UNION OF INDIA AND OTHERS versus AGRICAS LLP AND OTHERS ETC. on 26 August 2020

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SUPREME COURT REPORTS

[2020] 14 S.C.R.

UNION OF INDIA AND OTHERS

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AGRICAS LLP AND OTHERS ETC.

(Transfer Petition (Civil) Nos. 496-509 of 2020)

BAUGUST 26, 2020

[A. M. KHANWILKAR, DINESH MAHESHWARI ANDSANJIV KHANNA, JJ.]

Foreign Trade (Development and Regulation) Act, 1992 –ss.3(2), 9A – Statutory Scheme of – Notifications, trade notices wereCissued amending the import policy for peas, pulses shifting themfrom free to restricted category requiring prior authorization forimport – Validity of – Held: There is no violation of s.3 in the issuanceof the impugned notifications or orders, which are intra vires andnot ultra vires – Further, implementation of GATT-1994, includingDArticle XI, is left to the Central Government by means of delegatedlegislation – FTDR Act does not legislate and transform Article XIof the GATT-1994 – Notwithstanding s.9A, the Central Governmentcontinues and has authority to impose quantitative restrictions byan order u/s.3(2) – Impugned notifications are valid as they areissued in accordance with the power conferred in the CentralEGovernment in terms of sub-section (2) to s.3 – InternationalConvention/Treaties – General Agreement on Tariff and Trade(GATT), 1947; General Agreement on Tariff and Trade (GATT), 1994– Articles XI and XIX – Constitution of India – Arts. 73, 77, 253,Part XI- Chapter I – Government of India (Transaction of Business)FRules, 1961 – Customs Act, 1962 – s.11 – Safeguard Measures(Quantitative Restrictions) Rules, 2012 – Foreign Trade (Regulation)Rules, 1993 – Doctrines/Principles – Principle of invocability orjusticiability; Act of transformation.

International Convention/Treaties – International treaty –GGeneral Agreement on Tariff and Trade, 1994 (GATT-1994) – Effectof on domestic law; Obligations of contracting party – Discussed.

International Convention/Treaties – International customary/treaty law Applicability in domestic law – Theories – Dualism andMonism – Discussed.H

Foreign Trade (Development and Regulation) Act, 1992 –ss.3(4), 18A – Held: provisions of FTDR Act are in addition to, andnot in derogation of, the provisions of any other law for the timebeing in force – This would be the correct way to harmoniouslyread and interpret sub-section(4) to s.3 and s.18A.

Foreign Trade (Development and Regulation) Act, 1992 –ss.3, 9A – Interpretation of – Discussed.

Maxims – Lex specialis derogat legi generali – When notapplicable – Discussed.

Words & Expressions – ‘direct application’ – Meaning of –Held: It means and mandates that the treaty norms, either wholly orto some extent, are directly treated as norms of domestic law andenjoy the statutory law status by default in the domestic legal system– International Convention/Treaties.

Disposing of the transfer petitions, the Court HELD: 1.1 Discussion on challenge to the role and authorityof the Directorate General of Foreign Trade (DGFT) to issue theNotifications and Trade Notice and interpretation of the words“total quantity”

The importers have rightly not raised the contention thatthe DGFT could not have notified the impugned notifications.The notifications themselves record that they were published bythe Ministry of Commerce and Industry, Department ofCommerce, Directorate General of Foreign Trade. The firstparagraph of the notification states that they had been issued bythe Central Government in exercise of powers conferred underArticle 77 of the Constitution. Clearly, the notifications wereissued by the Central Government, and not the DGFT that hadperformed the ministerial act of publication. The decision toamend and issue the notification was of the Central Government.Neither Section 3(2) nor Section 6(3) of the Foreign Trade(Development and Regulation) Act, 1992 (FTDR) Act was violated.Article 77 does not provide for delegation of any power, albeitunder sub-section (3) of Article 77, the President is to make Rulesfor more convenient transaction of business and allocation of same A

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Aamongst Ministers. Under the Government of India (Transactionof Business) Rules, 1961, the government business is dividedamongst Ministers and specific functions are allocated to differentMinistries. The Director General of Foreign Trade is an ex officioAdditional Secretary in the Government of India and is appointedby the Central Government under sub-section (1) to Section 6 ofBthe FTDR Act to advise the Central Government in formulationand carrying out the Foreign Trade Policy. Wherefore, even thewebsite of the Ministry of Commerce and Industry, Departmentof Commerce, states that the DGFT is an agent of the CentralGovernment and attached office to it. Further, clause (2) of ArticleC77 provides that validity of an order or instrument made orexecuted in the name of the President, authenticated in themanner specified in the Rules made by the President, shall notbe called in question on the ground that it is not an order or aninstrument made or executed by the President. Therefore, thecontention of issuance of the impugned notification sans authority,Dcannot be sustained. [Para 15][396-E-H; 397-A-E]

Delhi International Airport Limited v. InternationalLease Finance Corporation and Others (2015) 8 SCC446: [2015] 2 SCR 1040 - relied on.

E1.2 FTDR Act vide Section 3(2) authorises the CentralGovernment to prohibit, restrict or otherwise regulate the importor export of goods, by an order published in the Official Gazette.FTDR Act vide Section 11(1) prohibits imports or exports of goodsin contravention of the FTDR Act, the rules and orders madethereunder and the EXIM Policy. Section 5 of the FTDR ActFauthorizes the Central Government to formulate and announcethe EXIM Policy by notification in the Official Gazette. UnderSection 11(2) of the FTDR Act, when a person makes or abets orattempts to make any import or export in contravention of theFTDR Act, any rule or order made thereunder or the EXIM policy,Ghe is liable to pay penalty upto Rs.10,000/- or five times the valueof the goods, services or technology, whichever is greater.Section 11 of the Customs Act,1962 provides that the CentralGovernment may by a notification in the Official Gazette prohibit,absolutely or subject to conditions as specified, import or export H

of any good. The listed purposes are wide and range fromconservation of foreign exchange and safeguarding of balance ofpayments, avoiding shortage of goods, prevention of surplus ofany agricultural or fisheries product, prevention of serious injuryto domestic production, establishment of any industry and lastlycompendiously includes “any other purpose conducive to theinterest of the general public”. Under clause (d) to Section 11 ofthe Customs Act goods imported or exported (or attempted tobe imported or exported) contrary to any prohibition are liable toconfiscation. [Para 16][397-E-H; 398-A-C]

1.3 The contention raised by some of the importers thatthe impugned notification is illegal because of vagueness or allowsrestricted quantity of 1/1.5 lakh MT of Peas (Pisum Sativum)including Yellow Peas, Green Peas, Dun Peas and Kaspa Peas asagainst a licence, meaning thereby each licensee is allowed toimport the maximum quantity specified in the notification isrejected. In other words, the total quantity specified in thenotification is per licensee and not for the total imports of thecommodity specified in the notification. The submission has nomerit as the notification expressly uses the expression ‘totalquantity’ of the commodity specified which could be imported.There is no ambiguity or vagueness in the notifications. Evenotherwise the expression ‘total quantity’ cannot be construed asquantity per licence issued as the number of licences issuedconcerning the subject goods could be numerable (as per theUnion of India 2248,1016 and 2915 licences were issued in 2019-20 for import of Tur, Moong and Urad dals against restricted quotaof 4,1.5 and 4 lakh MT, respectively). If each licence holder isallowed to import 1/1.5 lakh MT of Peas, the total import wouldwell exceed the total annual consumption after accounting forthe production within India. The plea and interpretation of theimporters if accepted will not only be contrary to the expresslanguage of the notification but would frustrate the intent andobject of restricting the imports of the stated goods by prescribinga quota. The legal effect of the notifications was to amend theEXIM policy whereby the specified commodities would henceforthnot be ‘free’ (importable without restriction) but would fall in the AB

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Arestricted category. Once the commodities were shifted to therestricted category, the requirement of licence would flow fromthe mandate of Section 3 of the FTDR Act read with Rule 4 of theForeign Trade (Regulation) Rules, 1993. Further, the EXIMPolicy regulates the restricted goods under Paragraphs 2.04, 2.08and 2.10 of Policy. [Paras 17, 18][398-C-G; 399-A-C]B

1.4 The effect of the Notifications is to bring the specifiedcommodities from free to the restricted category and thereforethe imports in question would require a prior authorisation forimport. The requirement of licence is nothing but authorisation.Therefore, in terms of paragraph 2.10, the imports of the specifiedCcommodities would only be by the ‘actual user’, unless the ‘actualuser’ condition was specifically dispensed with or diluted by theDGFT. The Directorate by specifying that the licence would beissued to the miller or refiner has, therefore, just clarified thatthe ‘actual user’ alone will be permitted to import the restrictedDgoods mentioned in the notification for which a prior authorisationor licence is required. The importers are traders and it is not thecase of any of the importers that they are the ‘actual users’.Further, none of the importers have applied for a licence orauthorisation for import of the restricted commodities. Violationof clause 9.03 of the EXIM Policy defining the expression ‘ActualEUser’, is neither alleged nor argued. Paragraph 2.10 consists oftwo parts. The first part relates to goods which are freelyimportable without any licence and states that such goods thatcan be imported by any person. The second part refers to suchimports which require authorisation and not the imports which Fare freely importable without any restriction. ‘Actual user’condition, therefore, applies by default when imports require anauthorisation. However, the DGFT can specifically dispense withor dilute the ‘actual user’ condition. [Paras 19, 20][400-C-F; 401-A-C]

G2.1 Section 9A of the FTDR Act and it’s interpretation.

(i) General Agreement on Tariff and Trade – 1947 and 1994.

Conference at Bretton Woods, New Hampshire in 1944 leadto establishment of the ‘International Monetary Fund’ and the‘World Bank’, but the attempt to establish ‘International TradeH

Organisation’ to develop and coordinate international tradefaltered and was finally given up in 1950. However, multilateraltrade negotiations had continued with the objective to prepare amultilateral treaty containing general principles of internationaltrade and a schedule of tariff reductions. By the end of 1947, thework on the General Agreement on Tariff and Trade (‘GATT’),1947 and tariff reduction was finalised and agreed upon. On orabout 8th July 1947, Government of India became a signatoryand ratified GATT-1947. However, GATT-1947 is considered tobe a failure or at best had a limited impact. What followed wasseveral years of intense negotiations involving over 100 nationsthat finally ended in 1994 at Marrakesh, Morocco, with amultilateral international treaty of over 400 pages of basic textwith substantive rules and tariff schedules. The final act signedexceeded 26,000 pages. This treaty popularly known as GeneralAgreement on Tariff and Trade (GATT-1994) was signed by 128countries including India on 1st January 1995. On the same day,the World Trade Organisation (WTO), an institution with asecretariat and staff, replaced GATT and came into existence, asthe international organisation for overseeing and regulatingfunctioning of the multilateral trade system. GATT-1994 innutshell is a rule-oriented package consisting of multilateral tradeagreements annexed to a single document and works on the basisof single undertaking approach whereby all agreements annexedbecome binding on all the members as single body of law. Themain agreement consists of the preamble and XVI articlesestablishing the WTO, four annexures and declarations, decisionsand understandings. Article XI prohibits quotas, import or exportlicences and other non-tariff measures, with some exceptions.Annexure 2 consists of the Understanding on Rules andProcedures Governing Settlement of Disputes, referred to as theDispute Settlement Understanding, providing mechanism forresolution of trade disputes among WTO members. Annexure 3establishes the trade policy review mechanism, with procedurefor periodic review of compliance with the WTO agreement byeach member. Annexure 4 consists of plurilateral tradeagreements binding only on the parties that have accepted them.GATT-1994 also has provisions that allow and permit exceptions.

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AArticle XIX is an exception and sometimes referred to as theescape clause, that provides emergency action where seriousinjury is caused or threatens domestic industry. The ‘MarrakeshAgreement’ enacts and incorporates rules-oriented approachregulating the conduct of the WTO members and are designedto ensure that the tariff concessions and the multilateral tradeBtreaty works as intended and not undermined. Articles XXIIprovides for sympathetic consideration and consultation andsatisfactory solution with respect to any matter affecting theoperation of GATT-1994. Article XXIII allows GATT contractingparty to make a complaint should it consider that anotherCcontracting party is directly or indirectly nullifying, impairing theGATT-1994 or otherwise impeding attainment of its objective:(a) by failure in carrying out its obligations; (b) by measures, evenwhen they are not in conflict with GATT-1994; and (c) in any othersituation. These Articles XXII, XXIII emphasise on the need forconsultation, withdrawal of conflicting measures and mutualDsatisfactory solution of the matter by the contracting partiesconcerned, consistent with the GATT-1994. Albeit on failure toreach a satisfactory adjustment within reasonable time or in caseof (c), the matter is to be referred to the Contracting Parties toinvestigate and make recommendations to the offending party orEmake a ruling on the matter, as appropriate. The dispute resolutionmechanism in Annexure 2 contains 27 Articles totalling about143 paragraphs and four appendices. The WTO, at the top,consists of Ministerial Conference which meets not less thanevery two years. Next there are four councils, including theGeneral Council which has an overall supervising authority andFto carry out many functions of the Ministerial Conference. Inaddition, there are Council for Trade Inputs, Council for Tradeand Services, and Council for Trade Related Aspects ofIntellectual Property Rights. The General Council, as per theWTO Charter, discharges the responsibility of the DisputeGSettlement Body (DSB). Thus, the WTO Charter adopts alegalistic and a rule-oriented approach for resolving issues relatingto violation of the GATT agreements. The DSB establishesPanel(s) and on adoption of Panel (and the Appellate Body)reports, provides for implementation of the recommendation and H

rulings, and can authorise action for failure to comply with therecommendation(s) and ruling. The procedure adopted for thedispute resolution mechanism is to facilitate prompt settlementof situations with the objective and purpose that the ‘MarrakeshAgreement’ is preserved and not nullified or impaired.[Paras 21-24][401-C-F, G-H; 402-A-C, F, G-H; 403-A-C, D-E;404-A-C; 405-A-B, E]

2.2 (ii) Obligations of the contracting party and effect ofinternational treaty, namely, GATT-1994 on the domestic law.

Two aspects relevant in the present case are; (i) applicabilityof the international treaty in domestic law and (ii) ‘invocability’ ofthe treaty in municipal law and before the municipal courts.

Breach of a stipulation in international law cannot be justifiedby the State by referring to its domestic legal position. This ruleof international law is unexceptionable and prosaic, as the contraview would permit the international obligations to be evaded bythe simple method of domestic legislation, executive action orjudicial decision. Contracting States are under an obligation toact in conformity with the rules of international law and bearresponsibility for breaches whether committed by the legislature,executive or even judiciary. In a way, therefore, internationaltreaties are constraint on sovereign activity, albeit voluntarilyagreed. For the purpose of GATT-1994, municipal laws areevidences of fact, including evidence of conduct in violation ofthe norms and objective of the treaty. At the same time, failure toenact an internal domestic law in conformity with the internationalobligation is not a breach of international law, unless there issuch requirement and obligation created by the internationaltreaty. In the absence of any such binding clause, breach arisesonly when the State concerned fails to observe its obligation on aspecific occasion. Various theories have been put forward toexplain applicability of international customary and treaty law indomestic law. The dualist position is that the internationalmunicipal law operates separately and before any rule or principleof international law can have effect within the domesticjurisdiction, it must be expressly or specifically transformed intomunicipal law by use of appropriate constitutional machinery.Dualism stresses that international law and municipal law exist AB

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Aseparately and cannot have effect on or overrule the other.Consequently, the municipal laws and international laws canoperate simultaneously as they regulate different subject matters.International law is between sovereign States, while the municipallaw applies within the State and regulates legal relationshipbetween the citizens/subjects inter se and the citizen/subject andBthe State. Monistic legal systems include international treatiesin domestic law. Monism takes the form of assertion of thesupremacy of the international law even within the nationalsphere, with the understanding and belief that an individual is asubject of international law. International norms provide the basicCnorms for the national legal order, and both are a part of the samesystems of norms. Most jurists draw distinction between ‘directapplication’ of treaties in domestic law, and national legal systemsthat mandate and require ‘act of transformation’ for aninternational treaty to apply and be a part of domestic law. ‘Directapplication’ means and mandates that the treaty norms, eitherDwholly or to some extent, are directly treated as norms of domesticlaw and enjoy the statutory law status by default in the domesticlegal system. The term ‘direct application’ will also coversituations in which government or different levels of governmentutilise treaty norms as part of domestic jurisprudence and is notElimited to situations in which private parties can sue on the basisof the treaty norms. There is distinction between direct applicationand ‘invocability’. ‘Act of transformation’ principle means andimplies that an international treaty is not directly applicable inthe domestic law system and requires provision in the domesticrules before it is applied. ‘Transformation’ is a word of wideFamplitude and does not refer to mere implementation as it includesthe right of the country to adopt, amend or modify the treatylanguage into domestic jurisprudence. The ‘act of transformation’is different from ‘direct application’ as in the former the treaty isnot received and treated as part of domestic jurisprudence untilGit is published and made part of the domestic jurisdiction in thesame manner as other law. There is great diversity of nationalconstitutional systems regarding international treaty application.[Paras 25, 27-30, 32][406-A, D-G; 407-A-H]

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2.3 It would be now appropriate to refer to the principle of‘invocation’. Invocability in simple terms refers to justiciability;admissibility of a claim before the national courts. It is notconnected with the defence or merits of the defence. In casewhere an ‘act of transformation’ is required, treaties may partiallyor entirely become part of the domestic law. Where the treaty orportion thereof become a part of the domestic law by ‘act oftransformation’, it is obvious that only the part incorporated ortransformed into domestic law is invocable and justiciable andnot the parts that are not codified into domestic law. However,invocability can embrace several ideas which are intertwined andis of specific concern in cases of constitutions allowing directapplication. Here ‘invocability’ is a generic term which means toembrace a small inventory of means of judicial control over theuse in a particular law suit of the direct applicability of the treaty.As in case of ‘act of transformation’, even in direct applicationcases, some jurisdictions accept the principle of partial directapplication and, therefore, the treaty is directly applicable for somepurposes and not others. [Para 33][410-D-G]

Status of Treaties in Domestic Legal System; A PolicyAnalysis Essay by Professor John H. Jackson –referred to.

In re. Berubari Union (I) AIR 1960 SC 845:[1960] 3SCR 250; Rai Sahib Ram Jawaya Kapur and Others v.State of Pubjab AIR 1955 SC 549:[1955] 2 SCR 225;Ram Kishore Sen and Others v. Union of India andOthers AIR 1966 SC 644: [1966] 1 SCR 430 – referredto.

3. Legal position in India.

The law in India is not very different from otherCommonwealth Countries. Article 253 of the Constitution statesthat notwithstanding anything in the foregoing provisions of thisChapter, the Parliament has the power to make laws for the wholeor any part of the territory of India for implementing any treaty,agreement or convention with any other country or countries or ABC

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Adecisions made at any international conference, association orbody. [Para 34][411-C, E-F]

Maganbhai Ishwarbhai Patel Etc. v. Union of India(1970) 3 SCC 400:[1969] 3 SCR 254 – followed.

4. Articles XI and XIX of GATT-1994 and the statutoryBscheme vide Sections 3 and 9A of FTDR Act and the SafeguardMeasures (Quantitative Restriction) Rules, 2012.

Indian Parliament, two years prior to the signing of GATT-1994, had enacted the FTDR Act which was enforced with effectfrom 7th August 1992. Sections 11 to 14 of the FTDR Act cameCinto force immediately and other provisions came into force on19th June 1992. The FTDR Act had repealed the Imports andExports (Control) Act, 1947 and the Foreign Trade (Developmentand Regulation) Ordinance, 1992 with the stipulation that anythingdone or any action taken under the Ordinance shall be deemedDto have been done or taken under the corresponding provisionsof the FTDR Act. The Statement of Objects and Reasons forenacting the FTDR Act, as recorded, are to acknowledge thatforeign trade is the driving force of economic activity as this spurseconomic growth and there is increasing interdependence andthat the goals of the new policy were to increase productivity andEcompetitiveness by ensuring that the trade policies serve as aninstrument to create an environment that will provide a strongimpetus to exports, facilitate imports and render export activitymore profitable. Section 9A of the FTDR Act is the only sectionin Chapter IIIA with the heading ‘Quantitative Restrictions andFthis section was inserted by Amendment Act 25 of 2010 with effectfrom 27th August 2010. Subsequently, in exercise of powersconferred by sub-section (3) to Section 9A of the FTDR Act, theCentral Government had published and notified the SafeguardMeasures (Quantitative Restrictions) Rules, 2012, which becameapplicable on the date of their publication in the Gazette of IndiaGdated 24th May 2012. [Paras 48, 50][424-D-G; 427-A-C]

Report of WTO Dispute Settlement Body’s panel on“India-Quantitative Restrictions on Imports ofAgricultural, Textile and Industrial Products” – referredto.

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5.1 Discussion and interpretation of Sections 3 and 9A ofthe FTDR Act.

Section 3 of the FTDR Act, as enacted, had undergoneamendments by addition of proviso to sub-section (2) and byinsertion of sub-section (4) vide Act 25 of 2010 with effect from25th August 2010. Sub-section (1) of Section 3 states that theCentral Government may, by an Order published in the OfficialGazette, make provision for the development and regulation offoreign trade by facilitating imports and increasing exports. It isa general provision which has no reference to GATT-1994. Itauthorises the Central Government to publish an order in theOfficial Gazette for development and regulation of foreign trade,i.e. imports and exports. Sub-section (2) states that the CentralGovernment can, by an order in the Official Gazette, make aprovision for prohibiting or restricting or otherwise regulating,in all or specified cases and subject to such exceptions, if any,the import or export of goods and after the amendment vide Act25 of 2010, services or technology. Sub-section (2) to Section 3,therefore, authorises the Central Government to, by an Orderpublished in the Official Gazette, make provisions restricting theimports or exports. Imposition of quantitative restrictions onimports or exports would clearly fall within sub-section (2) toSection 3 of the FTDR Act. Sub-section (3) to Section 3 statesthat where an order is passed under sub-section (2) whereby theimport or export of goods is prohibited, restricted or otherwiseregulated, the goods in question would be deemed to be prohibitedgoods under Section 11 of the Customs Act, 1962 and accordinglythe provisions of the latter Act would apply. [Para 54][438-E-H;439-A-B]

5.2 Sub-section (4) to Section 9A of the FTDR Actintroduced by Act 25 of 2010 with effect from 27th August 2010,requires some elucidation. The sub-section on one hand statesthat no permit or licence shall be necessary for imports or exportsof goods, nor any goods shall be prohibited from import or export,except as may be required under the FTDR Act, or the rules ororders made thereunder. At the same time, by using the phrase‘without prejudice to anything contained in any other law, rule, AB

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Aregulation, notification or order’, it protects the operation of theother law, rule, regulation, notification or order to the extent thatthey do not directly or indirectly deal with the permit or licencenecessary for import or export of goods or prohibit import orexport of goods. Operation of such law, rule, regulation,notification or order not dealing with the permit or licenceBnecessary for import or export on a prohibition of import of goodsis, therefore, protected and not overridden. Sub-section (4) toSection 3 therefore gives limited primacy to the FTDR Act,restricting it to the scope and subject matter of the FTDR Act,and not to override other laws. This is also clear from SectionC18A of the FTDR Act which was also enacted and inserted by Act25 of 2010 with effect from 27th August 2010. The provisions ofFTDR Act, therefore, are in addition to, and not in derogation of,the provisions of any other law for the time being in force. Thiswould be the correct way to harmoniously read and interpret sub-section (4) to Section 3 and Section 18A of the FTDR Act. Sub-Dsection (4) to Section 3 of the FTDR Act, therefore, in the contextof import and exports or prohibition of imports or exports of goodsstates that no permit or licence shall be necessary or requiredexcept as may be required under the FTDR Act, rules or ordersmade thereunder. The expression ‘order’, as per clause (h) toESection (2) of the FTA means any Order made by the CentralGovernment under Section 3. It is therefore, clear that there isno violation of Section 3 of the FTDR Act in the issuance of theimpugned notifications or orders, which are intra vires and notultra vires. [Para 55][439-B-E, F-G; 440-A-B]

F5.3 Article XI of the GATT-1994 has not been statutorilymade a subject of ‘act of transformation’ and incorporated in thedomestic legislation, i.e. the FTDR Act. The FTDR Act does notlegislate and transform Article XI of the GATT-1994. Section 3of the FTDR Act empowers and authorises the CentralGovernment, i.e. the Union of India to frame policy, rules orGregulations for import or export of goods. The policy is madeunder Section 5 of the Act. Thus, the Central Government i.e.the Union of India has been given the necessary discretion andelection with regard to framing of policies for import and export H

of goods, services and technology. Therefore, implementation ofGATT-1994, including Article XI, is left to the CentralGovernment by means of delegated legislation. Clause (2) ofArticle XI of GATT-1994 states that provisions of paragraph (1)shall not extend to three specified situations as stated in sub-clauses (a), (b) or (c). Clause (c) deals with import restrictions onany agricultural or fisheries product, imported in any formnecessary for enforcement of governmental measures specifiedtherein. Similarly, Article XII of GATT-1994 states thatnotwithstanding the provisions of paragraph (1) of Article XI, anycontracting party, in order to safeguard its external financialposition and its balance of payments, may restrict the quantity orvalue of merchandise permitted to be imported, subject to theprovisions of paragraphs of that Article. Paragraph (1) to ArticleXI is not an absolute rule. It is subject to exceptions in the formof paragraph (2) to Article XI, Article XII and other provisions.Of course, the conditions specified the respective Articles haveto be satisfied for a contracting party to be GATT-1994 compliant.Reference to this position is necessary and required when Section9A of the FTDR Act is interpreted which incorporates into thedomestic law Article XIX of GATT-1994, but neither Article XIand nor all exceptions by implication. Consequently, Section 9Afor the FTDR Act, is to be understood an enabling provisionempowering imposition of ‘quantitative restrictions’ after followingthe procedure in the situations referred to therein. However itdoes not limit and restrict the expans and power of the CentralGovernment to prohibit, regulate or restrict imports of goods interms of Section 3(2) of the FTDR Act. As a sequitur, it has to beheld that notwithstanding Section 9A, the Central Governmentcontinues and has authority to impose quantitative restrictionsby an order under Section 3(2) of the FTDR Act. Principle of Lexspecialis derogat legi generali, therefore, is not applicable to thecase in hand. [Paras 56-58][440-C-D, G-H; 441-A-F]

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Aalso in conformity with the provisions of the WTO Agreement onSafeguards made in terms of Article XIX of GATT-1994. Sub-rule (3) to Rule 5 of the Safeguard Measures (QuantitativeRestrictions) Rules, 2012 states and sets out the conditions forapplicability of Rule 9A, which are: (i) increased imports; (ii)serious injury or threat of serious injury; and (iii) a causal linkBbetween increased imports and alleged serious injury or threatof serious injury. The expression ‘increased imports’ has beendefined in terms of increased quantity to mean increase in importsin absolute terms or relative to domestic production. Theexpressions ‘serious injury’ and ‘threat of serious injury’ haveCbeen defined in clauses (c) and (d) of sub-clause (4) to Section 9Ato mean injury causing significant overall impairment in theposition of a domestic industry and a clear and imminent dangerof serious injury respectively. The expression ‘domestic industry’has also been defined in clause (b) to sub-section (4) to Section9A. Similarly, the expression ‘interested party’ has been definedDin sub-rule (d) to Rule 2 of the Safeguard Measures (QuantitativeRestriction) Rules, 2012 and includes exporter or foreignproducer or the importer of goods for the purposes of impositionof safeguard quantitative restrictions on trade or businessassociation. It also includes the government of the exportingEcountry or producer of goods or directly competitive goods inIndia or a trade or business association.The need to enact Section9A arose from the obligations flowing from Article XIX, asrestriction in form of ‘quantitative restriction’, require aprocedure to be followed. Affected parties including exporters,importers have to be heard. Consequently, ‘act of transformation’Fwas required. Article XIX of GATT-1994 is an escape provision,i.e. a provision which entitles a contracting state to escape fromthe rigours of paragraph (1) of Article XI of GATT-1994. Similar‘acts of transformation’ have been undertaken by enacting CustomValuation Rules, provision of antidumping, countervailing dutyGetc. but the entire GATT-1994 does not stand transposed andenacted by way of statutory law or delegated legislation. Thisbeing the position, Section 9A has to be interpreted as an escapeprovision when the Central Government i.e. the Union of Indiamay escape the rigours of paragraph (1) of Article XIX of GATT- H

1994. Section 9A is not a provision which incorporates ortransposes paragraph (1) of Article XI into the domestic law eitherexpressly or by necessary implication. To hold to the contrary, itwould be holding that the Central Government has no right andpower to impose ‘quantitative restrictions’ except under Section9A of the FTDR Act. This would be contrary to the legislativeintent and objective. Section 9A of the FTDR Act does not elideor negate the power of the Central Government to imposerestrictions on imports under sub-section (2) to Section 3 of theFTDR Act. [Paras 59-61][441-F; 442-B-G; 443-A-C]

5.5 The impugned notifications would be valid as they havebeen issued in accordance with the power conferred in the CentralGovernment in terms of sub-section (2) to Section 3 of the FTDRAct. The powers of the Central Government by an order imposingrestriction on imports under sub-section (2) to Section 3 is,therefore, not entirely curtailed by Section 9A of the FTDR Act.[Para 62][443-D-E]

6. Conclusion

The impugned notifications and the trade notices are upheldand the challenge made by the importers is rejected. The imports,if any, made relying on interim order(s) would be held to becontrary to the notifications and the trades notices issued underthe FTDR Act and would be so dealt with under the provisions ofthe Customs Act 1962. The Writ Petitions subject matter of theTransfer Petitions, subject to E in the judgment (What is notdecided) are dismissed. Writ Petitions filed by the intervenorsbefore the respective High Courts shall stand dismissed in termsof this decision. [Para 67][444-F-G]

Raj Prakash Chemical v. Union of India (1986) 2 SCC297: [1986] 1 SCR 448 – distinguished.

Gramophone Company of India Ltd. v. BirendraBahadur Pandey and Others (1984) 2 SCC 534: [1984]2 SCR 664; Jolly George Varghese and Another v. TheBank of Cochin (1980) 2 SCC 360 : [1980] 2 SCR 913;Director General of Foreign Trade and Another v.Kanak Exports and Another (2016) 2 SCC 226: [2015]

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A15 SCR 287; Associated Cement Companies Ltd. v.Commissioner of Customs (2001) 4 SCC 593: [2001] 1SCR 608; State of Punjab and Another v. DevansModern Breweries Ltd. and Another (2004) 11 SCC 26:[2003] 5 Suppl. SCR 930; S&S Enterprise v. DesignatedAuthority and Others (2005) 3 SCC 337: [2005] 2BSCR 255; Commissioner of Customs, Bangalore v. G.M.Exports and Others (2016) 1 SCC 91: [2015] 14SCR 848 ; Entertainment Network (India) limited andAnr. v. Super Cassette Industries Ltd. and Ors (2008)13 SCC 30: [2008] 9 SCR 165; His HolinessCKesavananda Bharati Sripadagalvaru v. State of Keralaand Another (1973) 4 SCC 225: [1973] Suppl. SCR 1;Pratap Singh v. State of Jharkhand and Anr. (2005) 3SCC 551:[2005] 1 SCR 1019 – referred to.

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Karan Dileep Nevatia v. Union of India (2010) 1 BomCR 588 – referred to.

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Maclaine Watson& Co. Ltd.v. Department of Trade andIndustry & Anr. (1989) 3 All ER 523; Lonrho Exportsv. ECGD [1983] 3 W.L.R. 394; The Eschersheim Anr v.The Jade Erkowit And Anr. (1976) 1 All ER 920 (HL) –referred to.

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The World Trade Organization, law, practice and policyMitsuo Matsushita, Thomas J. Schoenbaum, PetrosC. Mavroidis, and Michael Hahn, 3rd Edition 2015 atpage Nos. 2 – 3, page No. 3 and page Nos. 33-40;FStatus of Treaties in Domestic Legal Systems; a policyanalysis- Essay by Prof. John. H. Jackson – referredto.

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UNION OF INDIA AND OTHERS v. AGRICAS LLP

CIVIL ORIGINAL JURISDICTION: Transfer Petition (Civil)Nos. 496-509 of 2020

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(Petitions filed under Article 139A (1) with rule XL of SupremeCourt Rules, 2013)

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T.P.(Civil) D.No. 8823 of 2020.

Tushar Mehta, SG, Aman Lekhi, ASG, Harish Salve, Arvind Datar,Shyam Divan, Ravindra Shrivastava, Sr. Advs., Rajat Nair, Ms. SwatiGhildiyal, Ms. Sunita Sharma, Mrs. Anil Katiyar, K. R. Sasiprabhu,Aashish Chauhan, Aditya Shandilya, Kailash Pandey, Ranjeet Singh,Gaichangpou Gangmei, Udayditya Bannerjee, K. Raghavachryulu, B.Ramana Murthy, Udit Malik, Anshuman Shrivastava, AbhijeetShrivastava, Ms. Garima Tiwari, Karan Khanna, Mrs. SwarupamaChaturvedi, Hitesh Jain, Aman Jha, Ashutosh Mohan, Atishay Jain,Somiran Sharma, Aashish Chauhan, Ms. Swagoti Batchas, Saransh Saini,Vivek Jain, Ms. Anshul Sharma, Bhrigu Sharma, Ms. Suchitra Kumbhat,Nirvikar Singh, Ms. Anisha Upadhyay, Puneet Parihar, Bhrigu Sharma,Ms. Vrinda Bhandari, Pranav Jain, Siddhant Buxy, Pradeep Aggarwal,Ankit Sethi, Lal Pratap Singh, Umesh Pratap Singh, Arjun Aggarwal,Ms. Ruchi Kohli, Nitin Mishra, Ms. Mitali Gupta, Advs. for the appearingparties.

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AThe Judgment of the Court was delivered by

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AThe Judgment of the Court was delivered by SANJIV KHANNA, J.

Applications seeking intervention/impleadment are allowed.

2. Considering the nature of controversy involved, this Court, withBthe consent of the counsels for the parties, vide order dated 29th June2020 had deemed it appropriate to hear and decide challenge to thevalidity of the notifications dated 29th March 2019 bearing S.O. Numbers.1478-E,1479-E, 1480-E and 1481-E pending in several Writ Petitionsfiled before different High Courts. We have also examined and decidedthe connected challenge to the Trade Notice dated 16th April 2019 issuedCby the Directorate General of Foreign Trade on the ground of excessivedelegation as not being in accord with sub-section (2) to Section 3 readwith the bar under sub-section (3) to Section 6 of the Foreign Trade(Development and Regulation) Act, 1992 (hereinafter referred to as‘FTDR Act’).D3. Accordingly, we had heard arguments and by this commonjudgment would be disposing of the respective Writ Petitions, subjectmatter of these Transfer Petitions. This decision would also apply to theWrit Petitions filed by the intervening applicants.

4. For the sake of convenience, we would be referring the CentralEGovernment and the authorities collectively as ‘the Union of India’ andthe Writ Petitioners synchronously as ‘importers’. For clarity andwherever necessary we have referred to the Directorate General ofForeign Trade, as the ‘DGFT’. DGFT is an authority constituted underthe FTDR Act and appointed by the Central Government to advise themon foreign trade policy and is responsible for carrying out that policy.F

A. Factual background and legal issues.

5. The Union of India, vide Notification dated 29th March 2019,had exercised the powers conferred to it under Section 3 of the FTDRAct, read with paragraphs 1.02 and 2.01 of the Foreign Trade Policy,2015-2020 and amended the import policy conditions of items of ChapterG7 of the Indian Trade Classificatio‘n (Harmonized System), 2017,Schedule-I (Import Policy) as under:

“S.O. 1478(E).- In exercise of powers conferred by section 3 ofthe Foreign Trade (Development and Regulation) Act, 1992 (22of 1922), read with paragraphs 1.02 and 2.01 of the Foreign TradeHPolicy, 2015-2020, as amended from time to time, the Central UNION OF INDIA AND OTHERS v. AGRICAS LLP[SANJIV KHANNA, J.]

government hereby amends the Import Policy Conditions of itemsof Chapter 7 of the Indian Trade Classification (HarmonizedSystem), 2017, Schedule-I (Import Policy), as under:

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2. This notification shall come into force from the date of itspublication in the official Gazette.

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S.O. 1479(E).- In exercise of powers conferred by section 3 ofthe Foreign Trade (Development and Regulation) Act, 1992 (22of 1922), read with paragraphs 1.02 and 2.01 of the Foreign TradePolicy, 2015-2020, as amended from time to time, the Centralgovernment hereby amends the Import Policy Conditions of itemsof Chapter 7 of the Indian Trade Classification (HarmonizedSystem), 2017, Schedule-I (Import Policy), as under:

2. This notification shall come into force with effect from 1stApril, 2019.

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S.O. 1480(E).- In exercise of powers conferred by section 3 ofthe Foreign Trade (Development and Regulation) Act, 1992 (22

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Aof 1922), read with paragraphs 1.02 and 2.01 of the Foreign TradePolicy, 2015-2020, as amended from time to time, the Centralgovernment hereby amends the Import Policy Conditions of itemsof Chapter 7 of the Indian Trade Classification (HarmonizedSystem), 2017, Schedule-I (Import Policy), as under:

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2. This notification shall come into force from the date of itspublication in the official Gazette.

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S.O. 1481(E).- In exercise of powers conferred by section 3 ofEthe Foreign Trade (Development and Regulation) Act, 1992 (22of 1922), read with paragraphs 1.02 and 2.01 of the Foreign TradePolicy, 2015-2020, as amended from time to time, the Centralgovernment hereby amends the Import Policy Conditions of itemsof Chapter 7 of the Indian Trade Classification (HarmonizedFSystem), 2017, Schedule-I (Import Policy), as under:

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2. This notification shall come into force from 1st April, 2019.”

6. The Trade Notice dated 16th April 2019 issued by the DGFThad laid down the modalities for making applications for import of Peas,beans of Moong and Urad and Pigeon Peas and had inter alia stipulatedas under:

“a. Applications are invited online from the intending millers/refiners(having own refining / processing capacity) of pulses for its import-as per ANF-2M of FTP 2015-20 to DGFT, at [REDACTED] the concerned jurisdictional Regional Authorities.”

7. Earlier, the Union of India had issued a notification dated 25thApril, 2018 under Section 3 of FTDR Act read with the paragraphs 1.02and 2.01 of the Export – Import (EXIM) policy 2015-2020 by whichpeas were revised from ‘free’ to ‘restricted’ category for a period ofthree months, with a stipulation that during the period 1st April, 2018 to30th June, 2018 total quantity of 1 lakh MT of Yellow Peas minus thequantity already imported from 1st April, 2018 would be allowed againstlicence as per the procedure to be notified by the DGFT. The words‘already imported’ were defined to include shipment already arrived from1st April,2018 to 25th April, 2018 and those shipments backed byirrevocable letter of credit or advance payments made through bankingchannel before 25th April, 2018.

8. Considering the hardships faced by the traders who had madeadvance payments, the DGFT vide Trade Notice No. 19 dated 5th July2018 had allowed the import of Peas proportionate to the advancepayments made before 25th April 2018. By another Trade Notice dated6th July 2018, Peas, other than Yellow Peas, imported during theintervening period between 25th April 2018 to 15th May 2018 and awaitingclearance at customs or consignment of Peas with Bill of Lading prior to16th May 2018 were permitted freely. By the third Trade Notice dated17th August 2018, import of maximum 125 MT of Peas per contract,irrespective of the advance payment, made before 25th April 2018, wasallowed.

9. The Union of India had even earlier issued notifications dated5th August 2017 and 21st August 2017 revising import of beans of Urad/Moong and Pigeon Peas/Toor dal from ‘free’ to ‘restricted’ withstipulations as to annual (fiscal year) quota and requirement of a priorlicence from the DGFT. By notifications dated 24th April 2018 import of A

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Abeans of Urad/Moong and Pigeon Peas/Toor dal was to remainrestricted requiring a prior licence with stipulation as to annual quota forthe fiscal year 2018-19.

10. M/s. Hira Traders had filed Writ Petition Nos. 15921-15924of 2018 before the High Court of Judicature at Madras challengingBNotification No. 4/2015-20 dated 25th April 2018 and Trade NoticesNo. 05/2018 dated 9th May 2018, No. 10/2018-19 dated 16th May 2018and No. 12/2018 dated 18th May 2018 respectively. It had also prayedfor permission by way of an interim order to import Peas as per thecontracts. By interim order dated 28th June 2018, the operation ofNotification dated 25th April 2018 was stayed by the Madras High Court,Cthereby permitting imports without an import licence.

11. Several traders had thereafter filed Writ Petitions beforedifferent High Courts challenging imposition of restrictions on import ofPeas and pulses and interim orders were passed staying the notificationswhich had the effect of permitting imports without any restriction as toDquota or licence. The primary grounds raised in the Writ Petitions beforethe High Courts were:

(a) The impugned notifications issued by the DGFT had the effectof modifying or amending the EXIM policy as the specifieditems were withdrawn from the free category and moved toErestricted category. But, the DGFT, a statutory authorityunder the provisions of FTDR Act, was not authorised toauthenticate/issue an order amending or modifying the EXIMpolicy as this power vests with the Central Government interms of sub-section (2) to Section 3, read-with sub-section(3) to Section 6 of the FTDR Act, which states that powersFexercisable under Section 3, 5,15,16 and 19 of the FTDRAct cannot be delegated to the DGFT or any other officersubordinate to the Director General.

(b) Section 19(3) of the FTDR Act provides that every rule orevery order passed by the Central Government shall be laid,Gas soon as may be after it is made, before each House of theParliament while it is in session or thereafter. The impugnednotifications had not been laid before the Houses of theParliament.

(c) The Notifications and trade notices suffer from the viresHand defects mentioned by this Court in Director General of Foreign Trade and Another v. Kanak Exports andAnother.[1]

(d) The notifications and the trade notices offend the right toequality and violate Article 14 of the Constitution.

12. The Writ Petitions filed by M/s. Hira Traders were dismissedby the Madras High Court on 4th April 2019. The Bombay High Courtdismissed akin Writ Petitions filed by M/s. Taj Agro Commodities Pvt.Ltd. and others on 3rd July 2018. Similarly, Writ Petitions filed by M/s.Premium Pulses Products and others were dismissed by the GujaratHigh Court on 19th December 2018. The Madhya Pradesh High Courthad also dismissed similar petitions including the petition filed by M/s.Siddhi Vinayak and another, vide judgment dated 25th October 2018.Judgment of the Gujarat High Court was challenged before this Court inSpecial Leave Petition (Civil) No. 1922 of 2019 by M/s. Kusum Agencyand the same was dismissed vide order dated 28th January 2019. Subjectmatter of these Writ Petitions were the Notifications dated 5th August2017, 21st August 2017 and 25th April 2018 and the corresponding tradenotices issued by the DGFT.

13. Notwithstanding the aforesaid dismissals, as many as 90 WritPetitions were filed before the Rajasthan High Court at Jaipur challengingthe Notifications dated 29th March 2019 and the Trade Notice dated16th April 2019. Similarly, Writ Petitions were filed before the High Courtsof Delhi, Punjab and Haryana, Andhra Pradesh, Bombay and Calcutta.In several cases interim orders were passed permitting the importers toimport Peas/pulses notwithstanding the fact that they had not been issuedauthorisation/import licences or the total imports would exceed themaximum or total quantity fixed in the impugned notifications.

14. Before us, the importers had urged a new legal issue/pointwhich was not specifically raised in the Writ Petitions; the impugnednotifications were in the nature of ‘quantitative restrictions’ under Section9A of the FTDR Act, which could be only imposed by the CentralGovernment after conducting such enquiry, as is deemed fit, and onbeing satisfied that the “goods are imported into India in such quantitiesand under such conditions as to cause or threatens to cause seriousinjury to domestic industry.” Further, in exercise of power under sub-section (3) to Section 9A the Central Government has framed the 1 (2016) 2 SCC 226.

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ASafeguard Measures (Quantitative Restrictions) Rules, 2012, thatprescribe mandatory and detailed procedure for initiation, investigation,hearing to parties and adjudication by the Authorised Officer, whichstatutory mandate has not been followed. Under sub-rule (4) to the aboveRule, the Authorised Officer has power to initiate suo moto action if heis satisfied with the information received from any source that sufficientBevidence exits regarding increased imports; serious injury or threat ofserious injury to the domestic industry; and causal link between increasedimports and serious injury or threat of serious injury to the domesticindustry. Taking note of the submission, we had directed the parties tofile brief written submissions and the propositions which they propose toCcanvass in the context of the issues to be dealt with by this Court. TheUnion of India was also asked to file a Statement/Note disclosing numberof registered licences dealing with import of goods and quantity ofaverage annual consumption of the concerned goods in the country. Byanother order dated 2nd July, 2020 the Union of India was directed to file an affidavit clearly stating whether the impugned notifications are inDthe nature of ‘quantitative restrictions’ and if so whether the procedureunder Section 9A of the FTDR Act read with Safeguard Measures(Quantitative Restrictions) Rules, 2012 had been followed and to producethe relevant record thereof. We shall elaborate and decide the argumentsubsequently.EB. Discussion on the challenge to the role and authority ofthe DGFT to issue the Notifications and Trade Notice and“”interpretation of the words total quantity.

15. At the outset, we must record that the importers, and in ouropinion rightly, have not raised the contention that the DGFT could notFhave notified the impugned notifications. The notifications themselvesrecord that they were published by the Ministry of Commerce andIndustry, Department of Commerce, Directorate General of ForeignTrade. The first paragraph of the notification states that they had beenissued by the Central Government in exercise of powers conferred underGArticle 77 of the Constitution. Clearly, the notifications were issued bythe Central Government, and not the DGFT that had performed theministerial act of publication. The decision to amend and issue thenotification was of the Central Government. Neither Section 3(2) norSection 6(3) of the FTDR Act was violated. This Court in DelhiInternational Airport Limited v. International Lease FinanceH

Corporation and others[2], had referred to Articles 77 and 166 of theConstitution and held that the Constitution stipulates that wheneverexecutive action is taken by way of an order or instrument it shall beexpressed to be taken in the name of the President and Governor inwhose name the executive power of the Union and the States,respectively, are vested. Article 77 does not provide for delegation ofany power, albeit under sub-section (3) of Article 77, the President is tomake Rules for more convenient transaction of business and allocationof same amongst Ministers. Under the Government of India (Transactionof Business) Rules, 1961, the government business is divided amongstMinisters and specific functions are allocated to different Ministries.The Director General of Foreign Trade is an ex officio AdditionalSecretary in the Government of India and is appointed by the CentralGovernment under sub-section (1) to Section 6 of the FTDR Act toadvise the Central Government in formulation and carrying out the ForeignTrade Policy. Wherefore, even the website of the Ministry of Commerceand Industry, Department of Commerce, states that the DGFT is anagent of the Central Government and attached office to it. Further, clause(2) of Article 77 provides that validity of an order or instrument made orexecuted in the name of the President, authenticated in the mannerspecified in the Rules made by the President, shall not be called in questionon the ground that it is not an order or an instrument made or executedby the President. Therefore, the contention of issuance of the impugnednotification sans authority, cannot be sustained.

16. FTDR Act vide Section 3(2), as elucidated and examined below,authorises the Central Government to prohibit, restrict or otherwiseregulate the import or export of goods, by an order published in theOfficial Gazette. FTDR Act vide Section 11(1) prohibits imports or exportsof goods in contravention of the FTDR Act, the rules and orders madethereunder and the EXIM Policy. Section 5 of the FTDR Act authorizesthe Central Government to formulate and announce the EXIM Policy bynotification in the Official Gazette. Under Section 11(2) of the FTDRAct, when a person makes or abets or attempts to make any import orexport in contravention of the FTDR Act, any rule or order madethereunder or the EXIM policy, he is liable to pay penalty upto Rs.10,000/- or five times the value of the goods, services or technology, whicheveris greater. Section 11 of the Customs Act,1962 provides that the Central ABC

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AGovernment may by a notification in the Official Gazette prohibit,absolutely or subject to conditions as specified, import or export of anygood. The listed purposes are wide and range from conservation of foreignexchange and safeguarding of balance of payments, avoiding shortageof goods, prevention of surplus of any agricultural or fisheries product,prevention of serious injury to domestic production, establishment of anyBindustry and lastly compendiously includes “any other purpose conduciveto the interest of the general public”. Under clause (d) to Section 11 ofthe Customs Act goods imported or exported (or attempted to be importedor exported) contrary to any prohibition are liable to confiscation.

17. We would also without any hesitation reject the contentionCraised by some of the importers that the impugned notification is illegalbecause of vagueness or allows restricted quantity of 1/1.5 lakh MT ofPeas (Pisum Sativum) including Yellow Peas, Green Peas, Dun Peasand Kaspa Peas as against a licence, meaning thereby each licensee isallowed to import the maximum quantity specified in the notification. InDother words, the total quantity specified in the notification is per licenseeand not for the total imports of the commodity specified in the notification.The submission has no merit as the notification expressly uses theexpression ‘total quantity’ of the commodity specified which could beimported. There is no ambiguity or vagueness in the notifications, relevantportions of which have been quoted above. Even otherwise the expressionE‘total quantity’ cannot be construed as quantity per licence issued as thenumber of licences issued concerning the subject goods could benumerable (as per the Union of India 2248,1016 and 2915 licences wereissued in 2019-20 for import of Tur, Moong and Urad dals againstrestricted quota of 4,1.5 and 4 lakh MT, respectively). If each licenceFholder is allowed to import 1/1.5 lakh MT of Peas, the total import wouldwell exceed the total annual consumption after we account for theproduction within India. In our opinion, the plea and interpretation of theimporters if accepted will not only be contrary to the express languageof the notification but would frustrate the intent and object of restrictingthe imports of the stated goods by prescribing a quota. We decline andGwould not accept this farfetched and somewhat drivel interpretation ofsimple and straight forward words.

18. We would also reject the contention raised by the importersthat the Trade Notices issued by the DGFT violate Sections 3 and 5 readwith sub-section (3) of Section 6 of the FTDR Act as they had theHeffect of superseding the Notifications or imposing a new criterion and eligibility condition not envisaged by the notifications. The legal effect ofthe notifications was to amend the EXIM policy whereby the specifiedcommodities would henceforth not be ‘free’ (importable withoutrestriction) but would fall in the restricted category. Once the commoditieswere shifted to the restricted category, the requirement of licence wouldflow from the mandate of Section 3 of the FTDR Act read with Rule 4of the Foreign Trade (Regulation) Rules, 1993. Rule 4 reads as under:

“4. Application for grant of licences– A person may make anapplication for the grant of a licence to import or export goods inaccordance with the provisions of the Policy or an Order madeunder section 3.”

Further, the EXIM Policy regulates the restricted goods underParagraphs 2.04, 2.08 and 2.10 of Policy, which read as under:

“2.04 Authority to specify Procedures

DGFT may specify procedure to be followed by an exporter orimporter or by any licensing/Regional Authority (RA) or by anyother authority for purposes of implementing provisions of FT(D&R) Act, the Rules and the Orders made there under and FTP.Such procedure, or amendments, if any, shall be published by meansof a Public Notice.

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2.08 Export/Import of Restricted goods/Services Any goods/service, the export or import of which is ‘Restricted’may be exported or imported only in accordance with anAuthorisation/Permission or in accordance with the procedureprescribed in a Notification/Public Notice issued in this regard.

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2.10 Actual User Condition

Goods which are importable freely without any ‘Restriction’ maybe imported by any person. However, if such imports require anAuthorisation, actual user alone may import such good(s) unlessactual user condition is specifically dispensed with by DGFT.”

Paragraph 2.08 states that any goods or services, import or exportof which is restricted, can be exported or imported only in accordancewith the authorisation/permission or in accordance with the procedure AB

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Aprescribed in the notification/public notice in this regard. Paragraph 2.04states that the DGFT may specify procedures to be followed by anexporter or an importer or by a licencing/regional authority, etc. for thepurpose of implementing provisions of the FTDR Act, the rules and ordersmade thereunder. Such procedures or amendments, if any, shall bepublished by means of a public notice. Paragraph 2.10 sets the matterBbeyond controversy as it states that the goods which are freely importablewithout a restriction may be imported by any person. However, if goodsrequire authorisation, ‘actual user’[3] alone may import such goods.However, the DGFT can dilute and dispense with the ‘actual user’condition.C19. The effect of the Notifications, as noticed and beyond doubt,is to bring the specified commodities from free to the restricted categoryand therefore the imports in question would require a prior authorisationfor import. The requirement of licence is nothing but authorisation.Therefore, in terms of paragraph 2.10, the imports of the specifiedDcommodities would only be by the ‘actual user’, unless the ‘actual user’condition was specifically dispensed with or diluted by the DGFT. TheDirectorate by specifying that the licence would be issued to the milleror refiner has, therefore, just clarified that the ‘actual user’ alone will bepermitted to import the restricted goods mentioned in the notification forwhich a prior authorisation or licence is required. The importers areEtraders and it is not the case of any of the importers that they are the‘actual users’. Further, none of the importers have applied for a licenceor authorisation for import of the restricted commodities. Violation ofclause 9.03 of the EXIM Policy defining the expression ‘Actual User’,is neither alleged nor argued before us.F

3 9.03 “Actual User” is a person (either natural or legal) who is authorized to useimported goods in his/its own premise which has a definitive postal address.(a) “Actual User (Industrial)” is a person (either natural & legal) who utilizes importedgoods for manufacturing in his own industrial unit or manufacturing for his own use inanother unit including a jobbing unit which has a definitive postal address.(b) “Actual User (Non-Industrial)” is a person (either natural & legal) who utilizes theGimported goods for his own use in:

(i) any commercial establishment, carrying on any business, trade or profession, whichhas a definitive postal address; or

(ii) any laboratory, Scientific or Research and Development (R&D) institution,university or other educational institution or hospital which has a definitive postaladdress; orH(iii) any service industry which has a definitive postal address.

20. The importers have raised the contention that the expression‘if such imports’ used in the second sentence of paragraph 2.10 onlyqualifies the first sentence of paragraph 2.10. We do not accept thecontention, for paragraph 2.10 consists of two parts. The first part relatesto goods which are freely importable without any licence and states thatsuch goods that can be imported by any person. The second part refersto such imports which require authorisation and not the imports whichare freely importable without any restriction. ‘Actual user’ condition,therefore, applies by default when imports require an authorisation.However, the DGFT can specifically dispense with or dilute the ‘actualuser’ condition.

C. Section 9A of the FTDR Act and it’s interpretation.

(i) General Agreement on Tariff and Trade – 1947 and 1994.

21. Conference at Bretton Woods, New Hampshire in 1944 leadto establishment of the ‘International Monetary Fund’ and the ‘WorldBank’, but the attempt to establish ‘International Trade Organisation’ todevelop and coordinate international trade faltered and was finally givenup in 1950. However, multilateral trade negotiations had continued withthe objective to prepare a multilateral treaty containing general principlesof international trade and a schedule of tariff reductions. By the end of1947, the work on the General Agreement on Tariff and Trade (‘GATT’),1947 and tariff reduction was finalised and agreed upon. Interimcommission of the ‘International Trade Organisation’ became the GATTSecretariat based in Geneva, Switzerland. On or about 8th July 1947,Government of India became a signatory and ratified GATT-1947.However, GATT-1947 is considered to be a failure or at best had alimited impact. Most jurists and economists hold that the GATT-1947suffered from ‘birth defects’ as it did not have a legal personality, lackedestablished procedures and organizational structure in the absence of acharter; had ‘provisional application’ as it had provisions permittingcontracting parties to maintain legislations in-force inconsistent with the‘grandfathering rights’ and there was ambiguity and confusion about theGATT’s authority and decision making ability[4].

22. What followed was several years of intense negotiationsinvolving over 100 nations that finally ended in 1994 at Marrakesh, 4 The World Trade Organization, law, practice and policy Mitsuo Matsushita, ThomasJ. Schoenbaum, Petros C. Mavroidis, and Michael Hahn, 3rd Edition 2015 at pageNos. 2 – 3.

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AMorocco, with a multilateral international treaty of over 400 pages ofbasic text with substantive rules and tariff schedules. The final act signedexceeded 26,000 pages. This treaty popularly known as GATT-1994was signed by 128 countries including India on 1st January 1995. On thesame day, the World Trade Organisation (WTO), an institution with asecretariat and staff, replaced GATT and came into existence, as theBinternational organisation for overseeing and regulating functioning ofthe multilateral trade system. GATT-1994 in nutshell is a rule-orientedpackage consisting of multilateral trade agreements annexed to a singledocument and works on the basis of single undertaking approach wherebyall agreements annexed become binding on all the members as singleCbody of law. The main agreement consists of the preamble and XVIarticles establishing the WTO, four annexures and declarations, decisionsand understandings. Annexure I to the multilateral agreement is dividedinto three parts. Annexure 1A consists of the GATT-1994 and twelveother agreements on agriculture; application of sanitary and phytosanitarymeasures; textiles and clothing; technical barriers to trade; trade relatedDinvestment measures; anti-dumping duty; rules of customs valuation;rules of pre-shipment valuation; rules of origin; import licensingprocedures; subsidies and countervailing measures; and safeguards.Article II of GATT-1994 limits tariff charges to those agreed in theSchedules of Concessions, while Article I lay down the principle of Most-EFavoured-Nation giving benefit of the concessions to all WTO members.Article III mandates requirement of national treatment of import withrespect to taxes and regulations. Articles VI and XVI relate to subsidies,antidumping and countervailing duties. Article VII incorporates rules onvaluation for customs purposes. Article XI, which we shall subsequentlyexamine, prohibits quotas, import or export licences and other non-tariffFmeasures, with some exceptions. Annexure 1A includes schedule ofconcessions from each major trading country and a general interpretativenote that provides that in case of a conflict between provisions of GATT-1994 and another Annexure A-1 agreement, the provisions of latter wouldcontrol. Annexure 1B consists of the General Agreement on Trade inGServices. Annexure 1C consists of the Agreement on Trade RelatedAspects of Intellectual Property Rights. Annexure 2 consists of theUnderstanding on Rules and Procedures Governing Settlement ofDisputes, referred to as the Dispute Settlement Understanding, providingmechanism for resolution of trade disputes among WTO members.Annexure 3 establishes the trade policy review mechanism, withH

procedure for periodic review of compliance with the WTO agreementby each member. Annexure 4 consists of plurilateral trade agreementsbinding only on the parties that have accepted them.

23. GATT-1994 also has provisions that allow and permitexceptions. There are exceptions to quotas for balance-of-paymentspurposes in Article XII, XIII, XV and XVII, Section B, exceptions fordeveloping countries vide Article XVIII and Part IV and exception forhealth, safety, protection of natural resources and other matters in ArticleXX. Article XIX, which we would again refer to, is an exception andsometimes referred to as the escape clause, that provides emergencyaction where serious injury is caused or threatens domestic industry.There are exceptions for national security vide Article XXI, customsunions and free trade areas vide Article XXIV, waivers by the contractingparties vide Article XXV and ‘opt out’ option on ‘one-time basis’ whena new member joins GATT vide Article XXXV[5].

24. The ‘Marrakesh Agreement’ enacts and incorporates rules-oriented approach regulating the conduct of the WTO members and aredesigned to ensure that the tariff concessions and the multilateral tradetreaty works as intended and not undermined. Articles XXII[6] providesfor sympathetic consideration and consultation and satisfactory solutionwith respect to any matter affecting the operation of GATT-1994. ArticleXXIII[7] allows a GATT contracting party to make a complaint should it 5 The World Trade Organization, law, practice and policy Mitsuo Matsushita, ThomasJ. Schoenbaum, Petros C. Mavroidis, and Michael Hahn, 3rd Edition 2015 at pageNo. 3.

6 XXII. Consultation

1. Each contracting party shall accord sympathetic consideration to, and shall affordadequate opportunity for consultation regarding, such representations as may be madeby another contracting party with respect to any matter affecting the operation of thisAgreement. 2. The CONTRACTING PARTIES may, at the request of a contractingparty, consult with any contracting party or parties in respect of any matter for whichit has not been possible to find a satisfactory solution through consultation underparagraph 1.

7 XXIII. Nullification or Impairment

1. If any contracting party should consider that any benefit accruing to it directly orindirectly under this Agreement is being nullified or impaired or that the attainment ofany objective of the Agreement is being impeded as the result of (a) the failure ofanother contracting party to carry out its obligations under this Agreement, or (b) theapplication by another contracting party of any measure, whether or not it conflictswith the provisions of this Agreement, or (c) the existence of any other situation, the A

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Aconsider that another contracting party is directly or indirectly nullifying,impairing the GATT-1994 or otherwise impeding attainment of its objective:(a) by failure in carrying out its obligations; (b) by measures, even whenthey are not in conflict with GATT-1994; and (c) in any other situation.These Articles emphasise on the need for consultation, withdrawal ofconflicting measures and mutual satisfactory solution of the matter byBthe contracting parties concerned, consistent with the GATT-1994. Albeiton failure to reach a satisfactory adjustment within reasonable time or incase of (c) (supra), the matter is to be referred to the Contracting Partiesto investigate and make recommendations to the offending party or makea ruling on the matter, as appropriate. As the question of invocation andCjurisdiction of the national or domestic court arises for consideration inthe present case, we would like to slightly elaborate on the disputeresolution mechanism in Annexure 2. It contains 27 Articles totallingabout 143 paragraphs and four appendices. For the present case, it wouldbe suffice to record that the WTO, at the top, consists of Ministerial Conference which meets not less than every two years. Next there areDfour councils, including the General Council which has an overallsupervising authority and to carry out many functions of the MinisterialConference. In addition, we have Council for Trade Inputs, Council for

contracting party may, with a view to the satisfactory adjustment of the matter, makewritten representations or proposals to the other contracting party or parties which itEconsiders to be concerned. Any contracting party thus approached shall give sympatheticconsideration to the representations or proposals made to it.2. If no satisfactory adjustment is effected between the contracting parties concernedwithin a reasonable time, or if the difficulty is of the type described in paragraph 1 (c)of this Article, the matter may be referred to the CONTRACTING PARTIES. TheCONTRACTING PARTIES shall promptly investigate any matter so referred to themand shall make appropriate recommendations to the contracting parties which theyFconsider to be concerned, or give a ruling on the matter, as appropriate. TheCONTRACTING PARTIES may consult with contracting parties, with the Economicand Social Council of the United Nations and with any appropriate inter-governmentalorganization in cases where they consider such consultation necessary. If theCONTRACTING PARTIES consider that the circumstances are serious enough tojustify such action, they may authorize a contracting party or parties to suspend theGapplication to any other contracting party or parties of such concessions or otherobligations under this Agreement as they determine to be appropriate in thecircumstances. If the application to any contracting party of any concession or otherobligation is in fact suspended, that contracting party shall then be free, not later thansixty days after such action is taken, to give written notice to the Executive Secretary¹to the CONTRACTING PARTIES of its intention to withdraw from this Agreementand such withdrawal shall take effect upon the sixtieth day following the day on whichHsuch notice is received by him.

Trade and Services, and Council for Trade Related Aspects of IntellectualProperty Rights. The General Council, as per the WTO Charter,discharges the responsibility of the Dispute Settlement Body (DSB).Thus, the WTO Charter adopts a legalistic and a rule-oriented approachfor resolving issues relating to violation of the GATT agreements. TheDSB establishes Panel(s) and on adoption of Panel (and the AppellateBody) reports, provides for implementation of the recommendation andrulings, and can authorise action for failure to comply with therecommendation(s) and ruling. The DSB, though a part of the GeneralCouncil, has its own Chairman and follows separate procedures. ThePanels are normally composed of three persons, and in exceptional casesfive, who are well qualified government or non-government individualsselected from a roaster of persons suggested by WTO members. Thepanel members serve in their individual capacities and not asrepresentatives of WTO members. The Appellate Body reviews Paneldecisions. The Appellate Body is a standing institution composed ofseven persons appointed by DSB for four-year term. Members of theAppellate Body must be persons with recognised authority withdemonstrated expertise in law and international trade who are notaffiliated with any government. Membership of the Appellate Body isbroadly representative of the membership of the WTO. The procedureadopted for the dispute resolution mechanism is to facilitate promptsettlement of situations with the objective and purpose that the ‘MarrakeshAgreement’ is preserved and not nullified or impaired.

(ii) Obligations of the contracting party and effect ofinternational treaty, namely, GATT-1994 on the domestic law.

25. Application of treaties into national legal systems and thehierarchical status of the norms to be so applied are extraordinarilycomplex and vary from country to country depending upon constitutionaland other municipal rules. Further, a number of legal and constitutionalissues regarding international treaties arise in domestic law, like the powerto negotiate, sign and exit a binding international obligation or treaty,validity of a treaty under the national constitutional law, power to implementthe treaty obligations and applicability of treaty in domestic law includingthe principle of invocability or justiciability as contrasted from directapplicability and hierarchy of norms in domestic law where the treatynorms conflict with the norms of the domestic law. There is no uniformityin approach on these aspects as there are different national systems of AB

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Atreaty applications[8]. Two aspects relevant in the present case are; (i)applicability of the international treaty in domestic law and (ii) ‘invocability’of the treaty in municipal law and before the municipal courts.

26. In spite of there being different constitutional and statutoryapproaches on applicability, the States as signatories to the internationalBtreaty are under an obligation to act in conformity and bear responsibilityfor breaches, be it as a consequence of legislative enactment, executiveaction or even judicial decisions. The State cannot plead and rely uponinternal law including judicial decisions as a defence to a claim for breachof an international obligation. Acts of legislation, executive measuresand judicial decision making are not treated as third party acts for whichCthe State is not responsible. The national law, executive mandate andaction and the decisions of the domestic courts are facts which expressthe will and constitutes activities of the State. In international law,municipal laws cannot prevail upon the treaties as internal actions mustcomply with the international obligation. They may constitute breach ofDthe treaty.

27. Thus, breach of a stipulation in international law cannot bejustified by the State by referring to its domestic legal position. This ruleof international law is unexceptionable and prosaic, as the contra viewwould permit the international obligations to be evaded by the simpleEmethod of domestic legislation, executive action or judicial decision.Contracting States are under an obligation to act in conformity with therules of international law and bear responsibility for breaches whethercommitted by the legislature, executive or even judiciary. In a way,therefore, international treaties are constraint on sovereign activity, albeitvoluntarily agreed.F

28. For the purpose of GATT-1994, municipal laws are evidencesof fact, including evidence of conduct in violation of the norms andobjective of the treaty. At the same time, failure to enact an internaldomestic law in conformity with the international obligation is not a breachof international law, unless there is such requirement and obligationGcreated by the international treaty. In the absence of any such bindingclause, breach arises only when the State concerned fails to observe itsobligation on a specific occasion.

8 Prof. John. H. Jackson in his essay- Status of Treaties in Domestic Legal Systems; apolicy analysis.H

29. Various theories have been put forward to explain applicabilityof international customary and treaty law in domestic law. The dualistposition is that the international municipal law operates separately andbefore any rule or principle of international law can have effect withinthe domestic jurisdiction, it must be expressly or specifically transformedinto municipal law by use of appropriate constitutional machinery. Dualismstresses that international law and municipal law exist separately andcannot have effect on or overrule the other. Consequently, the municipallaws and international laws can operate simultaneously as they regulatedifferent subject matters. International law is between sovereign States,while the municipal law applies within the State and regulates legalrelationship between the citizens/subjects inter se and the citizen/subjectand the State. Monistic legal systems include international treaties indomestic law. Monism takes the form of assertion of the supremacy ofthe international law even within the national sphere, with theunderstanding and belief that an individual is a subject of internationallaw. International norms provide the basic norms for the national legalorder, and both are a part of the same systems of norms.

30. Most jurists draw distinction between ‘direct application’ oftreaties in domestic law, and national legal systems that mandate andrequire ‘act of transformation’ for an international treaty to apply and bea part of domestic law. ‘Direct application’ means and mandates thatthe treaty norms, either wholly or to some extent, are directly treated asnorms of domestic law and enjoy the statutory law status by default inthe domestic legal system. The term ‘direct application’ will also coversituations in which government or different levels of government utilisetreaty norms as part of domestic jurisprudence and is not limited tosituations in which private parties can sue on the basis of the treatynorms. As explained below, there is distinction between direct applicationand ‘invocability’. ‘Act of transformation’ principle means and impliesthat an international treaty is not directly applicable in the domestic lawsystem and requires provision in the domestic rules before it is applied.‘Transformation’ is a word of wide amplitude and does not refer to mereimplementation as it includes the right of the country to adopt, amend ormodify the treaty language into domestic jurisprudence. The ‘act oftransformation’ is different from ‘direct application’ as in the former thetreaty is not received and treated as part of domestic jurisprudence untilit is published and made part of the domestic jurisdiction in the samemanner as other law.

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A31. The Constitution of Netherlands is generally regarded asmonistic since it expressly provides that certain treaties are directlyapplied and the treaties are superior to all law including constitutionallaws. The 1958 Constitution of France also calls for the direct applicationand a higher status for treaties than later legislations. Similar provisionsare to be found in different ways in the Constitutions of Belgium andBSwitzerland. Under the United States jurisprudence, a differentiation ismade between ‘self-executing treaties’ which can be directly appliedand ‘non-self-executing treaties’[9]. Courts have ruled that a directly self-executing treaty has same status as federal laws and the latest in timetherefore prevails. Consequently, a later internal federal statue will prevailCover the international agreement. GATT-1994 in the United States legalsystem is a ‘non-self-executing treaty’. The European Union is establishedby two treaties namely the Treaty of European Union and the Treaty onthe Functioning of the European Union. Member States have attributedthe European Union with competence that may either a-priori renderthe pertinent state activity incompatible with European law or may, throughDuse of such legal title, pre-empt the states from continuing to act orlegislate. This could lead to exclusive European Union externalcompetence even in the area of shared internal competence. EuropeanUnion Law enjoys primacy over the laws of the member states and mayhave direct effect. Union legislators are on equal footing and are directlyEelected to the European Parliament and the Council for the EuropeanUnion. However, both European Union and member States are membersof the WTO and are contracting parties to GATT-1994. Internationalagreements concluded by European Union become integral part of theEuropean Union’s legal order and are hierarchically positioned betweenthe two founding treaties and the ordinary secondary legislation, whichFprinciple applies to GATT-1994. On this basis it has been held that theEuropean Union law is to be interpreted in light of the WTO obligation toensure GATT-1994 consistent interpretation of the European Unionlegislation. At the same time, authors and jurists have observed thatindividuals and member States challenge for GATT-1994 incompatibilityGsecondary legislation have received different answers as in some casesit has been held that international agreement will only be granted directeffect if the provisions are capable of conferring rights on citizens of the 9 Prof. John. H. Jackson in his essay- Status of Treaties in Domestic Legal Systems; aHpolicy analysis.

community which they can invoke before the court[10]. (Aspect of‘invocability’ has been separately examined below.)

32. United Kingdom, being a parliamentary democracy, the treatiesgenerally do not have direct statute like application, though they mayhave other internal effects. United Kingdom and other parliamentarydemocracies, like Canada and Australian systems, are generallyconsidered as prime example of a dualist system. In United Kingdom,the Crown is the constitutional authority to enter into treaties and thisprerogative power cannot be infringed by the courts. Further, treatiescannot operate by themselves and require passing off an enabling statute.Lord Oliver in the House of Lords decision in Maclaine Watson & Co.Ltd. v. Department of Trade and Industry & Anr.[11] had noted:

“...as a matter of the constitutional law of the United Kingdom,the royal prerogative, whilst it embraces the making of treaties,does not extend to altering the law or conferring rights on individualsor depriving individuals of rights which they enjoy in domestic lawwithout the intervention of Parliament. Treaties, as it is sometimesexpressed, are not self-executing. Quite simply, a treaty is notpart of English law unless and until it has been incorporated intothe law by legislation.”

Except to the extent that a treaty becomes incorporated into thelaws by a statute, the courts in United Kingdom have no power to enforcetreaty rights and obligations at the behest of foreign government or evena citizen of the United Kingdom. It has been also held that decision as towhether the terms of the treaty have been complied with are mattersexclusively for the Crown as ‘the court must speak with the same voiceas the executive’[12]. This principle is subject to the exceptions in caseswhere reference to the treaty is needed to explain the relevant factualbackground in cases where terms of the treaty are incorporated in acontract or the legislation refers to a relevant but un-incorporated treaty.However, an unincorporated international treaty can give rise to legitimateexpectations that the executive, in the absence of statutory or executiveindications to the contrary, will act in conformity with the treaty. In all 10 The World Trade Organization, law, practice and policy Mitsuo Matsushita, ThomasJ. Schoenbaum, Petros C. Mavroidis, and Michael Hahn, 3rd Edition 2015 at pageNos. 33–40.

11 (1989) 3 All ER 523

12 Lonrho Exports v. ECGD, [1998] 3 W.L.R 394.

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Aother cases, rights and duties of the British subjects are affected by anAct of Parliament which is necessary for the provisions of the particulartreaty to be operative within the United Kingdom. Further and at thesame time, there is a presumption in English law that legislation is to beconstrued as to avoid conflict with international law. This specificallyapplies when interpretation to the Act of Parliament is in question, i.e.Bwhile interpreting the enactment as a consequence of the ‘act oftransformation’. The courts would intend to bring the treaty into effect ifthe provisions are unambiguous unless they have no choice. In UnitedKingdom, the legislature is required to enact laws, that incorporate andtransform treaties or treaty norms into domestic law. Variation of thisCapproach is to be found in other countries like Germany and Italy. Thus,there is great diversity of national constitutional systems regardinginternational treaty application.

33. It would be now appropriate to refer to the principle of‘invocation’. Invocability in simple terms refers to justiciability;Dadmissibility of a claim before the national courts. It is not connectedwith the defence or merits of the defence. In case where an ‘act oftransformation’ is required, treaties may partially or entirely become partof the domestic law. Where the treaty or portion thereof become a partof the domestic law by ‘act of transformation’, it is obvious that only thepart incorporated or transformed into domestic law is invocable andEjusticiable and not the parts that are not codified into domestic law.However, invocability can embrace several ideas which are intertwinedand is of specific concern in cases of constitutions allowing directapplication. Here ‘invocability’ is a generic term which means to embracea small inventory of means of judicial control over the use in a particular

Flaw suit of the direct applicability of the treaty. As in case of ‘act oftransformation’, even in direct application cases, some jurisdictions acceptthe principle of partial direct application and, therefore, the treaty is directlyapplicable for some purposes and not others. Professor John H. Jackson,a leading jurist on this subject, whose treatise and essays have helped usunderstand the GATT and the complexities, in his essay ‘Status ofGTreaties in Domestic Legal System; A Policy Analysis’ referring to‘invocability’ even in cases of direct application in domestic law, hasobserved as under:

“Even when the rule of direct application covers most, ortheoretically all, treaties or certain broad categories of treaties,Hcourts will find ways to avoid applying the treaty norm in particular cases, perhaps by relying on one or another concept that can belumped under the rubric of invocability (e.g. standing), or by holdingthat the treaty norm is designed to constrain or assist certaingovernment agencies and not private litigants. Or the court mayrefuse to apply a treaty directly because it is not “specific andprecise” enough for that purpose, a concept akin to “justiciability”.Other disqualifying concepts may also be employed.”

(iii) Legal position in India.

34. The law in India is not very different from other CommonwealthCountries. Article 73 of the Constitution delineates the extent of executivepower of the Union which extends to all matters with respect to whichthe Parliament has the power to make laws and it extends to the exerciseof such rights, authority and jurisdiction as are exercisable by the CentralGovernment by virtue of any treaty or agreement. Proviso to the Articledeals with limitation of the executive power under sub-clause (a) withwhich we are not concerned. Chapter I of Part XI of the Constitution,captioned ‘Relations between the Union and the Sates’ vide differentArticles stipulates that in respect of List 1 of the 7th Schedule theParliament has exclusive power to make laws for the whole or any ofthe territory of India; in respect of List II (State List) the legislatures ofthe States have exclusive power to make laws for the whole or any partof the States; and in respect of List III (Concurrent List) the Parliamentand the State Legislatures have the power to make laws. For the purposeof the present case, Article 253 of the Constitution is important as itstates that notwithstanding anything in the foregoing provisions of thisChapter, the Parliament has the power to make laws for the whole orany part of the territory of India for implementing any treaty, agreementor convention with any other country or countries or decisions made atany international conference, association or body.

35. Constitutional Bench of this Court in Maganbhai IshwarbhaiPatel Etc. v. Union of India[13] had examined the question whether theGovernment of India should be restrained from ceding without approvalof the Parliament the ‘undemarcated area’ in the Runn of Kutch toPakistan as awarded in the award dated 19th February 1968. In thejudgment authored by Hidayatullah, C.J., on behalf of himself and threeother Judges, he referred to the earlier decisions of this Court in In re.

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ABerubari Union (I)[14], Rai Sahib Ram Jawaya Kapur and Others v.State of Pubjab[15] and Ram Kishore Sen and Others v. Union of Indiaand Others[16] and noticed the distinction between (i) formation of thetreaty; and (ii) performance of the treaty obligation. The first is anexecutive act and the second a legal act if domestic law is required.Unless the Parliament assents to the treaty and accords its approval toBthe first executive act, the performance has no force of law though thetreaties created by the executive action bind the contracting States and,therefore, means must be found for their implementation within law.Consequently, whenever a peace treaty involves municipal execution,statutes have to be passed. While accepting the contention that precedentsCof this Court are clear that no cession of Indian territory can take placewithout constitutional amendment, the Constitution Bench held that thesettlement of a boundary dispute cannot be held to be cession of territory.Accordingly, the decision to implement the award by exchange of letterstreating the award as an operating treaty by demarcating the correct boundary line was within the executive power of the government, andDno constitutional amendment was required.

36. More important for our purpose is the concurring opinion ofShah, J. who had quoted the effect of international treaty on the rights ofthe citizen/subjects of the State as stated in Oppenheim’s InternationalLaw, 8th Edition, in the following words:

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“...Such treaties as affect private rights and, generally, as requiredfor their enforcement by English Courts a modification of commonlaw or of a statute must receive parliamentary assent through anenabling Act of Parliament. To that extent binding treaties whichare part of International Law do not form part of the law of theFland unless expressly made so by the Legislature.

(page 40)

The binding force of a treaty concerns in principle the contractingStates only, and not their subjects. As International Law is primarilyGa law between States only and exclusively, treaties can normallyhave effect upon States only. This rule can, as has been pointedout by the Permanent Court of International Justice, be altered by 14 AIR 1960 SC 84515 AIR 1955 SC 549H16 AIR 1966 SC 644

the express or implied terms of the treaty, in which case itsprovisions become self-executory. Otherwise, if treaties containprovisions with regard to rights and duties of the subjects of thecontracting States, their Courts, officials, and the like, these Statesmust take steps as are necessary according to their MunicipalLaw, to make these provisions binding upon their subjects, Courts,officials, and the like.

(page 924)”

Referring to the power under Article 73 of the Constitution andthe power of the Parliament to make laws in terms of Article 253, Shah,J. had further observed:

“80...By Article 73, subject to the provisions of the Constitution,the executive power of the Union extends to the matters withrespect to which the Parliament has power to make laws. OurConstitution makes no provision making legislation a condition ofthe entry into an international treaty in times either of war orpeace. The executive power of the Union is vested in the Presidentand is exercisable in accordance with the Constitution. TheExecutive is qua the State competent to represent the State in allmatters international and may by agreement, convention or treatiesincur obligations which in international law are binding upon theState. But the obligations arising under the agreement or treatiesare not by their own force binding upon Indian nationals. Thepower to legislate in respect of treaties lies with the Parliamentunder Entries 10 and 14 of List I of the Seventh Schedule. Butmaking of law under that authority is necessary when the treatyor agreement operates to restrict the rights of citizens or others ormodifies the laws of the State. If the rights of the citizens orothers which are justiciable are not affected, no legislative measureis needed to give effect to the agreement or treaty.”

37. It was also clarified that Article 253 deals with the legislativepower of the Parliament and thereby confers power on the Parliamentwhich it may not otherwise possess. This provision does not seek tocircumscribe the extent of power conferred under Article 73. In otherwords, in consequence of the exercise of executive power, rights of thecitizens or others are restricted or infringed, or laws are modified, theexercise of power must be supported by legislation; where there is no AB

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Asuch restriction, infringement of the right or modification of the laws, theexecutive is competent to exercise the power. The dictum in MaganbhaiIshwarbhai Patel (supra) can be summarised[17] as under:

“(i) The stipulations of a treaty duly ratified by the CentralGovernment, do not by virtue of the treaty alone have the force ofBlaw.

(ii) Though the Executive (Central Government) has power toenter into international treaties/agreements/ conventions underArticle 73 (read with Entries 10 & 14 of List I of the VII Scheduleto the Constitution of India) the power to legislate in respect ofCsuch treaties/agreements/conventions, lies with Parliament. It isopen to Parliament to refuse to perform such treaties/agreements/conventions. In such a case, while the treaties/agreements/conventions will bind the Union of India as against the othercontracting parties, Parliament may refuse to perform them andleave the Union of India in default.D(iii) Though the applications under such treaties/agreements/conventions are binding upon the Union of India (referred to as“the State” in Maganbhai’s case) these treaties/agreements/conventions “are not by their own force binding upon Indiannationals”.E(iv) The making of law by Parliament in respect of such treaties/agreements/conventions is necessary when the treaty oragreement restricts or affects the rights of citizens or others ormodifies the law of India, F(v) If the rights of citizens or others are not affected or the lawsof India are not modified then no legislative measure is needed togive effect to such treaties/agreements/conventions.”

38. Even earlier in Gramophone Company of India Ltd. v.Birendra Bahadur Pandey and Others[18], this Court had held as under:

G“5. There can be no question that nations must march with theinternational community and the Municipal law must respect rulesof International law even as nations respect international opinion.The comity of Nations requires that Rules of International law 17 Karan Dileep Nevatia v. Union of India, (2010) 1 Bom CR 588H18 (1984) 2 SCC 534

may be accommodated in the Municipal Law even without expresslegislative sanction provided they do not run into conflict with Actsof Parliament. But when they do run into such conflict, thesovereignty and the integrity of the Republic and the supremacyof the constituted legislatures in making the laws may not besubjected to external rules except to the extent legitimatelyaccepted by the constituted legislatures themselves. The doctrineof incorporation also recognises the position that the rules ofinternational law are incorporated into national law and consideredto be part of the national law, unless they are in conflict with Actof Parliament. Comity of Nations or no, Municipal Law mustprevail in case of conflict. National Courts cannot say yes ifParliament has said no to a principle of international law. NationalCourts will endorse international law but not if it conflicts withnational law. National courts being organs of the National Stateand not organs of international law must perforce apply nationallaw if international law conflicts with it. But the Courts are underan obligation within legitimate limits, to so interpret the MunicipalStatute as to avoid conformation with the comity of Nations orthe well-established principles of International law. But if conflictis inevitable, the latter must yield.”

39. In Jolly George Varghese and Another v. The Bank ofCochin[19]this Court, while dealing with the application of an internationalcovenant pertaining to prohibition of civil imprisonment on non-dischargeof decree debt, observed that even though India be a signatory of acovenant and Article 51(c) of the Constitution obligates the State to“foster respect for international law and treaty obligations in the dealingsof organised people with one another”, the provisions of the internationalcovenant is to be applied by an Indian Court when there is a specificprovision in the Indian law. The positive commitment in the internationalagreement ignites legislative action at home but does not automaticallymake the covenant an enforceable part of the corpus juris of India.The international conventional law must go through the process oftransformation into municipal law before the international treaty canbecome an internal law. The Court, dealing with the enforceability of theinternational law at the instance of individuals, observed that the remedyfor breaches of International Law in general is not to be found in the law AB

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Acourts of the State because International Law per se or proprio vigorehas not the force or authority of civil law, till under its inspirational impactactual legislation is undertaken. The individual citizens, therefore, cannotcomplain about their breach in the municipal courts even if the countryconcerned has adopted the covenants and ratified the operational protocol.

B40. Afore-quoted decisions are on the legal effect of internationaltreaties in the domestic law in India. The ratio of these decisions primarilyrelates to and is confined to the requirement and mandate of the needfor ‘act of transformation’ to be a part and parcel of domestic law, whichconfers a right to invocability. The ratio of the above decisions has to bedistinguished from decisions interpreting domestic law after the ‘act ofCtransformation’ consequent to which portions of GATT-1994 standenacted thereby conferring right of invocability to parties. The decisionsreferred to in paragraphs 41 to 44 and relied upon by the importers fall inthe second category.

41. This Court had the occasion to examine and interpret CustomsDValuation Rules, 1988 that were framed keeping in view the GATTprotocol and WTO agreement in Associated Cement Companies Ltd.v. Commissioner of Customs[20] and it was observed:

“45. It will be appropriate to note that the Customs Valuation Rules,1988 are framed keeping in view the GATT protocol and the WTOEagreement. In fact our rules appear to be an exact copy of GATTand WTO. For the purpose of valuation under the 1988 Rules theconcept of “transaction value” which was introduced was basedon the aforesaid GATT protocol and WTO agreement. The shiftfrom the concept of price of goods, as was classically understood,Fis clearly discernible in the new principles. Transaction value maybe entirely different from the classic concept of price of goods.Full meaning has to be given to the rules and the transaction valuemay include many items which may not classically have beenunderstood to be part of the sale price.”

G42. Similarly, in State of Punjab and Another v. Devans ModernBreweries Ltd. and Another[21], this Court while examining the rationalebehind imposition of countervailing duty had referred to the WTOagreement to observe and hold as under:

20 (2001) 4 SCC 593H21 (2004) 11 SCC 26

“305. The economic rationale is very doubtful, as the effect of acountervailing duty is to make the product more expensive in theimporting country. However, there has been some level of anexplanation provided. Every time a tariff barrier is negotiated andagreed on, WTO members have reasonable expectations that theycan profit from the conditions of competition established in themarket of the member, binding its tariff and gain market share.Moreover, members have “paid” for the binding by promising toopen up their market, that is, by binding their own tariffs. WTOmembers may not frustrate their promises by subsidising theirdomestic industry producing the product for which a tariff bindinghas been previously offered. If this were allowed WTO membersmight lose the incentive to make concessions in the future.(See The World Trade Organisation — Law, Practice andPolicy by Mitsuo Matsushita, Thomas J. Schoenbaum and PetrosC. Mavroidis, p. 279.)”

43. In S&S Enterprise v. Designated Authority and Others[22],this Court while examining the question of levy of anti-dumping duty hadreferred to the terms of GATT and WTO to observe:

“4. In our opinion, the interpretation of Rule 14(d) by Respondent1 and the Tribunal is incorrect and contrary to its language. The impositionof anti-dumping duty is under Section 9-A of the Customs Tariff Act,1975 and the Rules and is the outcome of the General Agreement onTariff and Trade (GATT) to which India is a party. The purpose behindthe imposition of the duty is to curb unfair trade practices resorted to byexporters of a particular country of flooding the domestic markets withgoods at rates which are lower than the rate at which the exportersnormally sell the same or like goods in their own countries so as to causeor be likely to cause injury to the domestic market. The levy of anti-dumping duty is a method recognised by GATT which seeks to remedythe injury and at the same time balances the right of exporters fromother countries to sell their products within the country with the interestof the domestic markets. Thus the factors to constitute “dumping” are(i) an import at prices which are lower than the normal value of thegoods in the exporting country; (ii) the exports must be sufficient tocause injury to the domestic industry.”

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A44. In Commissioner of Customs, Bangalore v. G.M. Exportsand Others[23], again while examining the question of levy of anti-dumpingduty, this Court had emphasised that the correct approach to theconstruction of a statute made in response to international treaty obligationis to give effect to the obligations in international law. If there be adifference in the language of the statutory provision and that of theBcorresponding provision of the convention, then the statutory languageshould be construed in the same sense as that of the convention if thewords of the statute are reasonably capable of bearing that meaning.[24]It was emphasised that the municipal law should not only carry out thetreaty obligation but should be construed in a way not to be inconsistentCwith the terms of the treaty. This principle of interpretation is embodiedin the principle that the statute needs to be construed uniformly by allmember nations who are signatories and should, therefore, not becontrolled by domestic precedents. The interpretation should be basedon broad principles of general application in a purposive and not in anarrow literal manner. At times the answer to ambiguity can be found inDthe object and the structure of the convention, the language used and thesubject matter with which it deals and what was sought to be achievedis a uniform international code. The legal position was summarised asunder:

“23. A conspectus of the aforesaid authorities would lead to theEfollowing conclusions:(1) Article 51(c) of the Constitution of India is a Directive Principleof State Policy which states that the State shall endeavour tofoster respect for international law and treaty obligations. As aresult, rules of international law which are not contrary to domesticlaw are followed by the courts in this country. This is a situation inFwhich there is an international treaty to which India is not asignatory or general rule of international law are made applicable.It is in this situation that if there happens to be a conflict betweendomestic law and international law, domestic law will prevail.

(2) In a situation where India is a signatory nation to an internationalGtreaty, and a statute is passed pursuant to the said treaty, it is alegitimate aid to the construction of the provisions of such statutethat are vague or ambiguous to have recourse to the terms of thetreaty to resolve such ambiguity in favour of a meaning that isconsistent with the provisions of the treaty.

23 (2016) 1 SCC 91H24 The Eschersheim Anr v. The Jade Erkowit And Anr. (1976) 1 All ER 920 (HL)

(3) In a situation where India is a signatory nation to an internationaltreaty, and a statute is made in furtherance of such treaty, apurposive rather than a narrow literal construction of such statuteis preferred. The interpretation of such a statute should beconstrued on broad principles of general acceptance rather thanearlier domestic precedents, being intended to carry out treatyobligations, and not to be inconsistent with them.

(4) In a situation in which India is a signatory nation to aninternational treaty, and a statute is made to enforce a treatyobligation, and if there be any difference between the language ofsuch statute and a corresponding provision of the treaty, thestatutory language should be construed in the same sense as thatof the treaty. This is for the reason that in such cases what issought to be achieved by the international treaty is a uniforminternational code of law which is to be applied by the courts of allthe signatory nations in a manner that leads to the same result inall the signatory nations.”

This Court also referred to clause (c) of Article 51 of theDirective Principles of State Policy, which states that the State shallendeavour to foster respect for international law and treaty obligations.

45. We would also refer to Entertainment Network (India)limited and Anr. v. Super Cassette Industries Ltd and Ors.[25], whereinthis Court dealt with the application of international conventions in Indiaand observed that while interpreting the domestic/municipal laws,conventions/norms can be relied for the following purposes: (i) as a meansof interpretation; (ii) justification or fortification of a stance taken; (iii) tofulfil spirit of international obligation which India has entered into, whenthey are not in conflict with the existing domestic law; (iv) to reflectinternational changes and reflect the wider civilisation; (v) to provide arelief contained in a covenant, but not in a national law; and (vi) to fillgaps in law.

Thereafter, reference was made on case-laws, beginning fromHis Holiness Kesavananda Bharati Sripadagalvaru v. State ofKerala and Another[26], wherein it was held that international conventionsor the norms of international law can be used to interpret domestic lawprovided they are not inconsistent with domestic legislation i.e. by reason 25 (2008) 13 SCC 30 26 (1973) 4 SCC 225

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Athereof, the tenor of domestic law should not be breached, and further incase of inconsistency the domestic legislation shall prevail. It was alsoobserved that if there is no statutory law in India in the field, interpretation,if any, must give a regard to the ever-changing global scenario. Thisprinciple was accordingly applied in Pratap Singh v. State of Jharkhandand Anr[27] to interpret Juvenile Justice Act. It was further elucidated:B

“78. However, applicability of the international conventions andcovenants, as also the resolutions, etc. for the purpose ofinterpreting domestic statute will depend upon the acceptability ofthe conventions in question. If the country is a signatory theretosubject of course to the provisions of the domestic law, theCinternational covenants can be utilised. Where internationalconventions are framed upon undertaking a great deal of exerciseupon giving an opportunity of hearing to both the parties and filteredat several levels as also upon taking into consideration the differentsocietal conditions in different countries by laying down theDminimum norm, as for example, the ILO Conventions, the courtwould freely avail the benefits thereof.

79. Those conventions to which India may not be a signatory buthave been followed by way of enactment of new parliamentarystatute or amendment to the existing enactment, recourse toEinternational convention is permissible. This kind of stance isreflected from the decisions in People’s Union for CivilLiberties v. Union of India, Madhu Kishwar v. State ofBihar, Kubic Darusz v. Union of India, Chameli Singh v. Stateof U.P., C. Masilamani Mudaliar v. Idol of SriSwaminathaswami Swaminathaswami Thirukoil, ApparelFExport Promotion Council v. A.K. Chopra, KapilaHingorani v. State of Bihar, State of Punjab v. Devans ModernBreweries Ltd. and Liverpool & London S.P. & I Assn.Ltd. v. M.V. Sea Success I.”

GATT-1994 is an international convention framed after greatGdeliberation and exercise, to develop and promote international trade.

46. While interpreting the domestic law enshrining Human Rights(and sometimes environment issues) this Court on some occasions hasrelied on international conventions and treaties where the terms of any H27(2005) 3 SCC 551

legislation are absent, not clear or are reasonably capable of more thanone meaning. In such cases, where there are statutes, rules etc. themeaning which in consonance with the treaties can be relied upon, forthere is a prima facie presumption that the Parliament did not intend toact in breach of international law, including State treaty obligations. Part-III of the Indian Constitution a-priori incorporates and recognises theHuman Rights, consequently recourse to international conventions canbe made to interpret and borrow explicit terminologies and nuances tobailiwick Human Right jurisprudence. However, in the present case weare examining an economic and fiscal legislation or rather economicpolicy decision taken by the Union of India. These decisions on humanrights therefore would not be of much assistance.

(iv) Text of Articles XI and XIX of GATT-1994 and thestatutory scheme vide Sections 3 and 9A of FTDR Act and theSafeguard Measures (Quantitative Restriction) Rules, 2012.

47. Having regard to the general law on the question of treatiesand its application in domestic law in India and other countries, we wouldnow reproduce Articles XI and XIX of the GATT-1994, which read asunder:

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Article XI

General Elimination of Quantitative Restrictions

1. No prohibitions or restrictions other than duties, taxes or othercharges, whether made effective through quotas, import or exportlicences or other measures, shall be instituted or maintained byany contracting party on the importation of any product of theterritory of any other contracting party or on the exportation orsale for export of any product destined for the territory of anyother contracting party.

2. The provisions of paragraph 1 of this Article shall not extend tothe following:

(a) Export prohibitions or restrictions temporarily applied to preventor relieve critical shortages of foodstuffs or other products essentialto the exporting contracting party; (b) Import and export prohibitions or restrictions necessary to theapplication of standards or regulations for the classification, gradingor marketing of commodities in international trade; AB

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(c) Import restrictions on any agricultural or fisheries product,imported in any form, necessary to the enforcement ofgovernmental measures which operate:

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(i) to restrict the quantities of the like domestic product permittedto be marketed or produced, or, if there is no substantial domesticBproduction of the like product, of a domestic product for whichthe imported product can be directly substituted; or

(ii) to remove a temporary surplus of the like domestic product,or, if there is no substantial domestic production of the like product,of a domestic product for which the imported product can bedirectly substituted, by making the surplus available to certain groupsof domestic consumers free of charge or at prices below thecurrent market level; or C

(iii) to restrict the quantities permitted to be produced of any animalproduct the production of which is directly dependent, wholly orDmainly, on the imported commodity, if the domestic production ofthat commodity is relatively negligible.

Any contracting party applying restrictions on the importation ofany product pursuant to sub-paragraph (c) of this paragraph shallgive public notice of the total quantity or value of the productEpermitted to be imported during a specified future period and ofany change in such quantity or value. Moreover, any restrictionsapplied under (i) above shall not be such as will reduce the total ofimports relative to the total of domestic production, as comparedwith the proportion which might reasonably be expected to rulebetween the two in the absence of restrictions. In determiningFthis proportion, the contracting party shall pay due regard to theproportion prevailing during a previous representative period andto any special factors* which may have affected or may beaffecting the trade in the product concerned.

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Article XIX

Emergency Action on Imports of Particular Products

1. (a) If, as a result of unforeseen developments and of the effectof the obligations incurred by a contracting party under thisAgreement, including tariff concessions, any product is being H

imported into the territory of that contracting party in suchincreased quantities and under such conditions as to cause orthreaten serious injury to domestic producers in that territory oflike or directly competitive products, the contracting party shallbe free, in respect of such product, and to the extent and for suchtime as may be necessary to prevent or remedy such injury, tosuspend the obligation in whole or in part or to withdraw or modifythe concession.

(b) If any product, which is the subject of a concession with respectto a preference, is being imported into the territory of a contractingparty in the circumstances set forth in sub-paragraph (a) of thisparagraph, so as to cause or threaten serious injury to domesticproducers of like or directly competitive products in the territoryof a contracting party which receives or received such preference,the importing contracting party shall be free, if that other contractingparty so requests, to suspend the relevant obligation in whole or inpart or to withdraw or modify the concession in respect of theproduct, to the extent and for such time as may be necessary toprevent or remedy such injury.

2. Before any contracting party shall take action pursuant to theprovisions of paragraph 1 of this Article, it shall give notice inwriting to the CONTRACTING PARTIES as far in advance asmay be practicable and shall afford the CONTRACTINGPARTIES and those contracting parties having a substantialinterest as exporters of the product concerned an opportunity toconsult with it in respect of the proposed action. When such noticeis given in relation to a concession with respect to a preference,the notice shall name the contracting party which has requestedthe action. In critical circumstances, where delay would causedamage which it would be difficult to repair, action under paragraph1 of this Article may be taken provisionally without priorconsultation, on the condition that consultation shall be effectedimmediately after taking such action.

3. (a) If agreement among the interested contracting parties withrespect to the action is not reached, the contracting party whichproposes to take or continue the action shall, nevertheless, befree to do so, and if such action is taken or continued, the affectedcontracting parties shall then be free, not later than ninety days AB

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Aafter such action is taken, to suspend, upon the expiration of thirtydays from the day on which written notice of such suspension isreceived by the CONTRACTING PARTIES, the application tothe trade of the contracting party taking such action, or, in thecase envisaged in paragraph 1 (b) of this Article, to the trade ofthe contracting party requesting such action, of such substantiallyBequivalent concessions or other obligations under this Agreementthe suspension of which the CONTRACTING PARTIES do notdisapprove.

(b) Notwithstanding the provisions of sub-paragraph (a) of thisparagraph, where action is taken under paragraph 2 of this ArticleCwithout prior consultation and causes or threatens serious injuryin the territory of a contracting party to the domestic producers ofproducts affected by the action, that contracting party shall, wheredelay would cause damage difficult to repair, be free to suspend,upon the taking of the action and throughout the period ofDconsultation, such concessions or other obligations as may benecessary to prevent or remedy the injury.

48. Indian Parliament, two years prior to the signing of GATT-1994, had enacted the FTDR Act which was enforced with effect from7th August 1992. Sections 11 to 14 of the FTDR Act came into forceEimmediately and other provisions came into force on 19th June 1992.The FTDR Act had repealed the Imports and Exports (Control) Act,1947 and the Foreign Trade (Development and Regulation) Ordinance,1992 with the stipulation that anything done or any action taken underthe Ordinance shall be deemed to have been done or taken under thecorresponding provisions of the FTDR Act. The Statement of ObjectsFand Reasons for enacting the FTDR Act, as recorded, are to acknowledgethat foreign trade is the driving force of economic activity as this spurseconomic growth and there is increasing interdependence and that thegoals of the new policy were to increase productivity and competitivenessby ensuring that the trade policies serve as an instrument to create anGenvironment that will provide a strong impetus to exports, facilitate importsand render export activity more profitable.

49. In order to appreciate the contentions of the parties, we wouldnow like to reproduce Sections 3 and 9A of the FTDR Act, which readas under:

“3. Powers to make provisions relating to imports andexports.– (1) The Central Government may, by Order publishedin the Official Gazette, make provision for the development andregulation of foreign trade by facilitating imports and increasingexports.

(2) The Central Government may also, by Order published in theOfficial Gazette, make provision for prohibiting, restricting orotherwise regulating, in all cases or in specified classes of casesand subject to such exceptions, if any, as may be made by orunder the Order, the import or export of goods or services ortechnology:

Provided that the provisions of this sub-section shall be applicable,in case of import or export of services or technology, only whenthe service or technology provider is availing benefits under theforeign trade policy or is dealing with specified services or specifiedtechnologies.

(3) All goods to which any Order under sub-section (2) appliesshall be deemed to be goods the import or export of which hasbeen prohibited under section 11 of the Customs Act, 1962 (52 of1962) and all the provisions of that Act shall have effect accordingly.

(4) Without prejudice to anything contained in any other law, rule,regulation, notification or order, no permit or licence shall benecessary for import or export of any goods, nor any goods shallbe prohibited for import or export except, as may be requiredunder this Act, or rules or orders made thereunder.

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9A. Power of Central Government to impose quantitativerestrictions.– (1) If the Central Government, after conductingsuch enquiry as it deems fit, is satisfied that any goods are importedinto India in such increased quantities and under such conditionsas to cause or threaten to cause serious injury to domestic industry,it may, by notification in the Official Gazette, impose suchquantitative restrictions on the import of such goods as it maydeem fit:

Provided that no such quantitative restrictions shall be imposedon any goods originating from a developing country so long as the A

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Ashare of imports of such goods from that country does not exceedthree per cent. or where such goods originate from more thanone developing country, then, so long as the aggregate of theimports from all such countries taken together does not exceednine per cent. of the total imports of such goods into India.

B(2) The quantitative restrictions imposed under this section shall,unless revoked earlier, cease to have effect on the expiry of fouryears from the date of such imposition:

Provided that if the Central Government is of the opinion that thedomestic industry has taken measures to adjust to such injury orCthreat thereof and it is necessary that the quantitative restrictionsshould continue to be imposed to prevent such injury or threat andto facilitate the adjustments, it may extend the said period beyondfour years:

Provided further that in no case the quantitative restrictions shallDcontinue to be imposed beyond a period of ten years from thedate on which such restrictions were first imposed.

(3) The Central Government may, by rules provide for the mannerin which goods, the import of which shall be subject to quantitativerestrictions under this section, may be identified and the mannerEin which the causes of serious injury or causes of threat of seriousinjury in relation to such goods may be determined.

(4) For the purposes of this section—

(a) “developing country” means a country notified by the CentralGovernment in the Official Gazette, in this regard;F(b) “domestic industry” means the producers of goods (includingproducers of agricultural goods)—

(i) as a whole of the like goods or directly competitive goods inIndia; or G(ii) whose collective output of the like goods or directly competitivegoods in India constitutes a major share of the total production ofthe said goods in India;

(c) “serious injury” means an injury causing significant overallimpairment in the position of a domestic industry; H

(d) “threat of serious injury” means a clear and imminent dangerof serious injury.]

50. Section 9A of the FTDR Act is the only section in ChapterIIIA with the heading ‘Quantitative Restrictions’[28] and this section wasinserted by Amendment Act 25 of 2010 with effect from 27th August2010. Subsequently, in exercise of powers conferred by sub-section (3)to Section 9A of the FTDR Act, the Central Government had publishedand notified the Safeguard Measures (Quantitative Restrictions) Rules,2012, which became applicable on the date of their publication in theGazette of India dated 24th May 2012, the relevant portion of whichreads as under:

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2. Definitions

(b) ”Authorised Officer” means the Authorised Officer designatedas such under sub-rule(1) of rule 3;

(c) “increased quantity” includes increase in import whether inabsolute terms or relative to domestic production; (d) “interested party” includes –

(i) an exporter or foreign producer or the importer of goods(which is subject to investigation for purposes of imposition ofsafeguard quantitative restrictions) or a trade or businessassociation, majority of the members of which are producers,exporters or importers of such goods;

(ii) the Government of the exporting country; and

(iii) a producer of the like goods or directly competitive goodsin India or a trade or business association, a majority of membersof which produce or trade the like goods or directly competitivegoods in India; (e) “like goods” means goods which is identical or alike in allrespects to the goods under investigation, or in the absence of 28 The report of WTO Dispute Settlement Body’s panel on “India-QuantitativeRestrictions on Imports of Agricultural, Textile and Industrial Products” has interpretedthe expression ‘Quantitative Restrictions’ in Art.XI of GATT,1994. The decisions ofthe panel are binding on parties and are not binding interpretation of WTO agreements,as they have no precedential value and the doctrine of stare decisis has no application.The reasoning being persuasive can be adopted.

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Asuch goods, other goods which has characteristics closelyresembling those of the goods under investigation; (f) “quantitative restrictions” means any specific limit on quantityof goods imposed as a safeguard measure under the Act; (g) “specified country” means a country or territory which is aBmember of the World Trade Organization and includes the countryor territory with which the Government of India has an agreementfor giving it the most favoured nation treatment;

3. Responsibility of Authorised Officer for making enquiryin respect to safeguard quantitative restrictions—

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(1) The Central Government shall, by notification in the OfficialGazette, designate an officer not below the rank of AdditionalDirector General of Foreign Trade as an Authorised officer formaking investigation for the purpose of this rules.

(2) The Authorised Officer shall be responsible for conductingDinvestigation, under sub-section (1) of section 9A, for the purposeof imposition of safeguard quantitative restrictions and makingnecessary recommendation therein to the Central Government.

(3) The Directorate General of Foreign Trade shall providesecretarial support and the services of such other persons andsuch other facilities as it deems fit.

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4. Duties of Authorised Officer .— It shall be the duty of theAuthorised Officer —

(a) to investigate the existence of serious injury or threat of seriousinjury to domestic industry as a consequence of increased importof a goods into India; F

(b) to identify the goods liable for quantitative restrictions as asafeguard measure;

(c) to submit its findings, to the Central Government as to theserious injury or threat of serious injury to domestic industryconsequent upon increased import of goods into India from theGspecified country; (d) to recommend—

(i) the nature and extent of quantitative restrictions which, ifimposed, shall be adequate to remove the serious injury or threatof serious injury to the domestic industry; and H

(ii) the duration of imposition of safeguard quantitativerestrictions and where the period so recommended is morethan one year, to recommend progressive liberalisation adequateto facilitate positive adjustment; and (e) to review the need for continuance of the safeguardquantitative restrictions.

5. Initiation of investigation.—

(1) The Authorised Officer shall, on receipt of a written applicationby or on behalf of the domestic producer of like goods or directlycompetitive goods, initiate an investigation to determine theexistence of serious injury or threat of serious injury to the domesticindustry, caused by the import of a goods in such increasedquantities, absolute or relative to domestic production.

(2) The application referred to in sub-rule (1) shall be made inForm appended to these rules and be supported with- (a) the evidence of -

(i) increased imports as a result of unforeseen development;

(ii) serious injury or threat of serious injury to the domesticindustry; and

(iii) a causal link between imports and the alleged seriousinjury or threat of serious injury; (b) a statement on the efforts being taken, or planned to betaken, or both, to make a positive adjustment to increase incompetition due to imports; and

(c) a statement mentioning whether an application for theinitiation of a safeguard action on the goods under investigationhas also been submitted to the Director General of Safeguards,Department of Revenue.

(3) The Authorised Officer shall not initiate an investigationpursuant to an application made under sub-rule (1), unless, itexamines the accuracy and adequacy of the evidence provided inthe application and satisfies himself that there is sufficient evidenceregarding—

(a) increased imports;

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(b) serious injury or threat of serious injury; and

(c) a causal link between increased imports and alleged seriousinjury or threat of serious Injury.

(4) Notwithstanding anything contained in sub-rule (1), theAuthorised Officer may initiate an investigation suo moto, if, it issatisfied with the information received from any source thatsufficient evidence exists as referred to in clause (a), clause (b)or clause (c) of subrule (3).

6. Principles governing investigations. —

(1) The Authorised Officer shall, after it has decided to initiateinvestigation to determine serious injury or threat of serious injuryto domestic industry, consequent upon the increased import of agoods into India, issue a public notice notifying its decision which,inter alia, contain information on the following, namely:- (a) the name of the exporting countries, the goods involvedand the volume of import; (b) the date of initiation of the investigation;

(c) a summary statement of the facts on which the allegationof serious injury or threat of serious injury is based; (d) reasons for initiation of the investigation; (e) the address to which representations by interested partiesshould be directed; and (f) the time-limits allowed to interested parties for making theirviews known.

(2) The Authorised Officer shall forward a copy of the publicnotice to the Central Government in the Ministry of Commerceand Industry and other Ministries concerned, known exporters ofthe goods, the Governments of the exporting countries concernedand other interested parties.

(3) The Authorised Officer shall also provide a copy of theapplication referred to in sub-rule (1) of rule 5, to- (a) the known exporters, or the concerned trade association; (b) the Governments of the exporting countries; and

(c) the Central Government in the Ministry of Commerce andIndustry:

Provided that the Authorised Officer shall also make available acopy of the application, upon request in writing, to any otherinterested person.

(4) The Authorised Officer may issue a notice calling for anyinformation in such form as may be specified in the notice fromthe exporters, foreign producers and governments of exportingcountries and such information shall be furnished by such personsand governments in writing within thirty days from the date ofreceipt of the notice or within such extended period as theAuthorised Officer may allow on sufficient cause being shown.

Explanation.—For the purpose of this rule, the public notice andother documents shall be deemed to have been received one weekafter the date on which these documents were put in the courseof transmission to the interested parties by the Authorised Officer.

(5) The Authorised Officer shall provide opportunity to theindustrial user of the goods under investigation and to representativeconsumer organisations in cases where the goods is commonlysold at retail level to furnish information which is relevant to theinvestigation including inter alia, their views if imposition ofsafeguard quantitative restrictions is in public interest or not.

(6) The Authorised Officer may allow an interested party or itsrepresentative to present the information relevant to investigationorally but such oral information shall be taken into considerationby the Authorised Officer only when it is subsequently submittedin writing.

(7) The Authorised Officer shall make available the evidencepresented to it by one interested party to all other interested parties,participating in the investigation.

(8) In case where an interested party refuses access to orotherwise does not provide necessary information within areasonable period or significantly impedes the investigation, theAuthorised Officer may record its findings on the basis of thefacts available and make such recommendations to the CentralGovernment as it deems fit under such circumstances.

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8. Determination of serious injury or threat of seriousinjury.—

The Authorised Officer shall determine serious injury or threat ofserious injury to the domestic industry taking into account, interalia, the following principles, namely:- B

(a) in the investigation to determine whether increased importshave caused or are threatening to cause serious injury to a domesticindustry, the Authorised Officer shall evaluate all relevant factorsof an objective and quantifiable nature having a bearing on thesituation of that industry, in particular, the rate and amount of theincrease in imports of the goods concerned in absolute and relativeterms, the share of the domestic market taken by increased imports,changes in the level of sales, production, productivity, capacityutilisation, profits and losses, and employment; and C

(b) the determination referred to in clause (a) shall not be madeunless the investigation demonstrates, on the basis of objectiveevidence, the existence of the causal link between increasedimports of the goods concerned and serious injury or threat thereof:

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Provided that when factors other than increased imports arecausing injury to the domestic industry at the same time, suchinjury shall not be attributed to increased imports and in such cases,the Authorised Officer may refer the complaint to the authorityfor anti-dumping or countervailing duty investigations, asappropriate.

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9. Final findings.— (1) The Authorised Officer shall, within eightFmonths from the date of initiation of the investigation or withinsuch extended period as the Central Government may allow,determine whether, as a result of unforeseen developments theincreased imports of the goods under investigation has caused orthreatened to cause serious injury to the domestic industry, and acasual link exists between the increased imports and serious injuryGor threat of serious injury and recommend –

(i) the extent and nature of quantitative restrictions which, ifimposed, would be adequate to prevent or remedy ‘seriousinjury’ and to facilitate positive adjustment, as the case maybe; H

(ii) the extent of quantitative restrictions so that the quantity ofimports is not reduced to the quantity of imports below thelevel of a recent period which shall be the average of import inthe last three representative years for which statistics areavailable and justification if a different level is necessary toprevent or remedy serious injury;

(iii) the quota to be allocated among the supplying countries,and the allocation of shares in the quota for such specifiedcountries which have a substantial interest in supplying thegoods;

(iv) the duration of imposition of quantitative restrictions andwhere the duration of imposition of quantitative restrictions ismore than one year, the progressive liberalisation adequate tofacilitate positive adjustment.

(2) The final findings if affirmative shall contain all information onthe matter of facts and law and reasons which have led to theconclusion.

(3) The Authorised Officer shall issue a public notice recordinghis final findings.

(4) The Authorised Officer shall send a copy of the public noticeregarding his final findings to the Central Government in theMinistry of Commerce and Industry and a copy thereof to theinterested parties.

10. Imposition of safeguard quantitative restrictions.—

The Central Government may based on the recommendation ofthe Authorised Officer, by a notification in the Official Gazette,under sub-section (I)

of section 9A of the Act, impose upon importation into India of thegoods covered under the final determination, a safeguardquantitative restrictions not exceeding the amount or quantity whichhas been found adequate to prevent or remedy serious injury andto facilitate adjustment.

11. Imposition of safeguard quantitative restrictions on non-discriminatory basis.—

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Any safeguard quantitative restrictions imposed on goods underthese rules shall be applied on a non-discriminatory basis to allimports of the goods irrespective of its source.

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12. Date of commencement of safeguard quantitativerestrictions.—

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The safeguard quantitative restrictions levied under these rulesshall take effect from the date of publication of the notification inthe Official Gazette, imposing such quantitative restrictions.

13. Duration .—

(1) The safeguard quantitative restrictions imposed under rule 10shall be for such period of time as may be necessary to prevent orremedy serious injury and to facilitate adjustment.

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(2) Notwithstanding anything contained in sub-rule (1), safeguardquantitative restrictions imposed under rule 10 shall, unless revokedDearlier, cease to have effect on the expiry of four years from thedate of its imposition: Provided that if the Central Government isof the opinion that the domestic industry has taken measures toadjust to such serious injury or threat thereof and it is necessarythat the safeguard quantitative restrictions should continue to beimposed, to prevent such serious injury or threat and to facilitateEadjustments, it may extend the period beyond four years: Providedfurther that in no case the safeguard quantitative restrictions shallcontinue to be imposed beyond a period of ten years from thedate on which such restrictions were first imposed.

–14. Liberalization of safeguard quantitative restrictions. F

If the duration of the safeguard quantitative restrictions imposedunder rule 10 exceeds one year, the restriction shall be progressivelyliberalised at regular intervals during the period of its imposition.

(v) Contention of the importers on Sections 3 and 9A of theFTDR Act and the response by the Union of India.G

51. Before we go on the interpretation of respective sections,namely, Sections 3 and 9A of the FTDR Act, we would like to reproducein brief the contentions of the importers. The importers submit that theFTDR Act was introduced and enacted for development and regulationof foreign trade by facilitating imports and augmenting exports fromH

UNION OF INDIA AND OTHERS v. AGRICAS LLP[SANJIV KHANNA, J.]

India and to make India competitive in conformity with GATT-1994obligations. Section 3 of the FTDR Act reflects the said position andincorporates Article XI of the GATT-1994 which stipulates that thereshall not be any provision or restrictions other than duty, taxes and othercharges by any contracting party. Section 9A is almost a replica ofArticle XIX of the GATT-1994 and this is the only provision which conferspower on the Central Government to impose ‘quantitative restrictions’on imports. It, therefore, follows that unless the conditions of Section9A of the FTDR Act are satisfied and the procedure prescribed underthe Rules is followed, no ‘quantitative restrictions’ could have beenimposed by the Union of India through the medium of the impugnednotifications. Section 9A is a special provision dealing with ‘quantitativerestrictions’, whereas Section 3 is a general provision. The Union ofIndia cannot take recourse to Section 3 when conditions of Section 9Aare not satisfied and impose ‘quantitative restrictions’, otherwise, Section9A would become redundant for the reason that Union of India couldalways impose ‘quantitative restrictions’ under the general power. Thiswould be in conformity with the India’s obligation under GATT-1994 andthe domestic or municipal law must be construed in consonance with theGATT-1994 obligations.

52. For quantitative restrictions to be imposed under Section 9Aof the FTDR Act, following conditions must be cumulatively satisfied,namely, (a) increased quantities of imports (b) that have caused (c)serious injury or threaten to cause serious injury to domestic industries.Further, as per the procedure prescribed by the Rules, the AppropriateAuthority has to initiate proceedings, investigate, hear parties andadjudicate on the satisfaction of the conditions. In the present case,there has been no increase in imports as per the following table:

29 As per the Union of India, the import of Peas in 2016-17 was 31,72,758 MT.

29 As per the Union of India, the import of Peas in 2016-17 was 31,72,758 MT.

30 As per the Union of India, the import of Peas in 2016-17 was 6,52,607 MT.

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‘Quantitative restrictions’ were imposed in the financial year 2018-19. Further, the Union of India has themselves stated that there wasserious injury to the domestic industry due to import of pulses and Peas.Our attention was drawn to paragraphs 5 and 9 of the written submissionsfiled by the Union of India, which read as under:

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B“5. It is submitted that the farmers are one of the most importantstakeholders in matters related to import / export of agriculturalgoods and the Government is required to strike a balance betweenthe interests of domestic producers and importers. Thus, wheneverit is observed that large scale imports of an item is adverselyimpacting the interest of the domestic producers, due to fall inCprices in the local market, the Government in consultation withstakeholders concerned, tries to uphold the interests of domesticproducers through suitable measures like restriction on importquotas etc.

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D9. It is submitted that since domestic production of pulses / gramshas been very good, therefore the Government has imposedrestrictions on the import of peas. Yellow Peas which are largelyimported to India are mainly grown in countries like Canada, Russia,Ukraine etc. Due to agro-climatic conditions of these countriesEthey export peas in bulk. Therefore, price of Yellow Peas is lowerin comparison to other imported / domestically available pulses,including Gram. It is to be noted that the end use of Gram is mainlyflour, commonly known as “Besan”, used in preparations of Indiansavouries. As per industry estimates, about 70% of the Gramproduced is used in manufacture of Besan. It is informed thatFYellow Peas are a near perfect substitute for Gram in the makingof Besan. As the price of imported Yellow Peas in India is cheaperthan the domestic market price of Gram, a huge shift in industryusage from Gram to Yellow Peas had happened. Increased supplyof Yellow Peas had taken away Gram demand, the resulting in fallin prices of Gram. Thus, despite large scale procurement of GramGunder the PSS scheme in Rabi 2018 and 2019, prices of Gramcontinued to be below the MSP announced by the government.”

Thus, the Union of India themselves have accepted that theconditions of Section 9A had impelled then to issue the impugnednotifications but they did not follow the procedure prescribed by theHapplicable Rules.

53. The Union of India, in their affidavit filed on 26th June 2020,have pleaded that they were required to strike a balance between thefarmers and the importers as largescale imports would adversely impactthe interests of the farmers due to fall in prices in the local market.Reference was made to the Minimum Support Price (MSP) for Moong,Urad and Toor dal and Gram fixed on the recommendation of theCommission for Agricultural Costs and Prices. Further, the CentralGovernment under the schemes being run had procured 85 lakh MT ofpulses directly from 53 lakh farmers by paying them MSP in the last fiveyears. There was also increase in production of pulses from 25.42 MillionMTs in 2017-18 to 26.66 Million MTs in 2020-21. Imported Yellow Peasare the perfect substitute for Gram in making of Besan which is primarilyused in preparation of Indian savouries. As the price of imported YellowPeas in India is cheaper than the domestic price of Gram, a huge shift inindustry usage from Gram to Yellow Peas has taken place. In thesecircumstances that the government has imposed restrictions from April,2018 onwards with a small window of annual quota for permitted imports.However, in view of the interim orders passed by the various High Courts,the actual imports of peas were to the tune of 8,51,408 MT and 6,52,607MTs in 2018-2019 and 2019-2020 respectively, though the annual quotafor these two years was 1/1.50 lakh MTs. The Government is presentlyholding a buffer stock of 26.94 lakh MT of Gram, against the targetquantity of 3 lakh MTs. The Gram is being sold at Rs.4,000 – 4,200 perquintal, which is below the MSP of Rs.4,875/- per quintal. Imported CIFvalue of Yellow Peas is Rs.2,028/- per quintal. Due to the pandemic, thefarmers could be compelled to make panic disposal at much lower prices.In the further affidavit filed on 1st July 2020, the Union of India hasstated that they had not issued any quota for Peas, Yellow Peas etc. asinspite of restricted quota of 1 lakh and 1.5 lakh MTs for Peas in theFinancial Years 2018-19 and 2019-20, due to interim orders passed bythe various High Courts, the actual import was 8.51 lakh MTs and 6.67lakh MTs during the Financial Years 2018-19 and 2019-20, respectively.Consequently, it has been decided not to import Yellow Peas in the currentFinancial Year 2020-21. In the affidavit filed on 6th July 2020, withreference to Section 9A of the FTDR Act, the Union of India has statedthat the said section is attracted only when the goods are imported intoIndia in increased quantity and under such conditions as to cause orthreaten to cause serious injury to domestic industry. Section 9A is enactedas a safeguard mechanism in terms of Article XIX of the GATT-1994

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Aand Article II of the WTO Agreement on Safeguards vide the AmendmentAct, 2010. The notifications under challenge have been issued withinthe express terms of Section 3 of the FTDR Act which permits theCentral Government to impose restrictions without any qualification ofthe nature specified in Section 9A. Power of the Central Government torestrict imports to limited quantities under Section 3 and quantitativeBrestrictions under Section 9A of the FTDR Act are completely distinctand have no connection or interplay. The power under Section 3(2) ofthe FTDR Act is of a wide amplitude. Reference is also made to Rule5(2) to assert that there is necessity of evidence that the imports hadincreased as a result of ‘unforeseen developments’ in addition to theCnecessity for evidence disclosing serious injury or threat of serious injuryto domestic industry and a causal link between imports and serious injury.The restrictions have been imposed not due to increased quantities ofimports but to prevent panic disposal by farmers as the prices of Gramwould come down. It is submitted that special provisions like 9A of theFTDR Act would be limited to areas within its scope leaving the generalDprovision free to operate in other areas.(vi) Discussion and interpretation of Sections 3 and 9A ofthe FTDR Act.

54. Section 3 of the FTDR Act, as enacted, had undergoneEamendments by addition of proviso to sub-section (2) and by insertion ofsub-section (4) vide Act 25 of 2010 with effect from 25th August 2010.Sub-section (1) of Section 3 states that the Central Government may, byan Order published in the Official Gazette, make provision for thedevelopment and regulation of foreign trade 2.by facilitating importsand increasing exports. It is a general provision which has no referenceFto GATT-1994. It authorises the Central Government to publish an orderin the Official Gazette for development and regulation of foreign trade,i.e. imports and exports. Sub-section (2) states that the CentralGovernment can, by an order in the Official Gazette, make a provisionfor prohibiting or restricting or otherwise regulating, in all or specifiedGcases and subject to such exceptions, if any, the import or export ofgoods and after the amendment vide Act 25 of 2010, services ortechnology. Sub-section (2) to Section 3, therefore, authorises the CentralGovernment to, by an Order published in the Official Gazette, makeprovisions restricting the imports or exports. Imposition of quantitativerestrictions on imports or exports would clearly fall within sub-sectionH(2) to Section 3 of the FTDR Act. We are not concerned with the proviso to sub-section (2) in the present case. Sub-section (3) to Section3 states that where an order is passed under sub-section (2) wherebythe import or export of goods is prohibited, restricted or otherwiseregulated, the goods in question would be deemed to be prohibited goodsunder Section 11 of the Customs Act, 1962 and accordingly the provisionsof the latter Act would apply.

55. Sub-section (4) to Section 9A of the FTDR Act introduced byAct 25 of 2010 with effect from 27th August 2010, requires someelucidation. The sub-section on one hand states that no permit or licenceshall be necessary for imports or exports of goods, nor any goods shallbe prohibited from import or export, except as may be required underthe FTDR Act, or the rules or orders made thereunder. At the sametime, by using the phrase ‘without prejudice to anything contained in anyother law, rule, regulation, notification or order’, it protects the operationof the other law, rule, regulation, notification or order to the extent thatthey do not directly or indirectly deal with the permit or licence necessaryfor import or export of goods or prohibit import or export of goods.Operation of such law, rule, regulation, notification or order not dealingwith the permit or licence necessary for import or export on a prohibitionof import of goods is, therefore, protected and not overridden. Sub-section (4) to Section 3 therefore gives limited primacy to the FTDRAct, restricting it to the scope and subject matter of the FTDR Act, andnot to override other laws. This is also clear from Section 18A of theFTDR Act which was also enacted and inserted by Act 25 of 2010 witheffect from 27th August 2010 and reads as under:

“18A. Application of other laws not barred.– The provisionsof this Act shall be in addition to, and not in derogation of, theprovisions of any other law for the time being in force.”

The provisions of FTDR Act, therefore, are in addition to, andnot in derogation of, the provisions of any other law for the time being inforce. This would be the correct way to harmoniously read and interpretsub-section (4) to Section 3 and Section 18A of the FTDR Act. Wemay, at this stage, notice that the original amendment had used the phrase‘Notwithstanding anything contained in any other law, rule, regulation,notification or order’, but the Standing Committee had noticed thecontradiction and also the object and purpose behind enacting sub-rule(4) and had recommended that the said expression should be replacedwith the expression ‘Without prejudice to anything contained in any other A

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Alaw, rule, regulation, notification or order’. Sub-section (4) to Section 3of the FTDR Act, therefore, in the context of import and exports orprohibition of imports or exports of goods states that no permit or licenceshall be necessary or required except as may be required under theFTDR Act, rules or orders made thereunder. The expression ‘order’,as per clause (h) to Section (2) of the FTA means any Order made byBthe Central Government under Section 3. It is, therefore, clear to us thatthere is no violation of Section 3 of the FTDR Act in the issuance of theimpugned notifications or orders, which are intra vires and not ultravires.

56. We have already reproduced and quoted Article XI[31] of theCGATT-1994 and have to say that the same has not been statutorily madea subject of ‘act of transformation’ and incorporated in the domesticlegislation, i.e. the FTDR Act. The FTDR Act does not legislate andtransform Article XI of the GATT-1994. As noticed above, Section 3 ofthe FTDR Act empowers and authorises the Central Government, i.e.Dthe Union of India to frame policy, rules or regulations for import orexport of goods. The policy is framed under Section 5 of the Act, whichreads as under:

“5. Foreign Trade Policy. – The Central Government may,from time to time, formulate and announce, by notification in theEOfficial Gazette, the foreign trade policy and may also, in likemanner, amend that policy:

Provided that the Central Government may direct that, in respectof the Special Economic Zones, the foreign trade policy shall applyto the goods, services and technology with such exceptions,Fmodifications and adaptations, as may be specified by it bynotification in the Official Gazette.”

Thus, the Central Government i.e. the Union of India has beengiven the necessary discretion and election with regard to framing ofpolicies for import and export of goods, services and technology.GTherefore, implementation of GATT-1994, including Article XI, is left tothe Central Government by means of delegated legislation.

57. Clause (2) of Article XI of GATT-1994 states that provisionsof paragraph (1) shall not extend to three specified situations as stated insub-clauses (a), (b) or (c). Clause (c) deals with import restrictions on H31 Paragraph 47 (supra).

any agricultural or fisheries product, imported in any form necessary forenforcement of governmental measures specified therein. Similarly,Article XII of GATT-1994 states that notwithstanding the provisions ofparagraph (1) of Article XI, any contracting party, in order to safeguardits external financial position and its balance of payments, may restrictthe quantity or value of merchandise permitted to be imported, subject tothe provisions of paragraphs of that Article. Paragraph 23 (supra) listsa number of other provisions, which allow and permit exceptions. Wehave referred to these provisions to highlight that paragraph (1) to ArticleXI is not an absolute rule. It is subject to exceptions in the form ofparagraph (2) to Article XI, Article XII and other provisions. Of course,the conditions specified the respective Articles have to be satisfied for acontracting party to be GATT-1994 compliant.

58. Reference to this position is necessary and required when weinterpret Section 9A of the FTDR Act which we would acceptincorporates into the domestic law Article XIX of GATT-1994, but neitherArticle XI and nor all exceptions by implication. Consequently, Section9A for the FTDR Act, is to be understood an enabling provisionempowering imposition of ‘quantitative restrictions’ after following theprocedure in the situations referred to therein. However it does not limitand restrict the expans and power of the Central Government to prohibit,regulate or restrict imports of goods in terms of Section 3(2) of theFTDR Act. As a sequitur, it has to be held that notwithstanding Section9A, the Central Government continues and has authority to imposequantitative restrictions by an order under Section 3(2) of the FTDRAct. Principle of Lex specialis derogat legi generali, therefore, is notapplicable to the case in hand.

59. Section 9A of the FTA was enacted by Act 25 of 2010 pursuantto the recommendations of the Standing Committee which has opined asunder:

Clause 9 seeks to insert a new Chapter IIIA, with heading“Quantitative Restrictions”, after Section 9 of the Act, pertainingto Power of the Central Government to impose QuantitativeRestrictions. The Committee was informed that the proposedamendment seeks to make a clear provision in the Foreign Trade(Development and Regulation) Act for allowing QuantitativeRestrictions (QRs) to be imposed to protect domestic industryfrom serious injury in case of a surge in imports. While suchmeasures are available for all the WTO member countries, yet AB

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Asafeguard measures in the form of Quantitative Restrictions arenot provided for under any Indian law. This is in accordance withthe provision to incorporate safeguard measures in the form ofQuantitative Restrictions, as provided in Article XIX of GATTand the WTO Agreement on Safeguards.

BSection 9A substantially incorporates, with some modifications,provisions of Article XIX of GATT-1994. Rules made in 2012 are alsoin conformity with the provisions of the WTO Agreement on Safeguardsmade in terms of Article XIX of GATT-1994. Sub-rule (3) to Rule 5 ofthe Safeguard Measures (Quantitative Restrictions) Rules, 2012 statesand sets out the conditions for applicability of Rule 9A, which are: (i)Cincreased imports; (ii) serious injury or threat of serious injury; and (iii) acausal link between increased imports and alleged serious injury or threatof serious injury. The expression ‘increased imports’ has been definedin terms of increased quantity to mean increase in imports in absoluteterms or relative to domestic production. The expressions ‘serious injury’Dand ‘threat of serious injury’ have been defined in clauses (c) and (d) ofsub-clause (4) to Section 9A to mean injury causing significant overallimpairment in the position of a domestic industry and a clear and imminentdanger of serious injury respectively. The expression ‘domestic industry’has also been defined in clause (b) to sub-section (4) to Section 9A.Similarly, the expression ‘interested party’ has been defined in sub-ruleE(d) to Rule 2 of the Safeguard Measures (Quantitative Restriction) Rules,2012 and includes exporter or foreign producer or the importer of goodsfor the purposes of imposition of safeguard quantitative restrictions ontrade or business association. It also includes the government of theexporting country or producer of goods or directly competitive goods inFIndia or a trade or business association[32].

60. The need to enact Section 9A arose from the obligationsflowing from Article XIX, as restriction in form of ‘quantitative restriction’,require a procedure to be followed. Affected parties including exporters,importers have to be heard. Consequently, ‘act of transformation’ wasGrequired. Article XIX of GATT-1994 is an escape provision, i.e. a provisionwhich entitles a contracting state to escape from the rigours of paragraph(1) of Article XI of GATT-1994. Similar ‘acts of transformation’ havebeen undertaken by enacting Custom Valuation Rules, provision of 32 The words “unforeseen developments” are not to be found in Section 9A of theFTDR Act and Rule 5(3) but they find mention in Rule 5(2). It is clarified that we haveHnot examined and decided the need to establish “unforeseen developments”.

antidumping, countervailing duty etc. but the entire GATT-1994 does notstand transposed and enacted by way of statutory law or delegatedlegislation.

61. This being the position, Section 9A has to be interpreted as anescape provision when the Central Government i.e. the Union of Indiamay escape the rigours of paragraph (1) of Article XIX of GATT-1994.Section 9A is not a provision which incorporates or transposes paragraph(1) of Article XI into the domestic law either expressly or by necessaryimplication. To hold to the contrary, we would be holding that the CentralGovernment has no right and power to impose ‘quantitative restrictions’except under Section 9A of the FTDR Act. This would be contrary tothe legislative intent and objective. Section 9A of the FTDR Act doesnot elide or negate the power of the Central Government to imposerestrictions on imports under sub-section (2) to Section 3 of the FTDRAct.

62. In other words, the impugned notifications would be valid asthey have been issued in accordance with the power conferred in theCentral Government in terms of sub-section (2) to Section 3 of the FTDRAct. The powers of the Central Government by an order imposingrestriction on imports under sub-section (2) to Section 3 is, therefore, notentirely curtailed by Section 9A of the FTDR Act.

63. To be fair, learned counsel appearing for the importers hadconceded that they cannot enforce or claim violation of paragraph (1) ofArticle XI of GATT-1994 in the domestic courts in India unless the saidArticle has been expressly or by necessary implication incorporated andtransposed in the domestic law, that is, the FTDR Act.

64. In the present case, this Court is not called upon to decide andexamine the obligations of the Contracting Parties in terms of GATT-1994. Our findings and ratio are confined and restricted to interpretationof Section 3 and 9A of the FTDR Act and in that context we havereferred to GATT-1994.

D. Contention of the importers of bona fide imports underinterim orders and prayer for partial relief.

65. Learned counsel for some of the importers had placed relianceon Raj Prakash Chemical v. Union of India[33], which judgment, in A

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Aour opinion, has no application. In Raj Prakash Chemical (supra), thepetitioner had acted under a bona fide belief in view of judgments andorders of High Courts and the interpretation placed by the authorities.In this background, observations were made to giving benefit to theimporters, despite the contrary legal interpretation. In the instant case,the importers rely upon the interim orders passed by the High Court’sBwhereas on the date when they filed the Writ Petitions and had obtainedinterim orders, the Madras High Court had dismissed the Writ Petitionupholding the notification. Similarly, the High Court of adjudicature atBombay, High Court of Gujarat and the High Court of Madhya Pradeshhad dismissed the Writ Petitions filed before them and upheld theCnotifications and the trade notices. Notwithstanding the dismissals, theimporters took their chance, obviously for personal gains and profits.They would accordingly face the consequences in law. In thesecircumstances, the importers it cannot be said had bona fide belief inthe right pleaded.DE. What is not decided

66. Learned counsel for some of the importers had submitted thatthey have preferred statutory appeals against orders suspending orterminating import export code. The said aspect has not been examinedand decided and hence we make no comment and observation. TheEstatutory appeals, if any, preferred by the importer(s) will be decided inaccordance with law.

F. Conclusion

67. Accordingly, we uphold the impugned notifications and thetrade notices and reject the challenge made by the importers. The imports,Fif any, made relying on interim order(s) would be held to be contrary tothe notifications and the trades notices issued under the FTDR Act andwould be so dealt with under the provisions of the Customs Act 1962.The Writ Petitions subject matter of the Transfer Petitions, subject to Eabove (What is not decided) are dismissed. Writ Petitions filed by theGintervenors before the respective High Courts shall stand dismissed interms of this decision. Pending application(s), if any, also stand disposedof in the above terms. No order as to costs.

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Divya Pandey

Petition disposed of