Page 1 REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 4027 OF 2009

PARISONS AGROTECH (P) LTD. & ANR. .....APPELLANT(S)

VERSUS

UNION OF INDIA & ORS. .....RESPONDENT(S)

WITH

CIVIL APPEAL NO. 4028 OF 2009

AND

CIVIL APPEAL NO. 4029 OF 2009

J U D G M E N T

A.K. SIKRI, J.

Vide Notification No.39 (RE-2007)/2004-2009 dated

16.10.2007, the Central Government (respondent No.1 herein)

prohibited the import of palm oil through Kochi port in Kerala. It

was followed by another Notification No.63 (RE-2007)/2004-2009

dated 24.12.2007 whereby the import of palm oil has been

prohibited through all the ports of Kerala. These Notifications

Civil Appeal No. 4027 of 2009 & Ors. Page 1 of 38

Page 2 were issued by the Central Government in exercise of powers

conferred by Section 5 read with Section 3 of The Foreign Trade

(Development and Regulation) Act, 1992 (hereinafter referred to

as the 'Act'). All the appellants filed separate writ petitions

challenging the validity of these Notifications on the ground that

they were ultra vires the provisions of Section 3 of the Act and, in

any case, unconstitutional as offending Article 14 of the

Constitution of India. The writ petitions filed by them were

dismissed by learned single Judge. Matter was carried in appeal

before the Division Bench of Kerala High Court, but

unsuccessfully, as these appeals have also been dismissed.

It is clear from the above that the issue involved in all these

appeals are identical. This was the reason for clubbing these

appeals so that they could be heard analogously and decided as

one batch. However, for the sake of convenience, we will be

referring to the facts from Civil Appeal No.4027/2009 as well as

the impugned judgment dated 21.10.2008 which is impugned in

the said appeal.

2.The appellants are engaged in refining and manufacture of edible

oils, vanaspathi, bakery shortening, margarine etc. Their

registered offices and the factories are in the State of Kerala.

Civil Appeal No. 4027 of 2009 & Ors. Page 2 of 38

Page 3 The main raw material used in the manufacture of RBD palm oil is

crude palm oil. The appellants have been importing this raw

material from other countries, primarily from Indonesia and

Malaysia. Before the issuance of the aforesaid Notifications, this

import was through the ports of Kochi and Beypore from where it

used to be transported by road to its main factories which are in

Kozhikode and Malappuram, in the State of Kerala itself. The

impugned Notifications have prevented them from importing

crude palm oil through the ports of Kochi and Beypore. Instead,

they are forced to import this raw material through the ports

outside Kerala. The effect thereof is that distance from the ports

of import to the factories of appellants in Kerala stands increased,

in contrast with the situation prevailing earlier. It has led to

increased transportation cost for the appellants and that is

precisely the cause of grievance.

3.As mentioned above, vide Notification No.39

(RE-2007)/2004-2009 dated 16.10.2007, certain items mentioned

therein, which are all different varieties of crude palm oil, were not

allowed to be imported through Kochi port. The Notification gives

the description of the items and mentions the policy condition in

respect thereof by stipulating: “import not permitted through Kochi

Civil Appeal No. 4027 of 2009 & Ors. Page 3 of 38

Page 4 port”. This Notification was amended thereafter with the issuance

of Notification No.63 (RE-2007)/2004-2009 dated 24.12.2007 in

respect of same items by enlarging the scope of

restriction/prohibition with the stipulation: “import not permitted

through any port in Kerala”.

4.Again, as already pointed out above, these Notifications were

challenged on two grounds, viz.:

(i) The Notifications are issued purportedly in exercise of powers under

Section 5 read with Section 3 of the Act, but these provisions do

not confer any such power on the Central Government.

Therefore, the Notifications are ultra vires the provisions of

Section 3(5) of the Act;

(ii) Imposition of selective restriction and confining the prohibition of

import of crude palm oil to the ports in Kerala has not only

resulted in invidious discrimination, such an action is manifestly

arbitrary, irrational and unreasonable as well it is contended that

there is no rational objective which is sought to be achieved with

such Notifications and, therefore, they offends the equality clause

enshrined in Article 14 of the Constitution.

5.Both these arguments have been repelled by the High Court

which has found not only complete justification and rational in

Civil Appeal No. 4027 of 2009 & Ors. Page 4 of 38

Page 5 issuing such Notifications, it has also held that power for issuing

such a Notification can be traced to the provisions of Section 3 of

the Act. Before us, the appellants have raised the same

arguments and in the process also, submitted that the High Court

has not considered the aforesaid twin submissions of the

appellants in proper perspective, and, on the contrary, rejected

the same in perfunctory manner without dealing with these

contentions in the manner they were placed before the High

Court. Before we record the arguments of Mr. Naphade, learned

Senior Counsel who appeared for the appellants (counsel

appearing in other appeals adopted his arguments) in detail, it

may be advisable to state the reasons which were given by the

respondents in their counter affidavits in support of these

Notifications. We would, however, like to record that in the

impugned judgment the discussion on this aspect is contained in

detail as well.

6.State of Kerala is the largest producer of Coconut which is the

raw material for the production of coconut oil. Coconut oil and

palm oil are competing products. For production of palm oil,

crude palm oil is the raw material which is largely imported.

Since the import price of crude palm oil is much less than the

Civil Appeal No. 4027 of 2009 & Ors. Page 5 of 38

Page 6 price of coconut oil, the price of coconut oil is higher than that of

the palm oil because of the aforesaid reason. It was adversely

affecting the farmers in the State of Kerala which led to repeated

representations on their behalf to the Government for taking

remedial measures. Having regard to the importance of this crop

not only for the economy of the State but also livelihood of about

35 lakhs farmers, the State Government has constituted Coconut

Development Board (hereinafter referred to as the 'Board') which

takes care of the interests of the farmers growing Coconut crop

and also takes initiatives and steps for the development of this

crop.

7.The significant and marked difference between the price of

coconut oil and palm oil manifested the fact that percentage

difference between the two stood at 109% in the year 2004,

reduced to 50% in December, 2006, to 12% in September 2007

and 0.6% in October 2007. The Board also observed that the

import of palm oil in one particular year had a cascading

downward impact on coconut oil prices in the subsequent years.

For example, the huge import of 1,53,513 tonnes of palm oil in

2004-05 had led to a price decline in coconut in 2005-06 and

2006-07. While the average price of coconut oil is Rs.6,155/- per

Civil Appeal No. 4027 of 2009 & Ors. Page 6 of 38

Page 7 quintal in 2004-05, in 2005-06, it declined sharply to Rs.4,978/-

per quintal with further fall in 2006-07 when the price was

Rs.4,459/- per quintal. This raised concern with the policy

makers to protect the interest of huge number of small time

farmers in the State of Kerala. Such concerns were raised by the

Board as well as Union of Coconut Farmers with the concerned

authorities including Chief Minister, who in turn, took up the

matter with the Central Government at the highest level. The

narratives in this regard are stated in the impugned judgment of

the High Court itself and the discussion goes, somewhat, in the

following manner:

A letter dated 15.08.2005 was written by All Kerala Coconut

Farmers' Union to increase minimum support price of copra and

to restrict import of coconut oil and copra. In the letter, it is further

stated that the steep fall in the prices of coconut, copra and

coconut oil is in view of indiscriminate import of coconut and

coconut oil from foreign countries. The reiteration of this request

is made by yet another letter dated 15.12.2005. Sequel to these

two letters, Ministry of Agriculture has written a letter dated

03.02.2006 to Joint Director of General Foreign Trade (JDGFT)

enclosing a copy of the letter from All Kerala Coconut Farmers

Union, Thrissur to increase minimum support price of coconut oil

Civil Appeal No. 4027 of 2009 & Ors. Page 7 of 38

Page 8 and to cut import of coconut and coconut oil into the country and

in that letter a request is made to JDGFT to offer their comments,

if any. The Chairperson of the Board by her letter dated

06.12.2006 addressed to Director General of Foreign Trade

(DGFT) seeks restrictions/prohibition on the import of coconut oil

and coconut oil cake and the reason being slump in the prices of

coconut and coconut oil in the country and in particular, States

like Kerala. This correspondence was forwarded by DGFT Office

to Ministry of Agriculture. The Chief Minister of Kerala by his

letter dated 19.04.2007 to the Hon'ble Prime Minister has brought

to his notice the plight of coconut farmers in the State, in view of

steep decrease in the price of coconut, copra and coconut oil

and, therefore, a request was made to reverse the decision to cut

import duties of palm oil. This was followed by another letter by

Hon'ble Commerce Minister to Commerce Secretary requesting

the action on the letter of the Board dated 06.12.2006. Then, the

another crucial letter dated 08.05.2007, wherein the Deputy

Secretary, Ministry of Commerce forwarded a report of the Centre

for Development Studies on import of palm oil on the coconut

economy in Kerala to DGFT for its views on the detrimental effect

of import of palm oil on coconut prices. In the report, the Centre

for Development Studies on imports of palm oil on the coconut

Civil Appeal No. 4027 of 2009 & Ors. Page 8 of 38

Page 9 economy in Kerala, in clear and unequivocal terms have stated,

“some of the recent years that have witnessed large imports of

palm oil have also reported high prices. The influence of palm oil

imports on domestic coconut oil prices also works out in an

indirect manner. The international prices of coconut oil move

together with price of palm oil. Even though coconut oil and palm

kernel oil are not perfect or close substitutes, many consumers

tend to substitute these oils in their use as edible oils. As such

the possibility of palm oil imports having a dampening effect on

coconut oil prices cannot be ruled out”. This is the report of the

independent agency set up to make a detailed study on the effect

of import of palm oil on the coconut economy in the State. They

have given a gloomy picture of the whole scenario in regard to

the importation of palm oil into the State and what would be its

impact on the coconut oil industry in the State. The report

contains the facts and figures for a few previous years and how

the large importation of palm oil has cascading effect not only on

the prices of coconut and also on the prices of coconut oil. On

05.06.2007, the Chairperson of the Board while bringing to the

notice of the Ministry of Agriculture the need for imposing total

ban on import of palm oil through the ports of Southern States,

has indicated certain details with regard to the price effect of

Civil Appeal No. 4027 of 2009 & Ors. Page 9 of 38

Page 10 import of palm oil into the State of Kerala on the coconut oil

industry in the State.

8.This prompted Ministry of Agriculture to write a letter to the Prime

Minister's Office wherein reference was made to the

communications received from Chief Minister of Kerala and the

Chairperson/Board mentioning about the declining wholesale

price of coconut oil on the one hand and increase in wholesale

price of edible oil, on the other hand, which are causing hardship

to the coconut farmers. In this letter, it was also stated, “that

considering the increased trend of edible oil prices as a whole,

their department had supported a recent proposal of Ministry of

Finance for reduction of duties on crude palm oil and reiterated

the suggestion not to allow import of palm oil through Southern

Ports as suggested by Chairperson of the Board”. They sum it by

suggesting that the import of palm oil to Southern Ports

particularly through Cochin, Tuticorin, Mangalore and Chennai

should be disallowed with immediate effect and also the import

duty of crude palm oil should not be reduced further, since it may

have adverse impact on the livelihood of oil seed growers,

particularly the coconut farmers of Kerala as pointed out by the

Chief Minister of Kerala. This was followed by the letter dated

Civil Appeal No. 4027 of 2009 & Ors. Page 10 of 38

Page 11 03.09.2007 by the Director of Statistics to the Director General of

DGCI and seeking import data of palm oil for last three years in

the case of Cochin, Tuticorin, Mangalore and Chennai. This was

followed by the fax message requesting the Chairperson to clarify

on certain issues narrated in her letter dated 05.06.2007.

9.It is on the basis of the aforesaid material produced before the

Central Government which ultimately led to issuance of impugned

Notifications. Existence of the aforesaid material, which is based

on the record that was even produced before the High Court as

well, is not in dispute. In nutshell, the High Court considered the

following material produced before it by the respondents including

Union of India:

(a)Correspondence by the representatives of the coconut farmers

with various Ministries including the Hon'ble Prime Minister.

(b)Letter dated 06.12.2006 by the Chairperson of Coconut

Development Board addressed to Director General of Foreign

Trade (DGFT).

(c)Letter dated 19.04.2007 by the Hon'ble Chief Minister addressed

to the Hon'ble Prime Minister.

(d)Letter by Hon'ble Commerce Minister to Commerce Secretary.

(e)Letter dated 08.05.2007 by Deputy Secretary, Ministry of

Civil Appeal No. 4027 of 2009 & Ors. Page 11 of 38

Page 12 Commerce.

(f)Report of Centre for Development Studies on import of palm oil

on the coconut economy in Kerala:

The report in clear and unequivocal terms has stated, “Some of the

recent years that have witnessed large imports of palm oil have

also reported high prices. The influence of palm oil imports on

domestic coconut oil prices also works out in an indirect manner.

The international prices of coconut oil move together with the

price of palm oil. Even though coconut oil and palm kernel oil are

not perfect or close substitutes, many consumers tend to

substitute these oils in their use as edible oils. As such the

possibility of palm oil imports having a dampening effect on

coconut oil prices cannot be ruled out.”

On analysing the report, the High Court has made the following

remarks:

“This is the report of the independent agency set

up to make a detailed study on the effect of

import of palm oil on the coconut economy in the

State. They have given a gloomy picture of the

whole scenario in regard to the importation of

palm oil into the State and what would be its

impact on the coconut oil industry in the State.

The report contains the facts and figures for a

few previous years and how the large

importation of palm oil has cascading effect not

only on the prices of coconut and also the prices

of coconut oil.”

(g)Letter dated 05.06.2007 by the Chairperson of Coconut

Civil Appeal No. 4027 of 2009 & Ors. Page 12 of 38

Page 13 Development Board to Ministry of Agriculture on the basis of

which the High Court recorded the following findings:

“If we go by the tenor of the letter of the Hon'ble

Chief Minister and the letter of Chairperson of

Coconut Development Board, they are only

referring to the plight of the coconut farmers in

the State, in view of large scale importation of

palm oil which is being used as a substitute to

the coconut oil by the poor and middle class

families in the State as an alternate for their day

to day need of edible oil and this was precise

reason for the Central Government to issue the

impugned notification in the public interest and in

particular to protect the interest of the coconut

farmers in the State.”

(h)Letter of the Ministry of Agriculture to Prime Minister's

Office.

10.Mr. Naphade, however, argued that this material does not provide

any rationale for curbing the import through the ports in Kerala.

His submission was that by imposing ban on importation of palm

oil through the ports of Kerala alone, no such purpose, as

manifested, was going to be achieved. He further submitted that

such a ban on importation of palm oil through the ports of Kerala

would bring no succour to the coconut oil prices. In support of

this submission, he referred to the pleadings in para 6 of the writ

petition tabulating the prices of coconut oil and palm oil

respectively from time to time with endeavour to point out that

there is nothing common as far as prices of the two products are

Civil Appeal No. 4027 of 2009 & Ors. Page 13 of 38

Page 14 concerned. He further submitted that in the counter affidavit filed

by the Union of India, the figures shown in para 6 of the writ

petition were not countered by the said respondents. Thus, he

argued that there was no rational nexus between the two and no

intelligible differentia could be deciphered between the two

thereby rendering the decision arbitrary and bringing the decision

within the mischief of Article 14. He submitted that the appellants

in support of this argument of discrimination, referred to the

judgment of Calcutta High Court in Kalindi Woolen Mills (P) Ltd.

v. Union of India

1

but the High Court rejected it without suitably

dealing with the same. He also submitted that the interest of the

consumers was equally important and if the prices of the palm oil

are increased upwardly because of increase in transportation cost

etc., consumers would also be adversely effected and, therefore,

the decision was not in public interest.

11.Having regard to the material that is produced and taken note of

by us in extenso, which led to the issuance of the impugned

Notifications, we are unable to countenance the submissions

made by Mr. Naphade. It is well known that State of Kerala is the

largest producer of Coconut and, in turn, there is substantial

production of coconut oil as well. It is also a matter of common

11994 (74) ELT 827

Civil Appeal No. 4027 of 2009 & Ors. Page 14 of 38

Page 15 knowledge that coconut oil as well as palm oil are used for

cooking and other common purposes. In that sense, coconut oil

and palm oil are competing products. Whereas coconut oil

produced from indigenous raw material and for the production of

palm oil in India, the raw material i.e. crude palm oil is largely

imported. Since the import price of crude palm oil has been much

less than the price of coconut oil, the perception of Coconut

growers in the State of Kerala was that it was affecting their

livelihood. It is a matter of record that there are approximately 35

lakhs farmers in the State of Kerala who sustain their livelihood

on Coconut crop. Therefore, it becomes their life sustaining crop.

The Coconut crop covers more than 9 lakhs hectares in Kerala

and contributes to nearly 35% of the agricultural income of the

State which is a sufficient evidence to indicate that it is not only

main but important crop of the State. The Coconut growers are

predominantly small and marginal with the average size of

holding being only half an acre. As already pointed out above,

the significant and marked difference between the price of

coconut oil and palm oil was manifest the fact that percentage

difference between the two stood at 109% in the year 2004,

reduced to 50% in December, 2006, to 12% in September 2007

and 0.6% in October 2007. The Board also observed that the

Civil Appeal No. 4027 of 2009 & Ors. Page 15 of 38

Page 16 import of palm oil in one particular year had a cascading

downward impact on coconut oil prices in the subsequent years.

For example, the huge import of 1,53,513 tonnes of palm oil in

2004-05 had led to a price decline in coconut in 2005-06 and

2006-07. While the average price of coconut oil is Rs.6,155/- per

quintal in 2004-05, in 2005-06, it declined sharply to Rs.4,978/-

per quintal with further fall in 2006-07 when the price was

Rs.4,459/- per quintal. It is more than abundantly clear that the

restriction is imposed keeping in view the welfare of 35 lakhs

farmers in the State of Kerala. Matter was examined at the

highest level. The Government had two alternatives before it,

either to increase the custom duty i.e. duty on the import of crude

oil or to issue impugned Notification. Enhancing the import duty

would have all India ramification, whereas the problem was

Kerala specific. Therefore, instant step was taken. When a

particular decision is taken in the interest of the said farmers

which are marginalized section of the society, more so for their

survival, this policy decision of the Central Government provides

a complete rational in support of the decision having nexus with

the objective sought to be achieved.

12.No doubt, the writ court has adequate power of judicial review in

Civil Appeal No. 4027 of 2009 & Ors. Page 16 of 38

Page 17 respect of such decisions. However, once it is found that there is

sufficient material for taking a particular policy decision, bringing it

within the four corners of Article 14 of the Constitution, power of

judicial review would not extend to determine the correctness of

such a policy decision or to indulge into the exercise of finding out

whether there could be more appropriate or better alternatives.

Once we find that parameters of Article 14 are satisfied; there

was due application of mind in arriving at the decision which is

backed by cogent material; the decision is not arbitrary or

irrational and; it is taken in public interest, the Court has to

respect such a decision of the Executive as the policy making is

the domain of the Executive and the decision in question has

passed the test of the judicial review. In Union of India v.

Dinesh Engineering Corporation

2

, this Court delineated the

aforesaid principle of judicial review in the following manner:

“there is no doubt that this Court has held in

more than one case that where the decision of

the authority is in regard to the policy matter,

this Court will not ordinarily interfere since these

policy matters are taken based on expert

knowledge of the persons concerned and courts

are normally not equipped to question the

correctness of a policy decision. But then this

does not mean that the courts have to abdicate

their right to scrutinise whether the policy in

question is formulated keeping in mind all the

relevant facts and the said policy can be held to

be beyond the pale of discrimination or

2(2001) 8 SCC 491

Civil Appeal No. 4027 of 2009 & Ors. Page 17 of 38

Page 18 unreasonableness, bearing in mind the material

on record. Any decision be it a simple

administrative decision or policy decision, if

taken without considering the relevant facts, can

only be termed as an arbitrary decision. If it is

so, then be it a policy decision or otherwise, it

will be violative of the mandate of Article 14 of

the Constitution.”

13.The power of the Court under writ jurisdiction has been discussed

in Asif Hameed and Others. v. State of Jammu and Kashmir

and Others

3

in paras 17 and 19, which read as under:

“17. Before adverting to the controversy directly

involved in these appeals we may have a fresh

look on the inter se functioning of the three organs

of democracy under our Constitution. Although the

doctrine of separation of powers has not been

recognised under the Constitution in its absolute

rigidity but the Constitution makers have

meticulously defined the functions of various

organs of the State. Legislature, executive and

judiciary have to function within their own spheres

demarcated under the Constitution. No organ can

usurp the functions assigned to another. The

Constitution trusts to the judgment of these organs

to function and exercise their discretion by strictly

following the procedure prescribed therein. The

functioning of democracy depends upon the

strength and independence of each of its organs.

Legislature and executive, the two facets of

people's will has no power over sword or the purse

nonetheless it has power to ensure that the

aforesaid two main organs of State function within

the constitutional limits. It is the sentinel of

democracy. Judicial review is a powerful weapon to

restrain unconstitutional exercise of power by the

legislature and executive. The expanding horizon of

judicial review has taken in its fold the concept of

social and economic justice. While exercise of

powers by the legislature and executive is subject

to judicial restraint, the only check on our own

31989 Supp (2) SCC 364

Civil Appeal No. 4027 of 2009 & Ors. Page 18 of 38

Page 19 exercise of power is the self-imposed discipline of

judicial restraint.

xxx xxx xxx

19. When a State action is challenged, the function

of the court is to examine the action in accordance

with law and to determine whether the legislature

or the executive has acted within the powers and

functions assigned under the Constitution and if

not, the court must strike down the action. While

doing so the court must remain within its

self-imposed limits. The court sits in judgment on

the action of a coordinate branch of the

government. While exercising power of judicial

review of administrative action, the court is not an

appellate authority. The Constitution does not

permit the court to direct or advise the executive in

matters of policy or to sermonize qua any matter

which under the Constitution lies within the sphere

of legislature or executive, provided these

authorities do not transgress their constitutional

limits or statutory powers.”

14.The aforesaid doctrine of separation of power and limited scope

of judicial review in policy matters is reiterated in State of Orissa

and Others v. Gopinath Dash and Others

4

:

“5. While exercising the power of judicial review of

administrative action, the Court is not the Appellate

Authority and the Constitution does not permit the

Court to direct or advise the executive in the matter

of policy or to sermonise qua any matter which

under the Constitution lies within the sphere of the

legislature or the executive, provided these

authorities do not transgress their constitutional

limits or statutory power. (See Asif Hameed v. State

of J&K; 1989 Supp (2) SCC 364 and Shri Sitaram

Sugar Co. Ltd. v. Union of India; (1990) 3 SCC

223). The scope of judicial enquiry is confined to

the question whether the decision taken by the

Government is against any statutory provisions or

4(2005) 13 SCC 495

Civil Appeal No. 4027 of 2009 & Ors. Page 19 of 38

Page 20 its violates the fundamental rights of the citizens or

is opposed to the provisions of the Constitution.

Thus, the position is that even if the decision taken

by the Government does not appear to be

agreeable to the Court, it cannot interfere.

6. The correctness of the reasons which prompted

the Government in decision-making taking one

course of action instead of another is not a matter

of concern in judicial review and the Court is not

the appropriate forum for such investigation.

7. The policy decision must be left to the

Government as it alone can adopt which policy

should be adopted after considering all the points

from different angles. In the matter of policy

decisions or exercise of discretion by the

Government so long as the infringement of

fundamental right is not shown the courts will have

no occasion to interfere and the Court will not and

should not substitute its own judgment for the

judgment of the executive in such matters. In

assessing the propriety of a decision of the

Government the Court cannot interfere even if a

second view is possible from that of the

Government.”

15.As far as classification based on geographical area is concerned

i.e. held to be permissible by this Court in Gopal Narain v. State

of Uttar Pradesh and another

5

, held as under:

“11. Looking at the policy disclosed by Sections

7 and 8 and Section 128 of the Act and applying

the liberal view a law of taxation receives in the

application of the doctrine of classification, it is

not possible to say that the policy so disclosed

infringes the rule of equality. This Court in more

than one decision held that equality clause does

not forbid geographical classification, provided

the difference between the geographical units

has a reasonable relation to the object sought to

5AIR 1964 SC 370

Civil Appeal No. 4027 of 2009 & Ors. Page 20 of 38

Page 21 be achieved. This principle has been applied to a

taxation law in Khandige Sham Bhat's Case, AIR

1963 SC 591. In that case, this Court also

accepted the principle that the legislative power

to classify is of wide range and flexibility so that it

can adjust its system of taxation in all proper and

reasonable ways. It is indicated in “Willis on

Constitutional Law”, at p. 590, that a State can

make a territory within a city a unit for the

purpose of taxation. So, the impugned section in

permitting in the matter of taxation geographical

classification, which has reasonable relation to

the object of the statute, namely, for providing

special amenities for a particular unit the peculiar

circumstances whereof demand them, does not

in any way impinge upon the equality clause.”

16.We would also like to refer to the judgment of this Court in the

case of Premier Tyres Limited v. Kerala State Road Transport

Corporation

6

wherein this Court held that when a policy decision

is taken in the public interest, Courts need not tinker with the

same.

17.The locus classicus allowing freedom to the Executive to take

economic decisions is remarkably dealt with by this Court in R.K.

Garg v. Union of India

7

and the following discussion from the

said judgment is again worth quoting:

“8. Another rule of equal importance is that laws

relating to economic activities should be viewed

with greater latitude than laws touching civil

rights such as freedom of speech, religion etc. It

61993 Supp. 2 SCC 146

7(1981) 4 SCC 675

Civil Appeal No. 4027 of 2009 & Ors. Page 21 of 38

Page 22 has been said by no less a person than Holmes,

J., that the legislature should be allowed some

play in the joints, because it has to deal with

complex problems which do not admit of solution

through any doctrinaire or strait-jacket formula

and this is particularly true in case of legislation

dealing with economic matters, where, having

regard to the nature of the problems required to

be dealt with, greater play in the joints has to be

allowed to the legislature. The court should feel

more inclined to give judicial deference to

legislative judgment in the field of economic

regulation than in other areas where fundamental

human rights are involved. Nowhere has this

admonition been more felicitously expressed

than in Morey v. Doud, 354 US 457: 1 L Ed 2d

1485 (1957) where Frankfurter, J., said in his

inimitable style:

In the utilities, tax and economic

regulation cases, there are good reasons for

judicial self-restraint if not judicial deference to

legislative judgment. The legislature after all has

the affirmative responsibility. The courts have

only the power to destroy, not to reconstruct.

When these are added to the complexity of

economic regulation, the uncertainty, the liability

to error, the bewildering conflict of the experts,

and the number of times the judges have been

overruled by events — self-limitation can be

seen to be the path to judicial wisdom and

institutional prestige and stability.

The Court must always remember that

“legislation is directed to practical problems, that

the economic mechanism is highly sensitive and

complex, that many problems are singular and

contingent, that laws are not abstract

propositions and do not relate to abstract units

and are not to be measured by abstract

symmetry”; “that exact wisdom and nice adaption

of remedy are not always possible” and that

“judgment is largely a prophecy based on

meagre and uninterpreted experience”. Every

legislation particularly in economic matters is

essentially empiric and it is based on

experimentation or what one may call trial and

error method and therefore it cannot provide for

Civil Appeal No. 4027 of 2009 & Ors. Page 22 of 38

Page 23 all possible situations or anticipate all possible

abuses. There may be crudities and inequities in

complicated experimental economic legislation

but on that account alone it cannot be struck

down as invalid. The courts cannot, as pointed

out by the United States Supreme Court in

Secretary of Agriculture v. Central Roig Refining

Company, 94 L Ed 381 : 338 US 604 (1950) be

converted into tribunals for relief from such

crudities and inequities. There may even be

possibilities of abuse, but that too cannot of itself

be a ground for invalidating the legislation,

because it is not possible for any legislature to

anticipate as if by some divine prescience,

distortions and abuses of its legislation which

may be made by those subject to its provisions

and to provide against such distortions and

abuses. Indeed, howsoever great may be the

care bestowed on its framing, it is difficult to

conceive of a legislation which is not capable of

being abused by perverted human ingenuity. The

Court must therefore adjudge the constitutionality

of such legislation by the generality of its

provisions and not by its crudities or inequities or

by the possibilities of abuse of any of its

provisions. If any crudities, inequities or

possibilities of abuse come to light, the

legislature can always step in and enact suitable

amendatory legislation. That is the essence of

pragmatic approach which must guide and

inspire the legislature in dealing with complex

economic issues.

xx xx xx

19. It is true that certain immunities and

exemptions are granted to persons investing

their unaccounted money in purchase of Special

Bearer Bonds but that is an inducement which

has to be offered for unearthing black money.

Those who have successfully evaded taxation

and concealed their income or wealth despite the

stringent tax laws and the efforts of the tax

department are not likely to disclose their

unaccounted money without some inducement

by way of immunities and exemptions and it must

Civil Appeal No. 4027 of 2009 & Ors. Page 23 of 38

Page 24 necessarily be left to the legislature to decide

what immunities and exemptions would be

sufficient for the purpose. It would be outside the

province of the Court to consider if any particular

immunity or exemption is necessary or not for

the purpose of inducing disclosure of black

money. That would depend upon diverse fiscal

and economic considerations based on practical

necessity and administrative expediency and

would also involve a certain amount of

experimentation on which the Court would be

least fitted to pronounce. The Court would not

have the necessary competence and expertise to

adjudicate upon such an economic issue. The

Court cannot possibly assess or evaluate what

would be the impact of a particular immunity or

exemption and whether it would serve the

purpose in view or not. There are so many

imponderables that would enter into the

determination that it would be wise for the Court

not to hazard an opinion where even economists

may differ. The Court must while examining the

constitutional validity of a legislation of this kind,

“be resilient, not rigid, forward looking, not static,

liberal, not verbal” and the Court must always

bear in mind the constitutional proposition

enunciated by the Supreme Court of the United

States in Munn v. Illinois 94 US 13, namely, “that

courts do not substitute their social and

economic beliefs for the judgment of legislative

bodies”. The Court must defer to legislative

judgment in matters relating to social and

economic policies and must not interfere, unless

the exercise of legislative judgment appears to

be palpably arbitrary. The Court should

constantly remind itself of what the Supreme

Court of the United States said in Metropolis

Theater Company v. City of Chicago, 57 L Ed

730 : 228 US 61 (1912):

The problems of government are practical

ones and may justify, if they do not require, rough

accommodations, illogical it may be, and

unscientific. But even such criticism should not

be hastily expressed. What is best is not always

discernible, the wisdom of any choice may be

disputed or condemned. Mere error of

Civil Appeal No. 4027 of 2009 & Ors. Page 24 of 38

Page 25 government are not subject to our judicial review.

It is true that one or the other of the immunities

or exemptions granted under the provisions of

the Act may be taken advantage of by

resourceful persons by adopting ingenious

methods and devices with a view to avoiding or

saving tax. But that cannot be helped because

human ingenuity is so great when it comes to tax

avoidance that it would be almost impossible to

frame tax legislation which cannot be abused.

Moreover, as already pointed out above, the trial

and error method is inherent in every legislative

effort to deal with an obstinate social or

economic issue and if it is found that any

immunity or exemption granted under the Act is

being utilised for tax evasion or avoidance not

intended by the legislature, the Act can always

be amended and the abuse terminated. We are

accordingly of the view that none of the

provisions of the Act is violative of Article 14 and

its constitutional validity must be upheld.”

18.The aforesaid principle is echoed with equal emphasis in Balco

Employees' Union (Regd.) v. Union of India and Others

8

in the

following manner:

“46. It is evident from the above that it is neither

within the domain of the courts nor the scope of

the judicial review to embark upon an enquiry as

to whether a particular public policy is wise or

whether better public policy can be evolved. Nor

are our courts inclined to strike down a policy at

the behest of a petitioner merely because it has

been urged that a different policy would have

been fairer or wiser or more scientific or more

logical.

47. Process of disinvestment is a policy decision

involving complex economic factors. The courts

have consistently refrained from interfering with

economic decisions as it has been recognised

8(2002) 2 SCC 333

Civil Appeal No. 4027 of 2009 & Ors. Page 25 of 38

Page 26 that economic expediencies lack adjudicative

disposition and unless the economic decision,

based on economic expediencies, is

demonstrated to be so violative of constitutional

or legal limits on power or so abhorrent to

reason, that the courts would decline to interfere.

In matters relating to economic issues, the

Government has, while taking a decision, right to

“trial and error” as long as both trial and error are

bona fide and within limits of authority. There is

no case made out by the petitioner that the

decision to disinvest in BALCO is in any way

capricious, arbitrary, illegal or uninformed. Even

though the workers may have interest in the

manner in which the Company is conducting its

business, inasmuch as its policy decision may

have an impact on the workers’ rights,

nevertheless it is an incidence of service for an

employee to accept a decision of the employer

which has been honestly taken and which is not

contrary to law.

xx xx xx

Conclusion

92. In a democracy, it is the prerogative of each

elected Government to follow its own policy.

Often a change in Government may result in the

shift in focus or change in economic policies.

Any such change may result in adversely

affecting some vested interests. Unless any

illegality is committed in the execution of the

policy or the same is contrary to law or mala

fide, a decision bringing about change cannot

per se be interfered with by the court.

93. Wisdom and advisability of economic

policies are ordinarily not amenable to judicial

review unless it can be demonstrated that the

policy is contrary to any statutory provision or

the Constitution. In other words, it is not for the

courts to consider relative merits of different

economic policies and consider whether a wiser

or better one can be evolved. For testing the

correctness of a policy, the appropriate forum is

Parliament and not the courts. Here the policy

Civil Appeal No. 4027 of 2009 & Ors. Page 26 of 38

Page 27 was tested and the motion defeated in the Lok

Sabha on 1-3-2001.”

19.Insofar as judgment of Calcutta High Court in Kalindi Woolen

Mills (P) Ltd. (supra) is concerned, we have our reservations on

the correctness thereof wherein the High Court found that

Notification dated 28.04.1989 allowing imports of Woolen rags,

Synthetic rags, Shoddy wool through two ports only, namely,

Bombay and Delhi ICD. In any case, insofar as argument based

on Article 14 is concerned, the said judgment is distinguishable as

in that case the Court did not find any intelligible basis which was

disclosed before the Court either in the affidavits filed by the

Customs Authorities or in the Import Licensing Control Authorities

of the Government of India. Likewise, no rational nexus for

imposing the restrictions on importation of the subject goods only

through Delhi ICD and Bombay ports disclosed. In the absence

of such a justification, on the facts of that case, the Court found

the Notification to be violative of Article 14 of the Constitution.

20.In contrast, in the present case, as already pointed out above, the

respondents have been able to demonstrate intelligible basis for

issuing the impugned Notifications having rational nexus with the

objectives sought to be achieved. We, thus, reject the arguments

Civil Appeal No. 4027 of 2009 & Ors. Page 27 of 38

Page 28 based on Article 14 of the Constitution.

21.The argument of Mr. Naphade to the effect that interests of

consumers is equally important which is not taken into

consideration needs an outright rejection for more than one

reason. In the first place no such case was made out by the

appellants either in the High Court or even in the special leave

petition filed in this Court. This argument was raised for the first

time during oral hearing. There is, thus, no material produced on

record to show how the impugned Notification would affect the

interests of the consumers. An argument of this nature cannot be

raised in the air without having solid foundation with relevant

material. In any case, as we have found that the Notifications

were issued in the interests of farmer class in the State of Kerala

and, therefore, they are in public interest, this argument is of no

avail.

22.With this, we advert to the other arguments, namely, whether the

Notifications are ultra vires of Section 3 of the Act. Our

discussion has to, necessarily, start by noticing the provision of

Section 3, which reads as under:

“3. Powers to make provision relating to

Civil Appeal No. 4027 of 2009 & Ors. Page 28 of 38

Page 29 imports and exports. – (1) The Central

Government may, by Order published in the

Official Gazette, make provision for the

development and regulation of foreign trade by

facilitating imports and increasing exports.

(2) The Central Government may also, by Order

published in the Official Gazette, make provision

for

prohibiting, restricting or otherwise regulating, in

all cases or in specified classes of cases and

subject to such exceptions, if any, as may be

made by or under the Order, the import or export

of goods or services or technology:

Provided that the provisions of this sub-section

shall be applicable, in case of import or export of

services or technology, only when the service or

technology provider is availing benefits under the

foreign trade policy or is dealing with specified

services or specified technologies.

(3) All goods to which any Order under

sub-section (2) applies shall be deemed to be

goods the import or export of which has been

prohibited under section 11 of the Customs Act,

1962 (52 of 1962) and all the provisions of that Act

shall have effect accordingly.

(4) Without prejudice to anything contained in any

other law, rule, regulation, notification or order, no

permit or licence shall be necessary for import or

export of any goods, nor any goods shall be

prohibited for import or export except, as may be

required under this Act, or rules or orders made

thereunder.”

23.Scope and ambit of the aforesaid provision was considered in

Abdul Aziz Aminudin v. State of Maharashtra

9

, wherein this

Court held as under:

“11. It is clear therefore that the power conferred

under Section 3(1) of the Act is not restricted

9(1964) 1 SCR 830 : AIR 1963 SC 1470

Civil Appeal No. 4027 of 2009 & Ors. Page 29 of 38

Page 30 merely to prohibiting or restricting imports at the

point of entry but extends also to controlling the

subsequent disposal of the goods imported. It is

for the appropriate authority and not for the

Courts to consider the policy, which must depend

on diverse considerations, to be adopted in

regard to the control of import of goods. The

import of goods can be controlled in several

ways. If it is desired that goods of a particular

kind should not enter the country at all, the

import of those goods can be totally prohibited.

In case total prohibition is not desired, the goods

could be allowed to come into the country in

limited quantities. That would necessitate

empowering persons to import under licences

certain fixed quantities of the goods. The quantity

of goods to be imported will have to be

determined on consideration of the necessity for

having those goods in the country and that

again, would depend on the use to be made of

those goods. It follows therefore that the persons

licensed to import goods up to a certain quantity

should be amenable to the orders of the

licensing authority with respect to the way in

which those goods are to be utilised. If the

licensing authority has no such power, its control

over the import cannot be effective. It may have

considered it necessary to have goods imported

for a particular purpose. If it cannot control their

utilisation for that purpose, the imported goods,

after import, can be diverted to different uses,

defeating thereby the very purpose for which the

import was allowed and power had been

conferred on the Central Government to control

imports. It is therefore not possible to restrict the

scope of the provision about the control of import

to the stage of importing of the goods at the

frontiers of the country. Their content is much

wider and extends to every stage at which the

Government feels it necessary to see that the

imported goods are properly utilised for the

purpose for which their import was considered

necessary in the interests of the country.”

24.We may also point out that proviso to sub-section (2) as well as

Civil Appeal No. 4027 of 2009 & Ors. Page 30 of 38

Page 31 sub-section (4) were inserted by Act 25/2010 w.e.f. 27.08.2010. In

any case, we are primarily concerned with the interpretation of

sub-sections (1) and (2) of Section 3 as far as present case is

concerned. Sub-section (1) empowers the Central Government

to make provision for the development as well as regulation of

foreign trade by facilitating imports and increasing exports. Thus,

the Government is empowered to make provision insofar as they

relate to the development of foreign trade and it has also

empowered to regulate the foreign trade. The two key words

here are 'development' and 'regulation'. It is also important to

note that such development and regulation is aimed at facilitating

imports as well as increasing exports. First argument of Mr.

Naphade was that regulatory provision has to be for facilitating

imports whereas in the present case, it was to curb the imports

insofar as ports in Kerala are concerned. Sub-section (2) of

Section 3 further empowers the Central Government to make

provision for: (i) prohibiting; (ii) restricting; or (iii) otherwise

regulating 'the import or export of goods or services or

technology'. It can be done in all cases or in specified classes of

cases. The submission of Mr. Naphade was that such provisions

prohibiting, restricting or otherwise regulating are to be made in

respect of import or export of goods or services or technology

Civil Appeal No. 4027 of 2009 & Ors. Page 31 of 38

Page 32 which essentially were custom based. He referred to the

definition of 'import' and 'export' contained in Section 2(e) of the

Act which, in relation to goods, means bringing into, or taking out

of, India any goods by land, sea or air. He, thus, submitted that

insofar as import of goods is concerned, it only meant bringing

the said goods into India. That is by crossing the custom barrier,

to bring the same in the territory of India. Therefore, sub-section

(2) is with reference to goods and not with place. He also

submitted that the expression 'otherwise regulating' referred to

licence etc. by which the import could be regulated and had

nothing to do with the 'place'. Section 5 which existed at the

relevant time reads as under:

“5. Export and import policy. - The Central

Government may, from time to time formulate

and announce, by notification in the Official

Gazette, the export and import policy and may

also, in the like manner, amend that policy.”

This Section is substituted by amended Section 5 w.e.f.

27.08.2010 and the amended Section reads as under:

“5. Foreign Trade Policy. - The Central

Government may, from time to time, formulate

and announce, by notification in the Official

Gazette, the foreign trade policy and may also,

in like manner, amend that policy:

Provided that the Central Government

may direct that, in respect of the Special

Economic Zones, the foreign trade policy shall

apply to the goods, services and technology

with such exceptions, modifications and

Civil Appeal No. 4027 of 2009 & Ors. Page 32 of 38

Page 33 adaptations, as may be specified by it by

notification in the Official Gazette.”

25.Mr. Naphade submitted that proviso which is added in the new

Section 5 for the first time relates to the place and since it was

conspicuously absent in the old provision, it could clearly be

inferred that Section 5 as it stood at the relevant time had no

bearing as far as place of import and export policy is concerned.

On that basis, he argued that Section 3 read with Section 5 did

not give any such power to issue Notifications of the nature which

is subject matter of these proceedings. He, thus, submitted that

power could not be exercised by the Central Government to ban

or prohibit the import of palm oil through the ports of State of

Kerala alone and if any ban had to be imposed which should

have been done in all the ports throughout the country. He

further argued that Calcutta High Court in the case of Kalindi

Woolen Mills (supra) has specifically held to be so while

inculcating Sections 3 and 5 of the Act.

26.These were countered by Mr. Panda, learned senior counsel for

the respondents by arguing that the impugned Notifications may

be considered with reference to Section 3(2) of the Act not in

isolation, but on a harmonious construction of the same with

Civil Appeal No. 4027 of 2009 & Ors. Page 33 of 38

Page 34 reference to the statement of objects and reasons to the Act

along with Sections 2(e), 3(3) and 5 of the Act along with Sections

7 and 11 of the Customs Act, 1962. The Foreign Trade Policy of

2004-2009, the relevant provisions which have already been

extracted herein before at Para 5 may also be considered. This

approach, according to him, would be in consonance with the

ratio of the judgment of this Court in Union of India v. Asian

Food Industries

10

:

“25. Would the terms 'restriction' and 'regulation'

used in Clause 1.5 of the Foreign Trade Policy

include prohibition also, is one of the principal

questions involved herein.

26. A citizen of India has a fundamental right to

carry out the business of export, subject, of

course to the reasonable restrictions which may

be imposed by law. Such a reasonable

restriction was imposed in terms of the 1992 Act.

27. The purport and object for which the 1992

Act was enacted was to make provision for the

development and regulation of foreign trade

inter alia by augmenting exports from India.

While laying down a policy therefor, the Central

Government, however, had been empowered to

make provision for prohibiting, restricting or

otherwise regulating export of goods.

28. Section 11 of the 1962 Act also provides for

prohibition. When an order is issued under

sub-section (3) of Section 3 of the 1992 Act, the

export of goods would be deemed to be

prohibited also under Section 11 of the 1962 Act

and in relation thereto the provisions thereof

shall also apply.

10(2006) 13 SCC 542

Civil Appeal No. 4027 of 2009 & Ors. Page 34 of 38

Page 35 29. Indisputably, the power under Section 3 of

the 1992 Act is required to be exercised in the

manner provided for under Section 5 of the 1992

Act. The Central Government in exercise of the

said power announced its Foreign Trade Policy

for the years 2004-2009. It also exercised its

power of amendment by issuing the Notification

dated 27.06.2006. Export of all commodities

which were not earlier prohibited, therefore, was

permissible till the said date.

xx xx xx

43. We are, however, not oblivious of the fact

that in certain circumstances regulation may

amount to prohibition. But, ordinarily the word

“regulate” would mean to control or to adjust by

rule or to subject to governing principles (See

U.P. Cooperative Cane Unions Federations v.

West U.P. Sugar Mills Association and Others,

(2004) 5 SCC 430, whereas the word “prohibit”

would mean to forbid by authority or command.

The expressions “regulate” and “prohibit” inhere

in them elements of restriction but it varies in

degree. The element of restriction is inherent

both in regulative measures as well as in

prohibitive or preventive measures.

xx xx xx

46. The terms, however, indisputably would be

construed having regard to the text and context

in which they have been used. Section 3(2) of

the 1992 Act uses prohibition, restriction and

regulation. They are, thus, meant to be applied

differently. Section 51 of the 1962 Act also

speaks of prohibition. Thus, in terms of the 1992

Act as also the policy and the procedure laid

down thereunder, the terms are required to be

applied in different situations where for different

orders have to be made or different provisions in

the same order are required therefore.”

He also submitted that the above approach of this Court for

harmonious construction finds support from the following ratio laid

Civil Appeal No. 4027 of 2009 & Ors. Page 35 of 38

Page 36 down by this Court in Bhatnagars & Co. Ltd. v. Union of India

11

:

“.......... In modern times, the export and import

policy of any democratic State is bound to be

flexible. The needs of the country, the position

of foreign exchange, the need to protect national

industries and all other relevant considerations

have to be examined by the Central Government

from time to time and rules in regard to export

and import suitably adjusted. It would, therefore,

be idle to suggest that there should be

unfettered and unrestricted freedom of export

and import or that the policy of the Government

in regard to export and import should be fixed

and not changed according to the requirements

of the country.

xx xx xx

It was open to the Government, and indeed

national interests made it their duty, to intervene

and regulate the distribution of the commodity in

a suitable manner.”

27.According to us, we need not deal with these submissions

elaborately as the aforesaid contention of the learned senior

counsel for the appellants need to be discarded on altogether

different reason. These arguments ignore the crucial words

appearing in sub-section (2) of Section 3, namely, provision for

prohibiting, restricting or otherwise regulating, the import or export

of goods etc. can be made “subject to such exceptions, if any, as

may be made by or under the Order”. These words are of wide

amplitude giving necessary powers to make such exceptions as

the Central Government deems fit while issuing the Notifications

111957 SCR 701

Civil Appeal No. 4027 of 2009 & Ors. Page 36 of 38

Page 37 or the Order in prohibiting, restricting or regulating import or

export of goods etc. In the process, it can restrict the import of

particular goods through particular ports or disallow the import

through specified ports (See: Asian Food Industries judgment,

already extracted above). Of course, such an action cannot be

arbitrary or irrational and should be backed sound reasons.

28.In the present case, as already held above, there is a sufficient

public good sought to be achieved by laying down the exception

banning the imports of crude palm oil through ports in Kerala.

That, according to us, provides complete answer to the argument

of the learned senior counsel for the appellants. Calcutta High

Court in Kalindi Woolen Mills (P) Ltd. (supra) overlooked the

aforesaid pertinent aspect which gives sufficient powers to the

Central Government to act in the manner it has acted. The

argument of Mr. Naphade predicated on the contrast between old

and new provisions of Section 5 of the Act, again, would be of no

avail in view of our aforesaid discussion holding that sub-section

(2) of Section 3 of the Act gives ample power to the Government

to issue such Notifications in exceptional cases and present case

falls within those parameters. No other argument was addressed.

We, therefore, do not find fault with the view taken by the High

Civil Appeal No. 4027 of 2009 & Ors. Page 37 of 38

Page 38 Court upholding the Notifications in question. These appeals are

accordingly dismissed.

.............................................J.

(A.K. SIKRI)

.............................................J.

(ROHINTON FALI NARIMAN)

NEW DELHI;

AUGUST 21, 2015.

Civil Appeal No. 4027 of 2009 & Ors. Page 38 of 38