# UNION OF INDIA & ORS v. M/S. INDO-AFGHAN AGENCIES LTD. November 22. J 967 - **Citation:** [1968] 2 S.C.R. 366 - **Court:** Supreme Court of India - **Decided:** 1968 - **Bench:** J. C. Shah, S. M. Sikri, J. M. SHEi.AT - **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/union-of-india-ors-v-m-s-indo-afghan-agencies-ltd-november-22-j-967-4211 - **Pages:** 21 ## Headnote Imports and Exports (Control) Act (18 of 1947), 3. 3-Import Trade Policy-Notific111ions undtr-lf utcutivt instructions-Whether enforceablt-RtprtstntDlion to uporters that they wUl bt given ctrti{icatts to import mattrial tqual to 100% of tht valut of tht exporrs-Whtn quan· tum in import cerri{icatt can b1 rtductd-C/aim of uporttrs if foundtd on tquity. Section 3 of the Jmpons and Expons (Control) Act, 1947, authorises the Central Government to make, by order, provisions for prohibiting, restricting or otherwise controlling impon, export, carriage etc. of goods of specified description: In exercise of this power, the Central Government issued the Imports (Control) Order. 1955, and other orders setting out the policy governing the grant of import and export licences. The Central Government also evolved an Import Trade Policy to facilitate the mechanism of the Act and lhe orders issued thereunder. and it was modified from time to time by issuin~ fresh Schemes in respect of new commodities. Jn 1962, the Central Government promulgaied the Export Promotion Scheme providing incentives l<' exporters of woollen textile~ and goods. It provided for the grant to on exponer, certificates to impon raw materials of a total amount equal to 100% of the F.0.B. value of his export<. Clause 10 of the Scheme provided that the Textile Commissioner could grant an import certificate fo; a lesser a.mount if he ic; satisfied, after holding an enquiry. that the <.~clared value of the goods exported is hlgber than the real value of the goods. The Scheme was ex· tended to export:-. of \\-·oollen textiles and goods to Afghanistan. The respondents exported woollen goods to Afghaoisian and wero i'5ued an Import Entitlement Ccnificate by the Textile Commissioner n01 for the full F.0.ll. value of the goods exponed. but for a reduced amount. In doin.2 c;o, th-.: l'extilc Commissioner collected evidence ex oarte and actini.; UL1on the report of a Committee apooinled by him ·passed orders without informing the respondents or giving them an opportunity to explain the materials on the basis of which the 'imporl entitlement' of the respondents was reduced. Some of the exporters had appeared before the Committee and explained the circurnstances in which they made the exports, but the report of the Committee -.:as not made available to them. The respondents made representations tQ the Central Government but the Government confirmed the orders. The rCsPondents then filed writ petitions in the. High Court. The High Coun set aside the orders of the Textile Commissioner and Government, and held that the respondents '\1.;ere entitled under the Scheme to obtain import licences for an amount equal to 100% of the F.O.B. value of their expons, unles.< it was found on enquiry duly made under cl. IO of the Scheme that the respondents had by 'over-invoicing' the goods disentitled themselves to the import licences of the full value; and that the Textile Commissioner without making any such enquiry. proceeded upon ht< 'subiectivc satisfaction' that the respondents had 'over invoiced' the good.c; cxportedi. and that Government also acted in a similar -manner in dealing with the representation of the respondents. B c [) E F G H A • c D E I' G H UNION V. INDO·AFGHAN AGENCIES :i67 In appeal to this Court, it was contended : ( 1) that the Export Promotion Scheme was administrative in character, that it contained mere executive instructions issued by the Central Government to the Textile Commissioner, and created no enforceable rights in the exporters who exported their goods in purauance of the Scheme and .that it imposed no obligations upon the Government to issue import certificates, (2) that the Textile Commissioner was the sole judge of the reasons for reducing the import entitlement, that the Scheme did not require him to set out the reasons for reducing the import entitlement, or to give an opportunity to the respondents because, the exercise of the power to reduce, conferred upo ## Text _Characters 0–39,736 of 57,265. This is a partial read: ask again with offset=39736 for what follows._ UNION OF INDIA & ORS. v. M/S. INDO-AFGHAN AGENCIES LTD. November 22. J 967 [J. C. SHAH, S. M. SIKRI AND J. M. SHEi.AT, JJ.J Imports and Exports (Control) Act (18 of 1947), 3. 3-Import Trade Policy-Notific111ions undtr-lf utcutivt instructions-Whether enforceablt-RtprtstntDlion to uporters that they wUl bt given ctrti{icatts to import mattrial tqual to 100% of tht valut of tht exporrs-Whtn quan· tum in import cerri{icatt can b1 rtductd-C/aim of uporttrs if foundtd on tquity. Section 3 of the Jmpons and Expons (Control) Act, 1947, authorises the Central Government to make, by order, provisions for prohibiting, restricting or otherwise controlling impon, export, carriage etc. of goods of specified description: In exercise of this power, the Central Government issued the Imports (Control) Order. 1955, and other orders setting out the policy governing the grant of import and export licences. The Central Government also evolved an Import Trade Policy to facilitate the mechanism of the Act and lhe orders issued thereunder. and it was modified from time to time by issuin~ fresh Schemes in respect of new commodities. Jn 1962, the Central Government promulgaied the Export Promotion Scheme providing incentives l<' exporters of woollen textile~ and goods. It provided for the grant to on exponer, certificates to impon raw materials of a total amount equal to 100% of the F.0.B. value of his export<. Clause 10 of the Scheme provided that the Textile Commissioner could grant an import certificate fo; a lesser a.mount if he ic; satisfied, after holding an enquiry. that the <.~clared value of the goods exported is hlgber than the real value of the goods. The Scheme was ex· tended to export:-. of \\-·oollen textiles and goods to Afghanistan. The respondents exported woollen goods to Afghaoisian and wero i'5ued an Import Entitlement Ccnificate by the Textile Commissioner n01 for the full F.0.ll. value of the goods exponed. but for a reduced amount. In doin.2 c;o, th-.: l'extilc Commissioner collected evidence ex oarte and actini.; UL1on the report of a Committee apooinled by him ·passed orders without informing the respondents or giving them an opportunity to explain the materials on the basis of which the 'imporl entitlement' of the respondents was reduced. Some of the exporters had appeared before the Committee and explained the circurnstances in which they made the exports, but the report of the Committee -.:as not made available to them. The respondents made representations tQ the Central Government but the Government confirmed the orders. The rCsPondents then filed writ petitions in the. High Court. The High Coun set aside the orders of the Textile Commissioner and Government, and held that the respondents '\1.;ere entitled under the Scheme to obtain import licences for an amount equal to 100% of the F.O.B. value of their expons, unles.< it was found on enquiry duly made under cl. IO of the Scheme that the respondents had by 'over-invoicing' the goods disentitled themselves to the import licences of the full value; and that the Textile Commissioner without making any such enquiry. proceeded upon ht< 'subiectivc satisfaction' that the respondents had 'over invoiced' the good.c; cxportedi. and that Government also acted in a similar -manner in dealing with the representation of the respondents. B c [) E F G H A • c D E I' G H UNION V. INDO·AFGHAN AGENCIES :i67 In appeal to this Court, it was contended : ( 1) that the Export Promotion Scheme was administrative in character, that it contained mere executive instructions issued by the Central Government to the Textile Commissioner, and created no enforceable rights in the exporters who exported their goods in purauance of the Scheme and .that it imposed no obligations upon the Government to issue import certificates, (2) that the Textile Commissioner was the sole judge of the reasons for reducing the import entitlement, that the Scheme did not require him to set out the reasons for reducing the import entitlement, or to give an opportunity to the respondents because, the exercise of the power to reduce, conferred upon the Textile Commissioner, was not limited by the terms of cl. 10 of the Scheme, and was not, except on proof of mala fide exercise, open to judicial review; ( 3) that the Government on grounds of 'executive necessity' was the sole judge of the validity of its action in matters relating to import. and export policy, because ~he policy depended upon tbe economic clim,.ate and other related matters and had to be in its very nature flexible with power in the Government to mndify or adjust it as the altered circumstances necessitate; and ( 4) that if the Government is held bound by every r<'Presentation made by it regarding its intentions, the Government wouJd, be held bound . by a contractual obligation even though no formal contract in the manner required by Art. 299 of the Constitution was rotecuted. HELD : The Government is not exempt from liability to carry out the representation made by it as to its future conduct and it cannot on some undefined and undisclosed ground of necessity or expediency fail to carry~ out the promise solemnly made by it, nor claim tO be the judge of its own obligation to the citizen on an ex parte appraisement of the circumstances in which th·~ 9h1igation had arisen. [385 E-F] (I) Whether the Schemes for implementing the Import Trade Policy are 'merely exe<;mtive or administrative instructions, or are legislative directions as well, depends not on their form, or the method of publication or the source of their authority. but it is their substflnce that determines their true character. It cannot be assumed merely because the policy is general in terms and de3.ls with the grant of licences for import of goods and related matters, that it is statutory in• character. But even if it is ~oly executive or administrative in character, courts have power in appropriate cases to oompel performance of the obligations imposed by the Schemes upon the departmental authorities. [376 H; 377 B-C, F--0) (2) The Textile Commissioner was not the sole judge of the quantum of import Jit:ence to be granted to an exporter and courts are competent in appropriate cases to grant relief, if, contrary to the Scheme, the Government and its officers at ·their mere whim ignore the promises made by the Government and .aioitrarily decline to grant \he promised import licence to an exporter who bas acted to his prejndice relying upon the representation. [381 C-D] Where a person has acted upon representations made in an Export Promotion Scheme that import liceqce upto the value of the goods exported will be issued, and had exported goods, his claim for the import licence for the · maximum value pennissible by the Scheme cannot be arbitrarily rejected. In such .a case reduction in the .amount of import certificate may be justified on the ·ground of misconduct df the exporter in relation to the goods exported or on special considerations such as difficult foreign exchange position, or other matters having a bearing on thnt the import certificate for the full value of the goods exported if they deem it inexJ>"dicnt (376 A-CJ Rederu1ktiebo/aget Amphitrite v. The King. [1921) 3 K.B. 500 :.:id Robertson v. Minister of Pen. and Exports (Control) Act 18 of 1947 was enacted on March 24, 194 7 wi•h the object of enabling the Central Government to continue to exercise the power to prohibit, restrict or otherwise control imports and ·expor!s which had till then been e ·open to that Officer to reduce the import entitlement below the f.o.b. value of the goods exported, and exercise of the power conferred upon him is not limited by the terms of cl. 10 of the Scheme, and is not, except on proof of mala fide exercise open to judicial review. This exalted claim about the nature of the authority conferred upon the Textile Commissioner as representative of the Government may first be examined. Counsel for the Union said that the import and export policy of the Government is based on avai1abi!ity pf foreign exchange. requirement of goods of foreign origin for !nternal consumption, 374 SUPREME COURT IU!POllTS (1968] 2 S.C.R. economic climate in the country, and other related matters, and has in its very nature to be flexible, and on that account the power of the Government to modify or a~just it as the altered drcumstances necessitate, cannot be restricted on the ground that promises made by the Government in different situations are not carried out, however amoral that claim may appear to be According to Counsel the Government is the sole judge of the validity of its actions in matters relating to Import and Export Policy, and the citizens who have ·acted on the representations of 'the Government have only such rights as the Government in its wisdom chooses to recognise or accept at any given time. He relied in support of his submission upon the doctrine of "executive necessity" on which Rowlatt J., relied in Rederiaktiebo/aget Amphitrite v. The King.(') In that case during the First World War certain neutral shipowners obtained an undertaking from the British Government that if the shipowners sent a particular ship to the United Kingdom with a specified cargo, she shall not be detained. On the faith of that undertaking, the owners sent the ship to a British port with that specified cargo. The British Government withdrew their undertaking and refused her clearance. On a petition of right for damages for breach of contract it was held that the Government's undertaking was not enforceable in a Court of law, it not being within the competence of the Crown to make a contract which would have the effect of limiting its power of executive action in the future. RowJatt, J .. -observed at p. 503 : ·• ...... what 1 have to consider is whether this was a contract at all. I have not to consider whe!her there was anything of which complaint might be made outside a Court, whether that is to say what the Government did was morally wrong or arbitrary that would be altogether outside my province." He then proceeded to state : nNo doubt the Government can bind itself through its officers by a commercial contract, and if it does so it must perform it like anybody else or pay damages for the breach. But this was not a commercial contract, it was an arrangement whereby the Government purported to give an assurance as to what its executive action would be in the future in relation to a particular ship in the event of her coming to this country with a particular kind of cargo. And that is, to my mind, not a contract for the breach of which damages can he sued for in a Court of law. It was merely an expression of intention to act in a particular way in a ---'- (I) (1921] 3 K.B. 5UU. A B c D E F G H < ' A B c D E UNION v. INDO-AFGHAN AGENCIES (Shah,/.) 375 certain event. My main reason for so thinking is th.at it is not competent for the Government to fetter Its future executive action, which must necessarily be determined by the needs-of the community when the question arises. It cannot by contract hamper its freedom of action in matters which concern the welfare of the State." This observation is, "cl~arly very wide and· it is difficult to determine its proper scope": Anson's "English Law of Contract'', 22nd Ed., p. 174. It may also be noticed that before Rowlatt, J., the applicants claimed enforcement of a contract against the Crown, and the learned Judge came to !he conclusion that there was no contract and no damages could be awarded. In Robert· son v. Mini'ster of Pensions('), Denning, J. observed at p. 231 : "The Crown cannot escape by saying that estoppels do not bind the Crown for that doctrine has long been exploded. Nor can the Crown escape by praying in aid the doctrine of executive necessity, that is, the doctrine that the Crown cannot bind its.elf so as to fetter i!s future executive action. That doctrine was propounded by Rowlatt J., in Rederiaktiebo/aget Am· phitrite v. The King but it was unnecessary for the decision because the statement there was not a promise which was intended to be binding but only an expression of intention. Rowlatt, .T., seems to have been influenced by the cases on the right of the Crown to dismiss its servants at pleasure, but those cases must now all be read in the light of the judgment of Lord Atkin in Reilly v. The King-(1954) A.C. 176, 179). . • . . . In my opinion the defence of executive necessity is of limited scope. It only avails the Crown where there is an iniplied term to that effect· or that is the true meaning of the contract." Denning, J., was dealing with a case of a serving army officer, who wrote to the War Office regarding a disability and received a reply that his disability had been accepted as attributable to "military service". Relying on that assurance he forebore to obtain an independent medical opinion. The Minister of Pensions later decided that the appellant's disability could not be attributed to war service. It was held •hat as between subjects such an assurance would be enforceable because it was intended to be binding intended to be acted upon, and was in fact acted upon; and the assurance was also binding on the Crown because no term could be iniplied that the Crown was at liberty to revoke it. (I) [1949] I K.B 227. 376 SUPREME COURT REPORTS [1968] 2 S.C.R. The defence of executive necessity was not relied upon in the pre.sent case in the affidavit filed on behalf of the Union of India. It was also not pleaded that the representation in the Scheme was subject to an implied term that the Union of India will not be bound to grant the import certificate for the full value of the goods exported if they deem it inexpedient to grant the certificate. We are unable to accede to the contention that the executive necessity releases the Government from honouring its solemn promises relying on which citizens have acted to their detriment. Under our constitutional set-up no person may be deprived of his right or liberty except in due course of and by authority of law : if a member of the executive seeks to deprive a citizen of his right or liberty otherwise than in exercise of power derived from the lawcommon or statute---the Courts will be competent to and indeed would be bound to, protect the rights of the aggrieved citizen. The orders which the Central Government may issue in exercise of the power conferred by s. 3 of the Imports and Export~ Control Act may be executive or legislative. In exercise of that power, the Order was issued on December 7, 1955, that was clearly legislative in character. It appears that prior to the issuance of this no'.ification several orders had been issued under the Defence of India Rules and under the Imports and Exports Act dealing \\ith the grant of licences to import certain classes of goods. Those orders which are set out in the IVth Schedufo to the Order were repealed by cl. 12 of the Order of 1955, and machinery for granting licences was set up by foe Orc\er dated December 7, 1955. Counsel for the respondents submitted that the Export Promotion Schemes published by the Government under paragraph-52 of the Government Notification dated December 29, I 954, must be deemed to be issued under s. 3 of the Imports and Exports Control Act, 1947, since the Schemes have been published in the Gazette of India, and contain general provi>ions relating to the grant of licences and impose restrictions up•Jn the rights of citizens to carry on busines.~ in certain commod:t;es. Being general provisions restricting the rights of citizens to c~rry on business in certain commodities, the Schemes were, it was said, legislative in character, and the obligations imposed or the snncrions prescribed thereby must on that account be deemed to be enforceable by command of the Court. I: cannot be assumed merely because the Import Trade Policy is general in terms and deals with the grant of licences for import of goods and related matters, it is statutory in character. The Imports and Exports (Control) Act, 1947, au!horises the Central Government to make provisions prohibiting, restricting or l'therwise controlling import, export, carriage etc. of the goods and by the Imports (Con!rol) Order, I 955, dated December 7, 1955, II c D E F H B c D E F G H UNION v. INDO-AFGHAN AGENCIES (Shah, J.) 377 and by the provisiCIDS which were sought to be repealed resirictions were already imposed. The order was clearly legislative in character. The Import Trade Policy was evolved to facilitate the mechanism of the Act and the orders issued thereunder. Even granting that the Import Trade Policy notifications were issued in exercise of the power under s. 3 of the Imports and ExportS (Control) Act, 194 7, the Order as already' observed authorised the making of executive or administrative instructions as well as legislative directions. It is not the form of the order, the method of its publication or the source of its authority, but its substance, which determines its true character. A large majority of the paragraphs of the Import & Export Schemes are in the form of instructions to departmental officers and advice to persons engaged in the export and import business with their foreign counterparts. It may be possible to pick out paragraphs from the Scheme which appear in isolation to be addressed generally and have direct impact upon the rights and liberties of the citizens. But a large number of paragraphs of the Scheme reh:r to matters of procedure of departmental officers and heterogeneous material : it sets out forms of applications, the designations of licensing authorities, amounts of application and licensing fees, last dates for applications, intermixed with definitions of 'Established Importers', 'Actual users', 'New comers', and others and d.etails of different schemes such as Quota Registration Schemes, Export Promotion Schemes etc. There is no pattern of order or logical sequence in the policy statement: it is a jumble of executive instructions and matters which impose several restrictions upon the rights of citizens. Some of the provisions which impose restrictions upon citizens in the exercise of their right to carry on trade without statutory limits may be open to serious objection, but we do not find it necessary to embark upon an enquiry whether the provision which authorises the issue of import entitlement certificate for the full f.o.b. value of th.e goods exported Is legislative in character. Granting that it is executive in haractcr, this Court has held that Courts have the power in appropriate cases to compel performance of the obligations impo~ed by the Schemes upon the departmental authorities. The question whether the Import Trade Policy is legislative in character has not been .expressly dealt with in any decision of this Court. It appears to have been assumed in certain cases, that it is executive in character, but even so it has been held that when it is declared under an export policy that a citizen exporting goods shall be entitled to certain import facilities, in appropriate cases the Courts have the power to direct the concemerl authority to make that facility available to the citizen who has acted to his prejudice acting upon the representation in the policy, and has been denied that facility. In Mis Ramchand Jagadish Chand v. .. 378 SUPRl!ME OOURT REPORTS (1968] 2 S.C.R. Union of India and Ors.(') this Court was called upon to decide whether a person who had, pursuant to a representation in the Export Promotion Scheme that exporters will be awarded import licences upto a certain percentage of the export value of the goods was entitled to call upon the Union to issue in his favour import entitlement of the value of the goods exported. Under the 'Export Promotion Scheme" relating to artificial silk fabrics it was represented that with a view to stimulate exports of Indian "artsilk fabrics" etc. it was decided to grant import licences for the import of permissible varieties of artsilk yarn upto the percentages specified. The Scheme empowered the Controller of Imports and Exports to issue a licence upto 66 2/3 per cent. of the export value in the case of Indian "artsilk sarees" and upto I 00 per cent in the case of other Indian "artsilk fabrics". M/s Ramchllnd J agadish Chand, a firm of exporters relying upon the Scheme exported Indian "artsilk" goods and earned foreign exchange and applied for an import licence equivalent to the value of the goods it had exported. They were, however, not given an import licence for the value of the goods exported. They thereafter filed a writ petition in this Court for an order that the import certificate had been arbitrarily reduced and thereby the fundamental right of the exporter to carry on trade in artsilk was infringed. The Court held in that case that the State had the right to impose control in the larger interest of the general public on imports and to make orders in exercise of the powers conferred by the Imports and Exports (Control) Act providing for imposition of restrictions by permitting import of certain goods only in accordance with the licences or customs permits granted by th~ Central Government. Since in that case the power granted to the licensing authority was to grant licences only upto the maximum specified in cl. 2 of Appendix 42, the restriction imposed was held not to be unreasonable. It was also observed that it did not impose an obligation upon the controller enforceable at the instance of the exporter, to issue a licence for the amount (subject to the maximum prescribed) claimed by the exporter, and since the order of the Controller granting a licence only for 45 % of the value of goods exported did not infringe the fundamental right of the exporter under Art. 19(1)(g) of the Constitution, the petition filed by the exporter was liable to be dismissed. But the Court observed : "The licensing authority would normally issue an import licence for I 00% of the value of the goods exc ported, but having regard to special considerations such as diffkult foreign exchange position or other matters which have a bearing on the general interest of the State, import licences for a smaller percentage may be granted to the exporters. But by the use of the expression 'up- (1) !1962) 3 S.C.R. 72. B c D .. G H ' • ' .. UNION v. INDO·AFGHAN AGENCIES (Shah, J.) 37; A to the rollowing percentage of the rupee equivalent' power to fix arbitrarily a percentage of the value of the goods exported for awarding an import licenc\: is not granted." B c D E F G H Opinion was therefore expressed that if the power granted to the Controller was arbitrarily exercised, it was open to judicial review. In Ramchand Jagadish Chand's case(') a Committee was appointed to detennine the value of the goods exported by the exporter and the Committee scrutinised the claim 0f the exporter and found that the rat.es of some of the items could not be accepted as reasonable. Hnd recommended an import licence approximately of th.~ value of 45 per cent. of the goods exported. The exporter was given a right to make a representation and to be heard before the order was passed to his prejudice. In Probhudas Morarjee Rajkotia and others v. Union of India and others(2 ), a Special Exports Promotion Scheme for Engineering goods was promulgated by the Government of India. To give incentives to the manufacturers of engineering goods in India to export their products outside India. it was declared by the Scheme that import licences will be granted to exporters for materials upto the specified percentage of the f.o.b. value of the goods exported. An exporter claimed that he had exported goods of the f.o.b. value exceeding Rs. 9.44 lakhs and demanded import licence of the value of Rs. 4. 39 lakhs odd. The licensing authorities issued to the fim1 import licences for Rs. 3.77 lakhs odd. The exporter then moved this Court by a petition under Art. 32 of the Constitution for the issue of a writ against the Union of India granting an import · licence for the balance of Rs. 62,337 /- in accordance with the provisiqns of the Special Exports Promotion Scheme, and this Court held that even though there was no absolute right to the grant of an import licence for the maximum amount prescribed, the Controller could impose restrictions if special considerations such as difficult foreign exchange position or othe.r matters which have a bearing on the general interest of the State warranted, but the discretion to be exercised by him was to be reasonable and not arbitrary. On a consideration of the affidavit filed, and the power given to the Controller to grant licences upto and not of the value of the goods exported, it was held that no case of arbitrary exercise of the power to reduce the import entitlement was made out. In these cases it was clearly ruled that where a person has acted upon representations made in an Export Promotion Scheme that import licences upto the value of the goods exported will be issued, and had exported goods, his claim for import licence for the maximum value permissible by the Scheme could not be arbit- (1) [19621 3 S.C.R. 72. (2) A.I.R. 1966 S.C. 1044. 380 SUPREME COURT REPORTS [1968] 2 S,C.R. rarily rejected.