Case: Daya Vs. Joint Chief Controller of Imports &amp; Exports, &amp; Another

2. 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 year 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 internal 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 have exported any quantity of the ore won by him in or prior to the year 1953.3. 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 no 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 allotment of such wagons. The Government also took a hand in regulating the movement of wagons 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 co-ordinated with and correlated to certain changes which were effected for regulating the export of the commodity itself.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 had been unable to fulfil their commitments which had caused inconvenience to foreign buyers and so undermined the latters confidence 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) Mine-owners based on a annual average of the quantity of ore on which royalty was paid during the calendar 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 not necessary to refer as they are not material to the points now in controversy.6. It will be noticed that the control thus exercised and the restrictions thus imposed, mine-owners 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 "new-comers" was receiving their attention and that an announcement in that regard would be made in due course.7. 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 mine-owners 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 not refer.8. As regards 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 had 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 contracting, 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 mine-owners, 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 policy-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 followsFrom 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 mineowners 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 "new-comers" 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 had their own mines from which the ore required by them was won, and (b) in the absence of an internal market the mines 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 "new-comers" 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 mine-owners. 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.9. 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 mine-owners who were "new-comers", 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 facts giving rise to this appeal may be briefly stated. The appellant is the lessee of manganese mines situated in the State of Madhya Pradesh. He carries on the business of mining and selling the ore raised therefrom. There is practically no internal market for manganese, and most of the manganese produced in India is exported to foreign countries. The internal trade in regard to manganese ore being negligible, it may be ignored for the purpose of this case. Till about the middle of 1956, miners, including the appellant, were free to deal with foreign buyers for exporting their products and to sell them at their sidings to exporters or to carry them to any port by obtaining necessary wagon allotments from the Railways. But from May, 1956, the Government of India issued various notifications progressively restricting the export quotas available to the shippers and mine-owners, culminating in a stage when direct export by mine-owners and shippers was stopped and the entire trade canalized through the State Trading Corporation originally formed by the Government as a private company under the Companies Act, 1956 and subsequently made into a public company. We shall later on consider in detail the particulars of the said process. On December 1, 1958, the appellant filed an application before the Joint Chief Controller of Imports and Exports, the first respondent herein, for granting to him an export quota and licence for export of manganese ore under Clause (4) of the Exports (Control) Order, 1958, (hereinafter called the Order), and also for the movement of the ore from the railway sidings to Bombay port. The first respondent, by his reply dated December 17, 1958, refused to comply with the said request on the ground that export of manganese ore outside India was only allowed by established shippers and established mine-owners according to the "existing" orders of the Government. Aggrieved by the said order, the appellant filed the said writ petition before the High Court of Bombay, but that was dismissed. Hence the present appeal. The Joint Chief Controller of Imports and Exports is made the first respondent and the Union of India, the second respondent to the appeal.

Court's reasoning:
The effect of the policy statements and directions to the licensing authorities issued by virtue of the powers conferred by Clause 6(h) of the Exports 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 Article 19(6)(ii) be effected only by the State making a law in relation to the matters there set out. Neither the Exports and Imports (Control) Act, 1947 nor even the notified order made thereunder - 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 Clause (16) by the Constitution (First Amendment) Act, 1951. So much could beas pointed out already, the constitutional validity of Clause 6(h) insofar as it permits the canalising or channelling of the export trade is no longer res integra, this having been upheld in the Class Chatonsare 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 Section 3 and that consequently Clause 6(h) in its present form is within the rule-making power conferred on the Central Government by Section 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 Section 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 Clause 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 Section 3 of the Act mightCounsel 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.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 notquestion whether the canalising has been properly done in the sense that the groups selected are no better than the groups eliminated poses a very different problem, and if that were made out a question of discrimination might conceivably arise. We should, however, hasten to point out that it is not the case of the appellant that the established shippers and the mine-owners to whom quotas have been allotted in addition to the State Trading Corporation have been improperly included in the group of persons entitled to participate in the export trade, and that apart, there is a rational and very proper classification between those who have experience in the trade and the new-comers who do not possess these experience. In other commodities concerned in export or import, new-comers i.e., those with no previous experience in the export line but who have experience in other branches of the trade, have been allotted quotas, though this should depend upon the circumstances of each trade. It has not been suggested that previous experience in the export trade would not be a valuable qualification for the grant to a person or group of a quota, and even a preferential quota in the export trade in the commodity with which we are now concerned. It would thus appear that if the notifications had confined the entire export trade to those with previous experience, no legal objection could have been taken to the notifications on the arguments addressed to us by learned Counsel for the appellant. In such a state of circumstances the appellant would have been excluded but he could not still complain that he was illegally eliminated because this exclusion was necessary consequence of channelling or canalising of the exports through persons with previous experience in theis no doubt that if the only test of differentiation was previous experience, the preference of the State Trading Corporation to the appellant and the others of the class to which he belongs, might not be justified, but that is not the sole test by which the matter has to be judged. We have set out earlier the grounds upon which choice of the State Trading Corporation as the agency for effecting the export trade was determined by the Government and we consider that for those reasons there was nothing improper in the choice, but that on the other hand the object of the export trade, viz., the earning of foreign exchange to the maximum with benefit of a long range character for exports from this country could be expected to be attained with the State Trading Corporation as the main agency engaged in the trade. We do not therefore consider that there is any substance in the argument of the learned Counsel for the appellant that the choice of the State Trading Corporation and the granting to it of quotas on an ad hoc basis was either beyond the powers conferred upon the licensing authorities under Clause 6(h) of the Export Control Order or was otherwise open toare wholly unable to accept this argument. Whatever the term "specialised" might mean, the word "special" cannot bear the construction that it must be an expert agency in that line, in the sense that it possesses a type of previous experience which cannot be claimed by others. Without going so far as to say that a special agency or channel might mean merely a designated agency, it would be proper to construe the word as meaning, an agency selected having in view the purpose for which the channelling or canalising has to take place. In other words, an agency would be special if having regard to the purpose for which the canalising takes place it is more likely to achieve that objective than other agencies or achieve it in a larger measure than others. 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.20. In this state of circumstances the elimination of the class to which the appellant belongs, viz., new-comers 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, "new-comers" 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 that new-comers could never be permitted into that 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 "new-comers" 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 appellant were being fed on hopes of some relief to them and it was a case not merely of hope deferred 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 best 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.21. Reverting to the legal points raised in the appeal, it appears clear to us that on the premises (1) that Section 3 of the Imports & Exports (Control) Act, 1947 is a valid piece of legislation, (2) that Clause 6(h) of the Export Control Order is within the rule making 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 Article 226 of the Constitution.22. In this 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 thereunder.