Case: Dava Son Of Bhimji Gohil Vs. Joint Chief Controller Of Imports &amp; Exports

A few facts are necessary to be stated to appreciate the exact, grievance of the petitioner and the grounds upon which the notifications etc. issued by government are stated to contravene the Constitution and in particular to infringe the freedom granted to the appellant under Part III of the Constitution. The appellant is a lessee of certain manganese mines in two areas of Madhya Pradesh. The leases are stated to have been granted to him in the years 1953 for a period of 20 years each, with an option for renewal if the appellant so desired, under the Mineral Concession Rules 1949, for a like period. It is an admitted fact that the in eternal demand for manganese ore in India is very inconsiderable, so that the ore is extracted mostly for the purpose of being exported out of India. Having regard to the date when the appellant obtained the mining leases, he could not have won any appreciable quantity of the metal during 1953, nor, of course, could he hare exported any quantity of the ore won by him in or prior to the year 1953. It is now necessary to set out the history of the restrictions on the export of manganese ore from 1953 up to the date relevant to the petition to understand the points sought to be made on behalf of the appellant. Prior to 1953, i. e., at a time before the appellant entered the manganese ore business, export of manganese ore was freely licensed, i. e., the commodity was subject to restriction as regards export, nor was any control exercised by government on the allotment of wagons for the movement of manganese ore. As the export of the ore began to expand from that date, the Railways found themselves unable to meet the increased demand for wagons and were forced to regulate the appellant of such wagons. The government also took a hand in regulating the movement of wagous by evolving a system of registration of shippers for whom priority in the allotment of wagons was ensured. It has to be added that this regulation and control over wagon allotment and wagon movement was coordinated with and correlated to certain changes which were effected for regulating the export of the commodity itself.Section 3 of the Imports and Exports (Control) Act, 1947 (to be referred hereafter a, ; the Act) enacts : "3. Powers to prohibit or restrict imports and exports-(1) The Central Government say, by under 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 or any specified description intended to be taken out of India without being reserved from the ship or conveyance in which they are being carried. (2) All goods is which any order under sub. section (1) applies shall be, deemed to be goods of which the import or export has been prohibited or restricted under section 19 of the Sea Customs Act, 1878 (VIII of 1878) and all the provisions of that Act shall have effect accordingly, except that section 183 thereof shall have effect as if for the word "shall there in the word may were substituted. (3) Notwithstanding anything contained in the aforesaid Act, the Central Government may, by order published in the Official Gazette, prohibit, restrict or impose conditions on the clearance, whether for home consumption or for shipment abroad of any goods or class of goods imported intothe powers conferred by this section the Central Government issue the Exports Control Order, 1958 (or shortly the Control Order), cl. 3 of which provided that "no person shall export any goods of the description specified in Sch. I except under and in accordance with a licence granted by the Central Government or by any officer specified in Sch. II." Manganese and iron ore were specified in the first schedule. Clause 6 of this order sets out the grounds upon which the Central Govern- ment or the Chief Controller of Exports and Imports may refuse to grant a licence or direct a licensing authority not to grant a licence. In view of certain points urged before us it would be convenient to set out this clause in full "6. Refusal of licence.-The Central Government or the Chief Controller of Imports and Exports may refuse to grant a license or direct any other licensing authority not to grant a licence (a) if the application for the licence does not confers to any provision of this Order; (b) if such application contains any false, or fraudulent or misleading statement; (e) if the applicant uses in support of the application any document which is false or fabricated or which has been tempered with; (d) if the applicant on any occasion has tempered with an export licence or has exported goods without a licence where it is necessary, or has been a party to any corrupt or fraudulent practice in his commercial dealings; (e) if the application for an export licence is defective and does not conform to the prescribed rules; (f) if the applicant commits a, breach of the Export Trade Control Regulations; (g) if the appellant is not eligible for a licence in accordance with the Export Trade Control Regulations; (h) if the licensing authority decides to canalise exports through special or specialized agencies or channels; (i) if the applicant is a partner in a partnership firm, or a director of a private limited company, which is for the time being subject to any action under clause 8; (j) if the applicant is a partnership firm or a private limited company, any partner or director whereof, as the case may be, is for the time being subject to any action under clause 8."The first restriction on the export of manganese and iron ore was imposed in June, 1956 when the Ministry of Commerce and Industry issued a public notice on June 26, 1956, setting out their policy as regards export during the half year July to December, 1956. After reciting that the government were convinced that the then existing trading mechanism as regards the export of ores was inadequate to code with the developments which had taken place in the purchasing countries, it went on to add that persons who entered into contracts with foreign buyers bad been unable to fulfil their commitments which had caused inconvenience to foreign buyers and so undermined the latters con fidence in the capacity of this country to maintain an assured line of supply. In order, therefore, to overcome the obstacle in the way of augmenting foreign exchange earnings from the expert of these ores, the Government declared that they would, help in reorientating the trading in ores on more rational lines and that for this purpose they proposed to canalise the export of ores in a progressively increasing measure through the State- Trading Corporation which would in its turn rely on the mining interests in the country and use the existing trade mechanism to the extent practicable. For these reasons, they announced that a regulation would take place of the expert of these ores during the half year July- December, .1956 through three classes of exporters:(1) Established shippers who would be granted export quotas on the average of the quantities exported during the years 1953, 1954 and 1955.(2) Mineowners based on a annual average of the quantity of ore on which royalty was paid during the calender years 1953, 1954 and 1955, and(3) The State Trading Corporation which would be given a quota on an ad hoc basis. It is only necessary to mention that the State Trading Corporation which is a Corporation owned and controlled by the Union Government came into existence by registration under the Indian Companies Act in May, 1956. Rail transport facilities co-extensive with the quota granted, were also assured for those to whom quotas were granted. There were clarifications and unsubstantial variations of this Press Note to which, however, it is riot necessary to refer as they are not material to the points now in controversy.It will be noticed that the control thus exercised and the restrictions thus imposed, mineowners who had not entered the field before 1953 were excluded from the grant of any export quota.. By a public notice dated September 4, 1956, the Ministry of Commerce, however, announced that the case of these "newcomers" was receiving their attention and that an announcement in that regard would be made in due course. The same policy and the same basis of allocation was continued for the next half year January to June 1957. For the period July, 1957 to June, 1958, (the government having now started pursuing the policy of announcing their quotas for a year instead of for six months), a Press Note was issued on June 1, 1957, by which exporters and mineowners were allotted a quota equivalent to 60 per cent of their exports made in 1958 or 1956 to be selected by them. The quota thus released was made available for being allotted to the State Trading Corporation on an ad hoc basis and the Press Note added: "The State Trading Corporation will be allotted in adequate quota to enable them to maximise the exports of manganese ore. The Corporation are being advised to seek the co-operation of established trading and mining interest to make this effort a success". Here again, certain unsubstantial modifications were made by further Press Notes but to these we shall notregards the next period July 1958 to June 1959, the policy-decision of the government was indicated by a Public notice issued on May 26, 1958. In the course of this Press- statement the Government of India stated that they had been keeping under constant review the working of the policy announced by them under the Press Notes to which we have already referred, and that they bad come to the conclusion that the long-term interests of Indian Manganese ore would be better served if the export policy were to discourage fragmentation of quotas and encourage bulk con- tracting, movement, and shipment of ores. At the same time, the Government expressed their keenness to maintain continuity in the export arrangements to the extent practicable. Having regard to these factors, they went on to state: "Government have decided that for the period July 1958 to June 1959, the export of manganese ore will be regulated as follows. (i) The established shippers, the mineowner, exporters and the state Trading Corporation will be given an allotment of quota for a quantity equal to the quota for 1957-58. (ii) Firms and parties whose individual allotments are small are advised to form Co- operative or limited companies."At the date when the writ petition out of which this appeal arises was filed, the polioy-statement of May 26, 1958, was in force and it was the validity of the restriction and control exercised by it that was challenged as unconstitutional in the petition filed by the appellant. The position at that date may be summarised as follows: (1) From and after July 1956 the export of manganese ore had been controlled or restricted.(2) The restriction had taken the form of allotment of quotas for export granted to: (a) established exporters, i.e., comprising the category of these who had exported from 1953 onwards , (b) mine-owners who had similarly exported the ore won by them with a similar limitation as to the year when they should have exported, and (c) The State Trading Corporation which was granted an export quota on an ad hoc basis to cover every other quantity which could be exported and for which a foreign market could be found. Traders and mine-owners who had not any export performance to their credit in earlier years were excluded from the scheme and though the government were repeatedly stating in their public statements that the case of these persons termed "newcomers" would be considered, this had never been done. The appellant fell within the last category and was not eligible to any export quota and therefore could not export. The result was that the ore won by him had either to be sold (a) in the internal market which, as stated earlier, was a very restricted one, this because the steel producing concerns which were the principal or practically the only consumers of the ore in the country bad their own mines from which the ore required by them was won, and (b) in the absence of an internal market the mined ore had to be sold either to established shippers or to the State Trading Corporation. In regard , to established shippers, their quota of export was being progressively reduced, so that their demand for ore naturally shrank and unremunerative price had therefore to be offered by the "newcomers" to induce them to buy. The only other possible buyer was the State Trading Corporation which was being granted quotas on an ad hoc basis sufficient to enable it to get all the good ore which it might buy for which there might be a foreign buyer. In regard to the State Trading Corporation, there was an allegation made by the appellant, by reference to a circular issued by the Corporation on April 20, 1957, that the terms offered for the purchase of ore were unfair to the sellers because of the excessively large commission it demanded. It should, however, be stated that the State Trading Corporation was not impleaded as a party in the writ petition in the High Court, nor any relief sought on the basis of that allegation. The circumstance was relied on merely to emphasise the hardship caused to the appellant from the exclusion of those who had no expert performance in the years which were fixed as the basic years for the allotment of an export quota to mineowners. The State Trading Corporation being owned and controlled by, the Central Government is an agency or instrument of government for effectuating its commercial policy. If in the performance of its duties as such public authority it acts in any improper or unfair manner it would be subject to the control of the Courts but as no relief based on such a complaint was claimed by the appellant, it is not necessary to pursue the point or examine its merits. The case of the appellant has to be judged on the basis of two admitted features resulting from the policy statements of Government we have set out earlier : (1) That mineowners who were "newcomers", i. e., not having export performance in certain basic years, were excluded from direct participation in the export trade, but these persons had, in view of the practical absence of an internal market for manganese ore to sell their goods to others. who had been granted facility for export. (2) That the category of persons to whom they could sell their ore were two (a) Established shippers, and (b) The State Trading Corporation, and with the nature of this market as already described.The question raised for consideration by the appeal is whether the withholding of the right to engage in export trade from this class of mineowners constitutes an unreasonable restriction on their right to carry on business guaranteed by Art. 19 (1) (g) of the Constitution. Pausing here we might put aside one matter which is beyond the pale of controversy, and that is that the constitutional validity of s. 3 of the Imports & Exports Control Act, 1947, which forms as it were the ultimate root from which the impugned notifications and executive actions spring is conceded. The points urged by learned Counsel for the appellant were two : (1) Clause 6 (b) of Exports Control Order 1958, was beyond the rulemaking power under s. 3 of the Imports & Export Control Act, 1947, (2) Even if el. 6 (h) and the "canalising" of exports through "special" or "specialised" agencies or channels be valid, the notifica- tions by which the canalisation was effected are outside the contemplation of the agency or channel under el. 6proceeding further it is necessary to mention that the constitutional validity of el. d (h) of the Export Control Order 1953 was not disputed before us, the controversy in relation to it having been concluded by the decision by this Court in Glass Chatons Importers and Users Association v. Union of India (A.I.R. 1961 IS.C, 1514.). The argument in support of the contention that el. 6 (h) was beyond the terms of s. 3 of the Act was briefly this : Section 3 of the Act by its language, its setting and context permits restrictions or controls only in regard to goods which are the subject-matter of export and does not permit restrictions being imposed on persons engaged in the export trade. In other words, the Central Government is enabled by a notified order under s. 3 of the Act (a) to specify the goods in respect of which the control or restriction is to be exercised, along with (b) a matter which this necessarily involves, viz., the quantities that may be exported, (e) the quality of the goods that might pass out of the country and (d) as regards the destination to which they might be exported. But the restrictions could not extend any further. An order under s. 3 cannot make provisions restricting the persons who might participate in export trade, restrict either their number or impose qualifications which they must satisfy before being permitted to export. Besides, even if a notified order might validly prescribe the persons who might participate in the export trade, still it did not authorise an order which would so canalise or channel the persons who might engage in the export trade as practically to create a monopoly in favour of any particular person or group which is what r. 6 (h) has effected.The argument was put in a slightly different form by reference to the provisions of Art. 19 (6). Article 19 (1) (g), after guaranteeing to all citizens the right to carry on any occupation, trade or business, had gone on to provide in cl. (6) the restrictions which may constitutionally be imposed on the right thus guaranteed, and the clause as it now stands after the first Amendment of the Constitution reads. to quote the material words : "Nothing in sub-clause (g) of the said clause shall affect the operation of any existing law in so far as it imposes, or prevent the State from making any law imposing, in the interests of the general public, reasonable restrictions on the exercise of the right conferred by the said sub-clause, and, in particular, nothing in the said sub-clause shall affect the operation of any existing law in so far as it relates to, or prevent the State from making any law relating to, - (i) (ii) the carrying on by the State, or by corporation owned or controlled by the State, of any trade, business, . industry or service, whether to the exclusion, complete or partial, of citizens or otherwise". The effect of the policy statements and directions to the licensing authorities issued by virtue of the powers conferred by el. 6 (h) of the Export Control Order 1958 had resulted in the creation of a monopoly or a near monopoly in favour of the State Trading Corporation. It was urged that the creation of such a monopoly could on the language of Art. 19 (6) (ii) be effected only by the State making a law in relation to the matters there set out. Neither the Export & Import Control Act, 1947 nor even the notified order made there under-The Export Control Order, 1958 could be said to be "a law relating to the carrying on by the State of any trade, business, industry or service" and therefore the validity of the preferential treatment granted to the State Trading Corporation could not be justified or upheld by reference to the amendment effected to el. (16) by the Constitution (First Amendment) Act, 1961. So much could be accepted. But this, however, leaves for consideration the question whether the provision now impugned could not be sustained as "a reasonable restriction" on the exercise of the rights conferred by sub-cl. (g) of Art. 19 (1) in the interest of the general public i. e., on the opening words of para 1 of cl. (6). But as pointed out already, the constitutional validity of el. 6 (h) in so far as it permits the canalising or channelling of the export trade is no longer res integral this having been upheld in the Glass Chatons case (A.I.R. 1961 S.C. 1514, ).In the circumstances, the very narrow question for consideration, is whether the restrictions and control for which provision might be made by s. 3 would not include a provision for canalising the trade in any particular commodity. We are clearly of the opinion that the restriction or control in the form of channelling or Canalising the trade is not outside the limitations which might be imposed on export trading by s. 3 and that consequently el. 6(h) in its present form is within the rule-making power conferred on the Central Government by s. 3 of the Act. The argument that the restrictions which could be imposed or the control which might be exercised on exports by orders made under s. 3 of the Act, could not extend to restrictions on persons who might be permitted to engage in the export trade has only to be stated. If the quantum of the export in a commodity could be restricted, the control that would effectuate this must necessarily extend to the persons engaged in or desirous of engaging in the export of that commodity and this would a fortiori be so, if the restriction takes the form of a prohibition of exports in a commodity altogether. If therefore the control or restriction could legally extend to the persons who are engaged in the trade; it would appear to follow as a logical step that the restriction might take the form of classifying the persons who might participate in the trade and the conditions subject to which any particular class might be permitted to do so. It would be a matter of policy for the Government to determine, having regard to the nature of the commodity and the circumstances, attending the export trade in it, to lay down the basis for the classification between groups and fix their relative priorities etc. When el. 6(h) permits "canalising" or the "channelling" of exports through selected agencies it does not no more than make provision for the classification into groups etc. which but one of the modes which the "control" under a. 3 of the Act might assume.The next point to be considered is whether the notifications issued by which (1) the export trading in manganese ore is confined to three groups of persons engaged in the trade, viz., (a) established shippers, (b) mine-owners, and (e) the State Trading Corporation, the two former being allotted quotas based upon the export effected by them during certain basic years, (2) the progressive reduction in the quota of groups (a) & (b) with a view to enable the available export business to be handled by the State Trading Corporation, and (3) as a necessary result of the above the elimination from the export trade of the class known in the trade as "new- comers" was permitted under el. 6(h) of the export Control Order, 1958. It would be seen from the above that there are two grievances of the appellant which are inter-related: (1) The first consists in the complaint regarding the quota allowed to the established shippers and mineowners who had an export performance during a basic year. Learned Counsel however, did not put this forward as any serious grievance because persons falling within those already in the trade and the appellant who wants to come into the export trade could not legitimately object to those already in it being allowed facilities or licences for effecting exports. In his petition before the High Court the appellant raised a complaint that the basic years fixed in the policy statement were arbitrary but the fixation of any year must be so, and if the Government fixed as a basic year, a period three years before the announcement of the policy, i.e., took into account performance within a period of three years before that date, we do not see any unreasonableness or arbitrariness about it. (2) It was in regard to the inclusion of the State Trading Corporation among those entitled to export and the increasing quota given to it on an ad hoc basis without reference to any antecedent performance that the main attack was directed and it was this that learned Counsel stated amounted to a monopoly which was not countenanced by the law. It will therefore be sufficient for us to confine attention to the grounds upon which the successive notifications which afforded increasing facilities to the State Trading Corporation for export were challenged.Pausing here it would be convenient if we set out the reasons why according to the respondent the State Trading Corporation was preferred as a principal agency for canalising the export trade in this commodity. The vital necessity of export earnings for sustaining national economy not being a matter of controversy, the question which the government had to consider was how best to ensure the optimum earning from exports of manganese ore. India has no monopoly in the production of this ore and consequently the price of the commodity in the foreign market is dependent on world-wide factors. Having regard to the use to which the ore is capable of being put, viz., by steel factories in the production of steel, the foreign buyers, (and in this one factor to be taken into account is that in several foreign countries external trade is conducted through State agencies), are insistent that there shall be a regular supply of ore of uniform quality. There had been complaints in early years, when the trade in the commodity was unrestricted and not under any control, that the quality of the ore supplied was not according to sample, with the result that even the trade of those who took pains to maintain their quality of supplies suffered. It was in these circumstances that government stepped in 1956 by imposing restrictions and by assuring the foreign buyers of a regular supply through the mechanism of the controls exercised in this country. These facts were not disputed.

Reasoning: In that sense we have no hesitation in holding that the State Trading, Corporation might be a "special" agency or a channel for the purpose of enabling the country to maintain and foster the continuity of its trade in the commodity by ensuring exports in adequate quantity and of proper quality. In this state of circumstances the elimination of the class to which the appellant belongs, viz., newcomers who had no previous experience of the export trade during the basic year or earlier was the result of enforcing a permitted method of control and a type of restriction which it was legally competent to be imposed under 6 (h). In the case of other commodities, "newcomers" have been granted a quota. That however naturally depended upon the nature of the trade, the nature of the export market and other factors which it is the province of government to take into account. Having stated this legal position, we would hasten to add that it was not the view of the Government that the export trade in manganese ore was such into that that newcomers could never be permitted trade is clear from the several, policy-statements themselves in which, from time to, time, they conveyed an assurance that the allotment of quotas to the "newcomers" was under consideration. In the case of a commodity like manganese ore for which there is not much of an internal market the denial of a right to any group or we shall add, to any individual to export would in effect affect him adversely forcing him to sell to others who have been given such a facility. Persons like the app- ellant were being fed on hopes of some relief to them and it was a case not merely of hope deferrer making the heart sick, but of dashed hopes that led the appellant to approach. the Court for relief. Though we consider that the appellant has no legal right to the relief that he sought, his grievance is genuine and it would be for the Government to consider how beat the interest of this class should be protected and it is made worth their while to win the ore so as to expand, foster and augment the export trade in this valuable commodity.Reverting to the legal points raised in the appeal, it appears cleat to us that on the premises (1) that s. 3 of the Import & Export Control Act, 1947 is a valid piece of legislation, (2) that cl. 6 (h) of the Export Control Order is within the rulemaking power of the Central Government and is constitutional, there is no escape from the conclusion that no legally enforceable right of the appellant has been violated for which he could seek redress; under Art. 226 of thethis view it is unnecessary to consider whether the appellant having prayed primarily for the issue of a writ of mandamus to direct the licensing authorities to consider his application for an export licence for the half year current at the date of the petition , without reference to the terms of the impugned notifications and policy statement" and that half year having long ago gone by, he could be granted any relief by the High Court on his petition or by this Court on his appeal. It is possible that in such circumstances a person situated like the appellant might be entitled to a declaration as regards the validity of the restrictions imposed which continue to be in force even beyond the half year or year to which the licence relates. It is however unnecessary to pronounce upon this question which does not really arise for consideration in view of the conclusion that we have reached that the restrictions and control to which the trade has been subjected are legal and justified by the Act and the Rules framed there under.