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PETITIONER: D. NAVINACHANDRA & CO., BOMBAY & ANR. ETC.

       Vs.

RESPONDENT: UNION OF INDIA & ORS.

DATE OF JUDGMENT15/04/1987

BENCH: MUKHARJI, SABYASACHI (J) BENCH: MUKHARJI, SABYASACHI (J) PATHAK, R.S. (CJ) MISRA RANGNATH

CITATION:  1987 AIR 1794            1987 SCR  (2) 989  1987 SCC  (3)  66        JT 1987 (2)   141  1987 SCALE  (1)790  CITATOR INFO :  RF         1989 SC 690  (5,6)

ACT:     Import Policy, 1978-79--Diamond Exporters granted Export House  Certificates  and  Additional  Licences  pursuant  to orders of Court dated April 18, 1985--Entitlement for import of  items  under the Import Policy current at  the  time  of import--Effect  of  subsequent  decisions  rendered  by  the Court.

HEADNOTE:     By a common order dated April 18, 1985 in C.A. No.  1423 of  1984, etc., Union of India v. Rajnikant Bros. the  Court had  directed issue of Export House Certificates  and  Addi- tional Licences to the petitioners and other diamond export- ers  under  the  Import Policy 1978-79  stating:  "Save  and except items which are specifically banned under the  preva- lent  Import Policy at the time of import,  the  respondents shall  be entitled to import all other items  whether  cana- lised  or otherwise in accordance with the relevant  rules". The petitioners, who were issued Additional Licences  pursu- ant  to this order, imported several consignments  of  items falling  under  Appendices  2B, 3 and 5  of  Import  Policy, 1985-88,  and, while clearing them, the Customs  Authorities imposed  a  fine of Rs.45,000 in respect  of  certain  items failing  in  Appendix 2B and issued show  cause  notices  in respect of certain other items failing in Appendices 2B  and 5.  The petitioners challenge was directed not only  against these  orders, but extended to certain subsequent  decisions of  the  Court which, according to them, had  cut  down  the effect of the Court’s earlier order dated April 18, 1985  in Union of India v. Rajnikant Bros. Dismissing the petitions,     HELD: The decisions rendered subsequent to the  decision dated April 18, 1985 in Union of India v. Rajnikant Bros. do not  take any different or contrary view. Indeed, they  give effect to the letter and spirit of that decision. The  basic background in which the decision in Union of India v. Rajni- kant  Bros.  was rendered was that Export  Houses  had  been refused  Export House Certificates on the ground  that  they

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had  not  diversified their exports. It was found  that  was wrong.  The  wrong was undone by directing issue  of  Export House Certificates for 990 the year 1978-79 though the order was passed in April, 1985. That  was  a measure of restitution, but  the  Court,  while doing  so,  ensured that nothing illegal was done. It  is  a presumption of law that the courts act lawfully and will not ask  any authority to do anything which is illegal.  It  was directed  that  except those items which  were  specifically banned  under  the prevalent import policy at  the  time  of import, the respondents therein were entitled to import  all other items whether canalised or not canalised in accordance with  the  relevant rules. Analysing the said order,  it  is apparent: (1) that the importation that was permissible  was of  goods which were not specifically banned, (2) that  such banning  must  be under the prevalent import policy  at  the time  of import. and (3) whether items which were  canalised or  uncanalised  would be imported in  accordance  with  the relevant  rules. These conditions had to be  fulfilled.  The court never did and could not have said that canalised items could  be imported in any manner not permitted nor it  could have given a go-bye to the canalisation policy. [1000C-H]     (ii).  In Raj Prakash Chemicals v. Union of  India,,  it was  explained  that only such items could  be  imported  by diamond  exporters under the Additional Licences granted  to them  as  could have been imported under the  Import  Policy 1978-79  and  were also importable under the  Import  Policy prevailing at the time of import. These were the items which had  not  been  ’specifically banned’  under  the  prevalent Import  Policy.  The items had to pass  through  two  tests, firstly,  they should have been importable under the  Import Policy  1978-79  and, secondly, they should also  have  been importable under the Import Policy, 1985-88 in terms of  the Order  dated  18th April, 1985 and if one may add,  in  such terms  ’in accordance with the import rules’  whether  cana- lised or not canalised. The Court had no occasion to consid- er  in  that  case the significance of  the  words  ’whether canalised  or otherwise’ mentioned in the Order  dated  18th April,  1985 in Union of India v. Rajnikant  Bros.,  because that point did not arise there. [1000H; 1001A-D]     (iii) What did the court then intend by the words ’whet- her  canalised  or otherwise’ used in the order  dated  18th April, 1985 in Union of India v. Rajnikant Bros? The diamond exporters could import the items which they were entitled to import  under the Import Policy 1978-79 provided  they  were importable  also under the Import Policy ruling at the  time of  import.  These are items which were open  to  import  by Export  Houses holding Additional Licences for Sale  to  the Actual  Users (Industrial). These are items which  were  di- rectly  imported,  for example, items in Part II List  8  of Appendix  6 of Import Policy 1985-88. These are items  which are not canalised. Canalised items are those 991 items  which  are ordinarily open to import only  through  a public  sector agency. Although generally these are  import- able  through public sector agencies, it is permissible  for any Import Policy to provide an exception to the rule and to declare  that  an  importer might import  a  canalised  item directly.  It is in that sense and that sense only that  the Court  could  have  intended to define  the  entitlement  of diamond  exporters.  They would be entitled to import  items which were canalised or not if the Import Policy  prevailing at the time of import permitted them to import items failing under such category. [1001D-G]

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   (iv)  In  the Order dated 18th April, 1985 in  Union  of India  v. Rajnikant Bros., this Court did not do  away  with canalisation. That was not the issue before this Court. This expression  ’whether  canalised  or not  canalised’  was  to include  both. This Court did not say that  canalised  items could  be  imported directly by the importers  ignoring  the canalisation process. High public policy, it must be  empha- sised,  is  involved  in the scheme  of  canalisation.  This purpose of canalisation was examined by.this Court in Daruka JUDGMENT: of  this  Court  observed that the policies  of  imports  or exports  were fashioned not only with reference to  internal or  international  trade, but also on monetary  policy,  the development  of agriculture and industries and even  on  the political  policies  of the country and rival  theories  and views may be held on such policies. If the Government decid- ed  an economic policy that import or export should be by  a selected  channel  or through selected agencies,  the  court would proceed on the assumption that the decision was in the interest  of  the  general public unless  the  contrary  was shown.  Therefore, it could not be collaterally  altered  in the manner suggested. The policy of canalisation which is  a matter of policy of the Government was not given a go-bye by the  observations  referred to in the Order of  18th  April, 1985.  Indeed, it is possible to read the Order in a  manner consistent  with  canalisation  scheme in the  way  we  have indicated.  If that is so, then it should be so  read.  When this Court observed that the fact whether items were  sought to  be imported by diamond merchants were  canalised,  would not  be  an impediment to the import directly by  them,  the Court  meant to say that this could be imported directly  by them  through  the canalisation organisation. The  need  for canalisation stands on public policy and that need cannot be lightly  or inferentially given a go-bye. It should  not  be presumed that collaterally the court had done away with  the system of canalisation based on sound public policy. We have found nothing in the different authorities on this  subject, which  militate  against  the above  views.  Therefore,  the action taken by the Customs Authorities in issuing adjudica- tion notice and proceeding in 992 the manner they did we are of the opinion that they have not acted  illegally or without jurisdiction. This must  proceed in accordance with law as laid down by this Court which, in. our  opinion  is clear enough. The fact that  in  subsequent decision,  the  petitioner is not a party is  not  relevant. Generally  legal positions laid down by the court  would  be binding  on all concerned even though some of them have  not been  made  parties nor were served nor any notice  of  such proceedings given. [1001H; 1002A-G]     Union of India v. Rajnikant Bros., C.A. No. 1423 of 1984 decided on April 18, 1985; Raj Prakash Chemicals Ltd. & Anr. v.  Union  of India & Ors., [1986] 2 S.C.C. 291;  M/s.  Indo Afghan Chambers of Commerce &Anr., etc. v. Union of India  & Ors.,  etc., [1986] 3 S.C.C. 352; Union of India  v.  Godrej Soaps  Pvt. Ltd. &Anr., [1986] 4 S.C.C. 260; and  M/s.  Star Diamond Co. India v. Union of India & Ors., [1986] 4  S.C.C. 246,  discussed, explained and reiterated. Daruka &  Co.  v. Union of India & Ors., [1974] 1 SCR 570, referred to.

&     ORIGINAL JURISDICTION: Writ Petition Nos. 1483, 1494 and 1544 of 1986 etc.

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Under Article 32 of the Constitution of India.     Dr:  Y.S. Chitale, Satish Chandra, P.K.  Banerjee,  S.N. Kacker,  K.C.  Agarawal,  S.S. Rathore,  L.K.  Garg,  M.K.D. Namboodiary,  P.M.  Amin, Ashok  Grover,  Bulchandani,  M.N. Shroff, P.H. Parekh and Sohail Dutt for the Petitioners.     K. Parasaran, Attorney Genera1, G. Ramaswamy  Additional Solicitor  General, G. Subramaniam, A.S. Rao, Ms. Relan  and P.P. Parmeshwaran for the Respondents.     R.S..Nariman,  (Indo Afghan Chamber of Commerce).  Kapil Sibal,  (M/s Raj Prakash Chemicals) and Rajiv Dutta for  the Interveners. The Judgment of the Court Was delivered by     SABYASACHI  MUKHARJI, J. Writ Petition No. 1483 Of  1986 is  directed.  against ’the Show Cause  Notices  dated  21st August, 1986, 11th September, 1986 and 26th September,  1986 issued to the petitioners--Messrs.D. Navinchandra & Company, a partnership firm and Dilip Kumar Dalpatlal Mehta, a  part- ner’of  the  said firm. In order to ’appreCiate  this  chal- lenge;,  it  is necessary to refer to  certain  facts.  This petition raises the question of the rights of the  petition- ers and 993 other  diamond exporters who were entitled to  export  house certificates and additional licences under import policy  of 1978-79 and who were granted the same pursuant to the  judg- ment  and ’order of this Court dated 18th April,1985. As  we shall explain later, there is no conflict With this decision of  a Bench which consisted of a bench of three  judges  and the  subsequent  decisions of this Court  which  We.   Shall presently refer. It is necessary also that in order to  make out. a case, the petitioners have sought to emphasise on the point  that the decision dated 18th April, 1985 was a  deci- sion of three learned Judges, in Order to spin out a case of some sort of conflict with this decision and certain  subse- quent decisions of this Court consisting of benches of  two’ learned judges. It appears that the import policy issued  by the  Government of India for the year 1978-79  by  paragraph 176 provided for, additional licences. On 29th April,  1979, the  first  petitioner,  a diamond  exporters,  was  refused Export House Certificate. The said. petitioner filed a  writ petition before the High Court of Bombay. being Misc.  peti- tion  No. 1293/1979. By his order and judgment, Pendse ,  J. made the rule absolute holding that canalised items were not banned  items, and there was no reason why the  first  peti- tioner should not be compel-" led to approach the canalising agency for import of the same. On 7th April, 1983, the Delhi High  Court delivered a judgment in Civil writ Petition  No. 1501  of 1981 (which for the sake of convenience, the  party has chosen to describe as Rajnikant Bros. & Ors. case allow- ing  the diamond exporters the same and holding that  merely Canalising  an item could not be regarded as import of  that item  being  absolutely  banned.  Against‘  these  judgments special leave petitions were filed in this Court,     Appeal was also filed on 27th March. 1984 by the  Import Control Authorities and Union of India against the  judgment dated  11th November, 1983 mentioned hereinbefore passed  by Pendse,  J. and the said appeal as dismissed on  that  date. Against the’ same, the, Export Control authorities and Union of  India filed special leave petition No. 7190 Of  1984  in this  Court. Similar special leave petitions were  filed  in this  Court  against similar judgments of  the  Bombay  High Court.     On  18th April, 1985, by a common judgment, the  special leave. petitions were disposed of. As much has been made out ’of this judgment and order, it is necessary to refer to the

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same.  The  matter  was disposed of by the  order  in  Civil Appeal  No, 1423 of 1984’ by a bench consisting  Fazal  Ali, J., Varadarajan, J. and one of us (Sabyasachi Mukharji, J.). It was held by the said order that there was no  requirement of  diversification of exports as a condition for the  grant of Export 994 House  Certificate in the Import Policy for 1978-79.  There- fore,  while confirming the High Court’s judgment,  quashing the order impugned in the writ petitions in the High  Court, this Court directed the appellants namely Union of India and Import  Control authorities to issue necessary Export  House Certificates  for the year 1978-79. It was further  directed that  Export  House Certificates should  be  granted  within three months from that date. The order stated that ’save and except items which are specifically banned under the  preva- lent  import policy at the time of import,  the  respondents shall  be entitled to import all other items  whether  cana- lised  or otherwise in accordance with the relevant  rules’. The appeals were disposed of accordingly with no order as to costs.     Pursuant  to  the aforesaid order, on 29th  July,  1985, import  licence  was  issued, it is claimed,  to  the  first petitioner. of the c.i.f. value of Rs.71,15,900. Pursuant to the  said  import  licence, the  first  petitioner  imported several consignments of items failing either under  Appendix 3 (List of Limited Permissible Items), Appendix 2B (List  of Restricted Items) or Appendix 5 (Canalised Items). According to  the petitioner, in the matter of clearance of such  con- signments  different  standards were applied by  the  Custom authorities.     On  18th  October, 1985, in special leave  petition  No. 11843 of 1985--In the case of Raj Prakash Chemicals Ltd.  v. Union of India this Court directed that Acrylic Ester  Mono- mors  would  not be permitted to be  cleared  until  further orders  unless they had already been cleared. Similarly,  on 31st January, 1986, interim order was passed in the case  of M/s Indo-Afghan Chambers of Commerce v. Union of India (Writ Petition  No.  199  of 1986) directing that  Dry  Fruits  in respect  of  which Custom clearance had been  obtained  till 30th  January,  1986 would be allowed to be cleared  and  no clearance  of  Dry fruits from 31st  January,  1986  onwards would  be made by the Custom authorities until  further  or- ders.     On  5th March, 1986, judgment was delivered in the  case of Raj Prakash Chemicals Ltd. and Another v. Union of  India and Others, [1986] 2 SCC 297 by a bench consisting of  three learned  Judges-Tulzapurkar, J. and two of us (R.S.  Pathak, J.  as the Chief Justice then was, and Sabyasachi  Mukharji, J.).  This Court held that additional licence  holders  were entitled to import items permissible to Export Houses  under Import  Policy 1978-79 excluding those items which  fell  in Appendix  3  (List  of Banned Items) of  the  Import  Policy 1985-88. This Court observed that diamond exporters who were granted Addi- 995 tional  Licences  had formed a bona fide  belief  that  they could  import  all the items accessible to them  under  Open General  Licence under the Import Policy of  1978-79  except those  placed in Appendix 2 Part A of the Banned List  under the  Import  Policy 1985-88. This belief was formed  on  the basis of consistent orders of the High Courts and consistent manner  in which Import Control authorities construed  those orders.  In  view of such a belief, it was further  held  by this Court, in the interest of broad principles of  justice,

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equity  and  fair  play and to  avoid  undeserved  hardship, without going to the legal technicalities that those diamond exporters  who  were granted Additional Licences  under  the Import Policy 1978-79 and had opened and established irrevo- cable  letters of credit before 18th October, 1985 i.e.  the date on which the interim order was passed by this Court  in Raj  Prakash’s  case as mentioned  hereinbefore,  should  be permitted,  notwithstanding the construction placed by  this Court on the order dated 18th April, 1985 of this Court,  to clear the goods imported, or to be imported by them pursuant to  such irrevocable letters of credit. In other words,  all imports  effected pursuant to such letters of credit  should be deemed to have been legally and properly made, and should entail  no adverse consequences whatsoever. This Court  fur- ther  reiterated  that the Court must be  presumed  to  have given  effect to law--That presumption can be rebutted  only upon  evidence  showing a clear intention to  the  contrary, either  expressly  or by necessary implication.  This  Court noted  that the order dated 18th April, 1985 which  we  have set  out  hereinbefore  used  the  expression  "specifically banned"  and the controversy before this Court in  Raj  Pra- kash’s  case was on the meaning of the expression  ’specifi- cally  banned’ and the controversy between the parties  cen- tered round the meaning of the words ’specifically  banned’. It was mentioned that Appendix 3 is the list of items  which could  not  be  imported by an Export  House  on  additional licence,  it  was a ban with reference to  the  category  of importers.  Appendix 4 is the list of items which could  not be imported by anyone whosoever. This Court, therefore,  was of  the  view that when regard is had to the  Import  Policy 1984-85,  reference must necessarily be made to  the  corre- sponding  Appendix  3,  formerly described as  the  List  of Banned  Items and now described as the List of Limited  Per- missible Items, and Appendix 2 Part A which is now the  list of  Banned  Items replacing Appendix 4 (List  of  Absolutely Banned Items). In other words, said the Court, the Addition- al Licences to be issued to diamond exporters entitled  them to  import  items permissible to Export  Houses  under  such licence  under  the Import Policy  1978-79  excluding  those items  which  fell within Appendices 3 and 4 of  the  Import Policy 1978-79 and also excluding items which fell in Appen- dix 3 and Appendix 2 Part A of the Import 996 Policy 1984-85. This Court was of the view that this is  the meaning which must be given to the terms of the order  dated 18th April, 1985. This Court noted that when this Court made the  previous  order  on 18th April, 1985  when  the  Import Policy  of 1985-88 was in force. there were only  two  items which  were absolutely banned. and these were animal  tallow and animal cannot. That was also Substantially the  position under the Import Policy 1984-85.     This  Court was of the view that in the Import  Policies of  1984-85 and 1985-88 the items open to import under  Open General  Licence  were then set forth,  when  Raj  Prakash’s judgment was delivered i.e. in Appendix 6. A perusal of Part I1  of List 8 in Appendix 6 indicated that it enumerated  in fairly  long detail the items allowed to be imported by  the Export Houses holding Additional Licences for sale of  those items  to  eligible  Actual Users  (Industrial)  subject  to Actual  User  conditions. That was the  entitlement  of  the holder  of an Additional Licence under paragraph  265(4)  of the Import Policy 1985-88.     It  is  necessary  to set out in  detail  the  aforesaid judgment and also to refer to the order of 18th April.  1985 to  emphasise  that  whether non-canalised  items  could  be

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imported directly. and not through canalised agency, was not in issue in either of these two cases. nor decided or  adju- dicated upon.     In  the judgment in Raj Prakash’s case (supra),  it  was held that Additional Licence holders were entitled to import items  permissible to Export Houses under the Import  Policy 1978-79 excluding those items which fell in Appendix 3 (list of banned items) of the Import Policy 1985-88.     On  17th  March, 1986, letter was written by  the  Joint Chief  Controller of Imports to Messrs. B. Vijay  Kumar  and Co. stating that against Additional Licences issued in terms of  this  Court’s Order dated 18th April,  1985,  import  of items  permissible against Additional Licences in  terms  of Policy for 1978-79 would be allowed even if such items  were in the list of canalised items in Policy for 1978-79..     On  3rd April, 1986, there was a meeting with Member  of C.B.E.C. and Principal Collector where the minutes  recorded that items which were under O.G.L. during 1978-79 and subse- quently canalised in Policy for 1985-88 would be allowed  to be imported. On 23rd April, 1986, a circular was issued from the  Under  Secretary  to the Government of  India  to  port authorities stating that canalised items 997 were not covered within the purview of this Court’s decision in  Raj Prakash’s case and Additional Licence holders  would be allowed to import canalised item. By a letter on  14/15th May,  1986  from Principal Collector  to  Chairman,  Western Region, Federation of Indian Export Organisation, the matter had been clarified and clearance of canalised items  against Additional Licences was unconditionally allowed. This Court again dealt with the question in the case of  M/s Indo  Afghan Chambers of Commerce and Another etc. v.  Union of India and Other  etc., [1986] 3 SCC 352. In that decision two of us (R.S. Pathak, J. as the learned Chief Justice then was  and Sabyasachi Mukharji, J.) were parties. It was  held that under the import policy of 1978-79 dry fruits  (exclud- ing  cashewnuts) could be imported by all persons under  the Open General Licence. There was no need to obtain any  Addi- tional Licence  for importing items in the year 1978-79  and therefore,  the  wrongful denial of Additional  Licences  to diamond exporters in the year 1978-79, could not justify any restitution  subsequently  in regard to the  import  of  dry fruits (other than cashewnuts). It was further observed that under  the  Import  Policy 1985-88,  dry  fruits  (excluding cashewnuts  and dates) were no longer open to  import  under the  Open General Licence. The sanction for  importing  them must  be  found  under some other provision  of  the  Import Policy.  The diamond exporters, it was held,’ could  not  be regarded  as  dealers engaged in the trade of  stocking  and selling  dry fruits (excluding cashewnuts and  dates).  They were, therefore, not entitled to the advantage of  paragraph 181  (3)  of the Import Policy 1985-88. Dry fruits,  it  was further held, must be regarded as consumer goods of agricul- tural origin. The words "agricultural origin" in Item 121 of Appendix 2 Part B are used in the broadest sense. The  words ’consumer goods’ in item 121 referred to dry fruits imported for supply to Actual Users (Industrial). It was further held that dry fruits do not appear in Appendix 3 Part A and 5 nor can  be  imported under the Open General Licence  under  the Import Policy 1985-88, Inasmuch as they fail within Item 121 of  Appendix  2 part B they are excluded from the  scope  of Item 1 of Appendix 6, and cannot be imported as raw  materi- als  and consumables for sale to Actual Users  (Industrial). Appendix  2 Part B (List of Restricted Items) was also  suc- cessor of Appendix 4 (List of Absolutely Banned Items) under

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the Import Policy 1978-79. This Court reiterated, and it was important  to emphasise, that On the reasoning  which  found favour  with  this Court in Raj Prakash’s case, it  must  be held that diamond exporters holding Additional Licences were not entitled to import goods enumerated in Appendix 2 Part B of the Import Policy 1985-88. As held in that case,  holders of Additional Licences were 998 entitled  to import only those goods which were included  in Appendix  6 Part 2 List 8 of the Import Policy 1985-88.  Dry fruits  were  not included in that list and  therefore  they could not be imported under Additional Licences.     It is stated that on 20th May, 1986, there was an  order of  adjudication in respect of one consignment of the  first petitioner  in this case i.e. Messrs. D. Navinchandra &  Co. of items falling in Appendix 2B (List of Restricted Items) ( 10  Bills of Entry) imposing fine aggregating to  Rs.45,000. Then on 21st August, 1986, a show cause notice was issued to the first petitioner in this petition in respect of consign- ment  falling in Appendix 5 (Canalised Items) of the  Policy for 1985-88. Reply was duly given on 9th September, 1986 and a  show cause notice was issued on 11th September,  1986  to the  first petitioner in respect of one consignment  falling in  Appendix  2B (List of Restricted Items)  of  Policy  for 1985-88. In the meantime, this Court had occasion to examine some  passage of this decision. This question  was  examined and  it  is necessary to refer to the  said  two  subsequent decisions of this Court.     The  first  one  is the decision in Union  of  India  v. Godrej  Soaps Pvt. Ltd. and Another, [1986] 4 SCC.  260  and the second one is the decision in M/s Star Diamond Co. India v. Union of India and Others, [1986] 4 SCC 246. It is neces- sary first to refer to Godrej Soaps’ case. It was held  that a diamond exporter could import the items he was entitled to import  under the Import Policy 1978-79 provided  they  were importable  also under the Import Policy ruling at the  time of  import. These are items which are open to import  by  an Export  House  holding  an Additional Licence  for  sale  to eligible  Actual Users (Industrial). These are  items  which could be directly imported, for example, the items enumerat- ed  in Part 2 of List 8 of Appendix VI of the Import  Policy 1985-88.  These are items which are not ’canalised’.  ’Cana- lised’  items are those items which are ordinarily  open  to import only through a public sector agency. There is, howev- er,  nothing to prevent an Import Policy from  providing  in the  future that an Export House holding an  Additional  Li- cence  can directly import certain canalised items also.  In that  event, an Export House holding an  Additional  Licence would  be  entitled to import items  "whether  canalised  or otherwise", meaning thereby items open ordinarily to  direct import  (non-canalised  items)  as well  as  items  directly importable  although  on the canalised list. It is  in  that sense that the Court had intended to define the  entitlement of a diamond exporter by using the words "whether  canalised or otherwise" in its order dated 18th April, 1985. 999     In  that case this Court found that in respect  of  Palm Kernel Fatty Acid which was a canalised item listed as  Item 9(v)  in  Appendix V Part B of the  Import  Policy  1985-88, there  is  no provision in that policy which  permitted  the import of such item by an Export House holding an Additional Licence. Therefore, both on grounds of equity and  construc- tion  the  claim of the diamond exporters, or,  as  in  that case, a purchaser from the diamond exporter, was held to  be not  maintainable. As importation of canalised  items,  this

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Court reiterated, directly by holders of additional licences was banned, it should not be construed to have been  permit- ted  by  virtue  of the order of this Court  and  the  items sought to be imported do not come within List 8 of Part 2 of Appendix 6 of the Import Policy of 1985-88 against addition- al  licences. It was found that the goods were purchased  by the  respondents in that case after they were aware  of  the position of law as enunciated in Raj Prakash’s case as  well as  Indo Afghan Chambers of Commerce’s case. No question  of any restitution of rights, therefore, arose. Goods in  ques- tion  being specially banned goods, these could not  be  im- ported  under  Item I of Appendix 6 (Import of  items  under Open General Licence) of Import Policy, 1985-88, more so the import  being  not by the Actual User  (Industrial)  but  by somebody else from whom the respondent purchased the  goods. This position was reiterated in the case of M/s Star Diamond Co. India v. Union of India and others (supra).     This  Court further reiterated that a decision  of  this Court is binding on all.     To complete the narration of events, reply was given  by the  first  petitioner to the show cause notice  dated  11th September, 1986 on 18th September, 1986.     On  26th September, 1986, another show cause notice  was issued  to the Petitioner in respect of another  consignment falling in Appendix 2B (List of Restricted Items) of  Policy for  1985-88. Personal hearing was given to the first  peti- tioner  thereafter.  The petitioner moved this  Court  under Article 32 of the Constitution, for quashing the show  cause notices  dated 21st August, 1986, 11th September,  1986  and 26th  September,  1986 and the order of  adjudication  dated 20th May, 1986 and for consequential relief.     We are, however, unable to find any merit in this appli- cation either in law or in equity.  1000     One of the points on which an argument was sought to  be built  up was that the Bench of two judges of this Court  in the  subsequent  decisions had cut down the  effect  of  the decision of this Court dated 18th April, 1985 in the case of Union of India v. Rajnikant Bros. It has been stated that in subsequent  decisions referred to hereinbefore,  this  Court had deviated and indeed differed from the view expressed  in that case. It was urged that in Rajnikant Bros. case a bench of  three judges categorically stated that  the  respondents would  be entitled "to import all other items whether  cana- lised  or  otherwise" except those which  were  specifically banned  under  the prevalent import policy at  the  time  of import, with the relevant rules. In our opinion, the  subse- quent  decisions  referred to hereinbefore do not  take  any different  or contrary view. Indeed it gives effect  to  the letter  and spirit of the said decision. It has to be  borne in  mind, that the basic background under which  the  Rajni- kant’s  decision  was rendered, the Export Houses  had  been refused  Export House Certificates because it  was  insisted that they should have diversified their export and that  was a condition for the grant or entitlement of an export  house certificate..It  was found and it is common ground now  that that  was wrong. Therefore, the wrong was undone. Those  who had  been  denied Export House Certificates  on  that  wrong ground  were put back to the position as far as it could  be if  that wrong had not been done. To do so, the  Custom  au- thorities  and  Govt.  authorities were  directed  to  issue necessary  Export  House certificates for the  year  1978-79 though  the  order  was passed in April, 1985.  This  was  a measure  of  restitution, but tile Court,  while  doing  so, ensured  that nothing illegal was done. It is a  presumption

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of  law  that the courts act lawfully and will not  ask  any authority  to do anything which is illegal.  Therefore,  the court  directed  that except those which  were  specifically banned  under  the prevalent import policy at  the  time  of import,  the  respondents shall be entitled  to  import  all other items whether canalised or not canalised in accordance with  the  relevant rules. Analysing the said order,  it  is apparent, (1) that the importation that was permissible  was of  goods which were not specifically banned, (2) such  ban- ning  must be under the prevalent import policy at the  time of  import,  and (3) whether items which were  canalised  or un-canalised  would  be  imported in  accordance  _with  the relevant  rules. These conditions had to be  fulfilled.  The court never did and could not have said that canalised items could  be imported in any manner not permitted nor it  could have given a go-bye to canalisation policy.     It  must be emphasised that in the case of  Raj  Prakash (supra),  this  position has been explained by  saying  that only such items could 1001 be  imported by diamond exporters under the  Additional  Li- cences granted to them as could have been imported under the Import  Policy of 1978-79. the period during which the  dia- mond exporters had applied for Export House Certificates and had been wrongly refused and were also importable under  the import policy prevailing at the time of import which in  the present  case would be during the import policy of  1985-88. These  were  the  items which  had  not  been  ’specifically banned’ under the prevalent import policy. The items had  to pass to two tests. firstly, they should have been importable under  the  import policy 1978-79 and secondly  they  should also have been importable under the import policy 1985-88 in terms  of  the Order dated 18th April. 1985 and if  one  may add.  in  such terms  in accordance with the  import  rules’ whether  canalised or not canalised. It must  be  emphasised that in this case also. the CoUrt had no occasion to consid- er  the  significance  of the words  ’whether  canalised  or otherwise’  mentioned  in the Order dated 18th  April.  1985 because that point did not arise in the case before it. What did the court then intend by these words used by the  court? We  have seen that diamond exporters could import the  items which  they were entitled to import under the Import  Policy 1978-79 provided they were importable also under the  import policy  ruling at the time of import. These are items  which were  open  to import by Export  Houses  holding  Additional Licences  for sale to the Actual Users  (Industrial).  These are  items which were directly imported, for example,  items in  Part  2 List 8 of Appendix 6 of Import  Policy  1985-88. These are items which are not canalised. Canalised items are those items which are ordinarily open to import only through a public sector agency. Although generally these are import- able  through public sector agencies, it is permissible  for any import policy to provide an exception to the rule and to declare  that  an  importer might import  a  canalised  item directly.  It is in that sense and that sense only that  the Court  could  have  intended to define  the  entitlement  of diamond  exporters. They would be entitled to  import  items which were canalised or not if the import policy  prevailing at the time of import permitted them to import items falling under  such category. This was also viewed in that light  in the case of Indo Afghan Chambers of Commerce (supra).     It  must  be  emphasised that in the  Order  dated  18th April,  1985, this Court did not do away with  canalisation. That  was  not the issue before this Court.  The  expression ’whether  canalised or not canalised’ was to  include  both.

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This Court did not say that canalised items could be import- ed  directly  by  the importers  ignoring  the  canalisation process.  We are of the opinion that this Court did not  say that canalisation 1002 could be ignored. That was not the issue. High public  poli- cy,  it  must be emphasised, is involved in  the  scheme  of canalisation.  This purpose of canalisation was examined  by this Court in Daruka & Co. v. Union of India & Ors.,  [1974] 1  SCR  570 where the Constitution Bench of this  Court  ob- served  that the policies of imports or exports  were  fash- ioned  not only with reference to internal or  international trade,  but  also  on monetary policy,  the  development  of agriculture  and industries and even on the political  poli- cies of the country and rival theories and views may be held on  such  policies. If the Government  decided  an  economic policy that import or export should be by a selected channel or through selected agencies the court would proceed on  the assumption  that  the decision was in the  interest  of  the general  public unless the contrary was shown. Therefore  it could  not be collaterally altered in the manner  suggested. The  policy of canalisation which is a matter of  policy  of the  Government was not given a go-bye by  the  observations referred  to in the Order of 18th April, 1985. Indeed it  is possible  to  read  the Order in a  manner  consistent  with canalisation scheme in the way we have indicated. If that is so, then it should be so read. When this Court observed that the fact whether items were sought to be imported by diamond merchants were canalised, would not be an impediment to  the import  directly by them, the Court meant to say  that  this could be imported directly by them through the  canalisation organisation.  The  need for canalisation stands  on  public policy  and  that need cannot be  lightly  or  inferencially given a go-bye. It should not be presumed that  collaterally the  court  had done away with the  system  of  canalisation based, on sound public policy. We have found nothing in  the different  authorities  on  this  subject,  which   militate against the above views. Therefore, the action taken by  the Custom  authorities in issuing adjudication notice and  pro- ceeding  in the manner they did, we are of the opinion  that they have not acted illegally or without jurisdiction.  This must  proceed  in accordance with law as laid down  by  this Court which, in our opinion, is clear enough. The fact  that in subsequent decision, the petitioner is not a party is not relevant.  Generally legal positions laid down by the  court would  be binding on all concerned even though Some of  them have not been made parties nor were served nor any notice of such proceedings given.     As  held in Star Diamond’s case (supra), the meaning  of the expression "whether canalised or otherwise" used by this Court  in Rajnikant Bros’ case as explained in Godrej  Soaps Pvt.  Ltd. case and reiterated and followed in  the  present case is applicable to the present petitioner. 1003     We see no substance in the submission made in the  peti- tion and reiterated before us in this Court for a  reconsid- eration of this question by a larger Bench. In the aforesaid view  of  the matter, we are unable to sustain  the  grounds urged in support of this petition. We are, therefore, of the opinion that proceedings must go in accordance with law. The government’s  understanding  of the matter at one  point  of time is irrelevant.     There  are several applications for  impleadment.  These are  allowed, and they are impleaded. Their  statements  are taken on record.

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   Before  parting with this case, certain factors must  be noted.  The diamond exporters and dry fruit  exporters  have their  full round in this Court. Speaking entirely  for  my- self,  my  conscience  protests to me  that  when  thousands remediless wrongs await in the queue for this Court’s inter- vention  and  solution  for justice, the  petitions  at  the behest  of diamond exporters and dry fruit  exporters  where large  sums are involved should be admitted and disposed  of by  this  Court at such a quick speed. Neither  justice  nor equity nor good conscience deserves these applications to be filed  or  entertained. There is no  equity  of  restitution against  the  law declared categorically and  repeatedly  by this  Court and no principle of estoppel involved  in  these applications.     The  Writ  petition is dismissed and in  the  facts  and circumstances  of this case, we direct that  the  petitioner must pay cost of this application.     It  has  been prayed that clear-cut date must  be  fixed where  contracts had been entered into and in which  letters of credit prior to 15th April, 1986 have been entered  into, there  should be no prosecution. It has been further  prayed that  where however contracts have been entered into but  no letters of credit have been opened, such parties should  not be penalised in the facts and circumstances of the case.  No direction  is  necessary by this Court on this  aspect.  The authorities  concerned will decide the same in  taking  into consideration  all  the facts and circumstances  and  taking into  consideration  the  case of the  petitioners  and  the alleged claim of bona fide on their part.     A  submission  was made on the principle  of  promissory estoppel and reliance was placed on the several observations of  several cases including the case in Union of  India  and Others  etc.  v. Godfrey Philips India Ltd. etc.,  AIR  1986 S.C. 806. It is true that the doctrine of 1004 promissory estoppel is applicable against the Government  in the  exercise of its government, public or  executive  func- tions and the doctrine of executive necessity or freedom  of future  executive  action cannot be invoked  to  defeat  the applicability of the doctrine of promissory estoppel. But in this case no such case of promissory estoppel has been  made out. The intervention applications filed in this  connection are  allowed  and the submissions contrary to  what  we  had stated hereinbefore are rejected.     As the points involved in Writ Petition No. 1494 of 1986 are same, this is also dismissed with costs. Interim orders, if any, are vacated forthwith. The proceedings will  proceed as expeditiously as possible in accordance with law. For the same  reasons, Writ Petition No. 1544 of 1986 is  also  dis- missed with costs with the same observations. H.L.C.                                       Petition   dis- missed.                                 1 ?1005