the learned Judge came to the
conclusion that there was no contract and no damages could be awarded. In
Robertson v. Minister of Pensions(1), Denning, J. observed at p. 231:
"The Crown cannot escape by saying that
estoppels 'do not bind the Crown for that doctrine has long been exploded. Nor
can the Crown escape by praying in aid the doctrine of executive necessity,
that is, the doctrine that the Crown cannot bind itself so.
as to fetter its future executive action.
That doctrine was propounded by Rowlatt J.,
in Rederiaktiebolaget Amphitrite v. The King but it was unnecessary for the
decision because the statement there was not a promise which was intended to be
binding but only an expression of intention. Rowlatt, J., seems to have been
influenced by the cases on the right of the Crown to dismiss its servants at
pleasure, but those cases must now all be read in the light of the judgment of
Lord Atkin in Reilly v. The King--(1954) A.C. 176, 179)..
In my opinion the defence of executive
necessity is of limited scope. It only avails the Crown where there is an
implied term to that effect or that is the true meaning of the contract."
Denning, I was dealing with a case of a serving army officer, who wrote to the
War Office regarding a disability and received a reply that his disability had
been accepted as attributable to "military service". Relying on that
assurance he forbore to obtain an independent medical opinion. The Minister of
Pensions later decided that the appellant's disability could not be attributed
to war service. It was held that as between subjects such an assurance would be
enforceable because it was intended to be binding intended to be acted upon,
and was in fact acted upon; and the assurance was also binding on the Crown
because no term could be implied that the Crown was at liberty to revoke it.
(1)  1 K,B- 227.
376 The defence of executive necessity was
not relied upon in the present case in the affidavit filed on behalf of the
Union of India. It was also not pleaded that the representation in the Scheme
was subject to an implied term that the Union of India will not be bound to
grant the import certificate for the full value of the goods exported if they
deem it inexpedient to grant the certificate. We are unable to accede to the
contention that the executive necessity releases the Government from honouring
its solemn promises relying on which citizens have acted to their detriment.
Under our constitutional set-up no person may be deprived of his fight or
liberty except in due course of and by authority of law: if a member of the
executive seeks to deprive a citizen of his right or liberty otherwise than in
exercise of power derived from the law-common or statute--the Courts will be
competent to and indeed would be bound to, protect the rights of the aggrieved
The orders which the Central Government may
issue in exercise of the power conferred by s. 3 of the Imports and Exports
Control Act may be executive or legislative. In exercise of that power, the
Order was issued on December 7, 1955, that was clearly legislative in
character. It appears 'that prior to the issuance of this notification several
orders had been issued under the Defence of India Rules and under the Imports
and Exports Act dealing with the grant of licences to import certain classes of
goods. Those orders which are set out in the IVth Schedule to the Order were
repealed by cl. 12 of the Order of 1955, and.
machinery for granting licences was set up by
the Order dated December 7, 1955. Counsel for the respondents submitted that
the Export Promotion Schemes published by the Government under paragraph-52 of
the Government Notification dated December 29, 1954, must be deemed to be
issued under s. 3 of the Imports and Exports Control Act, 1947, since the
Schemes have been published in the Gazette of India, and contain general
provisions relating to the grant of licences and impose restrictions upon the
rights of citizens to carry on business in certain commodities. Being general
provisions, restricting the rights of citizens to carry on business in certain
commodities, the Schemes were, it was said, legislative in character, and the
obligations imposed or the sanctions prescribed thereby must on that account be
deemed to be enforceable by command of the Court.
cannot be assumed merely because the Import
Trade Policy is general in terms and deals with the grant of licences for
import of goods and related matters, it is statutory in character. The Imports
and Exports (Control) Act, 1947, authorises the Central Government to make
provisions prohibiting, restricting or otherwise controlling import, export,
carriage etc. of the goods and by the Imports (Control) Order, 1955, dated
December 7, 1955, 377 and by the provisions which were sought W, be repealed
restrictions were already imposed. The order was clearly legislative in
character. The Import Trade Policy was evolved to facilitate the mechanism of
the Act and the orders issued thereunder. Even granting that the Import Trade
Policy notifications were issued in exercise of the power under s. 3 of the
Imports and Exports (Control) Act, 1947, the Order as already observed
authorised the making of executive or administrative instructions as well as
legislative directions. It is not the form of the order, the method of its
publication or the source of its authority, but its substance, which determines
its true character. A large majority of the paragraphs of the Import &
Export Schemes are in the form of instructions to departmental officers and
advice to persons engaged in the export and import business with their foreign
counterparts. It may be possible to pick out paragraphs from the Scheme which
appear in isolation to be addressed generally and have direct impact upon the
rights and liberties of the citizens. But a large number of paragraphs of the
Scheme refer to matters of procedure. of departmental officers and
heterogeneous material: it sets out forms of applications, the designations of
licensing authorities, amounts of application and licensing fees, last dates
for applications, intermixed with definitions of 'Established/reporters',
'Actual users', 'New comers', and others and details of different schemes such
as Quota Registration Schemes, Export Promotion Schemes etc. There is no pattern
of order or logical sequence in the policy statement: it is a jumble of
executive instructions and matters which impose several restrictions upon the
rights of citizens. Some of the provisions which impose restrictions upon
citizens in the exercise of their right to carry on trade without statutory
limits may be open to serious objection, but we do not find it necessary to
embark upon an enquiry whether the provision which authorises the issue of
import entitlement certificate for the full f.o.b.
value of the goods exported is legislative in
Granting that it is executive in character,
this Court has held that Courts have the power in appropriate cases to compel
performance of the obligations imposed by the Schemes upon the departmental
The question whether the Import Trade Policy
is legislative in character has not been expressly dealt with in any decision
of this Court. It appears to have 'been assumed in certain eases, that it is.
executive in character, but even so it has been held that when it is declared
under an export policy that a citizen exporting goods shall be entitled to
certain import facilities, in appropriate cases the Courts have the power to
direct the concerned authority to make that facility available to the citizen
who has acted to his prejudice acting upon the representation in the policy,
and has been denied that facility. In M/s Ramchand Jagadish Chand v. 378 Union
of India and Ors.(1) this Court was called upon to decide whether a person who
had, pursuant to a representation in the Export Promotion Scheme that exporters
will be awarded import licences upto a certain percentage of the export value
of the goods was entitled to call upon the Union to issue in his favour import
entitlement of the value of the goods exported. Under the 'Export Promotion
Scheme" relating to artificial silk fabrics it was represented that with a
view to stimulate exports of Indian "artsilk fabrics" etc. it was
decided to grant import licences for the import of permissible varieties. of
artsilk yarn upto the percentages specilied.
The Scheme empowered the Controller of
Imports and Exports to issue a licence upto 66 2/3 per cent. of the export
value in the case of Indian "artsilk sarees" and upto 100 per cent in
the case of other Indian "artsilk fabrics".
M/s Ramchand Jagadish Chand, a firm of
exporters relying upon the Scheme exported Indian "artsilk" goods and
earned foreign exchange and applied for an import licence equivalent to the
value of the goods it had exported. They were, however, not given an import
licence for the value of the goods exported. They thereafter filed a writ
petition in this Court for an order that the import certificate had been
arbitrarily reduced and thereby the fundamental right of the exporter to carry on
trade in artsilk was infringed.
The Court held in that case that the State
had the right to impose control in the larger interest of the general public on
imports and to make orders 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. Since in that case the power
granted to the licensing authority was to grant licences only upto the maximum
specified in cl. 2 of Appendix. 42, the restriction imposed was held not to be
unreasonable. It was also observed that it did not impose an obligation upon
the controller enforceable at the instance of the exporter, to issue a licence
for the amount (subject to the maximum prescribed) claimed by the exporter, and
since the order of the Controller granting a licence only for 45% of the value
of goods exported did not infringe the fundamental right of the exporter under
Art. 19(1)(g) of the Constitution, the petition filed by the exporter was
liable to be dismissed. But the Court observed:
"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 'up- (1)
 3 S.C.R. 72.
379 to 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 not granted." Opinion was
therefore expressed that if the power granted to the Controller was arbitrarily
exercised, it was open to judicial review. In Ramchand Jagadish Chand's case(1)
a Committee was appointed to determine the value of the goods exported by the
exporter and the Committee scrutinised the claim of the exporter and found that
the 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 exporter was given a right to make a representation and to
be heard before the order was passed to his prejudice. In Probhudas Morarjee
Rajkotia and others v. Union of India and others(2), a Special Exports
Promotion Scheme for Engineering goods was promulgated by the Government of
India. To give incentives to the manufacturers of engineering goods in India to
export their products outside India, it was declared by the Scheme that import
licences will be granted to exporters for materials upto the specified
percentage of the f.o.b. value of the goods exported. An exporter claimed that
he had exported goods of the f.o.b. value exceeding Rs.
9.44 lakhs and demanded import licence of the
value of Rs.
4.39 lakhs odd. The licensing authorities
issued to the firm import licences for Rs. 3.77 lakhs odd. The exporter then
moved this Court by a petition under Art. 32 of the Constitution for the issue
of a writ against the Union of India granting an import licence for the balance
of Rs. 62,337/- in accordance with the provisions of the Special Exports
Promotion Scheme, and this Court held that even though there was no absolute
right to the grant of an import licence for the maximum amount prescribed, the
Controller could impose restrictions if special considerations such as
'difficult foreign exchange position or other matters which have a bearing on
the general interest of the State warranted, but the discretion to be exercised
by him was to be reasonable and not arbitrary. On a consideration of the
affidavit filed, and the power given to the Controller to grant licences upto
and not of the value of the goods exported, it was held that no case of
arbitrary exercise of the power to reduce the import entitlement was made out.
In these cases it was clearly ruled that
where a person has acted upon representations made in an Export Promotion Scheme
that import licences upto the value of the goods exported will be issued, and
had exported goods, his claim for import licence for the maximum value
permissible by the Scheme could not be arbit(1)  3 S.C.R. 72.
(2) A.I.R. 1966 S.C. 1044.
380 rarily rejected. Reduction in the amount
of import certificate may be justified on the ground of misconduct of the
exporter in relation to the goods exported, or on special considerations such
as difficult foreign exchange position, or other matters which have a bearing
on the general interests of the State. In the present case, the Scheme provides
for grant of import entitlement of. the value, and not upto the value, of the
goods exported. The Textile Commissioner was, therefore, in the ordinary course
required to grant import certificate for the full value of the goods exported:
he could only reduce that amount after enquiry contemplated by el. 10 of the
The judgment of this Court in Joint Chief
Controller of Ira,ports and Exports, Madras v. M/s Amin Chand Mutha etc.(1) may
also be usefully referred to. In that case, after the dissolution of a firm
which was the holder of quota fight as an established importer, one of the
partners applied to the Chief Controller to make a division of the quota rights
between the partners. He also applied to the Joint Chief Controller who was the
licensing authority for grant of a licence for the period January to June 1957
but in the application he could not mention his share in the quota right
because the Chief Controller had not before the date of the application
approved of the division of the quota right. After expiry of the period for
which the licence was to be issued, the Chief Controller informed the applicant
that instructions had been issued to the Joint Chief Controller about the
division of the quota right. But the Joint Chief Controller declined to grant a
licence to the applicant on the ground that the order of the Chief Controller
had no retrospective operation. The applicant succeeded in obtaining an order
from the High Court of Madras directing the Joint Chief Controller to grant a
licence. This Court confirmed the order of the High Court. It was held that the
licensing authority had to deal with the application for a licence on the
footing that the approved quota was given to the partners of the dissolved firm
from the date of dissolution and the agreement divide, and could not refuse the
licence solely on the ground that the approval of the Chief Controller was
granted after the expiry of the import period. The Court observed that the
Chief Controller had no power to refuse division of the quota right if he was
satisfied about the dissolution of the inn, and it followed that when he gave
his approval it must take effect from the date of the agreement, and on that
interpretation of the order of the Chief Controller, the application for the
issue of the licence should have been granted by the licensing authority.
The Court proceeded to observe that as no
order of the Central Government prohibiting the import of the articles for
which the licence was. :applied for was published in the Gazette, it was open.
to. the (1)  1 S.C.R. 262.
381 licensing authority to issue a licence
for the period January to June 1857, even if there was a change in the import policy
of the Government of India with respect to those articles. In Amin Chand
Mutha's case(1) the Court enforced compliance with the provisions relating to
the grant of a licence under the licensing instructions issued by the Central
In each of the three cases, the Court
observed that the Court was competent to grant relief in appropriate cases, if,
contrary to the Scheme, the authority declined to grant a licence or import
certificate or the authority acted arbitrarily. Therefore even assuming that
the provisions relating to the issue of Trade Notices offering inducement to.
the prospective exporters are in character executive, the Union Government and
its officers are, on the authorities of tiffs Court, not entitled at their mere
whim to ignore the promises made by the Government. We cannot therefore accept
the plea that the Textile Commissioner is the sole judge of the quantum of
import licence to be granted to an exporter, and that the Courts are powerless
to grant relief, if the promised import licence is not given to an exporter who
has acted to his prejudice relying upon the representation. To. concede to the
Departmental authorities that power would be to. strike at the very root of the
rule of law.
By the Export Promotion Scheme for woolen
textiles as extended to exports to Afghanistan, the exporters were invited to
get themselves registered with the Textile Commissioner for exporting woolen
goods, and it was represented that the exporters will be entitled to import raw
materials, of the total amount equal 100% of the f.o.b. Value of the exports.
Machinery for scrutiny of the applications and the issue of import entitlement
was provided by s. 9 of the Scheme, and the Textile Commissioner was invested
with the authority to determine whether in any given case the declared value of
the goods exported was higher than the real value of the goods and to,
assess-the correct value of the goods exported and to issue import certificates
on the basis of such assessed value. Undoubtedly the Textile Commissioner had
authority, if it was found that a fraudulent attempt was made to secure an
import certificate in excess of the true value of the goods exported, to reduce
the import certificate. But the authority vested in the Textile Commissioner by
the rules even though executive in character was from its nature an authority
to deal with the matter in manner consonant with the basic concept of' justice
and fair-play: if he made an order which was not consonant with the basic
concepts of justice and fair-play his proceeding was open to scrutiny and
rectification by the Courts. The Textile Commissioner acted upon a report of
the Committee appointed by him, and before that Committee the respondents had
no opportunity - (1)  1 S.C.R. 262. up. C.I/68--10 Sup.C.I/68--10 382 to
present their case. He collected evidence ex parte and did not disclose it to
the respondents and without giving an opportunity to them to represent their
case reduced the import certificate. In dealing with a representation made by the
respondent, the Government of India also acted similarly and declined either to
make available the evidence on which the Textile Commissioner had acted or to
give a hearing to the respondents. The Textile Commissioner and the Union of
India did not purport to act in exercise of the power under cl. 10 of the
Scheme: they have sought to support the order on the plea that the subjective
satisfaction of the Textile Commissioner is determinative of the extent of the
import certificate which may be granted to the respondents.
It was somewhat faintly urged that if the
Government is held bound by every representation made by it regarding its
intention. when the exporters have acted in the manner they were invited to
act, the Government would be held bound by a contractual obligation eve.n
though no formal contract in the manner required by Art. 299 of the
Constitution was executed, and the exporter would be entitled to claim damages
contrary to that provision for breach of the contract even though no formal written
contract had been executed in the manner provided by that Article. But the
respondents are not seeking to enforce any contractual fight: they are seeking
to enforce compliance with the obligation which is laid upon the Textile
Commissioner by the terms of the Scheme, and we are of the view that even if
the Scheme is executive in character, the respondents who were aggrieved
because of the failure to carry out the terms of the Scheme were entitled to
seek resort to the Court and claim that the obligation imposed upon the Textile
Commissioner by the Scheme be ordered to be carried out.
We hold that the claim of the respondents is
appropriately rounded upon the equity which arises in their favour as a result
of the representation made on behalf of the Union of India in the Export
Promotion Scheme, and the action taken by the respondents acting upon that
representation under the belief that the Government would carry out the
representation made by it. On the facts proved in this case, no ground has been
suggested before the Court for exempting the Government from the equity arising
out of the acts done by the exporters to their prejudice relying upon the
representation. This principle has been recognised by the Courts in India and
by the Judical Committee of the Privy Council in several cases. In The
Municipal Corporation of the City of Bombay v. The Secretary of State for India
in Council(1), it was held by the Bombay High Court that even though there is
no formal (1) I.L.R. 29 Bom. 580.
383 contract as required by the statute. the
Government may be bound by a representation made by it.' In that case in answer
to a requisition by the Government of Bombay addressed to the Municipal
Commissioner to remove certain fish and vegetable markets to facilitate the construction
of an arterial road, the Municipal Commissioner offered to remove the
structures if the Government would agree to rent to the Municipality other land
mentioned in his letter at a nominal rent. The Government accepted the
suggestion and sanctioned the application of the Municipal Commissioner for a
site for tabling and establishing the new markets. The Municipal Commissioner
then took possession of the land so made available and constructed stables,
workshops and chawls thereon. Twenty-four years thereafter the Government of
Bombay served notices on the Municipal Commissioner determining the tenancy and
requesting the Commissioner to.
deliver possession of the land occupied by
the markets, and to pay in the meantime rent at the rate of Rs. 12,000/- per
annum. The Municipality declined to pay the rent, and the Secretary of State
for India filed a suit against the Municipal Commissioner for a declaration
that the tenancy of the Municipality created by Government Resolution of
December 9. 1865, stood determined and for an order to pay rent at the rate of
Rs.. 12,000/- per annum. It was urged before the High Court of Bombay that the
events which had transpired had created an equity in favour of the Municipality
which afforded an answer to the claim of the Government to eject the
Municipality. Jenkins, C.J..
delivering the judgment of the Court
"The doctrine, involved in this phase of
the case is often treated as one of estopped, but I doubt whether this is a
correct, though it may be a convenient name to apply.
It differs essentially from the doctrine
embodied in section 115 of the Evidence Act, which is not a rule of equity, but
is a rule of evidence that was formulated and applied in Courts of law; while
the doctrine. with which I am now dealing, takes its origin from the
jurisdiction assumed by Courts of Equity to intervene in the case of, or to
prevent fraud." After referring to Ramsclen v. Dyson(1), the learned Chief
Justice observed that the Crown comes within the range of equity and proceeded
to examine whether the facts of the case invited the application of that
This case is, in our judgment a clear
authority that even though the case, does not fall within the terms of s. 115
of the Evidence Act, it is still open to, a party who has acted on a
representation made by the Government to claim that the Government 384 shall be
bound to. carry out the promise made by it, even though the promise is not
recorded in the form of a formal contract as required by the Constitution.
In Ahmad Yar Khan and others v. Secretary of
State for India in Council and another(3), the plaintiffs claimed title to a
canal supplied with water from the Sutlej having been constructed at great
expense by their predecessors for purposes of irrigation, with the sanction and
encouragement of the Government, partly on Government lands and partly on the
lands of private owners under arrangements with them.
It was held that the plaintiffs became
proprietors of the canal and entitled to' have the waters of the Sutlej
admitted into it so long as it was used for the purpose for which it was
originally designed. Similarly in The Ganges Manufacturing Co. v. Surujmull(2),
Garth C.J., observed that a man may be estopped not only from giving particular
evidence. but from doing any act or relying upon any particular argument or
contention, which the rules of equity and good conscience prevent him from
using as against his opponent.
Counsel for the Union invited our attention
to the observations made by Patanjali Sastri J., in Collector of Bombay v.
Municipal Corporation of the City of Bombay and others(3). The learned Judge
observed that equity cannot be enforced so as to violate an express statutory
provision, and he was therefore unable to share the view expressed by Jenkins
C.J. in The Municipal Corporation of the City of Bombay v. The Secretary of
State for India in Council(1).
In Collector of Bombay v. Municipal
Corporation of the City of Bombay and others(a) the facts were these: Acting
upon a representation made by the Government of Bombay, the Municipal
Commissioner of Bombay had given up certain old markets and had constructed new
markers on a site made available to the Municipality by the Government at
considerable expense. The Resolution under which the Government had granted the
land stated expressly that no rent should be charged to the Municipality as the
markets will be like other buildings for the benefit of the whole community.
When the Collector of Bombay sought to enhance the land revenue, the
Corporation sued for a declaration that the order of assessment was ultra vires
and that it was entitled to hold the land for ever without payment of any
assessment. The High Court of Bombay held that the Government had lost its
right to assess the land in question because of the equity arising on the facts
of the case in favour of the Municipality and a limitation on the right of the
Government to assess under s. 8 of the Bombay City Land Revenue Act arose. A
majority of the Judges of this Court held that (1) L.R. 28 I.A. 211. (2) I.L.R.
5 Cal. 669.
(3)  S.C.R. 43. (4) I.L.R. 29 Bom.
385 the Government was not, under the
circumstances of the case, entitled to assess land revenue on the land in
question, because the Corporation had taken possession of the land in terms of
the Government resolution and had continued in such possession openly,
uninterruptedly and as of right for over 70 years, and had thereby acquired the
limited title it had been prescribing for during the period, the right to hold
the land in perpetuity free of rent. Chandrasekhara Aiyar J., observed that
even if it be assumed that there was no representation in fact that the land
was rent free at the time when it was given to the Municipality, if there was a
holding out of a promise that no rent will 'be charged in the future, the
Government must be deemed in the circumstances of the case to have bound
themselves to fulfill it, and a Court of Enquiry must prevent the perpetration
of a legal fraud. Chandrasekhara Aiyar J., observed at p. 63:
"Whether it is the equity recognised in
Ramsden's case, or it is some other form of equity, is not of much importance,
Courts must do justice by the promotion of honesty and good faith, as far as it
lies in their power." Patanjali Sastri J., expressed a contrary view
holding that the express provisions of the statute could not be over- ridden by
considerations of equity.
Under our jurisprudence the Government is not
exempt from liability to, carry out the representation made by it as to its
future conduct and it cannot on some undefined and undisclosed ground of
necessity or expediency fail to carry out the promise, solemnly made by it, nor
claim to be the judge of its own obligation to the citizen on an ex parte
appraisement of the circumstances. in which the obligation has arisen. We agree
with the High Court that the impugned order passed by the Textile Commissioner
and confirmed by the Central Government imposing cut in the import entitlement
by the respondents should be set aside and quashed and that the Textile
Commissioner and the Joint Chief Controller of Imports and Exports be directed
to issue to the respondents import certificates for the total amount equal to
100% of the f.o.b. value of the goods exported by them, unless there is some
decision which fails within cl.
10 of the Scheme in question.
The facts which give rise to. the other
appeals are substantially the same as the facts in Civil Appeal No. 885 of
1967, except that in four out of those appeals the exporters had appeared
before the Committee appointed by the Textile Commissioner and had explained
the circumstances in which the exports were made by them. But it is common
ground that the report of the 386 Committee was not made available to them and
the Textile Commissioner, before he passed the orders, did not call for their
explanations. It must therefore be held that enquiry in a manner consonant with
the rules of justice was not made in the case of those four exporters also.
The appeals therefore fail and are dismissed
One heating fee.
V.P.S. Appeals dismissed.