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TMI Blog1963 (4) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... an internal market the denial of a right to any group or we shall add, to any individual to export would in effect affect him adversely forcing him to sell to others who have been given such a facility. Persons like the app- ellant were being fed on hopes of some relief to them and it was a case not merely of hope deferrer making the heart sick, but of dashed hopes that led the appellant to approach. the Court for relief. Though we consider that the appellant has no legal right to the relief that he sought, his grievance is genuine and it would be for the Government to consider how beat the interest of this class should be protected and it is made worth their while to win the ore so as to expand, foster and augment the export trade in this valuable commodity. Reverting to the legal points raised in the appeal, it appears cleat to us that on the premises (1) that s. 3 of the Import under Art. 226 of the Constitution. In this view it is unnecessary to consider whether the appellant having prayed primarily for the issue of a writ of mandamus to direct the licensing authorities to consider his application for an export licence for the half year current at the date of the petition ',wi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ticular to infringe the freedom granted to the appellant under Part III of the Constitution. The appellant is a lessee of certain manganese mines in two areas of Madhya Pradesh. The leases are stated to have been granted to him in the years 1953 for a period of 20 years each, with an option for renewal if the appellant so desired, under the Mineral Concession Rules 1949, for a like period. It is an admitted fact that the in eternal demand for manganese ore in India is very inconsiderable, so that the ore is extracted mostly for the purpose of being exported out of India. Having regard to the date when the appellant obtained the mining leases, he could not have won any appreciable quantity of the metal during 1953, nor, of course, could he hare exported any quantity of the ore won by him in or prior to the year 1953. It is now necessary to set out the history of the restrictions on the export of manganese ore from 1953 up to the date relevant to the petition to understand the points sought to be made on behalf of the appellant. Prior to 1953, i. e., at a time before the appellant entered the manganese ore business, export of manganese ore was freely licensed, i. e., the commodity wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt any goods of the description specified in Sch. I except under and in accordance with a licence granted by the Central Government or by any officer specified in Sch. II." Manganese and iron ore were specified in the first schedule. Clause 6 of this order sets out the grounds upon which the Central Govern- ment or the Chief Controller of Exports and Imports may refuse to grant a licence or direct a licensing authority not to grant a licence. In view of certain points urged before us it would be convenient to set out this clause in full "6. Refusal of licence.-The Central Government or the Chief Controller of Imports and Exports may refuse to grant a license or direct any other licensing authority not to grant a licence (a) if the application for the licence does not confers to any provision of this Order; (b) if such application contains any false, or fraudulent or misleading statement; (e) if the applicant uses in support of the application any document which is false or fabricated or which has been tempered with; (d) if the applicant on any occasion has tempered with an export licence or has exported goods without a licence where it is necessary, or has been a part ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the years 1953, 1954 and 1955. (2) Mineowners based on a annual average of the quantity of ore on which royalty was paid during the calender years 1953, 1954 and 1955, and (3) The State Trading Corporation which would be given a quota on an ad hoc basis. It is only necessary to mention that the State Trading Corporation which is a Corporation owned and controlled by the Union Government came into existence by registration under the Indian Companies Act in May, 1956. Rail transport facilities co-extensive with the quota granted, were also assured for those to whom quotas were granted. There were clarifications and unsubstantial variations of this Press Note to which, however, it is riot necessary to refer as they are not material to the points now in controversy. It will be noticed that the control thus exercised and the restrictions thus imposed, mineowners who had not entered the field before 1953 were excluded from the grant of any export quota.. By a public notice dated September 4, 1956, the Ministry of Commerce, however, announced that the case of these "newcomers" was receiving their attention and that an announcement in that regard would be made in due course. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rol exercised by it that was challenged as unconstitutional in the petition filed by the appellant. The position at that date may be summarised as follows: (1) From and after July 1956 the export of manganese ore had been controlled or restricted. (2) The restriction had taken the form of allotment of quotas for export granted to: (a) established exporters, i.e., comprising the category of these who had exported from 1953 onwards , (b) mine-owners who had similarly exported the ore won by them with a similar limitation as to the year when they should have exported, and (c) The State Trading Corporation which was granted an export quota on an ad hoc basis to cover every other quantity which could be exported and for which a foreign market could be found. Traders and mine-owners who had not any export performance to their credit in earlier years were excluded from the scheme and though the government were repeatedly stating in their public statements that the case of these persons termed "newcomers" would be considered, this had never been done. The appellant fell within the last category and was not eligible to any export quota and therefore could not export. The result w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m direct participation in the export trade, but these persons had, in view of the practical absence of an internal market for manganese ore to sell their goods to others. who had been granted facility for export. (2) That the category of persons to whom they could sell their ore were two (a) Established shippers, and (b) The State Trading Corporation, and with the nature of this market as already described. The question raised for consideration by the appeal is whether the withholding of the right to engage in export trade from this class of mineowners constitutes an unreasonable restriction on their right to carry on business guaranteed by Art. 19 (1) (g) of the Constitution. Pausing here we might put aside one matter which is beyond the pale of controversy, and that is that the constitutional validity of s. 3 of the Imports & Exports Control Act, 1947, which forms as it were the ultimate root from which the impugned notifications and executive actions spring is conceded. The points urged by learned Counsel for the appellant were two : (1) Clause 6 (b) of Exports Control Order 1958, was beyond the rulemaking power under s. 3 of the Imports & Export Control Act, 1947, (2) Even if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... first Amendment of the Constitution reads. to quote the material words : "Nothing in sub-clause (g) of the said clause shall affect the operation of any existing law in so far as it imposes, or prevent the State from making any law imposing, in the interests of the general public, reasonable restrictions on the exercise of the right conferred by the said sub-clause, and, in particular, nothing in the said sub-clause shall affect the operation of any existing law in so far as it relates to, or prevent the State from making any law relating to,- (i) (ii) the carrying on by the State, or by corporation owned or controlled by the State, of any trade, business,. industry or service, whether to the exclusion, complete or partial, of citizens or otherwise". The effect of the policy statements and directions to the licensing authorities issued by virtue of the powers conferred by el. 6 (h) of the Export Control Order 1958 had resulted in the creation of a monopoly or a near monopoly in favour of the State Trading Corporation. It was urged that the creation of such a monopoly could on the language of Art. 19 (6) (ii) be effected only by the State making a law in relation to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a logical step that the restriction might take the form of classifying the persons who might participate in the trade and the conditions subject to which any particular class might be permitted to do so. It would be a matter of policy for the Government to determine, having regard to the nature of the commodity and the circumstances, attending the export trade in it, to lay down the basis for the classification between groups and fix their relative priorities etc. When el. 6(h) permits "canalising" or the "channelling" of exports through selected agencies it does not no more than make provision for the classification into groups etc. which but one of the modes which the "control" under a. 3 of the Act might assume. The next point to be considered is whether the notifications issued by which (1) the export trading in manganese ore is confined to three groups of persons engaged in the trade, viz., (a) established shippers, (b) mine-owners, and (e) the State Trading Corporation, the two former being allotted quotas based upon the export effected by them during certain basic years, (2) the progressive reduction in the quota of groups (a) & (b) with a v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... foreign market is dependent on world-wide factors. Having regard to the use to which the ore is capable of being put, viz., by steel factories in the production of steel, the foreign buyers, (and in this one factor to be taken into account is that in several foreign countries external trade is conducted through State agencies), are insistent that there shall be a regular supply of ore of uniform quality. There had been complaints in early years, when the trade in the commodity was unrestricted and not under any control, that the quality of the ore supplied was not according to sample, with the result that even the trade of those who took pains to maintain their quality of supplies suffered. It was in these circumstances that government stepped in 1956 by imposing restrictions and by assuring the foreign buyers of a regular supply through the mechanism of the controls exercised in this country. These facts were not disputed. It is with this background that the challenge to the validity of the notification has to be considered and answered. The imposition of any restriction on those entitled to engage in any trade would necessarily mean that those who do not conform to the criteria l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to him and those like him, who win the ore to be exported, the State Trading Corporation which had Do previous experience of the export trade should have been selected as the agency for canalising exports. There is no doubt that if the only test of differentiation was previous experience, the preference of the State Trading Corporation to the appellant and the others of the class to which he belongs, might not be justified, but that is not the sole test by which the matter has to be judged. We have set out earlier the grounds upon which choice of the State Trading Corporation as the agency for effecting the export trade was determined by the government and we consider that for those reasons there was nothing improper in the choice, but that on the other hand the object of the export trade, viz., the earning of foreign exchange to the maximum with benefit of a long range character for exports from this country could be expected to be attained with the State Trading Corporation as the main agency engaged in the trade. We do not therefore consider that there is any substance in the argument of the learned Counsel for the appellant that the choice of the State Trading Corporation and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the export trade in manganese ore was such into that that newcomers could never be permitted trade is clear from the several, policy-statements themselves in which, from time to, time, they conveyed an assurance that the allotment of quotas to the "newcomers" was under consideration. In the case of a commodity like manganese ore for which there is not much of an internal market the denial of a right to any group or we shall add, to any individual to export would in effect affect him adversely forcing him to sell to others who have been given such a facility. Persons like the app- ellant were being fed on hopes of some relief to them and it was a case not merely of hope deferrer making the heart sick, but of dashed hopes that led the appellant to approach. the Court for relief. Though we consider that the appellant has no legal right to the relief that he sought, his grievance is genuine and it would be for the Government to consider how beat the interest of this class should be protected and it is made worth their while to win the ore so as to expand, foster and augment the export trade in this valuable commodity. Reverting to the legal points raised in the appeal, it a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of this case. Till about the middle of 1956, miners, including the appellant, were free to deal with foreign buyers for exporting their products and to sell them at their sidings to exporters or to carry them to any port by obtaining necessary wagon allotments from the railways. But from May 1956, the Government of India issued various notifications progressively restricting the export quotas available to the shippers and mine-owners, culminating in a stage when direct export by mineowners and shippers was stopped and the entirtrade canalized through the State Trading Corporation originally formed by the Government as a private company under the India Companies Act, 1956 and subsequently made into a public company, We shall later on consider in detail the particulars. of the said process. On December 1, 1958, the appellant filed an application before the Joint Chief Controller of Imports and Exports, the first respondent herein, for granting to him an export quota and licence for export of manganese ore under cl.(4) of the Exports (Control) Orders, 1958, (hereinafter called the Order), and also for the movement of the ore from the railway sidings to Bombay port. The first responden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... result, they are compelled either not to do the business at all or put themselves at the mercy of others, who ,are in a position to dictate terms and who may or not buy the ore from them. The implementation of the policy to the detriment of miners like the appellant is an unreasonable restriction on their right to carry on their business in mining and selling manganese ore. Learned counsel for the respondents Contended that the petition filed by the appellant under Art. 226 of the Constitution should be dismissed on the ground that it has become infructuous, as the year for which the licence was asked, namely, 1959, had run out. The learned counsel also sought to support the order made by the first respondent on ground that el.( 6) of the Order was validly made and that the scheme of implementation of the policy adumberated by the Government was not only sanctioned by el. 6(h) of the Order, but the restriction imposed on the fundamental right of the petitioner was also a reasonable one. The first question is whether el. 6(h) of the Order was ultra vires the Act. The relevant provisions may be noticed. The meterial part of a. 3 of the Act reads: "Powers to prohibit or restric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... means to promote export and to secure favourable balance of trade. A machinery will have to be evolved to select the goods which the country can spare or may prefer to exchange for more essential foreign goods, to find suitable foreign markets for them and, to take necessary steps to establish a reputation for Indian goods by securing qualitative standards, prompt deliveries and honest dealings, and to prevent avoidable hardships by allotting quotas to businessmen or equitable principles, to fix reasonable rates for their goods and to discharge similar other duties. This cannot be achieved if the control of the Central Government is confined only to the exportation point. The regulation of the export trade may have to commence even at an earlier stage ; in extreme cases even at the stage of production. It is question of fact in each case,whether the control exercised by the Central Government is only to regulate export trade or is a colourable exercise of controlling the internal trade under the guise of regulating export trade. I therefore, hold that the power conferred under a. 3 of the Act cannot be conferred on the authorities concerned under ol. 6(h) of the Order to canalize ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mining and trading interests has made it virtually impossible for the limited resources to be used to the maximum advantage or for economical arrangements to be made for the transportation of ores and for their handling at the ports. (3) The trading interests entered into large contracts and some of them were not able to fulfil them. (4) The mining industry did not have an adequate scope for development on sound lines. For the foregoing reasons, the Government propounded the following new policy : "Government have therefore come to the conclusion that it would be necessary for them to play a more positive role to overcome the obstacles in the way of augmenting foreign exchange earnings from the export of ores. It has Accordingly been decided that Government should help in reorientating the trading in ores on more rational lines and with this object in view they propose to canalise the export of ores in a progressively increasing measure through the State Trading Corporation and will, in fulfilling its responsibility, rely mainly on the mining interests in the country and use the existing trading mechanism to the extent practicable. At the same time, limited opportunities are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no previous shipment of their credit was not within the contemplation of Government policy. In that statement Go- vernment announced that it was considering their case but at no later stage does it appea r that their case was specifically provided for until the State Trading Corporation took over. (4) During the period covered by the 7th statement, the State Trading Corporation was introduced into the picture and freely competed with private interests. During this period small quota holders were advised to form co-operatives or companies and were discouraged. (5) Form the date of the 8th statement, viz., March 12, 1959, it is clear that the full freedom of private trading as before was virtually stopped because all orders were to be canalized" through the State Trading Cor- poration. The terms and conditions on which "canalization" could take place were onerous and difficult of fulfilment by individual small interests. The State Trading Corporation itself laid down certain terms. (6) There were no restrictions on the activities of the State Trading Corporation and its quota was unlimited. (7) The policy was put into effect with the aid of the licensing authorities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1958. Be it as it may, I shall consider the argument alternatively. The argument based upon the alleged existence of a free market wherein the petitioner could sell his manganese ore to recognized exporters is not only unrealistic but also unfair to the petitioner. What was the market wherein the petitioner could sell his manganese ore for reasonable prices? Admittedly he could not sell in the internal market, for there was practically no such market. None of the reco- gnized exporters, either the established shippers or the State Trading Corporation, was bound to purchase any quota from the petitioner or the miners in the position of the petitioner. The recognized exporters were in a position to dictate terms and even to ignore some of the mine-owners. In short, an artificial market was created for the mine- owners like the appellant wherein they could sell the manganese ore only to established shippers, if they wanted the ore and for a price dictated by them. The so-called market was further circumscribed and limited to one purchaser, namely, the State Trading Corporation, after March 1959. The appellant complains that he could not sell his manganese more because of the said rest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntioned he may be in the discharge of his duties. The scheme of channelling of exports through an agency or agencies could certainly be dovetailed with that of equitable apportionment of quotas amongst persons producing or doing business in manganese ore without any detriment to the object of promoting export trade Any scheme of can- alization of exports through specialized agencies must be governed by definite rules whereunder provision is made giving stability and guarantee of fair treatment in ordinary times as well as in times of emergency. For instance appropriate rules could be framed fixing quotas for each mine-owner the expected total quantity of export, having regard to the quality and the quantity of manganese produced. It may also be necessary to appoint an expert body under the said rules not only to advise the State in fixing the quota but also for fixing reasonable prices, having regard to the relevant circumstances. Perhaps, many other methods may be evolved to achieve the said result. It is for the Government and the experts to do so. But what I emphasize is that, matters shall not be kept,, in a vague uncertainty in the minds of, persons affected by the said scheme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... some other law would necessarily be an unreasonable restriction: such an interference will not have the protection of the amended provision of the Constitution, but must be judged by the standard provided by the first part of Art. 19(6); it would be valid, if it was a reasonable restriction on the exercise of the petitioner's fundamental right made in the interest of the general public. The decision of this Court in Saghir Ahmad v. The State U. P. (1) does not really help the appellant. there, this Court was considering the question whether the U. P. Road Transport Act (11 of 1951) violated the fundamental rights of private citizens guaranteed under Art. 19 (1)(g) of the Constitution, and was protected by cl. (6) of Art. 19. The question fell to be considered on the basis of the article,, as it stood before it was amended by the Constitution (First Amendment) Act, 1951. This Court held that it did offend the fundamental right. In that context, this Court made the following observations: It is quite true that if the present statute was passed after the coming into force of the new clause in article 19(6) of the Constitution, the question of reasonableness would not have arisen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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