The Imports (Control) Order, 1955: A Legal Disquisition on India's Erstwhile Trade Regulation Framework

Introduction

The Imports (Control) Order, 1955 (hereinafter "the 1955 Order" or "the Order") stood as a cornerstone of India's international trade regulation for several decades. Promulgated by the Central Government in exercise of powers conferred by Sections 3 and 4A of the Imports and Exports (Control) Act, 1947 (hereinafter "the 1947 Act"), the Order established a comprehensive regime for controlling the import of goods into India. This article undertakes a scholarly analysis of the 1955 Order, examining its statutory underpinnings, key provisions, judicial interpretations, and its interplay with allied legislation. While the 1947 Act and the 1955 Order have since been superseded by the Foreign Trade (Development and Regulation) Act, 1992, and subsequent regulations, a study of the 1955 Order remains crucial for understanding the historical trajectory of India's trade policy and the evolution of administrative law principles in this domain. The jurisprudence developed around the Order continues to offer valuable insights into issues of licensing, administrative discretion, natural justice, and the enforcement of economic regulations.

Statutory Framework and Objectives of the Imports (Control) Order, 1955

The genesis of import and export controls in India can be traced to emergency measures during World War II, which were subsequently continued by the Emergency Provisions (Continuance) Ordinance, 1946, and later formalized through the Imports and Exports (Control) Act, 1947 (Probhudas Morarjee Rajkotia & Ors v. Union Of India & Ors, 1966 S.C.). Section 3(1) of the 1947 Act empowered the Central Government to, by order published in the Official Gazette, "make provision for prohibiting, restricting or otherwise controlling, in all cases or in specified classes of cases... the import, export, carriage coastwise or shipment as ships' stores of goods of any specified description" (Sheikh Mohd. Omer v. Collector Of Customs, Calcutta And Others, 1970 S.C.; Bennett Coleman & Co. And Others v. Union Of India And Others, 1972 S.C.).

The Imports (Control) Order, 1955, was issued under this statutory mandate. Its primary objective was to regulate the inflow of goods into India, aligning imports with national economic priorities, conserving foreign exchange, and protecting domestic industries. The Order, along with the periodically published Import Trade Policy (often referred to as the "Red Book"), formed the operational framework for import control (Ramesh Chhotalal Doshi v. Union Of India And Others, 1985 Bom HC; Hazarimal K. Shah v. Collector Of Customs, Madras, 1970 S.C.).

Core Tenets of the Imports (Control) Order, 1955: Licensing and Conditions

Clause 3: The Licensing Mandate

The regulatory fulcrum of the 1955 Order was Clause 3(1), which stipulated: "Save as otherwise provided in this Order, no person shall import any goods of the description specified in Schedule I, except under, and in accordance with, a licence or a customs clearance permit granted by the Central Government or by any officer specified in Schedule II" (Union Of India And Another v. Sampat Raj Dugar And Another, 1992 S.C.; Sheikh Mohd. Omer v. Collector Of Customs, Calcutta And Others, 1970 S.C.). Schedule I of the Order contained the list of articles whose import was controlled (Bilenbarric Steels Limited v. Regional Development Commissioner For Iron & Steel And Others, 1990 Cal HC). This provision effectively established a licensing regime, making an import license a prerequisite for bringing specified goods into the country.

Clause 5: Imposition and Enforcement of Licence Conditions

Clause 5(1) of the Order empowered the licensing authority to issue licenses subject to specific conditions. These conditions could include, inter alia, stipulations that "the goods covered by the licence shall not be disposed of, except in the manner prescribed by the licensing authority, or otherwise dealt with, without the written permission of the licensing authority" and that "the goods covered by the licence on importation shall not be sold or distributed at a price exceeding that which may be specified in any direction attached to the licence" (Union Of India And Another v. Sampat Raj Dugar And Another, 1992 S.C.).

The judiciary consistently upheld the binding nature of these conditions. In East India Commercial Co., Ltd., Calcutta And Another v. Collector Of Customs, Calcutta (1962 AIR SC 1893), the Supreme Court held that a violation of a condition imposed under a license issued pursuant to a governmental order under Section 3 of the 1947 Act is tantamount to a breach of the order itself. This interpretation was crucial for enforcement, as it brought such breaches within the ambit of penal provisions under customs law. Similarly, in STATE OF WEST BENGAL v. MOTILAL KANORIA (1966 INSC 78), the Supreme Court affirmed that the sale of imported goods in contravention of a license condition (that goods were for the company's own use) constituted an offence under Section 5 of the 1947 Act read with Clause 5 of the 1955 Order.

The Nature of Quota Rights and Licences

The system often involved quota rights, particularly for established importers. The Supreme Court, in Joint Chief Controller Of Imports And Exports, Madras v. Aminchand Mutha Etc. (1966 AIR SC 478), examined the nature of these rights in the context of a firm's dissolution. Citing Chimanlal Popatlal v. B.M. Choksey (1957), the Court noted that quota rights are essentially government-sanctioned permissions and not transferable property with inherent market value. The Aminchand Mutha case also established the principle that administrative approval for the division of quota rights among partners of a dissolved firm should relate back to the date of the dissolution agreement, ensuring that administrative delays do not disadvantage the rightful parties. This underscored the judiciary's role in ensuring fairness in the administration of the licensing regime.

Administrative Powers and Procedural Safeguards under the Order

Clauses 8 & 9: Suspension and Cancellation of Licences

The 1955 Order vested significant powers in the licensing authorities to suspend or cancel licenses. Clause 8 provided for actions such as keeping license applications in abeyance pending investigation into allegations mentioned therein (Liberty Oil Mills And Others v. Union Of India And Others, 1984 SCC 3 465). Clause 9 empowered the Central Government or authorized officers to cancel import licenses if, for instance, they were found to have been obtained by fraud or misrepresentation (Fedco (P) Ltd. Another v. S.N Bilgrami Others, 1960 AIR SC 415). The cancellation of licenses often had severe consequences, including rendering the imported goods liable for confiscation under customs law if the cancellation was retrospective or if the import itself was tied to the validity of the subsequently cancelled license (Collector Of Customs, Bombay v. Sneha Sales Corporation, 1998 S.C.).

Clause 10: The Imperative of Natural Justice

A critical safeguard against arbitrary administrative action was embedded in Clause 10 of the Order. This clause mandated that no action under Clauses 7 (amendment of licence), 8 (suspension/abeyance), or 9 (cancellation) could be taken unless the licensee was given a "reasonable opportunity of being heard" (Fedco (P) Ltd. Another v. S.N Bilgrami Others, 1960 AIR SC 415).

In Fedco (P) Ltd., the Supreme Court extensively deliberated on the scope of this provision. The majority upheld the cancellation of Fedco's licenses, finding that the notice to show cause provided was sufficient to meet the requirements of natural justice in that specific case, even though detailed particulars of fraud were not initially supplied. The Court affirmed that the Chief Controller's function in cancelling licenses was quasi-judicial, thus necessitating adherence to natural justice principles. This judgment underscored the balance between regulatory powers and the protection of individual rights, emphasizing that while Clause 9 did not confer unbridled authority, Clause 10 provided an adequate procedural framework.

Judicial Scrutiny: Enforcement and Interplay with Allied Legislation

Consequences of Contravention: Linkage with Customs Law

A significant aspect of the 1955 Order's enforcement mechanism was its linkage with customs legislation. Section 3(2) of the Imports and Exports (Control) Act, 1947, provided that all goods to which any order under sub-section (1) applies (such as the 1955 Order) "shall be deemed to be goods of which the import or export has been prohibited or restricted under Section 19 of the Sea Customs Act, 1878 (8 of 1878) and all the provisions of that Act shall have effect accordingly" (East India Commercial Co., Ltd., Calcutta And Another v. Collector Of Customs, Calcutta, 1962 AIR SC 1893).

This deeming provision meant that importation in contravention of the 1955 Order (e.g., without a valid license or in breach of a license condition) rendered the goods liable to confiscation and penalties under the Sea Customs Act, 1878 (later the Customs Act, 1962). The Supreme Court in East India Commercial Co. Ltd. affirmed the jurisdiction of Customs authorities to confiscate goods for breach of license conditions, reasoning that such a breach was a breach of the Order itself, thus falling within Section 167(8) of the Sea Customs Act, 1878. This principle was also applied in cases like Hazarimal K. Shah v. Collector Of Customs, Madras (1970 S.C.), where goods misclassified and imported without a valid license for their correct classification were confiscated.

The Role of Import Trade Policy and Administrative Guidelines

The practical application of the 1955 Order was guided by the Import Trade Policy, published periodically in the "Red Book," and various administrative instructions. The Red Book detailed specific items, conditions for import, and procedures (Ramesh Chhotalal Doshi v. Union Of India And Others, 1985 Bom HC; Bilenbarric Steels Limited v. Regional Development Commissioner For Iron & Steel And Others, 1990 Cal HC). Courts often had to interpret these policy documents and instructions. For instance, in Joint Chief Controller v. Aminchand Mutha Etc. (1966 AIR SC 478), the Supreme Court interpreted "Instruction 71" of the Red Book concerning the division of quota rights, emphasizing fairness and the retroactive effect of approvals. The government also reserved the right to amend the policy in the public interest, with such amendments to be duly notified (Bilenbarric Steels Limited).

Distinction between Regulatory Regimes: The Order and Other Statutes

The courts also clarified the distinct operational spheres of the 1955 Order and other statutes. In Rama Krishna Sales Pvt. Ltd. v. Union Of India And Others (2019 SCC ONLINE DEL 6838), the Delhi High Court held that while parts of E-Rickshaws might be classified as motor vehicles for customs tariff purposes (under interpretative rules creating a legal fiction for duty assessment), this did not automatically mean they were "motor vehicles" requiring a Type Certificate under the Central Motor Vehicles Rules, 1989, for import clearance. The legal fiction for customs classification could not be extended beyond its intended purpose.

Furthermore, proceedings and findings under the Imports and Exports (Control) Act, 1947, and the 1955 Order were not necessarily binding on authorities acting under the Customs Act, 1962. In Mohammed Yusuf v. Union Of India And Others (1985 Bom HC), the Bombay High Court observed that the fields covered by the two Acts were distinct. An order by the Deputy Chief Controller of Imports and Exports dropping proceedings under the 1955 Order (e.g., finding no misrepresentation in obtaining a license) would not preclude Customs authorities from investigating potential offences under the Customs Act related to the same goods or transactions.

Conclusion

The Imports (Control) Order, 1955, was a pivotal instrument in shaping India's foreign trade landscape for a significant period. It established a comprehensive licensing regime that allowed the government to exercise stringent control over imports, reflecting the prevailing economic policies of the era, which included objectives like foreign exchange conservation, protection of indigenous industries, and canalisation of certain trade activities (State Trading Corporation Of India Ltd. v. Union Of India And Others, 1994 S.C.).

Judicial interpretation of the Order and its parent Act played a critical role in defining the scope of administrative powers, the rights of importers, and the imperative of procedural fairness. Landmark cases, such as Fedco (P) Ltd. on natural justice, East India Commercial Co. Ltd. on the consequences of breaching license conditions, and Joint Chief Controller v. Aminchand Mutha on the nature of quota rights and administrative fairness, have contributed enduring principles to Indian administrative law. While the specific regulatory framework of the 1955 Order has been consigned to history with the advent of trade liberalization and the enactment of the Foreign Trade (Development and Regulation) Act, 1992, the legal precedents and principles forged in its crucible continue to inform contemporary legal understanding of state regulation, administrative accountability, and the protection of commercial rights.