Liberty Oil Mills V. Union of India

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PETITIONER:
LIBERTY OIL MILLS & OTHERS
Vs.
RESPONDENT:
UNION OF INDIA & OTHERS
DATE OF JUDGMENT01/05/1984
BENCH:
REDDY, O. CHINNAPPA (J)
BENCH:
REDDY, O. CHINNAPPA (J)
SEN, A.P. (J)
VENKATARAMIAH, E.S. (J)
CITATION:
1984 AIR 1271 1984 SCR (3) 676
1984 SCC (3) 465 1984 SCALE (1)750
CITATOR INFO :
R 1985 SC1416 (102)
RF 1986 SC 555 (6)
D 1987 SC1802 (28,30)
RF 1991 SC 363 (11)
RF 1991 SC 537 (13)
ACT:
Imports (Control) order, 1955- Promulgated under ss. 3
and 4A of the Imports and Exports (Control) Act, 1947 -
Clause 8B-Added later by way of amendment-Interpretation of-
Contemplates action of interim nature-Order action must
satisfy rules of natural justice-Authorities not bound to
give pre-decisional hearing-Authorities must give post-
decisional hearing-Decision must be communicated to person
affected-order need not give reasons but must be indicate
satisfaction forming basis for action and concise statement
of allegations-Action under Clause 8B of drastic nature-Must
be animated 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
to consider public interest-Courts not to concern themselves
with sufficiency of ground-Courts to consider question of
mala fide or patent lack of jurisdiction.
Import (Control) order, 1955-Clause 8B read with Clause
11(4)- Interpretation of-Clause 8B applies equally to goods
covered by open General Licence.
Interpretation of statutes-Rules of-Courts not
permitted to interpret statutory instruments so as to
exclude natural justice unless language of instrument leaves
no option to Court.
Natural justice-Rules of-Extent of natural justice-Must
vary from case to case-Interim orders imply natural justice-
Seeking comments of person before investigation against him
not necessary-Decision affecting a person must be
communicated to the affected person-Affected person must be
given post-decisional opportunity not possible.
Words and phrases-Investigation-When commences.
HEADNOTE:
On being discovered that beef tallow imported from
abroad was either being sold as vanaspati or used in its
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manufacture by certain unscrupulous persons, general public
feeling was roused and there was public agitation and
demands were made that severe action be taken against those
responsible. As a result of the discoveries the Central
Government thought that drastic action was called for. So, a
notification was issued under s. 3(3) of the Imports and
Exports (Control) Act, 1947 totally banning the import of
beef, buffalo and pig tallow into India w.e.f. August 24,
1983. And, on different dates in November
677
and December 1983, five circulars, styled ’abeyance’
circulars and marked ’secret’ were issued by the Deputy
Chief Controller of Imports and Exports, in respect of as
many as 192 concerns directing licensing authorities to keep
in 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 customs clearance
permits and allotment of imported goods through agencies
like the States Trading Corporation of India Limited or any
other similar agency. Though the circulars did not
themselves cite any statutory authority, they were, as
claimed and as agreed to by the parties, presumed to be
statutory orders made in exercise of the power conferred by
cl. 8B of the Import (Control) Order, 1955. Several persons
against whom ’abeyance’ orders had been made filed writ
petitions in different High Courts challenging those orders.
Liberty oil Mills was one of those who filed such a writ
petition in the Bombay High Court. The case was withdrawn to
the Supreme Court under Art. 139A of the Constitution.
Liberty oil Mills contended: (1) that the requisite
satisfaction of the appropriate authority which was
necessary for issuing an order under cl. 8B was not only not
recorded in the circular but there 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 or to items which could be said
to have some connection with the banned item, but extended
to all item for which applications for the grant of licences
or for allotment had been made by Liberty oil Mills; (3)
that general nature 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 there was
no indication whatsoever that the facts relating 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 industries and
throwing hosts of workers out of employment; (6) that there
was no substance in the 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 authorisation for import of beef tallow as if they were
actual users; and (7) that the circumstance that there was
public agitation about the import of beef tallow was a total
irrelevant circumstance for making an order under cl. 8B.
The interveners contended: (1) that cl. 8B 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
Article 14 and 19(1)(g) of the Constitution; (2) that secret
orders affecting rights of parties could not lawfully be
made since secrecy would militrate against natural justice
and against the right of appeal provided by s. 4M of the
Imports and Exports (Control) Act, and (3) that an order
under cl. 8B could only be made after the investigation
under cl 8 had commenced, that is after a show cause notice
had been issued under cl.8, Dismissing the writ petitions.
^
HELD: It is not permissible to interpret any statutory
instrument 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 when ever action is taken affecting the rights of
parties. It may be that the opportunity to be heard may not
be pre-decisional; it may necessarily have to be post-
678
decisional where the danger to be averted or the act to be
prevented is imminent or where the action to be taken can
brook ne delay. It may not oven be necessary in some
situations to give pre-decisional opportunity of making a
representation but it would be sufficient but obligatory to
consider any representation that may be made by the
aggrieved person and that would satisfy the requirements of
procedural 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. 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 heard at a later stage. Even if the interim
orders do not make provision for such an opportunity, an
aggrieved party has, nevertheless, always the right to make
an appropriate 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 opportunity at his 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. 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. (700H ; 701A-F)
There is no rule of justice of fair play which requires
the authority to seek 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
seeking an explanation from the person concerned. (699F)
In some cases, ex-parte interim orders may be made
pending a final adjudication. But that does not mean 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 risk and hazard.
Therefore, there must be observed some modicum of residual,
core natural justice, sufficient to enable the affected
person to make an adequate representation. These
considerations may not, however, apply to cases of liquor
licensing which involve the grant of a privilege and are not
a matter of right. That may be and in some cases it can only
be after an initial ex-parte interim order is made. (705B-D)
Queen v. Randolph et al. 56 D.L R. (2d) 283,
Commissioner of Police v, Tanos, 98, C.L.R. 383, Levis v.
Heffer, [1978] 3 All ER 354 and Furnell v. Whangarei High
Schools Ed, 1973 Appeal Cases 660 and Chingleput Bottlers v.
Majestic Bottling Company, Supreme Court’s Civil Appeal Nos.
1970-71 of 1973, referred to.
Clause 8 of the imports (Control) order, 1955 empowers
the Central
679
Government or the Chief Controller of Imports and Exports to
debar person from importing goods or from receiving licences
or allotment of imported goods for a specified period if
such person if guilty of any of the acts or commission or
omission enumerated in the Clause. Clause 8A empowers the
Central Government or the Chief Controller of Imports and
Exports to suspend the importation of goods by any person or
grant of licences or allotment of imported goods pending
investigation into one or more of the allegations mentioned
in cl. 8 without prejudice to any other action that may be
taken against him in that behalf. 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 cl.8
against a licences importer or any other person subject to
fulfilment of the requirement of the satisfaction of the
appropriate authority regarding 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, it would not be necessary to give an
opportunity to the person concerned before proceeding to
take action under cl. 8A or cl. 8B. But while cl. 8B deals
with the right to obtain licences and the rights to obtain
allotments, cl. 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 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
and 8B that cl.10 provides for a pre-decisional opportunity
in the case of action under cl. 8A and does not so provide
in the case of action under cl. 8B. Again, it is 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 a decision under cl. 8B. But that does
not mean that the requirements of natural justice are not to
be meant at all in the case of action under cl. 8B. The
requirements of natural justice will be met in the case of
action under cl. 8B by considering, bona fide, any
representation that may be made in that behalf by the person
aggrieved. Clause 8B itself gives an indication that such a
post-decisional opportunity on the request of the person
concerned is contemplated. The action under cl. 8B is to be
taken if the authority is satisfied in the public interest
that such action may be taken without ascertaining further
details in regard to the allegations. It clearly. implies
that when further facts are ascertained by the authority or
brought to the notice of the authority, such action may be
reviewed. Therefore, in the case of action under cl. 8B it
is not necessary to give a pre-decisional opportunity but a
post-decisional opportunity must be given if so requested by
the persons affected. [698G; 696D-E; G; 705F-H; 706A-E]
The decision to keep in ‘abeyance’ should be
communicated to the person concerned otherwise the rules of
natural justice will not be satisfied. It would be most
arbitrary and quit clearly violative of Articles 14 and 19
(i) (g) of the Constitution if cl. 8B is to be interpreted
as excluding
680
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 has to be communicated,
but reasons for the decision have not to be stated. Reasons
of course, must exist for the decision since the decision
may only be taken if the authority is satisfied that the
grant of licence or allotment of imported goods will not be
in the public interest. The expression without 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 reasons, 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 of the 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 the trafficking and
unscrupulous 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. It is true that public
administration is not to be run on public sentiment and
statutory action may only be taken on grounds permitted by
the statute. Public sentiment is not in some cases the
ground for the action but it is what clothes the ground with
that sense of urgency which makes it imperative that swift
action be taken. [707D-H]
Public interest must nolens volens 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 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. 8B. 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].
An ‘abeyance’ order under 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 is pending.
Therefore the question is whether it is not in the public
interest that a particular person should be prevented from
obtaining import licences or imported goods any description
pending investigation into the allegations under cl. 8B.
That would depend on the nature 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. [708E-G]
681
Action under cl. 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 outweighing
circumstances in his favour. That 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 material whatsoever. If the
authority declines to consider the representation, or if the
authority after consideration 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. [709E-G]
Barium Chemicals v. 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, [1981] 1 SCR 952 and
Commissioner of Income Tax v. Mahindra and Mahindra, [1983]
4 S.C.C. 392, referred to.
The Court cannot consider the question whether there is
sufficient relevant material in support of the allegations
made against the petitioners. The Court may properly
consider the question of mala fide or patent lack of
jurisdiction. Therefore in the instant case the Court cannot
consider 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 the abeyance order was never
formally communicated 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 the party, the abeyance 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 no
substance. Clause 8B expressly provides that action under
the Clause may be taken "not withes standing anything
contained in this order". In view of this non-obstante
clause there is no doubt that cl. 8B applies. equally to
goods covered by open General Licence. [698B-C]
The argument that the order as embodied in the abeyance
circular did not fulfil the conditions precedent prescribed
by the statute has. some substance. The Circular did not
contain a recital of the allegations constituting 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
682
be dealt with by a 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
his concerned separately. It is true that the abeyance
circular suffers from everyone of these informities. But the
Court’s attention was invited to the statements made in the
counter-affidavit by the Deputy Chief Controller of
Imports and Export the author of the abeyance circular
and the relevant files placed before the Court for perusal
which shows that the principal allegations against the
petitioners were that they had prima facie indulged in
illegal importation of beef tallow and had also misutilised
the beef tallow. Why the authority took this prima facie
view has been explained in the counter-affidavit. From a
perusal of the files it is found that the cases of
Liberty Oil Mills as well as other concerns were separately
and individually considered. Thus it does not make any
difference on the peculiar facts of this case that a
single circular was issued covering a large number of
concerns.[712A-B; D.G]
It is impressed upon the authorities that those
entrusted by statute with the task of taking prejudicial
action on the basis of their subjective satisfaction should,
first bestow careful attention to the allegations forming
the basis of the proposed action and the probable
consequence 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. [713B-D]
In the instant case, the real remedy of the party to
make a representation to the concerned authority which is
directed to consider such representation if made. [713F]
JUDGMENT:
ORIGINAL JURISDICTION : Transferred Case No. 22 of
1984.
Arising out of Civil Appeal No. 274 of 1984 from
Special Leave Petition No. 17128 of 1983 from the Judgment
and order dated 13th & 23rd December, 1983 of the Bombay
High Court in Writ Petition No. 2855 of 1983.
Ashok H. Desai, S.S. Ray, A.N. Banatwala, G.E.
Vehanvati, B R. Agarwala, P.G. Gokhale, M.M. Jayakar, V.K.
Chittre, R.H. Rancholi, M. Jayakar & A. Subba Rao for the
Petitioner in WP & for Respondent in C.A. No. 274/84.
K Parasaran, Attorney General. M.K. Banerjee, Addl.
Sol., General, A.K. Ganguli, G. Subramaniam and R.N. Poodar,
for the Respondent in T.C. & for the Appellants in CA. No.
274 of 1984.
S.S. Ray, Ashok H. Desai, Summeet Kachawaha, Rani
Karanjawala, Ms. M. Karanjawala, Kuldeep Pablay, A.N.
Banathwala, G.E. Vahanvati,
683
Ms.Bina Gupta, Rainu Walia, T.M. Ansari and D.N. Misra
for the Interveners.
The Judgment of the Court was delivered by
CHINNAPPA REDDY, 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 used in 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. Assurances were given in
Parliament. Bureaucracy went into action. It was discovered
that though the import of beef tallow, like other animal
tallow, had been canalised through the State Trading
Corporation with effect from June 5, 1981, 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 who 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
21st December, five circulars, styled abeyance circulars’
and marked ‘secret’ were issued by the Deputy Chief
Controller of Imports and Exports, in respect of as many as
192 concerns (business houses), directing licensing
authorities to keep in ‘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
Customs clearance Permits and allotment of imported. 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. It 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) Ltd. is as follows:.
684
SECRET
GOVERNMENT OF INDIA
MINISTRY OF COMMERCE
OFFICE OF THE CHIEF CONTROLLER
OF IMPORTS & EXPORTS
UDYOG BHAVAN, NEW DELHI-11
dated, the 9th Nov. 1983
ABEYANCE CIRCULAR No. 28/83-84/HQ.
Whereas investigation into certain allegation mentioned
under Cl. 8 of the Imports (Control) order, 1955 are pending
against the under mentioned concerns, all the licensing
authorities are hereby requested to keep in abeyance for six
months from the date of issue of this circular any
application received from them for the grant of import
licence of Customs Clearance Permit and allotment of
imported goods through agencies like the State Trading
Corpn. Of India Ltd./Minerals and Metals Trading Corpn. of
India Ltd. or any other similar agency:
SI. Name & address Name & address of Name of the Prop./
No. of the concern. the branches as partner/Director etc.
available. as available.
------------------------------------------------------------
1 2 3 4
------------------------------------------------------------
*
*
*
*
14 M/s. Liberty oil
Mills (P) Ltd., 16
Lal Bahadur
Shastri Marg,
Kurla, Bombay-400070
*
*
*
*
------------------------------------------------------------
685
2. These instructions may be kept secret and if any of
the above mentioned firms make any enquiry about the
position of their application (s), they may simply be
informed the matter is under consideration.
3. This does not, however, preclude the licensing
authorities from rejecting their applications if they are
otherwise inadmissible or suffer from discrepancies in terms
of the licensing instructions. Only these applications may
be kept in abeyance where the party is entitled to licences
or Customs Clearance Permits etc. except for the allegations
against them.
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
acknowledge in the standard proforma.
sd/-
(J.P. SHARMA)
DY. CHIEF-CONTROLLER OF
IMPORTS & EXPORTS
(Issued from file no. 3/42/HQ/83/ECA-I)"
To say the least and to put it mildly, it is a very odd
circular, emanating as it does from a high dignitary of the
Government of India. Why the secrecy and why the instruction
to mislead, as it were ? Are statutory orders to be made and
given effect in this furtive manner, almost as if the
authorities that be are afraid of wounding the
susceptibilities of the persons in respect of whom the
orders are made ! We presume they are statutory orders made
in exercise of the powers conferred by clause 8 B of the
Import Control Order, though they do not themselves cite any
statutory authority. The actual direction, the use of the
word ‘abeyance’ and the prescription of the six-month period
are indicative that clause 8 B is the source of power. In
the counter affidavits filed on behalf of the Government of
India and the Chief and Deputy Chief Controller of Imports
and Exports it is claimed that the power exercised was that
conferred by clause 8B. It was so asserted by the Addl.
Solicitor General. The learned counsel who appeared for the
parties proceeded on that basis. So, we may also proceed on
that basis. Incorporating, as they did, directions under
clause 8B, vitally affecting the
686
business of the concerns concerned, one would expect 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. Curiously, 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. Everyone 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 Clearance 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 such a
Writ Petition in the Bombay High 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 Controller and Deputy Chief
Controller of Imports and Exports and Shri M.C. Bhandare and
Shri A. Subba Rao for the State Trading Corporation.
Liberty Oil Mills (P) Ltd. is a ‘Trading House’
recognised as 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 commodities
such as oil and oil seeds, Chemicals, Drugs, etc. They claim
to have a factory refining Vegetable oil at Kurla and a
factory for manufacturing vanaspati at Shahpur. They have
plants for processing frozen food at Madras, Tuticorin,
Calcutta and Vishakhapatnam; they also have solvent
extraction and: Industrial Oil plants. They claim that they
require a continuous 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 employment. They state that they have never
687
adulterated the vanaspati manufactured in their factory 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 additional
licences and, replenishment licences and, replenishment
licences held by them. All. the additional licences had been
issued prior to June 5, 1981 and import of OGL items was
permitted against the said licences. Beef tallow become
canalised from June 5, 1981 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 and in respect of
seven of the contracts letters of credit had also been
opened before that date. The beef tallow imported upto July,
1982 was duly cleared by Custom authorities without any
dispute or question. Thereafter the tallow as 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 what 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 canalised 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,
1981
688
and upto the date on which the import of beef tallow was
totally banned. 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
Section 128 and 131 of the Customs 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 the
licence and amendments made after the date of issue do
not have any application to the licencees." 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 particular cases. In
this case the licences were issued during the policy
for the period AH-81 and were governed by this policy
only particularly para 174(v) thereof. These 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 period AM-82 these
licences continued to be valid for beef tallow as this
item continued in the list of OGL items even after the
coming into force of the policy for the period AM-82
When vide Public Notice No.29/81 dated June 5, 1981
beef tallow was put 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 as far as beef tallow is
concerned, in case such licences were valid earlier to
import this item. In the absence of any specific
provision the licences produced by the importer in this
case had to be accepted for the clearance of beef
tallow."
It was further contended that the circular order under
Clause 8B as actually 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 Mills (P)
Ltd., whether or not such items had the remotest connection
with animal tallow Shri Ashok Desai connected that the very
general nature of the order disclosed a total non-
application of the mind since there was no nexus between the
alleged misuse of licence
689
for importing 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 other 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 they 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 import 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 ‘air-treatment’. It was also argued by Shri Ashok
Desai that the circumstances that there was public agitation
about the import of beef tallow was a 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 3-1 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 intervener, 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. 14 and 19(i) (g) of the
Constitution. It was 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
allotment. Shri Ram Jethmalani, who appeared for another
intervener
690
urged that secret orders affecting rights of parties could
not lawfully 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 conform 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 was any relevant material
before the authority competent 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 not 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 purchased 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 (P) 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 available
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 their
691
duty in the public interest to investigate into malpractices
connected with the import of beef tallow and the misuse of
beef tallow after 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 learned
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
proceedings 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 international 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 be a
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
692
judgment on the appropriateness or the adequacy of a
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 173 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 up a 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 II 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 under:-
"The licence will also be valid for import of OGL items
under paragraph 185 of import policy, 1981-82, subject
to the conditions laid down and shall be non-
transferable."
Paragraph 185 (3) further stipulates 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 validity period of the import licence
693
itself, whichever date is earlier. Paragraph 186 (1) broadly
entitles 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.o.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 by Appendix V) which have been placed on Open
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
’depending 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 additional 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 shall 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-
694
tions set 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 State
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’ in the list of canalised items, the
expression "tallow of any animal organ including mutton
tallow" was substituted. Therefore with effect from June 5,
1981 beef tallow 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 August 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 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
695
a customs clearance permit issued, under any control order.
Section 3 of the Act is 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 conditions
on the clearance whether for human consumption or for
shipment abroad, of any goods or class of goods imported
into India. Section 4A empowers the Central Government to
levy fee in respect of licences granted or renewed under any
order made or deemed to be made under the Act. Sections 4 B,
4 C, 4 D, 4 E and 4 F are provisions relating to the power
to enter and inspect the power to search, the power to seize
imported goods or material, the power to stop and seize
conveyances. Sections 4 G and 4 H, provide for confiscation
and Section 4 I for the levy of penalty. Section 4 J
preserves 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 4 K
provides for adjudications and Section 4 L entitles 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
4 M 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 deemed 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 rules for
carrying out the provisions of the Act.
The Imports (Control) Order, 1955 is an order made 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 in accordance 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 may 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’.
696
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 allotment of the imported goods
through the State Trading Corporation of India, the Minerals
and Metals 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 mentioned 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 licence or an application for
a licence" and "If he commits a breach of any law (including
any rule, 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 licences 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 pending
investigation into one or more of the allegations mentioned
in Clause 8 without prejudice to any other notice that may
be taken against him in that behalf. The first proviso to
Clause 8A prescribes that the grant of a licence or
allotment of imported goods shall not ordinarily be
suspended under this clause for a period exceeding 15
months. The second proviso stipulates that on the withdrawal
of such suspension a licence or 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 fulfilment 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
697
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 prejudice 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 8 or 8A is
taken. 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 ineffective for
any of the reasons mentioned in the clause. One of the
reasons is ’If the licensee has committed a breach of any of
the conditions of a licence". Another reason is "If the
Central Government 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 action taken under
Clause 8(1) or 8(3) or 8(A) or 9(1) to prefer an appeal to
the authority constituted by the Central Government for that
purpose. Clause 11(4) prescribes,
"Nothing in this order, except paragraph (iii) of sub-
clause(3) of Clause 5, Clause 8, Clause 8A, Clause 8C
and Clause 10C,
698
shall apply to the import of any goods covered by Open
General Licence or Special General Licence issued by
the Central Government."
We may notice here the argument of Shri V.P. Raman that
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 mention 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 provision 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 fair to the learned 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 General, as
mentioned by us earlier, agreed that natural justice should
be read into Clause 8B so as to provide for a post-
decisional hearing at the request of the affected party. Let
us examine Clause 8B in the 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 Controller 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 guilty 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 reasonable opportunity to the affected
party. Clause 8A and 8B refer to orders which may be made
pending investigation into the allegations under Clause 8
and by necessary implication 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. Neither
699
Clauses 8 nor Clause 10 prescribes the procedure to be
followed before a final order under Clause 8 is made. Has a
show-cause notice to be issued first, then followed by an
investigation and finally concluded by yet another show
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-cause
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 by a show-cause notice. The word ’Investigation’
is not defined but in the content it means no more than the
process of collection of evidence or the gathering of
material. It is not necessary that it should commence with
the communication 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 as the 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 the
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 imported goods pursuant to the licences or to
prevent him from obtaining the imported goods allotted to
him through the specified agencies. If so, the authority may
make an order under Clause 8A
700
suspending the importation of goods, the grant of licences
or the allotment of imported goods. But Clause 10 provides
that no action 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 order of suspension is
made. So it is that Clause 8A contemplates a pre-decisional
hearing. On the other hand, licences may not yet have been
issued and allotments may yet have to be made. The
appropriate 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, the 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 to
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
Clauses 8A and 8B, with freedom to the authority to pursue
action either under Clause 8A or Clause 8B each providing a
different procedure 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 and 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 temporary 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
altogether 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
701
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 requisitioning
vehicles to evacuate population. If there is an out-break 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
even be necessary in some situations to issue such notices
but it would be sufficient but obligatory to consider any
representation that may be made by the aggrieved person and
that would satisfy the requirements of procedural 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 heard at a later
stage. Even if the interim orders do not make provision for
such an opportunity, an aggrieved party has, nevertheless,
always the right to make appropriate 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 opportunity at
the 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 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,
702
"In s. 7 it has not abrogated it (i.e. the application
of the maxim audi alteram paterm) Rather it has provided
that before 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 hearing. If such a duty
existed it would be a duty to notify the party affected of
what was alleged against him and to give 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 the rights of
parties which are final in their nature, and this is true
also of s. 2 (e) of the Canadian Bill of Rights, 1960 (Can),
c. 44 upon which the respondents relied."
"The following passage in Broom’s Legal Maxims 10th
ed., p. 68 is in point:
Although cases may be found in the books of decisions
under particular statues 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 that a 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 and a 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 hearing before any order made against him becomes final.
"In my opinion, the two interim prohibitory orders in
question were validly made."
In the Commissioner of Police v. Tanos, the High Court
of
703
Australia (Dixon C. J and Webb J.) was considering the
question whether an ex-parte order of closure of a
Disorderly House may be made. It was observed.
"......it 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 urgency an immediate
declaration is demanded. A power to regulate procedure
might be treated as authorising regulations allowing an
ex-parte 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 I 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 (ii) 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 effected 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
chambers. This regulation may perhaps he read as
leaving the choice of course at large to the judge. But
it ought not so to be 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.
"It 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,
704
"Those words apply, no doubt, 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, as
a holding operation, pending enquiries. Very often
irregularities are disclosed in a government department
or in a business house; and a man may be suspended on
full pay pending enquiries. Suspicion 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 such a
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 in 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 the
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 Furnell v. Whangarei High School Bd. the Privy
Council upheld the order of suspension of a teacher pending
determination of charges against him. It was observed,
"Neither in the regulations nor in the Act is
suspension classified 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 lay it down that the written
statement of a teacher (under regulation 5(2)) and the
oral personal statement (under regulation 5(3)) will be
made 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 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
705
interests of all concerned, that pending decision
whether the charge is substantiated a teacher should be
suspended from duty. In many cases it can 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 ex-parte 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 risk 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 privilege and are not a matter of
right : See Chinglepur 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-parte
interim order is made.
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 necessary to give an
opportunity to the person concerned before proceeding to
take action under clause 8A or clause 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
706
presumably because of this difference that clause 10 while
providing for an appeal against a decision under clause 8A
does not provide for an appeal against a decision under
clause 8B. Not that it makes any difference because S. 4M
and 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 that the requirements of natural justice are
not to be met at all in the case of action under clause 8B.
The requirements of natural justice will be met in the case
of action under clause 8B by considering, bona fide, any
representation that may be made in that behalf by the person
aggrieved. Clause 8B itself gives an indication that such a
post-decisional opportunity on the request of the person
concerned is contemplated. We have seen that action under
clause 8B is to be taken if the authority is satisfied in
the public interest that such action may be taken without
ascertaining further details in regard to the allegations.
It clearly implies that when further facts are ascertained
by the authority or brought to the notice of the authority,
such action may be reviewed. As we have earlier pointed out
while ex-parte interim orders may always be made without a
pre-decisional opportunity or without the order itself
providing for a post-decisional opportunity, the principles
of natural justice which 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 opportunity must be given if so
requested by the person affected.
The next question for consideration is whether the
decision to keep in ’abeyance’ should be communicated to the
person concerned. There can be no two opinions on this. Ours
is a Constitutional Government, an open democracy founded
upon the rule of law and not a cloak and dagger regimen. It
is inconceivable that under our constitutional scheme a
decision of the kind contemplated by clause 8B which may
have the effect of bringing to a stand still the entire
business activity of the person affected and which may even
spell ruin to him, should be made and implemented without
being communicated to that person. Intertwined is the
question of observance of natural justice and how can
natural justice be satisfied if the decision is not even
communicated ? It would be most arbitrary and quite clearly
violative of Articles 14 and 19(i)(g) of the Constitution if
707
clause 8B is to be interpreted as excluding communication of
the decision taken. There is nothing in clause 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 has to be communicated, but reasons for
the decision have not to be stated. Reasons of course, must
exist for the decision since the decision may only be taken
if the authority is satisfied that the grant of licence or
allotment of imported goods will not be in the public
interest. We must make it clear that ’without 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 reasons, but the
skeletal allegations must be mentioned in order to provide
an opportunity to the person affected to make his
representation, Chapter and verse need not be quoted.
Details may not be mentioned and an outline of the
allegations should be sufficient.
The further question is on what should the satisfaction
be based ? Since action under clause 8B is to be taken
pending investigation into allegations under clause 8, we
must take it that the action under clause 8B is really in
aid of the ultimate order under clause 8. It must follow
that in order to invite the satisfaction contemplated by
clause 8B there must be present some strong suspicion of
one or other or more of the grounds mentioned in clause 8.
Since the action which is of a drastic nature is to be taken
ex-parte, it must necessarily be animated by a sense of
urgency. The sense of urgency may be infused by a host of
circumstances such as the trafficking and unscrupulous
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. One of the submissions very
strenuously pressed before us was that public sentiment was
wholly irrelevant in arriving at the satisfaction
contemplated by Clause 8B. We are unable to agree. It is
true that public administration is not to be run on public
sentiment and statutory action may only be taken on grounds
permitted by the statute. But strong public sentiment may
impart a sense of urgency to a situation such as to compel
the authorities to proceed to take action under a statute
provided of course grounds for taking action 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 urgency which makes it imperative that swift action
be taken. That is how we understand the reference to public
sentiment in the
708
counter affidavit filed on behalf of the Union of India and
the Chief Controller of Imports and Exports.
Public interest must nolens volence 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. 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 Clause
8B. There may 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 or a
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 sufficiency of the grounds on which
action is taken or 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
licencees and allotments of imported goods which have been
kept in ’abeyance’ relate to goods which are totally
unrelated to beef tallow or any other animal tallow and
there was no justification whatever for keeping them in
’abeyance’. But an ’abeyance’ order under clause 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 clause 8 is pending.
The question is not whether any particular type of goods
should be allowed to be imported or allotted to any person
that is a question of policy-, but whether 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 and, most important, the element of the public
interest. If the allegations against a person involve him
deeply in trafficking or racketeering in import licences and
imported 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 the allegations are grave, if the effect
of an order under clause 8B is
709
likely to result in loses of considerable foreign exchange
or to shut down an industry throwing large 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 and goods of certain description only instead
to 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
acquire 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 a bonafide interpretation 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 the authority making the order under clause 8B and not
for the Court.
We have 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 outweighing circumstances in his favour. That 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
material whatsoever. If the 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 the
well known cases of Barium Chemicals v Company Law Board,
Rohtas Industries v. S.D. Agarwal, M.A. Rashecd v. State of
Kerala, and the recent cases
710
of Shalini Soni v. Union of India, and Commissioner of
Income Tax v. Mahindra and Mahindra and we have considered
all of them in arriving at our conclusion.
In the present case, the party instead of representing
his case to the appropriate authority chose the path of
litigation obviously deterred by the clumsy attempt at
secrecy made by the concerned authority and the failure to
communicate the decision to the party. One of the
submissions made to us was that the abeyance order was never
formally communicated 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 v. Balbir Singh. We do not think that these
decisions are of any facility to us on the facts of the
present case. In Bachittar Singh’s case, what was decided
was that a decision taken in the privacy of a Minister’s
Chamber, which was not communicative to the party and which
was reversed without ever being communicated was of no
effect at all. In Balbir Singh case, it was held that once
an order was sent out, and went out beyond the control of
the authority, the order must 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 knowledge. The
affected party also learnt about it but probably deterred by
the attempt at secrecy, chose the path of litigation,
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 been
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 of the circular along with
the writ petition-, and in the final analysis, the
711
object of communication is only to impart knowledge. Since
then, a volume 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 beef tallow. 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 5,1981 According to the authorities to is 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 before
April 1,1981 but if 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 is an 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 of Appendix 10 of
the Import Policy of 1980-81 which expressly states:
"Nothing in the Open General Licence shall affect the
application 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
utilisation of the imported goods by the petitioners 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 merits
of the controversy and it is not for us to embark into a
discussion into these matters.
712
But we may properly consider, even at this stage, the
question of mala 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
circular did not fulfil the conditions-precedent prescribed
by the statute It did not contain a recital of the
allegations constituting the basis of the satisfaction
contemplated by clause 8B for action under that provision,
and without a recital of the allegation 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 customs clearance permit and
allotment of imported goods through agencies like the State
Trading Corporation of India, Minerals and Metals Trading
Corporation of India and similar agencies, making a bare
recital that investigations into certain allegations under
clause 8 were pending against the concerns. Again a large
number of concerns were lumped together and purported to be
dealt with by a 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 circular
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 Addl, 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 filed 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 had prima facie
indulged in illegal importation of beef tallow and had also
misutilised the beef 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 in the counter-affidavit. Illegal
importation of beef tallow and mis-utilisation of the
imported beef tallow are certainly relevant grounds on which
action may be taken under clause 8B. We are of course, not
concerned with the question of the sufficiency of material
before the authority in arriving at its conclusion. A
perusal of the files shows that in respect of nine of the
firms covered by the abeyance circular dated November 7,
1983
713
the decision to keep their applications and allotments in
abeyance was taken at the highest level, that is, at the
level of the Minister for Commerce, 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
satisfaction 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
cases also, it is possible to envisage similar results
depending on the rights 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 interest
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 before the writ petition
was transferred
714
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.
H.S.K. Petitions dismissed.
715

Liberty Oil Mills V. Union of India

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