Glass Chatons Importers and Users'... vs Union Of India (Uoi)

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Not extracted

Decision Date: 10 April, 1961

Coram: A.K. Sarkar, K.C. Das Gupta, K.N. Wanchoo, N. Rajgopala Ayyangar, P.B. Gajendragadkar

In this matter, the petitioners filed an application under Article 32 of the Constitution seeking protection of the fundamental rights guaranteed by Articles 19(1)(f), 19(1)(g), 31 and 14. The second and third petitioners were merchants who, until 1957, had imported substantial quantities of glass chatons. The first petitioner was an association of merchants, whose members included both importers of glass chatons and those who used the material in their manufacturing processes. Glass chatons are an essential raw material for producing glass bangles and other similar wearable articles, and their importation was permitted only through licences issued by the appropriate licensing authorities. Since 1955, the import of such items had been governed by the Imports (Control) Order, 1955, a statutory instrument promulgated by the Central Government under the authority conferred by Sections 3 and 4‑A of the Import and Export Control Act, 1947. That Order prohibited the import of a wide range of goods, including glass chatons, except where a licence had been obtained in accordance with the procedures set out in the Act. From time to time, the Government of India issued policy statements to indicate its approach to the granting of import licences. For the period from January 1957 to the end of March 1958, the policy declared a total prohibition on the import of glass chatons. Beginning in April 1958, the policy was altered so that imports of glass chatons were allowed only under the Export Promotion Scheme. In view of this policy, none of the second or third petitioners, nor any other merchants represented by the association, submitted any application for a licence to import glass chatons in 1957 or thereafter, and consequently no licences were issued to them. Nevertheless, licences were granted to the State Trading Corporation for the import of glass chatons valued at five lakh rupees for the period April‑September 1958, and subsequently for an additional import worth one lakh twenty‑five thousand rupees for the period October 1958 to March 1959. The petitioners filed their present application on 27 April 1959. Their relief sought direction that the first two respondents – the Union of India and the Chief Controller of Imports – should (i) refrain from giving the State Trading Corporation any preferential treatment over the petitioners in the issuance of permits; (ii) avoid creating a monopoly in favour of the State Trading Corporation; and (iii) cancel the import permits already granted to the third respondent, the State Trading Corporation. Additionally, the petitioners requested that the State Trading Corporation be ordered not to import glass chatons on the basis of the licences that had already been issued to it.

It was noted that the import permits described in the petition as “already granted” had, by the time of the hearing, fully expired; consequently the two final prayers in the petition – namely the cancellation of those permits and an order preventing future imports on their basis – could not be granted. Moreover, none of the second or third applicants, nor any of the merchants comprising the association that was the first appellant, had filed any application for new import licences. Because no such applications existed, there was no possibility that the respondents, the Union of India and the Chief Controller of Imports, could have shown any preference to the petitioners in the issuance of licences. The court also found no evidence of any scheme to issue fresh licences to the State Trading Corporation, and therefore concluded that there was no present or prospective action that could create a monopoly in favour of that corporation. On this basis, the petitioners were held to be without any remedy in the present proceedings.

Counsel for the petitioners, however, submitted that as long as paragraph 6(h) of the Imports (Control) Order, 1955, remained in force, any application by his clients for licences would be futile. Paragraph 6 enumerates several grounds on which the Central Government or the Chief Controller of Imports and Exports may refuse to grant a licence or may direct any licensing authority not to grant one. The specific ground in clause (h) provides that a licence may be refused “if the licensing authority decides to canalise imports and the distribution thereof through special or specialised agencies or channels.” Counsel argued that this provision was void because it conflicted with Articles 19(1)(f) and 19(1)(g), as well as Article 31, of the Constitution. He further contended that, to the extent that Section 3 of the Imports and Exports Control Act, 1947, empowers the Central Government to make an order such as paragraph 6(h), Section 3 itself must be considered invalid. In view of these submissions, counsel was permitted to press his challenge to the validity of paragraph 6(h) of the 1955 Order and to make a limited attack on the validity of Section 3 of the 1947 Act.

The requirement that certain goods may be imported only pursuant to a licence is, without doubt, a restriction on the right to carry on trade in those goods and also on the right to acquire property. Counsel did not contend that the requirement imposed by Section 3 of the Imports and Exports Control Act, taken alone, constituted an unreasonable restriction. His challenge was directed solely at the additional restriction imposed by the provision in paragraph 6(h) of the Order, which authorises the Central Government or the Chief Controller of Imports and Exports to refuse a licence or direct a licensing authority not to grant licences “if the licensing authority decides to canalise imports and the distribution thereof through special or specialised agencies or channels.” The argument advanced was that this further restriction on the right to trade and to acquire property, stemming from paragraph 6(h), is totally unreasonable.

The Court observed that the argument that the restriction on the right to carry on trade and the right to acquire property, which flows from the provision in question, is wholly unreasonable. It noted that when a decision has been taken that imports of a particular commodity must be effected through designated agencies or channels, granting a licence to any applicant outside those agencies or channels would inevitably defeat the purpose of that decision. Consequently, if the canalisation of imports is intended to serve the general public, the refusal to issue import licences to applicants who are not part of the designated agencies or channels must also be regarded as serving the general public. The Court therefore framed the real issue as whether the canalisation of imports through special or specialised agencies or channels is in the interests of the general public.

The Court went on to explain that a policy concerning imports forms an integral component of a country’s overall economic policy. Such a policy must take into account not only its impact on domestic and international trade but also its effects on monetary policy, agricultural development, industrial growth and even the nation’s political stance, including questions of friendship, neutrality or hostility toward other countries. Because of the breadth of these considerations, the Court recognised that a tribunal may not possess sufficient material to reach a definitive conclusion as to whether a particular import policy, when weighed against all the relevant factors, serves the general public. Even assuming that all necessary information were available, the Court acknowledged that reasonable minds could diverge on whether a specific import policy – whether it involves high customs barriers, total prohibition, or the delegation of imports to selected agencies or channels – is in the public interest.

In light of these observations, the Court held that the burden on a party challenging the Government’s assessment of the public‑interest implications of an import policy is exceedingly heavy. When the Government elects that the import of a specified commodity shall be carried out through a selected channel or agency, the Court will proceed on the presumption that such a decision is made in the public interest, unless the challenger can clearly demonstrate the contrary. Accordingly, the Court could not accept the proposition that a decision to canalise imports is, by its very nature, an unreasonable restriction on the public interest.

The Court further clarified that while the decision to canalise the import of a particular commodity may be difficult to contest, the specific choice of the agency or channel employed to implement that decision can be examined on the ground that it violates Article 14 of the Constitution or other fundamental rights. However, the Court noted that no such issue was raised in the present proceedings. As a result, the Court concluded that the attack on the validity of Paragraph 6(h) of the Imports Control Order, 1955, fails. The contention

In this case the Court examined the contention that section 3 of the Imports and Exports Control Act, 1947, is invalid to the extent that it authorises the Government to issue an order such as paragraph 6(h) of the Imports Control Order, 1955, and consequently found that this argument also fails. The Court then considered the allegation that paragraph 6(h) of the order violates Article 31 of the Constitution. Even if the right to carry on trade were treated as property for the purposes of the present dispute, the Court observed that no acquisition of that right occurs. When a licence is denied to an applicant under paragraph 6(h), the applicant simply loses the ability to trade in the specified goods. Conversely, when a licence is granted to the agencies or channels selected for canalising imports, those agencies or channels are permitted to trade, but this permission does not arise from an acquisition of the trading right that the unsuccessful applicant previously possessed. Accordingly, Article 31 does not apply to the situation. The Court further addressed the claim that granting licences to the third respondent, the State Trading Corporation of India, while none were granted to the second and third petitioners, amounted to a denial of the equal protection of laws guaranteed by Article 14. The Court noted that if the petitioners had applied for licences under the Export Promotion Scheme and the Corporation had still been preferred, it would have been necessary to examine whether the preference was based on reasonable and rational grounds. However, the petitioners, although entitled to apply for licences under that scheme, did not make any such application. Therefore, there is no basis for asserting discrimination against them. In conclusion, the Court held that the petitioners were not entitled to any relief under Article 32 of the Constitution. Accordingly, the petition was dismissed with costs, and the dismissal order was entered.