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TMI Blog2023 (10) TMI 966X X X X Extracts X X X X X X X X Extracts X X X X ..... y required to ascertain whether the classification has any rational nexus with the object sought to be served. It is also well settled that a classification is not required to be scientifically perfect or logically complete - The classification need not be mathematically accurate and cannot be called into question merely because it is disadvantageous to certain individuals or class of persons. However, it is equally well settled that the intelligible differentia to support the classification must be real and substantial . In the present case, there is no material on record, which would even remotely suggest that persons who have exported broken rice to the respective countries would have a higher capacity to export rice or the quality of broken rice to be exported by them would in any way be superior than that which may be exported by rice exporters who had exported to other countries in the past. There is also no material to indicate that the channels of export to the countries in question are different from the channels of export to other countries. The underlying assumption of the classification is that the rice exporters who had exported rice to the countries in questi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 20.06.2023 (hereafter the impugned Trade Notice ) issued by the Directorate General of Foreign Trade (hereafter DGFT), inter alia, setting out the conditions of eligibility and procedure for allocation of quota for export of broken rice on humanitarian food security grounds. 2. The petitioners are, essentially, aggrieved by the conditions that restrict the eligibility for securing allocation of quota to only those exporters, who had exported rice to the countries in question (Senegal, Gambia and Indonesia) in the three preceding financial years. The petitioners state that they have a verifiable track record of exporting rice, thus, restricting the eligibility to export rice only to those persons that had exported rice to the specified countries offends Article 14 and Article 19(1)(g) of the Constitution of India. 3. Export of broken rice, which is otherwise proscribed, has been permitted to certain countries (Senegal, Gambia and Indonesia) in limited quantities on humanitarian grounds and to address the food security concerns of those nations. 4. Whilst the quantitative restriction as imposed for the export of broken rice to the countries in question is not challen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Indian and Foreign Bank was prior to the said date. 10. On 07.11.2022, the Central Government issued a Notification amending the Conditions no. (iii) of paragraph 2 of the Notification dated 08.09.2022. Whereas the original condition excluded the consignments of broken rice, which were handed over to the customs and registered in their system prior to 08.09.2022, from the rigors of the notification prohibiting export of broken rice; the amended condition also extended the exception to those consignments that had entered the customs station for exportation and were registered in the electric systems of the concerned custodian prior to 08.09.2022. The Notification further extended the period of export till 15.10.2022. 11. Notwithstanding that the export of only those consignments of broken rice that satisfied the specific conditions, were permitted; the DGFT on an adhoc basis permitted export of broken rice to Djibouti, Gambia and Senegal by certain consignors. The DGFT sent communications to the Customs Department directly communicating its decision to permit exports of specific consignments, specifically setting out the name of the consignor and the consignee. 12. In t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MEA considered apposite for considering a viable solution. 17. Thereafter, the DGFT issued a Notification dated 24.05.2023 in exercise of its powers under Sections 3 and 5 of the FTDR Act incorporating the following policy conditions in respect of the export of broken rice, which continued to be prohibited: Export will be allowed on the basis of permission granted by the Government of India to other countries to meet their food security needs and based on the request of their government. 18. The respondents have affirmed in their counter affidavit that based on the request made by Indonesia, Senegal and Gambia through the Ministry of External Affairs, the competent authority had approved export of the following quantities of broken rice during the financial year 2023-2024: (i) 2 LMT of broken rice to Indonesia; (ii) 5 LMT of broken rice to Senegal in six months time; and (iii) 5000 MT of rice to Gambia in six months time. 19. On 20.06.2023, the Central Government issued the impugned Trade Notice. 20. It is stated that, thereafter, by the Trade Notice dated 30.06.2023, the Central Government partially amended the impugned Trade Notice by decre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red to various authorities, mentioned in his written note, in support of the proposition that every action of the State, which is not informed by reason, can be called into question as being arbitrary. 24. Next, he contended that the impugned Trade Notice permitting export of broken rice to selected exporters only is tailor-made to favour five exporters, who had filed counter affidavits in W.P.(C) 4053/2023. He submitted that in the earlier round of proceedings relating to the said petition, it was demonstrated that the respondents were favouring certain rice exporters including those that had no track record in the business. He submitted that the impugned Trade Notice was a renewed attempt to benefit only selected exporters. He also contended that the object to ensure capacity and quality, as averred by the respondents in their counter affidavit, has no nexus with excluding established rice exporters with the confirmed track record merely because they had not exported rice to a particular country. 25. Mr Ashish Batra, learned counsel appearing for other petitioners advanced contentions similar to those as noted above. He also contended that the bills were raised on entities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, their business was not affected in any manner. He also submitted that once the Central Government had made a policy to prohibit export of broken rice, the petitioners had no right to carry on the said business. He referred to the decision of the Bombay High Court in Prithviraj Enterprises Ors. v. State of Maharashtra and Ors. 2021 SCC OnLine Bom 946 and submitted that the Bombay High Court had rejected the challenge to the resolution of the State Government of Maharashtra and the Notification dated 15.01.2021 issued by the Consumer Protection Department, Government of Maharashtra, whereby contracts for transportation of food and other essential commodities from Food Corporation of India to public distribution shops were confined only to those transporters, who had work experience in transportation of food grain of the stipulated capacity in the particular district in respect of which the transporter had submitted its tender. He referred to the decision of the Supreme Court in State of Tamil Nadu Another v. National South Indian River Interlinking Agriculturist Association (2021) 15 SCC 534 and he submitted that there are two tests for determining whether any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otification dated 08.09.2022 prohibiting the export of rice, violates Article 14 and 19(1)(g) of the Constitution of India. 31. At the outset, it is necessary to note that there is no challenge to the policy decision of the respondent to prohibit export of broken rice or to permit export of limited quantities of broken rice to the specified countries. The respondents state that notwithstanding that broken rice was placed in the prohibited category under the export policy, the Central Government had permitted exports of limited quantity of broken rice to certain countries. This decision was pursuant to the request made at the highest levels for permitting such export to address the food security concerns of the said countries keeping in view the strong bilateral relations with the said countries. Clearly, if the Central Government is of the view that it must address the food grain security of certain friendly countries by permitting the export of rice, the said decision would not be amenable to judicial review under Article 226 of the Constitution of India. 32. The examination in these petitions is limited to the prescribed eligibility criteria for securing allocation of quota ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of a gift by a candidate would amount to bribery under Section 123 of the Representation of People Act, 1951. It was also contended that the said distribution of gifts was ultra vires Article 14 of the Constitution of India as there was no reasonable classification based on any intelligible differentia. In the aforesaid context, the Supreme Court held that the distribution of gifts was for the public purpose to elevate the standards of living of the people. The distribution of TVs, mixtures, fans and laptops by the State was in furtherance of the Directive Principles under Article 47 of the Constitution of India, and therefore, the said decision was not amenable to challenge. The Court also noted that the concept of equality based on classification is a proportional equality and the State is not prohibited from making a scheme, which provides benefit only to eligible and deserving persons, which form a separate class. The Supreme Court rejected the contention that the gifts being State largesse are required to be distributed equally amongst all citizens. As is apparent, this case has no application to the challenge in the present case. As noted above, the challenge in the presen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ector General of Foreign Trade (DGFT) is responsible for carrying out the said policy. The criteria for allocation of export quota has been approved by the DGFT to implement the export policy. 39. The classification between the exporters, who had supplied broken rice to the countries in question in the three years preceding the year of issuance of notification prohibiting export of broken rice, and those that had not, is required to be evaluated on the basis of the twofold test. First, whether the said classification is founded on the intelligible differentia; and second, whether the said differentia has a rational nexus to the object sought to be achieved. 40. It would, thus, be necessary to examine the reasons, which had led to the Government to permit only those rice exporters that had in the past exported rice to the countries in question for allocation of quota of export of broken rice. 41. The respondents had produced relevant files relating to the decision to confine the allocation of quotas to rice exporters that had exported rice to the respective countries prior to imposition of the prohibition. The file notings indicates that a meeting was held on 17.05.2022 bet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecided to keep the minimum threshold limit for export of broken rice at 8000 MT. Accordingly, applications may be called for from applicants who had exported broken rice under HS Code 1006 40 00 to the respective countries. The applicants will mandatorily submit export performance data for the last three years preceding the year when export policy was amended from free to prohibited. Allocation may be made on pro-rata basis. Any applicant whose allocated quantity falls below 8000 MT shall be disqualified and the quantity shall be redistributed amongst the eligible applicants. We may also request all the eligible exporters to submit Landing Certificate . 43. The file noting dated 08.06.2023 does not indicate any reasons as to why it was decided to confine the allocation of quota to exporters that have exported rice in the three years preceding the year in which the export policy was amended to prohibit export of broken rice. However, the file noting on 09.06.2023 indicates that the objective of the allocation policy was to ensure capacity and quality. The file noting on 09.06.2023 is relevant and is set out below: Note # 27 Notes above Vide above note an att ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the DGFT, was to allocate export quota amongst those rice exporters that had exported to the respective countries in question prior to the prohibition, and not restrict the allocation to top 25 exporters only. 46. The file notings do not contain any reasons for proposing the allocation of quota for export of broken rice to only those exporters that had exported rice in the past to the respective countries in question. However, the file noting of 09.06.2023 indicates that the purpose of restricting the export allocation of broken rice to only those exporters, who had exported rice to the countries in question, is that capacity and quality is ensured for export . 47. In view of the above, the controversy in the present case is narrowed down considerably. It is, essentially, confined to considering whether restricting the allocation of quota for export of broken rice to only those exporters that had exported rice to the respective countries in question prior to such exports being prohibited, bears a nexus to the object of ensuring capacity and quality . 48. It is necessary to bear in mind that the scope of judicial review in this regard is not wide. The Court is neithe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , there is no material whatsoever that provides any basis to assume that the quality of rice exported by such exporters was of a better quality than those exported by other rice exporters. The assumption that the quality of broken rice would be assured by restricting the allocation of export quota to only those exporters that had past experience of exporting to the respective countries, and excluding other rice exporters with the established track record of exports to other countries, is without basis. 53. Ex facie, the given classification of rice exporters does not bear any nexus with the object of ensuring quality of rice. 54. The assumption that the exporters that have exported rice to the given countries in question would have the capacity to do so may not be unfounded. However, the point is not whether the rice exporters that have past experience of exporting to the countries in question would have the capacity to service the export quota; the point is whether such exporters would in any manner hold out a more credible assurance of capacity to service the export orders in comparison with other rice exporters having a similar or higher export turnover but to other countr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fidavit filed by the respondents also does not set out any material to suggest that the rice exporters having a past experience of exporting rice in a particular country, would be better placed to service the export orders from that country in comparison with other exporters with established track record. 59. It is important to note that the objective of the policy was to ensure capacity and quality. We are unable to find that the given classification has any nexus to the said objective. 60. Mr Kirtiman Singh also referred to the decisions of the Supreme Court in Michigan Rubber (India) Ltd. v. State of Karnataka and Ors. 2012 8 SCC 216 and had contended that the decision of an authority cannot be challenged unless the decision is such that no responsible authority acting responsibly and aware of relevant law, could have reached. The said decision was rendered in the context of challenge to prequalification criteria in respect of bids invited by Karnataka State Road Transport Corporation (KSRTC) for supply of tyres. KSRTC had set out a pre-qualification criteria that had restricted the eligibility to only original equipment manufacturers. Clearly, the entity procuring a p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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