# AGRICULTURAL AND PROCESSED FOOD PRODUCTS ETC v. OSWAL AGRO FURANE AND ORS

- **Citation:** [1996] Supp. 2 S.C.R. 73
- **Court:** Supreme Court of India
- **Decided:** 1996-04-30
- **Case number:** Civil Appeal No. 3785 of 1992
- **Bench:** J.S. Verma, B.N. Kirpal
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/agricultural-and-processed-food-products-etc-v-oswal-agro-furane-and-ors-14310
- **Pages:** 33

## Headnote

Imports and Exports (Control) Act 1947:
Export Oriented Unit--100% exp01t of product-Other than those indicated in industrial licence-Imposition of trade restrictions including fo:ation
of minimum price for export-{fnit contended such restrictions not applicable
to it in view of saving provisions of Clause 15(j)-Held : Clause 15(j)
applicable only to those products indicated in industrial licence not saved
under the Clause-Trade restrictions applicable in respect of these
products-Fixing of minimum price held valid.
Registration and Licensing of Industrial Undertakings Rules, 1952 :
Rule 16.
Export--Indust1ial licence-Variation or amendment of--Pennissible at
B
c
D
the instance of the undertaking-Export of product not indicated in original E
licence-Subsequently the undertaking expressed willingness to export said
product indicating amount of foreign exchange to be eame!f-Accordingly
Licence amended making amendment a condition-Held : amendment was
valid and the undertaking obliged to export said product pursuant thereto--Industrie£ (Development and Regulation) Act, 1951.
F
Central Excise and Salt Act, 1944: Sections 3 and SA.
100% Export Oriented Unit-Production of excisable goods-Sold
within country instead of exporting them-No pennission obtained from
authorities-Excise duty not paid-Non-payment of Excise duty not disclosed · G
in writ petition filed before High Court-High Court by interim order pennitted
unit to clear goods without payment of excise duty-Held : in absence of
pemiission from authorities to sell goods within country, unit liable to pay full
amount of excise duty-Since the unit, a commercial organisation, obtained
unfair and undue advantage from High Court the amount due was a bank
loan on which interest at 18% per annum was payable.
H
73
74
SUPREME COURT REPORTS [1996] SUPP. 2 S.C.R.
A
Constitution of India, 1950: ·
Altic/es 136 and 226--Re/ief--lnterest on amount due to Govemment-bzcorrect order obtained from High Coult by company-Thereby no
excise duty paid and amount invested in its business-Held : amount due to
B be treated as bank loaJt-flence, while paying excise duty company liable to
pay interest at bank rate.
Articles 136 and 226-F.,xport of goods-At price less than minimum
price by virtue of unwarranted interim order by High Coult-Conditional order
passed by Supreme Court that company would make good the difference
C between minimum price and actual price if export was in violation of
law-Held : company obtained unfair and undue advantage as a result of
interim order of High Coult-ft would be incumbent on Supreme Coult to
inteifere under Article 136 and grant appropriate relief-Export qs· well as its
price in violation of laW-Company liable to pay difference between minimum
price and actual export price-Even thought if valid authorisation was issued
D for export the company was liable to pay only 5% commission but it made
export in violation of law and under conditional orders passed by Supreme
Court, it could not be allowed to say it was not liable to pay difference.
Articles 136 and 226--Process of CouTt-Abuse of-Suppression of
E material fact-Writ petition filed by company before Delhi High
Court-witlzout making any reference to its earlier petiti01z filed before Punjab
and Haryrma High Court in respect of same matter-Statements in both writ
petitions contrary to each other--Held: had company disclosed details of its
earlier petiti01~ Delhi High Court would not have entertained the petition.
F
Inte!pretation of Statutes :
G
Saving provision-Merely preserved right or obligation that existed did
not and could not confer any new or additional right--lt is different from
exemption provision.
The Government of India, Ministry of commerce issued a notification whereby a scheme was formulated to facilitate setting up of 100%
export oriented units. The respondents were granted industrial licence to
manufacture Furfural and edible rice bran oil in a 100% export oriented
project. This licence was issued

## Text

_Characters 0–39,873 of 81,800. This is a partial read: ask again with offset=39873 for what follows._

AGRICULTURAL AND PROCESSED FOOD PRODUCTS ETC.
A
v.
OSWAL AGRO FURANE AND ORS.
APRIL 30, 1996
[J.S. VERMA AND B.N. KIRPAL, JJ.]
Imports and Exports (Control) Act 1947:
Export Oriented Unit--100% exp01t of product-Other than those indicated in industrial licence-Imposition of trade restrictions including fo:ation
of minimum price for export-{fnit contended such restrictions not applicable
to it in view of saving provisions of Clause 15(j)-Held : Clause 15(j)
applicable only to those products indicated in industrial licence not saved
under the Clause-Trade restrictions applicable in respect of these
products-Fixing of minimum price held valid.
Registration and Licensing of Industrial Undertakings Rules, 1952 :
Rule 16.
Export--Indust1ial licence-Variation or amendment of--Pennissible at
B
c
D
the instance of the undertaking-Export of product not indicated in original E
licence-Subsequently the undertaking expressed willingness to export said
product indicating amount of foreign exchange to be eame!f-Accordingly
Licence amended making amendment a condition-Held : amendment was
valid and the undertaking obliged to export said product pursuant thereto--Industrie£ (Development and Regulation) Act, 1951.
F
Central Excise and Salt Act, 1944: Sections 3 and SA.
100% Export Oriented Unit-Production of excisable goods-Sold
within country instead of exporting them-No pennission obtained from
authorities-Excise duty not paid-Non-payment of Excise duty not disclosed · G
in writ petition filed before High Court-High Court by interim order pennitted
unit to clear goods without payment of excise duty-Held : in absence of
pemiission from authorities to sell goods within country, unit liable to pay full
amount of excise duty-Since the unit, a commercial organisation, obtained
unfair and undue advantage from High Court the amount due was a bank
loan on which interest at 18% per annum was payable.
H
73
74
SUPREME COURT REPORTS [1996] SUPP. 2 S.C.R.
A
Constitution of India, 1950: ·
Altic/es 136 and 226--Re/ief--lnterest on amount due to Govemment-bzcorrect order obtained from High Coult by company-Thereby no
excise duty paid and amount invested in its business-Held : amount due to
B be treated as bank loaJt-flence, while paying excise duty company liable to
pay interest at bank rate.
Articles 136 and 226-F.,xport of goods-At price less than minimum
price by virtue of unwarranted interim order by High Coult-Conditional order
passed by Supreme Court that company would make good the difference
C between minimum price and actual price if export was in violation of
law-Held : company obtained unfair and undue advantage as a result of
interim order of High Coult-ft would be incumbent on Supreme Coult to
inteifere under Article 136 and grant appropriate relief-Export qs· well as its
price in violation of laW-Company liable to pay difference between minimum
price and actual export price-Even thought if valid authorisation was issued
D for export the company was liable to pay only 5% commission but it made
export in violation of law and under conditional orders passed by Supreme
Court, it could not be allowed to say it was not liable to pay difference.
Articles 136 and 226--Process of CouTt-Abuse of-Suppression of
E material fact-Writ petition filed by company before Delhi High
Court-witlzout making any reference to its earlier petiti01z filed before Punjab
and Haryrma High Court in respect of same matter-Statements in both writ
petitions contrary to each other--Held: had company disclosed details of its
earlier petiti01~ Delhi High Court would not have entertained the petition.
F
Inte!pretation of Statutes :
G
Saving provision-Merely preserved right or obligation that existed did
not and could not confer any new or additional right--lt is different from
exemption provision.
The Government of India, Ministry of commerce issued a notification whereby a scheme was formulated to facilitate setting up of 100%
export oriented units. The respondents were granted industrial licence to
manufacture Furfural and edible rice bran oil in a 100% export oriented
project. This licence was issued subject to various conditions, one of which
H was Condition No. (vi) which stated that the entire 100% production shall
AGRICULTURAL AND PROCF.sSED FOOD POTS. v. OSWAL AGRO FURANE
75
be exported. The Government of India in exercise of its powers under A
Section 3 of the Imports and Exports (Control) Act, 1947, issued the
Export (Control) Order, 1988 and it came into force with immediate effect.
The new order imposed a restriction to the effect that no person shall
export any goods of the description specified in Schedule I to the Order.
However, Clause 15(j) of the said new Order stipulated that this Order B
shall not apply to products manufactured in an approved. 100% Export
Oriented Units.
The aforesaid Export (Control) Order 1988 was amended so as to
include in Part-C in Schedule I in List II a number of items including
non·basmati rice which was allowed to be exported against registration~ C
cum-allocation certificate issued by the appellant and also fixed its minimum export price.
The respondents filed a writ petition in the High Court challenging
the validity of Clause No. (vi). This writ petition was subsequently trans· D
ferred to this Court. Thereafter, the respondents filed another writ petition
challenging the validity of Clause lS(j) of the Export Control Order, 1988
without making any reference to the earlier petition. The High Court
passed an interim order permitting the respondents to export non-basmati
rice subject to the condition that the respondents would furnish a security
of the minimum price fixed by the appellants and the price at which E
non-basmati rice was exported. Aggrieved by the High Court's judgment
the appellants preferred the present appeal in which this Court directed
that the export was being permitted subject to the condition that the
respondents would make good the difference in dollars if ultimately it was
held that they were not entitled to export the said rice.
F
On behalf of the appellants it was contended that the industrial
licence which has been granted was only for the manufacture of two items,
namely, Furfural and edible rice bran oil and this was subject to the
condition that ~be entire 100% production of these items was to be exported; that according to Clause 15 (j) or the Export (Control) Order, 1988, G
only the export of Furfural and its bye product edible rice bran oil was
saved from the operation of the Export (Control) Order 1988 and not the
export of non-basmati rice; that the filing of the writ petition in the High
Court without making any reference to the earlier petition was a clear
abuse of the process of the Court; and that the respondents were liable to H
76
SUPREME COURT REPORTS (1996) SUPP. 2 S.C.R.
A
pay the difference between the actual export price and the minimum export
price fixed by the appellants.
On behalf of the respondents it was contended that Clause lS(j) was
not confined to the end product governed by the Industries (Development
and Regulation) Act, 1951 but is also extended to the bye-products; that
B they on their own volition could export other items manufactured in the
factory; that Clause 15(j) brought in the geographical or topographical
concept thereby meaning that whatever was manufactured in the export
oriented unit was free from the shackles of the Export (Control) Order,
1988; that by using the plural word 'products' in Clause 15(j), the implicaC tion was that it was to apply to all the products manufactured in the unit;
that the appellant was entitled to only 5% of the minimum price fixed and
not the difference between the actual sale price and the minimum price
fixed; and that even if the High Court had taken an erroneous view this
Court in exercise of its discretionary jurisdiction under· Article 136 of the
D Constitution should not interfere.
Allowing the appeal, thii; Court
HELD : 1.1. Clause 15(j) of the Export (Control) Order, 1988 is a
saving provision and not an exemption clause. A saving provision or clause
E
merely preserves what exists. Clauses 3 and 15 of the export (Control)
Order have to be read togeth1!r. Clause 3 places restrictions and makes
provision with regard to export of goods specified in Schedule I and
Schedule III of the Order. If, however, a case falls within any of the various
provisions of sub-clauses of Clause 15, then in that case only the Order
F
does not apply. Clause 15, to put it differently, merely preserves any right
or obligation which existed prior to the issuance of the Export (Control)
Order and it did not, and could not, confer any new or additional right.
Clause 15(i) merely preserves the right of the respondent to export those
products which it could expol't as on the date of the Export (Control)
Order, 1988 and any amendment in the schedule to the said Order would
G not and cannot give the respondent a right to export non-basmati rice,
which right it did not have on the date of the Export (Control) Order.
When the Export (Control) order 1988 was promulgated, the respondent
had an industrial licence which made it obligatory to export its entire
production of Furfural. It was this right to export Furfural which was
H preserved by Clause 15(j) and the respondent could make its exports
•.
AGRICULTURAL AND PROCESSED FOOD PDTS. v. OSWALAGRO FURANE
77
without following the provisions of the said Order. (90-B; 91-A-D]
1.2. Keeping in view the nature of a saving provision it is not correct
to say that every product manufactured in a 100% export oriented unit was
exempt from the applicability of the provisions of the said Order. Clause
15 clearly provides that what is saved are the products for which the export
oriented unit is approved and not any other product manufactured by it.
The word "approved" in Clause 15(j) must be tead both with the words
"products" as well as with words the "export oriented unit". A unit is
granted approval, as an export oriented unit in respect of specific product
to be manufactured by it. The names of those products are indicated in
the licence granting approval and the saving Clause 15(j) is applicable to
those products the manufacture and export of which has been approved
as a 100% export oriented unit. The language of the said sub-clause is
capable of no other interpretation. (91-F-H; 92-A]
Shah Bhojrai Kuverji Oil Mills and Ginning Factory v. Subbash
Chandra Yograj Sinha, [1962] 2 SCR 159, relied on.
F.A.R. Bennion "Statutory Interpretation" Second Edition, pp 494 -495,
referred to.
A
B
c
D
2.1. The submission that clause 15(i) of the Order brings in E
geographical or topographical concept does not flow from the scheme of
the Order or the language of the clause. When Clause 15 (j) refers to "100%
export oriented unit" it is quite obvious that the clause has been inserted
in the Export (Control) Order, 1988 in view of the promulgation and
existence of the export promotion scheme. The scheme for export oriented
units was for grant of approval for the manufacture of products which, F
according to the conditions contained in the approval, had to be exported
from the country. It is the contention of the respondent that under the
terms of its licence it was under an obligation to export only Fnrfural and
not other product. It is on this basis that it has been contended in the
transferred case that the respondent is under no obligation to export G
edible rice bran oil. The obligation to export the entire quantity of Furfural ·
manufactured by it arises because of a specific condition to export 100%
production contained in the industrial licence. (92-B-D]
2.2. Clause 15(j) had to be inserted so as to save such conditions
which had been incorporated in the industrial licence which was issued to H
A
B
c
D
78
SUPREME COURT REPORTS (1996] SUPP. 2 S.C.R.
the respondent. Had clause IS(j) not been incorporated in the Order it
may have been possible for a unit to try and content that by virtue of the
restriction on exports being placed by Clause 3 of the Export (Control)
Order, the unit was not in a {Josition to export its products, though it was
obliged to do so when the licence was issued. The implication of the
insertion of the saving clause therefore, was that the existing right or
commitment for the export or the products wa' not in any way curtailed
or taken away by the pronoulgation of the said Order. No extra right or
licence to export an item, which the unit could not previously export was
sought to be conferred by Clause lS(j). [92-E-G]
2.3. The use of the word "products" in plural, does not mean that very
product made or produced in the unit could be exported. The said word
"products" signifies that ther" may be more than one product which may
be required to be exported in terms of the industrial licence or registration
of the export oriented unit and clause (lS(j) would save the export of all
such items. (92-H; 93-A]
2.4. The appellant was entitled to allow exports against registrationcum-allocati~n certificate and reading the same along with Clause 3 and
4 of the Export (Control) Order, conditions not inconsistent with the Act
or the Order, could be imr1osed while permitting export. One of the
E
conditions imposed by the appellant for export of non-basmati rice was
that it could not be exported at less than the minimum price fixed by it
and it was clearly entitled to do so. There is thus no merit in the contention
that the appellant could not lix the minimum price at which non-basmati
rice could be exported. [93-G-H; 94-A-B; 93-B]
F
3. The High Court ought not to have exercised its jurisdiction under
Article 226 of the Constitution for more than one reason and therefore, it
would be incumbent upon this Court to interfere under Article 136 of the
Constitution and not to allow the respondent to take advantage of an
obviously wrong decision of the High Court. Firstly the High Court misG construed Clause 15(j) of the Order and held that because the respondent
was an export oriented unit, it could export any item manufactured by it,
which conclusion is wholly incorrect. Secondly the High Conrt not to have
entertained the wTit petition because of the respondent's conduct. It bad
liled and earlier writ petition in the Punjab and Haryana High Court
H dee.ling with the same issue, namely, its obligation and right to export its
>.
·,
AGRICULTURALANDPROCESSEDFOODPDTS. '· OSWALAGROFURANE
79
products under the licence and in terms or the Export (Control) Order. It A
is possible that the Delhi High Court may not be aware or the pendency or
the Writ petition in the Punjab and Haryana High Court, regarding the
export or edible rice bran oil, because there is no reference to the filing of
the said case in writ petition filed in the Delhi High Court. The respondent
is guilty or suppression or this very important fact. It was contended in the
Punjab and Haryana ·High Court that it was under no obligation to export
the edible rice bran oil and its only obligation was to export Furfural, while
B
in the writ petition filed in the Delhi High Court, a somewhat contrary
contention was raised, namely, that being an export oriented unit, it was
entitled to export non-basmati rice, in addition to Furrural. Had the
respondent indicated in the writ petition filed in the Delhi High Court that C
it had also filed a petition in the Punjab and Haryana High Court which
was still pending, relating to export of edible rice bran oil, then Delhi High
Court most probably would not have e~tertained the petition because the
proper course \\'hich should have been folhnved by Oswal Agro was to raise
this contention, regarding export of non-basmati rice, in the \\Tit petition D
filed in the Punjab and Haryana High Court or to file a new petition there.
Under these circumstances the exercise of jurisdiction under Article 136
of the Constitution is clearly called for, more so when it is admitted that
the respondent had exported non-basmati rice at a price far less than the
minimum price fixed by the appellant. Therefore the respondent could not,
in law,. export non-basmati rice. The Delhi High Court, instead of passing E
interim orders and allowing export of non-basmati rice, ought to have
dismissed the writ petition. [94-E-H; 95-A-E]
4. It is clear that Oswal Agro had exported non-basmati rice which,
in law, it \\'as not entitled to export lvithout getting the pernlission from
F
the appellant and at a price less than what was fixed by it. The export was
possible only because or interim orders which were passed first by the
Delhi High Court and thereaner by this Court. This Court made it clear
that the export was being permitted subject to the condition that the
respondent would make good the difference in dollars if ultimately it was G
held they were not entitled to export the said rice. After the imposition of
such a ·condition, the respondent c::hose to make the export of rice. It
availed or the permission which was granted by the courts and as the
permission \\'as a conditional one, it is not open to it to contend that it is
not liable to make good the ditl'erence when it has been found that they
were not, in law, entitled to export rice without authorisation from the H
80
SUPREME COURT REPORTS (1996] SUPP. 2 S.C.R.
A
appellant. Having taken advantage of the interim orders of the High Court
and of the order of this court, in particular, the respondent cannot now be
permitted to escape from the condition which was imposed upon it. Even
though, if a valid authoris.ation had been issued for the export of rice, the
appellant may have been entitled to receive only 5% commission but as the
B
c
respondent has made export of rice in violation of law and under the conditional orders passed by this Court, it cannot be now allowed to say that is not
liable to pay the difference between the price at which the rice was exported
and the minimum price fixed by the appellant. The liability to pay to appellant
arises by virtue of interim orders by the High Court and this Court, which
orders are binding on the parties. [96-A-B; E-H; 97-A]
5.1. It is clear that the respondent was willing to export edible rice bran
oil, if it was permitted to do so. In fact it had also indicated the amount of
foreign exchange which it would earn by the export of edible rice bran oil. It
is on the basis of this willingness that the industrial licence \V'J.s amended by
D incorporating clause (vi) which had the effect of making it a condition for the
respondent to export edible rice bran oil. [99-H; 100-A-B]
5.2. Under Rule 16(2) of the Rules the owner of an industrial undertaking may ask for variation or amendment of the licence and under
E
sub-rule (2) the Ministry of Industrial Development has the power to vary
or amend the licence and \\'hile doing so, amend or alter or add any one
or more conditions. In as much as the export promotion scheme had been
promulgated \\'ilh a view to encourage export oriented units so as to earn
more foreign exchange, it is not surprising that, viewed in that context, the
F
Government of India acce11ted the request for permission to export edible
rice bran oil and a specific condition to that extent was incorporated in
the industrial licence by inserting clause (vi). It is interesting to note that
no protest against that amendn1ent appears to have been lodged by the
respondent. The reason obviously must have been that this an1endment
was sought for and the respondent had categorically stated that it was
G willing to export edible oil, if permitted. The respondent did not readily
protest and on the contrary, commenced the production of the rice bran
oil. It also accepted the other arnendments made in the licence, which had
been sought by it. Under these circumstances, and seeing the conduct of
the respondent, it is not entitled to any relief under Article 226 of the
H Constitution as it was obliged to export the rice bran oil. [100-C-F)
'
>
AGRICULTIJRALAND PROCESSED FOOD PDTS. v. OSWALAGRO FURANE
81
6. The High Court clearly overlooked the statutory provisions of A
Sections 3 and SA of the Central Excise and Salt Act, 1944 and the respondent got an unfair and undue advantage as a reason thereof. It is therefore,
not only liable to pay the amount of excise duty which was due and payable
but it also has to pay interest thereon. The respondent which was a commercial Organisation had approached the High Court in exercise of its discretionary jurisdiction under article 226 of the Constitution of India
purportedly to get justice. In actual fact it sought and obtain interim orders
which resulted in its not becoming liable to pay excise duty which, under no
circumstances, could have been a matter of dispute. A litigant who obtains
B
c
an incorrect order and does not pay. the statutory dues should not be
allowed to m_ake any profit or gain from the infraction of law. The money
which was legitimately due to the Government has been utilised by the
respondent in its business. Dealing with such cases which have financial
implications involving business houses or companies it is the commercial
principles which must be applied by the Court while ordering payment of
interest. Had the respondent instead of using the Government money, D
obtained the said amourit of loan from a bank, it would have had to pay
interest thereon at the bank rate then prevailing. A lending institution like
a bank would normally have advanced money for the purposes of business
at the bank rate which is fixed >1ith periodical rest. In addition thereto, a
bank would normally also obtain a collateral security so as to safeguard the
loan advanced by it. The respondent, on the other hand, had not paid the E
excise dues to the Government and the Government money has presumably
been used in its business. No collateral security has been furnished by them
because none was ordered by the Court. Under these circumstances, there
is no reason as to why the respondent would not be required to pay at least
that rate of interest, and on such terms, as it would have to pay to a bank if F
that amount of money had been obtained by it on loan. Keeping this principle in mind, it would be just and proper that the respondent be directed to
pay, in addition to the excise duty payable, interest at the rate of 18o/(I per
annum. [103-B·H; 104-A-B]
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 3785 of
1992 of Etc. Etc.
From the Judgment and Order dated 31.3.92 of the Delhi High Court
G
in W.P. No. 42 of 1992.
H
A
B
c
82
SUPREME COURT REPORTS [1996] SUPP. 2 S.C.R.
M. Chandrasekhar, Additional Solictor General, R.F. Nariman, Ram
· Jethmalani, Tarun Bajaj, Dhananjay K. Singh, Atul K. Bandhu, V. Shekhar,
Rajiv Dutta, Naresh Kr. Sharma, A. Subba Rao and Ms. Sushma Suri for
the appearing parties.
The Judgment of the Court was delivered by
KIRPAL, J. This judgment will dispose of appeals arising from the
judgment of the High Court of Delhi which had permitted Oswal Agro
Furane Ltd. (hereinafter referred to as 'Oswal Agro') to export non-basmati rice and T.C. (C) No. 15 of 1996 which was a writ petition filed by
the Oswal Agro in the Punjab and Haryana High Court seeking permission
to sell in the domestic market the edible rice bran oil manufactured by it.
The Government of India Ministry of Commerce, on 31st December,
1980 issued a notification whereby a scheme was formulated to facilitate
setting up of 100% export oriented units. It was decided lo give such units
D
certain concessions so as to enable thc1n to meet figures of foreign den1an<l
in terms of pricing, quality precision etc. Such an export oriented unit was
to belong to an industry in respect of which the export putentional and
export targets had been considered by the relevant Export Promotion
Council. The units which were intending to set up such industries were
E
required to apply for approval, to the Department of Industrial Development, Ministry or Industry.
The Punjab State Industrial Development Corporation on 9th/22nd
July, 1982 made an application to the Ministry of Industry for the grant of
industrial licence to manufacture Furfural and other edible products in a
F
100% export oriented project. In the application it was slated that the
proposed project envisaged the putting up of a composite unit, inter alia,
consisting of two paddy shelling units, each having a shelling capacity of 30
tonnes per hour. The application also further stated that after shelling the
rice, the rice produced on custom basis \Vould be returned back to the
paddy suppliers; the residual rice husk would be subjected to Furfural
G extraction and edible oil would be extracted from the rice bran obtained
as a bye product. It was stated that the edible rice bran oil so produced
would be 100% import substitution because the country wa' importing
edible oil. On 19th May, 1986, industrial licence was granted lo M/S.
Punjab Agro Furane Ltd., Chandigarh , which was set up by the Punjab
H State industrial Corporation. The new industrial undertaking was to have
AGRICULTURALANDPROCESSEDFOOD PDTS. "· OSWALAGROFURANE(KIRPAL,J.l 83
an installed capacity of manufacturing 3000 tonnes of Furfural and 3000 A
tonnes of Edible Rice Bran Oil, as a bye product. This licence was issued
subject to various conditions one of which was that "the entire '100 per
cent' production shall be exported."
Oswal Agro entered into an agreement with the Punjab State Industrial Corporation for establishing the unit for manufacturing Furfural
and as a result thereof the name of the Punjab Agro Furane Ltd. was
changed to Oswal Agro Furane Ltd. On 18th May, 1987, the Government
of India issued a letter by which the industrial licence dated 19th May,
1986, which had been issued for the manufacture of Furfural was .amended.
By this amendment a number of additional conditions were included in the
industrial licence. One of the conditions which was incorporated was that
the rice shelling plant will not be a part of 100% export oriented project
but the Government may consider granting permission for the import of
B
c
this plant subject to levy of such duties as may be decided at that time.
This condition regarding the rice shelling plant was challenged by the D
company by filing Civil Writ Petition No. 3622 of 1987 in the Punjab and
Haryana High Court. By judgment dated 2nd June, 1989, the High Court
allowed the writ petition and held that the project was a comprehensive
one and permission for the import of rice shelling plant had by necessary
implication been granted by the Government of India and, therefore, the
plant could be imported without payment of customs duty. This d.ecision
has become final as the same was not challenged by the Government of
India. As a consequence thereof the rice shelling plant was imported by
the respondents without payment of customs duty.
E
One more condition which was incorporated in the licence by the
p
aforesaid letter of 18th May, 1987 was condition No. (vi) which stated that
"you shall also export rice bran oil produced in the 100% export oriented
unit. If, however, it is so required by the Government, you will agree to
supply the said oil to an agency that will be nominated by the Government
at prices not higher than the international prices." It was also by this
amendment letter dated 18th May, 1987, that it was recognised that the G
project would be implemented by M/s. Oswal Agro Furane Ltd.
The Government of India on 30th March, 1988, in exercise of its
powers under Section 3 of the Imports and Exports (Control) Act, 1947,
issued the Export (Control) Order, 1988. This order repealed the earlier H
84
SUPREME COURT REPORTS [1996] SUPP.2S.C.R.
A
Export (Control) Order 1977 and it came into force with immediate effect.
B
c
Restriction on export of certain goods was imposed by clause 3 of the new
Order which inter alia, stated that "Save as otherwise provided in this
Order no person shall export any goods of the description specified in
Schedule I, except under and in accordance with a licence granted by the
Central Government or by an officer specified in Schedule ll." In this order
a saving clause was inserted in Clause 15. In the present appeals we are
concerned with t~e construction of Clause 150) of the said order, which
reads as follows :
"15. Saving - Nothing in this Order shall apply to -
(j) products manufactured in and exported from the respective
Free Trade Zones and approved 100 per cent Export Oriented
Units except textile items covered by bilateral arrangements; ..
The aforesaid Export (Control) Order 1988 was amended by an
D order dated 14th October, 1991 so as to include in Part-C in Schedule I in
List II a number of items including non-basmati rice. As a result of this
amendment non-basmati rice ~vas allowed to be exported subject to the
following conditions "exports shall be allowed against registration-cum-allocation certificate issued by the Agricultural and Processed Food Product
E
F
G
Export Development Authority (herein after referred to 'APEDA') - appellant herein". This amendment was followed by a Trade Notice dated
15th October, 1991, issued by the appellant by which procedure was laid
down for allotment of quota which envisaged that the minimum export
price of non-basmati rice, which was fixed, was GS $ 231 FOB per MT.
This was followed by a letter dated 15th October, 1991 from Government
of India to APEDA, inter alia, stating that additional quota of non-basmati
rice for export subject to minimum export price of US $ 231 per MT had
been released and it was stated that the Highest unit value realisation, and
not cornering of quota by any party, should be the priority for allowance
of export.
It is in the background of the aforesaid facts that we may now refer
to the filing of the writ petitions by the respondents with which we are now
concerned.
On 7th January, 1991, Writ Petition "lo. 561 of 1991, was filed
H by Oswal Agro in the Punjab and Haryana High Court wherein they
AGRICULTURAL AND PROCESSED FOOD POTS. v. OSWALAGROFURANE(KIRPAL,J.l 85
'
challenged the validity of Clause No. (vi) in the aforesaid amendment letter A
.,
dated 18th May, 1987 and it was contended that they were under no
obligation to export the edible rice bran oil and that they should be
permitted to sell the same in the domestic tariff area. It is this writ petition
which, vide this Court's order dated 14th March, 1996, has been transferred
to this Court and is T.C. (Civil) No. 15 of 1996. On 12th January, 1992, B
Oswal Agro filed another writ petition No. 42 of 1992 in the High Court
of Delhi claiming that it was not bound by the provisions of the Export
(Control) Order, 1988 and it should be allowed to export, \vi th out any
restriction, the non-basmati rice produced by it.
It will be appropriate, at this stage, to consider the points arising in c
these two cases, the Delhi case dealing with the case of export of rice and
the Punjab case relating to the export of edible rice bran oil, separately.
The case relating to expo1t of rice. The writ petition was filed in the
Delhi High Court because vide letter dated 7th January, 1992, the Assistant D
Collector of Customs, Kandla, did not allow the export of rice and in fact,
directed Oswal Agro to unload the rice which had been loaded. ll appears
that the action by the customs authorities had been taken when the appel-
]ants herein had informed the Assistant Collector of Customs, Kandla, that
export of non-basmati rice could be allowed only when registration-cumallocation certificates are issued. Inasmuch as Oswal Agro \Vanted to E
export the non-basmati rice \Vithout, any registration-cum-allocation certificate from the appellant and below the minimum price which had been
fixed, the aforesaid action was taken by the Customs Authorities of slopping Oswal Agro from exporting rice. In the writ petition filed by the
respondents in the Delhi High Court it was contended that being a 100 per F
cent export oriented unit, it was exempted from any trade restriction, inter
alia, by \Ortue of the saving Clause J5U) of the Export (Control) Order
1988. Another contention which was raised was that the fixation of mini-
-
mum price by the appellant herein was without any power and authority.
Further contending that Oswal Agro had entered into a number of contracts for the export of rice, it was submitted that the appellants herein G
•
were estopped from stopping the said export. According to Oswal Agro it
had entered into contracts dated 16th October, 1991, 18th October, 1991
and 21st October, 1991, whereby it was under a contractual obligation to
supply l,07,000 M.T. of non-basmati rice to M/s Continental Grain Compaoy, New York. It is an admitted case that the price at which Oswal Agro
wanted to export the non-ba.sn1ati rice, without any registration or H
86
SUPREME COURT REPORTS [1996] SUPP. 2 S.C.R.
A
authorisation from the appellant was US $ 213 per M.T., i.e., below the
minimum price fJXed by the appellant herein.
B
c
On 15th January, 1992, the Delhi High Court issued rule nisi and, by
an interim order of the same day, stayed the operation of the aforesaid
order dated 7th January, 1992, of the Assistant Collector of Customs,
Kandla and directed that there shall be no interference in the loading/shipment of non-basmati rice by Oswal Agro to the extent of 13200 M.T. It was
further directed that this was subject to the condition that Oswal Agro will
furnish a security of the amount of difference between the minimum price
fJXed by the appellants herein and the price at which the said quantity of
rice was being exported by Oswal Agro and the security was to be furnished
within three weeks after competition of the shipment/export of the said
quantity of rice.
By judgment dated 31st March, 1992 a Division Bench of the Delhi
High Court allowed the aforesaid writ petition. It accepted the contention
D on behalf of Oswal Agro that the provisions of the Export (Control) Order,
1988, were not applicable to the respondents by merely observing as
follows:
E
F
"The contentions of Mr. Banerjee, the learned counsel for the
petitioner appears to have force. As stated hereinabove, in terms
of clause 15G) of the Export (Control) Order 1988, nothing in this
order shall apply to the 100 per cent export oriented Unit. In view
of the aforesaid clause the notification dated 14th October, 1991,
by which the said order has been amended, will not apply to the
petitioner's unit which is admittedly a 100 per cent export oriented
unit. Since the Trade Notice dated 15th October, 1991, has been
issued pursuant to the notification dated 14th October, 1991, the
same will also not apply lo the exports being made by 100 per cent
export oriented Units."
The High Court also held that there was no prov1s10n m the Export
G
(Control) Order 1988 for fixing the minimum price for non-basmati rice.
By taking note of the fact that vide letter dated 15th October, 1991, of the
appellants herein, the last date for exporting the entire quantity of non-basmati rice was 31st March, 1992, the High Court while allowing the writ
petition granted three months' time to export the balance quantity of 83800
H M.T. of non-basmati rice.
•
•
AGRICULTURAL AND PROCESSED FOOD PDTS. '· OSWALAGRO FURANE[KIRPAL.J.J 87
On 15th May, 1992, in Special Leave Petition (c) No. 6854 of 1992, A
filed by the appellant, from which Civil Appeal No. 3785 of 1992 arises,
this Court while directing the petition to be listed on 8th September, 1992
gave Oswal Agro the liberty to export the rice in question on the undertaking that in the event of the Court holding that the item was a canalised
item and Oswal Agro was not entitled to export the same, then it would
make good the difference, as determined, in dollars.
Notwithstanding the fact that the aforesaid special leave petition was
pending in this Court. Oswal Agro moved another miscellaneous applicaB
tion before the Delhi High Court in which it was stated that by the end of
June, 1992, 66,099.680 M.T. of non-basmati rice would be exported and C
that for exporting the remaining quantity in question time may be extended
upto 31st August, 1992, and it be also permitted to export the same to
buyers other than with whom the earlier contracts were alleged to have
been entered. On 9th July, 1992, the High Court allowed this application
and extended the time till 8th September, 1992, to export the balance D
quantity of rice but with the observation that the same was "subject to the
conditions laid down by the Supreme Court in their order dated 15th May,
1992." Thereupon this Court on 8th September, 1992, granted leave to
appeal and stayed the operation of the High Court judgment.
On behalf of the appellant it is contended by Mr. R.F. Nariman,
learned senior counsel, that the industrial licence which had been granted
was only for the manufacture of two items, namely, Furfural and edible rice
bran oil and this was subject to the condition that the entire 100% product
of these items was to be exported. He further submitted that according to
clause 15(j) of the Export (Control) Order, 1988, only the export of
Furfural and its bye product edible bran rice oil was saved from the
operation of the Export (Control) Order, 1988 and not the export of nonbasmati rice. Elaborating this submission he contended that the construcE
F
tion placed by the High Court on Clause 15(j) would mean that so long as
there was a 100% approved export oriented unit then it could export any G
goods irrespective of what was approved to be manufactured for export by
that unit. It was also contended that filing of the writ petition in the Delhi
High Court was a clear abuse of the process of the court inasmuch as the
petition had been filed without making any reference to the earlier Writ
Petition No. 561 of 1991 which was filed in the Punjab and Haryana High
Court and that the statements made in both the writ petitions were contrary H
88
SUPREME COURT REPORTS [1996] SUPP. 2 S.C.R.
A
to each other. It was abo contended that the High Court in its discretion
ought not to have granted any relief to Oswal Agro on the principle
analogous to Order 2 Rule 2 of the Code of Civil Procedure. Lastly, it was
submitted that Oswal Agro had exported 86,500 MT of non-basmati rice
in violation of the Export (Control) Order and by virtue of the undertaking
B given by it to this Court, it is liable to pay the difference between the actual
export price and the minimum export price fixed by the Government and
so calculated this difference which comes to t.:S $ 24,54,644 at the current
foreign exchange rates.
Mr. Ram Jethmalani, learned senior counsel for Oswal Agro at the
C outset conceded that in terms of the industrial licence Oswal Agro was
under no obligation to export basmati rice. According to him the only
obligation which it had, in terms of the licence, was to export Furfural and
not edible rice bran oil. For justifying the export of non-basmati rice. Mr.
Jethmalani relied upon clause 15(j) and submitted that the said clause was
D not confined to the end product governed by the !DR Act but it extended
to bye products manufactured in that factory. In other words his submission
was that an export oriented unit, by virtue of Clause 15(j) was entitled to
export not merely the goods mentioned in the industrial Unit but also other
products manufactured in that factory. He submitted that with respect to
E
the licensed product the Oswal Agro was under an obligation to export but
because of Clause 15(j) the Oswal Agro, on its own volition, the export
oriented unit could export other item which are also manufactured in that
factory. It was contended that what was sanctioned in the case of the
respondent was a project which started from the stage of dehusking of
F
paddy and, therefore, whatever was covered by the scheme would be
covered by Clause 15(j).