13 December 1982
Supreme Court


Case number: Appeal Civil 3741 of 1982








CITATION:  1983 AIR  278            1983 SCR  (2)   1  1983 SCC  (1) 119        1982 SCALE  (2)1366

ACT:      Constitution   of    India-Art.    136-Public    sector undertaking-Wrong  statements   made  in  affidavits  filed- Government’s  instructions   disregarded-Relief  granted  to petitioners.

HEADNOTE:      In June  1982  the  Chief  Controller  of  Imports  and Exports issued  export instructions on the subject of Export Policy of  Niger Seeds during 1982-83. Paragraphs 2 and 3 of the instructions  stated that  the Government had decided to allow export  of Niger  Seeds within  an overall  ceiling of 10,000  metric  tonnes  through  the  National  Agricultural Cooperative Marketing Federation of India (NAFED) subject to a minimum  export price  of Rs.  8,500 per  metric tonne. In addition to  NAFED, private  exporters who  registered their contracts with  NAFED were  also allowed to export the seeds on the  basis of  first  come  first  served,  against  firm commitments backed by irrevocable letters of credit, subject to availability  of ceiling.  It was  also stated  that  the NAFED would be responsible to monitor the ceiling and ensure that export of the seeds did not exceed the overall quantity of 10,000  metric tonnes  during the year. A Trade Notice on these lines  was issued  by the  Joint Chief  Controller  of Imports and Exports.      On the faith of the trade notice the petitioner entered into contract  with  a  foreign  buyer  who  opened  a  firm irrevocable letter  of credit  in favour  of the petitioner. The petitioner thereupon requested the NAFED to register the contract and  that one  thousand tonnes  of  seed  might  be reserved for  him for  export. About  six  weeks  later  the petitioner reminded  the NAFED  by letter and telegram about his request for allotment of the quota.      In the  meanwhile the  NAFED wrote to the Government of India, Ministry  of Commerce  that it  was for NAFED and its Board of  Directors to  formulate guidelines  regarding  the release and  modalities  of  export  of  the  seeds  and  it forwarded two  statements-one showing names of 22 applicants whose requests  for allotment  of quotas  were  said  to  be backed by letters of credit and the other containing list of 34 names  of applicants  whose contracts  were not backed by letters of credit. The petitioner’s name was included in the



first list.      Reiterating the  earlier  instructions  the  Government wrote to the NAFED that the allotment of quotas should be in conformity with  the instructions  and the  Trade Notice and that it was not for the NAFED to issue another Trade Notice. 2      In disregard  of the  instructions the  NAFED  selected certain applicants  and gave time to them to produce letters of credit. The petitioners were not in this list.      The  Delhi   High  Court   dismissed  in   limine   the petitioners’ petition under Art. 226 of the Constitution.      The petitioners  thereupon filed  their petition  under Art. 136 of the Constitution.      Allowing the petition, ^      HELD:   While   the   petitioners   satisfy   all   the requirements of  the Trade  Notice some  of  the  applicants chosen by  the NAFED  for allotment of quota did not furnish the letters  of credit and the NAFED’s action in giving them time for  their production  was not  in accordance  with the terms stipulated by the Trade Notice. [6H]      The file  produced by  the Government  of India exposed the  statement  made  in  the  NAFED’s  affidavit  that  the petitioners were not in the list of 22 as false. Its counsel was  misled   and  wrongly  instructed  to  argue  that  the petitioners  were   not  included  in  that  list.  But  the petitioners  in  fact  figured  in  the  statement  entitled "enquiries received  from private  parties backed by letters of credit  for export  of Niger seeds" prepared by the NAFED and sent to the Government of India. [7 E]      Even if the claim of NAFED that the selected applicants had secured  a higher price and that would help to earn more foreign exchange  is correct,  they were  not  eligible  for registration firstly because their contracts were not backed by letter  of credit  in  terms  of  the  Trade  Notice  and secondly because the ceiling had already been reached. [7 G]      The counter-affidavit  filed by the Government of India fully substantiates  the claim  of the  petitioners that the NAFED had  disregarded the  trade instructions issued by the Government of  India as  well as  the Trade Notice which was issued pursuant to the trade instructions. [8 A]

JUDGMENT:      CIVIL APPELLATE JURISDICTION: Civil Appeal Nos. 3741-42 of 1982.      From the  Judgment and  Order dated  the 22nd  October, 1982 of  the Delhi  High Court in C.W. Nos. 3577 and 3575 of 1982.      V.M. Tarkunde,  K.K.  Venugopal,  F.S.  Nariman,  Rajiv Datta and A.N. Bhanot for the Appellants.      M.K. Banerjee, Additional Solicitor General and Miss A, Subhashini for the Respondent. 3      M.C. Bhandare and S. Bhandare for the Respondent.      The Order of the Court was delivered by      CHINNAPPA REDDY,  J. It transpires from the facts which we shall  presently set  out that  the National Agricultural Cooperative Marketing  Federation of India, NAFED for short, is a  law unto  itself  and  its  officers  are  not  unduly concerned  either   about  carrying  out  the  Export  Trade Instructions issued  by the  Government of  India  or  about filing truthful affidavits in the Supreme Court of India.      On June  23, 1982,  the Chief Controller of Imports and



Exports, Ministry  of Commerce,  Government of India, issued Export Instruction  No. 59  of 1982 on the subject of Export Policy of  Niger Seeds during 1982-83. Paragraphs 2 and 3 of the Instruction are important and may be fully set out. They are as follows:-           "On a  review of  the position it has been decided      to allow  export  of  Niger  Seeds  within  an  overall      ceiling of  10,000 (Ten  thousand) tonnes  through  the      canalising  agency,   viz.  The  National  Agricultural      Cooperative Marketing  Federation of India Ltd. (NAFED)      subject to   minimum export price of Rs.8,500/- (Rupees      eight thousand  five hundred)  per metric  tonne. While      the NAFED can continue to undertake exports themselves,      private parties  will also  be allowed  to export Niger      Seeds as  Associates of  NAFED against firm commitments      backed by  irrevocable  Letter  of  Credit  subject  to      availability of ceiling. Export by private parties will      be allowed  on first come, first-served basis. For this      purpose, the  exporters should register their contracts      with the  NAFED. The  NAFED will  stop registration  of      contracts as soon as the ceiling is exhausted.           The NAFED  will  be  responsible  to  monitor  the      ceiling and  ensure that  export  of  Niger  Seeds  not      exceeding the  overall quantity  of 10,000  M.T. during      1982-83. In  other words,  the export  will be  allowed      only against  the balance  quantity left unutilised out      of the  ceiling of  10,000 tonnes  released vide Export      Instruction No. 15/82 dated 7.4.1982." 3      Pursuant to  the Trade  Instruction, a Trade Notice was published by  the Joint  Chief  Controller  of  Imports  and Exports on  the same  lines. We may mention here that out of the 10,000  tonnes, export  of which  was to be allowed, the NAFED reserved  to itself  the right  to export 5,000 tonnes and decided  to allow its associates to export the remaining 5,000 tonnes.      On the  faith of  the Trade  Notice, the  petitioner in Special Leave  Petition No.  10230 of  1982 entered  into  a contract with  M/s Curtis  (Confirmers) Limited of London on 7.7.82 for  the sale  and export  of 1,000  metric tonnes of Indian Niger  Seeds at  the price  of Rs.  8,560 per  metric tonne, f.o.b.  at any  Indian Port.  Shipment of  200 metric tonne was  to be  by October,  1982, 300  metric  tonnes  by February, 1983  and 500  metric tonnes  by  March,  1983  at buyer’s option  with one  month’s clear  notice. The payment was to be by ’firm, irrevocable credit, to be opened through first class bank for 10% value now and for balance 90% to be opened 15  days prior to shipment’. The petitioner forwarded the contract  to NAFED  on 22.7.82  with a  request that the contract may  be registered and promising to send the letter of credit  in two  or three days. An Irrevocable Documentary Letter of  Credit was duly opened by the Banque Nationale de Paris on  behalf of  the foreign  buyer  in  favour  of  the petitioner for  the amount  of Rs.8,56,000  being 10% of the total  value  of  the  goods.  The  letter  of  credit  also stipulated that  within 15  days before  each shipment, ’the credit value was to be increased to cover the amount of each shipment and  that would  be advised  as an amendment to the credit’. Letter  of Credit was forwarded to the NAFED by the petitioner on  26.7.82 with  a request  that the quantity of one thousand  metric tonnes  might be  reserved for  him for export. The NAFED sent a reply on 6.8.82. "We will revert in the matter  shortly". On  3.9.82 the petitioner reminded the NAFED both  by letter  and telegram  about his  request  for allotment of  quota. The  petitioner also sent a telegram to



the Government  of India  that matters  were unduly  delayed though he had completed all the formalities. It appears that meanwhile, the  NAFED wrote  to the  Ministry  of  Commerce, Government of  India, on 17.9.82 informing the Government of India that  it was  for the NAFED and its Board of Directors to formulate  guidelines regarding release and modalities of export. A  copy of the guidelines formulated by the NAFED on 16.9.82 was enclosed. Two statements containing the names of the applicants for quotas 5 and  other   particulars  were   also  enclosed.  The  first statement showed  the names  of 22 applicants whose requests for allotment of quotas were said to be backed by Letters of Credit. The appellants in the appeals before us are included in this list though this was denied in the counter affidavit filed on  behalf of  the NAFED.  More about  it  later.  The second statement  contained a list of 34 names of applicants whose contracts were not backed by any Letters of Credit. On receipt of  this letter  the Government  of India  by  their letter dated 30.9.82 objected to the guidelines said to have been approved  by the  NAFED as  they were  contrary to  the guidelines issued by the Government of India. It was pointed out that  according to the instructions of the Government of India the  allotment had  to be  made on  first  come  first served basis whereas according to the guidelines prepared by the NAFED  the quotas  were to  be allotted  by a  committee consisting of  the Chairman  and officials of the NAFED, the Government  and   the  trade,   after  considering  all  the applications received  within a certain specified period. In fact the  guidelines  issued  by  the  Government  of  India required that registration of applications should be stopped as soon  as the  ceiling limit  was reached  on a first come first served  basis. Further, the guidelines prepared by the NAFED provided  that Letters  of Credit  would  have  to  be submitted within  three weeks  after allotment  and this was again contrary to the guidelines issued by the Government of India which  required that  the Letters  of Credit should be made  available   for  registration   of  the  requests  for allotment of  quotas. The letter of the Government again and again emphasised  that quotas  should be  allotted on  first come  first   served  basis   to  exporters   against   firm commitments,  backed   by  irrevocable  Letters  of  Credit, subject to availability of ceiling. The Government asked the NAFED to  refer to  the fact  that the  letter of  the NAFED itself showed  that there were 22 parties who had registered their contracts  for export,  whose requests  for  allotment were backed by Letters of Credit and that the total of their requests came  to 4,859  tonnes. On  the other  hand, it was pointed out, the requests of the other 34 parties for quotas were not  backed by  Letters of  Credit. The  Government  of India finally instructed the NAFED to ensure that exports of Niger  Seeds   were  undertaken   in  conformity   with  the instructions issued  by the  Government of  India in E.I.No. 59/82 dated  23.6.82. The  NAFED was reminded that while the NAFED 6 was only  a canalising agency for export of Niger Seeds, the export would  have to  be undertaken by them only within the policy as  laid. down  by  the  Government.  The  NAFED  was further told  that a Trade Notice had already been issued by the Joint  Controller of Imports and Exports and that it was not for  the NAFED to issue another Trade Notice as proposed by it.      The instructions  of the Government of India reiterated by their  letter dated  30.9.82 fell on deaf ears. The NAFED



ignored the  instructions of  the Government  of  India  and persisted in  the error  of its  ways. At  a meeting held on 16.10.82 the NAFED purported to select applicants for export quotas neither  on  a  first  come  first  served  basis  as originally announced in the Trade Notice nor only from among applicants whose contracts were backed by Letters of Credit. They proposed  to give  time to  the selected  applicants to produce Letters of Credit.      The  petitioners  moved  the  Delhi  High  Court  under Article 226  of the  Constitution for redress but their Writ Petitions were  dismissed in  limine. They have come to this Court under Article 136 of the Constitution. As we were told that the  applicants who  had been selected for allotment of quotas had  been able  to secure  a higher  price from their buyers  and,   therefore,  allotment   of  quotas   to   the petitioners would  result in  considerable loss  of  foreign exchange, we  were anxious  to know  the present attitude of the Government  of India  in the  matter. The  Government of India  has  now  appeared  before  us  through  the  learned Additional Solicitor  General and  a counter  affidavit  has been filed  on their  behalf by  a Deputy  Secretary in  the Ministry of Commerce.      The NAFED  has no  clear  or  definite  answer  to  the petitioners’ claim.  First, it  was said  that the letter of Credit furnished  by the  petitioner did  not conform to the requirement of  the Trade  Notice, but  the argument was not pursued as  it was  seen  from  the  file  produced  by  the Government of  India that the Letters of Credit furnished by such of  the selected  applicants for  quotas as did furnish Letters of  Credit were all similar to those produced by the petitioners. In  fact, some  of the chosen ones furnished no Letters of  Credit and it was proposed to give them time for the production  of Letters  of Credit.  This, of course, was not in  accordance with  the terms  stipulated by  the Trade Notice. It  is also  clear from  the letters which the NAFED addressed to the Govern- 7 ment of  India that  it was  never for  a moment  doubted by anyone  that   the  Letters   of  Credit   produced  by  the petitioners conformed  to  the  requirements  of  the  Trade Notice. The  present stand  is a  clear after-thought  and a pretence. In  the counter  affidavit filed  on behalf of the NAFED it was stated that 22 applicants for allotment claimed that they had firm contracts backed by Letters of Credit for full value. The total quantity covered by these applications was 4,859  tonnes. It  was asserted that the petitioners did not  fall   in  this   category.  It  was  stated  that  the petitioners came  in the category of those who had secured a price of  Rs. 8,600  per tonne  but whose contracts were not backed by  Letters of  contract.  The  Learned  Counsel  who appeared  for   the  NAFED  also  submitted  before  us,  on instructions, that  the petitioners  were not  among the  22 applicants whose  contracts were  considered by the NAFED as backed by  Letters of  Credit. But  a perusal  of  the  file produced by  the Government  of India  exposed the statement made in the affidavit filed on behalf of the NAFED as false. The NAFED had itself prepared a statement showing "Enquiries received from  private parties  backed by  Letters of Credit for export  of Niger  Seeds". This statement was sent to the Government of  India along with its letter dated 17.9.82 and it contains  a list of twenty two names. Both the appellants in the  appeals figure  in it.  It is  clear to  us that the statement in  the counter  affidavit is  false. It  is  also clear to  us that the Learned Counsel was misled and wrongly instructed to  argue before  us that the appellants were not



included in the list of twenty two.      It appeared  to us  that a  copy of  the  letter  dated 17.9.82 of the NAFED to the Government of India was not made available even  to the  Learned Counsel. We repeatedly asked for it and we could ultimately get it from the file produced by the Government of India,      One of the submissions made to us was that the selected applicants had  secured a  higher price  per tonne  and that would help to earn more foreign exchange. In the first place their contracts  are not  backed by  Letters  of  Credit  as stipulated by  the Trade  Notice and  they were not eligible for registration.  In  the  second  place  the  ceiling  had already been reached and for that reason also they could not be registered.      The counter  affidavit filed by the Government of India fully substantiates  the claim  of the  appellants that  the NAFED had 8 disregarded the  trade instructions issued by the Government of India  as well as the Trade Notice issued pursuant to the trade  instructions.   In  paragraph   27  of   the  counter affidavit,  it  is  expressly  stated  "I  submit  that  the answering respondents have no objection if relief is granted to the  petitioners provided they fulfil the requirements of the export instructions issued by respondents 1,2 and 4". In the circumstances  we have  no option  but  to  allow  these appeals. Necessary directions have already been issued by us on 29.11.82.  The appellants are entitled to get their costs in each  of these  appeals  from  the  6th  respondent,  the National Agricultural Co-operative Marketing Federation Ltd. We fix the costs at Rs. 5.000/- in each appeal. P.B.R,                                     Petition allowed, 9