IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE THE CHIEF JUSTICE MR.H.L.DATTU & THE HONOURABLE MR. JUSTICE A.K.BASHEER TUESDAY, THE 21ST OCTOBER 2008 / 29TH ASWINA 1930 W.A.No. 642 of 2008 ----------------------------------- AGAINST THE JUDT. IN WPC.218/2008 DATED 15.12./2008 .................... APPELLANTS/PETITIONERS: --------------------------------------- 1. PARISONS FOODS (P) LIMITED, REGISTERED OFFICE: CHEROOTY ROAD, KOZHIKODE - 673 032, REPRESENTED BY ITS MANAGING DIRECTOR, N.K. MOHAMMED ALI. 2. PARISONS AGROTECH (P) LIMITED, REGISTERED OFFICE: CHEROOTY ROAD, KOZHIKODE - 673 032, REPRESENTED BY ITS MANAGING DIRECTOR, N.K. MOHAMMED ALI. 3. N.K. HARRIS, S/O. A.V.KUNHI PARI, RESIDING AT 18/547, NELLIKOTTE HOUSE, Z.C.H.N. ROAD, CALICUT - 673 002. BY ADVS. SRI. ARSHAD HIDAYATHULLA (SR), SRI. E.K. NANDAKUMAR SRI. A.K. JAYASANKAR, SRI. ANIL D. NAIR. RESPONDENTS/RESPONDENTS: ----------------------------------------------- 1. THE UNION OF INDIA, REPRESENTED BY THE SECRETARY, MINISTRY OF COMMERCE AND INDUSTRY, UDYOG BHAVAN, NEW DELHI - 110 001. 2. THE DIRECTOR GENERAL OF FOREIGN TRADE, UDYOG BHAVAN, NEW DELHI - 110 001. 3. THE COMMISSIONER OF CUSTOMS, CUSTOMS HOUSE, COCHIN - 682009. 4. THE COMMISSIONER OF CUSTOMS, CUSTOMS HOUSE, MANANCHIRA, KOZHIKODE - 673 001. z W.A. No.642 of 2008 5. STATE OF KERALA, REPRESENTED BY THE SECRETARY TO GOVERNMENT, AGRICULTURE DEPARTMENT, SECRETARIAT, THIRUVANANTHAPURAM. 6. THE DIRECTOR OF AGRICULTURE, THIRUVANANTHAPURAM. ADDL. RESPONDENTS:- 7. KERALA PRADESH KARSHAKA CONGRESS, INDIRA BHAVAN, THIRUVANANTHAPURAM, REPRESENTED BY ITS PRESIDENT, SRI.LAL VARGHESE KALPAKAVADY. 8. COCONUT DEVELOPMENT BOARD, REPRESENTED BY ITS CHIEF COCONUT DEVELOPMENT OFFICER, KOCHI -11. (ADDL. RESPONDENTS 7 AND 8 ARE IMPLEADED AS PER ORDER DT.18.8.2008 IN I.A. Nos.676/08 AND 687/08 IN THE WRIT APPEAL). R1 TO R4 BY ASST. SOLICITOR GENERAL SRI. P. PARAMESWARAN NAIR. R5 AND R6 BY ADDL. ADVOCATE GENERAL SRI. VENGANOOR CHANDRASEKHARAN NAIR & SR.GOVT. PLEADER SRI. P.K. BABU. R7 BY ADV. SRI. JOHN VARGHESE. R8 BY ADV. SRI. KELU NAMBIAR (SR). & SRI. O.V. MANIPRASAD. THIS WRIT APPEAL HAVING BEEN FINALLY HEARD ON 24.9.2008 ALONGWITH W.A. No.1716/08, THE COURT ON 21.10.2008 DELIVERED THE FOLLOWING: H.L. DATTU, C.J. & A.K. BASHEER, J. ------------------------------------- W.A. No.642 and 1716 of 2008 ------------------------------------ Dated this, the 21 st day of October, 2008 JUDGMENT H.L. DATTU, C.J. The challenge in these appeals is to the order passed by the learned Single Judge in W.P.(C) No.218 of 2008 and connected matters disposed of on 15th day of February, 2008. 2. In the petition filed, the petitioner had called in question the legality or otherwise of the Notification No.63 (RE-2007)/2004-09 dated 24th December, 2007, issued by the Director General of Foreign Trade (DGFT, for short) amending the Foreign Trade Policy (Schedule - I) (Imports) of the ITC (HS) Classifications of Export and Import items 2004-09, in exercise of the powers conferred by Section 5 read with Section 3 of the Foreign Trade (Development and Regulation) Act, 1992, along with Paragraph 2.1 of the of the Foreign Trade Policy 2004-09. By this notification, a condition is imposed, that, the import of palm oil and its fractions, whether or not refined, but not chemically modified, would not be permitted through all the ports in State of Kerala. 3. Prior to this notification, the Central Government had issued another Notification No.39 (RE-2007)/2004-09, dated 16th October, W.A. No.642 & 1716/2008 - 2 - 2007, prohibiting the import of the aforesaid commodities through Kochi Port only. That had been questioned by the petitioners in W.P.(C) No.31397 of 2007. 4. The learned Single Judge has repelled the challenge to these notification and accordingly by a common order dated 15th day of February, 2008 has rejected the writ petitions. 5. The appellant companies are engaged in the refining and manufacture of edible oils, vanaspathi, bakery shortening, margarine etc,. They have their registered office at Kozhikode and factories at Kozhikode and Malappuram Districts in the State of Kerala. The factories were set up for the purpose of refining and manufacturing of edible oils within the State of Kerala. The main raw material used in the manufacture of RBD Palm Oil is crude palm oil, which the appellant company imports from countries like Indonesia and Malaysia. The crude palm oil is imported through the ports of Kochi and Beypore. After the import of crude palm oil through the aforementioned ports, the appellants stores the same in the storage tanks at the ports and thereafter transport the same by road to main factories at Kozhikode and Malappuram. Since the notifications issued by the Central Government affected the business interest of the petitioners, the same is called in question by the petitioners by filing petitions under W.A. No.642 & 1716/2008 - 3 - Article 226 of the Constitution of India. A spate of public interest litigation was also filed by public spirited citizens, to issue a writ in the nature of mandamus to the Central Government to extend the ban of import of crude palm oil through all the ports in Southern India. A public spirited person has also impleaded himself to support the stand of the Central Government. 6. The two notifications issued by the Central Government are as under: “Notification No.39 (RE-2007)/2004-2009 -------------------------------------------------------- NEW DELHI, DATED 16th OCTOBER, 2007 S.O.(E). In exercise of powers conferred by Section 5 of the Foreign Trade (Development and Regulation) Act, 1992 read with paragraph 2.1 of the Foreign Trade Policy - 2004-09, the Central Government hereby amends Schedule I (Imports) of the ITC (HS), Classifications of Export and Import items, 2004-09, as under:- 1. Import Policy for the following items will be amended as follows: Exim Code Item Description Policy Policy Conditions 1511 Palm Oil and its fractions , whether or not refined, but not chemically modified. 1511 10 00 Crude Free Import not permitted through Kochi port 1511 90 Other Free Import not permitted through Kochi port 1511 90 10 Refined, bleached deordorised palm oil Free Import not permitted through Kochi port 1511 90 20 Refined, bleached deordorised palmolein Free Import not permitted through Kochi port W.A. No.642 & 1716/2008 - 4 - Exim Code Item Description Policy Policy Conditions 1511 90 90 Other Free Import not permitted through Kochi port 1513 21 10 Palm Kernel OIl Free Import not permitted through Kochi port 1513 21 10 Palm Kernel Oil and its fractions Free Import not permitted through Kochi port 2. This issues in public interest. Sd/- (R.S. Gujral), Director General of Foreign Trade, And Ex Officio Additional Secretary to the Govt. of India.” “Notification No.63 (RE-2007)/2004-2009 -------------------------------------------------------- NEW DELHI, DATED 24th December, 2007 S.O.(E). In exercise of powers conferred by Section 5 of the Foreign Trade (Development and Regulation) Act, 1992 read alongwith paragraph 2.1 of the Foreign Trade Policy - 2004-09, the Central Government hereby amends Schedule I (Imports) of the ITC (HS), Classifications of Export and Import items, 2004-09, as under:- 1. Import Policy for the following items as amended vide Notification No.39 (RE-2007) dated 16th October, 2007 will be further amended as follows: Exim Code Item Description Policy Policy Conditions 1511 Palm Oil and its fractions, whether or not refined, but not chemically modified. 1511 10 00 Crude Free Import not permitted through any port in Kerala 1511 90 Other W.A. No.642 & 1716/2008 - 5 - Exim Code Item Description Policy Policy Conditions 1511 90 10 Refined, bleached deordorised palm oil Free Import not permitted through any port in Kerala 1511 90 20 Refined, bleached deordorised palmolein Free Import not permitted through any port in Kerala 1511 90 90 Other Free Import not permitted through any port in Kerala 1513 21 10 Palm Kernel Oil Free Import not permitted through any port in Kerala 1513 21 10 Palm Kernel Oil and its fractions Free Import not permitted through any port in Kerala 2. This issues in public interest. Sd/- (R.S. Gujral), Director General of Foreign Trade, And Ex Officio Additional Secretary to the Govt. of India.” 7. A detailed counter affidavit is filed by the Central Government and other respondents in the writ petition. In the counter affidavit filed, it is the stand of the Central Government, that the decision to impose prohibition with regard to import of Palm Oil and its fractions was a policy decision taken with a view to protect the interest of the coconut farmers within the State of Kerala, based on the letter received from the Chairman of Coconut Development Board who had recommended the total prohibition of import of palm oil and its fractions through the ports of all the Southern States and the letter from the Chief Minister of the State, seeking a reversal of the earlier decision of the W.A. No.642 & 1716/2008 - 6 - Central Government to reduce the import duty on palm oil and consequently to increase the duty on the said commodity. 8. The learned Single Judge after noticing the entire factual matrix and the legal issues raised and canvassed, is of the view, that, the impugned notifications of the Central Government has only given expression to a policy decision of the Central Government and the same is beyond the pale of judicial review and hence could not be interfered with, in a petition filed under Article 226 of the Constitution of India. It is the correctness or otherwise of the conclusion reached by the learned Judge, is called in question in this appeal. 9. At the time of hearing of the writ appeal, the learned Senior Counsel Sri.Hidayatulla would contend, that, under the Foreign Trade (Development and Regulation) Act, 1992, while the Central Government has the power to issue a notification prohibiting, restricting or otherwise regulating the import of goods into the country, it does not have the power to issue a notification prohibiting the import of goods through any particular port in India alone. Therefore, the decision of the Central Government is ultra vires the Act. Further, it is contended that the decision of the Central Government as evidenced by the impugned notification was manifestly arbitrary, irrational and unreasonable, since it W.A. No.642 & 1716/2008 - 7 - was taken on the basis of insufficient material and on incorrect factual assumptions and therefore, the impugned notifications, though it is termed as a policy decision is liable to be struck down as violative of Article 14 and 19(1) (g) of the Constitution of India. The learned counsel would further submit, that, the learned Single Judge, having come to the conclusion that this court has the power to review the policy decision of the Central Government has refused to do the same, on the sole ground that the policy decision of the Central Government is beyond the pale of judicial review and hence could not be interfered in a petition filed under Article 226 of the Constitution of India. While elaborating the aforesaid contention, the learned counsel would submit, that, the learned Single Judge has failed to consider the issue whether there was any material before the Central Government before formulating the policy which would affect the palm oil industry in the State of Kerala. It is submitted, that, the Chief Minister in his letter dated 19.4.2007 addressed to the Hon'ble Prime Minister had only expressed his apprehension with regard to reduction of import duty on palm oil, by stating that, if the decision to reduce the import duty is carried out, it will result in large scale import of palm oil and resultant effect would be the steep decrease in the price of coconuts and coconut oil, and, therefore, immediate steps requires to be W.A. No.642 & 1716/2008 - 8 - taken to reverse the decision to reduce the import duty of palm oil and protect the livelihood of the coconut farmers of the country. The learned senior counsel would further contend, that, the figures which are reflected in the letter of the Chairperson of the Coconut Development Board is in variance with the literature on coconut industry in the State which is co-authored by the Chairperson herself. Therefore, there is total non-application of mind by the Central Government while formulating the policy decision which has been notified by issuing the impugned notification. The learned Senior Counsel fairly submits that the writ court should not normally interfere with the policy decision of either the Central or the State Government, but would definitely use its power of judicial review, if the policy decision is demonstrably the result of total non-application of mind and manifestly arbitrary. In aid of his submission, the learned senior counsel has placed reliance on the decision of the Apex Court in the case of Union of India vs. Dinesh Engineering Corporation (2001) 8 SCC 491, wherein the Apex Court has observed, that, “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 mater, this court will not ordinarily interfere since these policy matters are taken based on expert knowledge of the persons concerned and courts are W.A. No.642 & 1716/2008 - 9 - 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”. The court has further proceeded to observe that, “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 learned counsel also makes reference to the decision of the Supreme Court in the case of Directorate of Film Festivals and Others vs. Gaurav Ashwin Jain and Others (2007) 4 SCC 737, wherein the court has observed, that the scope of judicial review of governmental policy is now well defined. “Courts do not act as appellate authorities examining the correctness, suitability and appropriateness of a policy, nor are the courts are advisors to the executive on matters of policy which the executive is entitled to formulate. The scope of judicial review when examining a policy of the Government is to check whether it violates the fundamental rights of the citizens, or is opposed to the provisions of the Constitution, or opposed to statutory W.A. No.642 & 1716/2008 - 10 - provisions or manifestly arbitrary. Courts cannot interfere with the policy either on the ground that it is erroneous or on the ground that a better, fairer or wiser alternative is available. Legality of the policy and not the wisdom or soundness of the policy, is the subject of judicial review”. 10. The learned Senior Counsel would further contend that the notifications are issued by the Central Government in purported exercise of their powers under Section 3(2) and Section 5 of the Foreign Trade (Development and Regulation) Act, 1992. Section 3(2) empowers the Central Government to make a provision for prohibiting, restricting or otherwise regulating, in all cases or in specified cases, and subject to such exceptions, if any, as may be made by or under the order, the import or export of the goods. Section 5 of the Act enables the Central Government, to formulate the export and import policy and also to amend the policy. The power exercised by the Central Government under Section 3(2) cannot be at variance with or contradictory to the export and import policy formulated by it under Section 5 of the Act. Thus, when the policy formulated by the Central Government was to permit the import of palm oil and its fractions into the Country, it could not in purported exercise of its powers under Section 3(2) of the Act, prohibit the import of the said commodity through particular ports in India, thus rendering the W.A. No.642 & 1716/2008 - 11 - decision of the Central Government ultra vires, conferred under the Foreign Trade (Development and Regulation) Act. In aid of this submission, reliance is placed on the decision of the Calcutta High Court in the case of Kalindi Woollen Mills (P) Ltd. vs. Union of India, 1994 (74) ELT 827, in which reference is made to the decision of Rajasthan High Court in the case of Swastika Woollen Industries (P) Ltd. vs. Union of India, 1992 (62) ELT 17 (Raj.) and the decision of the Madras High Court in the case of B.L.Tandon vs. Union of India, {unreported decision in WPC No.2167/90, decided on 25.4.1990}. 11. The learned Assistant Solicitor General, Sri.Parameswaran Nair, would submit that, the Central Government has issued the impugned notification on proper application of mind to the relevant factors and materials that are available on record and in particular the recommendations made by the Coconut Development Board and the State Government, and therefore, the policy decision of the Central Government cannot be characterised as either arbitrary or contrary to the mandate of the Constitutional provisions. Reliance is placed on the decision of the Apex Court in the case of M.P.Oil Extraction vs. State of M.P.(1997) 7 SCC 592, Federation of Railway Officers Association vs. Union of India, (2003) 4 SCC 289, Subhash Photographics vs. Union W.A. No.642 & 1716/2008 - 12 - of India, 1993 Supp.(3) SCC 323, Union of India vs. International Trading Co.,(2003) 5 SCC 437, Union of India vs. Ashutosh Kumar Srivastava, (2002) 1 SCC 188. The learned counsel would also submit that Article 14 of the Constitution does not forbid the geographical classification. In aid of this submission, the learned counsel relies on the decision of the Apex Court in the case of Gopal Narain vs. State of Uttar Pradesh AIR 1964 SC 370. 12. The learned counsel would further submit that the Foreign Trade Policy 2004-09 was formulated and announced by the Central Government in exercise of the powers conferred by Section 5 of the Foreign Trade (Development and Regulation) Act, 1992, and under clause 1.3 of the above said policy, a right is reserved by the Central Government to effect any amendments to the Foreign Trade Policy for any purpose conducive to the interest of general public, such a policy decision cannot be assailed on the ground that it is violative of Article 14 of the Constitution of India as well as violative of Article 301 of the Constitution of India. 13. The State Government in support of the impugned notification issued has also filed its counter affidavit. In that, it is stated that the oil from the coconut is a most important commercial product W.A. No.642 & 1716/2008 - 13 - derived from coconut. The coconut farmers mainly depend on the income derived from the coconut and its allied product. The increasing import of palm oil and its fractions has been adversely affecting the farmers who are depending on the coconut economy. The import of palm oil has caused steep reduction in the price of coconut oil. There is strong co-relation between the import of palm oil and fall of price of coconut oil. The Coconut Development Board in order to protect the coconut farmers had requested the Central Government to impose restrictions on import of palm oil through the ports of South India and pursuant to the request made, the impugned notifications are issued in public interest and in order to protect the interest of coconut farmers in the State. Hence, it does not infringe the fundamental rights of the petitioners either under Article 14 or under 19(1)(g) of the Constitution of India. The learned Additional Advocate General while reiterating the aforesaid contention submits that the Central Government in order to protect the interest of coconut farmers in the State, the impugned notifications are issued, and therefore this court need not upset the policy decision of the Central Government which has been done in the public interest. In aid of his submission, the learned counsel has relied on certain observations made by the Apex Court in the case of Premier Tyres Ltd. vs. K.S.R.T.C. 1993 (2) KLT 130. W.A. No.642 & 1716/2008 - 14 - 14. Sri.Kelu Nambiar, learned senior counsel appearing for the Coconut Development Board, would submit, that, the Board is a statutory authority controlled by the Union Government and the Board has a duty to promote the development of coconut industry by employing such measures as it deems fit. The learned counsel further contends that the records/Note sheet maintained by the agency which has issued the impugned notification would clearly demonstrate that the relevant inputs were taken into consideration by the agency before issuing the impugned notifications, and therefore, the decision on which reliance was placed by the learned Senior Counsel for the petitioners would not assist him in any manner whatsoever. It is further stated that the decision of the Calcutta High Court which is pressed into service was rendered in the context of a different enactment and also on a different fact situation and therefore, it cannot be said that the impugned notifications are in violation of any Constitutional provisions. 15. The method by which the Central Government has reached its decision and the extent the judicial review of the decision can be made has been the subject matter of discussion for a long period predating the Administrative Procedure Act. A series of Supreme Court decisions dating back to “New deal era” and continuing up to 2008 have W.A. No.642 & 1716/2008 - 15 - provided orderly approach to these issues. 16. Petitioners claim that the final decision making process by the Director General of Foreign Trade, prior to issuance of the notification was primarily dependent on the letter of the Chief Minister and the letter of Chairperson of the Coconut Development Board, and there was no other relevant material which could facilitate to formulate a policy by amending its earlier policy and therefore, the policy decision is invalid and manifestly arbitrary. 17. In our view, in matters like this, the full record must be utilised, although such enquiry into the mental process of the decision maker is generally to be avoided, since the policy decision is entitled to a presumption of regularity. However, that presumption is not to shield its action if it is manifestly arbitrary. In the present case, there was contemporaneous explanation of the decision maker in the counter affidavit filed before this court, but that explanation may have been “curt” but it surely indicates the determinative reason for the final decision. In the records produced by the Additional Solicitor General, we find a lot of correspondence by the representatives of the coconut farmers with various Ministries including the Hon'ble Prime Minister. The first letter is dated 15.8.2005, by All Kerala Coconut Farmers' Union to increase W.A. No.642 & 1716/2008 - 16 - 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 3.2.2006, 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. 18. The Chairperson of Coconut Development Board by her letter dated 6.12.2006 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. 19. The Chief Minister of Kerala. by his letter dated 19.4.2007 to the Hon'ble Prime Minister has brought to his notice the