SCA/19592/2006 1/64 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No. 19592 of 2006 With Civil Application No. 12200 of 2006 With Civil Application NO. 11643 of 2006 With Special Civil Application No. 19593 of 2006 With Civil Application No.12201 of 2006 With Civil Application No. 11644 of 2006 With Special Civil Application No. 19594 of 2006 With Civil Application No. 12202 of 2006 For Approval and Signature: HONOURABLE MR.JUSTICE DN PATEL ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ========================================================= GUJARAT STATE SUGAR FEDERATIONLTD., & 1 - Petitioner(s) Versus UNION OF INDIA SERVED THRO' THE SECRETARY & 2 - Respondent(s) ==================================================== SCA/19592/2006 2/64 JUDGMENT Appearance : Special Civil Application No. 19592 of 2006 Mr. K.S.Nanavati, Senior Advocate with Mr. Keyur Gandhi, for M/s. NANAVATI ASSOCIATES for the Petitioners. Mr.S.N.Shelat, Senior Advocate with Mr. S.I.Nanavati, Senior Advocate with Mr. Saurin Mehta and Mr. Vivek Manpara, advocates for M/s. Nanavati and Nanavati Advocates for respondent nos. 1 and 2. Mr. S.N.Soparkar, Senior Advocate with Mr. Amar Dave and Mr. Mehul Vakharia, Advocates for respondent no. 3. Special Civil Application No. 19593 of 2006. Mr. K.S.Nanavati, Senior Advocate with Mr. Keyur Gandhi, for M/s. NANAVATI ASSOCIATES for the Petitioners. Mr.S.N.Shelat, Senior Advocate with Mr. S.I.Nanavati, Senior Advocate with Mr. Saurin Mehta and Mr. Vivek Manpara, advocates for M/s. Nanavati and Nanavati Advocates for respondent nos. 1 and 2. Mr. S.N.Soparkar, Senior Advocate with Mr. Amar Dave and Mr. Mehul Vakharia, Advocates for respondent no. 3. Special Civil Application No.19594 of 2006 Mr. K.S.Nanavati, Senior Advocate with Mr. Keyur Gandhi, for M/s. NANAVATI ASSOCIATES for the Petitioners. Mr.S.N.Shelat, Senior Advocate with Mr. S.I.Nanavati, Senior Advocate with Mr. Saurin Mehta and Mr. Vivek Manpara, advocates for M/s. Nanavati and Nanavati Advocates for respondent nos. 1 and 2. Mr. Navin Pahva Advocates for respondent no. 3. ==================================================== CORAM : HONOURABLE MR.JUSTICE DN PATEL Date : 20/11/2006 ORAL JUDGMENT SCA/19592/2006 3/64 JUDGMENT These petitions have been preferred challenging the action of the Central Government taken under section 3 of the Jute Packaging Material (Compulsory Use in packaging commodities) Act, 1987 (hereinafter referred to as the Act of 1987). By this notification dated 24th July, 2006, it is made compulsory that 100% of production of food grains as well as sugar are required to be packed in jute packing material only. 2. An important question of law has arisen for adjudication by this Court as to whether the notification issued by the Central Government under sub-section (1) of section (3) of the Act of 1987 which prescribes that 100% production of food grains as well as sugar required to be packed in jute material only, is arbitrary and whether such decision has been taken by considering the factors which are not referred in section 3 as well as section 4 of the Act of 1987 ? 3. I have heard the learned Senior Advocate Mr. K.S.Nanavati for the petitioners , who has mainly submitted that the impugned notification dated 24th July, 2006 has been issued by the Central Government SCA/19592/2006 4/64 JUDGMENT for the jute year 2006-2007 (that is, from 1st July,2006 to 30th June,2007) which is at Annexure “A” to the memo of the petition, is patently illegal, and de hors the provisions of the Act, 1987. Factors required to be considered prior to issuance of notification under section 3 of the Act, 1987 are referred in sections 3 and 4 thereof. These factors have not been considered, on the contrary, extraneous factors have been considered and therefore, the impugned notification deserves to be quashed and set aside. It is stated by the learned Senior Advocate Mr. Nanavati for the petitioners that as per the impugned notification, 100% production of food grains and sugar are required to be packed in jute material. This has given resultant effect into a huge import of jute from neighbouring countries like Bangladesh, Nepal etc. In the year 1987, there was import of 54 tonnes of jute, whereas in the year 2004-2005, it has gone very high, that is, to 1,15,600 tonnes. There cannot be a decision by the Central Government which gives encouragement to import. It is further stated by the learned counsel for the petitioners that batching oil used in jute bags is harmful for the health of human beings. Food grains and sugar which are now compulsorily to be packed in jute bags gets SCA/19592/2006 5/64 JUDGMENT contaminated due to batching oil and affect the health of the consumers. A detailed report has been given by the Jute Commissioner that batching oil used in jute bags is harmful to the health of human beings. Therefore, these factors ought to be considered before fixing 100% usage of jute bags by sugar producers. It is also contended by the learned counsel for the petitioners that the department of Food and Public Distribution of the Central Government has also given report that compulsory jute packing norms should be reduced to 50%. This will cause reduction in the expenditure to the tune of Rs. 475 crores to the Central Government. Likewise, several other departments like department of Chemicals and Petrochemicals, Ministry of Textiles, as representatives of Ministry of Finance have recommended for reduction in use of jute packing material. It is also stated by the learned counsel for the petitioners that as per section 4, Standing Advisory Committee (“SAC” for short) has been constituted. It represents various departments in the Ministry of Central Government. These experts are considering, various factors as stated in sub- section (2) of section 4 of the Act of 1987. As per the SAC, for the jute year 2006-2007, it was SCA/19592/2006 6/64 JUDGMENT suggested, after considering all the factors which are referred to in sub-section (2) of section 4 of the Act of 1987, that 75% of food grains and 70% of sugar be packed in jute bags. Thus, the aforesaid percentage of the total production of the respective commodities is required to be packed in jute material. Various statistical data and opinions have been considered which are referred in the minutes of the 14th meeting of SAC constituted under the Act of 1987 on 5th May, 2006. These, details are at Annexure “H” to the memo of the petition. It is stated by the learned counsel for the petitioners that this advice has not been followed by the Central Government and that the Central Government has brushed aside report/advice of SAC for extraneous reasons. The learned Counsel for the petitioners has also taken this Court, in great details, to the movements of the files. The original files were also produced before this Court by Union of India and the Court has perused the original files which were also shown to the learned counsel for the petitioners. It is also stated by the learned counsel for the petitioners that the only reason given by the Central Government for not to follow the advice of SAC as constituted under the Act of 1987 is that “in view of the SCA/19592/2006 7/64 JUDGMENT commitments of UPA Government to national common minimum programme and in continuation with the policy retained during the last jute year”, 100% jute packing material is required to be used by food grains and sugar industries. Thus, the factor considered by the Central Government is the national common minimum programme and the jute policy of the year 2005. The learned counsel for the petitioners stated that there is nothing in the national common minimum programme or in the jute policy of the year 2005 that 100% production of sugar and food grains are required to be packed in jute material only. On the contrary, these are the extraneous considerations, looking to the provisions of sections 3 and 4 of the Act of 1987. The learned counsel for the petitioners has drawn attention of this Court to the statement of objects and reasons of the Act of 1987, especially upon para-3 thereof, on the following sentence “As such, it is not proposed to make packing in jute packaging material compulsory on all commodities or class or classes of commodities or their entire production.” Thus, it was not the intention to make compulsory that the entire production of a particular commodity is required to be packed in jute packaging material. It is also SCA/19592/2006 8/64 JUDGMENT stated by the learned counsel for the petitioners that the decision making process of issuance of the notification is wrong and de hors the provisions of the Act of 1987. All the relevant factors which were considered by statutorily constituted body under section 4, cannot be brushed aside by the Central Government without any reasons. There must be reasons on the file, though no speaking order is required to be passed by the Central Government. Looking to the original file, there are no reasons on the file for brushing aside the advice given by the statutorily constituted body under section 4 of the Act. On the contrary, on extraneous grounds, the decision has been taken by the Central Government for 100% use of jute packaging material, i.e. food grain and sugar. It is not in the interest of people at large. It is also contended by the learned counsel for the petitioners that the decision taken under sub-section (1) of section 3 has not been laid before the Parliament though Parliament was in session. The notification is dated 24th July, 2006 and upto 30th August, 2006, the Parliament was in session. The decision taken under sub-section (1) of section 3 of the Act of 1987 should be laid before the Parliament at an earliest opportunity. It is also stated by the SCA/19592/2006 9/64 JUDGMENT learned Senior counsel for the petitioners that the domestic manufacturing of jute is sufficient to cater the domestic need therefore, reserve market should not be given to the jute industries. It is also submitted by the learned counsel for the petitioners that even Intra-Ministerial committee had initially made reservation upto 70-75% for sugar and food grains respectively. The reasons given in the notification dated 24th July, 2006 are nothing but parrot-like reproduction of provisions of section 3 which is not correct looking to the original file and the note of Textile Ministry approved by Cabinet Committee on Economic Affairs (CCEA). Thus, relevant factors have not been considered at all and extraneous factors have been considered and what is considered is concealed in the notification. Thus, the Central Government has acted arbitrarily and the decision taken under sub-section (1) of section 3 of the Act of 1987 is ultra vires the Act, 1987. It is also stated by the learned counsel for the petitioners that even if it is assumed that the impugned notification is quasi legislative, then also judicial review is permissible, if the decision making process is de hors the provisions of the Act,1987 and if it is found arbitrary, and based upon SCA/19592/2006 10/64 JUDGMENT extraneous considerations. The learned counsel for the petitioners has also placed reliance upon several decisions, one of them is in the case of Dalmiya Cement (Bharat) Ltd. And another vs. Union of India and others reported in (1996) 10 SCC, 104 and it is submitted that as per para-31 thereof, “competing right to carry on business guaranteed to a citizen or person is also to be protected. In the clash of competing rights, of socio-economic justice, of the producers of agricultural commodities and of the individual right of a citizen to carry on trade or business, the latter yields the paramount social right. However, a balanced view has to be struck by the Central Government and directing the use of jute packaging material at the percentage of jute bags to be used for compulsory packing of commodities. It is also stated by the learned counsel for the petitioners that looking to the provisions of section 3 of the Act of 1987, percentage of usage of jute material ought to be decided looking to the facts of each case and this process ought to be done every year, that is, once it is fixed at 100%, it cannot be said that for all time to come, this percentage ought to be continued. If such a reason is given for SCA/19592/2006 11/64 JUDGMENT continuation of 100% use of jute packaging material, then it is a breach of section 3 of the Act of 1987 because every year is a separate unit (Jute year). Every year, statistical data will be different i.e. export, import, production, sale, need etc. It is stated by the learned counsel for the petitioners that in the year 1987, the Standing Advisory Committee constituted under section 4, had taken a decision for 100% use of jute packaging material and therefore, the notification was issued under section 3 for 100% use of jute packaging material. Looking to the facts of the present year, i.e. jute year 2006- 2007, SAC has recommended for 70% and 75% of jute packaging material for sugar and food grain, but without considering the factors as stated in sections 3 and 4, the Central Government has brushed aside the advice of the statutorily constituted body only on the political grounds, that is, commitment to UPA Government and on the ground of last year's jute policy. Neither of the reasons, are as per sections 3 and 4 of the Act of 1987. Political reasons are no reasons in the eye of law and last year's jute policy cannot be a reason because every year fresh decision is to be taken under sections 3 and 4 of the Act of 1987. Thus, it is stated by the learned counsel for SCA/19592/2006 12/64 JUDGMENT the petitioners that the impugned notification deserves to be quashed and set aside. The learned counsel for the petitioners has also relied upon several judgments, one of them is (2006) 3 SCC, 434, especially for the reason that the decision taken by the Central Government is not a legislative decision, but it is execution of statutory power based upon factors referred to in sections 3 and 4 of the Act of 1987. In past also, several writ petitions were preferred being Special Civil Application Nos. 12615, 11239 and 11274 of 2000, wherein also, decision taken by the Central Government was quashed and set aside vide judgment and order dated 19th June, 2006. Letters Patent Appeals have been preferred but no stay has been granted by this Court. It is also stated by the learned counsel for the petitioners that additional reasons have been given in the affidavit-in-reply filed by the Central Government. These reasons cannot support the decisions which have already been taken by the Central Government vide impugned notification dated 24th July, 2006. The affidavit-in- reply cannot supplement the reasons to the impugned notification. There must be such reasons on the file itself. Looking to the facts of the present case, no such reasons are there on the file which are stated SCA/19592/2006 13/64 JUDGMENT in the affidavit-in-reply. It is also stated that the notification is to be placed before the Parliament. Though, Parliament was in session, the impugned notification has not been placed before the Parliament. Nonetheless, this is not giving any immunity from the judicial review. For the aforesaid proposition of law, the learned counsel for the petitioners has also relied upon several judgments which are referred hereinafter in this judgment. It is also stated by the learned counsel for the petitioners that in Special Civil Application no. 19594 of 2006, the petitioner's members are carrying on their trade and business activities within State of Gujarat. They are members of the petitioner association and they are directly affected by the decision taken by the Central Government under section 3 of the Act of 1987. Therefore, this Court has territorial jurisdiction. The cause of action has arisen within the State of Gujarat for the members of the petitioner association having their business activities in the State of Gujarat. List of members of the association in the State of Gujarat has already been given with further affidavit of the petitioner association. It is a registered association and therefore, the petitioner has locus SCA/19592/2006 14/64 JUDGMENT to file the petition bearing Special Civil Application No. 19494 of 2006. Thus, it is stated by the learned counsel for the petitioners that the decision taken under sub-section (1) of section 3 of the Act of 1987 imposes 100% of total production of food grains and sugar which is required to be packed in a jute packaging material, which is illegal and dehors the provisions of the Act of 1987 and against the advice of the SAC constituted under section 4 of the Act of 1987 and such a decision has been taken for extraneous considerations and reasons and against the advice of SAC and therefore, it deserves to be quashed and set aside. 4. I have heard the learned Senior Counsel Mr. Mihir Joshi for the petitioners in another petition and he has accepted the contentions canvassed by the learned Senior Advocate Mr. K.S.Nanavati and additionally submitted that this Court had passed orders dated 14th June, 2006 as well as 12th October, 2006 which have not been complied with by the respondents. Hence, the respondents should not be heard unless they comply with the direction given by this Court. It is stated by the learned Senior counsel Mr. Joshi that no satisfaction has been SCA/19592/2006 15/64 JUDGMENT recorded by the Central Government as per section 3(1) of the Act of 1987 on the original file. No affidavit has been filed by the persons who have taken the decision on behalf of the Central Government. No facts have been referred pointing out the satisfaction and for brushing aside the advice given by the statutorily constituted committee under section 4 of the Act of 1987. Parrot-like repetition has been referred in the impugned notification of the provisions of section 3 of the Act of 1987. It is also stated by the learned counsel that out of total seven members of the Standing Advisory Committee, five members have recommended for the reduction in the percentage of total production which is to be packed in jute material. Even looking to the draft of intra-ministerial committee's report, recommendations of SAC has been accepted, but it is only Textile Ministry which has brushed aside the advice of SAC only on the ground of commitment of UPA Government (on the basis of common minimum programme) and on the basis of last year's jute policy. Both these are extraneous considerations to the Act of 1987. Common minimum programme is nothing but intra-party agreement between several parties which cannot be the basis for the departure from the advice of SAC. The SCA/19592/2006 16/64 JUDGMENT learned counsel for the petitioners has taken this Court in detail, to the common minimum programme and the jute policy and pointed out that there is nothing in these two documents which mandates 100% use of jute packaging material. Thus, it is stated by the learned counsel that the decision taken by the Central Government is not in the public interest and is against the Act, 1987. Use of Jute packaging material is hazardous to health, it encourages import of jute and ignores savings of public exchequer (As per one of the members of SAC, if this percentage is reduced to 50%, there will be saving of Government money by Rs. 475 crores). There is no transparency in the decision taken by the Government. When there is a total prohibition, State has to show why lesser reduction is not to be applied and is not beneficial. The process of shifting from 70-75% to 100% leads from restriction to total prohibition. Therefore, the impugned notification deserves to be quashed and set aside. 5. It is stated by Senior Advocate Mr. Mihir Thakore, on behalf of petitioner in another writ petition that looking to the provisions of section 3 of the Act of 1987, it is the duty vested in the SCA/19592/2006 17/64 JUDGMENT Central Government, before issuance of the impugned notification, to consider the factors which are referred to in sections 3 and 4 of the Act of 1987. The satisfaction must be arrived at by the Central Government keeping in mind these factors. If there is any other consideration, other than the parameters stated in sections 3 and 4 of the Act, weighed with the Central Government for arriving at satisfaction, it will vitiate the decision and it can be labelled as illegal and violative of the Act of 1987. Looking to the original file, the only reason given by the Central Government is the commitment to UPA Government and last year's jute policy. None of these two considerations have been referred in sections 3 and 4 of the Act of 1987. On the contrary, the Central Government could have referred the matter back to SAC. He has also accepted the arguments advanced by the learned Senior Advocates Mr. K.S.Nanavati and Mr.Mihir Joshi and has submitted that the impugned decision taken by the Central Government under sub-section (1) of section (3) of the Act of 1987is arbitrary, unreasonable and violative of the Act of 1987and therefore, it deserves to be quashed and set aside. SCA/19592/2006 18/64 JUDGMENT 6. I have heard the learned Senior Counsel Mr. S.N.Shelat and learned Senior Advocate Mr. S.I.Nanavati for the respondent Central Government who have mainly submitted that the decision taken by the Central Government is a policy decision and therefore, is not justiciable. The power of fixation of percentage of use of jute-packaging material is not available to courts. Nonetheless, the decision taken by the Central Government is in consonance with the provisions of section 3 of the Act of 1987. In fact, this decision is a legislative action and is not a quasi legislative decision much less an executive decision. He has also read over the statement of objects of the Act of 1987 and pointed out that India is an agro-based country and therefore, the protection of the jute industry is very much necessary and for their protection, the whole Act has been enacted. Constitutional validity of the Act has already been upheld by the Hon'ble Supreme Court in the case of Dalmiya Cement (Bharat) Ltd. vs. Union of India and others reported in (1996) 10 SCC, 104. It is also stated by the learned counsel Mr. Shelat that the decision is taken under sub- section (1) of section 3. There is also a provision SCA/19592/2006 19/64 JUDGMENT that such a decision is required to be placed before the Parliament. The Parliament has power to modify the said decision and therefore, such a decision under sub-section (1) of section 3 of the Act is under direct control of the Parliament. It is also stated by the learned Senior Counsel that in the last jute year 2005-2006 also, 100% of production of food grains and sugar was required to be packed in jute material. The advice given by the Standing Advisory Committee is not binding to the Government and therefore, the Central Government can take deviation from the recommendation of the SAC. It is also stated by the learned Senior Counsel that the note of Cabinet Committee on Economic Affairs was considered by the Central Government and therefore, the whole note should be treated as reasons for arriving at the satisfaction of 100% usage of the jute packaging material. It is also stated by the learned Senior counsel for the respondents that common minimum programme and the jute policy 2005 are not irrelevant considerations. It is also stated that once the grounds considered by the Central Government are found to be relevant, its