SUPREJ\IE COl'.RT REPORTS v. U1'ion of India

The pctitionern, M/s. R~m Chand Jagadish Chanel are a firm engaged in business as exporters and import-0rs. March 1959, the petitioners exported to Singapore, Bush Shirt Cloth, GID.ss Nylon, Art silk Piece Goods and Superior Class Nylon of the total C.I.F. value of Rs. 7,10,817/-, and relying upon cl. (2) of the Export Promotion Scheme as out.linod in the Import Trade Control Policy, called upon Controller of Imports to issue licenoes for artsilk yarn for R~. 4,04,218.62 np. and Rs. 3,03,490.93 np. tho months of Fcbruqry and respectively for - 1981 M/•· Baaich<!ll<l J"4afi, llh' ChsJatl v. Uni<m of India Shal>J. 3 S.C.R. SUPREME COURT REPORTS 77 March 1959. The petitioners claimed that they had, pursuant to the Export Promotion Scheme, exported artsilk goods to Singapore and had earned net foreign exchange of the value of Rs. 7,07, 709.55 np. and that. they were entitled to import licences for artsilk yarn of that amount.

In September 1959, the petitioners were informed by the Assistant Controller of Imports and Exports that a consoli dated licence for the months of February and March, 1959 was granted to them for import of artsilk goods of the value of Rs. 3,19,35~/-. It appears that the Government of India, having come to learn of certain malpractices by the importers of artsilk yarn, while suspending the Export Promotion Scheme as from March 9, 1959, announced that applications which were pending with the port licensing authorities will be scrutinised by a Committee and in May 1959, the Government of India appointed a Committee for verification of the value of goods exported. The petitioners appeared before the Committee and furnished docu mentary evidence in support of their claim for 100% of the rupee equivalent of the cloth exported. The Committee accepted as reasonable the rates at which the exported "Flock Printed Nylon Dyed" cloth was exported by the petitioners, but in their view, the rates at which "Bush Shirt Cloth" was exported could not be accepted as reasonable and for the purpose of the Export Promotion Scheme, the value of that cloth should be computed at the rate of Re.

1.50 np. per yard of 36" width. The Controller of licences accepted the recommendation of the Committee and issued to the petitioners an import licence for Rs. 3,19,354/- only. The peti tioners after making an infructuous demand for a licence for the value of the goods exported, filed this petition under Art. 32 of the Constitution for a writ or direction in the nature of mandamus directing the Chief Controller of Imports and to grant to the petitioners al} imporfi :Exports ' < • ' 1981 M /._ Raf!Vhond Jq,.diah Oliand v. Unio11 of India Sltah J. ' 78 SUPREME COURT REPORTS [1962] licence for the month~ of February and March 1959 equivalent to I 00% of the goods exported by them in rnlevant previous months and in the alternative, to issue a w·rit of certiorari c•alling for the records and proceedings resulting in the issue of a licenco of the value of Hs. 3,19,354/· and for an ordor quashing the same anrl granting to the petitioners a licence for the fnll amount claimed by them.

The petitioners submitted that the Controller of licences had arbitrarily reduced the valnc of their import licence under the Export Promotion Scheme and had thereby unlawfully infringed their funda- mental to carry on busine;;8. They also claimcrl that the Controller was hound to grant licence to import artsilk yarn under the Export Promotion Scheme for the fnll value of the goods exported by thorn, and in failing to do so, had practised discrimination against the petitioners, because several other importers of artsilk yarn who were the petitioners' ri\·als in trade during the identical period were gi,·en licences for amounts "ranging between 85 and 100 per cent of their exports". Tn paragraph 22 of their petition, the petitioners submitted a table setting out the names of eight such exporlern, the amount and the percentages granted to such exporters. Thc> fundamental right of a citizen to carry on any occupation, trade or business nndcr Art.

I !I (l){g) of the· Constitution is not absolute: it is subject to reasonable restrictions which may be imposed h.v the statn in the interests of the general public. The right of the State to impose controls in the larger interest of the general public on imports has accordingly not been denied : nor has the authority of the State to i;;sue the Imports (Control) Order, l!l5ii in exercise of the power8 conferred by the Imports and Exports (Control) Act pro\Tiding for imposition of restrictions by permit- ting import of certain goods only in accordanco with licences O!" cqstoms permits granted by tlw ... : ... < -·

1981. M/•. ·Ram&hatld Jagadi•h Chand v. Union of India Shah J. • - ... 3S.C.R. SUPREME COURT REPORTS 79 Central Government, been challenged. It was suggested somewhat faintly by Mr. Viswanatha Sastri on behalf of the petitioners that the power granted under cl. (3) of the Imports (Control) Order, 1955 was uncanalised power in the matter of fixing percentages and to that extent, the authority imposed an unreasonable restriction on the freedom to carry on business. But the authority to grant or refuse to grant licences is conferred upon high officers of the State and the grant of licences is governed by the Import Trade Control Policy which is issued from time to time and detailed provisions arc made in the Imports (Control) Order setting out the grounds on which licences may be refused, amended, suspended or cancelled (see els. 6 to 9 of the Order). Provision to afford a bearing to the licence before action is taken under els.

6 to 9 is also made. It cannot therefore be said that the power conferred is uncanalised or arbitrary. the artsilk fabrics exported. The argument seriously canvassed by counsel for the petitioners was that relying upon cl. 2 of appendix 42 of the Import Trade Control Policy, the petitioners had exported artsilk fabrics, and had earned foreign currency, and they could not, except for good :ctnd adequate reasons, be deprived of import licence to the full extent of 100% of the The value of petitioners say that they purchased the goods from various merchants and by exporting those goods earned foreign exchange which was duly credited to their account by their bankers, and in reducing the import licence to approximately 45% of the value of the goods exported, the State has, by executive order, imposed an unreasonable restriction upon their right to carry on business. But under cl. 2 of the Export Promotion Scheme as outlined in appendix 42 in so far as it related to licences for import of artsilk yarn, the Controller of Imports is authorised to grant licences upto the percentages specified in that clause : there is no right t4erebr 1981 M/1.

R..,,chand JltgOO;.h Chand v. Union of India Slla% J. 80 SUPREME COURT REPORTS [1962J created to the exporter t-0 obtain a licence for the full 1·nluc of tho commodity exported. Under cl. 2 oft]}(' scheme the Controller has the powm· to grant a licence for a.ny amount upto I 00% of tho rupee equivalent of the foreign exchange earned on tho basis of the l<'.0.B. value of the goods ex ported. By that clause, the exporter is not given import licence for any the opt ion to claim an amount not C'Xcceiling the value of the foreign exchange earned by Pxport of good~. The clause invests the Controller with authority, it <locs not. impo8c an obligation upon him <!11for1·<'able at the instance of the exporter, to ibsu" a liccn('c for the amount (Subject the maximum prescribed) clainrnd by the exporter. The power is plainly discretionary. It i8 true that the discretion has to he exerci;;ed reasonably and not arbitrnrih-. The licensing authority woul;l normally issue an' import licence for l 00% of tho Yalue of tho good.~ export<'d, but having regard to ~pecial considcratiims such as difficult foreign exchange position or other matters which have a bearing on the goncral intcn·~t of the State, import licences for a smaller percentage may he granted to the exporters.

But h:•: the use of the expres~ion "upto tho following percentage of the rupee equivalent" power to fix arbitrarily a per centage of the ,·alue of the goodR exported for awarding an is not granted. import licence • .. , • fn ~ranting a licence to the petitioners for· exercised Rs. 3,19,354/-, has th<' authority ht'<'n arbitrurily or is it supportr<l by som<' reasonbly discemible prinriplc? Ram llfurth Sharma, Deputy Chief Controller of' Imports unrl Export~ i11 his affidavit stated that of the Export Promotion Scheme wrongful advantage waH take11 by some exporterR of artsilk fabrics ' it wa~ found by the Government of India invoice valu<'s or artificial silk fabrics were inflated by the exporters / by more than 100% of the value with the object of importing "speculative'' coplmoqities like artij, icia! 19il M/s. llam~anJ J agadi1h Chand v. Union of lndig, Shah J. 3 S.C.R. SUPREME COURT REPORTS 81 silk yarn.

Sharma stated that "as againsi, 381 thousand yards of artificial silk fabrics exported during the period January-June, 1957 at a value of about Rs. 456 thousand i.e., at about Rs.l-2-0 per yard the merchants sought to show the rise in price for tho export of suuh goods during October March 1959 at Rs. 2-9-0 per yard so that for 986 thousand yards exported, the invoice value shown was 28, 799 thousand rupees, even though the actual price of the goods in the wholesale market had no1 at all .risen to that extent between those periods. The index number of wholesale price 111 India in respect of "silk and rayon" fabries rluring the month of June 1957 was 85 and during the month of March 1959 it rose to 95. 7 only thm showing a rise of about 11 %- Against this rise, the rise in the price invoiced by the exporters showed a rise of over 125% during the span of the same period. This will clearly show that the aforesaid rise was shown by merchants merely with a view to get licences for higher value for the import of speculative item .like "Art Silk Yarn.

" Relying upon this evidence, counsel for the Union contended the Export Promotion that this perversion of Scheme had seriouH repercussions on the foreign exchange position, and the scbeme was suspended by notification dated March fl, I 959, and the Govern ment directed that the pending applications for import licences for artsilk yarn be scrutinised by a behalf. The Committee Committee scrutinised the cases of 1106 parties including the petitioners, and the petitioners were given a licence for Rs. 3,19,354(-, and by reducing the value of the import licence, no fundamental right of the petitioners under Art. 19 of the Consti tution was infringed. appointed A scrutiny of the applications for licences in the Export Promotion view of the misuse of Scheme and granting of licences on the result of ~qch scrutiny cannot be regarded as imposin¥ all ·-M / •. Ji<t>nc 1""'4 J<>g/J/Ji•h. Girand v. lloim of India Shah J. - 82 . SUPREME COURT REPORTS (1962] earning urtreasona hie restriction.

Tbe State is as much concerned with foreign exchange as maintaining and consolidating its export trade. If a large quantity of goods bo dumped at excessive prices in foreign markets to meet a temporary demand in tho ultimate result tho export trado of If taking advantage of the State may suffer. temporary cleman<l.s in the foreign market, the exporters charge excessive prices which are not commensurate with reasonable profits on the roal value of the goods awl seek to iil\'cst tho profits earned in speculative commo<litics thereby endangering the internal ccoriomy of the country, the State may be justified in taking steps to prevent the exporters from obtaining advantage of such excessive profits by refusing to afford facilities for importin~ goods to the exporters who seek to rel.v upon tho export value of tho goods at inflated rates. The affidavit of Sharma shows that in ;i number of cases, importing firm in tl1c foreign country was only a "sister concern" of the exporting house, and the exporters adopted the expedient of inflating the price with the object of adjusting the excess valuo received by them.

It appears therefore that some exporters under cover of the Export Promotion Scheme by inflating the prices were fouucl uot only to import speculative varieties of goods for very much larger values than the real prices justified, but were suspcctc<l by tho authorities even to foreign assets without disclosing the repatriate It <'annot same to the State n.s require<l by law. th1~refore be sai<l that the power granted to the licensing authorities to grant licences only upto the maximum specified in el. 2 of the Scheme ia. by itself an unreasonable restriction; nor will the notification directing scrutiny of all applicatiom1 amount to .imposing an unreasonable restriction. · Counsel for the petitioners however submitted .that .the Controller had placed no evidence. on the record that the petitioners have, for the goods ,;.. I ~ ---- 1961 M /•- l?ciinchand Jag!idi~J, .Chan·/ .v:· Un£o'ii.'of.

India -shah J. . .38.0.R. SUPREME COURT REPORTS .83 . purchased by them in the Indian market, not paid · Rs. 7,07,709:.55 nP. or that any part thereof repre repatiated sented foreign assets intended to be contrary to law. Counsel submitted that M/s. V. M. S. Abdul Razak & Company to whom the goods were consigned are not a "sister concern" of the petitioners and that in the affidavit of the Deputy Chief Controller of Imports and Exports it is not denied that the petitioners had received the full ''alue for which the goods were exported by them. But in considering the case of the petitioners, the Committee observed : "The party hae purchased Bu~h Shirt Cloth from J. C. Vakaria & Sons, Govardhandas Iswardass International Trading Agency, Agwarwla Brothers and Calcutta Silk M<tnufacturing Co., Ltd. Rates vary from Rs. 3.87 to Rs. 3.92. x x xx neither the purchase vouchers nor the export invoices contain any description nor give any idea as to whether the material was Nylon, Rayon, Nynon, etc.

" The committee also observed that the peti tioners were "not able to produce adequate justifi cation of the prices of Art Silk Bush Shirting Cloth. Samples cannot be linked with the relative pur chase vouchers or export invoices. " They then pointed out that the correspondence with M/s. Abdul --. _ Razak & Company did not give any "justification nor contained any description to link the goods with the materials sent," and in the light of these findindgs, the Committee recommended that the value of bush shirt cloth for the purposes of import licence be calculated at the rate of Re. I. 50 nP. per · yard. It is somewhat unfortunate that the Com ·mittee have not stated in the reasons given by them ,i, · that Re. I. 50 nP. was the prevailing market rate in respect of Bush Shirt Cloth at the time of the - export in the Indian market. But in paragrabh 22 of the respondents' affidavit, it is stated that "the petitioner tjrm has been ~ranted licence e~ual tc;> 1961 lif/8.

Rarnchan.Z Jaaadish Chand .... l}nio·1~ of IndirJ --,~- 7 - \ Shah J. SUPREME COURT REPORTS [1962] .. 100% of the value which has been . arrived at as reasonable value of the exports effected by the firm. " · · • The petitioners alleged that the decision of • exported,. . the Committee was arbitrary ; the licensing autho rity contends that the decision was made after ascertaining the reasonable value in the Indian : market at the material time of the goods exported py the petitioners. The petitioners have not placed before the court any independent evidence . to.show that the current market rate of "bush shirt cloth" which was substtmtially exceeded the rate of Re. 1. 50 nP. per yard of 36" width; In the circumstances, we would not be justified in assuming that the - Committee made an arbitrary decision in arriving at the value of the hush shirt cloth exported for the purpose of recom mending· the grant of import licence.

The contention that the order passed by I.he . Controller granting a .licence only for45% of the value of the goods .exported infringes the funda mental right, of the petitioners under"·~rt. 19 (1) (g) by imposing - an · unreasonable restriction cannot therefore be sustained. Does the_ fact that the petitioners have been granted licence approximately for 45% of the total value of the goods exported amount to discrimi . nation entitling them to protection of Art. 14 of the Constitution ? Under the Export Promotion .. Scheme, the petitioners have exported artsilk goods of the value of Rs. 7,07,709.55 nP. and may in the normal course have been entitled to import licence for ,100% of the value of the goods exported unless . there was a reduction in the value of the licence .for imports on account of certain circumstances . such as general deterioration of the foreign exchange position or necessity to conserve a particular . currency or other justifying a the maxima set out in cl.

2 of . departure :from circumstances -· 3 S.d.R. · SUPREME dOURT REPORTS 85 - > personal to the petitioners or appendix 42 of the Export Promotion Scheme. The reduction may also be justified on grounds to a group to which they belonged. Any malpractice or under-hand dealing may warrant such a reduction. " /961 .ill /s .. Rarnchand J agaditJh . Chand v. Un1'on of ~nd1·a Shah J. - - It was the case of the respondents that many exporters were guilty of malpractices and with a view either to speculate in artsilk goods or to repatriate unlawfully foreign assets, the valmi of In th<' the goods exported was unduly inflated. order passed by the Committee appointed by the Government of India, dealing with the case of the petitioners, it was observed that the petitioners had business relations with certain firms and that the rates at which bush shirt cloth were purchased varied from Rs. 3.87 to Rs. 3.92 nP. The Committee was not satisfied that the documentary evidence produced by the petitioners related to the goods exported by them.

These findings disclosed that, in the view of the Committee, thP.re was reason to believe that the claim of the petitioners that they had purchased goods approximately for the priCeo; at which they were exported, was not made out. The Committee accordingly the value of "bush shirt cloth" should be computed at the rate of Rs. 1.50 nP. per yard. It is trut> that there is no definite evidence on the record indicating that that was the current market rate, but the court may be justified in holding that the members of the Committee who were vitally concerned with the trade in artsilk goods were conversant with the current market rates of the . cloth which was exported by the petitioners. recommended Counsel for the Union has placed before us in the course of the hearing the report of the Committee in respect of seven out of the eight exporters who the petitioners claimed had been given import lictmce_ for . t):i{) full value_ of the export1> •. The,r_Q;pQJ'J;:,0f, t~c QlJ_i;nrojtte«. with_~~g~rq __ to M/s.

E,ajastban. ·Expo~.ters:and _Importe~!j, .C~l011tta !JfA" ·Ratt\Chand .lagttd1.ih Chand v. r1tii1tn of 11ttf. Ui Shah J. .. . - I .• StJ1.>REME COGRT ItEPORTS [ 1962] to be is not placed before us on tho pica it· is not immediately available. On a perusal of the report of the Committee with regard to tho other exportNs, it may b<' stak<l tlmt the claim of th<' petitioners that H.aghunath Rai Piyarilal wero gi\·en import licence for the full value of the goods exported is not correct. It appears. from the r<·cord that only 40% of the .F.O.B. value "Glass Nylon dyed" exported in respect of application No. 36. Simi larly, in respect of application Xo. 35, 40% of the F.O.B. value was to bo taken for the purpose of granting import licenceR. It is true that in tho cases of the other importers . Premsukhdass Sitaram, Indian Exporters and Imporkrs Corpora tion, M/s. Univc111al 'Vatch Emporium, M/s. ,Jawahar Knitting Hosiery, M/s.

Va~tralaya Ltd. and t.l/s. Agarwala Trading Co., Ltd., the Committee have recommended acceptance of the purchase prices submitted by the <'Xport-0rs in granting import licences. thegc import-0rs were gi\·en Jicencc for 100% of the export value of the goods. But the Committee have given reasons which appear to be rrima facie tlwsc expor. for accepting the daim:; (\f ff, on tho materials placed before them, ters. the Committee were satisfied that there was some misconduct or under-hand dealing on the part of the petitioners, or that the evidence led before them justified the Gomm it tee in holding that tho goods exported were not of the value claimed by the petitioners in their invoicc8, an order recommend ing that import licence may be granted for the value of bush shirt cloth computed on the basis of Re.1.50 nP. per yard clocs not amount to discrimi natory treatment of the petitioners. Article 14 confers a guarant{m of the equal protection of the law-a guarantee against arbitrary discrimination between persons similarly circumstanced.. On the materials placed before the Committee, there was evidence to show that the rooord produced by the therefore, be assumed It may, Jll!JJ. JII /•. Rlr"'ellcrn , Jagadiah Chand v.

Union of India Shah J. • > - 3 S.C.R. SUPREME COURT REPORTS 81· petitioners was unsatisfactory ; they were not satisfied that the prices which the petitioners said they had paid for purchasing the goods were in truth paid. If there was evidence to ·show that in respect of other persons who were. in the opinion of the Committee found also to have··· iµflated the prices in the manner adopted by :l;he petitioners and still the Controller had granted import lic!Jnces to those persons for the full ariioµnt of. the export value or a percentage substantially ·hi· exce$s .. of. the percentage import : licence w:as granted to the petitioners, a case of discrimination could have been made out ; but· in :the· absence of such evidence, we do not think that any case of discrimhiation is made out. for which The petition fails and is dismissed with costs. The application filed by Mf s. M. Shaams and Company for intervention is dismissed, because Miscell11neous Application No. 264 of 1960 which was filed by the applicants in the High Court of Judic11ture at Bombay for a writ of mandamus, direction or order under Art. 226 of the Constitu' tion has been di8missed by the High Court and the remedy applicants is to file an appeal to this Court. Petitwn dismissed.