BEFORE THE MADURAI BENCH OF MADRAS HIGH COURT
DATED: 08/09/2008
CORAM
THE HONOURABLE MR.JUSTICE K.CHANDRU
W.P.(MD)No.5701 of 2008
W.P.(MD)Nos.5284,6108,6119,6188,6189,
6324,6388, 6389 6438, 6455, of 2008
and
M.P.(MD)Nos.1,1,1,1,1,1,1,1,1 and 1 of 2008 in W.P(MD).Nos.5284 , 5701, 6108 ,
6188, 6189, 6324, 6388, 6389, 6438, 6455, 6119 of 2008
and
M.P.(MD).Nos.2,2,2,2,2,2 and 2 of 2008 in
W.P(MD).Nos.5284, 5701,6108 6119,6188,
6189,6324,6438,6455, of 2008
and
M.P.(MD).Nos.3 and 3 of 2008 in W.P.(MD).Nos.5284 and 6108 of 2008
1.M/s.S.Mira Commodities Pvt., Ltd.,
Rep. by its Director Mr.Farook Shabbir Noorani,
601, C.Halima Apartments, 96, Morland Road,
Mumbai-400 008. ...Petitioner in WP 5701/08
2.M/s.S.Mira Group of Companies,
Rep. by its Proprietor Mr.Farook Shabeer Noorani
337, Central Facility Building, A.P.M.C.Market-1,
Phase-II, Sector-19, Vashi,
Navi Mumbai-400705. ..Petitioner in WP 6438/08
3.M/s.Ayesha Commercial Trade Services,
Rep. by its Proprietor Mr.Farook Shabeer Noorani,
601-c, Halima Apartments,
95, Morland Road,
Mumbai-400 008. ..Petitioner in WP 6455/08
4.M/s.Radhakrishna Trading Co.,
Rep. by its Proprietor Vijay Sajnani,
Maskasath Square,
Sambhaji Kasar Road,
Itwari, Nagpur,
Maharashtra-440 002.
..Petitioner in WPs 6119,6388/08
5.M/s.Alyunus Exports Corporation,
Rep. by its Director Mr.Farook Shabbir Noorani,
337, Central Facility Building, A.P.M.C.Market-1,
Phase-II, Sector-19, Vashi,
Navi Mumbai-400 705. ..Petitioner in WP 6189/08
6.M/s.Empire Exports,
Rep. by its Director Mr.Bimal Kumar Modi,
1,Govind Chandra Dhar Lane,
Kolkatta-700 001
..Petitioner in WP 6188/08
7.M/s.Zhi Trading Company,
Rep. by its Proprietor
Mr.Shabbir Haji Issak Noorani,
601-c, Halima Apartments,
95, Morland Road,
Mumbai-400 008. .. Petitioner in WP.6324/08
8.M/s.Unik Traders,
No.140, Old Tharagupet,
Bangalore by its Proprietor
Hanif Thara. ..Petitioner in WP 5284/08
9.M/s.Shri Shiv Enterprises,
Chhottalal Madhavji Buildings
Itwari, Maharashtra,
Rep. by its Proprietor Mr.Prakash Suchak.
..Petitioner in WP 6108/08
10.M/s.Anil Industries,
Chhikhli Layout,
Plot No.88, Kalamina Road,
Small Factory Area, Near
Thaukar Jarda, Nagpur,
Maharashtra-440 008. ..Petitioner in WP 6389/08
vs.
1.Union of India,
Rep. by its Secretary,
Ministry of Commerce and Industry,
Department of Commerce,
Udyog Bhawan, New Delhi-110 001.
2.The Director General of Foreign Trade
and Ex-Officio Additional Secretary,
to Government of Commerce,
Udyog Bhawan, New Delhi-110 001.
3.The Commissioner of Customs,
Custom House, New Harbour Estate,
Tuticorin-628 004.
... Respondents in all the W.Ps
PRAYER in 5701 of 2005
Writ Petitions filed under Article 226 of the
Constitution of India praying for issuance of a Writ of Declaration, declaring
the Policy condition in impugned Notification No.15(RE-2008)/2004-2009, dated
04.06.2008, (in respect of all W.Ps) issued by the 2nd respondent in so far as
it restricts the free import of Betel Nuts only to those of value of Rs.35/- per
Kilogram and above as illegal, arbitrary, unconstitutional and in violation of
the rights guaranteed under the Constitution of India.
!For Petitioners ... Mr.B.Kumar Senior Counsel
For Mr.B.Satish Sundar,
Mr.A.K.Jayaraj,
and Mr.P.Dhanapal
^For Respondents ... Mr.C.Arul Vadivel @ Sekar
Assistant Solicitor General
*****
:COMMON ORDER
The prayer in all these writ petitions is for declaring the policy
condition imposed by the Director General of Foreign Trade vide its notification
No.15 (RE-2008)/2004-2009, dated 04.06.2008, insofar as it restricts the
free trade of Betal nuts for a value of Rs.35/ per kilo gram including C.I.F.
value (Cost, Insurance and Freight) by notification dated 04.06.2008 as
unconstitutional, arbitrary and violative of rights guaranteed under the
Constitution.
2. Since the questions raised in all these writ petitions are one and
the same, they were all heard together and a common order is passed.
3. Heard Mr.B.Kumar, learned Senior Counsel appearing for all the
petitioners and Mr.C.Arul Vadivel @ Sekar learned Assistant Solicitor General
and perused the records.
4. At the the time of admission in all these cases, interim orders were
granted. It is only when the second respondent filed a vacate stay application
supported by a counter affidavit, the matter was taken up for final hearing by
the consent of parties.
5. It is stated by the petitioners that the petitioners are all
importers of betal nuts and spices. The petitioners were importing betal nuts
from the countries such as Indonesia and Sri Lanka, since there is a great deal
of demand in India. The local production in this country of betal nuts do not
even meet 10% of the demand of the manufacturers. Therefore, import of betal
nuts became a necessity as there is a wide spread requirement for such betal
nuts for the manufacture of Supari, Sugants and Pan masala. The policy of betal
nuts is not restricted and even as per the impugned notification, the import is
made free. Apart from this, there is 100% duty imposed by the Customs on the
imported betal nuts.
6. The cost of purchase of such betel nuts normally varies between
Rs.15/- to Rs.20/- in foreign countries. This fact has been even admitted by
the second respondent in the counter affidavit dated 01.08.2008, wherein it is
shown that the import price of betel nuts (whole) comes to Rs.15.50 paisa per
kilo gm and split betel nuts comes to Rs.13/- per kilo gm.
7. By the impugned notification the importers were directed to import
the betel nuts provided C.I.F. value of the betel nuts is provided at Rs.35/-
per kg. According to the petitioners, such a fixation of Rs.35/- per kg. with
C.I.F. value is arbitrary and curtails the right of the importers under Articles
19(1)(g) and 301 of the Constitution.
8. It is further contended that when import policy with reference to
particular good namely betel nuts is a free policy, then there is no question of
restricting the right of the importers and the policy introduced by the second
respondent has no legal sanctity. It is stated that in para:2.1 of the Foreign
Trade Policy ( for short ‘FTP’) provides exports and imports shall be free
except where regulated by FTP or other law for the time being in force. Para
2.6 of the FTP, empowers the respondents to impose restrictions on imports by
way of notifications for achieving the following purposes only:-
“i. Protection of public morals.
ii.Protection of human, animal or plant life or health.
iii.Protection of patents, trademarks and copyrights and the prevention of
deceptive practices.
iv.Prevention of use of prison labour.
v.Protection of national treasures of artistic, historic or archaeological
value.
vi.Conservation of exhaustible natural resources.
vii.Protection of trade of fissionable material or material from which they are
derived; and
viii.Prevention of traffic in arms, ammunition and implements of war.”
9. Since the policy introduced by the impugned notification does not
advance any of the causes listed above, the said policy is arbitrary. It is
further submitted that the Foreign Trade (Development Regulation Act) 1992, (for
short ‘FTDR’) does not authorise the second respondent to restrict the import of
betel nuts on the basis of fixing a minimum import price. It is also stated that
the petitioners have long term contracts with their foreign suppliers and
pursuant to the contracts, goods have arrived in various ports and therefore,
they should be allowed to import without insisting the price of the goods fixed
at Rs.35/- (C.I.F) per kg.
10. In support of their submissions, the petitioners have also filed
various agreements between them and the foreign suppliers. The trade
commitments that they have with the foreign suppliers were also mentioned in
those correspondences. It is in the light of these submissions, they wanted
their writ petitions to be allowed and consequently, the impugned notifications
should be set aside.
11. In the counter affidavit filed by the second respondent the said
policy id sought to be supported on the basis that the low price of import of
betel nuts was causing declining the domestic prices and consequential loss for
the domestic betel nut growers. This policy will prevent inferior quality of
the betel nuts from being imported and also it will provide adequate
remunerative prices for the local growers. By this protectionism, there will be
a perfect competition in the home produce and imported betel nuts. It will also
generate employment potentials and the notifications were issued setting forth
the policy for the years 2004-2009 was in public interest and in exercise of
powers conferred under Section 5 of the F.T.D.R.Act,1992 read with para 2.1 of
the F.T.P.
12. It is averred in para No:2.J of the counter affidavit, which is as
follows:-
“…..Therefore, in order to protect the interests of the domestic growers of
betel nut and to provide a level playing field to them and to ensure that the
domestic prevailing price of betel nut does not fall down, the minimum floor
price for import of betel nut has been fixed of Rs.35 per kgm and above vide
Notification No.15/RE2008/2004-2009, dated 04.06.2008. Presently, the import
duty on betel nut is 100%. The floor price of betel nuts @ Rs.35 per Kg. coupled
with 100% custom duty would result in the landed price of betel nut to Rs.0.70
per kg, which is approximately at par with the rate prevailing during 2006-2007
(i.e.ranging from Rs.66 per kg. 75 per kg.) as reported by the Directorate of
Arecanut and Species Development, Bangalore.”
13. In the light of the above factual metrics Mr.B.Kumar, learned Senior
Counsel appearing for the petitioners made the following submissions:-
(i)The second respondent DGFT has no power to issue
a policy in terms of Section 5 read with Section 6(3) of the FTDR, Act,1992.
(ii)To test the validity of the impugned notifications the relative bearing of
three enactments are to be looked into. They are Customs Act,1962, Customs
Tariff Act,1975 and FTDR Act,1992. Each enactment places an assigned role and
they must be read harmoniously and one cannot claim overriding effect over the
provisions of other Acts.
(iii)That in so far as the present policy is not based on any anti-dumping
policy, the policy is arbitrary.
(iv)After introducing a free policy the second respondent cannot create an
artificial price fixing insofar as the local production satisfies only 10% of
the requirement of the manufacturers. There is no necessity to introduce such
artificial price fixing and label it as support price or floor pricing or Saving
the local producers.
(v)When admittedly the price available in the countries of import does not
exceed Rs,15/- to Rs.20/- per kg, there is no question of fixing the price at
Rs.35/- per kg (CIF).
(vi)The importers of betel nuts such as the petitioners have not been informed
as to what should be done with the money which will be found in the excess of
the cost of import. This will only lead to fictitious billing, which is not the
intention of a free import policy and it is not the power of Government to fix
any price under FTDR, Act.
(vii)Fixing the value of goods can be done only under the Customs Act and
Customs Tariff Act. Those Acts also provide for an appointment of Directorate
General of Safeguards. The Customs Tariff Act, 1975, provides for differential
tariff including imposition of increased import duties under Section 8A
imposition of Safe Guards Duty under Section 8B and anti-dumping duties under
Section 9A the Customs Tariff Act. It also provides for an appeal under Section
9C.
(viii)The customs Act also provides for appointment of Customs Officers to
decide the value of the import. Therefore, where there are ample provisions
under the special enactments, it is not open to the second respondent to issue a
notification FTDR, Act, 1992 to bring an artificial price fixing for the
imported betel nuts.
(ix)The learned Senior Counsel submitted that Section 6(3) only delegates
certain powers on the DGFT and the present notification though claimed to have
issued under Section 5, such a delegation is not available to the second
respondent in terms of Section 6(3) of the FTDR Act. The power to frame a
policy solely vests with the Central Government under Section 3 of the Act.
Though in the notification impugned, it refers to the Central Government
amending Schedule I of Imports for the years 2004-2009, it is not a notification
issued by the Central Government. It only signed by the DGFT, who is also the ex
officio Additional Secretary to Government.
(x)In the counter affidavit filed by the second respondent, there is no
reference to the Central Government issuing the said policy and there is no
details regarding the Central Government’s decision mentioned therein.
14. Even though a specific contention was raised in this regard, the
Central Government has not taken any policy decisions in terms Section 3 read
with Section 5 of the FTDR Act and there being no delegation permissible for
evolving such of policy in the light of Section 6(3) conferred on the second
respondent, the impugned order to be set aside on this short ground alone.
15. In any event, when there is sufficient safeguard is provided under
the special laws such as Customs Act as well as the Customs Tariff Act, it is
not open to the respondents to invoke FTDR Act for making an artificial price
fixation.
16. The learned Senior counsel for the petitioners relied upon the
judgment of the Supreme Court in Allahabad Bank V. Canara Bank reported in AIR
2000 Supreme Court 1535 for the purpose of showing that at times a general law
can be a specific law vis-a-vis a special law and it depends on the context. He
relied upon the following passage found in para:39, which is usefully extracted
below:-
“39.There can be a situation in law where the same statute is treated as a
special statute vis-a-vis one legislation and again as a general statute vis-a-
vis another legislation. Such situations do arise as held in Life Insurance
Corporation of India V D.J.Bahadur, AIR 1980 Supreme Court 2181: (1980 Lab IC
1218. It was there observed.
“for certain cases, an Act may be general and for certain other purposes, it may
be special and the Court cannot blur a distinction when dealing with finer
points of law.”
17. In the light of the above, it was further submitted that the FTDR
Act cannot be a special law with reference to a price fixation of an imported
commodity and the power is available only under the provisions of other two
enactments, i.e.the Customs Act and the Customs Tariff Act.
18. He further submitted that even assuming that any policy guideline is
issued, such a guideline can be scrutinzed by this Court and it is not beyond
the pale of judicial review conferred under Article 226 of the Constitution.
The learned Senior Counsel referred to the decision of Supreme Court reported in
Union of India and Others and Dinesh Engineering Corporation and another, (2001)
8 SCC 491. The learned counsel placed reliance upon the following passage found
in para 12 of the said order:-
“12…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 a 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 scrutinize 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.
19. The learned Senior Counsel further submitted that when in the
counter affidavit it was admitted that the prevailing price of the betel nuts in
the countries of origin was only Rs.13/- to Rs.15/- there is no question of
fixing the imported betel nuts @ Rs.35/- in an artificial manner. Protecting
the local growers can be done only by either increasing the import duty or
totally prohibiting the import. Further, for making the contention that the
sub-standard goods will be brought in, there is no material produced by the
respondents in support of that contentions. Even otherwise, if the goods are
substandard, no manufacturers will buy such goods. Therefore, the attempt of
the Central Government is to lead support to certain monopolists, who were also
involved in using the betel nuts as raw metals in their production.
20. Per contra, the learned Assistant Solicitor General relied upon the
contentions raised in the counter affidavit and also relied upon certain
decisions of the Supreme Court in support of his arguments.
21. He referred to case of Dhargham Oils Pvt Ltd & another Vs. Union of
India reported in 1995 (1) SCC 345 for a proposition that the Government can
amend the policy of import even though there may be concluded contract with a
foreign supplier.
22. He also cited the judgment in S.B.International Ltd Vs Assistant
Director of Foreign Trade reported in 1996 (2) SCC 439 that the principles of
promissory estoppel are not applicable in deciding the validity of a Foreign
Trade Policy.
23. He further placed reliance upon the judgment of the Supreme Court in
P.T.R.Export (Madras) Pvt.Ltd Vs Union of India and others and relied upon the
following passages found in paras:4 and 5:-
“4.an applicant has no vested right to have export or import licences in terms
of the policies in force at the date of his making application. For obvious
reasons, granting of licences depends upon the policy prevailing on the date of
the grant of the licence or permit. The authority concerned may be in a better
position to have the overall picture of diverse factors to grant permit or
refuse to grant permission to import or export goods. The decision, therefore,
would be taken from diverse economic perspectives which the executive is in a
better informed position unless, as we have stated earlier, the refusal is mala
fide or is an abuse of the power in which event it is for the applicant to plead
and prove to the satisfaction of the court that the refusal was vitiated by the
above factors.
5….. When the Government is satisfied that change in the policy was
necessary in the public interest, it would be entitled to revise the policy and
lay down new policy. The Court, therefore, would prefer to allow free play to
the Government to evolve fiscal policy in the public interest and to act upon
the same. Equally, the Government is left free to determine priorities in the
matters of allocations or allotment or utilisation of its finances in the public
interest. It is equally, entitled, therefore, to issue or withdraw or modify
the export or import policy in accordance with the scheme evolved.”
24. He further submitted that the Foreign Trade Policy expressed in the
impugned notification is not susceptible for a judicial review and referred to
the judgment of the Supreme Court in State of N.C.T of Delhi and another Vs.
Sanjeev alias Bittoo reported in 2005 Supreme Court 2080. He placed reliance
upon the following passages found in paras:15 and 16:-
“15….In the purported exercise of its discretion, it must not do what it has
been forbidden to do, nor must it do what it has not been authorised to do. It
must act in good faith, must have regard to all relevant considerations and must
not be influenced by irrelevant considerations, must not seek to promote
purposes alien to the letter or to the spirit of the legislation that gives it
power to act, and must not act arbitrarily or capriciously. These several
principles can conveniently be grouped in two main categories: (i) failure to
exercise a discretion, and (ii) excess or abuse of discretionary power. The two
classes are not, however, mutually exclusive. Thus, discretion may be
improperly fettered because irrelevant considerations have been taken into
account, and where an authority hands over its discretion to another body it
acts ultra vires.
16.The present trend of judicial opinion is to restrict the doctrine of immunity
from judicial review to those classes of cases which relate to de-ployment of
troupes, entering into international treaties, etc. The distinctive features of
some of these recent cases signify the willingness of the Courts to assert their
power to scrutinize the factual basis upon which discretionary powers have been
exercised. One can conveniently classify under three heads the grounds on which
administrative action is subject to control by judicial review. The first
ground is ‘illegality’ the second ‘irrationality’ and the third ‘procedural
impropriety’.”
25. It is not clear as to how the citations referred to by the Assistant
Solicitor General will help the case of the respondents. The notifications
impugned in these writ petitions are without jurisdiction and made without any
application of mind and they are liable to be set aside by this Court.
26. This Court has already found that the second respondent has no power
to issue the notification under Section 5 read with 6(3) of the FTDR Act.
Further, that the price fixing on an artificial basis cannot be done and that
too under the FTDR Act. It has to be done in the light of the enactments such as
the Customs Act and the Customs Tariff Act. No material data have been
furnished for arriving at the figure of Rs.35/- per kilo (CIF) for the betel
nuts imported. When the market for betel nuts requires 90% import and the free
import policy has been evolved for such an import, the present notification goes
contrary to such policy. It also makes the importers to commit further
illegalities of retention of amounts in Foreign Countries.
27. The other argument that sub-standard material are imported is not
supported by any records. Further any sub-standard materials will be rejected
by the Customs Department and even by the manufacturers who placed orders with
the importers.
28. In the light of the above, all these writ petitions will stand
allowed. However, there will be no order as to costs. All the connected M.P.s
are closed.
ssm
To
1.The Secretary,
Union of India,
Ministry of Commerce and Industry,
Department of Commerce,
Udyog Bhawan, New Delhi-110 001.
2.The Director General of Foreign Trade
and Ex-Officio Additional Secretary,
to Government of Commerce,
Udyog Bhawan, New Delhi-110 001.
3.The Commissioner of Customs,
Custom House, New Harbour Estate,
Tuticorin-628 004.