Full Judgment Text
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PETITIONER:
UNION OF INDIA & ORS.
Vs.
RESPONDENT:
M/S. INDO-AFGHAN AGENCIES LTD.
DATE OF JUDGMENT:
22/11/1967
BENCH:
SHAH, J.C.
BENCH:
SHAH, J.C.
SIKRI, S.M.
SHELAT, J.M.
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)
ACT:
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.
HEADNOTE:
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
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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 thereunder. 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
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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. [1962]
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, [1966] 1 S.C.R. 262, followed.
(3) Executive necessity, if any, does not release the
Government from honoring its solemn promises relying on
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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, [1921] 3 K.B.
500 and Robertson v. Minister of Pensions, [1949] 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. [1952] S.C.R. 43. referred to.
JUDGMENT:
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
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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 f.o.b 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 carried.
(2)....................
(3).....................
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.
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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 Notification.
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."
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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 "overinvoiced" 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
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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 law".
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.
503:
" ...... what I have to consider is
whether this was a contract at all. I have
not to consider whether there was anything of
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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) [1921] 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
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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) [1949] 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 citizen.
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
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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 character.
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 authorities.
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.
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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) [1962] 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
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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) [1962] 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 Scheme.
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
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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) [1966] 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 Government.
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
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the basic concept of’ justice and fair-play: if he made an
order which was not consonant with the basic concept.s 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 oppor-
(1) [1966] 1 S.C.R. 262. up. C.I/68--10
Sup.C.I/68--10
382
tunity 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
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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 observed:
"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 principle.
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
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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) [1952] 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
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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 with costs.
One heating fee.
V.P.S. Appeals
dismissed.
387