Delhi High Court
Sophisticated Marbles & Granite ... vs Union Of India & Anr. on 4 March, 2010
Author: S. Muralidhar
IN THE HIGH COURT OF DELHI AT NEW DELHI
W.P.(C) 13091 of 2009 & CM APPL No. 14083/09
Reserved on: February 4, 2010
Decision on: March 4, 2010
SOPHISTICATED MARBLES &
GRANITE INDUSTRIES ...... PETITIONER
Through: Mr. Jayant Bhushan, Senior
Advocate with Mr. Mohit Chaudhary and
Mr. Gautam Talukdar, Advocates
versus
UNION OF INDIA AND ANR ..... Respondents
Through: Mr. A.S. Chandhiok, ASG with
Mr. Sachin Dutta and
Mr. Manikya Khanna, Advocates
CONT CAS (C) 43 of 2010
SOPHISTICATED MARBLES &
GRANITE INDUSTRIES ...... PETITIONER
Through: Mr. Jayant Bhushan, Senior
Advocate with Mr. Mohit Chaudhary and
Mr. Gautam Talukdar, Advocates
versus
MARGRET JOS ..... RESPONDENTS
Through: Mr. A.S. Chandhiok, ASG with
Mr.Sachin Dutta and
Mr. Manikya Khanna, Advocates
CORAM: JUSTICE S. MURALIDHAR
1. Whether reporters of local paper may be allowed
to see the judgment? No
2. To be referred to the report or not? Yes
3. Whether the judgment should be referred in the digest? Yes
JUDGMENT
1. The petitioner, an importer of rough marble blocks/slabs, challenges in
this writ petition a circular dated 23rd October 2009 as well as notification
dated 15th October 2009 issued by the Director General of Foreign Trade
(„DGFT‟) imposing a condition that for the purposes of securing an import
licence the Petitioner would have to install a gang saw machine in its unit.
2. The Petitioner is a sister concern of the Litoller Group which was a
pioneer in importing Italian marble into India. The petitioner was issued an
import license for the import of marble slabs/blocks on 12 th October 1999.
On 22nd January 2003 the DGFT renewed the Petitioner‟s license for import
of rough marble blocks/slabs.
A conspectus of the DGFT Circulars on import of marble
3. In order to appreciate the challenge to the impugned circular, it is
necessary to refer to the background in which it came to be issued. On 14th
March 2002 the DGFT issued guidelines for import of rough marble slabs. It
was clarified that the EXIM Facilitation Committee („EFC‟) which was an
Inter-Ministerial Committee comprising of representatives from various
Ministries/Departments, would be considering the applications for import
license in the DGFT, New Delhi. The eligible categories included those who
had set up manufacturing and processing units in the country and those who
were already importing marble in the preceding years when marble was
being imported under Special Import Licence („SIL‟). The said circular
dated 14th March 2002 also fixed the floor price for rough marble blocks at
US$ 300 per metric tonne (PMT) and for slabs at US$ 450 PMT. The floor
price for crude and roughly trimmed marble was fixed at US$ 300 PMT. In
case of the importers of marble who were operating when marble was
included in the SIL list, the value of the licence to be issued in one year was
limited to 50% of the average value of the sales made during the years when
marble was under the SIL list. The licences were subject to actual user
condition.
4. After the import restrictions on marble were removed in 2001, when India
became part of GATT, rough marble slabs/blocks continued to be in the
restricted list. It is stated that based on representations received after 1 st
April 2001, and in consultation with Department of Industrial Policy &
Promotion („DIPP‟) and the Ministry of Mines, a policy circular was issued
on 14th March 2002 permitting import of marble against licence, to those
firms who had set up manufacturing/processing unit in the country and had
also imported marble in the preceding year when it was under the SIL List.
5. By a circular dated 24th August 2004, the clause concerning value of
yearly licence was amended and the limit was revised to the total CIF value
of import made during 1999-2000 and 2000-2001. On 30th August 2005,
further amendments were made to the following effect:
I. eligibility to be considered by the EFC- only
manufacturing/processing units and importers of these
items in preceding years.
II. Total import of rough marble blocks subject to a ceiling of
1.3 lakh MT per licensing year. The entitlement of
individual firms to be worked out on the basis of the
turnover of the preceding year.
III. The last date for receiving applications 1st October of each
licensing year.
IV. Monthly returns regarding the imports to be filed with the
Regional Licensing Authority.
V. All applications forwarded through Chemicals and Allied
Products Export Promotion Council who will certify the
turnover of the applicant before sending it to DGFT(HQrs)
6. In September 2005 the Government introduced floor prices for import of
processed marble products i.e. tiles, slabs etc. at US$ 2700 per cubic meter.
This was similar to the price fixed on processed marble during SIL period.
The Domestic Tariff Area („DTA‟) sale of marble by 100% Export Oriented
Units („EOUs‟) was banned during this period. This ban was imposed to
address complaints that the 100% EOUs were diverting imported marble
into the domestic market thereby adversely affecting the domestic mining
industry and the livelihood of a large number of workers. The 100% EOUs
protested this ban and challenged it in the various High Courts and the
Supreme Court. These were consolidated and finally heard and disposed of
by a judgment of the Supreme Court in Hindustan Granites v. Union of
India (2007) 12 SCC 178. The Supreme Court rejected the challenge by the
100% EOUs to the aforementioned circular and notification.
7. On 30th November 2005, by a circular No. 34/2005-09, it was stipulated
that the entitlement was to be calculated on only the basis of the turnover of
marble imported under Chapter 25 of the ITC (HS) Classification of Export
Import Items 2004-09. The companies which had been importing under
Chapter 25 were also allowed to add their complete turnover for imported
marble for the preceding year i.e. 2004-05. The same circular also
introduced the eligibility criteria that the manufacturing/processing unit must
have been established when marble was under SIL List or before.
8. On 26th July, 2007 the following amendments were made by Circular No.
01(RE-07)/2004-2009: floor prices were revised: for crude or roughly
trimmed marble - US $350 PMT, for rough marble blocks - US $350 PMT
and for slabs - US $500 PMT. The total import of rough marble blocks was
subject to a ceiling of 1.85 lakh MT per licensing year. Entitlement of
individual firms was to be worked out taking into account the growth in
demand for these items, the unallocated quota of the preceding year i.e.
2006-07, on the basis of the eligible turnover of the eligible firm for 2006-07
i.e. the turnover of the eligible firm for 2005-06, or the turnover of the firm
for 2004-05 with a cap of 10%, whichever is less. An additional quota of
10,000 MT could be allocated by the Government to actual users, such as
hotels, places of worship etc.
9. Pursuant to the representations made by the domestic industry, a meeting
of the Committee of the Secretaries („COS‟) was convened on 11 th
September 2007 to discuss grant of import licences for rough marble blocks.
The DGFT has, in its reply to the present petition referred to the decision
taken by the said COS and also placed on record minutes of the above
meeting held on 11th September 2007. The COS arrived at the following
decisions:
"(i) The present system of quantitative restrictions
combined with grant of licences only to a few importers
who had imported under Special Import Licences during
1990-2001, is inequitable and hence needs to be changed.
(ii) with a view to liberalizing imports of rough marble
blocks/slabs while protecting the domestic industry,
Secretary, DOC will in consultation with Secretary, M/o
Mines and Secretary, M/o MSME, review the current
restrictions on marble imports and formulate an
alternative arrangement. The following two options may
be considered in this regard.
(1) Remove quantitative restrictions on imports
and allow imports freely under OGL but at higher
floor prices.
(2) Continue the present quantitative restriction
system, but grant licences without restriction on
the number of importers so as to do away with
monopoly of a few and prescribe suitable objective
criteria for granting the same."
10. Thereafter, the Secretary, Commerce held a meeting on 22nd October
2007 with the Secretary, Ministry of Mines and Ministry of MSME.
Regarding option at (1) above, the unanimous view was that "if the import
of rough marble blocks is brought under OGL, then the domestic mining
would be definitely adversely impacted. It was the consensus view that the
import of rough marble blocks needs to be kept on the restricted list and not
under OGL." It was recommended by the above Committee to continue
with the present quantitative restriction of 140,000 tonnes per annum, but
grant import licence to all persons who meet the following criteria:
"(i) Marble processing units having their own gang saw,
would be eligible.
(ii) The processing units should have been in operation
for a minimum of three years as on 1.10.2007.
(iii) The processing units should have a minimum sales
turnover of Rupees one crore per annum."
11. Pursuant to the above recommendation, a dual policy was notified on
27th June 2008 and 30th June 2008. The circular dated 27th June 2008
introduced guidelines for import of rough marble blocks/slabs for the year
2008-09 permitting both groups i.e. SIL category as well as domestic
processors to obtain import licence. The SIL category was entitled to a
maximum import of 1.40 lakh MT per annum and the domestic category was
also entitled to an equivalent amount. For the domestic units the eligibility
was to be decided on the basis of the following two criteria:
a) Units which have installed marble gang saw machine
[except 100% EOUs, units in SEZ and units which have been
granted marble block import licences under previous licencing
years or are eligible to avail licence in the current licensing year
(2008-09) under SIL category]. The units should have been in
operation since prior to 31/03/2001.
b) All eligible units as per (a) above should have indigenous
sales turnover of marble slabs/tiles only, of Rs. One Crore and
above in each of the three financial years 2004-05, 2005-06 and
2006-07.
12. Eligible units were entitled to an import licence pro rata on the basis of
average indigenous sales turnover of marble slabs/tiles only, in the financial
years 2004-05, 2005-06 and 2006-07. The quantity so calculated was to be
subject to the following overall ceiling:
a) Unit having one marble gang saw machine entitled to a
maximum licence of 3,000 MT of marble blocks/slabs; and
b) Unit having more than one marble gang saw machine will be
entitled for a maximum licence of 3,000 MT of marble
blocks/slabs for the first gang saw machine and 1500 MT of
marble blocks/slabs per additional marble gang saw machine.
13. On 16th July 2008 the DGFT issued a policy circular whereby certain
additional conditions were imposed for importing of rough marble
blocks/slabs for the year 2008-09. These were in addition to the conditions
imposed in the Circular dated 30th June 2008. For the eligibility and
entitlement of the unit, the applicants would have to enclose certificates
issued by the State Industry Department (District Industry Center) („DIC‟) as
to the number of gang saws established by the unit. The DIC certificate had
to state that the unit has been in operation since prior to 31 st March 2001.
The list of equipments/capital goods set up by the applicant showing
processing equipment for marble slabs/tiles as per the balance sheet, duly
certified by a Chartered Accountant („CA‟) or the year 2000-01 was also
required to be enclosed. The certificate of the CA would also show the
figures of indigenous sales turnover of marble slabs/tiles for the years 2004-
05, 2005-06, 2006-07.
14. Another policy circular was issued on 8th August 2008 stipulating therein
the sales turnover as criteria for granting import license. It is stated the
Petitioner fulfilled all the above conditions as well and therefore, its import
licence was continued. On 20th August, 2008 the ceiling for total import of
rough marble blocks was increased from 1.10 lakh MT to 1.4 lakh MT for
the year 2008-09.
15.1 On 10th October, 2008 further amendments were made in the policy.
The eligibility of the units was to be decided based on the following two
criteria:
a) Units which have installed marble gang saw machine (except
100% EOUs, units in SEZ and units which have been granted
marble block import licences under previous licensing years or are
eligible to avail licence in the current licensing year (2008-09)
under SIL category). The units should have been in operation since
prior to 31/03/2001.
b) All eligible units as per (a) above should have indigenous sales
turnover of marble slabs/tiles only, of Rs. Two Crore and above in
each of the three financial years 2004-05, 2005-06 and 2006-07.
15.2 The floor prices were revised as under:
i. For rough/unprocessed blocks of agglomerated/artificial
stones - US $300 per MT for goods of Chinese origin and $400
per MT for others; and
ii. For rough/unprocessed slabs of agglomerated/artificial stones
US $22 per square meter for goods of Chinese origin and $28
per square meter for others.
15.3 The total ceiling was reduced to 40,000 MT while the individual units
were to be entitled for an import licence pro rata on the basis of average
indigenous sales turnover of marble slabs/tiles only, in the financial years
2004-05, 2005-06 and 2006-07. The quantity so calculated was to be subject
to the following overall ceiling:
a. Unit having one marble gang saw machine entitled
to a maximum licence of 3,000 MT of
rough/unprocessed blocks and slabs of
agglomerated/artificial stones.
b. Unit having more than one marble gang saw
machine will be entitled for a maximum licence of
3,000 MT of rough/unprocessed blocks and slabs of
agglomerated/artificial stones and 1500 MT of
rough/unprocessed blocks and slabs of
agglomerated/artificial stones per additional marble
gang saw machine.
16. Subsequently, an amendment was made to the Circular dated 10th
October 2008 and the total ceiling was increased to 60,000 MT. A further
condition was added to be eligible; minimum turnover for the year 2006-07
to be Rs. 5 Crore. Units having a turnover of more than 50 Crore were to be
considered after capping their turnover at Rs. 50 Crores. On 2nd March, 2009
in light of the demand for artificial stones going down, an option was given
to the importers to import rough/unprocessed blocks and slabs of
agglomerated/artificial stones or the items listed in their licence i.e.
artificial/agglomerated stones. On 29th September, 2009 with reference to the
policy circular 12(RE-08)/2004-09 dated 27/06/08, another 25% quota of the
quantity granted for the year 2008-09 was permitted.
17. On 15th October 2009 a notification was issued by the DGFT introducing
two new eligibility criteria to replace the earlier criteria. It appears that with
this notification the Government did away with the dual policy of permitting
not only the existing importers to import marble but also encourage the
domestic manufacturers to import marble.
18. On 23rd October 2009 within eight days of the earlier issued notification
dated 15th October 2009, the DGFT issued another notification amending the
earlier notification by stipulating the following conditions:
"(i) Serial No. 2 (C) 1 (a) of the DGFT notification No. 15
dated 15th October 2009, shall be substituted as under:
(a) units who have installed marble gang saw machine
(except 100% EOUs and units in SEZ). However, the
marble gang saw machine shall be in the name of the
applicant only. No gang saw on lease basis shall be
considered for the purpose of allocation of import
entitlement.
The unit should have been in operation for five years
prior to 1st April of the current licencing year."
19. Pursuant to the above notification dated 23rd October 2009 the DGFT
issued a policy circular on the same date. Para 3 (a) of the said circular read
as under:
"Para 3 (a) The established gang saw in the unit should
be in the name of the unit as on date of this circular, as
certified by the State Industry Department (District
Industry Centre). The gang saw should also not be „on
lease‟ from any other party."
20. The Petitioner states that it was severely prejudiced by the introduction
of the above conditions since the last date for receipt of the application for
renewal of licence after fulfilling the conditions of the above policy circular
dated 23rd October 2009 was to 2nd November 2009 i.e. barely seven days
before the closing date. It is stated that there was no way the Petitioner
could, within 17 days‟ time, establish a gang saw machine in its own name.
Such condition could have helped only those importers who had already
installed gang saw machines and were using them for processing and sale of
marble. In para 8 of the grounds in the writ petition it is submitted as under:
"8. Because the policy has been framed in order to
benefit only a handful of players and is totally unjust and
biased. The unit should be 5 years old we agree with that,
the unit should have a minimum turnover of 1 crore a
year petitioner also agree with that but regarding the gang
saw the following needs to be done a) minimum 2 years
should be given to the importer unit to set up at the
required gang saws, b) The sole purpose of these gang
saws should be for the processing of imported marble
only and not for the processing of domestic marble and
locally produced artificial marble, c) gang saws set up
during the period from November 2009 - November
2011 should only be taken into consideration."
Proceedings in this Court
21. It may be recalled that the Petitioner had applied for import licence but
had not received any response thereto. Along with the present petition filed
on 20th November 2009, the Petitioner filed an application praying for stay
of the notification dated 15th October 2009 and the subsequent policy
circular dated 23rd October2009. A direction was sought to the Respondent
to consider the Petitioner‟s application for issuance of import licence. On
11th November 2009 this Court passed the following order:
"Learned counsel for the respondents will take
instructions on the averments made in paragraph XVI of
the writ petition for extension of time.
Till the next date of hearing, the respondents will not
reject the application filed by the Petitioner.
List on 17th November 2009. Dasti."
22. It must be recalled that the statement made by the Petitioner in para XVI
of the writ petition was that the conditions stipulating the ownership by the
unit of the gang saw machine was introduced on 23rd October 2009 giving
barely seven days‟ time prior to the closing date of 2 nd November 2009 for
submitting the application. Therefore, it was not possible on the part of the
Petitioner to comply with the said condition.
23. Thereafter, the case came up for hearing on 17th November 2009 this
Court was informed by learned counsel for the Respondents that 164 persons
had been granted licenses and the Petitioner‟s request had been rejected. The
following order was then passed by this Court:
"Counsel for the respondents states that 164 persons have
been granted licenses and the petitioner‟s request has
been rejected.
Issue notice to show cause returnable on 22nd January
2010.
Notice is accepted by Mr. Sachin Datta, Advocate on
behalf of the respondents.
Counter affidavit will be filed within four weeks.
Rejoinder affidavit, if any, will be filed within four
weeks after counter is served."
24. According to the Petitioner, as on 30th October 2009 its application had
not been rejected as was evident from the DGFT‟s letter dated 5th November
2009 informing the Petitioner that its application for import license was
under scrutiny. The defect pointed out in the Petitioner‟s application was
that it had not submitted "DIC certificate indicating number of gang saws
installed and operational as on 30.09.2009."
25. The Petitioner contends that its application could not be rejected in view
of the order dated 11th November 2009 passed by this Court. However, the
Petitioner was sent a rejection letter dated 16th November 2009 which reads
as under:
"File No. 03/27-008/00246/AM19/234 30.10.2009
To,
Sophisticated Marble & Granite Industries,
Plot No. 17, Panchal Indl. Est. Bhimpur,
Daman, UT 396210
Sub: Rejection letter
Sir/Madam,
Your application has been rejected due to following reasons:
This has reference to your application for import licence for
import of marble. In this regard this is to inform you that your
application stands rejected because "you have not submitted the
DIC certificate". Also, you are requested to pay the balance
application fee of Rs.19,000/- in your application is processed.
Your case stands closed.
Yours faithfully,
Place: Mumbai
Date: 16.11.2009
Sd/-
ForeignTrade
Development Officer"
26. It is the case of the Petitioner that the above rejection on 16th November
2009 was in the teeth of the order passed on 11th November 2009 passed by
this Court. It is stated that the rejection letter was deliberately back dated to
a day prior to 17th November 2009 on which date this Court was to be
informed whether the Petitioner‟s application had been rejected. It is in the
above context that Cont Case No.43 of 2010 has been filed in this Court
asking this Court to hold the Respondent to be in contempt of the order
dated 11th November 2009.
Submissions of counsel
27. Mr. Jayant Bhushan, learned Senior counsel appearing for the Petitioner
urges that if the Petitioner does not desire to process the imported rough
marble for sale in the domestic market, then it makes little sense to require
an importer like the Petitioner to install a gang saw machine. It is further
submitted that the pattern of the earlier circulars issued by the DGFT show
that even while they were encouraging domestic manufacturers to also
import marble directly, those who were purely importers were not totally
excluded. It is also pointed out that a gang saw machine requires a minimum
of four months for installation. Therefore, some lead time had to be given for
setting up such a machine. The conditions imposed by the impugned
circulation dated 23rd October 2009 of the DGFT was therefore impractical
and unrealistic. Mr.Bhushan pointed out that for an importer like the
petitioner, who did not further process the rough marble or the slabs but sold
them validly in the market in the same form in which they were imported, a
gang saw machine was of no use. He was further critical of the ceiling
imposed on the maximum quantity of marble that could be processed on the
first and subsequent gang saw machines. According to him, with such a
restriction, the gang saw machine would remain idle for most of the time
thus not serving the purpose and resulting in avoidable wastage of money.
28. Relying on the decision in Bacchhitar Singh v. State of Punjab AIR
1963 SC 395 Mr.Bhushan points out that till a decision is communicated, it
does not become effective. Since the rejection of the Petitioner‟s application
for import license had not been communicated to the petitioner till 21st
November 2009 as far the Petitioner is concerned that was the date of
rejection which was subsequent to the interim order dated 1th November
2009 passed by this Court. Therefore the Respondents had wrongly informed
this court on 17th November 2009 that the Petitioner‟s application had been
rejected since as on that date the decision was yet to be communicated to the
Petitioner. It is urged that the Respondents should be held to have wilfully
disobeyed the order dated 11th November 2009 which enjoined them from
rejecting the petitioner‟s application.
29. Mr. A.S.Chandhiok, learned Additional Solicitor General appearing for
the Respondent first submits that the impugned policy circular dated 15 th
October 2009 and the subsequent notification dated 23rd October 2009 have
been issued to operationalise the earlier decision taken by the COS on 11th
September 2007 itself. It is submitted that the change in the policy was
brought about with a view to encouraging domestic industries. The earlier
dual policy was replaced with a new policy requiring all applicants to satisfy
the same criteria. It is stated that the unified policy has the following
advantages over the previous dual policy:
(i) Since the allocation is based on the indigenous sales
turnover and the number of marble gang saw machines
installed, it would promote additional investment;
(ii) some new entrants would be eligible to be added
every year;
(iii) a large number of domestic processors would be
entitled for the import entitlement.
30. It is pointed out that the above policy is for the third and fourth quarter
of the financial year 2009-10 which comes to an end on 31st March 2010.
While it is not denied that it takes four to five months to instal a gang saw
machine it is stated that by the time the Petitioner installs and make the said
machine operational, it would be the end of March 2010. Nevertheless, since
the quota is fixed on annual basis, the Petitioners can apply under the quota
allocation for the next financial year subject to compliance with the
conditions to be fulfilled for the 2010-11 quota.
31. As regards fixing the maximum output of 3000 PMT for the first gang
saw and 1500 MTs for every subsequent gang saw, it is submitted that such
a cap would result in an equitable distribution to all the eligible processors
based on their turnover and the number of gang saw machines made
operational by them. These gang saw machines are used for processing both
imported as well as locally available marble blocks and slabs. If so used the
machines would not be kept idle. It is pointed out that number of eligible
applicants has increased from about 30 prior to the 2008 policy to around
140 (117 domestic processors plus 23 erstwhile SIL imports) under the 2008
policy. This has further increased to 158 (domestic processors) under the
unified policy of 2009-10. It is further pointed out in the written synopsis of
arguments that of the 29 erstwhile SIL category applicants, including the
Petitioner who had applied in October 2009, 23 were found eligible having
fulfilled the gang saw requirement.
32. Mr.Chandiok places reliance on the decisions of the Supreme Court in
Deputy Assistant Iron & Steel Controller v. L. Manickchand (1972) 3 SCC
324, Liberty Oil Mills v. Union of India (1984) 3 SCC 465, M.P. Oil
Extraction v. State of M.P. (1997) 7 SCC 592, Secretary to Government of
Madras v. P.R. Sriramulu (1996) 1 SCC 345, P.T.R. Exports (Madras) (P)
Limited v. Union of India (1996) 5 SCC 268 and Ugar Sugar Works
Limited v. Delhi Admn. (2001) 3 SCC 635 to urge that the High Court will
not, in exercise of its power of judicial review under Article 226, ordinarily
interfere with a policy decision of the executive unless the policy is shown to
be vitiated on the grounds of mala fide, unreasonableness, arbitrariness or
unfairness. However, the mere fact that it would hurt the business interests
of a party would not justify invalidating a policy.
Is the unified policy and the gang saw requirement unreasonable?
33. The principal question that arises for consideration is whether the
Petitioner has been able to persuade this Court to hold that the impugned
policy circular and notification are arbitrary or irrational. In particular, the
question is whether the condition requiring the ownership and installation of
a gang saw machine by an importer of rough marble blocks/slabs, who does
not further process such marble prior to sale in the domestic market, is
unreasonable? This has to be examined in light of the fact that such importer
sells the imported marble in the market without further processing. Does
such condition therefore have a nexus with the object of discouraging
monopoly in the imported marble trade? The question of the need for such
an additional condition arises in the context that under the dual policy
introduced in 2008, the domestic industry has been issued an increased
number of licences for import of marble. Also, if indeed it takes four to five
months to instal and make operational a gang saw machine, does giving an
applicant just seven days‟ time to make arrangements to purchase and instal
a gang saw machine render such requirement unreasonable as it would mean
that an applicant not having such equipment would face the inevitable
rejection of its application for licence?
34. The conspectus of the DGFT circulars shows that as a first step, acting
on the recommendations of the COS, the Respondent introduced a dual
policy which permitted domestic manufacturers to import marble alongside
the erstwhile SIL marble importers. Over the next year, there has been a
further transition to a unified policy where all applicants are required to
satisfy uniform criteria. The important aspect here is that this change did not
happen overnight. Everyone in the marble trade, whether as importer or as a
domestic manufacturer, was in the full know of the various policy changes.
The frequency of policy changes, the number of circulars and notifications
over a short span bear testimony to hectic behind-the scene lobbying by the
two broad categories of marble traders, i.e. importers and domestic
manufacturers, and even their sub-groups. Therefore, it is not possible to
accept the contention that the change brought about by the impugned
circular and notification took the petitioner and other similarly placed
importers of marble by surprise.
35. The minutes of the meeting of the COS held on 11th September 2007 is
instructive as to the background and the reasons for the change in the policy.
There were divergent views expressed by the Secretaries of different
Departments/Ministries. Some of them were in favour of liberalization of
import of marble whereas others favoured retaining the restrictions on its
import. This led to the decision to have a further sub-committee comprising
the Cabinet Secretary, Secretary, Commerce in consultation with the
Secretary, Ministry of Micro, Small and Medium Enterprises (MSME) to
consider one of the two options i.e. removal of the quantitative restrictions
on imports of marbles and allow imports freely under OGL but at higher
floor prices or the second option of continuing the present quantitative
restriction system but grant licenses without restriction on the number of
imports "so as to do away with monopoly of a few, and prescribe suitable
objective criteria for granting the same."
36. Pursuant to the above decision the COS, the sub-committee met on 22nd
October 2007 and took a decision to continue with the quantitative
restriction of 140,000 tonnes per annum but grant import license to all
persons who meet the other criteria i.e. marble processing units should have
their own gang saw machines; the processing units should have been
operational for a minimum of three years as on 1st October 2007 and should
have had a minimum sales turnover of Rs. 1 crore per annum. This was
when the requirement first emerged. It is another matter that it was not
actually introduced till June 2008. What is pertinent is that the requirement
had a basis in the deliberations of the COS and the sub-committee which
urged the formulation of "objective criteria" to curtail monopoly in marble
trade.
37. Two essential legal principles govern the exercise of the power of
judicial review by a High Court in matters such as these. First, the court will
not sit in appeal over the ultimate decision of the administrative body. It is
really concerned about the procedure adopted in arriving at such decision.
Was it a fair, reasonable and just procedure? Were relevant materials
considered and irrelevant materials kept out? As far as the final decision is
concerned, is it vitiated by malafides or is it so arbitrary that no reasonable
person would, in the circumstances, have arrived at it. Second, in policy
matters, the Court will be slow to interfere. As the case law reveals, where
the question is of reasonableness of restrictions imposed through an import
policy, the degree of deference shown by the judicial wing to the executive
is greater. In Dy. Assistant Iron & Steel Controller v. L.Manichand the
Supreme Court explained: (SCC p. 337)
"11...... In granting licences for imports, the authority
concerned has to keep in view various factors which may
have impact on imports of other items of relatively
greater priority in the larger interest of the over-all
economy of the country which has to be the supreme
consideration; and an applicant has no absolute vested
right to an import licence in terms of the policy in force
at the time of his application because from the very
nature of things at the time of granting the licence the
authority concerned may often be in a better position to
have a clearer over-all picture of the various factors
having an important impact on the final decision on the
allotment of import quota to the various applicants."
38. It was observed in Liberty Oil Mills v. Union of India (SCC p. 477):
"6..... The import policy of any country, particularly a
developing country, has necessarily to be tuned to its
general economic policy founded upon its constitutional
goals, the requirements of its internal and international
trade, its agricultural and industrial development plans,
its monetary and financial strategies and last but not the
least the international political and diplomatic overtones
depending on 'friendship, neutrality or hostility with
other countries' (Glass Chotans Importers and Users'
Association v. Union of India [1962]1SCR862 . There
must also be a considerable number of other factors
which go into the making of an import policy. Expertise
in public and political, national and international
economy is necessary before one may engage in the
making or in the criticism of an import policy. Obviously
courts do not possess the expertise and are consequently
incompetent to pass judgment on the appropriateness or
the adequacy of a particular, import policy. But we may
venture to assert with some degree of accuracy that our
present import policy is export oriented. Incentives by
way of import licences are given to promote exports....."
39. In M.P. Oil Extraction v. State of M.P. it was held (SCC, p.611):
"41.......The executive authority of the State must be
held to be within its competence to frame policy for the
administration of the State. Unless the policy framed is
absolutely capricious and, not being informed by any
reason whatsoever, can be clearly held to be arbitrary
and founded on mere ipsi dixit of the executive
functionaries thereby offending Article 14 of the
Constitution or such policy offends other
constitutional provisions or comes in conflict with any
statutory provision, the Court cannot and should not
out step its limit and tinker with the policy decision of
the executive functionary of the State. This Court, in
no uncertain term, has sounded a note of caution by
indicating that policy decision is in the domain of the
executive authority of the State and the Court should
not embark on the unchartered ocean of public policy
and should not question the efficacy or otherwise of
such policy so long the same does not offend any
provision of the statute or the Constitution of India.
The supremacy of each of three organs of the State i.e.
legislature, executive and judiciary in their respective
field of operation needs to be emphasised. The power of
judicial review of the executive and legislative action
must be kept within the bounds of constitutional scheme
so that there may not be any occasion to entertain
misgivings about the role of judiciary in out stepping its
limit by unwarranted judicial activism being very often
talked of in these days. The democratic set up to which
the polity is so deeply committed cannot function
properly unless each of the three organs appreciates the
need for mutual respect and supremacy in their respective
field." (emphasis supplied)
40. In Secretary to Govt. of Madras v. P.R. Sriramulu the Supreme Court
observed (SCC p. 358):
"15. As pointed out earlier with reference to the decisions
of this Court the State enjoys the widest latitude where
measure of economic regulations are concerned. These
measures for fiscal and economic regulation involve an
evaluation of diverse and quite often conflicting
economic criteria, adjustment and balancing of various
conflicting social and economic value and interests. It is
for the State to decide what economic and social
policy it should pursue. It is settled law that in view of
the inherent complexity of the fiscal adjustments, the
Courts give a large discretion to the legislature in the
matter of its references of economic and social policies
and effectuate the chosen system in all possible and
reasonable ways. If two or more methods of adjustment
of an economic measure are available, the legislative
preference in favour of one of them cannot be questioned
on the ground of lack of legislative wisdom or that the
method adopted is not the best or there are better ways of
adjusting the competing interests and the claims as the
legislature possesses the greatest freedom in such areas.
It is also well settled that lack of perfection in a
legislative measure does not necessarily imply its
unconstitutionality as no economic measure has so far
been discovered which is free from all discriminatory
impact and that in such a complex area in which no
fool proof device exists, the Court should be slow in
imposing strict and rigorous standard of scrutiny by
reason of which all local fiscal schemes may be
subjected to criticism under the Equal Protection
clause." (emphasis supplied)
41. In P.T.R. Exports (Madras) P Limited v. Union of India, the Supreme
Court observed:
"5. It would, therefore, be clear that grant of licence
depends upon the policy prevailing as on the date of the
grant of the licence. The Court, therefore, would not bind
the Government with a policy which was existing on the
date of application as per previous policy. A prior
decision would not bind the Government for all times to
come. When the Government are satisfied that change
in the policy was necessary in the public interest, it
would be entitled to revise the policy and lay down
new policy. The Court, therefore, would prefer to
allow free play to the Government to evolve fiscal
policy in the public interest and to act upon the same.
Equally, the Government is left free to determine
priorities in the matters of allocations or allotments or
utilisation of its finances in the public interest. It is
equally entitled, therefore, to issue or withdraw or
modify the export or import policy in accordance with
the scheme evolved. We, therefore, hold that the
petitioners have no vested or accrued right for the
issuance of permits on the MEE or NQE, nor the
Government is bound by its previous policy." (emphasis
supplied)
42. In Ugar Sugar Works Limited v. Delhi Administration the Supreme
Court observed thus (SCC p. 643):
"18. .......... It is well settled that the Courts, in exercise
of their power of judicial review, do not ordinarily
interfere with the policy decisions of the executive unless
the policy can be faulted on grounds of mala fide,
unreasonableness, arbitrariness or unfairness etc. Indeed,
arbitrariness, irrationality, perversity and mala fide will
render the policy unconstitutional. However, if the policy
cannot be faulted on any of these grounds, the mere fact
that it would hurt business interests of a party, does not
justify invalidating the policy. In tax and economic
regulation cases, there are good reasons for judicial
restraint, if not judicial deference, to judgment of the
executive. The Courts are not expected to express their
opinion as to whether at a particular point of time or in a
particular situation any such policy should have been
adopted or not. It is best left to the discretion of the
State."
43. As far as the present case is concerned, it is not possible to hold that the
transition from the dual policy to a unified policy was either arbitrary or
irrational. The decision-making process itself appears to be a well
deliberated one where matters were considered at different levels. The
Respondents were faced with an unenviable task of accommodating several
competing interests. How these should in fact be resolved should be left to
the Respondents. The court cannot be expected to sit in appeal over the
decision of the government to introduce a requirement for eligibility for
grant of an import licence and opine that one criterion is more appropriate
than the other.
44. This court finds that no case of mala fides or unreasonableness in the
issuance of the impugned circular and notification has been made out by the
petitioner. No doubt the criterion of ownership of a gang saw machine was
introduced at a late stage thus rendering it impossible for the petitioner to get
licences for the last two quarters of 2009-2010. However, in the considered
view of the court, that by itself cannot render the requirement arbitrary when
viewed in the overall context of a unified policy requiring the fulfilment of
uniform criteria by all applicants. Any policy change is bound to adversely
affect some marble trader or the other and perhaps some more than the
others. If one were to go only by that yardstick, then every imperfect policy
that does not cater to every description of a marble trader will fall foul of
Article 14. Our Supreme Court has time and again emphasised that
"imperfect" policies are not necessarily arbitrary or unreasonable policies.
What has to be seen is whether the object of encouraging domestic industry,
while not discouraging imports, is advanced by the impugned measure. In
the context of the present case, the answer to that question has to be in the
affirmative.
45. The Respondents need not have waited till 23rd October 2009 to
introduce the gang saw ownership criterion given the fact that it takes four to
five months to instal a gang saw machine. This does cause a degree of
inconvenience to applicants like the petitioner. But as already observed,
every change is bound to adversely affect some trader or the other in varying
degrees. The "mere inconvenience to a trader cannot by itself render the
policy arbitrary or unreasonable." This criterion was in fact mooted by the
sub-committee of the COS in October 2007 itself. It appears to have been
anticipated by some of the importers themselves as is evident from the fact
that for the last quarter of 2009-2010, 23 of the 29 (erstwhile) SIL category
importers who applied did have gang saw machines. As much as a
government has to keep apace with changes in the industry and the markets,
the traders have to adapt to the changing norms. In a competitive market,
regulated by the State, this is only to be expected.
46. Likewise, while it is arguable that the petitioner cannot be compelled to
switch to processing of imported marble and that the gang saw machines it
would instal would in any event remain idle, these are factors that should be
evaluated by the policy maker. It will be for the Respondents to consider if
they need to make further policy/criteria changes which will cater to the
needs of persons like the petitioner who sell the imported marble as such in
the domestic market. Likewise, the question: if in fact a gang saw machine
can process up to 8000 MT of marble, then why restrict the limit on the first
one to 3000 and the subsequent ones to 1500 MT? This court cannot take
upon itself the task of determining if the policy needs to be changed
depending on the answer to these questions. It is only called upon to
examine if the policy as it presently stands meets the tests of reasonableness.
This court does not find it possible to conclude to the contrary.
Conclusion
47. The writ petition is accordingly dismissed with costs of Rs.10,000/-
which will be paid by the Petitioner to the Respondents within a period of
four weeks from today. The application is disposed of.
Contempt Case (C) No. 43 of 2010
48. The question that arises in the present contempt petition is whether the
Respondents have wilfully disobeyed the order dated 11 th November 2009
passed by this court whereby they were directed not to reject the petitioner‟s
application.
49. The records of the DGFT were summoned by the Court and perused. It
appears that the decision to reject the Petitioner‟s application was taken on
10th November 2009 itself. However when this Court heard the case on 11 th
November 2009 it could not be informed of the said decision since learned
counsel for the Respondent had not been instructed and was therefore not
aware of it. Consequently, this Court‟s order dated 11 th November 2009
directing the Respondent not to reject the application filed by the Petitioner
was passed at a time when the application had already been rejected.
Learned counsel for the Respondents states that although the said order
dated 11th November 2009 was communicated to the Respondents it was
opined that since the decision to reject the Petitioner‟s application had
already been taken by them. No further action was required to be taken to
reverse that decision. It is denied that the rejection letter was back dated. The
date 30th October 2009 shown on top of the letter is actually the date
pertaining to the file number. The rejection letter is in fact dated 16th
November 2009. The rejection letter was issued pursuant to the decision
taken on 10th November 2009. It is stated that although the letter dated 5 th
November 2009 to the Petitioner pointed out the deficiencies, it was decided
not to wait beyond 11th November 2009 as the import licence was to be
issued for two quarters ending on 31st March 2010. The noting on the file
shows that separate lists were prepared of persons who fulfilled the criteria
and those who did not. The Petitioner‟s name figured in the latter list.
50. It appears that the decision to reject the Petitioner‟s application was
taken on 10th November 2009 itself, prior to this court‟s order dated 11th
November 2009. Although this decision was communicated to the petitioner
in writing later, there is nothing to doubt that the decision was itself taken on
10th November 20009. In the circumstances it is not possible to hold that the
Respondents were in contempt of this Court‟s order dated 11 th November
2009 when they communicated the decision of rejection to the Petitioner by
the letter dated 16th November 2009. There is no merit in the contempt
petition and it is dismissed as such.
S. MURALIDHAR, J.
March 4, 2010
rk
