1980 (5) TMI 107 - SC - Indian Laws

Summary

Issues Involved:
1. Morality of law versus government policy on the export of silver.
2. Application of the Imports and Exports (Control) Act, 1947.
3. Validity and impact of the Exports (Control) Fifteenth Amendment Order, 1979.
4. Indemnity clause in the contract between the indigenous supplier and the State Trading Corporation (STC).
5. Judicial review of administrative policy.
6. Equitable relief for the indigenous supplier.

Issue-wise Detailed Analysis:

1. Morality of Law versus Government Policy on Export of Silver:
The judgment emphasizes the importance of public morality over governmental policy decisions. The Court notes, "public morality is more precious than silver and gold for individual and nation and to honour the plighted word of a public body is proof of this higher policy." This observation sets the tone for the Court's approach to balancing legal principles with ethical considerations in the context of government policy on the export of silver.

2. Application of the Imports and Exports (Control) Act, 1947:
The export of silver is governed by the Imports and Exports (Control) Act, 1947. Section 3 of the Act empowers the Central Government to prohibit, restrict, or control the import and export of goods. The Court acknowledges the legal framework provided by the Act and the Exports (Control) Order, 1977, which restricts the export of certain goods, including silver.

3. Validity and Impact of the Exports (Control) Fifteenth Amendment Order, 1979:
The Exports (Control) Fifteenth Amendment Order, 1979, moved silver from Part B to Part A of Schedule I, effectively banning its export. The Court notes, "This switch came about since February 20, 1979, and meant a virtual ban on export of silver." The Court examines the reasons provided by the Union of India for this ban, which include the conservation of national resources and meeting internal demand. The Court finds no grounds to discredit this policy, stating, "Courts cannot deal cavalierly with administrative policy where the judicial process is functionally under a handicap."

4. Indemnity Clause in the Contract between the Indigenous Supplier and the STC:
The core issue revolves around Clause 9(a) of the contract between the indigenous supplier (Damani) and the STC, which includes an indemnity clause. The Court highlights the significance of this clause: "Any cess, duty, rate or tax whatsoever, payable in respect of any transaction covered by this contract shall be borne by the supplier." The Court examines whether this indemnity clause should be enforced, given the special circumstances of the case, including the frustration of the contract due to the export ban.

5. Judicial Review of Administrative Policy:
The Court asserts its authority to review administrative policies, especially when fundamental rights are at stake. The judgment states, "The sovereign power is in the Constitution, not the Administration and the Court is the sentinel." However, the Court also exercises caution, noting that constitutional questions should be considered only when absolutely necessary.

6. Equitable Relief for the Indigenous Supplier:
The Court grants equitable relief to the indigenous supplier (Damani) by releasing them from the indemnity obligation under Clause 9(a). The judgment states, "We hold, confined to the facts and circumstances of this case, that Clause 9(a) which creates the indemnity clause shall not be enforced by the STC against Damani." This decision is based on the unique facts of the case and the equitable considerations highlighted by the Court.

Conclusion:
The Supreme Court's judgment balances legal principles with ethical considerations, emphasizing the importance of public morality and equitable relief. The Court upholds the government's policy decision to ban the export of silver while providing relief to the indigenous supplier from the indemnity clause in their contract with the STC. The judgment underscores the Court's role in reviewing administrative policies and ensuring justice in specific circumstances. Each party is directed to pay Rs. 2,000 to the Legal Aid Society (Supreme Court) but otherwise bear their respective costs.