Case: Union of India and Others Vs. Messrs C. Damani and Company and Others

6. The story of silver and its export has been one of fluctuating fortunes. Until February 1974 its export had been handed. Then followed a permissive period for private exporters until August 26, 1976. Thereafter, export trade in silver was canalised through, the State Trading Corporation (we may use the acronym STC, for convenience) which is whollybut with separate statutory personality. By the Exports (Control) Fifteenth Amendment Order, 1979, silver jumped from Part B to Part A to Schedule I. This switch came about since February 20, 1979, and meant a virtual ban (not normally allowed to be exported) on export of silver. This embargo on export of bullion hurt the respondent (M/s. DamaniCo. or, for short, Damani) for reasons we will now state.7. There is big money in bullion dealings, more so in the export/import business thanks to wild variations in Indian and international prices. Of course, there are also the high hazards of heavy fluctuation and sharp speculations, added to the risk of transnational adjudications implicit in international trade and private international law. Damani has been in the bullion business, and when silver export came to be canalised from August 1976, trade adjusted itself to the new realities and a flexible arrangement was evolved whereby the STC enjoyed a monopoly export business but the bullion supplies were fed into the stream by private dealers like Damani. Law is the handmaid of economics and when the economics of trade suffers a radical change law helps the process without hampering of the flaw. The flexible from of the contracts which emerged on canalization of silver export is relevant for us because the bone of contention between Damani and the STC, apart from the challenge to the vires of the Export (Control) Fifteenth Amendment Order, 1979, insofar as it prohibitscommitments (or the exclusion of such contracts from its operation, by way of interpretation), is about the efficacy of an indemnity clause in the contract between the two.8. The nation lives not for the benefit of Big Business but for conservation of its own resources, and export policy is dictated by a host of considerations ordinary imponderable for the court. Although its reasonableness is not beyond the power of this Court to examine when constitutionality is in issue, the zone is so sensitive, the subject is so strategic and the import and impact so intricate that judges do not rush in where administrators fear to tread. The reasons for the ban on silver exports brought about in to tread. The reasons for the ban on silver exports brought about in February 1979, are explained briefly by the Union of India in its affidavit :Such a step became necessary on account of depletion of the availability of silver in the country. The Export (Control) Fifteenth Amendment Order was passed by the central Government in exercise of its power under Section 3 of the Act after a full review of the prevailing conditions in the country, in the public interest, for the conservation of national resources and to meet the internal demand in the country itself. All the relevant facts were taken into account by the Central Government before issuing the order.The reasons are set out more convincingly in another affidavit as the need of the national economy :Due to export of silver on large scale since 1974, its availability in the country became considerably reduced giving rise to an increase in price of silver. The impugned order and impugned notice Exs. C and D to the petition were therefore issued by the government after review of prevailing conditions in the country and in public interest the impugned action was taken by the government is the interest of National Economy and for conservation of national resources and to meet the local demand.I submit that the policy decision of the government to ban export of silver was taken by the appropriate authority after taking in consideration all the relevant factors in exercise of powers vested in the Central Government under the law. I submit that in the very nature of things such a decision had to be taken suddenly and there can be no prior notice or intimation about the same. I submit that the impugned decision is taken in larger national interest and certain amount of alleged inconvenience or hardship to the parties in the trade cannot be helped and this is the normal incident of some risk in the trade which a trader has got to take.

Court's reasoning:
The flexible from of the contracts which emerged on canalization of silver export is relevant for us because the bone of contention between Damani and the STC, apart from the challenge to the vires of the Export (Control) Fifteenth Amendment Order, 1979, insofar as it prohibitss (or the exclusion of such contracts from its operation, by way of interpretation), is about the efficacy of an indemnity clause in the contract between theits reasonableness is not beyond the power of this Court to examine when constitutionality is in issue, the zone is so sensitive, the subject is so strategic and the import and impact so intricate that judges do not rush in where administrators fear to tread. The reasons for the ban on silver exports brought about in to tread. The reasons for the ban on silver exports brought about in February 1979, are explained briefly by the Union of India in its affidavit :Such a step became necessary on account of depletion of the availability of silver in the country. The Export (Control) Fifteenth Amendment Order was passed by the central Government in exercise of its power under Section 3 of the Act after a full review of the prevailing conditions in the country, in the public interest, for the conservation of national resources and to meet the internal demand in the country itself. All the relevant facts were taken into account by the Central Government before issuing the order.The canalisation programme has for its raison detre many purposes including policing and servicing foreign trade and, hopefully, making some profit for the benefit of the nation, apart from stabilising the countrys foreign trade on a sound and credible basis, pledging the creditworthiness of theto the Prohibition, a trade notice of February 27, 1979 was published benefit of the commercial community. It is indisputable, on account of the amendment of the law on February 20, 1979, that export of silver became impossible for the STC or for that matter for anyone else.13. We have started earlier that government is in the best position to take a policy decision on total or conditional ban of exports of commodities the gold and silver. Of course, the Union of India has taken the extreme that there is a ban on judicial review of the administrative policy behind the ban by the Central Government. We do not agree with this proposition in the light of Article 19 of the Constitution. The sovereign power is in the Constitution, not the Administration and the Court is the sentinel.Although many contentions have been canvassed before us, the battle of legal wits has been fought on Clause 9(a) which may, therefore, be treated as decisive of the present forensicthe present case, broadly speaking, we are not inclined to stand in the way of the full operation of a policy decision by the Central Government in regard to export of silver. Prima facie, national policy in this area should not be interfered with by courts unless compelled by glaring unconstitutionality. Shri Divan, taking sensitive note of our approach, readily agreed that his client would be satisfied even if the silver which he had collected at great expense and trouble and on the export of which he legitimately expected a large profit, were not allowed to be exported, provided the court would give him relief against the inequitable enforcement of the indemnity clause in the contract with the STC.21. This takes us to the circumstances which were highlighted by Shri Divan and countered by Shri Watal. The Central Government was somewhat neutral, once our inclination was made clear that we were not disposed to permit export of silver even regardingcommitments.22. The Bombay High Court discussed at great length in its interlocutory order under challenge the permissibility of export of silver in respect of which commitments had been made prior to February 20, 1971. Indeed, the High Court allowed thecommitments to be honoured because it was not impressed by the argument of reasonable restrictions based upon national interest.It is significant that there is a specific provision in the aforesaid order in clause (3) which is the foundation of the equitable jurisdiction that are propose to exercise in the present case. It is noteworthy that the STC has at no state, moved for modification of this order and has acquiesced in it. Thus, now when the appeal itself is being disposed of, it becomes our obligation, in conformity with the ad interim order to consider whether, in equity, we should give a direction that if the foreign buyer claims damages for breach of contracts from STC, STC should at all be permitted to enforce indemnity given by the intending exporters.25. Indeed, there is an express indication in the order that this question of equity will be decided at the time of the disposal of the appeal. It is also made clear to the said order that what will be disposed of by this Court will not be the interlocutory matter only but the entireconnected with the silver export pending before the Bombay High court.26. Let us recapitulate the facts relevant to the equities of the situation. The High Court had passed an ad interim order which, if carried out, would have facilitated that export of large quantities of silver. Naturally, the Union of India would have been adversely affected if this relief had not been negated by an interim stay by this Court. In this context, the significance of the direction by our learned brother, Desai J. cannot be missed. As we have indicated earlier, we are inclined to agree tentatively with the larger relief that the Union of India has claimed, namely, a prohibition of the export of silver pursuant even tocommitments. It must be permission to export silver in pursuance of contracts concluded prior to the ban. We must also notice that the indigenous supplier Damani, had collected a huge quantity of silver and offered delivery to the STC in full compliance with the contract. The first respondent had done all it could to fulfil the contract. Once the embargo on the export is upheld by us, the consequent financial loss of the first respondent must be considered from an equitable angle. It is iniquitous that on top of that it should be exposed to the risks, perhaps remote yet real, of the foreign buyer involving the STC in aout litigation fought on foreign soil. That would be double injury. (Daughter gone and the ducats too !) Of course, if the legal consequence resulted in double damage, Damani would have had to bear it in the normal circumstances. However, in the present case, this Court, while granting leave and ad interim stay, had put a condition in its order contained in clause (3) thereof. Justice and equity have been made a component of the final disposal and we cannot forsake that direction.27. The jurisdiction under Article 136 has extraordinary amplitude and abundant ambience. Its reach and range are regulated by correction of injustice and the rainbow of colours shaping the final direction may also depend as much on justice as on law. Giving realistic consideration to the many equitable facets of the facts present in the case to which we have made reference, we are satisfied that the Central Government must be content with the larger victory of total ban even on concluded contracts. The STC, notwithstanding its independent personality, is an instrumentality of the State and must be satisfied that the policy of the State is being upheld by this Court, although confined only to this case. We do not unravel the intricate folds of the law bearing on the position of the STCthe Central Government. In an appropriate case that question may have to be investigated. So far as the present appeal is concerned, the least that justice demands is not to expose the first respondent to the liabilities under the indemnity clause. We expressly leave open as a general proposition of law the question of automatic absolution from the indemnity clause so far as indigenous suppliers are concerned. The present case need not rest on the larger proposition but can be disposed of on the special situation and the narrow jurisdiction founded on equitable considerations springing from the ad interim order made by this court.28. Counsel for the STC, it is apt to state, did represent that the chances are remote of the foreign buyer being able to establish damages for breach of contract in so clear a case of frustration as the present one. Even so, he did not want to take the risk of being made liable if that liability was not available to be passed on under the indemnity clause to Damani. We have given enough reasons to hold why this recondite liability apprehended by the STC should not weight against equity which induces us to release Damani from the indemnity obligation.