1. Dispute over refusal to grant full import entitlements under an export promotion scheme — Petition for writ of mandamus under Article 32 of the Constitution. (Para 4 , 5 )
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1966 Supreme(SC) 46
SUPREME COURT OF INDIA
P.B.Gajendragadkar, C.J.I., J.C.Shah, K.N.Wanchoo, S.M.Sikri, V.Ramaswami, JJ.
Probhudas Morarjee Rajkotia
Versus
Union Of India
Case No. : 46 of 1965
Date of Decision : 2/4/66
Advocates Appeared: Agarwala E.C. : Agarwala P.C. : Daphtary C.K. : Dapthary C.K. : Dhebar R.H. : Mody A.V.
Advocates:
A.V.MODI, C.K.DAFTARY, E.C.AGARWAL, P.C.AGRAWAL, R.H.Dhebar
A.V.MODI, C.K.DAFTARY, E.C.AGARWAL, P.C.AGRAWAL, R.H.Dhebar
To establish a violation of Article 14, a petitioner must prove they were treated differently from similarly circumstanced persons without a reasonable basis; mere allegation of differential treatment is insufficient. Administrative discretion in granting licenses is valid if based on reasonable, non-arbitrary grounds.
Headnote:(A) Imports and Exports (Control) Act, 1947 - Section 3 - Sea Customs Act - Section 19 - Constitution of India - Articles 14 and 32 - Import licenses - Special Exports Promotion Scheme - Discretion of Licensing Authority - Arbitrariness and Mala fides - Discrimination - To make out a case of denial of the equal protection of the laws under Article 14 of the Constitution, a plea of differential treatment is by itself not sufficient; an applicant must demonstrate that they have been treated differently from persons similarly circumstanced without any reasonable basis, and such differential treatment is unjustifiably made. (Para 8)
(B) Administrative Discretion - Exercise of power to grant import licenses under a promotion scheme - Power to reduce entitlement based on quality of exported goods - If the reduction in import entitlement is based on a technical report indicating that the exported machinery was damaged, incomplete, and defective, such exercise of discretion is not arbitrary. (Para 6)
(C) Mala fides - Allegation that refusal to grant license was due to refusal to advance a loan to a foreign importer - If the official requesting the loan was not directly concerned with the question of import entitlement and partial entitlement had already been granted prior to the request, the allegation of mala fides cannot be sustained. (Para 7)
Facts of the case:
A firm of exporters applied for import licenses under a special export promotion scheme based on the value of machinery exported to a foreign entity. While a portion of the entitlement was granted, the balance was refused. The petitioners alleged that the refusal was mala fide, stemming from their refusal to grant a loan to the foreign importer at the request of a government official, and further claimed that the action was arbitrary and discriminatory in violation of Article 14 of the Constitution.
Findings of Court:
The court found that the reduction in import entitlement was justified by an engineer's report showing the exported machinery was damaged and defective. The allegation of mala fides was rejected as the official involved in the loan request was not the decision-maker for the license. The plea of discrimination under Article 14 failed because the petitioners did not identify similarly situated persons who were treated differently.
Issues: Whether the refusal to grant the balance of import licenses was arbitrary, mala fide, or discriminatory in violation of Article 14 of the Constitution.
Ratio Decidendi: The court held that the Licensing Authority's discretion to reduce import entitlement is valid if based on reasonable grounds, such as the quality of goods. Furthermore, a claim of discrimination under Article 14 requires specific evidence of differential treatment compared to similarly circumstanced persons without a reasonable basis; mere allegation of differential treatment is insufficient.
Result: The petition fails and is accordingly dismissed with costs.
Legal Category Hierarchy
Table of Contents
2. Arbitrary exercise of discretion — Mala fide refusal based on extraneous considerations — Discriminatory treatment violating Article 14 of the Constitution. (Para 6 , 7 , 8 )
3. Refusal based on quality reports of exported goods is not arbitrary — Lack of evidence for mala fides — Insufficient pleading for Article 14 violation. (Para 6 , 7 , 8 )
4. To establish Article 14 violation, a petitioner must prove differential treatment of similarly circumstanced persons without reasonable basis. (Para 8 )
5. Petition dismissed with costs. (Para 9 )
6. Can the Licensing Authority reduce import entitlements under an export promotion scheme?
Yes. While discretion must be exercised reasonably and not arbitrarily, the authority may reduce entitlements based on special considerations, such as reports indicating that exported goods were damaged, incomplete, or defective. (Para 6 )
7. How is a claim of mala fide refusal based on extraneous considerations evaluated?
The court examines whether there is a causal link between the extraneous circumstance and the refusal, considering the timeline of events and whether the official involved was directly concerned with the decision. (Para 7 )
8. What is required to successfully plead a violation of the equal protection of laws under Article 14?
A petitioner must demonstrate that they were treated differently from other persons in similar circumstances without a reasonable basis, and that such differential treatment is unjustifiably made. (Para 8 )
V.RAMASWAMI,J.
(1) CONTROLS on exports and imports were introduced as an emergency measure during the last war in respect of certain commodities and were kept alive after the lapse of the Defence of India Rules by the Emergency Provisions (Continuance) Ordinance, 1946 which was later replaced by the Imports and Exports (Control) Act, 1947 (18 of 1947). Under S. 3 of the Imports and Exports (Control) Act, 1947, the central government was authorised by order published in the Official Gazette, to provide 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, the import, export, carriage of goods of any specified description. By Ss. (2) of S. 3, it is provided that all goods to which an order under Ss. (1) applied shall be deemed to be goods of which the import or export has been prohibited or restricted under S. 19 of the Sea Customs Act, In exercise of authority under S. 3 of the Imports and Exports (Control) Act, 1947 the central Government issued notifications from time to time prohibiting, restricting or otherwise controlling the export and import of several commodities. By a consolidated order dated 7/12/1955, known as the Imports (Control) Order, 1955, restrictions on the import of certain goods were imposed by Cl. 3 of the said order. By Cl. 3, it was provided that no person shall import any goods of the description specified in Sch. 1, except under, and in accord once with, a licence or a customs clearance permit granted by the central government, or by an officer specified is Sch II. For implementing the scheme of controling imports. various provisions were made in CIs. 3 to 11 of the Imports (Control) Order,
(2) THE government of India makes known its import policy every six months by issuing in the government Gazette the procedure and the conditions for eligibility of licences and for the grant of import licences. This policy is published in a handbook called the Import Trade Control Policy" The policy is obviously framed having regard to requirements for home consumption of commodities to be imported, the foreign currency situation and the economy of the country as a whole With effect in 1/04/1963. the government of India promoted a scheme called "Special Exports Promotion Scheme for Engineering Goods" The object of the scheme was to give incentive to the manufacturers in India to export then finished products outside India and at the same time grant to the said exporters import licences for materials upto the extent of defined percentage of the F. 0. B. value of needs exported. The further object of the scheme was to create a market in the foreign countries for Indian goods not only from the standpoint of earning foreign exchange but also from the standpoint of enhancing the prestige of the Indian goods exnorted to those countries
(3) PARA 5.4 of the Scheme states "The value for which an import licence is given will be determined with reference to the F O B. value of exports and will be up to the Detary extent mentioned in Annx. V. This provision is, however, subject to the provisions that in addition to any action which may be taken to stop corrupt fraudulel practices:
(I) cases where the Licensing Authority considers that the value of the goods exported is over-invoiced. it shall be open to the Licensing Authority the to refuse to issue any licence against such export or to reduce the value if the licence to such figure as he deems fit: and
(II) In cases where the Licensing authority considers that there lias been a misdeclaration of the description of the products exported, no licence will be issued agree such exports and suitable penal action may also be taken against the person concerned."
(4) THE petitioners are "partners in a registered firm carrying on business as exporters and importers in the firm name and style of Transworld Trade Li
