JAIN SHUDH VANASPATI LIMITED Vs. UNION OF INDIA

JUDGEMENT

(1.) This petition under Article 226 of the Constitution of India, by a company, which carries on the business of the manufacture and sale of refined and hydrogenated oil, and its Managing Director, challenges the validity of certain restrictions on the importation of Palm Oil and the manufacture of referred Palm Oil. The petition was filed in the following circumstances :-

(2.) Jain Sudh Vanaspati Limited, a joint stock company, for short the Company, petitioner No. 1, carries on the business, inter alia. of the manufacture and sale of refined and hydrogenated oil. Petition No- 2 is its Managing Director and holds, along with the other members of his family, controlling interest in the company. The manufacture and sale of refined oil is regulated by the Vegetable Oil Product Producers (Regulations of Refined Oil Manufacture) Order, 1973, for short, the order of 1973, issued under Section 3 of the Essential Commodities Act, 1955, for short, the Act. Clause 3 of the Order of 1973 provides that no producer shall manufacture for sale refined vegetable oils in excess of the quantity determined in the manner set out in sub-clause (a) or sub-clause (b) of the said clause. The expression "producer" is defined to mean the person carrying on the business of manufacturing any vegetable oil product. By an order of March 2, 1977 (Annexure 2), Clause 3 of the Order of 1973 was amended, inter alia, by the addition of a proviso which excepted inter alia, the manufacture of "refined imported palm oil" from the operation of the aforesaid Clause. Earlier, in the new import policy, it was announced that open general licences would be issued, inter alia, for the import of palm oil pursuant to which it was noticed by a Public Notice of January 17, 1977 (Anpexure 3) that "with a view to overcoming the shortage of edible oils in the country, it has been decided to allow import of edible oils for direct human consumption, or for refining and blending for direct human consumption". The Public Notice listed Palm Oil among the oil of which the import will be allowed with the result that any person, including the vegetable oil manufacturers, could freely import palm oil: Subsquently by a public notice of May 27 1977 (Annexure 4), it was notified that on a-review of the position it had been decided that "licences for import of edible oils. and oil seeds will be granted on the basis of firm commitment entered into by the applicant with the overseas suppliers" and the prospective applicants were advised that applications for grant of such licences should, therefore, be acconipanied by photostat copies of firm offer and acceptance. According to the petitioners, taking advantage of the aforesaid policy, the company concluded contracts with foreign suppliers of palm oil and made applications for the grant of open genneral licences in terms of the policy between March 7, 1977, and September 7, 1977, pursuant to which the company was issued various licences the details of which are set out in the statement (Annexure 8) to the petition. It is further contended that on the basis of these licences the company approached their bankers and opened irrevocable letters of credit from time to time .to ensure payment of the purchase priceAccording to the petitioners, the total quantity of palm oil, both refined and unrefined, which had been contracted to be purchased by the company was about 43,000 tons out of which approximately 7,850 tons Worth Rs. 5,50,00,000 had been received by the company at its factory in Gaziabad by October 15, 1977, and 3,550 tons was received at the factory between October 15, 1977, and October 26, 1977, and that approximately 13,500 tons was in the pipelines, having been exported from abroad already, but had not reached the factory. It was further alleged that out of the total quantity received at the factory upto October 26, 1977, 2,370 tons of unrefined palm oil remained to be refined and sold in the market and that its value Would roughly work out to Rs. 1,50,00,000. It. however, appears that by public notice of September 23,1977 (Annexure 10), the Chief Controller of Imports and Exports, Government of India notified that on a review of the position "it has been decided that no licence for import of palm oil refined for direct human consumption shall be issue" in future, but that "in case where firm commitments have been entered into with foreign suppliers for import of palm oil refined for direct human consumption, prior, to the date of the Public Notice, import licence will be granted by the Licensing Authority concerned to the extent of quantity/value of commitments entered into by the applicants". According to the petitioners, the application of the aforesaid Public Notice was confined to refined Palm Oil and, therefore. the company continued to enter into firm commitments with foreign suppliers for the import of unrefined Palm Oil even after the date of the aforesaid Public Notice and made applications for the grant of open general licence on the basis of such commitments in terms of the existing policy. By asubsequent Public Notice of October 11, 1977 (Armexure 11) it was notified that all licences issued for Palm Oil refined for direct human consumption" against which shipment is not made (wholly or partly) on or before 15-10-1977, shall stand automatically invalidated for (further) imported oil". It was further notified that no fresh licence for the import of Palm Oil refined for direct human consumption shall be granted in any other case. According to the petitioners, the company had entered into firm commitmente for the import of 3,000 tons of Palm Oil and licence on that basis had already been issued to the company before October 15, 1977, but the goods had not till then been received by the company. It is further alleged that in addition the company had entered into a contract for the purchase of 13,000 tons of Palm Oil for the' importation of which application for open general licence had already been made, but the licences had not till then been issued. Subsequently, by an order of October 15, 1977 (Annexure 12), a copy of which was allegedly received by the company on October 26, 1977, Clause 3 of the Order of 1973 was further amended so as to impose a total ban on the manufacture for sale by any producer of "any refined imported Palm Oil".

(3.) The petitioners filed the present petition on or about October 27. 1977, challenging the Public Notice of October 11, 1977 (Annexure 11 ) and the order of October 15, 1977 (Annexure 12) as being illegal, arbitrary, ultra vires, void and bad in law. According to the petitioners, the company had entered into firm commitments for the import of unrefined Palm Oil on the basis of the then subsisting. Government policy and had received large quantity of such oil at its factory of the value of about Rs. 1,50,00,000 which was yet to be refined. It is alleged that the unrefined Palm Oil has no market in India and the company would not be able to dispose it of and if the company was not allowed to refine such oil even though it had been imported for the purpose, irrepairable injury and hardship would be caused to the company. It was further contended that but for the policy of the Government in permitting the import of unrefined Palm Oil, the company would not have imported it in such huge quantities which had cost the company over Rs. 14 crores which had been paid in foreign exchange on the basis of Bank borrowings, and that unrefined oil of the value of over Rs. 2 crores was lying now at the factory of the company and if the company was not allowed to refine and market the same by virtue of the order of October 15, 1977, even though the company had been allowed to import it on the assurance that it would be allowed to refine and sell it, irrepairable loss and injury would be caused to the interest of the company. It was further alleged that as a result of the impugned order, the company was neither able to sell the unrefined oil or to refine it for sale, and that the action of the respondents was not only arbitrary, but violative of the fundamental rights of the petitioners under Articles 14, 19, and 31 of the Constitution of India and the restrictions imposed by the impugned Public Notice and the order were wholly unreasonable.