PARISONS AGROTECH (P) LTD. & ANR. Vs. UNION OF INDIA & ORS.
Supreme Court of India (Division Bench (DB)- Two Judge)
Appeal (Civil), 4027 of 2009, Judgment Date: Aug 21, 2015
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 4027 OF 2009
PARISONS AGROTECH (P) LTD. & ANR. .....APPELLANT(S)
VERSUS
UNION OF INDIA & ORS. .....RESPONDENT(S)
WITH
CIVIL APPEAL NO. 4028 OF 2009
AND
CIVIL APPEAL NO. 4029 OF 2009
J U D G M E N T
A.K. SIKRI, J.
Vide Notification No.39 (RE-2007)/2004-2009 dated 16.10.2007, the
Central Government (respondent No.1 herein) prohibited the import of palm
oil through Kochi port in Kerala. It was followed by another Notification
No.63 (RE-2007)/2004-2009 dated 24.12.2007 whereby the import of palm oil
has been prohibited through all the ports of Kerala. These Notifications
were issued by the Central Government in exercise of powers conferred by
Section 5 read with Section 3 of The Foreign Trade (Development and
Regulation) Act, 1992 (hereinafter referred to as the 'Act'). All the
appellants filed separate writ petitions challenging the validity of these
Notifications on the ground that they were ultra vires the provisions of
Section 3 of the Act and, in any case, unconstitutional as offending
Article 14 of the Constitution of India. The writ petitions filed by them
were dismissed by learned single Judge. Matter was carried in appeal
before the Division Bench of Kerala High Court, but unsuccessfully, as
these appeals have also been dismissed.
It is clear from the above that the issue involved in all these
appeals are identical. This was the reason for clubbing these appeals so
that they could be heard analogously and decided as one batch. However,
for the sake of convenience, we will be referring to the facts from Civil
Appeal No.4027/2009 as well as the impugned judgment dated 21.10.2008
which is impugned in the said appeal.
The appellants are engaged in refining and manufacture of edible oils,
vanaspathi, bakery shortening, margarine etc. Their registered offices and
the factories are in the State of Kerala. The main raw material used in
the manufacture of RBD palm oil is crude palm oil. The appellants have
been importing this raw material from other countries, primarily from
Indonesia and Malaysia. Before the issuance of the aforesaid
Notifications, this import was through the ports of Kochi and Beypore from
where it used to be transported by road to its main factories which are in
Kozhikode and Malappuram, in the State of Kerala itself. The impugned
Notifications have prevented them from importing crude palm oil through the
ports of Kochi and Beypore. Instead, they are forced to import this raw
material through the ports outside Kerala. The effect thereof is that
distance from the ports of import to the factories of appellants in Kerala
stands increased, in contrast with the situation prevailing earlier. It
has led to increased transportation cost for the appellants and that is
precisely the cause of grievance.
As mentioned above, vide Notification No.39 (RE-2007)/2004-2009 dated
16.10.2007, certain items mentioned therein, which are all different
varieties of crude palm oil, were not allowed to be imported through Kochi
port. The Notification gives the description of the items and mentions the
policy condition in respect thereof by stipulating: “import not permitted
through Kochi port”. This Notification was amended thereafter with the
issuance of Notification No.63 (RE-2007)/2004-2009 dated 24.12.2007 in
respect of same items by enlarging the scope of restriction/prohibition
with the stipulation: “import not permitted through any port in Kerala”.
Again, as already pointed out above, these Notifications were challenged on
two grounds, viz.:
(i) The Notifications are issued purportedly in exercise of powers under
Section 5 read with Section 3 of the Act, but these provisions do not
confer any such power on the Central Government. Therefore, the
Notifications are ultra vires the provisions of Section 3(5) of the Act;
(ii) Imposition of selective restriction and confining the prohibition of
import of crude palm oil to the ports in Kerala has not only resulted in
invidious discrimination, such an action is manifestly arbitrary,
irrational and unreasonable as well it is contended that there is no
rational objective which is sought to be achieved with such Notifications
and, therefore, they offends the equality clause enshrined in Article 14 of
the Constitution.
Both these arguments have been repelled by the High Court which has found
not only complete justification and rational in issuing such Notifications,
it has also held that power for issuing such a Notification can be traced
to the provisions of Section 3 of the Act. Before us, the appellants have
raised the same arguments and in the process also, submitted that the High
Court has not considered the aforesaid twin submissions of the appellants
in proper perspective, and, on the contrary, rejected the same in
perfunctory manner without dealing with these contentions in the manner
they were placed before the High Court. Before we record the arguments of
Mr. Naphade, learned Senior Counsel who appeared for the appellants
(counsel appearing in other appeals adopted his arguments) in detail, it
may be advisable to state the reasons which were given by the respondents
in their counter affidavits in support of these Notifications. We would,
however, like to record that in the impugned judgment the discussion on
this aspect is contained in detail as well.
State of Kerala is the largest producer of Coconut which is the raw
material for the production of coconut oil. Coconut oil and palm oil are
competing products. For production of palm oil, crude palm oil is the raw
material which is largely imported. Since the import price of crude palm
oil is much less than the price of coconut oil, the price of coconut oil is
higher than that of the palm oil because of the aforesaid reason. It was
adversely affecting the farmers in the State of Kerala which led to
repeated representations on their behalf to the Government for taking
remedial measures. Having regard to the importance of this crop not only
for the economy of the State but also livelihood of about 35 lakhs farmers,
the State Government has constituted Coconut Development Board (hereinafter
referred to as the 'Board') which takes care of the interests of the
farmers growing Coconut crop and also takes initiatives and steps for the
development of this crop.
The significant and marked difference between the price of coconut oil and
palm oil manifested the fact that percentage difference between the two
stood at 109% in the year 2004, reduced to 50% in December, 2006, to 12% in
September 2007 and 0.6% in October 2007. The Board also observed that the
import of palm oil in one particular year had a cascading downward impact
on coconut oil prices in the subsequent years. For example, the huge import
of 1,53,513 tonnes of palm oil in 2004-05 had led to a price decline in
coconut in 2005-06 and 2006-07. While the average price of coconut oil is
Rs.6,155/- per quintal in 2004-05, in 2005-06, it declined sharply to
Rs.4,978/- per quintal with further fall in 2006-07 when the price was
Rs.4,459/- per quintal. This raised concern with the policy makers to
protect the interest of huge number of small time farmers in the State of
Kerala. Such concerns were raised by the Board as well as Union of Coconut
Farmers with the concerned authorities including Chief Minister, who in
turn, took up the matter with the Central Government at the highest level.
The narratives in this regard are stated in the impugned judgment of the
High Court itself and the discussion goes, somewhat, in the following
manner:
A letter dated 15.08.2005 was written by All Kerala Coconut Farmers'
Union to increase minimum support price of copra and to restrict import of
coconut oil and copra. In the letter, it is further stated that the steep
fall in the prices of coconut, copra and coconut oil is in view of
indiscriminate import of coconut and coconut oil from foreign countries.
The reiteration of this request is made by yet another letter dated
15.12.2005. Sequel to these two letters, Ministry of Agriculture has
written a letter dated 03.02.2006 to Joint Director of General Foreign
Trade (JDGFT) enclosing a copy of the letter from All Kerala Coconut
Farmers Union, Thrissur to increase minimum support price of coconut oil
and to cut import of coconut and coconut oil into the country and in that
letter a request is made to JDGFT to offer their comments, if any. The
Chairperson of the Board by her letter dated 06.12.2006 addressed to
Director General of Foreign Trade (DGFT) seeks restrictions/prohibition on
the import of coconut oil and coconut oil cake and the reason being slump
in the prices of coconut and coconut oil in the country and in particular,
States like Kerala. This correspondence was forwarded by DGFT Office to
Ministry of Agriculture. The Chief Minister of Kerala by his letter dated
19.04.2007 to the Hon'ble Prime Minister has brought to his notice the
plight of coconut farmers in the State, in view of steep decrease in the
price of coconut, copra and coconut oil and, therefore, a request was made
to reverse the decision to cut import duties of palm oil. This was
followed by another letter by Hon'ble Commerce Minister to Commerce
Secretary requesting the action on the letter of the Board dated
06.12.2006. Then, the another crucial letter dated 08.05.2007, wherein the
Deputy Secretary, Ministry of Commerce forwarded a report of the Centre for
Development Studies on import of palm oil on the coconut economy in Kerala
to DGFT for its views on the detrimental effect of import of palm oil on
coconut prices. In the report, the Centre for Development Studies on
imports of palm oil on the coconut economy in Kerala, in clear and
unequivocal terms have stated, “some of the recent years that have
witnessed large imports of palm oil have also reported high prices. The
influence of palm oil imports on domestic coconut oil prices also works out
in an indirect manner. The international prices of coconut oil move
together with price of palm oil. Even though coconut oil and palm kernel
oil are not perfect or close substitutes, many consumers tend to substitute
these oils in their use as edible oils. As such the possibility of palm
oil imports having a dampening effect on coconut oil prices cannot be ruled
out”. This is the report of the independent agency set up to make a
detailed study on the effect of import of palm oil on the coconut economy
in the State. They have given a gloomy picture of the whole scenario in
regard to the importation of palm oil into the State and what would be its
impact on the coconut oil industry in the State. The report contains the
facts and figures for a few previous years and how the large importation of
palm oil has cascading effect not only on the prices of coconut and also on
the prices of coconut oil. On 05.06.2007, the Chairperson of the Board
while bringing to the notice of the Ministry of Agriculture the need for
imposing total ban on import of palm oil through the ports of Southern
States, has indicated certain details with regard to the price effect of
import of palm oil into the State of Kerala on the coconut oil industry in
the State.
This prompted Ministry of Agriculture to write a letter to the Prime
Minister's Office wherein reference was made to the communications received
from Chief Minister of Kerala and the Chairperson/Board mentioning about
the declining wholesale price of coconut oil on the one hand and increase
in wholesale price of edible oil, on the other hand, which are causing
hardship to the coconut farmers. In this letter, it was also stated, “that
considering the increased trend of edible oil prices as a whole, their
department had supported a recent proposal of Ministry of Finance for
reduction of duties on crude palm oil and reiterated the suggestion not to
allow import of palm oil through Southern Ports as suggested by Chairperson
of the Board”. They sum it by suggesting that the import of palm oil to
Southern Ports particularly through Cochin, Tuticorin, Mangalore and
Chennai should be disallowed with immediate effect and also the import duty
of crude palm oil should not be reduced further, since it may have adverse
impact on the livelihood of oil seed growers, particularly the coconut
farmers of Kerala as pointed out by the Chief Minister of Kerala. This was
followed by the letter dated 03.09.2007 by the Director of Statistics to
the Director General of DGCI and seeking import data of palm oil for last
three years in the case of Cochin, Tuticorin, Mangalore and Chennai. This
was followed by the fax message requesting the Chairperson to clarify on
certain issues narrated in her letter dated 05.06.2007.
It is on the basis of the aforesaid material produced before the Central
Government which ultimately led to issuance of impugned Notifications.
Existence of the aforesaid material, which is based on the record that was
even produced before the High Court as well, is not in dispute. In
nutshell, the High Court considered the following material produced before
it by the respondents including Union of India:
(a) Correspondence by the representatives of the coconut farmers with
various Ministries including the Hon'ble Prime Minister.
(b) Letter dated 06.12.2006 by the Chairperson of Coconut Development
Board addressed to Director General of Foreign Trade (DGFT).
(c) Letter dated 19.04.2007 by the Hon'ble Chief Minister addressed to
the Hon'ble Prime Minister.
(d) Letter by Hon'ble Commerce Minister to Commerce Secretary.
(e) Letter dated 08.05.2007 by Deputy Secretary, Ministry of Commerce.
(f) Report of Centre for Development Studies on import of palm oil on the
coconut economy in Kerala:
The report in clear and unequivocal terms has stated, “Some of the recent
years that have witnessed large imports of palm oil have also reported high
prices. The influence of palm oil imports on domestic coconut oil prices
also works out in an indirect manner. The international prices of coconut
oil move together with the price of palm oil. Even though coconut oil and
palm kernel oil are not perfect or close substitutes, many consumers tend
to substitute these oils in their use as edible oils. As such the
possibility of palm oil imports having a dampening effect on coconut oil
prices cannot be ruled out.”
On analysing the report, the High Court has made the following
remarks:
“This is the report of the independent agency set up to make a detailed
study on the effect of import of palm oil on the coconut economy in the
State. They have given a gloomy picture of the whole scenario in regard to
the importation of palm oil into the State and what would be its impact on
the coconut oil industry in the State. The report contains the facts and
figures for a few previous years and how the large importation of palm oil
has cascading effect not only on the prices of coconut and also the prices
of coconut oil.”
(g) Letter dated 05.06.2007 by the Chairperson of Coconut Development
Board to Ministry of Agriculture on the basis of which the High Court
recorded the following findings:
“If we go by the tenor of the letter of the Hon'ble Chief Minister and the
letter of Chairperson of Coconut Development Board, they are only referring
to the plight of the coconut farmers in the State, in view of large scale
importation of palm oil which is being used as a substitute to the coconut
oil by the poor and middle class families in the State as an alternate for
their day to day need of edible oil and this was precise reason for the
Central Government to issue the impugned notification in the public
interest and in particular to protect the interest of the coconut farmers
in the State.”
(h) Letter of the Ministry of Agriculture to Prime Minister's Office.
Mr. Naphade, however, argued that this material does not provide any
rationale for curbing the import through the ports in Kerala. His
submission was that by imposing ban on importation of palm oil through the
ports of Kerala alone, no such purpose, as manifested, was going to be
achieved. He further submitted that such a ban on importation of palm oil
through the ports of Kerala would bring no succour to the coconut oil
prices. In support of this submission, he referred to the pleadings in
para 6 of the writ petition tabulating the prices of coconut oil and palm
oil respectively from time to time with endeavour to point out that there
is nothing common as far as prices of the two products are concerned. He
further submitted that in the counter affidavit filed by the Union of
India, the figures shown in para 6 of the writ petition were not countered
by the said respondents. Thus, he argued that there was no rational nexus
between the two and no intelligible differentia could be deciphered between
the two thereby rendering the decision arbitrary and bringing the decision
within the mischief of Article 14. He submitted that the appellants in
support of this argument of discrimination, referred to the judgment of
Calcutta High Court in Kalindi Woolen Mills (P) Ltd. v. Union of India[1]
but the High Court rejected it without suitably dealing with the same. He
also submitted that the interest of the consumers was equally important and
if the prices of the palm oil are increased upwardly because of increase in
transportation cost etc., consumers would also be adversely effected and,
therefore, the decision was not in public interest.
Having regard to the material that is produced and taken note of by us in
extenso, which led to the issuance of the impugned Notifications, we are
unable to countenance the submissions made by Mr. Naphade. It is well
known that State of Kerala is the largest producer of Coconut and, in turn,
there is substantial production of coconut oil as well. It is also a
matter of common knowledge that coconut oil as well as palm oil are used
for cooking and other common purposes. In that sense, coconut oil and palm
oil are competing products. Whereas coconut oil produced from indigenous
raw material and for the production of palm oil in India, the raw material
i.e. crude palm oil is largely imported. Since the import price of crude
palm oil has been much less than the price of coconut oil, the perception
of Coconut growers in the State of Kerala was that it was affecting their
livelihood. It is a matter of record that there are approximately 35 lakhs
farmers in the State of Kerala who sustain their livelihood on Coconut
crop. Therefore, it becomes their life sustaining crop. The Coconut crop
covers more than 9 lakhs hectares in Kerala and contributes to nearly 35%
of the agricultural income of the State which is a sufficient evidence to
indicate that it is not only main but important crop of the State. The
Coconut growers are predominantly small and marginal with the average size
of holding being only half an acre. As already pointed out above, the
significant and marked difference between the price of coconut oil and palm
oil was manifest the fact that percentage difference between the two stood
at 109% in the year 2004, reduced to 50% in December, 2006, to 12% in
September 2007 and 0.6% in October 2007. The Board also observed that the
import of palm oil in one particular year had a cascading downward impact
on coconut oil prices in the subsequent years. For example, the huge import
of 1,53,513 tonnes of palm oil in 2004-05 had led to a price decline in
coconut in 2005-06 and 2006-07. While the average price of coconut oil is
Rs.6,155/- per quintal in 2004-05, in 2005-06, it declined sharply to
Rs.4,978/- per quintal with further fall in 2006-07 when the price was
Rs.4,459/- per quintal. It is more than abundantly clear that the
restriction is imposed keeping in view the welfare of 35 lakhs farmers in
the State of Kerala. Matter was examined at the highest level. The
Government had two alternatives before it, either to increase the custom
duty i.e. duty on the import of crude oil or to issue impugned
Notification. Enhancing the import duty would have all India ramification,
whereas the problem was Kerala specific. Therefore, instant step was
taken. When a particular decision is taken in the interest of the said
farmers which are marginalized section of the society, more so for their
survival, this policy decision of the Central Government provides a
complete rational in support of the decision having nexus with the
objective sought to be achieved.
No doubt, the writ court has adequate power of judicial review in respect
of such decisions. However, once it is found that there is sufficient
material for taking a particular policy decision, bringing it within the
four corners of Article 14 of the Constitution, power of judicial review
would not extend to determine the correctness of such a policy decision or
to indulge into the exercise of finding out whether there could be more
appropriate or better alternatives. Once we find that parameters of
Article 14 are satisfied; there was due application of mind in arriving at
the decision which is backed by cogent material; the decision is not
arbitrary or irrational and; it is taken in public interest, the Court has
to respect such a decision of the Executive as the policy making is the
domain of the Executive and the decision in question has passed the test of
the judicial review. In Union of India v. Dinesh Engineering
Corporation[2], this Court delineated the aforesaid principle of judicial
review in the following manner:
“there is no doubt that this Court has held in more than one case that
where the decision of the authority is in regard to the policy matter, this
Court will not ordinarily interfere since these policy matters are taken
based on expert knowledge of the persons concerned and courts are normally
not equipped to question the correctness of a policy decision. But then
this does not mean that the courts have to abdicate their right to
scrutinise whether the policy in question is formulated keeping in mind all
the relevant facts and the said policy can be held to be beyond the pale of
discrimination or unreasonableness, bearing in mind the material on record.
Any decision be it a simple administrative decision or policy decision, if
taken without considering the relevant facts, can only be termed as an
arbitrary decision. If it is so, then be it a policy decision or
otherwise, it will be violative of the mandate of Article 14 of the
Constitution.”
The power of the Court under writ jurisdiction has been discussed in Asif
Hameed and Others. v. State of Jammu and Kashmir and Others[3] in paras 17
and 19, which read as under:
“17. Before adverting to the controversy directly involved in these
appeals we may have a fresh look on the inter se functioning of the three
organs of democracy under our Constitution. Although the doctrine of
separation of powers has not been recognised under the Constitution in its
absolute rigidity but the Constitution makers have meticulously defined the
functions of various organs of the State. Legislature, executive and
judiciary have to function within their own spheres demarcated under the
Constitution. No organ can usurp the functions assigned to another. The
Constitution trusts to the judgment of these organs to function and
exercise their discretion by strictly following the procedure prescribed
therein. The functioning of democracy depends upon the strength and
independence of each of its organs. Legislature and executive, the two
facets of people's will has no power over sword or the purse nonetheless it
has power to ensure that the aforesaid two main organs of State function
within the constitutional limits. It is the sentinel of democracy. Judicial
review is a powerful weapon to restrain unconstitutional exercise of power
by the legislature and executive. The expanding horizon of judicial review
has taken in its fold the concept of social and economic justice. While
exercise of powers by the legislature and executive is subject to judicial
restraint, the only check on our own exercise of power is the self-imposed
discipline of judicial restraint.
xxx xxx xxx
19. When a State action is challenged, the function of the court is to
examine the action in accordance with law and to determine whether the
legislature or the executive has acted within the powers and functions
assigned under the Constitution and if not, the court must strike down the
action. While doing so the court must remain within its self-imposed
limits. The court sits in judgment on the action of a coordinate branch of
the government. While exercising power of judicial review of administrative
action, the court is not an appellate authority. The Constitution does not
permit the court to direct or advise the executive in matters of policy or
to sermonize qua any matter which under the Constitution lies within the
sphere of legislature or executive, provided these authorities do not
transgress their constitutional limits or statutory powers.”
The aforesaid doctrine of separation of power and limited scope of judicial
review in policy matters is reiterated in State of Orissa and Others v.
Gopinath Dash and Others[4]:
“5. While exercising the power of judicial review of administrative
action, the Court is not the Appellate Authority and the Constitution does
not permit the Court to direct or advise the executive in the matter of
policy or to sermonise qua any matter which under the Constitution lies
within the sphere of the legislature or the executive, provided these
authorities do not transgress their constitutional limits or statutory
power. (See Asif Hameed v. State of J&K; 1989 Supp (2) SCC 364 and Shri
Sitaram Sugar Co. Ltd. v. Union of India; (1990) 3 SCC 223). The scope of
judicial enquiry is confined to the question whether the decision taken by
the Government is against any statutory provisions or its violates the
fundamental rights of the citizens or is opposed to the provisions of the
Constitution. Thus, the position is that even if the decision taken by the
Government does not appear to be agreeable to the Court, it cannot
interfere.
6. The correctness of the reasons which prompted the Government in
decision-making taking one course of action instead of another is not a
matter of concern in judicial review and the Court is not the appropriate
forum for such investigation.
7. The policy decision must be left to the Government as it alone can
adopt which policy should be adopted after considering all the points from
different angles. In the matter of policy decisions or exercise of
discretion by the Government so long as the infringement of fundamental
right is not shown the courts will have no occasion to interfere and the
Court will not and should not substitute its own judgment for the judgment
of the executive in such matters. In assessing the propriety of a decision
of the Government the Court cannot interfere even if a second view is
possible from that of the Government.”
As far as classification based on geographical area is concerned i.e. held
to be permissible by this Court in Gopal Narain v. State of Uttar Pradesh
and another[5], held as under:
“11. Looking at the policy disclosed by Sections 7 and 8 and Section 128
of the Act and applying the liberal view a law of taxation receives in the
application of the doctrine of classification, it is not possible to say
that the policy so disclosed infringes the rule of equality. This Court in
more than one decision held that equality clause does not forbid
geographical classification, provided the difference between the
geographical units has a reasonable relation to the object sought to be
achieved. This principle has been applied to a taxation law in Khandige
Sham Bhat's Case, AIR 1963 SC 591. In that case, this Court also accepted
the principle that the legislative power to classify is of wide range and
flexibility so that it can adjust its system of taxation in all proper and
reasonable ways. It is indicated in “Willis on Constitutional Law”, at p.
590, that a State can make a territory within a city a unit for the purpose
of taxation. So, the impugned section in permitting in the matter of
taxation geographical classification, which has reasonable relation to the
object of the statute, namely, for providing special amenities for a
particular unit the peculiar circumstances whereof demand them, does not in
any way impinge upon the equality clause.”
We would also like to refer to the judgment of this Court in the case of
Premier Tyres Limited v. Kerala State Road Transport Corporation[6] wherein
this Court held that when a policy decision is taken in the public
interest, Courts need not tinker with the same.
The locus classicus allowing freedom to the Executive to take economic
decisions is remarkably dealt with by this Court in R.K. Garg v. Union of
India[7] and the following discussion from the said judgment is again
worth quoting:
“8. Another rule of equal importance is that laws relating to economic
activities should be viewed with greater latitude than laws touching civil
rights such as freedom of speech, religion etc. It has been said by no less
a person than Holmes, J., that the legislature should be allowed some play
in the joints, because it has to deal with complex problems which do not
admit of solution through any doctrinaire or strait-jacket formula and this
is particularly true in case of legislation dealing with economic matters,
where, having regard to the nature of the problems required to be dealt
with, greater play in the joints has to be allowed to the legislature. The
court should feel more inclined to give judicial deference to legislative
judgment in the field of economic regulation than in other areas where
fundamental human rights are involved. Nowhere has this admonition been
more felicitously expressed than in Morey v. Doud, 354 US 457: 1 L Ed 2d
1485 (1957) where Frankfurter, J., said in his inimitable style:
In the utilities, tax and economic regulation cases, there are
good reasons for judicial self-restraint if not judicial deference to
legislative judgment. The legislature after all has the affirmative
responsibility. The courts have only the power to destroy, not to
reconstruct. When these are added to the complexity of economic regulation,
the uncertainty, the liability to error, the bewildering conflict of the
experts, and the number of times the judges have been overruled by events —
self-limitation can be seen to be the path to judicial wisdom and
institutional prestige and stability.
The Court must always remember that “legislation is directed to practical
problems, that the economic mechanism is highly sensitive and complex, that
many problems are singular and contingent, that laws are not abstract
propositions and do not relate to abstract units and are not to be measured
by abstract symmetry”; “that exact wisdom and nice adaption of remedy are
not always possible” and that “judgment is largely a prophecy based on
meagre and uninterpreted experience”. Every legislation particularly in
economic matters is essentially empiric and it is based on experimentation
or what one may call trial and error method and therefore it cannot provide
for all possible situations or anticipate all possible abuses. There may be
crudities and inequities in complicated experimental economic legislation
but on that account alone it cannot be struck down as invalid. The courts
cannot, as pointed out by the United States Supreme Court in Secretary of
Agriculture v. Central Roig Refining Company, 94 L Ed 381 : 338 US 604
(1950) be converted into tribunals for relief from such crudities and
inequities. There may even be possibilities of abuse, but that too cannot
of itself be a ground for invalidating the legislation, because it is not
possible for any legislature to anticipate as if by some divine prescience,
distortions and abuses of its legislation which may be made by those
subject to its provisions and to provide against such distortions and
abuses. Indeed, howsoever great may be the care bestowed on its framing, it
is difficult to conceive of a legislation which is not capable of being
abused by perverted human ingenuity. The Court must therefore adjudge the
constitutionality of such legislation by the generality of its provisions
and not by its crudities or inequities or by the possibilities of abuse of
any of its provisions. If any crudities, inequities or possibilities of
abuse come to light, the legislature can always step in and enact suitable
amendatory legislation. That is the essence of pragmatic approach which
must guide and inspire the legislature in dealing with complex economic
issues.
xx xx xx
19. It is true that certain immunities and exemptions are granted to
persons investing their unaccounted money in purchase of Special Bearer
Bonds but that is an inducement which has to be offered for unearthing
black money. Those who have successfully evaded taxation and concealed
their income or wealth despite the stringent tax laws and the efforts of
the tax department are not likely to disclose their unaccounted money
without some inducement by way of immunities and exemptions and it must
necessarily be left to the legislature to decide what immunities and
exemptions would be sufficient for the purpose. It would be outside the
province of the Court to consider if any particular immunity or exemption
is necessary or not for the purpose of inducing disclosure of black money.
That would depend upon diverse fiscal and economic considerations based on
practical necessity and administrative expediency and would also involve a
certain amount of experimentation on which the Court would be least fitted
to pronounce. The Court would not have the necessary competence and
expertise to adjudicate upon such an economic issue. The Court cannot
possibly assess or evaluate what would be the impact of a particular
immunity or exemption and whether it would serve the purpose in view or
not. There are so many imponderables that would enter into the
determination that it would be wise for the Court not to hazard an opinion
where even economists may differ. The Court must while examining the
constitutional validity of a legislation of this kind, “be resilient, not
rigid, forward looking, not static, liberal, not verbal” and the Court must
always bear in mind the constitutional proposition enunciated by the
Supreme Court of the United States in Munn v. Illinois 94 US 13, namely,
“that courts do not substitute their social and economic beliefs for the
judgment of legislative bodies”. The Court must defer to legislative
judgment in matters relating to social and economic policies and must not
interfere, unless the exercise of legislative judgment appears to be
palpably arbitrary. The Court should constantly remind itself of what the
Supreme Court of the United States said in Metropolis Theater Company v.
City of Chicago, 57 L Ed 730 : 228 US 61 (1912):
The problems of government are practical ones and may justify,
if they do not require, rough accommodations, illogical it may be, and
unscientific. But even such criticism should not be hastily expressed. What
is best is not always discernible, the wisdom of any choice may be disputed
or condemned. Mere error of government are not subject to our judicial
review.
It is true that one or the other of the immunities or exemptions granted
under the provisions of the Act may be taken advantage of by resourceful
persons by adopting ingenious methods and devices with a view to avoiding
or saving tax. But that cannot be helped because human ingenuity is so
great when it comes to tax avoidance that it would be almost impossible to
frame tax legislation which cannot be abused. Moreover, as already pointed
out above, the trial and error method is inherent in every legislative
effort to deal with an obstinate social or economic issue and if it is
found that any immunity or exemption granted under the Act is being
utilised for tax evasion or avoidance not intended by the legislature, the
Act can always be amended and the abuse terminated. We are accordingly of
the view that none of the provisions of the Act is violative of Article 14
and its constitutional validity must be upheld.”
The aforesaid principle is echoed with equal emphasis in Balco Employees'
Union (Regd.) v. Union of India and Others[8] in the following manner:
“46. It is evident from the above that it is neither within the domain of
the courts nor the scope of the judicial review to embark upon an enquiry
as to whether a particular public policy is wise or whether better public
policy can be evolved. Nor are our courts inclined to strike down a policy
at the behest of a petitioner merely because it has been urged that a
different policy would have been fairer or wiser or more scientific or more
logical.
47. Process of disinvestment is a policy decision involving complex
economic factors. The courts have consistently refrained from interfering
with economic decisions as it has been recognised that economic
expediencies lack adjudicative disposition and unless the economic
decision, based on economic expediencies, is demonstrated to be so
violative of constitutional or legal limits on power or so abhorrent to
reason, that the courts would decline to interfere. In matters relating to
economic issues, the Government has, while taking a decision, right to
“trial and error” as long as both trial and error are bona fide and within
limits of authority. There is no case made out by the petitioner that the
decision to disinvest in BALCO is in any way capricious, arbitrary, illegal
or uninformed. Even though the workers may have interest in the manner in
which the Company is conducting its business, inasmuch as its policy
decision may have an impact on the workers’ rights, nevertheless it is an
incidence of service for an employee to accept a decision of the employer
which has been honestly taken and which is not contrary to law.
xx xx xx
Conclusion
92. In a democracy, it is the prerogative of each elected Government to
follow its own policy. Often a change in Government may result in the shift
in focus or change in economic policies. Any such change may result in
adversely affecting some vested interests. Unless any illegality is
committed in the execution of the policy or the same is contrary to law or
mala fide, a decision bringing about change cannot per se be interfered
with by the court.
93. Wisdom and advisability of economic policies are ordinarily not
amenable to judicial review unless it can be demonstrated that the policy
is contrary to any statutory provision or the Constitution. In other words,
it is not for the courts to consider relative merits of different economic
policies and consider whether a wiser or better one can be evolved. For
testing the correctness of a policy, the appropriate forum is Parliament
and not the courts. Here the policy was tested and the motion defeated in
the Lok Sabha on 1-3-2001.”
Insofar as judgment of Calcutta High Court in Kalindi Woolen Mills (P) Ltd.
(supra) is concerned, we have our reservations on the correctness thereof
wherein the High Court found that Notification dated 28.04.1989 allowing
imports of Woolen rags, Synthetic rags, Shoddy wool through two ports only,
namely, Bombay and Delhi ICD. In any case, insofar as argument based on
Article 14 is concerned, the said judgment is distinguishable as in that
case the Court did not find any intelligible basis which was disclosed
before the Court either in the affidavits filed by the Customs Authorities
or in the Import Licensing Control Authorities of the Government of India.
Likewise, no rational nexus for imposing the restrictions on importation of
the subject goods only through Delhi ICD and Bombay ports disclosed. In
the absence of such a justification, on the facts of that case, the Court
found the Notification to be violative of Article 14 of the Constitution.
In contrast, in the present case, as already pointed out above, the
respondents have been able to demonstrate intelligible basis for issuing
the impugned Notifications having rational nexus with the objectives sought
to be achieved. We, thus, reject the arguments based on Article 14 of the
Constitution.
The argument of Mr. Naphade to the effect that interests of consumers is
equally important which is not taken into consideration needs an outright
rejection for more than one reason. In the first place no such case was
made out by the appellants either in the High Court or even in the special
leave petition filed in this Court. This argument was raised for the first
time during oral hearing. There is, thus, no material produced on record
to show how the impugned Notification would affect the interests of the
consumers. An argument of this nature cannot be raised in the air without
having solid foundation with relevant material. In any case, as we have
found that the Notifications were issued in the interests of farmer class
in the State of Kerala and, therefore, they are in public interest, this
argument is of no avail.
With this, we advert to the other arguments, namely, whether the
Notifications are ultra vires of Section 3 of the Act. Our discussion has
to, necessarily, start by noticing the provision of Section 3, which reads
as under:
“3. Powers to make provision relating to imports and exports. – (1) The
Central Government may, by Order published in the Official Gazette, make
provision for the development and regulation of foreign trade by
facilitating imports and increasing exports.
(2) The Central Government may also, by Order published in the Official
Gazette, make provision for
prohibiting, restricting or otherwise regulating, 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, the import or export of goods or services or
technology:
Provided that the provisions of this sub-section shall be applicable, in
case of import or export of services or technology, only when the service
or technology provider is availing benefits under the foreign trade policy
or is dealing with specified services or specified technologies.
(3) All goods to which any Order under sub-section (2) applies shall be
deemed to be goods the import or export of which has been prohibited under
section 11 of the Customs Act, 1962 (52 of 1962) and all the provisions of
that Act shall have effect accordingly.
(4) Without prejudice to anything contained in any other law, rule,
regulation, notification or order, no permit or licence shall be necessary
for import or export of any goods, nor any goods shall be prohibited for
import or export except, as may be required under this Act, or rules or
orders made thereunder.”
Scope and ambit of the aforesaid provision was considered in Abdul Aziz
Aminudin v. State of Maharashtra[9], wherein this Court held as under:
“11. It is clear therefore that the power conferred under Section 3(1) of
the Act is not restricted merely to prohibiting or restricting imports at
the point of entry but extends also to controlling the subsequent disposal
of the goods imported. It is for the appropriate authority and not for the
Courts to consider the policy, which must depend on diverse considerations,
to be adopted in regard to the control of import of goods. The import of
goods can be controlled in several ways. If it is desired that goods of a
particular kind should not enter the country at all, the import of those
goods can be totally prohibited. In case total prohibition is not desired,
the goods could be allowed to come into the country in limited quantities.
That would necessitate empowering persons to import under licences certain
fixed quantities of the goods. The quantity of goods to be imported will
have to be determined on consideration of the necessity for having those
goods in the country and that again, would depend on the use to be made of
those goods. It follows therefore that the persons licensed to import goods
up to a certain quantity should be amenable to the orders of the licensing
authority with respect to the way in which those goods are to be utilised.
If the licensing authority has no such power, its control over the import
cannot be effective. It may have considered it necessary to have goods
imported for a particular purpose. If it cannot control their utilisation
for that purpose, the imported goods, after import, can be diverted to
different uses, defeating thereby the very purpose for which the import was
allowed and power had been conferred on the Central Government to control
imports. It is therefore not possible to restrict the scope of the
provision about the control of import to the stage of importing of the
goods at the frontiers of the country. Their content is much wider and
extends to every stage at which the Government feels it necessary to see
that the imported goods are properly utilised for the purpose for which
their import was considered necessary in the interests of the country.”
We may also point out that proviso to sub-section (2) as well as sub-
section (4) were inserted by Act 25/2010 w.e.f. 27.08.2010. In any case, we
are primarily concerned with the interpretation of sub-sections (1) and (2)
of Section 3 as far as present case is concerned. Sub-section (1) empowers
the Central Government to make provision for the development as well as
regulation of foreign trade by facilitating imports and increasing exports.
Thus, the Government is empowered to make provision insofar as they relate
to the development of foreign trade and it has also empowered to regulate
the foreign trade. The two key words here are 'development' and
'regulation'. It is also important to note that such development and
regulation is aimed at facilitating imports as well as increasing exports.
First argument of Mr. Naphade was that regulatory provision has to be for
facilitating imports whereas in the present case, it was to curb the
imports insofar as ports in Kerala are concerned. Sub-section (2) of
Section 3 further empowers the Central Government to make provision for:
(i) prohibiting; (ii) restricting; or (iii) otherwise regulating 'the
import or export of goods or services or technology'. It can be done in
all cases or in specified classes of cases. The submission of Mr. Naphade
was that such provisions prohibiting, restricting or otherwise regulating
are to be made in respect of import or export of goods or services or
technology which essentially were custom based. He referred to the
definition of 'import' and 'export' contained in Section 2(e) of the Act
which, in relation to goods, means bringing into, or taking out of, India
any goods by land, sea or air. He, thus, submitted that insofar as import
of goods is concerned, it only meant bringing the said goods into India.
That is by crossing the custom barrier, to bring the same in the territory
of India. Therefore, sub-section (2) is with reference to goods and not
with place. He also submitted that the expression 'otherwise regulating'
referred to licence etc. by which the import could be regulated and had
nothing to do with the 'place'. Section 5 which existed at the relevant
time reads as under:
“5. Export and import policy. - The Central Government may, from time to
time formulate and announce, by notification in the Official Gazette, the
export and import policy and may also, in the like manner, amend that
policy.”
This Section is substituted by amended Section 5 w.e.f. 27.08.2010
and the amended Section reads as under:
“5. Foreign Trade Policy. - The Central Government may, from time to time,
formulate and announce, by notification in the Official Gazette, the
foreign trade policy and may also, in like manner, amend that policy:
Provided that the Central Government may direct that, in respect of
the Special Economic Zones, the foreign trade policy shall apply to the
goods, services and technology with such exceptions, modifications and
adaptations, as may be specified by it by notification in the Official
Gazette.”
Mr. Naphade submitted that proviso which is added in the new Section 5 for
the first time relates to the place and since it was conspicuously absent
in the old provision, it could clearly be inferred that Section 5 as it
stood at the relevant time had no bearing as far as place of import and
export policy is concerned. On that basis, he argued that Section 3 read
with Section 5 did not give any such power to issue Notifications of the
nature which is subject matter of these proceedings. He, thus, submitted
that power could not be exercised by the Central Government to ban or
prohibit the import of palm oil through the ports of State of Kerala alone
and if any ban had to be imposed which should have been done in all the
ports throughout the country. He further argued that Calcutta High Court
in the case of Kalindi Woolen Mills (supra) has specifically held to be so
while inculcating Sections 3 and 5 of the Act.
These were countered by Mr. Panda, learned senior counsel for the
respondents by arguing that the impugned Notifications may be considered
with reference to Section 3(2) of the Act not in isolation, but on a
harmonious construction of the same with reference to the statement of
objects and reasons to the Act along with Sections 2(e), 3(3) and 5 of the
Act along with Sections 7 and 11 of the Customs Act, 1962. The Foreign
Trade Policy of 2004-2009, the relevant provisions which have already been
extracted herein before at Para 5 may also be considered. This approach,
according to him, would be in consonance with the ratio of the judgment of
this Court in Union of India v. Asian Food Industries[10]:
“25. Would the terms 'restriction' and 'regulation' used in Clause 1.5 of
the Foreign Trade Policy include prohibition also, is one of the principal
questions involved herein.
26. A citizen of India has a fundamental right to carry out the business
of export, subject, of course to the reasonable restrictions which may be
imposed by law. Such a reasonable restriction was imposed in terms of the
1992 Act.
27. The purport and object for which the 1992 Act was enacted was to make
provision for the development and regulation of foreign trade inter alia by
augmenting exports from India. While laying down a policy therefor, the
Central Government, however, had been empowered to make provision for
prohibiting, restricting or otherwise regulating export of goods.
28. Section 11 of the 1962 Act also provides for prohibition. When an
order is issued under sub-section (3) of Section 3 of the 1992 Act, the
export of goods would be deemed to be prohibited also under Section 11 of
the 1962 Act and in relation thereto the provisions thereof shall also
apply.
29. Indisputably, the power under Section 3 of the 1992 Act is required to
be exercised in the manner provided for under Section 5 of the 1992 Act.
The Central Government in exercise of the said power announced its Foreign
Trade Policy for the years 2004-2009. It also exercised its power of
amendment by issuing the Notification dated 27.06.2006. Export of all
commodities which were not earlier prohibited, therefore, was permissible
till the said date.
xx xx xx
43. We are, however, not oblivious of the fact that in certain
circumstances regulation may amount to prohibition. But, ordinarily the
word “regulate” would mean to control or to adjust by rule or to subject to
governing principles (See U.P. Cooperative Cane Unions Federations v. West
U.P. Sugar Mills Association and Others, (2004) 5 SCC 430, whereas the word
“prohibit” would mean to forbid by authority or command. The expressions
“regulate” and “prohibit” inhere in them elements of restriction but it
varies in degree. The element of restriction is inherent both in
regulative measures as well as in prohibitive or preventive measures.
xx xx xx
46. The terms, however, indisputably would be construed having regard to
the text and context in which they have been used. Section 3(2) of the
1992 Act uses prohibition, restriction and regulation. They are, thus,
meant to be applied differently. Section 51 of the 1962 Act also speaks of
prohibition. Thus, in terms of the 1992 Act as also the policy and the
procedure laid down thereunder, the terms are required to be applied in
different situations where for different orders have to be made or
different provisions in the same order are required therefore.”
He also submitted that the above approach of this Court for
harmonious construction finds support from the following ratio laid down by
this Court in Bhatnagars & Co. Ltd. v. Union of India[11]:
“.......... In modern times, the export and import policy of any democratic
State is bound to be flexible. The needs of the country, the position of
foreign exchange, the need to protect national industries and all other
relevant considerations have to be examined by the Central Government from
time to time and rules in regard to export and import suitably adjusted.
It would, therefore, be idle to suggest that there should be unfettered and
unrestricted freedom of export and import or that the policy of the
Government in regard to export and import should be fixed and not changed
according to the requirements of the country.
xx xx xx
It was open to the Government, and indeed national interests made it their
duty, to intervene and regulate the distribution of the commodity in a
suitable manner.”
According to us, we need not deal with these submissions elaborately as the
aforesaid contention of the learned senior counsel for the appellants need
to be discarded on altogether different reason. These arguments ignore the
crucial words appearing in sub-section (2) of Section 3, namely, provision
for prohibiting, restricting or otherwise regulating, the import or export
of goods etc. can be made “subject to such exceptions, if any, as may be
made by or under the Order”. These words are of wide amplitude giving
necessary powers to make such exceptions as the Central Government deems
fit while issuing the Notifications or the Order in prohibiting,
restricting or regulating import or export of goods etc. In the process,
it can restrict the import of particular goods through particular ports or
disallow the import through specified ports (See: Asian Food Industries
judgment, already extracted above). Of course, such an action cannot be
arbitrary or irrational and should be backed sound reasons.
In the present case, as already held above, there is a sufficient public
good sought to be achieved by laying down the exception banning the imports
of crude palm oil through ports in Kerala. That, according to us, provides
complete answer to the argument of the learned senior counsel for the
appellants. Calcutta High Court in Kalindi Woolen Mills (P) Ltd. (supra)
overlooked the aforesaid pertinent aspect which gives sufficient powers to
the Central Government to act in the manner it has acted. The argument of
Mr. Naphade predicated on the contrast between old and new provisions of
Section 5 of the Act, again, would be of no avail in view of our aforesaid
discussion holding that sub-section (2) of Section 3 of the Act gives ample
power to the Government to issue such Notifications in exceptional cases
and present case falls within those parameters. No other argument was
addressed. We, therefore, do not find fault with the view taken by the
High Court upholding the Notifications in question. These appeals are
accordingly dismissed.
.............................................J.
(A.K. SIKRI)
.............................................J.
(ROHINTON FALI NARIMAN)
NEW DELHI;
AUGUST 21, 2015.
-----------------------
[1] 1994 (74) ELT 827
[2] (2001) 8 SCC 491
[3] 1989 Supp (2) SCC 364
[4] (2005) 13 SCC 495
[5] AIR 1964 SC 370
[6] 1993 Supp. 2 SCC 146
[7] (1981) 4 SCC 675
[8] (2002) 2 SCC 333
[9] (1964) 1 SCR 830 : AIR 1963 SC 1470
[10] (2006) 13 SCC 542
[11] 1957 SCR 701
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