- Bookmark
- Share
- CaseIQ
Probhudas Morarjee Rajkotia & Ors v. Union Of India & Ors
Factual and Procedural Background
During and after World War II the Central Government controlled imports and exports under the Defence of India Rules, later continued by the Emergency Provisions (Continuance) Ordinance, 1946 and then by the Imports and Exports (Control) Act, 1947. Acting under section 3 of that Act, the Government issued the Imports (Control) Order, 1955, which requires an import licence for goods listed in Schedule I.
The Government’s semi-annual “Import Trade Control Policy” included, from 1 April 1963, a “Special Exports Promotion Scheme for Engineering Goods.” Under paragraph 5.4 of that Scheme exporters could obtain import licences up to a percentage (“the monetary extent mentioned in Annexure V”) of the FOB value of goods they had exported, subject to reductions for over-invoicing or mis-declaration.
The petitioners, partners of Transworld Trade Link Corporation, exported engineering machinery to Tigrai Agricultural and Industrial Development Ltd. (Ethiopia) between October 1963 and August 1964 with an FOB value of Rs 9,44,540.80. They received import licences worth Rs 3,77,333 but claimed a further entitlement of Rs 62,337. Alleging arbitrary refusal, mala fides, and discrimination, they filed a petition under Article 32 of the Constitution seeking a writ of mandamus directing the authorities to issue the balance licences. The Union of India opposed the petition.
Legal Issues Presented
- Whether the reduction of the petitioners’ import entitlement by Rs 62,337 was arbitrary and thereby violated their fundamental right to carry on business.
- Whether the refusal was tainted by mala fides arising out of a Government official’s request that the petitioners advance a loan to the Ethiopian buyer.
- Whether the differential treatment alleged by the petitioners constituted unlawful discrimination in violation of Article 14 of the Constitution.
Arguments of the Parties
Petitioners' Arguments
- Paragraph 5.4 of the Scheme entitled them to licences up to the percentage fixed in Annexure V; any reduction must be reasonable and not arbitrary.
- The reduction was influenced by an extraneous demand from Shri S. Than (Director, Foreign Trade) that they lend Rs 5,00,000 to the Ethiopian purchaser; their refusal allegedly triggered the cut, rendering the decision mala fide.
- Other exporters similarly situated had received full entitlements; denial to them alone violated Article 14.
Respondents' Arguments
- The reduction was justified because the Ethiopian importer complained of damaged, incomplete and defective machinery; an engineer’s report confirmed these deficiencies, warranting a downward adjustment under paragraph 5.4(i).
- Shri S. Than was not concerned with import entitlement decisions, and the loan request (dated 29 January 1965) post-dated the grant of the existing licences; hence no causal link or mala fides existed.
- The Article 14 plea was unsubstantiated because the petitioners failed to identify any similarly situated exporters who received different treatment.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Ramchand Jagdish Chand v. Union of India, 1962 - 3 SCR 72 : 1963 AIR (SC) 563 | An applicant under Article 14 must show differential treatment vis-à-vis persons similarly situated without reasonable basis. | The Court relied on this principle to dismiss the petitioners’ Article 14 claim because they supplied no particulars of comparators. |
Court's Reasoning and Analysis
The Court accepted that the licensing authority’s discretion under paragraph 5.4 must be exercised reasonably, not arbitrarily. It examined the respondents’ affidavit and the engineer’s report (Annexure III) showing that machinery exported by the petitioners was “damaged, incomplete and defective.” Consequently, the authority reduced the import entitlement; the Court held this was a legitimate, non-arbitrary exercise of power.
On the allegation of mala fides, the Court noted that the loan request from Shri S. Than occurred after substantial licences had already been issued and that Shri Than had no role in entitlement decisions. The temporal sequence and organisational separation undermined the claim of improper motive.
Regarding Article 14, the Court found the plea inadequately pleaded. The petition named no exporters similarly placed who received more favourable treatment. Applying the principle in Ramchand Jagdish Chand, the Court ruled that a mere allegation of discrimination, without specifics, cannot sustain an Article 14 challenge.
Holding and Implications
Petition dismissed with costs.
The immediate effect is that the petitioners will not receive import licences for the disputed Rs 62,337. The decision rests on fact-specific findings of quality defects and pleading deficiencies; it sets no new precedent beyond reiterating established principles on arbitrariness, mala fides, and the pleading burden under Article 14.
: Controls on exports and imports were introduced as an emergency measure during the last war in respect of certain commodities and were kept alive after the lapse of the defence of india rules by the Emergency Provisions (Continuance) Ordinance, 1946 which was later replaced by the Imports and Exports (Control) Act, 1947 (18 of 1947). Under S. 3 of the Imports and Exports (Control) Act, 1947, the Central Government was authorised by order published in the Official Gazette, to provide for prohibiting, restricting or otherwise controlling, in all cases or in specified classes of cases and subject to such exceptions, if any as may be made by or under the order, the import, export, carriage of goods of any specified description. By sub-section (2) of S. 3. It is provided that all goods to which an order under sub-section (1) applies shall be deemed to be goods of which the import or export has been prohibited or restricted under S. 19 of the Sea Customs Act In exercise of authority under S. 3 of the Imports and Exports (Control) Act, 1947 the Central Government issued notifications from time to time prohibiting, restricting or otherwise controlling the export and import of several commodities. By a consolidated order dated December 7. 1955, known as the Imports (Control) Order, 1955. Restrictions on the import of certain goods were imposed by Cl. 3 of the said order. By Cl. 3, it was provided that no. person shall import any goods of the description specified in Sch. 1, except under, and in accordance with, a licence or a customs elearance permit granted by the Central Government, or by an officer specified in Sch II. For implementing the scheme of controlling imports, various provisions were made in Cls. 3 to 11 of the Imports (Control) Order.
2. The Government of India makes known its import policy every six months by issuing in the Government Gazette the procedure and the conditions for eligibility of licences and for the grant of import licences. This policy is published in a handbook called the "Import Trade Control Policy" The policy is obviously framed having regard to requirements for home consumption of commodities to be imported, the foreign currency situation and the economy of the country as a whole. With effect from April 1, 1963, the Government of India promoted a scheme called "Special Exports Promotion Scheme for Engineering Goods" The object of the scheme was to give incentive to the manufacturers in India to export their finished products outside India and at the same time grant to the said exporters import licences for materials upto the extent of defined percentage of the F. O. B. value of goods exported. The further object of the scheme was to create a market in the foreign countries for Indian goods not only from the standpoint of earning foreign exchange but also from the standpoint of enhancing the prestige of the Indian goods exported to those countries
3. Para 5. 4 of the Scheme states.
"The value for which an import licence is given will be determined with reference to the F. O. B. value of exports and will be up to the monetary extent mentioned in Annexure V. This provision is, however, subject to the provisions that in addition to any action which may be taken to stop corrupt or fraudulent practices.
(i) in cases where the Licensing Authority considers that the value of the goods exported in over invoiced, it shall be open to the Licensing Authority either to refuse to issue any licence against such export or to reduce the value of the licence to such figure as he deems fit : and
(ii) In cases where the Licensing Authority considers that there has been a mis-declaration of the description of the products exported, no. licence will be issued against such exports and suitable action may also be taken against the person concerned."
4. The petitioners are partners in a registered firm carrying on business as exporters and importers in the firm name and style of Transworld Trade Link Corporation (hereinafter called the "firm"). On or about May 28, 1963, the firm entered into a contract with Messrs. Tigrai Agricultural and Industrial Development Ltd., incorporated in Ethiopia (hereinafter referred to as the T. A. I. D. L.). In pursuance of the contract, the firm exported machinery from October, 1963 till August, 1964. The contractual goods so shipped were of the F. O. B. value of Rs. 9, 44, 540.80 P. In payment of the exports the firm received this amount through the Bank of India Ltd., Bombay, who were authorised dealers in Foreign Exchange. The petitioners alleged that they became entitled to Import Licences and sought import entitlement which accrued to the petitioners under the export promotion Schemes amounting to Rs. 4, 39, 670. The petitioners accordingly applied to the Licensing Authorities in the prescribed manner for issuing import licences. The Licensing Authorities issue to the firm import licences for Rs. 3, 77, 333, but for the balance of Rs. 62, 337 import licences were not issued. In spite of repeated requests made by petitioner No. 1 the respondents did not issue import licences for the balance of Rs. 62.337. It is alleged for the balance of Rs. 62, 337. It is alleged by the petitioners that on January 29, 1965 Sri S. Than of the Ministry of Commerce wrote to them requesting them to consider grant of a loan of Rs 5, 00.000 to T. A. I. D. L. but the petitioners declined to grant any such loan. The case of the petitioners is that the action of the respondents in refusing to grant import licences for the balance of Rs. 62, 337 was influenced by this extraneous circumstance and was consequently mala fide.
5. The petitioners have accordingly moved this Court for grant of a writ in the nature of mandamus under Art. 32 of the Constitution directing the respondents to grant to the petitioners import licences for the balance of Rs. 62, 337 in accordance with the provisions of the Special Exports Promotion Scheme. Cause has been shown by the Attorney-General on behalf of the respondents to whom notice of rule was ordered to be given.
6. On behalf of the petitioners it was argued, in the first place, that the act of the respondents in declining to grant import licences for the balance of Rs. 62, 337 was arbitrary and had unlawfully infringed the fundamental right of the petitioners to carry on their business. It is contended that under Cl. 5.4 of the Scheme the petitioners were entitled to import licences upto the "monetary extent mentioned in Annexure V".
"It was conceded that the petitioners had no. absolute right to the grant of a licence to the maximum amount prescribed and the Controller had the discretion to impose a restriction. It was submitted, however, that the discretion had to be exercised reasonably and not arbitrarily. The legal proposition for which the petitioners contend is undoubtedly correct. The Licensing Authority would normally issue an import licence upto the monetary extent prescribed but, having regard to the special considerations such as difficult foreign exchange position or other matters which have a bearing on the general interest of the State, import licences for a smaller percentage may be granted to the exporters. It may be assumed that by the use of the expression "upto the monetary extent mentioned in Annexure V" in Cl. 5.4., the authorities are not clothed with an arbitrary power to fix the percentage of the value of the goods exported for awarding an import licence. In the present case, however, the affidavit of the respondents indicates that the power has not been exercised in an arbitrary manner. In para 6 of the counter-affidavit the respondents said that complaints were made by the Ethiopian importer with regard to the quality and condition of machinery supplied by the petitioners. It appears that the Indian Embassy in Ethiopia got the machinery inspected and examined by a qualified engineer. The report of the engineer shows that the machinery being supplied by the petitioners was damaged, incomplete and defective. For the purpose of granting import licence the respondents have, therefore, not taken into account the total. F. O. B. value but imposed a suitable reduction in the import entitlement. The allegation of the respondents is supported by the report of the engineer which is Annexure III of the counter-affidavit. We accordingly reject the argument of the petitioners that the value of import entitlement was arbitrarily reduced by the Licensing Authority in this case.
7. It was next contended on behalf of the petitioners that Sri S. Than, Director (Foreign Trade) of the Ministry of Commerce had requested Sri N. C. Bhatt, the firm's representative to grant a loan of Rs. 5, 00, 000 to T. A. I. D. L. to enable the latter to operate the machinery sold by the firm. It is alleged that the petitioners were not willing to advance the loan and it was for this reason that the respondents had not issued import licences to the firm for the balance of Rs. 62, 887. The argument of the petitioners is that the refusal to advance a loan of Rs. 5, 00, 000 to T. A. I. D. L. was an extraneous and irrelevant circumstances and the conduct of the respondents in refusing to issue import licences for the balance of Rs. 62, 337 was mala fide. The respondents have denied in the counter-affidavit that the refusal to grant the import licence for the balance of Rs. 62, 337 was, in any way, connected with refusal of the petitioners to advance a loan of Rs. 5, 00, 000 to T. A. I. D. L. In para 16 of the counter- affidavit the respondents say that Sri Than was not directly concerned with the question of import entitlement. It is further stated that the request of Sri Than for the loan was made on January 29, 1965 but previous to that date the petitioners had already been granted import entitlement to the extent of Rs. 3, 77, 333 and the petitioners had imported scarce commodities like stainless steel against the grant of the import entitlement. We are, therefore, unable to accept the argument of the petitioners on this aspect of the case.
8. Lastly the argument was put forward by the petitioners that the failure of the respondents to grant licence for the balance of Rs. 62, 337 is discriminatory and violates Art. 14 of the Constitution. In para 16 of the petition it is stated that"
other Exporters and Importers covered by the said Schemes have been granted import licences and the failure of the respondents go grant the said licences to the firm is discriminatory and violates Art. 14 of the Constitution " But it is not mentioned in the petition as to who were the persons who were similarly placed and who have been given import licences by the authorities. There is no. specification of the persons who have been differentially treated. The plea of violation of equal protection of laws under Art. 14 of the Constitution has not been properly pleaded in this case. It cannot be too strongly emphasized that to make out a case of denial of the equal protection of the laws under Art. 14 of the Constitution, a plea of differential treatment is by itself not sufficient. An applicant pleading that Article 14 has been violated must make out that not only he had been treated differently from other but he has been so treated from persons similarly circumstanced without any reasonable basis, and such differential treatment is unjustifiably made-See Ramchand Jagdish Chand v. Union of India, 1962- 3 SCR 72 : 1963 AIR(SC) 563). It is manifest in the present case that the petitioners have not furnished sufficient particulars to justify the plea of infringement of Art. 14 of the Constitution. We accordingly hold that the case of the petitioners on this point should be rejected.
9. For the reasons expressed, we are of opinion that the petitioners have not made out a case for the grant of a writ under Art. 32 of the Constitution. The petition fails and is accordingly dismissed with costs.
Alert