1. Challenge to the constitutional validity of notifications restricting manganese ore exports to established entities and a state corporation, excluding newcomers under the Imports and Exports (Control) Act, 1947. (Para 1 , 2 , 5 , 8 , 25 )
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1962 Supreme(SC) 159
SUPREME COURT OF INDIA
B.P.Sinha, C.J.I., J.R.Mudholkar, K.Subba Rao, N.Rajagopala Ayyangar, T.L.Venkatarama Ayyar, JJ.
Daya
Versus
Joint Chief Controller Of Imports And Exports
Case No. : 226 of 1961
Date of Decision : 4/16/62
Advocates Appeared: Bobde A.S. : Daphtary C.K. : Dapthary C.K. : Menon Bishan Narain P.D. : Sanghi G.L.
Advocates:
A.S.Bobde, BISHAN NARAIN, C.K.DAFTARY, G.L.SANGHI, P.D.MENON
A.S.Bobde, BISHAN NARAIN, C.K.DAFTARY, G.L.SANGHI, P.D.MENON
The power to restrict exports includes the authority to canalize trade through specialized agencies and classify exporters based on previous experience. Such measures are reasonable restrictions under Article 19(6) if they serve the general public interest, such as ensuring quality and maximizing foreign exchange earnings.
Headnote:(A) Imports and Exports (Control) Act, 1947 - Section 3 - Export Control Order, 1958 - Clause 6(h) - Constitution of India - Article 19(1)(g) and 19(6) - Power to prohibit or restrict exports - Validity of canalizing exports through special or specialized agencies - Whether the power to restrict exports includes the ability to restrict the class of persons who can participate in export trade - If the quantum of export in a commodity can be restricted, the control must necessarily extend to the persons engaged in or desirous of engaging in the export of that commodity - Classification of exporters based on previous experience is a matter of policy and constitutes a reasonable restriction in the interest of the general public to ensure foreign exchange earnings, maintain quality of supply, and ensure continuity of trade. (Paras 14, 17, 18)
(B) Constitution of India - Article 19(6) - Creation of monopoly by State - Whether a specific law relating to the carrying on of trade by the State is required for every interference with the trade of a citizen - Interference by the State under other laws must be judged by the standard of "reasonable restriction" in the interest of the general public. (Para 31)
(C) Administrative Action - Interpretation of "special" or "specialized" agency - An agency is "special" if, having regard to the purpose for which canalizing takes place, it is more likely to achieve that objective than other agencies or achieve it in a larger measure. (Para 19)
Facts of the case:
A lessee of manganese mines, who entered the business after the basic years fixed for export quotas, was excluded from direct export trade due to government notifications. The policy restricted export licenses to established shippers and mine-owners with previous export performance and canalized the remaining trade through a state-owned corporation. The appellant challenged these restrictions as an unreasonable infringement of the right to carry on business under Article 19(1)(g) of the Constitution.
Findings of Court:
The power to control exports under the Act includes the power to canalize trade through selected agencies. The exclusion of newcomers based on a lack of previous experience is a valid classification and a reasonable restriction to maintain the reputation and continuity of exports. While one judge observed that the virtual monopoly created might be an unreasonable restriction, the petition was ultimately found to be infructuous as the period for the requested license had expired.
Issues: 1. Whether the power to restrict exports under Section 3 of the Act includes the power to canalize trade through special agencies under Clause 6(h) of the Order. 2. Whether the exclusion of "newcomers" from the export trade constitutes an unreasonable restriction on the right to carry on business under Article 19(1)(g) of the Constitution.
Ratio Decidendi: The court held that "control" of exports necessarily includes the power to regulate the persons participating in the trade. Canalizing trade through a "special" agency—defined as one selected to achieve a specific objective—is a permissible mode of control. Such restrictions are reasonable if they serve the public interest, such as maximizing foreign exchange and ensuring quality standards.
Result: Appeal dismissed.
Legal Category Hierarchy
- constitutional law
- administrative law
- trade and commerce
Table of Contents
2. Whether canalising exports through specialized agencies under the Export Control Order is ultra vires the parent Act and constitutes an unreasonable restriction on the right to business. (Para 11 , 12 , 13 , 26 )
3. Canalisation is a valid form of export control; classification based on experience is rational; state corporations can be designated as special agencies to ensure national economic interests. (Para 14 , 16 , 17 , 18 , 19 , 28 , 29 )
4. Power to restrict or control exports includes the power to canalise trade through selected agencies, provided such restrictions are reasonable and in the interest of the general public. (Para 14 , 17 , 28 )
5. Appeal dismissed; no legally enforceable right violated. (Para 21 , 23 , 32 )
6. Does the power to restrict exports include the power to canalise trade through specific agencies?
Yes. The power to prohibit, restrict, or control exports under Section 3 of the Imports and Exports (Control) Act, 1947, is wide enough to include canalising exports through special or specialised agencies as a mode of control. (Para 14 , 28 )
7. Is the exclusion of newcomers from export quotas a violation of the right to carry on business under Article 19(1)(g)?
Not necessarily. Canalisation implies the exclusion of some groups. Classification based on previous export experience is a rational basis for granting quotas and is a permissible restriction in the interest of the general public. (Para 17 , 20 )
8. Can a state-owned corporation be designated as a special agency for the purpose of canalising trade?
Yes. An agency is special if it is selected based on its ability to achieve the objective of canalisation, such as ensuring the continuity of trade, quality of supply, and maximizing foreign exchange earnings. (Para 18 , 19 , 29 )
9. Does the creation of a state monopoly via administrative action require a specific law under Article 19(6)(ii)?
Not if the restriction is a reasonable restriction in the interest of the general public under the first part of Article 19(6). While a specific law protects total exclusion, administrative restrictions are judged by the standard of reasonableness. (Para 31 )
AYYANGAR J. : (B. P. Sinha C.J.I., Rajagopala Ayyangar and Mudholkar JJ. agreeing)
(1) THIS appeal comes before us by virtue of a certificate, of fitness granted by the Nagpur bench of the High court of Bombay under Arts. 132(i) and 133(1)(c) of the Constitution. It arises out of a petition filled by the appellant under Art. 226 of the Constitution before the High court of Bombay at Nagpur impugning the constitutional validity of certain notifications and directions issued under the Imports and Exports (Control) Act, 1947, and the Export Control Order, 1958, framed thereunder and substantially prayed that the Joint Chief Controller of Imports & Exports, Bombay impleaded as the first respondent should be directed to consider the application of the appellant for the grant of a licence to enable him to export certain manganese ore which he had won from his mines, without reference to the impugned notifications. This petition was dismissed by the learned Judges of the High court who, however, granted the appellant is certificate which has enabled him to file this appeal.
(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 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.
(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 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.
(4) 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 th
