1998 Supreme(SC) 934

1998(7) Supreme 305
Supreme Court of India
(Under Article 32 of the Constitution)
S.C. Agrawal, S.P. Kurdukar and S. Rajendra Babu, JJ.
Zippers Karamchari Union -Petitioner
versus
Union of India & Ors. -Respondents
Writ Petition (C) No. 781 of 1996
Decided on 3-9-1998
Counsel for the Parties :
For the Petitioner : Shanti Bhushan, Sr. Advocate, E.C. Agrawal and Atul Sharma, Advocates.
For the Respondents : C.S. Vaidyanathan, Additional Solicitor General, F.S. Nariman, Arun Jaitley, Sr. Advocates, A. Subba Rao, D.S. Mehra, Ms. Mukti Chaudhry, O.P. Khaitan, Subhash Sharma, Advocates.

Important Point
Notification S.O. No. 309(3) dated 30.5.1986 issued under Section 29B(2) (2B) of the Industries (Develop­ment and Regulation) Act dereserving zip fasteners providing exception in case of integrated plant is not ultra vires Section 29B and approv­al granted by Central Government to a foreign Company to set up inte­grated plant is not against industrial policy.

Headnote:Industries (Development and Regulation) Act, 1951 - Section 29B(2)(2B)-Item 38(3) in the First Schedule - Notification S.O. No. 309(3) dated 30.5.1986-Dereser­vation of zip fasteners reserved for small scale industries-Validity of-Central Government dereserved zip fasteners (metallic and non-metal­lic) providing exception in case of integrated plant manufacturing zip fasteners-YKK, a foreign Company was granted permission to set up integrated plant with 100 capital of its own with no export obligation -Challenge to notification dereser­ving zip fasteners from Small Scale Industries as violative of and ultra vires Section 29B(2) (2B) - Plea that notification violative of gua­rantee of equality contained in Article 14 of Constitution-Conten­tion that approval in favour of foreign company would render several workers jobless - Pleas, whether sustainable-No-Rigidity of cons­truction as advanc­ed by petitioners to Section 29B(2) (2B) would not promote object and spirit underlying the section-Noti­fication dereserved only integrated plant-Industry engaged in manufacture of zip fasteners still continue to be in the province of Small Scale Industries-YKK’s production is 2-3 of Indian market-Sizeable market is available to Indian manufacturers-Apprehension that many workers would be rendered jobless is figment of imagination-Noti­fication and approval in re­spect of integrated plant not violative of equality contained in Article 14-Appro­val to YKK would provide access to world market-Approval granted to YKK is neither illegal nor contrary to industrial policy of Government.

       Held : The reading of the provisions and Entry 38 in Schedule, the Legislature’s intent is quite clear that the zip fasteners (metallic and non-metallic) were reserved for small scale industry under Section 29-B (2B) read with Entry 38(3) in the Schedule of the Act. But howev­er, the Central Government may constitute an Advisory Committee con­sisting of such persons as have in the opinion of the Government necessary expertise to give advice on that matter. The question that needs to be considered is as to whether the Notification dated 30.5.1986 issued under the Act is valid and sustainable. (Para 7)

       From the preamble of the notification itself, it is quite clear that in view of the recommendations made by the Advisory Committee constituted under sub-section 2-B of Section 29(B) of the Act, the Government of India dereserved the integrated plant manufacturing all components. The concept of integrated plant is well known in the business circle to mean that all components needed for the end product are manufactured under one roof. (Para 8)

       It was contended that the Central Government thought it fit to reserve Zip Fasteners (Metallic and Non-Metallic) industry under Item 38 of Schedule I for small scale industry. Any change in the policy of dereservation by notification would be illegal and ultra vires Section 29-B(2B) of the Act. In our considered view, the rigidity of such a construction to Section 29-B(2B) would not promote the object and spirit underlying the said section. The industry engaged in manufac­ture of zip fasteners (metallic and non-metallic) still continues to be in the province of small scale industry. The Notification dated May 30, 1986 however, dereserved only an integrated plant. It is, therefore, quite clear that even today manufacturing of zip fastener (metallic and non-metallic) would continue to be a small scale industry. What has been dereserved is an integrated plant. It is taken out from the purview of small scale industry. This change was made on the basis of the recommendation of the Advisory Committee constituted under sub-section 2(B) of Section 29-B of the Act. (Paras 9 & 10)

       It was argued that the Notifica­tion has brought about an artificial classification in the small scale units and an integrated plant which is violative of Guarantee of Equality contained in Article 14 of the Constitution of India. The said Notification is totally detrimental to the small scale units which are manufacturing zip-fasteners (metallic and non-metallic). In our considered view, there is no substance in this submission because the integrated plant is a class by itself and totally different from the small scale industry which is engaged in manufacturing zip fasteners metallic and non-metallic. The submission raised on behalf of the petitioner must, therefore, fail. (Para 14)

       There is also another aspect which needs to be considered in the light of the expending market of readymade garments, leather garments and other articles where zip fasteners metallic and non-metallic are used. Since 1983, the export of these goods gaining a good support in the international market and naturally if India wants to compete with other countries engaged in the said business will have to improve upon the quality of its goods. In 1983, the Directorate General of Techni­cal Development, Government of India had appointed a study team and the said team was entrusted with the work of finding out as to (1) whether small scale units manufacturing zip fasteners (metallic and non-metallic) have necessary machinery for the manufacture of zip colla/teeth or they are simply importing zip chain and components and assembling the same into finished zips; and (2) the quality of indige­nous zips vis-a-vis the imported ones. The quality of indigenous zip fasteners would be an important factor. The study team during its survey found that zip fasteners were smuggled into India on large scale and they were being used by the manufacturers of readymade garments and leather garments and other allied articles. The Govern­ment of India accepted the report of the said study team and with a view to have quality zip fasteners (metallic and non-metallic) and in order to compete with the world market and also to generate employment in the field of readymade garments and leather industry, it thought fit to deserve an integrated plant manufacturing zip fasteners. The object seems to be that all components of zip fasteners if manufac­tured in an integrated plant, the same will have a quality control which will compete with the world market in that behalf. It is in these circumstances we are of the considered opinion that the Notifi­cation dated May 30, 1986 is neither illegal, irrational nor discrimi­natory. (Para 15)

       After giving our careful thought to the pleadings of the parties before us, we are of the considered opinion that having regard to the quality and worldwide reputation carried by YKK zip fasteners, it would be reasonable to conclude that it would provide access to the world market which is indicated in the statement on Industrial Policy in paragraph V sub clause V quoted hereinabove. Having regard to the quality and worldwide reputation earned by YKK zip fasteners, it would not be out of place to mention that it would provide access to the world market which is indicated in the Statement on Industrial Policy in paragraph 39 Clause V quoted hereinabove. Consequently we hold that approval granted to YKK is neither illegal nor contrary to the Industrial Policy, 1991. (Paras 18 & 19)

       As regard the argument that many workers of the present petitioner association would be rendered jobless has also no force, we are told that as of today, there are as many as 17 Indian companies which have been granted licences and are outside the purview of small scale units. This statement appearing in the affidavit of Shri Hiroshi Mitani in paragraph 12 is contested on behalf of the petitioners contending that many of these Indian companies have been rendered non-functional because of variety of reasons. But, however, the fact remains that some of the Indian Companies have started integrated plants for manufacture of metallic and non-metallic zip fasteners. Whether they are successful in their attempt or not is really not a decisive factor. In this behalf, it is also necessary to highlight the ratio between the production and requirement of zip fasteners (metal­lic and non-metallic) in India. In paragraph 7, Shri Hiroshi Mitani has stated that in 1997, the production of YKK was 2.2 crore pieces. The said figure was calculated on the basis that Indian Market size is about 100 crore pieces. Therefore, YKK production was 2-3 of the Indian Market in the year 1997. In 1998 onwards the production of YKK is going to be 9.2 crore pieces i.e. 9-10 of the local market. There is no effective denial to this statement in the rejoinder filed on behalf of the petitioners and if this fact has any bearing upon the factual state of requirement, it is quite clear that yet a sizeable market is available to the Indian manufacturers and the apprehension entertained by the petitioner appears to us a mere figment of imagina­tion. (Para 20)

       Held, consequently that for the foregoing conclusions, we are of the considered view that the petitioner has made out no case for grant of any of the reliefs claimed in this petition under Article 32 of the Constitution of India. The Writ Petition is thus devoid of any merit. The Writ Peti­tion, therefore, stands dismissed. In the circumstances of the case, parties are directed to bear their own costs. (Para 27)

       Per Rajendra Babu, J. (Concurring):

       The Central Government can exercise the powers under Section 29-B (2B) of the Act to determine the nature of any article or class of articles that may be reserved for production by any small-scale indus­trial undertaking and to determine the same, must constitute an Advi­sory Committee consisting of such persons as have the necessary expertise to give advise on such matters. In the leading judgment, my learned Brother has set out the details of the constitution of Adviso­ry Committee and the advice tendered by it to the Government before issuing Notification impugned herein. If that Committee was of the opinion that any article or class of articles must be taken out of the category of small-scale industrial undertakings, certainly, the same could be done and such exercise of power will not be ultra vires the said provision. However, the thrust of argument of Shri Shanti Bhushan is that such determination could be with reference to only nature or class of any article that could be reserved for production of small-scale industry and, therefore, there cannot be classification on the basis of the size of the industry or the process adopted to produce such articles. In other words, if such a course is adopted by taking out any category of article or class of articles from the scope of small-scale industries, it is obvious that there cannot be a competi­tion between small-scale industry and large scale industry thereby the small-scale industry would be routed out of the market. (Para 31)

       In matters of trade and commerce or economic policy, the wisdom of the Government must be respected and courts cannot lightly interfere with the same unless such policy is contrary to the provisions of the Constitution or any law or such policy itself is wholly arbitrary. In the present case, the two categories of articles considered in the Notification are ‘zip fasteners’ manufactured by small-scale indus­tries and ‘zip fasteners’ manufactured by large scale industries in integrated units. In order to improve the quality of ‘zip fasteners’ produced, the Advisory Committee opined that ‘zip fasteners’ must be allowed to be manufactured by integrated units which would certainly fall within the category of large scale industries as the investment has to be heavy in such cases. Articles manufactured by one industry adopting one process can be commercially different from the goods manufactured by other industrial units. Such categorisation of goods depending upon the process adopted is well-known in fiscal statutes and is not un­known commercially. If same principles is extended in categorisation of articles for the purpose of production of quality goods and in quality if the two types of articles are different, those manufactured by adopting the integrated process and the other by ordinary process, certainly the two articles will fall into separate categories and thus, satisfy the provisions of Section 29-B (2B). (Para 32)

       Therefore, there is no substance in the argument that the classification into zip fasteners manufactured by small-scale industries and zip fasteners manufactured by integrated units is violative of the provisions of the Act. (Para 33)