Liberty OIL Mills & Others v. Union Of India & Others.

LIBERTY OIL MILLS & OTHERS

“UNION OF INDIA & OTHERS. *

~ = May 1,1984 7

{o. CHINNAPPA Reppy, A.P. SEN AND E.§. VENKATARAMIAH, Wj]

* Imports (Control) Order, 1955~Promulgated under ss. 3 and 4-4 of the Imports and Exports (Control) Act, 1947—Clause 8B—Added later by way of amendment—Iinterpretation of—Contemplates action of .interim nature~Order) action must sutisfy rules of natural jnstice—Authoriiies not bound to give pre

¢ decisional hearing—Authorities must give past-decisional hearing—Decision must be communicated to person affected—Order need uot give reasons but must indicate satisfaction forming basis for action and concise statement of allegatians—Action under Clause 8B of drastic nature—Must be anjmated by sense of urgency—Sense of urgency infused by several factors—Public sentiment is one such factor—Public

_ interest to be paramount consideration—It is for authorities ta consider public interest—Courts not to concern themselves with sufficiency of ground—Couris ta consider question of mala fide or patent lack of jurisdiction,

Import (Control) Order, 1955—~Clause 8B read with Clause 1 (d)—Inter Pretation, of—Clause® 8B applies equally to goods covered by Open General Licence. : : : . ®

_ _ Anterpretation of statutes~ Rules of—Courts nos permitted to interpret statutory instruments so as to exclude natural justice unless language of instrument leaves ® option to Court.

* Natural justico—Rules of Extent of natural justice—Must yary from cate 1? ie case—interim orders imply natural” justice—Seeking comiments-of person before investigation against him net necessary—Decision affecting a person must be come municuted to the affected person—Affected persun must be given post-decis? opporinity net possible, ‘ .

Words and phrases—‘Inyestigation’ —W. hen conunénces,

On being discovered that beef tallow imported from abroad. was — being sold a vanaspati or used in its manufacture by certain unscrupaD 4 persons, general public feeling was roused and there was public agitation = ' demands were mude that severe action be tuken against those responsible. a & result of the discoveries the Central Government thought that drasti¢ me was called for. So, a nolification was issued under s.3(3) of the Imports

_ Exports (Control) Act, 1947 totally banning the import of beef, buffallo and pis tallow into India w.e.f, August 24, 1983. And, on different dates. ia Nove

LIBERTY OIL MILLS-p. UNION

A ne pecember 1983, five circulars, styled ‘abeyance’ c'rcular+and marked ‘secret?

and were 155 many

‘od of Six months yed by the Deputy Chief Controller of Imports and Exports, in respect of as 192 concerns directing licensing authorities to kecp in abeyance for a from the respective dates of the circulars, any application

« ised from any of them for the grant of import licence or customs clearance

K permits Trat cee

‘and allotment of imported guods through agencies like the States ding Corporation of {India Limited or any other simitar agency, Though the lars did not thems-lves ¢ te any statutory authority, they were, as cluimed sod as agreed (0 by the parties, presumed to be statutory orders made in exercise -

( of the power conferred by cl. 8B of thy Import (Control) Order, 1955. Several’ persons against whom ‘abeyance’ Orders had been made filed writ petitions io oF Li-erty Oil Mulls contended :° (1) that the requisite satisfaction of the Be appropriate authority which was necessary for issuing an ordec unnes cl. 8B was >” - gifercent High Courts challenging thase ofders., Liberty Oil Mills was one of thosé who filed such a writ petition in the Bombay High Court. The case was ' , withdrawe to the Supreme Court under Art, 139A of the Constitution.

pot only not recorded in the circular but {! co was no material whatsoever upon which such satisfaction could have been arrived at ;

2) that the-circular was not confined to the banned item of animal tallow er to items which could be said which applications for the grant of licences or for allotment had been made by i | tohave sume cofnection with the banned item, bur extended to all item. for i¢

Liberty Oil Mills; (3) that general oature of the order disclosed a total non- application of the mind ; (4) that several firms were clubbed together and dealt with by a single circular and theee was no indication whatsoever that the facts telating to each of the firms had been considered separately; (5) that the ‘abeyance circulars’ far from advancing the public interest would, on the other hand, prejudicially affect the public interest by bringing to a halt several indus. ties and throwing hosts of workers out of employment; (6) that there was no

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[ lude the ¢, oy io x

«had commen Smissing the writ potitions, oF ay ; hity erm Is taken affecting the rights of parties. card may not be pre-decisional ; it may necessit substance is, cne allegation that Liberty Oil Mills were not ‘actual users’ of beef tallow but they had misused the import licences of other licensees by obtaining letters of aushorisation for import of becf tallow as if they were actual users ; Und (7) that the'circumstance that there was public agitation about the import of . beef taltow was a total irrelevant circumstance for making an order under cl. 8B. “The interveners® contended ; (1) thatcl, $B should be construed as “providing * fran Opppriunity to be heard und since the abeyance orders made no provisit for hearing, they shuu’d be struck down -as opposed to the principles of natural Hslice, and therefore, arbitrary and violative of Article 4 and 19(1)(g) of the + Constitution 3 (2) that sceret orders affecting rights of parties could not lawfully made since secrecy would militrate against natural justice adti against the _ Feht Of appeal provided by 4, 4M_ of the Imports and Exports (Control) Act, and 3) that an order under cl. 8B could only be made after the investigation under ced, that is after a show cause notice had been issued under cl.8,

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HELD: [tls not permissible to interpret any statutory instrument $0 as to Datural justice, unless the language of the instrument leaves no option to

© Court, Procedural fairness embodying natural justice is to be implicd when- It may be that the opportu.

tily have 10 be post.

e * » a ! SUPREMB COURT REPORTS . feeeet’ . 2 f TS See EF pe 11984] 3504 j 4° decisional where the danger to bY averted or the act to he Prevented ; eat 4 « °.” orwhere the action to be taken can brook.ne delay, It may fot 1S imminent sary in some situations to give predecisional opportunity of tig . tation but it would be sufficient but obligatory to consider any rep ie may be made by the aggrieved person and that would satisfy the seni that ‘. procedural fairness and natural justice. There can be no ta etter of 2 “extent of natural justice, It may and indeed it must vary from statute et the - B “. situation ¢o situation and-case to case. Pre-decisional natural eon } usually contemplated when, the decisions taken are of an interim inatire wit | ° investigation or enquiry. .Ad-interim orders may always be made ex-parte a ; "such orders may themselves provide for an opportunity to the aggrieved patty to hen bf be heard at a later stage. Even if the ipterim orders do not make provision foc , such an opportunity, an aggcieved party has, nevertheless, always the ri is ig” \ » make an appropriate representation secking a review of the order and asking the rR authority to rescind or modify the order. The principles of natural justice would be satisfied if the aggrieved party is given an opportunity at his request, There is no violation of a princi»le of natural justice ifan ex-parte ud-interim order is made unless of course, the statute itself provides for a hearing befere ’ the order is made. Natural justice will be violated if the authority refuses to _ consider the request of the aggrieved party for an opportunity to make bis D representation against the ex-parte ad-interim orders, (700H ; 701A-F) é i x. There is no rule of justice of fair play whivh requires the authority to seck ? the comments of the person concerned before embarking upon an investigation. * Investigation commences as soon as the authority concerned to take the first step whether by way of seeking evidence or by way of secking an explanation from

* : the person concerned. (699F) ,

In some cases, ex-parte interim. orders may be made pending a foal | t 3 adjudication, But that does uot mean that natural justice is not attracted when io orders of suspension or like orders of an interim nature are made. Some orders of that nature, intended to prevent further mischief of one kind, may themselves _ be productive of grea:er mischief of another kind. An interim order of stay oF F suspension which bas the effect of preventing a person, however, temporarily, say, from pursuing his profession or linc of businsss, may have substantial, serious and even disastrous consequences to him and may expose him Ww grave risk and hazard, Therefore, there must be observed some modicum of residual, core natural justice, sufficient to enable the alfecte.t person to.make an . representation. These considerations may not, however, apply to cases of 7 4 licensing which mvolve the grant of a privileges and are nota matter of woe *G | That may bz and ia sons caiss, it cid oaly ba after aa initial ex-parte Latecl orderis made, (705B-D) ' : : .

- : i ¥

Qurenv. Rardulp'’s et al, $60.1 R. (24) 283, Coin nissioner of F we! ve

Tanos, 98, C.L.R. 343, Levis v. Heffer, [1978] 3 All ER 354and ease Whangarei High Schools Ed, 1973 Appeal Cases 660 and Chingleput Bo

H ” Mujestie B2ttling Company, Sugrems Court's Civil Appa! Nos. 1970referred to, e 5

Claus: ts the Ceatral

)~ ‘ . of tz faports (Control) Order, 1955 earpowe t yports to he

«a .

| ; * LIBERTY OIL MILLS y. UNION © 679 * td . . > . 3 serait or the Chief ro te of Imports and Exports to debar A g person from peel a = " bel saa licences or allotment of f jmposted goods for a speci ed period if suc! person if guilty of any of the acts. OF commission or omission enumerated in the Clause.” Clause 8A owers the Central Government or the Chief Controller of Imports and suspend the importation of goods by any person or grant of ficeaces: OF allotment of imported goods pending investigation into one or more of the allegations mentioned in cl. 8 without prejudice to any other B action that may be taken against him in that behalf. Clause 8B empowers the Central Government or the Chief Coatroller of Imports and Exports to keep in abeyance applica tions for licences or allotment of imported goods where ony investigation is pending wto say of the allegations mentioned in . ch 8 against a licencee, importer or any orber person subject to fulfilment of the requirement of the satisfaction of the appropriate authority regarding © Cc the public interest. Both clauses 8A and 8B, which were inserted in the Import (Control) Order, 1955 later by way of amendment, contemplate action of an interim nature pending investigation into allegations under — cl. 8 Ordinarily in the absence of anything more, st would not be neces-— sary to givéan Ofportunity to the perso concerned before procecdingé to take action under cl. 8A or cl. 8B. But while cl. 8B deals with the right to obfain licences and the tight to obtain allotments, cl. 8A deals with D rights which have flowered into licences and allotments, A person to_ whom licences have been granted or allotments made may have arranged his affalrs on that basis and entered into transactions with others, and,*to him -* the consequences of aciton under cl. 8A may be truly disastrous whereas the * consequences of action under cl. 8B may not be so imminently harmful... It _ is presumably because of this lively difference between cl. 8A ard 8B that cl. 10 provides for a pre-decisional opportunity in the case of action under ¢l. 8A and does not so provide in the case of action under cl. 8B. Again, it 8 presumably because of this difference that cl. 10 while providing for an appeal against a decision under cl. 8A does not provide for an appeal against — under cl, 8B. But that docs not mean that the requiremenis of the uatice are not to be ment atall in the case of action under cl. 8B. a aye Of natural justice .will be met in the case of action under F iat bee om Sona fide, any representation that may be made in. eran by the Person aggrieved. Clause 8B itself gives an indication — peal Me Post-decislonal opportunity on the request of the person cuncer- nae The action under ci. 8B is to be taken if the authority certainin Z the public Interest that such action may be taken without

; whey Urther details in regard to the allegations, [t clearly’ implies G Dotle ot Ege! facts are ascertained by the authority or brought to the

é ae Authority, such gclion may be reviewed. Therefore, in be

Pportunig eo Under cl. 8B it is not necessary to give a —— io OY the persone tt POst-uecisional opportunity must be given if so request SS affected, (698G; 696D-B; G; 705F-H; 706A-E] ino icsision to keep in ‘abeyance’ should be communicated to the Nh Woulg cttd Otherwise the cules of natural justice will not be satisfied. 19 (i ta) : Most arbitrary and quit cleacly violative of Articles 14 and °F the Constitution if cl. 8B is to be interpreted as excluding seh: a Bea

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SUPREME COURT-REPORTS {1984] 3 s.c.n.

communication of the decision ‘taken. There -.is nothing In cl. 8B to suggest that the decision is not to be communicated. On the other hand, - the expression ‘‘without assigning any reason” implies that the decision bas to be commuificated, but reasons for the decision have uot to-be stated. Reasons of course, must exist for the decision: since the decision may only be taken if the ‘authority in satisfied that the. grant of licence or allotment of: imported goods will not be in the public interest. ‘The expres ion with- out assigning reasons’ only means that there is no obligation to formulate |

‘ reasons and nothing more. Formal reasons may lead to complications when the matter is still under investigation. So -the authority’ may not. - give formal reasoffs, but the skeletal-allegations must be mentioned in order to Provide. an opportunity to the person affected to make his representation. -.

[706H; 707A-C]

On what should the. satisfaction, be based ? The action under cl. 8B .

is really in aid of the ultimate order under cl. 8. Therefore, in order to invite the satisfaction contemplated by cl, 8B.there must be present some .

strong suspicion of one or other or more ofthe grounds mentioned in ‘cl.8.

Since the action which is of a drastic nature is to be taken.ex-parte, it must ‘necessarily be animated by a sence of urgency. The sense of urgency “may be infused by a host of circumstances such as ihe trafficking and unseru- pulous peddling in licences, large scale misuse of imported goods, attempts | to monopolise or corner the market, wholesale prevalence of improper practices among classes of importers, public sentiment etc. etc. -Itis true that public administration is not to be run on public sentiment and statutory ation may only ‘be taken oa grounds permitted by the. statute, Public. . ‘Sentiment i6 not in some cases‘the ground for the action but it is what clothes the ground-with that sense of urgency which makes it” ipberktive that swift action be taken. ° [7 07D-H]

Public interest must notens velens be the paramount .cosideration. Tf

‘the threatened public mischief is such as to outweigh the likely injury to

' the party, the authority may take action under cl. 8B. If the threatened public injury is very slight compared to the harm which may be done to the party, the authority may not take action under ’cl. 8B. Which element »

_of the public interest should ‘be given greater weight and which grounds should: weigh at’ all are matters for’ the authority taking action under cl.

‘SB. Courts do not concern. themselves’ ‘with the sufficiency of the grounds on which action is taken or-with the balancing of competing considerations, in favour of and against the action, [708A-D] ! d \ Aa ‘abeyance’ order uader cl, 8B is directed not against any particular. type of goods but against an importer, licensee or other person ‘against whom an investigation into allegations under cl 8 fs pending.

- Thereforé the question is whether -it is not in the public interest that a particular person shuuld be prevented from obtaining import licences or imported goods of any description pending investigation into the allegations

/ ynder cl.8B. That would | depend on the natute of the allegations, the “extent of involvement of the person concerned and, most important, the element of the public interest which are for the consideration of the .authority making the order under cl.-8B and not for the Court. {708B-G]

. . . La 6

~4 ra ou wy

. clause there is no doubt that cl. 8B

LIBERTY OIL MILLS y. UNION

Action under cl. 8B is ofan interim nature and it may be ex-parte, - ‘in which case the affected party may ‘make a suitable representation bringing ‘out all. the outweighing circumstances id his favour. ‘Titat’ is the real . _remedy of the-party. Courts do not enter the picture at that ‘Stage unless . the. action ‘is mala fide or patently without jurisdiction. The action will be patently without jurisdiction if it is not based on any relevant, matgyial whatsoever. If the-authority declines to consider the representation, or if the authority after consideration or from. @bliqus motive, or the decision is - such .as no reasonable nian properly directed on the law would arrive at on the material facts, it will be open to the.party to seek. the intervention of the court at that stage. [70SE-G] ~

— Chemicals ‘ys Company Law Board [1966] Supp. SCR 311

Rohtas Industries v. S. D. ‘Agarwal, [1959] 3 S-C.R. 108, M. A. Rasheed .

v. State of Kerala, [1975] 2 S.C.R. 93, Shalini Soni v. Union of India, 41981] 1 SCR 952 and Commissioner of Income Tax v. Mahindra and Mahindra, [1983]

4 §.C.C, 392, referred to. : a

- The Court cannot consider , the question whether there is sufficient

- yelevant material in support of the allegations made against the petitioners.

The Court may properly consider the question of mala fide ot patent. lack of jurisdiction. . Therefore in the instant case the Coyrt cannot consider

Bat pe the question whether the material available justifies a prima facie conclusion —

- that the petitioners have ‘made illegal imports of beef tallow. [711A-B]

The submission that since tbe abeyance order was never formally commiunicated to the petitioners, it must be treated as non est has no substance. The abeyance order was undoubtedly communicated to the concerned authorities. Despite the attempt at secrecy made by the concerned authority and the failure to formally communicate the decision to thé party, the Xbeyauce circular was very soon public knowledge and the petitioners did come to know of the orders. © [710B; E-F] ,

. The argument that cl. 11 (4) excludes the .application of cl. 8B to goods covered by Open. General Licence has 2° substance. Clause 8Bexpressly provides that action under tho Clau = may be. taken “not withe’

standing anything contained in this Order”. - In view of this non-obstante —

: 3 applies equally to goods covered by Open General Licence. [698B-C]

The argument-that the order ‘as embodied in ths abeyance circular did not’ fulfil ‘the conditions precedent prescribed by the statute has some

“substance. The. circular did pot contain a recital of the allegations- consti- tuting the basis of the satisfaction contemplated by cl. 8B for action. under that provision, and without a recital of the allegations-it was impossible to .

say that the action was not based on irrelevant material. It did not even recite that which was the foundation of any action under'cl. 8B, namely, the satisfaction of the authority that the-action was in the public interest.

Again a large number of concerns were lumped together and purported to 4 ‘ .

ae, .

. Pe . ’ . - = 7: . Po:

682... 4.” SUPREME CouRT

REPORTS = - {i984} 3 scp

A- b: dealt with by a single abeyance circular. There wus ex-facie nothing in - the circular which could point to the authority having applied its ming pe considered the case of his concerned separatoly. It is true that tae abeyance circular suffers from everyone of these informities, But the Court's atten. tion. was invited to’the statements mido in ths counter-aftidayt by the < Deputy Chief Controller of Imports and Exports th author of the abeyarcs € ate “ Gireutars, aad ths relevaat files placed before the Court for perusal whic} shows that the pcincipal allegations agfiast the -petitiorers were “that they had. prima facie indulged ia illega! importation of beef tallow and hag also misutilised the beef tallow, “Why the authority took this prima facie view ~ has been explaincd in (he counter-affidavit. From @ perusal of the fites jr is found that the cases of Libsety Oil Mills as well as other concerns were separately aid individually considered. Thus it does no: mike any difference . on the peculiar facts of this cise that a single circular was issued ‘covering

_ a large sumber of concerns. [712A-B;D:G] §. ~ = ; :

. {t is impressed upon the aathorities that those entrusted by stutate +. with th? task of taking prejudicial action on tho basis of their subjective ‘satisfaction should, first, bes’ow carsful-atteation to the allegations forming ibe basis -of the proposed action and the probable consequences which may . ensue such action and, next, take the trouble of reciting ia the order issued by them the satisfaction forming the bas:s of the action and a concise state- ~

-'+ment of the allegations forming the basis of the satisfaction. «[f the necessary recitals are got fouid, there may bs serious sequels. [713B-D]

Ia the instant case, the real remedy of the party is. to make a reprer seniation to the cuncerned authority which is directed to consider such E representation if made. -[713F] : e '

- ‘ ; _ ORIGINAL JURISIDICFION : Transferred Case No. 22 of 1984.

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Arising out of Civil Appeal No, 274 of 1984 from Special Leave Petition No, 17128 of 1933 from the Judgment and Order, dated 13th & 23rd December, 1983 of the Bombay. High Court in in Writ Petition No.°2855 of 1983. ,

Ashok H. Desal, S.S.-Ray, A.N, Banatwala, G.E. Vehanvatl, BR, Agirwala, P.G. Gokhale,. MM. Jayukar, V.K.Chittre, R.H. Rancholi, M. Juyakar & A. Subba Rao for the Petitioner ia WP & for Respondent in C.A, No. 274/84, .

Q

_ *. Parasuran, Attorny General, M.K. Bunerjee, Addl, Sols General, A.K, Gangull, G. Subramaniam and R.N, Poodar, for the Respondent in T.C, & for the Appellants in CA. No, 274 of 1984.

SS. Ray, Ashok II. Desal, Summeet Kachawaha, Rani Karunjawald, Als, Mf. Kuraujawala, Kuldeep Pablay, A.N, Banathwala, G.E. Vahenvath

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LIBERTY OIL MULL* v. “UNION (Chinnappa Reddy, J.)

Ms:.- Bina Gupta, Rainy Walia, T. M. “Ansari and D. N. Misra for the Interveners, ahs Judgment of the Court was delivered by

CHINNAPPA Reppy, J. A few months ago, orthodox Hindu sentiment was outraged and general public feeling was roused by the discovery that beef tallow. imported from abroad was either being sold as vanaspati or uselin its manufacture by certain unscrupulous persons, There was. a furore in the country. There was public agitation. Questions were asked in Parliament. Outside the’ House,

Press and Politician’ made capital of it. There were demands‘ that:

_ severe action be taken against those responsible. Assurancés were given in Parliament. Bureaucracy went into acticn. It was discover- .

ed that though the import of beef tallow, like other animal tallow,

-had been canalised through the State Trading Corporation with effect from June 5, 1 981, there had been considerable import.of beef tallow outside the channel of the State Trading Corporation even subsequent to June 5, 1981, on the ostensible pretext that licences had been issued and firm contracts had already been entered ‘into before that date. It was’ also discovered that beef tallow had been allowed to be imported even by ‘non-actual users’ under letters of authority given by licensees. wh“ had obtained import licences against the

‘entitlement based on ‘the value of ‘their exports. As a result of these discoveries it was thought that drastic action was called for. So, a notification was issued under S.3 (3) of the Imports and Exports Control Act totally.banning the import of beef, buffalo and pig tallow into India with effect from August 24, 1983. And, on

7th, 9th and 10th November and 17th and Fist December, five circulars, styled ‘abeyance circulars’ and marked ‘secret’ were issued by the Deputy Chief Controlier of Imports and Exports, in respect ofas many as 192 concerns (business houses), directing licensing , authorities to keepin ‘abeyance’ for a period of six months from the respective dates of the circulars -any application received from any of them for the grant of import licence or. Cus- toms clearance Permits and allotment of imporied goods through

“agencies like the State Trading Corporation of India Limited, the

Minerals and Metals Trading Corporation of India Ltd. or any other sImilar. agency. Jt may be useful to extract one of these

‘abeyance’ circulars, all of which are in substantially similar terms.. The abeyance circular dated November 9, 1983 which ‘lists’ we will _.

not use the word ‘black-lists’—as many as 61 concerns including Liberty Oil Mills (P)- Td. is as follows :

ss ‘ 3 wee etic sy O84 "Supreme court REPORTS * " [1984] 3 sce ae oe ee, “wi ‘Be _* GOVERNMENT OF INDIA” - _ . MINISTRY OF COMMERCE . OFFICE OF THE CHIEF CONTROLLER

: ; OF IMPORTS & EXPORTS ‘Bo. OMe EPXpS BHAVAN, NEW DELHI—11

SECRET e 4 . oo. : , ‘dated, the 9th Nov, ‘1983 ABEYANCE CIRCULAR No, 28/83-84/HQ.

- y Cc’ Whereas investigation into eectaid: allegation mentioned under Z “Cl. 8 of the Imports (Control) order, 1955 are pending against the the - _ under mentioned conceras, all the licensing authorities are hereby .Tequested' to keep in abeyance for six months from the date ofissue . of this circular any application received from them for the graat: of import licence of Customs Clearance Permit and allotment of s1..D | imported goods through agencics like the State Trading Corpa.of , India Ltd./Minerals and Metals Trading Corpn. of India Ltd. or any ‘ other similar agency :

y = ra) ‘wee Se 5 Le ae ee ae, Wate. a q oat! poutine boty

Sl. Name & sili Name & address of - Senn of the prop! : Nb. ofthe concern, the branches as partner/Director etc. y E - oo, available, as available, ance emt permeates

S05 ky ad ’ = ST oS ae # re M/s. Liberty Oil. . ~ Mills (P) Ltd., 16 . Lal Bahadur Shastri Marg, - : Kurla, Bombay--400070 .

tae} eee

LIDERTY Ol MILLS ¥? UNION (Chinnappa Reddy, J.) ‘ 685° aa

2, These instructions may be kept secrey and if any of the A: ) above mentioned firms make any enquiry absut the Position of their * : J application (s), they may simply be informed the matter is under - f. consideration. % : ;

3, This does not, however, preclude the licensing authorities from rejecting their applications if they are otherwise inadmissible or B.” suffer from discrepancies in terms of the licensing instructions. Only these applications may be kept in abeyance where the party is entitled 4,’ to licences or Customs Clearance Permits etc, except for the allega- "* tons against them. : at

, 4. Full details of all applications kept in abeyance as a result - of the above instructions may be reported to the Headquarters,

- 5, The receipt of this circular may please be acknowled in the -

- standard proforma. . : |

' . = 3 : a Sdj- _ (LP. SHARMA) DY, CHIEF-CONTROLLER OF - ‘IMPORTS & EXPORTS E at

(Issued from file no. 3/42/HQ/83/ECA—1)"

To say the least and to put it mildly, it isa very odd circular, emanating as it does from a high dignitary of the Government of . Jndia. Why the: secrecy and why the instruction to mislead, as it were? Are statutory orders to be made and given effect in this” Ft +3 furtive manner, almost as if the authorities that be are afraid of : 2 Wounding the susceptibilities of the persons in respect. of whom ~ t the orders are made | We presume they are statutory orders made in *kercise of the powers conferred by clause 8 B of the Import Control * : Order, though they do not themselves cite any statutory authority. r he he actual direction, the use of the word ‘abeyance’ and the pres-“~ G+? rikgaene of the six-month period are indicative that clause 8 B is 3 a Source of power, In the counter affidavits filed on bebalf of the * Cveroonent of India and the Chief aod Deputry Chief Controller ' fen and Exports it is cluimed that the power exercised was Gen Soufetred by clause 8B,. It was so asserted by the Addl. Solicitor’ =. ‘: eral. The learded counsel who appeared for the parties proceeded » Hib - |. ; that basis. So, we may also proceed on that’ basis. Incors!+ L Porating, as they did, directions under clause’ 8B, vitally affecting: the’

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SUPREME COURT EPORTS [1984] 3 s.d.r.

fraahuses of the concerns concerned, one would e pect the circulars to be communicated to the affected. parties, even. if they were to be kept secret from other prying eyes. That was not done for reasons which no one has been able to explain to us, Curisously, enough; | despite the circular, supplies of imported goods appear to have been continued to be made for about a month to some parties, But soon the circulars ceased-to be secret. Everyoné came to know of them. True but unauthorised versions were even published in commercial newspapers. The circulars also came to be acted upon. Licenses were: not granted. Customs Cledrance Permits .were not

-. issued.” Allotments were not made. Several persons against whom .

‘abeyance’ orders had been made filed Writ Petitions in different High Courts challenging those orders. Liberty Oil Mills (P) Ltd.

was one of those who’ filed sucha Writ Petition in the Bombay Hight Court. The case has been withdrawn to this Court under Art ’

139A of the Constitution and it is this‘ case that has been heard by us. We heard Shri Ashok Desai for the Liberty Oil Mills (P)- Ltd. and Shri Soli Sorabji, Shri V.P. Raman and Shri Ram —

Jethmalani: for the interveners. We heard Shri Milon Banerjea, Addl. Solicitor, Generalably assisted by Sri Gopala ‘Subrahmanyam

-for the Union of India and the Chief Controtler and Deputy Chief -Controlfer-of Imports’ and Exports and Shri M.C, Bhandare and aa A. Subba Rao for the State Trading Corporation. .

such in terms of the expression as defined in the ‘Import Policies’ for several years. Their exports for the period 1982-83 are stated to have exceeded Rs. 19 crores. They claim to deal in Vegetable Oils, export of Frozen Marine Products, Frozen foods, Textiles, Chemicals,

Agricultural Products and imports of diverse commoditieg such as Oiland Oil seeds, Chemicals, Drugs, etc. They claim to have a factory refining Vegetable Oil at Kurla and a factory for manufactur- ing vanaspati at Shahpur. They have plants for processiag frozen food © at Madras, Tuticorin, Calcutta and Vishakhapatnam ; they also have solvent extraction and Industrial Oil Plants. They claim that

‘they require a continous and steady flow of various imported goods for their several Industrial activities; They ‘allege that if import licences for which they have applied are not granted to them and | - if the imported goods for, which they have applied are not allotted © to them, their factories and their plants will Have to be closed down: _their business will be seriously affected and many of their employees “will be thrown out of ep: heya state that “they have never

Liberty Oil Mills (P) Ltd. is a ‘Trading House’ recognised as .

ead

“ay

_ LIBERTY OIL MILLS v. UNION (Chinnappa Reddy, J.) | adulterated the vanaspati: manufactured in their factoty. at Shahpur and that the samples taken from their factory on as many as thirty six occasions had never been found to contain any type of animal tallow. They further state that they had. not imported any tallow after July, 1982. Such tallow as was.imported by them before July,

1982 was sold to them by other licencees to them as actual users.. - The tallow so purchased was air-treated by them in their premises at

Kurla and sold by’ them to soap manufacturers and other fatty acid plants. The import. of tallow was on the strength of letters of _ authority issued by licences in respect of.additiowal licences and,

_ replenishment licences held by them. All the additional licences had been issued prior to Jiine 5, 1981 and import of OGL items was permitted against the said licences. Beef tallow became canalised from June 5, 198{ ‘but the “canalisation was not retrospective and could not affect the licences previously issued. All the contracts for the import of beef tallow had been entered into before June.5, 1981 andin respect of seven of the .cofttracts letters of eredit-had also been opened before that date. The beef tallow iniported upto July, 1982 was duly cleared by Custom Authorities without any dispute or

' question, Thereafter the tallow was subjected to air-treatment and

Sold to soap manufacturers and fatty acid plants. There was never any allegation against the petitioners that any portion of the tallow .

imported by them had ever been diverted for the adulteration of vanaspati. Liberty Oil. Mills therefore, claim that ‘there was no

. justification whatsoever for making an order under clause 8B against them. They accordingly seek the issue of Writ to quash the circular. ‘ -

Shri Ashok Desai for Liberty Oil Mills (P) Ltd. contended that an order under clause 8B of the Import Control Order could only be made if the Central Government or the Chief Controller of Imports and Exports was satisfied that the grant of licences and allotment of imported goods would not be in the public interest. In the present

‘case, not only was the requisite satisfaction of the appropriate * _Authority not recorded in the circular said to have been issued under . Clause 8B but there was no material whatsoever upon which such

Satisfaction could have been arrived it, Before June 5, 1981, beef tallow was not cancalised and could therefore, be freely imported.as an OGL item. It was on June 5, 1981 that the import of beef tallow | came to be canalised but such canalisation could not affect licences . Which had already been granted. Beef tallow could be imported _ under the preexisting licences as an OGL item even after June 5, 198]

, SUPREME COURT REPORTS os i984] 3 S.C.R.

and uptesthe date ‘on which | the import of beef tallow was totally banfed. Our attention was repeatedly invited to the two cases of

Arvind Exports (P) Ltd. and Jayant Oil Mills (P) Ltd,, where dealing

"with appeals and decisions under Sections 128 and 131 of the Customs

_ Mils.(P) Ltd., whether’ or not such items had. the remotest connnec-

Act, the Central Board of Excise and. Customs and ‘the Government of the India took the view -

“The licence issued during a Policy period is governed by that policy as amended upto the date of issue of .he licence and amendments made after the date of ‘issue do not have any |

-application to the licences.” and

“A licence is governed by the Policy which is made applicable

_to-it. Restrictions placed on the import of goods in the policy |

‘for the subsequent years have to be ignored, ‘unless of course, any such restriction has been | specifically made, applicable to licences issued earlier either generally or in the particulag cases. In this case the licences were issued during the policy for the period AM-81 and were governed by this policy only particularly para 174(v) thereof. ‘Thése licences were valid for the goods in question as only Mutton Tallow was in the list of canalised items.” In terms of para 222(3) of the policy for the periad a yerrs thesé licences continued to be valid for beef tallow as

. this item continued’ in the list of OGY items even after the com- ing into force of the policy forthe period AM-82. When vide.

_ Public. Notice No. 29/81 dated June 5, 1981 beef tallow. was pnt . in the canalised items it is from this date only that it became © ~ canalised. In the public notice there is no specific provision — invalidating licences previously issued, so far as beef tallow is concerned, in. case such licences were valid earlier to import this'item. In the absence of any specific prohibition the licences produced by the importer in this case had to be accepted for , the clearance of beef tallow.”

It-was: further contended that it the clicular order under Clause 8B asactually issued -was not confined to the banned-item.of-animal tallow or to.items. which,could be said to have some connection with the banned item but extended to all items for which applications for’

the grant.of licences. or for allotment had been made by Liberty. Oil tion with anima! tallow Shri, Ashok Desai connected. that: the-very general natue of the order disclosed a total non-application. of the mind since there was no nexus beiween the alleged misuse of licenesg coe

LIBERTY OIL MILES ¥. UNION (Chinnappa Reddy, SY for jopaeing beef tallow or the misuse of the imported beef tallow and the abeyance of applications for grant of import licences and for allotment of other items. ‘It was .also argued that as many as 61

- firms were clubbed together and dealt with. by single «circular and . there was no indication whatsoever that the facts relating to each of the firms had been considered separately. The circular was an omnibus one and revealed a total non-application of the mind. It was suggested that the abeyance orders far from advancing the public interest, would, on the otlier hand, prejudicially affect the public interest by bringing ‘to a halt several industries and throwing hosts of workers out of employment. It would also affect exports. from India and reduce foreign exchange earnings. . It was submitted that there was no substance in the allegation that Liberty Oil Mills Pvt. Ltd. were not ‘actual users’ of beef tallow but they had none the less obtained letters of authorisation for import of beef tallow as if they were actual users.and they had’ thus misused the imort ‘licences of other licencees. It was pointed out that the beef tallow imported by the under letters of authority had either been sold by them to actual users on the high seas or.had been. actually used by them to produce marketable beef tallow for use by soap manufacturers and fatty acid. plants, by subjecting the imported beef tallow to ‘airtreatment’. It was also argued “by Shri Ashok Desai that the

‘circumstances that there was public agitation about the import of beef _ tallow wasa totally irrelevant circumstances for making an order " under clause 8B. Shri V.P. Raman, learned counsel for one of the interveners suggested that clause 8B did not apply to goods covered by Open General Licence in view of clause 11(4) of the Import Control Order which provided, “Nothing in this order, except

. paragraph 3-I of sub-clause 3 of Clause 5, Clause 8, Clause 8A,

Clause 8-C and Clause 10-C shall apply to the import of any goods |

* covered by Open General Licence or Special General Licence issued” by the Central Government.” Shri Soli Sorabjee, who appeared for another interyener, submitted that clause 8-B should be construed as providing for an opportunity to be heard and since the abeyance orders made no provision for ‘hearing, they. should be struck down, as opposed to the principles: of natural justice, and therefore arbitrary and violative of Art. {4 and 19(i) (g) of the Constitution. It was

7 also urged by. the learned counsel that the satisfaction contemplated by clause 8B was not an’ omnibus satisfaction but a satisfaction. which must, disclose an application of the mind to the facts of each © individual case and each individual application. for licence or allotmest. ShriRam Jethmalani, who appeared for another intervener o i

SUPREME COURT REFORTS _ [1984] 3 s. CR.

urged that secret orders affecting rights of patties: could not Soiully be made since secrecy would militate against natural justice and against the right of appeal provided by sec. 4-M of the Imports and

Exports (Control) Act. He also submitted that in the .absence of an express recital ‘of satisfaction. which was the foundation for the exercise of the jurisdiction under clause 8B, the order must be held not to confotm to clause, 8B and therefore, vitiated. He also contrasted clause 8A and clause 8B and argued that the -public interest contemplated by clause 8B should be such as to exclude a

-_pre-decisional. hearing. There was no such public interest involved "in the case. There was not even a,recital to that effect. For that reason also the order was Vitiated.- He. further submitted that an order ‘clause 8B could only be made after the investigation under

“ clause 8 had commenced, that is after a show cause notice, had been issued under clause 8.

Shri “Millon: Bannerjee, learned Additional Solicitor General

“urged that the only question for the consideration’ of the court was whether there wa8 any relevant materjil before the authority com-

- ‘petent to take action under clause 8B to reach the satisfaction contemplated by that clause. Since the satisfaction contemplated by ©

‘clause 8B was the subjective satisfaction of the authority concerned,

' .the court was rot to concern. itself with the sufficiency’ of the ‘material in arriving at the requisite satisfaction. He however, invited:

our attention to various facts and circumstances which, according to him, wholly justified the action taken against Liberty Oil Mills (P) Ltd. Though Liberty Oil Mills itself held several licences, it nevertheless indulged in the collection of a large number of licences of other imported beef tallow as their authorised agents, sold part of the beef tallow to alleged actual users on high seas or puachased the beef

. tallow after importation, subjected it to the so-called air-treatment a treatment which could by no means be called a manufacturing

‘process and which left the character of beef tallow unaltered-and sold it to innumerable. parties stated to be soap manufacturers and fatty acid plants. The claim of Liberty Oil Mills (Pa Limited that Liberty Oil Mills was an ‘actual users’,, who’ had purchased beef tallow for subjecting it to air treatment was no more than a pretence. It was.

stated that full particulars of the parties to whom the beef tallow was claimed to have been sold were not made avaiable despite requests for the same. There was great public concern about.the manner in which beef tallow had been imported and used by some importers and the authorities very naturally felt that it was theiy e er

Pd ju

' duty in the public interest to investigate into malpractices connected with the import of beef tallow and the misuse of beef tallow afte!

import. The learned Additional Solicitor General ‘placed before us” _the relevant files which according to him indicated that the case of

Liberty Oil Mills (P) Limited as well as the cases of each of the other firms. who were included in the abeyance circular had been separately considered and satisfaction duly and properly arrived at by the appropriate authority on relevant material.. The lear ed Additional Solicitor General very fairly did not urge that the decision to keep in ‘abeyance’ need not be communicated or that the principles of natural’ justice were not required to be observed. But he argued that a pre-decisional hearing was not contemplated. He submitted that rule 8B did not rule out a post-decisional hearing

. and-stated that the appropriate authorities were ready even now to consider faithfully any representation ‘made by the parties affected. With reference to the views expressed by the Central Board to Excise and Customs and the Government of India, in the cases of Arvind Exports and Jayant Oil Mills, Shri Bannerjee submitted that those cases did not represent the correct position in law. ‘Those decisions were rendered in proceedirigs under the Customs Act and - did not preclude appropriate action under the Import .and Export

Control Act: and the Import Control! Rules. Shri Bannerjee also _

_ invited out attention to several provisions of the Import Control ’ Order.

Before considering the questions at issue, it will be useful to refer to our Import Policy and to take a cursory look at the various statutory and non-statutory instruments embodying the policy. The

‘ import policy of any country, particularly ‘a developing country, has necessarily to be tuned to. its general economic policy founded upon its constitutional goals, the. requirements of its internal and international trade, its agricultural and industrial development plans, its monetary and financial strategies and last but not the least the inter- national political and diplomatic overtones depending on ‘friendship, ; neutrality or hostility with other countries’ (Glass Chotans Importers and Users’ Association v. Union of India’). There must also bea considerable number of ‘other factors which go into the making of an import policy. Expertise in public and political, national and international economy, is necessary before one may engage in the making or in the criticism of.an import policy. Obviously courts do

~ not possess the expertise and are consequently incompetent to pass

G@)_ [1962] 1 SOR 862, ww ca

*F

SUPREME COURT REPORTS =: {1984] 3 s.c.R. judgment or the appropriateness or the adequacy ofa particular import policy. But we may venture to assert with some degree of

* accuracy that our present import policy is export oriented. Incentives :

by way of import licences are given to promote exports. Paragraph iB

_ of Chapter 18 of the ‘Import Policy’ -for April 1981 to March:1982 published by the Government of India, Ministry of Commerce-in the first week of April every year, an annual ‘Import and Export Policy’ to, be in force during the financial year is published-expressly states.» “the objective of the scheme of registration of Export Houses and} . the grant of special ‘facilities to them . is to strengthen their negotiating capacity in foreign trade and‘ to build upa more enduring ~ relationship between them and their supporting manufacturers”. Paragraphs 183: and- 184 enumerate the various import facilities —

_ available to Export Houses. Paragraph 185(1) allows Export Houses to import OGL (Open General Licence) items against REP (Replenishment) Licences issued in their own names or transferred to. them by others. The facility is stated to be available to them for

_ import of (a) capital goods listed in Appendix JI and placed on,

Open General Licence for Actual, Users and (b) Raw. Materials, components, consumables and spares (excluding items covered by Appendix V) which have been placed on Open General Licence for Actual. Users. Paragraph 185 (1) further stipulates that Capital Goods so imported shall be transferred by them only to such Actual Users as are authorised to purchase them by the concerned Licensing “Authority and that raw: materials, components and consumables so

' imported may be transferred by them to eligible Actual Users.

Imported’ spares may be sold to any person. Paragraph 185 (2) provides that import replenishment licences issued in their own names or transferred to them. by others, against which. Export . Houses wish to take advantage of the facility provided in Paragraph 185, shall be non-transferable. Therefore, the Export Houses wishing to take advantage of the facility are required to get the licences concerned endorsed by the licensing authority - as Ke under :— . SO, . =

**The licence will also be valid for import of OGL items under , paragraph - 185 of import policy, 1981-82, subject ‘to the conditions Jaid down and shal! be non- -tinaiateraie:”

iivepaph 185 @) further dinclis that import of OGL items under these provisions shall be subject to the condition ‘that the shipment of goods shall takes place within the validity of the OGL, that is, © March 31, 1982 or within, the: venety feriod ofthe import licence

»

Crs

_— Py

LIBERTY OIL MILLS vp. UNION (Chinnappa Reddy, ey

Export Houses to Additional Licences upto the value of 15% of the f.o.b. value of select products made in 1981-82 and manufactured by small scale and cottage industries, plus 7-1/2°% of the f.0.b. value of other exports of select products made in the same-year. All such Additional Licences shall be non*transferable. Paragraph 186(7) provides that the Additional Licences will also be valid for import of Raw Materials, Components, Consumables. and Spares (including items covered hy Appendix V) which have been placed-on Open itself, whichever date is earlier. Paragraph 186 (1) broadly entitles -

General Licence for Actual Users (Industrial). While Spares so.

imported may be sold to any person, Raw Materials, Components and Consumables may only be sold to eligible Actual Users. Paragraph 192. requires every Export, Houses to maintain proper accounts of all its exports, ‘imports and disposed of imported items.

and are further required to furnish detailed information in the prescribed forms.

Some Export Houses . are ‘recognised as ‘Trading Houses ‘depening on their performance. Trading Houses are entitled to all the facilities available to Export Houses, but their entitlement to:

' additional licences against, exports of products manufactured in the small scale and cottage sectors is to be 20 per cent and not 15 per cent. ,

~ Paragraph 222(1) prescribes that additignal licences issued to Export Houses in 1980-81 shall cease to be valid for items which do not appear in Appendices 5 and 7 of . Import Policy, 1981-82. But it is said that restriction will not apply to the extent that the licence holders have made firm commitments by opening irrevocable letters of credit through authorised dealers of foreign exchange before April 1,.1981. Paragraph 222(3) provides that REP licences and

. additional licences held by Export Houses shali-cease to be valid for — import of any item which could be imported under Open General Licences during 1980-81, but it is no longer so in the Import Policy 1981-82 except for such commitments as have been made by opening irrevocable letters of credit through authorised dealers in foreign exchange before April, 1981. We may notice here that Appendices 1, .3, 4 and 6 contain lists of banned items. Appendix 5 and Appendix 7 contain a list of restricted items. Appendix 8 contains a list of items

-import of which is canalised through public sector agencies, .

Appendix 2 contains: a list of Capital Goods allowed under Open General Licences and Appendix 10 contains a list of Items allowed to be imported. under Open General Licences, subject to the condi-

69d tions. sét out therein. It appears that prior to 1978, OGL was confined to certain restricted items only. But in April, 1978, the - Government of India issued Import Trade Control Order No. 9 of |

1978 : the OGL No. 3 of 1978 granting general permission to import into India from any country of the world, Raw Materials and Components by Actual Users (industrial) if the. items to be imported were not covered by any of the lists of banned, restricted and,

-canalised items and did not figure in Appendix IX of the Import Policy for 1978-79. One of the results was that animal tallow which .

could not be imported as an OGL item prior to April 1978, could be so imported after 1978 as it was not one of the banned, restricted or canalised items. In the Import Policy for April 1980 to March 1981, mutton tallow was included in the list of canalised items. Therefore, while mutton. tallow could be imported. thereafter through the agency of the Staté Trading Corporation only, beef tallow could still be imported as an OGL item. The position was the same in the Import Policy issued for the period April 1981-March 1982. However, on June 5, 1981 by a Public Notice for the word ‘mutton tallow’ inthe list of canalised items, the expression “tallow of any

“animal orgin including mutton tallow” was substituted. Therefore with effect from June 5, 1981 beef tallaw also became a canalised item. One of the questions posed is regarding the effect of the public. _ notice dated June 5, 1981 by which the expression ‘tallow of animal origin or including mutton tallow’ was substituted for the word

‘mutton tallow’. The question posed is whether the ban of import except through the State Trading Corporation was applicable to beef tallow imported into India after June 5, 1981 but against licences - issued earlier and in respect of which contacts had already been into. We have already mentioned that on Agust 24, 1983, the Government of India made an order under Section 3 of the Exports and Imports (Control) Act totally banning the import into India of

* beef, buffalo and pig tallow.

We may mention here that the Import Policy for earlier as well as later years, contain more or less similar provisions as those i in the Import Policy for April 1981-March 1982.

The statutory regulation of imports | is contained in the Imports and Exports (Control) Act, 1947 and the Imports Control Order 1955. Section 2 of the Imports and Exports (Control) Act defines various expressions. ‘Letter of _authority’: is defined a letter meaning as authorising the licensee to-_permit another person, named,

” in the Said letter, to import goods against the licence granted to the licensee. Licence is.defined to mean a licence granted and including

SUPREMB COURT REPORTS [1984] 3 s.c.r.

eon"

ae a custonis clearance permit issued, under any control order. . Section 3 of the Actis the pivotal section. Section 3(3) empowers © ‘the Central Government, notwithstanding anything contained in the Customs Act, by order published-in the official Gazette, to prohibit; restrict or impose condtrons on the clearance wheter for human consumption or for shipment abroad, of any goods or. class of goods imported into India. Section 4A empowers the Central

GoverMment to levy fee is respect of licences granted or

“renewed under any order. made or deemed to’ be made under ‘the Act. Sections 4B, 4C, 4D, 4E and 4F are provisions:

relating to the power to enter. and inspect the power to search, the

‘ power to seize impotted goods or material, the power to stop and seize conveyances. Sections 4 G aud 4 H provide for confiscation and Section 4 I for-the levy-of penalty. Section 4J preservs the power to inflict any other punishment under the provisions of the Act or under any other law despite the confiscation or penalty imposed under the Act. Section 4K. provides for adjudication and Section -

4 L entitlés the owner of the goods, materials, conveyance or animals or other persons concerned to be given a reasonable opportunity of making a representation before any order of adjudication of confiscation or imposition of a penalty is made. Section 4M provides for an appeal against any decision or order made under the Act and Section 4. N empowers the Chief Controller to exercise power of revision in cases where no appeal has been preferred. Section 5 makes contraventions of any order made or deémed'to be made under the Act or any condition of a licence granted under such order punishable with imprisonment and fine as mentioned in that provision. Section 8 empowers the Central Government to make tules for SEH out the provsions of the Aot.

The Imports (Control) Order, 1955 is an order inade by the

Central Government in exercise of the powers conferred by Section

3 and 4-A of the Imports and Exports (Control) Act. Clause 3 of the Imports (Control) Order prescribes that no person shall import any goods of the description specified in Schedule-I {except under and inaccordance with the licence or a customs clearance permit granted by the Central] Government or by a specified officer. Clause 5 provides: for the imposition of conditions+ subject to which licences | . may be issued. Clause 6 prescribes the situations when the Central.

Government or the Chief Controller of Imports and Exports thay refuse to grant a licence or direct any other licensing authority not to grant a licence. One of the situations is ‘if the applicant is for the. time being subject. to any action under. clause 8, 8A or 8B’,

§

A-

' SUPREME COURT REPORTS [1984] 3 s.c.r.

- Clause 8(1) empowers the Central Government or the Chief Controller of Imports and Exports to debar a licencee or importer or any other person from: importing any goods or receiving licences’ or aflotthent of the imported goods through the State Trading Corpora- tion of India, the Minerals and Mctals Trading Corporation of India, — or any other similar agencies and direct, without prejudice to any other action that may be taken against him in this behalf and that no licence or allotment of imported goods shall be granted to him and he’

shall not be permitted to import any goods for a specified period for any of the reasons specified in the clause. Two of the reasons men- tioned in the clause are: “If he fails to comply with .or contravenes or attempts to contravene or abets the contravention of any conditions embodied in or accompanying, a Jicence or an application for a licence” and “If he. commits a breach of any Jaw (including any tule, order or regulation) relating to custom or the import or export of goods or foreign exchange’. Clause 8A empowers the Central Government or the Chief Controller of Imports to suspend the importation of goods by any person or grant of licexces or allotment of imported goods through the State Trading Corporation of India, the Minerals and Metals Trading Corporation of India, or any other similar agency, to a licensee or importer or any other person penaing investigation into one or more of the allegations mentioned in Clause 8 without prejudice to any other notice that may be taken against him inithat behalf. The first proviso to Clause 8A prescribes that’the

. grant of a licence or allotment of imported goods shal! not ordinarily . be. suspended under this clause fora period exceeding 15 months.

The second proviso stipulates that on the withdrawl of such suspension a licence ox allotment of imported goods ‘may be granted to him

'.. for a period of suspension, subject to such conditions, restrictions or limitations as may be decided by the authorities -aforesaid keeping in view of the foreign exchange position, indigenous production and other relevant factors. Clause 8B empowers the Central Government or the Chief Controller of Imports and Exports to keep in abeyance applications for licences or allotment of imported goods where any

‘ investigation is pending into any of the allegations mentioned in

Clause 8 against a lincensee, importer or any other person subject to

‘the fulflment of the requirement of the satisfaction of the appropriate authority regarding the public‘interest. Since we are primarily concerned in this.case with the vires, the width and the interpretation of Clause. 8B, the whole of it may be usefully extracted :—

8B: Power to keep in abeyance applications for licences or allotments of imported goods—Where any investigation into 7 c s oo any of the allegations mentioned in clause 8 is pending against a licensee or importer or any other person, and the Central Government or the Chief Controller of Imports and Exports in satisfied that without ascertaining further details in regard to such allegation, the grant of licence or allotment of imported goods will not be in the public interest, then notwithstanding. anything contained. in this Order, the Central Government or the Chief Controller of Imports and Exports ‘may keep in abeyance any application for grant of licence from such person, or direct the State Trading Corporation of India, the “Minerals _ and Metals Trading Corporation of India, or any other similar agency to keep in’abeyance allotments of imported goods to

‘such person, without. assigning any reason and without preju- dice to any,other action that may be taken in this behalf :

Provided that- the period for which the grant of such licence or allotment is kept in abeyance under this clause shall — not ordinarily exceeds six months.”

Clause 8C authorises the Central Government ‘to publish or

“cause to be published the name of such persons or class of persons against whom action under clause 3 or 8A istaken. Clause 9 empowers the Central Government or the Chief Controller of Imports and Exports or any other officer authorised in that behalf to cancel

“any licence granted under the order or: otherwise to render it ineffec- tive for any of the reasons mentioned in the clause. One of the reasons is ‘If the licensee lias committcd a breach of any of the . “conditions of a licence”. Another reason is “If the Central Govern- » ment is or such officer is satisfied that-.the licence will not serve the purpose for which it has been granted.” Yet another reason in “If — the licensee has‘committed a breach of any law relating to customs or the rules or regulations relating to Imports’ and « Exports of goods

' or any other law relating to foreign exchange.” Clause 10(i) provides that no action shall be taken, inter alia, under Clause 8(1) or Clause -

8A or Clause 9(1) against a licensee or importer or any other. person

= unless he has been given a reasonable opportunity of being heard. Clause 10(2) enables any person aggrieved by any acrion taken under -

Clause 8(1) or 8(3) or 8(A) or 9(1) to prefer an appeal to the autho-

- rity constituted by the Central Government for wap purpose. Clause

11(4) presoribes,

‘Nothing j in this order, — paragraph (iii) of sub-clause(3) of Clause 5, Clause 8, Clause 8A, Clause 8C and Clause 10C,

697 |

SUPREME couRr RE PORTS [1984] 3 $.c, R.

shall apply ‘to the ftapat of — goods covered by Open

General Licence or Special General bigiate issited by the Central Government.”

Clause. 11(4) excludes the application of Clause 8B to goods covered by Open General Licence. We find no substance in this submission. Clause 8B expressly provides that action under the clause may be taken “notwithstanding anything contained in this order’. In view’

of this non-obstante clause, we have no doubt that Clause 8B applies equally to goods covered by Open General Licence,

We may niention at this juncture that Clauses 8A and 8B were not to be found in the Imports (Control) Order 1955 originally but

_were introduced into it later by way of amendment, to make provi- sion for the making of interim orders pending investigation. into. allegation under Clause 8. The amendment was -af consequence of the lacuna being pointed out by the Bombay High Court in some cases which came before it,

- To be fais’ to’ the learied counsel for the petitioner and the ~ other learned counsel for the interveners, all of them were unanimous about the necessity for a provision like Clause 8B, and none of them argued that Clause 8B would be ultra vires if the principles of natural

"justice could be read into it. The learned Additional Solicitor

Genefal, as mertioned by us ‘earlier, agreed-that natural justice,

| . should be read into Clause 8B so as to provide fora post-decisional hearing’ at the request of the.affected party. Let us examine Clause 8B inthe scheme and setting of the Imports (Control) Order and consider whether natural justice is excluded and, if not, when and what opportunity may be provided to the affected party. © :

Clause 8,.we have Seen, empowers the Central Government or the Chief Controllér of Imports and- Exports to debar a person from

- importing goods or from receiving licences or allotment of imported goods. for a specified period if such person’ is guility of any of the acts of commission or omission enumerated in the Clause. An order of this immensity cannot obviously be made without due investigation and without giving a: réasonable opportunity to the affected party. Clause 8A and 8B refer to, orders which may be made pending inves-

. tigation into the alle gations under Clause 8 and by necessary implica.

tion expose the investigative content of Clause 8. Clause 10 expressly stipulates that action-under Clause 8 may not be taken unless a reasonable opportunity is given to the party concerned. oie

+ We may notice here the argument of Shri VP, Raman that

—

LIBERTY OIL MILLS ¥. UNION (Chinnappa Reddy, J.)

Clauses 8 nor Clause 10 prescribes the procedure to be followed be-

- fore a final order under Clause 8 is made.’ Has a show-cause notice to be issued first, then followed by an investigation and finally con-

. cluded by yet another shdw cause notice ? Or is it enough if a show- ; cause notice is issued after the investigation is concluded and the person concerned is asked to explain the evidence gathered: against him? When may investigation be said to have commenced ? Should investigation, be necessarily preceded by a show-canse notice ? We do not think that the Central Government or the Chief Controller is _ bound to follow any rigid, hide-bound, pre-determined procedure. The procedure may be different in each case and may be determined by the facts circumstances and exigencies of each case. The authority may design its own procedure to’ suit the requirements of an individual case. The procedure must be fair and not so designed as. to

“defeat well known principles of justice and thus deny justice. That.

is all. If the procedure is fair it matters not whether the investigation is preceded, interjected or succeeded bya show-cause notice. The.

‘word ‘Investigaticn’ is not defined but in the context it means no

“more than the process of collection.of evidence or the gathering of ‘material. It is not necessary that it should commence wiih the com- munication of an accusation to the person whose affairs are to be investigated. , That may follow later, When facts come to the notice of the Government or the Chief Controller of Imports which prima facie disclose an act or omission of the nature mentioned in Clause 8, the authority may straight away communicate the allegations to the person concerned, seek his answer and proceed to further investigate or the authority may consider it more prudent to further satisfy itself”

by seeking other :evidence or material before communicating the allegations to the person concerned. There is ‘no rule of justice or fair play which requires the authority to seek the comments of the person concerned before embarking upon an investigation. Investigation commences as soon asthe authority decides to take the first step whether by way of seeking evidence or by way of seeking an .

explanation from the person concerned. On the initiation of a proceeding under Clause 8 by thé commencement oF investigation; the authority has to address itself to the Question whether any‘action of an interim nature to prevent further harm or mischief is warranted pending investigation, Licences may have already been issued and allotment of imported goods may have already been made. The authority may consider it desirable to prevent the person from im-

‘ported goods. pursuant to the licences or to prevent him from obtaining the imported goods allotted to him through the specified agencies. Ifso, the authority may make an order under Clause 8A,

Hod

* saspending the importation of goods, the grant of licences or the allotment of imported goods. But Clause 10 provides that no ac ction under Clause 8A may be taken without giving a reasonable opportunity to the person concerned. ’ It is obviously thought that the right such as it may be, to obtain a licence or allotment of goods having become crystalised into a licence or an allotment, an order under

Clause 8A may have immediate and grave prejudicial repercussions.

on the person concerned making it desirable that he should be heard before an ordet of suspension is made. So it is that Clause 8A contempla es a pre-decisional hearing. On the other hand, licences may not yet have been issued and. allotments may yet have to be made. The approprite authority may be satisfied that it would not be in the public interest to issues licences or make allotments to the person concerned, without ascertaining further details with regard to -the allegations against him. In such cases, thé authority may make-° an order of ‘abeyance’ under Clause 8B. Though the language of ‘ Clause 8B is capable of being read as if it applies to both allotments already made and allotments yet to be made, a reference to the marginal head, in the background of what has been provided for in

Clause 8A, makes it clear that Clause 8B applies. only fo allotments .

_yet to be made and licences yet to be issued. That clearly is the

- Contextual! construction of Clause 8B. Read in any other manner, there will be a totally unnecessary over-lapping of and a needless

‘conflict between Clausds 8A and 8B, with freedom to: the authority to _ to pursue action either under Clause 8A or Clause 8B each providing © a different procedure of of its own, We do not think’ that it is permissible for us to read clauses 8A ‘and 8B in a manner as to create needless conflict and .confusion when the two classes are capable of existing separately, without encroaching upon each other. Contextual construction demands such a construction a: d we have no hesitation in adopting it. Clause 10 which provides for a reasonable opportunity before action is taken under clause 8A, does not make similar provision: in the case of action under clause 8A as well as action

- under clause 8B are both in the nature of interim orders of tempo-.

rary duration aimed at preventing further harm and mischief pending investigation into the allegations under clause 8. Does it ‘mean that the principle of natural justice of procedural fairness is to be alto-

_gether excluded when action is taken under clause 8B? - We do not think that it is permissible to interpret: any statutory instruments so as to exclude natural justice, unless the language of the instrument leaves no option to the court. Procedural fairness embodying natural - justice is to be implied whenever action is taken effecting the rights ot

—_

Tye

LIBERTY OIL MILLS VY, UNION (Chinnappa Reddy, J.)

of parties. It may be that the opportunity to be heard may not be pre-decisional ; it may. necessarily have to be pre-decisional where the danger to be averted or the act to be prevented is imminent or where the action to. be taken can brook no delay. If an area is devastated by flood, one cannot wait to issue show-cause notices for fequisitioning vehicles to evacuate population. If there is an outbreak of an epidemic, we presume one does not have to issue :show-

. cause notices to requisition beds in hospitals, public or private... In

‘such situations, it may: be enough to issue post-decisional notices providing for an opportunity. It may not e:en be necessary in some | ‘situations to issue,such’ notices, but it would be sufficient but obliga- tory to consider any representation that may be made by the agegrieved-person and that would satisfy the requirements of proce- dural fairness and natural justice. - There can. be no tape-measure of the extent of natural justice. It may and indeed it must vary from -

Statute to statute, situation to situation and case to case. Again, it is necessary to say that. pre-decisional natural justice is not usually contemplated when the decisions taken are of an interim nature pending investigation or enquiry. ‘Ad-interim orders may always be made ex-parte and such orders may themselves provide for an opportunity to the aggrieved party to be beard ata later stage. Even if the interim ordérs do not make provision for such an opportunity, an aggrieved party has, nevertheless, always the right to make appro- priate representation seeking a review of the order and asking the.

authority to rescind or modify the order. The principles of, natural justice would be satisfied’ if the aggrieved party is,given an opportu-

‘ nity atthe request. There is no violation of a principle of natural justice if an ex-parte ad-interim order is made unless of course, the Statute itself provides for a hearing before the order is made as in- clause 8A. Natural justice will be violated if the authority refuses to .

consider the request of the aggrieved party for an opportunity to make his representation against the ex-parte ad-interim orders.

In the Qeen v. Randolph et al.’, the Supreme Court of Canada had to consider the question whether an interim order under s. 7 of, of the Post Office Act prohibiting the delivery of mail directed to or deposited by a person’ in a Post Office may be made without prior notice to the person affected, pending the final determination which could only be made after hearing the party affected. The Supreme Court said,

(1) 56 D.LR. (2d) 283

B.

’

SUPREME COURT REPORTS [1984] 3 s.c.k.

“Tn s, 7 it has not abrogated it (i.e. the application of the maxim audi alteram paterm) Rather it has provided that befofé any final prohibitory order is made, the party affected shall have notice and a right to an expeditions hearing and has defined the procedure to be followed. It would, in.my opinion, - be inconsistent with: the scheme of the section to hold that before making an interim order the Post-master-General must hold a hearitig. If such a duty existed it would bea duty to notify the party affected of what was-allged against him and togive him a reasonable opportunity to answer. If this were done the hearing prescribed sub-s. (2) would be’ an unnecessary

_ > repetition. Generally speaking the maxim audi alteram partem has reference to the making of decisions affecting thé rights of parties which are final in their nature, and this is true also of 3. 2 (e) of the Canadian Bill of Rights, 1960 (Can.), c. 44 . upon which the respondents relied. »

“The following passage in Hiroom’ 8 Legal Maxims .10th ed., p- 68 is in point :

Although cases may be found in the books of decisions under particular statutes which at first might seem to conflict with the maxim, it will be found on consideration that they are not inconsistent with it, for the rule, which is one of elementary _justice, only requires thata man shall not be subject to final "judgment or to punishment without an opportunity of being | heard. ”

“The main object of s. 7 is to. enable the Post-master-General to take prompt action to prevent the use of the’ mails for the purpose of defrauding the public or other. criminal activity. That purpose might well be defeated if he could take action only after notice anda hearing. _. Sub-section (1) enables him to act swiftly in performing the “duty of protecting the public while sub-s. (2) gives protection to the person affected by conferring the right to a baneity before any order made against _ him becomes final.

“In my opinion, the two interim prohibitory orders in questionwere validly made.” -

In the Commissioner of Police v. Tanos, the High Court of

_ G) 98, CLR. 383

Can

& 2 c

LIBERTY OIL MILLS », UNION ichienappe Reddy, J.)

Australia (Dixon C. Jand Webb J.) was “considering the question

_, Whether an ex-parte order of closure of a Disorderly House may be . . made. lt was observed,

..+.. dt is in a broad sense a procedural matter and while the general principle must prevail it is apparent that exceptional cases may be imagined in which because of some special hazard or cause of uigency an immediate declaration is demanded. A power to regulate procedure might be treated as authorising regulations allowing an exparte order in such cases. Under the power conferred by section 15 upon the Governor-in-Council to make regulations this very course seems to have been adopted. Regulation 1 provides that if the judge is of the opinion that reasonable grounds have been shown (i) he may make the declaration immediately and ex-parte if this seems to him necessary or desirable,- or (ji) if he thinks that an opportunity should be given to the owner or. occupier or both to oppose the making of the declaration he may direct them to be served. with a copy of the affidavit and to be notified of the day on which the matter will be dealt with, such service and notification to be

. @ffected in such manner as may seem to him sufficient : when . the matter comes on, the Superintendent or Inspector of Police or counsel or solicitor on his -behalf’ and the owner and occupier or counsel or solicitor on their behalf may attend and. ~~ be heard, and the matter shall be disposed of in public cham- bers. This regulation may perhaps be read as leaving the choice of course at large to the judge. But it ought not so tobe interpreted. It should be understood as meaning that prima facie the course provided for in para (iii) should be followed and . ‘only in exceptional or special cases should an immediate declaration be made.

The analogy is that of an interim injunction, but’ the caution should be greater because the declaration, unless it is framed as provisional or conditional, concludes the right subject to rescission.

“Tt may be added that probably a declaration improperly made ex-parte ‘may be rescinded or set aside on an application made independently of s. 4(1).”

“In Lewis v. Heffer!, Lord Denning MR distinguished the observations of Megarry J. in John v. Rees and observed, ee (1) [1978] 3 AI ER 354

>

>

SUPREME COURT RETORTS - —=—«*[1984] 3.c.R.

“Those words. sag no doilbi, to suspensions which are inflicted by way of punishment, as for instance when a member’

“of the Bar is suspended from practice for six months, or when solicitor is suspended from: practice. _ But they do not apply to suspensions which are made,asa holding operation, pending enquiries. Very often irregularities are disclosed in a govern-

~ ment department or in a business house ; and a man may be . suspended on full pay pending enquiries. Suspicioh may rest on him; and so he is suspended until he is cleared of it. No

' one, so far as I know, has ever questioned sucha suspension on the ground that it could not be-done unless he is given notice.of the charge and an opportunity of defending himself, and so forth. The suspension sin such a case is merely done by way of good administration. A situation has arisen in which something must be done at once. The work of thel department.

_ or the office is. being affected ‘by rumours and suspicions. The others will not trust the man. In order to get back to proper ..

work, the man is suspended. At that stage, the rules ‘of natural justice do not apply ;: see Furnell v. Whangarei High. ~

Schools Board.” . _

-

In inet Whangarei High School Bd. the Privy Council upheld the order of suspension of a teacher peeing iain ain of charges against him, It was observed, ;

“Neither in thé ropilifions nor in-the Act is suspension classi- fied as a penalty. Section.157 (3) shows that it is not. It must

_however .be- recognised that suspension’ may involve hardship.

.During suspension salary is not paid and apart from this something of a temporary slur may be involved if a teacher is suspended, | But the regulations (by regulation 5) clearly contemplate or Jay it down that the written statement of a teacher (under regulation 5(2)) and- the oral personal statement (ander regulation 5(3)) will be madé after suspension if any has taken © place. Suspension is discretionary. Decisions as to whether to | suspend will often be difficult. Members of a board who. are

. appointed or elected to act as the governing body of a school

Fes

‘must in the exercise of their responsibilities have-regard not only to the interests of teachers: but to the interests of. pupils and of parents and of the public. There may be occasions when

‘having regard to the nature of a charge it will be wise, in the

{1973] Appeal Cases 660 . eee

™

. parte interim order is made.

LIBERTY 0 Olt MILLS . UNION (Chianappa Red, J. )

interests of all conoernet that pending decision whether the charge is substantiated a teacher should be suspended from duty: In many cases itcan be assumed that charges would be .

denied and that only after a full hearing could the true position be ascertained. It is not to be assumed that a board; constituted as it is, will wantonly exercise its discretion.”

We have referred to these four cases only to illustrate how exparte interim orders may be made pending a final adjudication. We however, take. care to say that we do not mean to suggest that Natural Justice is- not attracted when orders of suspension or like orders of an interim nature: are made. Some orders of that nature, intended to prevent further mischief ‘of one kind, may themselves be _ productive of greater mischief of another kind. An interim order of stay or suspension which has the effect of preventing a person, ‘however, temporarily, say, from pursuing his profession or line of business, May have substantial, serious and even disastrous consequences to him and may expose him to grave tisk and hazard. Therefore, we say that there must be observed some modicum of residual, core natural justice, sufficient to enable the effected person to make an adequate representation. (These considerations may not, however,

_ apply to cases of liquor licensing which involve the grant of a privi- © . legeandare not a matter of, right : See Chingleput Bottlers v.

Majestic Bottling: Company, Civil Appeal Nos. 11970-71 of 1983). That may be and in some cases, it can only be after. an initial ex-

* t

As we have seen, both clauses 8A and 8B contemplate action of an interim nature pending investigation into allegations under clause

8. Ordinarily, in the absence of anything more, it would not be

. hecessary to give an opportunity to the person concerned before proceeding to take action under clause 8A orclause 8B. But while .

clause 8B deals with the right to obtain licences and the right to obtain allotments, clause 8A deals with rights which have flowered .

into licences and allotments. A person to whom licences have been granted or allotments made may have arranged his affairs on that .

basis and entered into transactions ‘with others, and; to him the

' consequences. of action under clause 8A may.be truly disastrous whereas the consequences of action under clause 8B may not be so imminently harmful: It is presumably because of this lively difference. between clauses 8A and 8B that clause 10 provides for a pre-decisional opportunity in the case of action under clause 8A and does not so provide in the case of: action under clause 8B. Again; it, is

Yo s iad vara a . SUPREME couRT REPORTS = 11984)3 se.

A ” Spreeminaby bias of this dinrereraes that — 10 while providing . for an appeal against a decision under clause 8A does sot provide for» an appeal against a decision under clause 8B. ‘Not that it makes any difference because S. 4M arid 4N of the Imports and Exports

(Control) Act provide for an appeal and a revision against any — decision or order made under the Act, which naturally include any _ decision or made under any subordinate legislation made under the

Act, and this right of appeal and revision cannot be whittled down

. by the subordinate legislation. As we mentioned earlier, it does not - mean thaf the requirements of natural justice are not to be met at all

_ in the case of action under clausé 8B. The ‘requirements of natural ¢ , - justice will be met in thé cas¢ of action. under clause 8B by consider- . ~ ing, bona fide, any representation that ay: be. mdde in that bebalf . by the person aggrieved. “Clause 8B itself gives an indication that” "such a post-decisional opportunity on the request of the persoh con- ° cerned is contemplated. _ Wé -have ‘seen that action under-clause 8B. -is to be taken if the authority is‘ satisfied in the. public interest that’ 20 D such | action may be-taken without ascertaining further details in | _regard to the allegations. It -leatly implies that when further facts — are ascertained by thé authority or brought to the notice .of the authority, such action may be reviewed. -A$ we have earlier pointed

‘ out while ex-patte interim ofders may always be made withouta pre-

’ decisional opportunity or: Ayithout the ordef itself providing for a

“E - post-decisional opportunity, the principles of natural justice which” e ~ are never excluded will be satisfied: if a post-decisional opportunity .

.. is given'if demanded. So we hold that in the case of action under _ (clause 8B it is not necessary to give a pre-decisional opportunity but

‘a post decisional - "epportnony must be given if so requested by the. - e- "Berson affected.” aa ae se em oe ‘The next question for consideration is whether the decision to - ._” keep in ‘abeyance’ shouldbe communicated tothe person concerned. _. Therecan be no two opinion§ on: this. - Ours is a Constiutional _ . Government, an open democracy founded upon the rule: of law and

‘G ~ . nota cloak and dagger regimen. It is inconceivable that under our

'. donstitutional stheme a decision of the kind cantemplated ‘by clause “. 8B which may have the effect of bringing $to a Zstand ;still the entire .

. business ‘activity of the person affected and hich may ‘even ‘spell ruin to him, should be made and ‘implemented. without .being commuhi-. ; cated to that person. Tntertwined i is the question of. observance of ~H natural justice and how’ can ‘natural justice: be satisfied if the decision , is not even communicated 2 It would be most arbitrary and quite

3 pay ‘wolative of Articles 14 A ane Pip of the Constitution. if.

€ rte clause 8B is to be Fitesbootted, as © excluding’ communication of the AC , decision taken.’ There is nothing’ in clause’ 8B to Suggest ‘that the- - decision i is not to be communicated. On the other hand, the expres- ~. - "Sion “without assigning any. reason” “implies that the decision has to ' be communicated, but reasons for the decision have not to be stated. : Reasons of course, ymust exist for the decision since, the decision may , ~~ only be taken if the authority is satisfied that. the grant of licence or B ~ . allotment of imported goads will not . bei in the public interest. We — must make it clear that ‘without assigning reasons’ only means - that sthere is “no; obligation | to formulate reasons and. nothing more. ae : Formal reasons may lead to. complications . when. the. matter is still : ‘- under investigation. So the authority may not. -Bive formal Teasons, “ @ :.but the skeletal allegations. aust be mentioned in order to _proyide an ot +: Opportunity - to. the. person | affected to, make “his representation, ; « Chapter and verse. need not be. quoted. Details. ymay not be. men-. wy "e. “oy eigoge aod an outline of, ithe. allegations should be sufficient.

fw The fiirthes: “question ison what . should the ‘satisfaction be b baad ? : Since action under.clause 8B. is to, be taken pending investigation into allegations under clause 8, we must take jt that the action” under clause 8B is really in aid of the ultimate ‘order. under clause 8. ‘It must follow that i in order to, invite the satisfaction contemplated by” clause 8B there must. be present some - strong suspicion of one or © » alee Rag hal _ Other or more of the grounds | mentioned in clause 8. Since the action _ which is of a drastic nature, is to be taken exparte, it must riecessarily » "be animated by a’ sense - of . urgency. » Tho: sense of urgency may be * infused by a host of circumstances “such as the. trafficking and unscru- “pulous peddling i in licences, ‘large ‘scale: misus¢..of imported goods, . - attempts to monopolise or corner the market, wholesale prevalence co “of i improp:r practices among glasses» of importers, public sentiment _e@tc. etc: | One of the submissions very: ‘strenuously: pressed before us “A. . was that public sentiment was wholly ‘irrelevant ‘in arriving: at: the B:% _ satisfaction contemplated by Clause SB. We are ‘unable to agree. It’ ' is true that public administration, is.not to be: run on public sentiment G _. and statutory action may only be taken on: grounds permitted ‘by the 1 _ Statute. But strong ‘public sentiment may impart a sense - of urgency © toa situation such as to compel. the. ‘authorities to proceed to take action unde: a statute provided . of, course” grounds for taking action 4 ° .under the statute. ” Public sentiment is not, in such cases, ‘the ground for the action but it is what clothes the ground with | “that sense of H . curgeacy which makes it imperative that swift action be taken. That .is how we uaderstand the referrence to public sentiment in the

\

“SUPREME couRT REPORTS

- counter affidavit filed on ‘behalf of the Union ¥ India and the Chief

Coutpolier of Imports and Exports.

Public interest must nolens yolence be the paramount consideration. If the threatened public mischief is such as to outweigh the likely injury, to the party, the authority may take action under Clause.

8B. Ifthe threatened public injury is very slight compared ‘to the

“‘harm which may be done to the party, the authorlty may not take action under Clause 8B. There imay be cases where the ‘abeyance’

_ orders may themselves be productive of serious public injury as where * ’ a substantial amount of foreign exchange may be lost ora large number of. workers are likely to’ be thrown out of employment etc. In such situations the authorities may pause and have second thoughts, consider the inevitable consequences and be guided by that element of the public interest which outweighs all others. Which _ element of the public interest should be given greater weight and - which grounds should weigh at all are matters for the authority

’ taking action under Rule 8B. Courts do not concern themselves.

with the sufficiericy of the grounds on which action is taken of with the balancing of competing considerations, in favour of and against the action.

One of the submissions very strenuously urged before us was that a large number of the applications for import lincenges and allotments of imported goods which have been kept in ‘abeyance’

telate to goods which are totally unrelated to beef tallow or any other animal tallow and there was no justification whatever for keep-

. ing them in ‘abeyance’. But an ‘abeyance’ order under clause 8B is directed. not against any particular type of goods but agaiist ai importer, licensee or other person against whom an investigation into allegations under clause g is pending. The question is not it is not in the public interest that a particular person should be

'. prevented from obtaining import licences or imported goods of any description pending investigation into the allegations under clause 8B. That would depend on the nature of the allegations, the extent © of involvement of the person concerned aid, most important, the element of the public interest. Jf the allegations against a person’ ~ inyovle him deeply in trafficking or racketeering in import licences and infported goods, the authority may consider it inexpedient in the public interest to keep in abeyance any application of his for the

“grant of a licence or allotment of goods. On the other hand even if

_ [1984] 380k. 7

Xx

. whether any particular type of goods should be allowed to be impor~ | ‘ted or allotted to any person-that is a question of policy-, but whether ly the -allegations are grave, if the effect of an order under clause 8B is __

%

LIBERTY OIL MILLS ¥. YNION (Chinappa Reddy, J. )

“Tikely to result in loses of considerable foreign exchange or to shut down an isdustry throwing jJarge number .of workers out of employment, the authority should restrain itself in larger public interest, from making an order under clause 8B or may make an. order confining the abeyance order to applications atid goods of

‘certain description only instead of making a, general order which extends to all. applications for import licences and allotment of _ imported goods. .Again, the allegations may reveal that the involvement of the person in. illegal activity'is so remore or minimal that it would be entirely inexpedient to make an order clause,8B.

‘ A- person who legitimately purchases - ‘imported ‘goods or imports goods under a licence lawfully acquired by him and who has used the goods in the manufacture of a different kind of goods in which industry the person is engaged may not be visited with an order under clause 8B merely because the original licensee’s actions may be

"suspicious. Again where a person’s bonafides -are not suspect at all but he may be ‘technically at fault or he may have acted on ® bonafide interpretattion of the rules and regulations, it may-not be a case for making an order under clause. 8B. But-these are all matters:

' for the consideration of tke authority making the order urider clause .

$B and not for the Court.

_ Wehave held that action under Clause 8B is of. an interim nature and it may be ex-parte, in which case the affected party may make'a suitable representation bringing out all the outwheighing

- Gircumstances in his favour. That is the real remedy of the party. -Courts do not enter the picture at that stage utiless. the action is malafide or patently without jurisdiction. The action will be patently without jurisdiction if it is not based on any relevant material whatsoever. If thc authority declines to consider the- representation, or if the authority after consideration of the representation eschews relevant considerations and prefers to act on irrelevant considerations or from oblique motive, or the decision is such as no .reasonable man ~ ‘properly “directed on the law would arrive at on the material facts, it will be open to the party to seek the intervention of the court at that stage. Our attention was drawn to tke well known. cases of Barium Chemicals v. Company Law Board’, Rohtas Industries y. S.D. Agarwal?, M.A. Rashecd v. State of Kerala®, and the recent cases oe (1) {1966} Supp. SCR 311

- (2) [1969] 3 S.C.R, 108 .

3) [1975] 2S°C.R.93 j

H08

SUPREME cOURTREvoRTS == S«*[1984]. 3 S.CuK’

‘of Shatini Soni v. Union of India’, ‘gud Goinmissioner of Income Tax’

‘y, Maltindta ahd Makindra® anid wre have. considered all of them in ‘FIRE at our conclusion:

‘ Inthe present-case, the patty instead of representing his case to the appropriate authority chose the path, of ditigaiion obviously’ deterréd by the clumsy ‘attempt at secrecy made by the concerned authority and the failure to communicate the decision to

_ the party.’ One of the siibmissiots made to uswas that the:sbeyance ‘order was never formafly commutticated to the-petitioners and it.was, therefore, to be treated as ‘non est. “Reliance was placed on the decisions of | Bachhittar Singh v. State’of Punjab’ -and-State of Punjab yy. Balbir Sing 4. ‘We do not think that these decisions are of any facility to us on the facts of the present case. ‘Un Buchittar Singh's

‘case, what was decided was thata decison taken >in“the. privacy of a. Minister’ $ Chamber, which was not tommunivative to the-party and ° which was reversed without ever “béltig communicated was of no

- effect at all. In Bolbir Singh's case, itwris+held:that once ‘an-order

‘was sent out, apd went out beyond the-oniro! -of:the authority, the

‘order miust be said to have ‘been issued no-matter when -the party . affected actually received. it. Communication, according -to ‘learned.

Judges, was the process of setting in motion the despatch of the order. It was -held. in that case that forwarding of copies to the

Accountant General and to the Chief Engineer was sufficient communication. In the.present case, the ‘abeyance’ order was undoubtedly: communicated to the licensing authorities, the State Trading

Corporation, the Minerals,and Metals Trading Corporation and other similar agencies. Despite the attempt at secrecy made ‘by the © concerned authority and the failure to formally communicate the decision to the party, the abeyance circular was very soon

-public kncwledge. The affected’ party also learnt, about it’ but probabiy: deterred by the attempt at secrecy, chose the path of hitigation, instead of representing his case to the appropriate authority. We might have considered the question of what relief the petitioners were entitled to had the-secrecy.heen maintained and knowledge

_of the order ‘continued to be held back from the ‘party. But the person affected did come to know of the order—he filed a copy ofthe - circular along with:the writ petition—, and in the final analysis, the

SEE Sc 7

/ a) “1981 15.C.R. 962. Q) ‘11983 4} S.C.C. 392

' () [1962] Suppl. $.C.R. 37°

« [1976] 2S.G.R. 115 ae, me en

. ——o . ie

TT

LIBERTY OIL MILLS ¥. UNION (Chinnappa Reddy, 7). .

object of communication is only to impart knowledge.’ Since then, a

* yolume of water has flown under the bridge and we must proceed on " the basis that the affected party is aware of the decision and so, what next? We can not, of course, proceed to consider the question whether there is sufficient relevant material in support of the allegations made against petitioners. In fact we can-not enter upon the merits of the controversy at all. We cannot, for example, consider © the question whether the material available justifies a prima facie ‘conclusion that the petitioners have made illegal imports of beeftallow. According to the contention of the petitioners, they were entitled to import beef tallow even after June 5, 1981 if they had * valid licences and if they had entered into firm contracts and opened , ~ letters of credit before June 5,198t. According to the authorities tois was not permissible; the affect of paragraph - 222(3) of the *

Import Policy was that the amendment which was made on June 5, 1981 took effect from April 1, 1981 and permitted import of beef tallow. under OGL only where firm contracts had been entered into and letters of credit had been opened prior to April 1, 1981 butif - the contracts had not been, entered into and letters of credit had not been opened before April 1, 1981, the imports had to be through the channel of the State Trading Corporation only. Though in the cases

* of Arvind Exports and Jayant Mills isan appeal and review arising under the provisions of the Customs Act, the question was decided in favour of the parties, the present stand of the’ Government is that those decisions are not binding on the authorities functioning under the Imports (Control) Order and that those decisions had been rendered without reference to paragraph 222(3) as well paragraph 24 ofAppendix 10 of the Impott Policy of 1980-81 which expressly states : ‘ . “Nothing in the Open General Licence shall affect the applica tion to any goods, of any other prohibition or regulation affecting the import thereof, in force, at the time where they are actually imported.” . . “We consider that this is not a matter for the court to decide at this Stage in a petition under Article 226 of, the Constitution or under Article 32 of the Constitution questioning an ad-interim order under

- Clause 8B, Again we cannot enter into the controversy whether there has been mis-ulilisation of the imported goods by the peti- tioners and whether the petitioners can be termed as ‘actual users? within the meaning of that expression in the’ Import Control Order — by the mere fact that they subject the beef tallow to ‘air-treatment’. All these'questions pertain to the meuits of the controversy and it is ot for us to en:bark into a discussion into these matters.

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But we may properly consider, even at this stage, the question of mald fides‘or patent lack of jurisdiction.’ ‘There is no suggestion that the action was mala: fides, It was, however, argued that the order as embodied in the abeyance ¢ircular- did not fulfil the con- ditions-precedent prescribed by the statute It did not contain a

_ contemplated by clause 8B for action under that provision, and with- ~ recital ofthe allegations constituting the basis of the satisfaction out a recital of the allegations it was impossible to say that the action was not based on irrelevant material. It did not. even recite that

.. Which was the foundation of any action under clause 8B, namely, the ’ satisfaction of the authority that the action was in the public interest.

On the other hand, it issued a directive to the licensing authorities to

-keep in abeyance for a period of six months any application received

. from the concerns specified for the grant of import licence or cus- toms clearance permit and allotment of imported goods through’ agencies like the State Trading Corperation of India, Minerals and

~ Metals Trading Corporation of India arid similar agencies, making a

- bare recital that investigations into certain allegations under clause 8 _ were pending against the concerns. Again a large number of con-— cerns were lumped together and purported to be dealt with bya x single abeyance circular. There was ex.facie’ nothing in the circular ° which could point to the authority having applied its mind and considered. the case of each concern separately. It is true that the | abeyance circuiar suffers from every one -of these infirmities and if there was nothing more, the parties would be well entitled to ask us to quash ‘the circular. But the learned Addi, Solicitor General . invited our attention to the statements made by Shri J.P. Sharma,

Deputy Chief Controller of Imports and Exports ‘and the author of the abeyance circulars in the counter affidavit filéd by him. The:

learned Additional Solicitor General has also placed before us for our perusal the relevant files of the authority.. The counter-affidavit , of Shri J.P, Sharma shows that the principal allegations against the petitioners were that they bad prima facie indulged in illegaf import-

' ation of beef tallow and had also misutilised the b&f tallow. Why the authority took the prima facie view that the petitioners had. illegally: imported: beef.tallow and had mis-utilised the imported beef. tallow has been explained by him inthe counter-affidavit. Illegal -

_ importation of beef tallow and mis-utilisation of the imported beef tallow ars certainly relevant grounds on which action may be taken under clause 8B. Weare, of course, not concerned with the question

- of the sufficiency of material before the authority in arriving at its conclusion. A persual of the files shows that in respect of nine of _ the firms‘covered by the abeyance circular dated November 7, 1983,

-

Dare ae

| al p c LIBERTY OIL MILLS ¥. UNION (Chinnappa Reddy, J.)

. the decicision to kee) their applications and allotments in abeyance "was taken at the highest level, that is, at ihe level of the Ministér ‘ for Commercé, Government of India. Thereafter the Deputy: Chief Controller of Imports and Exports, the files show, considered the cases of 61 concerns including that of Liberty Oil Mills Limited . _and issued the abeyance circular dated November 9, 1983. We find ‘that the cases of Liberty Oil Mills Limited as well as other concerns were separately and individually considered. Their cases having been considered by the authority separately and individually before the circular was issued, we do not think that it makes any difference on the peculiar facts of this case that a single circular was issued, covering a large number of concerns. However, we wish to impress

_ upon the authorities that those entrusted by statute with the task of taking prejudicial action on the basis of their subjective satisfac-

‘tion should, first, bestow careful attention to the allegations forming the basis of the proposed action and the probable consequences. which may ensue such action and, next, take the trouble of reciting in the order issued by them the satisfaction forming the basis of the action and a concise statement of the allegations forming the basis of the satisfaction. If the necessary recitals are not found, there may be serious sequels. In cases involving civil liberties, the orders will necessarily have to be quashed. In other casesalso, it is possible to envisage similar results depending on the Tights'involved, the object of the statute and other facts and circumstances. As it is the circulars in question are hopelessly drafted adding to the confusion created by .

the sadly drafted clause 8B. In the facts and circumstances of this, case, the real remedy of the party, as we conceive it, is to make a representation to the concerned authority setting out his version of the facts and the law and the prejudice to himself.and the public inteyest as a consequence ‘of the action under clause 8B. We would

‘ have first directed the authority to communicate, within a specified ‘time, to the party the allegations forming the basis of the action.

But we do not consider it necessary to do so as the party is noW fully apprised of the allegations against him. In the circumstances, we think that it would be proper if we direct the authority concerned to consider any representation that may hereafter be made by the party within 10 days from the date of its receipt. Subject to this directions, the writ petition is dismissed but without any order as to costs,

Civil Appeal No. 274 arises out of an’ interlocutory order made by the Bombay High Court b:fore th: writ petition was transferred

SUPREME COURT REPORTS [1984] 3 s.c.k. to this court. In view of our final decision disposing of the main writ petition, it is unnecessary to pass any orders in this civil appeal, which is disposed of accordingly.

USK. Petitions dismiss e-