sc01 UoI-Vs-Agricas-LLP Case no TP(C) No. 496-509-2020

UoI-Vs-Agricas-LLP Case no TP(C) No. 496-509-2020

REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL ORIGINAL JURISDICTION

TRANSFER PETITION (CIVIL) NOS. 496-509 OF 2020

UNION OF INDIA AND OTHERS ….. PETITIONERS(S)

VERSUS

AGRICAS LLP AND OTHERS ETC. ….. RESPONDENT(S)

W I T H

TRANSFER PETITION (CIVIL) NO. OF 2020

(DIARY NO. 8823 OF 2020)

JU D G M E N T

SANJIV KHANNA, J.

Applications seeking intervention/impleadment are allowed.

2. Considering the nature of controversy involved, this Court, with

the consent of the counsels for the parties, vide order dated 29

Signature Not Verified

Digitally signed by DEEPAK SINGH Da te: 2020.08.26 13:54: 05 IST

Re ason:

June 2020 had deemed it appropriate to hear and decide

challenge to the validity of the notifications dated 29 March 2019

bearing S.O. Numbers. 1478-E,1479-E, 1480-E and 1481-E

pending in several Writ Petitions filed before different High Courts.

We have also examined and decided the connected challenge to

the Trade Notice dated 16 April 2019 issued by the Directorate

General of Foreign Trade on the ground of excessive delegation

T.P. (C) Nos. 496-509 of 2020 & Anr. Page 1 of 86


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as not being in accord with sub-section (2) to Section 3 read with

the bar under sub-section (3) to Section 6 of the Foreign Trade

(Development and Regulation) Act, 1992 (hereinafter referred to as ‘FTDR Act’).

3. Accordingly, we had heard arguments and by this common

judgment would be disposing of the respective Writ Petitions,

subject matter of these Transfer Petitions. This decision would

also apply to the Writ Petitions filed by the intervening applicants.

4. For the sake of convenience, we would be referring the Central

Government and the authorities collectively as ‘the Union of India’

and the Writ Petitioners synchronously as ‘importers’. For clarity

and wherever necessary we have referred to the Directorate

General of Foreign Trade, as the ‘DGFT’. DGFT is an authority

constituted under the FTDR Act and appointed by the Central

Government to advise them on foreign trade policy and is responsible for carrying out that policy.

A. Factual background and legal issues.

5. The Union of India, vide Notification dated 29 March 2019, had

exercised the powers conferred to it under Section 3 of the FTDR

Act, read with paragraphs 1.02 and 2.01 of the Foreign Trade

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Policy, 2015-2020 and amended the import policy conditions of

items of Chapter 7 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 of the Foreign Trade (Development and Regulation) Act, 1992 (22 of 1922), read with paragraphs 1.02 and 2.01 of the Foreign Trade Policy, 2015-2020, as amended from time to time, the Central government hereby amends the Import Policy Conditions of items of Chapter 7 of the Indian Trade Classification (Harmonized System), 2017, Schedule-I (Import Policy), as under:

Exim

Code

Item Description Existing

Policy

Revised Policy

Condition

0713

3110

0713

90 10

0713

90 90

Beans of the SPP

Vigna Mungo (L.)

Hepper.

Split

Other

Restricted Import of Moong shall be subject an

annual (fiscal year) quota of 1.5 lakh MT per procedure to be notified by Directorate General of Foreign Trade: –

Provided that this restriction shall not apply to Government’s import commitments under any bilateral or Regional Agreement or Memorandum of Understanding.

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

xx xx xx

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

Exim

Code

Item Description Existing

Policy

Existing Policy

Condition

Revised Policy

Condition

0713

Peas (Pisum

Restricted Restricted for the

During the period

1000

Sativum) including

period from 1

from 1 April, 2019

Yellow peas,

Green peas, Dun

peas and Kaspa

peas

January, 2019 to

31 March, 2019

to 31 March,

2020, total quantity of 1.5 Lakh MT of Peas shall be

0713

90 10

0713

90 90

Split

Other

allowed against

licence as per the

procedure to be

notified by

Directorate General

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of Foreign Trade

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

xx xx xx

S.O. 1480(E).- In exercise of powers conferred by section 3 of the Foreign Trade (Development and Regulation) Act, 1992 (22 of 1922), read with paragraphs 1.02 and 2.01 of the Foreign Trade Policy, 2015-2020, as amended from time to time, the Central government hereby amends the Import Policy Conditions of items of Chapter 7 of the Indian Trade Classification (Harmonized System), 2017, Schedule-I (Import Policy), as under:

Exim

Code

Item Description Existing Policy

Condition

Revised Policy condition

0713

31 90

0713

90 10

0713

90 90

Beans of the SPP

igna Radiata (L.)
ilezek

Split

Other

Restricted. Import of Urad shall be subject to

an annual (fiscal year) quota of 1.5 lakh MT as per procedure to be notified by Directorate

General of Foreign Trade:

Provided that this restriction shall not apply to Government’s import commitments under any Bilateral

or Regional Agreement or

Memorandum of Understanding.

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

xx xx xx

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

Exim

Code

Item Description Existing Policy

Condition

Revised Policy condition

0713

60 00

0713

90 10

0713

90 90

Pigeon Peas

(Cajanus Cajan)/

Toor Dal

Split

Other

Restricted. Import of Pigeon Peas (Cajanus

Cajan)/Toor Dal shall be subject to an annual (fiscal Year) quota of 02 lakh MT as per procedure to be notified by Directorate General of Foreign Trade:

Provided that this restriction shall

T.P. (C) Nos. 496-509 of 2020 & Anr. Page 4 of 86

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not apply to Government’s import commitments under any Bilateral

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

2019.”

6. The Trade Notice dated 16 April 2019 issued by the DGFT had

laid down the modalities for making applications for import of

Peas, beans of Moong and Urad and Pigeon Peas and had inter alia stipulated as 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 policy2-dgft@nic.in besides the concerned jurisdictional Regional Authorities.”

7. Earlier, the Union of India had issued a notification dated 25 April,

2018 under Section 3 of FTDR Act read with the paragraphs 1.02

and 2.01 of the Export – Import (EXIM) policy 2015-2020 by which

peas were revised from ‘free’ to ‘restricted’ category for a period of

three months, with a stipulation that during the period 1 April,

2018 to 30 June, 2018 total quantity of 1 lakh MT of Yellow Peas

minus the quantity already imported from 1 April, 2018 would be

allowed against licence as per the procedure to be notified by the

DGFT. The words ‘already imported’ were defined to include

shipment already arrived from 1 April,2018 to 25 April, 2018 and

those shipments backed by irrevocable letter of credit or advance

payments made through banking channel before 25 April, 2018.

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8. Considering the hardships faced by the traders who had made

advance payments, the DGFT vide Trade Notice No. 19 dated 5

July 2018 had allowed the import of Peas proportionate to the

advance payments made before 25 April 2018. By another Trade

Notice dated 6 July 2018, Peas, other than Yellow Peas,

imported during the intervening period between 25 April 2018 to

15 May 2018 and awaiting clearance at customs or consignment

of Peas with Bill of Lading prior to 16 May 2018 were permitted

freely. By the third Trade Notice dated 17 August 2018, import of

maximum 125 MT of Peas per contract, irrespective of the advance payment, made before 25 April 2018, was allowed.

9. The Union of India had even earlier issued notifications dated 5

August 2017 and 21 August 2017 revising import of beans of

Urad/Moong and Pigeon Peas/ Toor dal from ‘free’ to ‘restricted’

with stipulations as to annual (fiscal year) quota and requirement

of a prior licence from the DGFT. By notifications dated 24 April

2018 import of beans of Urad/Moong and Pigeon Peas/ Toor dal

was to remain restricted requiring a prior licence with stipulation as to annual quota for the fiscal year 2018-19.

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10. M/s. Hira Traders had filed Writ Petition Nos. 15921-15924 of

2018 before the High Court of Judicature at Madras challenging

Notification No. 4/2015-20 dated 25 April 2018 and Trade Notices

No. 05/2018 dated 9 May 2018, No. 10/2018-19 dated 16 May

2018 and No. 12/2018 dated 18 May 2018 respectively. It had

also prayed for permission by way of an interim order to import

Peas as per the contracts. By interim order dated 28 June 2018,

the operation of Notification dated 25 April 2018 was stayed by

the Madras High Court, thereby permitting imports without an import licence.

11. Several traders had thereafter filed Writ Petitions before different

High Courts challenging imposition of restrictions on import of

Peas and pulses and interim orders were passed staying the

notifications which had the effect of permitting imports without any

restriction as to quota or licence. The primary grounds raised in the Writ Petitions before the High Courts were:

(a) The impugned notifications issued by the DGFT had the

effect of modifying or amending the EXIM policy as the

specified items were withdrawn from the free category and

moved to restricted category. But, the DGFT, a statutory

authority under the provisions of FTDR Act, was not

T.P. (C) Nos. 496-509 of 2020 & Anr. Page 7 of 86

authorised to authenticate/issue an order amending or

modifying the EXIM policy as this power vests with the

Central Government in terms of sub-section (2) to Section 3,

read-with sub-section (3) to Section 6 of the FTDR Act,

which states that powers exercisable under Section 3,

5,15,16 and 19 of the FTDR Act cannot be delegated to the

DGFT or any other officer subordinate to the Director General.

(b) Section 19(3) of the FTDR Act provides that every rule or

every order passed by the Central Government shall be laid,

as soon as may be after it is made, before each House of

the Parliament while it is in session or thereafter. The

impugned notifications had not been laid before the Houses of the Parliament.

defects mentioned by this Court in Director General of

Foreign Trade and Another v. Kanak Exports and

Another.

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

1 (2016) 2 SCC 226.

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12. The Writ Petitions filed by M/s. Hira Traders were dismissed by

the Madras High Court on 4 April 2019. The Bombay High Court

dismissed akin Writ Petitions filed by M/s. Taj Agro Commodities

Pvt. Ltd. and others on 3 July 2018. Similarly, Writ Petitions filed

by M/s. Premium Pulses Products and others were dismissed by

the Gujarat High Court on 19 December 2018. The Madhya

Pradesh High Court had also dismissed similar petitions including

the petition filed by M/s. Siddhi Vinayak and another, vide

judgment dated 25 October 2018. Judgment of the Gujarat High

Court was challenged before this Court in Special Leave Petition

(Civil) No. 1922 of 2019 by M/s. Kusum Agency and the same was

dismissed vide order dated 28 January 2019. Subject matter of

these Writ Petitions were the Notifications dated 5 August 2017,

21 August 2017 and 25 April 2018 and the corresponding trade notices issued by the DGFT.

13. Notwithstanding the aforesaid dismissals, as many as 90 Writ

Petitions were filed before the Rajasthan High Court at Jaipur

challenging the Notifications dated 29 March 2019 and the Trade

Notice dated 16 April 2019. Similarly, Writ Petitions were filed

before the High Courts of Delhi, Punjab and Haryana, Andhra

Pradesh, Bombay and Calcutta. In several cases interim orders

T.P. (C) Nos. 496-509 of 2020 & Anr. Page 9 of 86

were passed permitting the importers to import Peas/pulses

notwithstanding the fact that they had not been issued

authorisation/import licences or the total imports would exceed the

maximum or total quantity fixed in the impugned notifications.

14. Before us, the importers had urged a new legal issue/point which

was not specifically raised in the Writ Petitions; the impugned

notifications were in the nature of ‘quantitative restrictions’ under

Section 9A of the FTDR Act, which could be only imposed by the

Central Government after conducting such enquiry, as is deemed

fit, and on being satisfied that the “goods are imported into India in

such quantities and under such conditions as to cause or

threatens to cause serious injury to domestic industry.” Further, in

exercise of power under sub-section (3) to Section 9A the Central

Government has framed the Safeguard Measures (Quantitative

Restrictions) Rules, 2012, that prescribe mandatory and detailed

procedure for initiation, investigation, hearing to parties and

adjudication by the Authorised Officer, which statutory mandate

has not been followed. Under sub-rule (4) to the above Rule, the

Authorised Officer has power to initiate suo moto action if he is

satisfied with the information received from any source that

sufficient evidence exits regarding increased imports; serious

injury or threat of serious injury to the domestic industry; and

T.P. (C) Nos. 496-509 of 2020 & Anr. Page 10 of 86


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causal link between increased imports and serious injury or threat

of serious injury to the domestic industry. Taking note of the

submission, we had directed the parties to file brief written

submissions and the propositions which they propose to canvass

in the context of the issues to be dealt with by this Court. The

Union of India was also asked to file a Statement/Note disclosing

number of registered licences dealing with import of goods and

quantity of average annual consumption of the concerned goods

in the country. By another order dated 2 July, 2020 the Union of

India was directed to file an affidavit clearly stating whether the

impugned notifications are in the nature of ‘quantitative

restrictions’ and if so whether the procedure under Section 9A of

the FTDR Act read with Safeguard Measures (Quantitative

Restrictions) Rules, 2012 had been followed and to produce the

relevant record thereof. We shall elaborate and decide the argument subsequently.

B. Discussion on the challenge to the role and authority of the 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 our

opinion rightly, have not raised the contention that the DGFT could

not have notified the impugned notifications. The notifications

T.P. (C) Nos. 496-509 of 2020 & Anr. Page 11 of 86


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themselves record that they were published by the Ministry of

Commerce and Industry, Department of Commerce, Directorate

General of Foreign Trade. The first paragraph of the notification

states that they had been issued by the Central Government in

exercise of powers conferred under Article 77 of the Constitution.

Clearly, the notifications were issued by the Central Government,

and not the DGFT that had performed the ministerial act of

publication. The decision to amend and issue the notification was

of the Central Government. Neither Section 3(2) nor Section 6(3)

of the FTDR Act was violated. This Court in Delhi International

Airport Limited v. International Lease Finance Corporation

and others , had referred to Articles 77 and 166 of the

Constitution and held that the Constitution stipulates that

whenever executive action is taken by way of an order or

instrument it shall be expressed to be taken in the name of the

President and Governor in whose name the executive power of

the Union and the States, respectively, are vested. Article 77 does

not provide for delegation of any power, albeit under sub-section

(3) of Article 77, the President is to make Rules for more

convenient transaction of business and allocation of same

amongst Ministers. Under the Government of India (Transaction of

Business) Rules, 1961, the government business is divided 2 (2015) 8 SCC 446

T.P. (C) Nos. 496-509 of 2020 & Anr. Page 12 of 86

amongst Ministers and specific functions are allocated to different

Ministries. The Director General of Foreign Trade is an ex officio

Additional Secretary in the Government of India and is appointed

by the Central Government under sub-section (1) to Section 6 of

the FTDR Act to advise the Central Government in formulation

and carrying out the Foreign Trade Policy. Wherefore, even the

website of the Ministry of Commerce and Industry, Department of

Commerce, states that the DGFT is an agent of the Central

Government and attached office to it. Further, clause (2) of Article

77 provides that validity of an order or instrument made or

executed in the name of the President, authenticated in the

manner specified in the Rules made by the President, shall not be

called in question on the ground that it is not an order or an

instrument made or executed by the President. Therefore, the

contention of issuance of the impugned notification 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

otherwise regulate the import or export of goods, by an order

published in the Official Gazette. FTDR Act vide Section 11(1)

prohibits imports or exports of goods in contravention of the FTDR

Act, the rules and orders made thereunder and the EXIM Policy.

T.P. (C) Nos. 496-509 of 2020 & Anr. Page 13 of 86

Section 5 of the FTDR Act authorizes the Central Government to

formulate and announce the EXIM Policy by notification in the

Official Gazette. Under Section 11(2) of the FTDR Act, when a

person makes or abets or attempts to make any import or export

in contravention of the FTDR Act, any rule or order made

thereunder 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, whichever is greater. Section 11 of the Customs

Act,1962 provides that the Central Government may by a

notification in the Official Gazette prohibit, absolutely or subject to

conditions as specified, import or export of any good. The listed

purposes are wide and range from conservation of foreign

exchange and safeguarding of balance of payments, avoiding

shortage of goods, prevention of surplus of any agricultural or

fisheries product, prevention of serious injury to domestic

production, establishment of any industry and lastly

compendiously includes “any other purpose conducive to the

interest of the general public”. Under clause (d) to Section 11 of

the Customs Act goods imported or exported (or attempted to be

imported or exported) contrary to any prohibition are liable to confiscation.

T.P. (C) Nos. 496-509 of 2020 & Anr. Page 14 of 86

17. We would also without any hesitation reject the contention raised

by some of the importers that the impugned notification is illegal

because of vagueness or allows restricted quantity of 1/1.5 lakh

MT of Peas (Pisum Sativum) including Yellow Peas, Green Peas,

Dun Peas and Kaspa Peas as against a licence, meaning thereby

each licensee is allowed to import the maximum quantity specified

in the notification. In other words, the total quantity specified in

the notification is per licensee and not for the total imports of the

commodity specified in the notification. The submission has no

merit as the notification expressly uses the expression ‘total

quantity’ of the commodity specified which could be imported.

There is no ambiguity or vagueness in the notifications, relevant

portions of which have been quoted above. Even otherwise the

expression ‘total quantity’ cannot be construed as quantity per

licence issued as the number of licences issued concerning the

subject goods could be numerable (as per the Union of India

2248,1016 and 2915 licences were issued in 2019-20 for import of

Tur, Moong and Urad dals against restricted quota of 4,1.5 and 4

lakh MT, respectively). If each licence holder is allowed to import

1/1.5 lakh MT of Peas, the total import would well exceed the total

annual consumption after we account for the production within

India. In our opinion, the plea and interpretation of the importers if

T.P. (C) Nos. 496-509 of 2020 & Anr. Page 15 of 86

accepted will not only be contrary to the express language of the

notification but would frustrate the intent and object of restricting

the imports of the stated goods by prescribing a quota. We decline

and would not accept this farfetched and somewhat drivel interpretation of simple and straight forward words.

18. We would also reject the contention raised by the importers that

the Trade Notices issued by the DGFT violate Sections 3 and 5

read with sub-section (3) of Section 6 of the FTDR Act as they had

the effect of superseding the Notifications or imposing a new

criterion and eligibility condition not envisaged by the notifications.

The legal effect of the notifications was to amend the EXIM policy

whereby the specified commodities would henceforth not be ‘free’

(importable without restriction) but would fall in the restricted

category. Once the commodities were shifted to the restricted

category, the requirement of licence would flow from the mandate

of Section 3 of the FTDR Act read with Rule 4 of the Foreign Trade (Regulation) Rules, 1993. Rule 4 reads as under:

“4. Application for grant of licences– A person may

make an application for the grant of a licence to import

or export goods in accordance with the provisions of

the Policy or an Order made under section 3.”

T.P. (C) Nos. 496-509 of 2020 & Anr. Page 16 of 86

Further, the EXIM Policy regulates the restricted goods

under Paragraphs 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 or importer or by any licensing/Regional Authority (RA) or by any other 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 means of a Public Notice.

xx xx xx

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 an Authorisation/Permission or in accordance with the procedure prescribed in a Notification/Public Notice issued in this regard.

xx xx xx

2.10 Actual User Condition

Goods which are importable freely without any ‘Restriction’ may be imported by any person. However,

if such imports require an Authorisation, actual user

alone may import such good(s) unless actual user condition is specifically dispensed with by DGFT.”

Paragraph 2.08 states that any goods or services, import or

export of which is restricted, can be exported or imported only in

accordance with the authorisation/permission or in accordance

with the procedure prescribed in the notification/public notice in

this regard. Paragraph 2.04 states that the DGFT may specify

T.P. (C) Nos. 496-509 of 2020 & Anr. Page 17 of 86

procedures to be followed by an exporter or an importer or by a

licencing/regional authority, etc. for the purpose of implementing

provisions of the FTDR Act, the rules and orders made

thereunder. Such procedures or amendments, if any, shall be

published by means of a public notice. Paragraph 2.10 sets the

matter beyond controversy as it states that the goods which are

freely importable without a restriction may be imported by any

person. However, if goods require authorisation, ‘actual user ’

alone may import such goods. However, the DGFT can dilute and dispense with the ‘actual user ’ condition.

19. The effect of the Notifications, as noticed and beyond doubt, is to

bring the specified commodities from free to the restricted

category and therefore the imports in question would require a

prior authorisation for import. The requirement of licence is

nothing but authorisation. Therefore, in terms of paragraph 2.10,

the imports of the specified commodities would only be by the

‘actual user ’, unless the ‘actual user ’ condition was specifically 3 9.03 “Actual User” is a person (either natural or legal) who is authorized to use imported goods in

his/its own premise which has a definitive postal address.

“Actual User (Industrial)” is a person (either natural & legal) who utilizes imported goods for manufacturing in his own industrial unit or manufacturing for his own use in another unit including a jobbing unit which has a definitive postal address.
“Actual User (Non-Industrial)” is a person (either natural & legal) who utilizes the imported goods for his own use in:
any commercial establishment, carrying on any business, trade or profession, which has a definitive postal address; or
any laboratory, Scientific or Research and Development (R&D) institution, university or other educational institution or hospital which has a definitive postal address; or
any service industry which has a definitive postal address.

T.P. (C) Nos. 496-509 of 2020 & Anr. Page 18 of 86

dispensed with or diluted by the DGFT. The Directorate by

specifying that the licence would be issued to the miller or refiner

has, therefore, just clarified that the ‘actual user ’ alone will be

permitted to import the restricted goods mentioned in the

notification for which a prior authorisation or licence is required.

The importers are traders 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 licence or authorisation for import of

the restricted commodities. Violation of clause 9.03 of the EXIM

Policy defining the expression ‘Actual User ’, is neither alleged nor argued before us.

20. The importers have raised the contention that the expression ‘if

such imports’ used in the second sentence of paragraph 2.10 only

qualifies the first sentence of paragraph 2.10. We do not accept

the contention, for paragraph 2.10 consists of two parts. The first

part relates to goods which are freely importable without any

licence and states that such goods that can be imported by any

person. The second part refers to such imports which require

authorisation and not the imports which are freely importable

without any restriction. ‘Actual user ’ condition, therefore, applies

by default when imports require an authorisation. However, the

T.P. (C) Nos. 496-509 of 2020 & Anr. Page 19 of 86

DGFT can specifically dispense with or dilute the ‘actual user ’ condition.

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

(i) General Agreement on Tariff and Trade – 1947 and 1994. 2. Conference at Bretton Woods, New Hampshire in 1944 lead to

establishment of the ‘International Monetary Fund’ and the ‘World

Bank’, but the attempt to establish ‘International Trade

Organisation’ to develop and coordinate international trade

faltered and was finally given up in 1950. However, multilateral

trade negotiations had continued with the objective to prepare a

multilateral treaty containing general principles of international

trade and a schedule of tariff reductions. By the end of 1947, the

work on the General Agreement on Tariff and Trade (‘GATT’),

1947 and tariff reduction was finalised and agreed upon. Interim

commission of the ‘International Trade Organisation’ became the

GATT Secretariat based in Geneva, Switzerland. On or about 8

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 a limited impact. Most jurists and economists hold that

the GATT-1947 suffered from ‘birth defects’ as it did not have a

legal personality, lacked established procedures and

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organizational structure in the absence of a charter; had

‘provisional application’ as it had provisions permitting contracting

parties to maintain legislations in-force inconsistent with the

‘grandfathering rights’ and there was ambiguity and confusion about the GATT’s authority and decision making ability .

3. What followed was several years of intense negotiations involving

over 100 nations that finally ended in 1994 at Marrakesh,

Morocco, with a multilateral international treaty of over 400 pages

of basic text with substantive rules and tariff schedules. The final

act signed exceeded 26,000 pages. This treaty popularly known

as GATT-1994 was signed by 128 countries including India on 1

January 1995. On the same day, the World Trade Organisation

(WTO), an institution with a secretariat and staff, replaced GATT

and came into existence, as the international organisation for

overseeing and regulating functioning of the multilateral trade

system. GATT-1994 in nutshell is a rule-oriented package

consisting of multilateral trade agreements annexed to a single

document and works on the basis of single undertaking approach

whereby all agreements annexed become binding on all the

members as single body of law. The main agreement consists of

4 The World Trade Organization, law, practice and policy Mitsuo Matsushita, Thomas J. Schoenbaum, Petros C. Mavroidis, and Michael Hahn, 3rd Edition 2015 at page Nos. 2 – 3.

T.P. (C) Nos. 496-509 of 2020 & Anr. Page 21 of 86

the preamble and XVI articles establishing the WTO, four

annexures and declarations, decisions and understandings.

Annexure I to the multilateral agreement is divided into three

parts. Annexure 1A consists of the GATT-1994 and twelve other

agreements on agriculture; application of sanitary and

phytosanitary measures; textiles and clothing; technical barriers to

trade; trade related investment measures; anti-dumping duty;

rules of customs valuation; rules of pre-shipment valuation; rules

of origin; import licensing procedures; subsidies and

countervailing measures; and safeguards. Article II of GATT-

1994 limits tariff charges to those agreed in the Schedules of

Concessions, while Article I lay down the principle of Most-

Favoured-Nation giving benefit of the concessions to all WTO

members. Article III mandates requirement of national treatment of

import with respect to taxes and regulations. Articles VI and XVI

relate to subsidies, antidumping and countervailing duties. Article

VII incorporates rules on valuation for customs purposes. Article

XI, which we shall subsequently examine, prohibits quotas, import

or export licences and other non-tariff measures, with some

exceptions. Annexure 1A includes schedule of concessions from

each major trading country and a general interpretative note that

provides that in case of a conflict between provisions of GATT-

T.P. (C) Nos. 496-509 of 2020 & Anr. Page 22 of 86

1994 and another Annexure A-1 agreement, the provisions of

latter would control. Annexure 1B consists of the General

Agreement on Trade in Services. Annexure 1C consists of the

Agreement on Trade Related Aspects of Intellectual Property

Rights. Annexure 2 consists of the Understanding on Rules and

Procedures Governing Settlement of Disputes, referred to as the

Dispute Settlement Understanding, providing mechanism for

resolution of trade disputes among WTO members. Annexure 3

establishes the trade policy review mechanism, with procedure for

periodic review of compliance with the WTO agreement by each

member. Annexure 4 consists of plurilateral trade agreements binding only on the parties that have accepted them.

4. GATT-1994 also has provisions that allow and permit exceptions.

There are exceptions to quotas for balance-of-payments purposes

in Article XII, XIII, XV and XVII, Section B, exceptions for

developing countries vide Article XVIII and Part IV and exception

for health, safety, protection of natural resources and other

matters in Article XX. Article XIX, which we would again refer to, is

an exception and sometimes referred to as the escape clause,

that provides emergency action where serious injury is caused or

threatens domestic industry. There are exceptions for national

T.P. (C) Nos. 496-509 of 2020 & Anr. Page 23 of 86


6	5	7

security vide Article XXI, customs unions and free trade areas vide

Article XXIV, waivers by the contracting parties vide Article XXV

and ‘opt out’ option on ‘one-time basis’ when a new member joins GATT vide Article XXXV .

5. The ‘Marrakesh Agreement’ enacts and incorporates rules-

oriented approach regulating the conduct of the WTO members

and are designed to ensure that the tariff concessions and the

multilateral trade treaty works as intended and not undermined.

Articles XXII provides for sympathetic consideration and

consultation and satisfactory solution with respect to any matter

affecting the operation of GATT-1994. Article XXIII allows a

The World Trade Organization, law, practice and policy Mitsuo Matsushita, Thomas J. Schoenbaum, Petros C. Mavroidis, and Michael Hahn, 3rd Edition 2015 at page No. 3.

XXII. Consultation

1. Each contracting party shall accord sympathetic consideration to, and shall afford adequate opportunity for consultation regarding, such representations as may be made by another contracting party with respect to any matter affecting the operation of this Agreement. 2. The CONTRACTING PARTIES may, at the request of a contracting party, consult with any contracting party or parties in respect of any matter for which it has not been possible to find a satisfactory solution through consultation under paragraph 1.

7 XXIII. Nullification or Impairment

If any contracting party should consider that any benefit accruing to it directly or indirectly under this Agreement is being nullified or impaired or that the attainment of any objective of the Agreement is being impeded as the result of (a) the failure of another contracting party to carry out its obligations under this Agreement, or (b) the application by another contracting party of any measure, whether or not it conflicts with the provisions of this Agreement, or (c) the existence of any other situation, the contracting party may, with a view to the satisfactory adjustment of the matter, make written representations or proposals to the other contracting party or parties which it considers to be concerned. Any contracting party thus approached shall give sympathetic consideration to the representations or proposals made to it.
If no satisfactory adjustment is effected between the contracting parties concerned within 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. The CONTRACTING PARTIES shall promptly investigate any matter so referred to them and shall make appropriate recommendations to the contracting parties which they consider to be concerned, or give a ruling on the matter, as appropriate. The CONTRACTING PARTIES may consult with contracting parties, with the Economic and Social Council of the United Nations and with any appropriate inter-governmental organization in

T.P. (C) Nos. 496-509 of 2020 & Anr. Page 24 of 86

GATT contracting party to make a complaint should it consider

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 when they are not in conflict with GATT-1994;

and (c) in any other situation. These Articles emphasise on the

need for consultation, withdrawal of conflicting measures and

mutual satisfactory solution of the matter by the contracting parties

concerned, consistent with the GATT-1994. Albeit on failure to

reach a satisfactory adjustment within reasonable time or in case

of (c) (supra), the matter is to be referred to the Contracting

Parties to investigate and make recommendations to the offending

party or make a ruling on the matter, as appropriate. As the

question of invocation and jurisdiction of the national or domestic

court arises for consideration in the present case, we would like to

slightly elaborate on the dispute resolution mechanism in

Annexure 2. It contains 27 Articles totalling about 143 paragraphs

and four appendices. For the present case, it would be suffice to

record that the WTO, at the top, consists of Ministerial Conference

cases where they consider such consultation necessary. If the CONTRACTING PARTIES consider that the circumstances are serious enough to justify such action, they may authorize a contracting party or parties to suspend the application to any other contracting party or parties of such concessions or other obligations under this Agreement as they determine to be appropriate in the circumstances. If the application to any contracting party of any concession or other obligation is in fact suspended, that contracting party shall then be free, not later than sixty days after such action is taken, to give written notice to the Executive Secretary¹ to the CONTRACTING PARTIES of its intention to withdraw from this Agreement and such withdrawal shall take effect upon the sixtieth day following the day on which such notice is received by him.

T.P. (C) Nos. 496-509 of 2020 & Anr. Page 25 of 86

which meets not less than every two years. Next there are four

councils, including the General Council which has an overall

supervising authority and to carry out many functions of the

Ministerial Conference. In addition, we have Council for Trade

Inputs, Council for Trade and Services, and Council for Trade

Related Aspects of Intellectual Property 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 approach for resolving

issues relating to violation of the GATT agreements. The DSB

establishes Panel(s) and on adoption of Panel (and the Appellate

Body) reports, provides for implementation of the recommendation

and rulings, and can authorise action for failure to comply with the

recommendation(s) and ruling. The DSB, though a part of the

General Council, has its own Chairman and follows separate

procedures. The Panels are normally composed of three persons,

and in exceptional cases five, who are well qualified government

or non-government individuals selected from a roaster of persons

suggested by WTO members. The panel members serve in their

individual capacities and not as representatives of WTO members.

The Appellate Body reviews Panel decisions. The Appellate Body

is a standing institution composed of seven persons appointed by

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DSB for four-year term. Members of the Appellate Body must be

persons with recognised authority with demonstrated expertise in

law and international trade who are not affiliated with any

government. Membership of the Appellate Body is broadly

representative of the membership of the WTO. The procedure

adopted for the dispute resolution mechanism is to facilitate

prompt settlement of situations with the objective and purpose that

the ‘Marrakesh Agreement’ is preserved and not nullified or impaired.

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

6. Application of treaties into national legal systems and the

hierarchical status of the norms to be so applied are

extraordinarily complex and vary from country to country

depending upon constitutional and other municipal rules. Further,

a number of legal and constitutional issues regarding international

treaties arise in domestic law, like the power to negotiate, sign and

exit a binding international obligation or treaty, validity of a treaty

under the national constitutional law, power to implement the

treaty obligations and applicability of treaty in domestic law

including the principle of invocability or justiciability as contrasted

from direct applicability and hierarchy of norms in domestic law

T.P. (C) Nos. 496-509 of 2020 & Anr. Page 27 of 86


		8

where the treaty norms conflict with the norms of the domestic

law. There is no uniformity in approach on these aspects as there

are different national systems of treaty applications . 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.

7. In spite of there being different constitutional and statutory

approaches on applicability, the States as signatories to the

international treaty are under an obligation to act in conformity and

bear responsibility for breaches, be it as a consequence of

legislative enactment, executive action or even judicial decisions.

The State cannot plead and rely upon internal law including

judicial decisions as a defence to a claim for breach of an

international obligation. Acts of legislation, executive measures

and judicial decision making are not treated as third party acts for

which the State is not responsible. The national law, executive

mandate and action and the decisions of the domestic courts are

facts which express the will and constitutes activities of the State.

In international law, municipal laws cannot prevail upon the

treaties as internal actions must comply with the international obligation. They may constitute breach of the treaty.

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

T.P. (C) Nos. 496-509 of 2020 & Anr. Page 28 of 86

8. Thus, breach of a stipulation in international law cannot be

justified by the State by referring to its domestic legal position.

This rule of international law is unexceptionable and prosaic, as

the contra view would permit the international obligations to be

evaded by the simple method of domestic legislation, executive

action or judicial decision. Contracting States are under an

obligation to act in conformity with the rules of international law

and bear responsibility for breaches whether committed by the

legislature, executive or even judiciary. In a way, therefore,

international treaties are constraint on sovereign activity, albeit voluntarily agreed.

9. For the purpose of GATT-1994, municipal laws are evidences of

fact, including evidence of conduct in violation of the norms and

objective of the treaty. At the same time, failure to enact an

internal domestic law in conformity with the international obligation

is not a breach of international law, unless there is such

requirement and obligation created by the international treaty. In

the absence of any such binding clause, breach arises only when

the State concerned fails to observe its obligation on a specific occasion.

T.P. (C) Nos. 496-509 of 2020 & Anr. Page 29 of 86

10. Various theories have been put forward to explain applicability of

international customary and treaty law in domestic law. The dualist

position is that the international municipal law operates separately

and before any rule or principle of international law can have

effect within the domestic jurisdiction, it must be expressly or

specifically transformed into municipal law by use of appropriate

constitutional machinery. Dualism stresses that international law

and municipal law exist separately and cannot have effect on or

overrule the other. Consequently, the municipal laws and

international laws can operate simultaneously as they regulate

different subject matters. International law is between sovereign

States, while the municipal law applies within the State and

regulates legal relationship between the citizens/subjects inter se

and the citizen/subject and the State. Monistic legal systems

include international treaties in domestic law. Monism takes the

form of assertion of the supremacy of the international law even

within the national sphere, with the understanding and belief that

an individual is a subject of international law. International norms

provide the basic norms for the national legal order, and both are a part of the same systems of norms.

T.P. (C) Nos. 496-509 of 2020 & Anr. Page 30 of 86

11. Most jurists draw distinction between ‘direct application’ of treaties

in domestic law, and national legal systems that mandate and

require ‘act of transformation’ for an international treaty to apply

and be a part of domestic law. ‘Direct application’ means and

mandates that the treaty norms, either wholly or to some extent,

are directly treated as norms of domestic law and enjoy the

statutory law status by default in the domestic legal system. The

term ‘direct application’ will also cover situations in which

government or different levels of government utilise treaty norms

as part of domestic jurisprudence and is not limited to situations in

which private parties can sue on the basis of the treaty norms. As

explained below, there is distinction between direct application

and ‘invocability’. ‘Act of transformation’ principle means and

implies that an international treaty is not directly applicable in the

domestic law system and requires provision in the domestic rules

before it is applied. ‘Transformation’ is a word of wide amplitude

and does not refer to mere implementation as it includes the right

of the country to adopt, amend or modify the treaty language into

domestic jurisprudence. The ‘act of transformation’ is different

from ‘direct application’ as in the former the treaty is not received

and treated as part of domestic jurisprudence until it is published

T.P. (C) Nos. 496-509 of 2020 & Anr. Page 31 of 86


		9

and made part of the domestic jurisdiction in the same manner as other law.

12. The Constitution of Netherlands is generally regarded as monistic

since it expressly provides that certain treaties are directly applied

and the treaties are superior to all law including constitutional

laws. The 1958 Constitution of France also calls for the direct

application and a higher status for treaties than later legislations.

Similar provisions are to be found in different ways in the

Constitutions of Belgium and Switzerland. Under the United

States jurisprudence, a differentiation is made between ‘self-

executing treaties’ which can be directly applied and ‘non-self-

executing treaties’ . Courts have ruled that a directly self-

executing treaty has same status as federal laws and the latest in

time therefore prevails. Consequently, a later internal federal

statue will prevail over the international agreement. GATT-1994 in

the United States legal system is a ‘non-self-executing treaty’.

The European Union is established by two treaties namely the

Treaty of European Union and the Treaty on the Functioning of the

European Union. Member States have attributed the European

Union with competence that may either a-priori render the

9 Prof. John. H. Jackson in his essay- Status of Treaties in Domestic Legal Systems; a policy analysis.

T.P. (C) Nos. 496-509 of 2020 & Anr. Page 32 of 86

pertinent state activity incompatible with European law or may,

through use of such legal title, pre-empt the states from continuing

to act or legislate. This could lead to exclusive European Union

external competence even in the area of shared internal

competence. European Union Law enjoys primacy over the laws

of the member states and may have direct effect. Union

legislators are on equal footing and are directly elected to the

European Parliament and the Council for the European Union.

However, both European Union and member States are members

of the WTO and are contracting parties to GATT-1994.

International agreements concluded by European Union become

integral part of the European Union’s legal order and are

hierarchically positioned between the two founding treaties and

the ordinary secondary legislation, which principle applies to

GATT-1994. On this basis it has been held that the European

Union law is to be interpreted in light of the WTO obligation to

ensure GATT-1994 consistent interpretation of the European

Union legislation. At the same time, authors and jurists have

observed that individuals and member States challenge for GATT-

1994 incompatibility secondary legislation have received different

answers as in some cases it has been held that international

agreement will only be granted direct effect if the provisions are

T.P. (C) Nos. 496-509 of 2020 & Anr. Page 33 of 86


		11		10

capable of conferring rights on citizens of the community which

they can invoke before the court . (Aspect of ‘invocability’ has been separately examined below.)

13. United Kingdom, being a parliamentary democracy, the treaties

generally do not have direct statute like application, though they

may have other internal effects. United Kingdom and other

parliamentary democracies, like Canada and Australian systems,

are generally considered as prime example of a dualist system. In

United Kingdom, the Crown is the constitutional authority to enter

into treaties and this prerogative power cannot be infringed by the

courts. Further, treaties cannot 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. 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 individuals or depriving individuals of rights which they enjoy in domestic law without the intervention of Parliament. Treaties, as it is sometimes expressed, are not self-executing. Quite simply, a treaty is not part of English law unless and until it has been incorporated into the law by legislation.”

The World Trade Organization, law, practice and policy Mitsuo Matsushita, Thomas J. Schoenbaum, Petros C. Mavroidis, and Michael Hahn, 3rd Edition 2015 at page Nos. 33–40.
(1989) 3 All ER 523

T.P. (C) Nos. 496-509 of 2020 & Anr. Page 34 of 86

Except to the extent that a treaty becomes incorporated into

the laws by a statute, the courts in United Kingdom have no power

to enforce treaty rights and obligations at the behest of foreign

government or even a citizen of the United Kingdom. It has been

also held that decision as to whether the terms of the treaty have

been complied with are matters exclusively for the Crown as ‘the

court must speak with the same voice as the executive’ . This

principle is subject to the exceptions in cases where reference to

the treaty is needed to explain the relevant factual background in

cases where terms of the treaty are incorporated in a contract or

the legislation refers to a relevant but un-incorporated treaty.

However, an unincorporated international treaty can give rise to

legitimate expectations that the executive, in the absence of

statutory or executive indications to the contrary, will act in

conformity with the treaty. In all other cases, rights and duties of

the British subjects are affected by an Act of Parliament which is

necessary for the provisions of the particular treaty to be operative

within the United Kingdom. Further and at the same time, there is

a presumption in English law that legislation is to be construed as

to avoid conflict with international law. This specifically applies

when interpretation to the Act of Parliament is in question, i.e.

while interpreting the enactment as a consequence of the ‘act of 12 Lonrho Exports v. ECGD, [1998] 3 W.L.R 394.

T.P. (C) Nos. 496-509 of 2020 & Anr. Page 35 of 86

transformation’. The courts would intend to bring the treaty into

effect if the provisions are unambiguous unless they have no

choice. In United Kingdom, the legislature is required to enact

laws, that incorporate and transform treaties or treaty norms into

domestic law. Variation of this approach is to be found in other

countries like Germany and Italy. Thus, there is great diversity of

national constitutional systems regarding international treaty application.

14. 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 not connected with the

defence or merits of the defence. In case where an ‘act of

transformation’ is required, treaties may partially or entirely

become part of the domestic law. Where the treaty or portion

thereof become a part of the domestic law by ‘act of

transformation’, it is obvious that only the part incorporated or

transformed into domestic law is invocable and justiciable and not

the parts that are not codified into domestic law. However,

invocability can embrace several ideas which are intertwined and

is of specific concern in cases of constitutions allowing direct

application. Here ‘invocability’ is a generic term which means to

T.P. (C) Nos. 496-509 of 2020 & Anr. Page 36 of 86

embrace a small inventory of means of judicial control over the

use in a particular law suit of the direct applicability of the treaty.

As in case of ‘act of transformation’, even in direct application

cases, some jurisdictions accept the principle of partial direct

application and, therefore, the treaty is directly applicable for some

purposes and not others. Professor John H. Jackson, a leading

jurist on this subject, whose treatise and essays have helped us

understand the GATT and the complexities, in his essay ‘Status of

Treaties in Domestic Legal System; A Policy Analysis’ referring to

‘invocability’ even in cases of direct application in domestic law, has observed as under:

“Even when the rule of direct application covers

most, or theoretically all, treaties or certain broad categories of treaties, courts will find ways to avoid applying the treaty norm in particular cases, perhaps by relying on one or another concept that can be lumped under the rubric of invocability (e.g. standing), or by holding that the treaty norm is designed to constrain or assist certain government agencies and not private litigants. Or the court may refuse to apply a treaty directly because it is not “specific and precise” enough for that purpose, a concept akin to “justiciability”. Other disqualifying concepts may also be employed.”

(iii) Legal position in India.

15. The law in India is not very different from other Commonwealth

Countries. Article 73 of the Constitution delineates the extent of

T.P. (C) Nos. 496-509 of 2020 & Anr. Page 37 of 86

executive power of the Union which extends to all matters with

respect to which the Parliament has the power to make laws and it

extends to the exercise of such rights, authority and jurisdiction as

are exercisable by the Central Government by virtue of any treaty

or agreement. Proviso to the Article deals with limitation of the

executive power under sub-clause (a) with which we are not

concerned. Chapter I of Part XI of the Constitution, captioned

‘Relations between the Union and the Sates’ vide different Articles

stipulates that in respect of List 1 of the 7th Schedule the

Parliament has exclusive power to make laws for the whole or

any of the territory of India; in respect of List II (State List) the

legislatures of the States have exclusive power to make laws for

the whole or any part of the States; and in respect of List III

(Concurrent List) the Parliament and the State Legislatures have

the power to make laws. For the purpose of the present case,

Article 253 of the Constitution is important as it states that

notwithstanding anything in the foregoing provisions of this

Chapter, the Parliament has the power to make laws for the whole

or any part of the territory of India for implementing any treaty,

agreement or convention with any other country or countries or

decisions made at any international conference, association or body.

T.P. (C) Nos. 496-509 of 2020 & Anr. Page 38 of 86


	13				16

16. Constitutional Bench of this Court in Maganbhai Ishwarbhai

Patel Etc. v. Union of India had examined the question whether

the Government of India should be restrained from ceding without

approval of the Parliament the ‘undemarcated area’ in the Runn of

Kutch to Pakistan as awarded in the award dated 19 February

1968. In the judgment authored by Hidayatullah, C.J., on behalf of

himself and three other Judges, he referred to the earlier

decisions of this Court in In re. Berubari Union (I) , Rai Sahib

Ram Jawaya Kapur and Others v. State of Pubjab and Ram

Kishore Sen and Others v. Union of India and Others and

noticed the distinction between (i) formation of the treaty; and (ii)

performance of the treaty obligation. The first is an executive act

and the second a legal act if domestic law is required. Unless the

Parliament assents to the treaty and accords its approval to the

first executive act, the performance has no force of law though the

treaties 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 precedents of this Court are 13 (1970) 3 SCC 400

AIR 1960 SC 845
AIR 1955 SC 549
AIR 1966 SC 644

T.P. (C) Nos. 496-509 of 2020 & Anr. Page 39 of 86

clear that no cession of Indian territory can take place without

constitutional amendment, the Constitution Bench held that the

settlement of a boundary dispute cannot be held to be cession of

territory. Accordingly, the decision to implement the award by

exchange of letters treating the award as an operating treaty by

demarcating the correct boundary line was within the executive

power of the government, and no constitutional amendment was required.

17. More important for our purpose is the concurring opinion of Shah,

J. who had quoted the effect of international treaty on the rights of

the citizen/subjects of the State as stated in Oppenheim’s International Law, 8 Edition, in the following words:

“…Such treaties as affect private rights and, generally, as required for their enforcement by

English Courts a modification of common law or of a

statute must receive parliamentary assent through an enabling Act of Parliament. To that extent binding

treaties which are part of International Law do not

form part of the law of the land unless expressly

made so by the Legislature.

(page 40)

The binding force of a treaty concerns in principle the contracting States only, and not their subjects. As International Law is primarily a law between States only and exclusively, treaties can normally have effect upon States only. This rule can, as has been pointed out by the Permanent Court of International Justice, be altered by the express or implied terms of the treaty, in which case its provisions become self- executory. Otherwise, if treaties contain provisions

T.P. (C) Nos. 496-509 of 2020 & Anr. Page 40 of 86

with regard to rights and duties of the subjects of the contracting States, their Courts, officials, and the like,

these States must take steps as are necessary according to their Municipal Law, 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

and the 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 with respect to which the

Parliament has power to make laws. Our Constitution

makes no provision making legislation a condition of

the entry into an international treaty in times either of

war or peace. The executive power of the Union is

vested in the President and is exercisable in accordance with the Constitution. The Executive is

qua the State competent to represent the State in all matters international and may by agreement, convention or treaties incur obligations which in international law are binding upon the State. But the obligations arising under the agreement or treaties are not by their own force binding upon Indian nationals. The power to legislate in respect of treaties lies with the Parliament under Entries 10 and 14 of List I of the Seventh Schedule. But making of law under that authority is necessary when the treaty or agreement operates to restrict the rights of citizens or others or modifies the laws of the State. If the rights of the citizens or others which are justiciable are not affected, no legislative measure is needed to give effect to the agreement or treaty.”

18. It was also clarified that Article 253 deals with the legislative power

of the Parliament and thereby confers power on the Parliament

T.P. (C) Nos. 496-509 of 2020 & Anr. Page 41 of 86


		17

which it may not otherwise possess. This provision does not seek

to circumscribe the extent of power conferred under Article 73. In

other words, in consequence of the exercise of executive power,

rights of the citizens or others are restricted or infringed, or laws

are modified, the exercise of power must be supported by

legislation; where there is no such restriction, infringement of the

right or modification of the laws, the executive is competent to

exercise the power. The dictum in Maganbhai Ishwarbhai Patel (supra) can be summarised as under:

“(i) The stipulations of a treaty duly ratified by the Central Government, do not by virtue of the treaty

alone have the force of law.

(ii) Though the Executive (Central Government) has

power to enter into international treaties/agreements/ conventions under Article 73 (read with Entries 10 & 14

of List I of the VII Schedule to the Constitution of India)

the power to legislate in respect of such

treaties/agreements/conventions, lies with Parliament.

It is open 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 other contracting parties, Parliament may refuse to perform them and leave the

Union of India in default.

(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 Indian nationals”.

(iv) The making of law by Parliament in respect of such

treaties/agreements/conventions is necessary when

17 Karan Dileep Nevatia v. Union of India , (2010) 1 Bom CR 588

T.P. (C) Nos. 496-509 of 2020 & Anr. Page 42 of 86


		18

the treaty or agreement restricts or affects the rights of citizens or others or modifies the law of India,

(v) If the rights of citizens or others are not affected or

the laws of India are not modified then no legislative measure is needed to give effect to such treaties/agreements/conventions.”

19. Even earlier in Gramophone Company of India Ltd. v. Birendra

Bahadur Pandey and Others , this Court had held as under: “5. There can be no question that nations must march

with the international community and the Municipal law

must respect rules of International law even as nations respect international opinion. The comity of Nations requires that Rules of International law may be accommodated in the Municipal Law even without express legislative sanction provided they do not run into conflict with Acts of Parliament. But when they do run into such conflict, the sovereignty and the integrity of the Republic and the supremacy of the constituted legislatures in making the laws may not be subjected to external rules except to the extent legitimately accepted by the constituted legislatures themselves. The doctrine of incorporation also recognises the position that the rules of international law are incorporated into national law and considered to be part of the national law, unless they are in conflict with Act of Parliament. Comity of Nations or no, Municipal Law must prevail in case of conflict. National Courts cannot say yes if Parliament has said no to a principle of international law. National Courts will endorse international law but not if it conflicts with national law. National courts being organs of the National State and not organs of international law must perforce apply national law if international law conflicts with it. But the Courts are under an obligation within legitimate limits, to so interpret the Municipal Statute as to avoid conformation with the comity of Nations or the well- established principles of International law. But if conflict is inevitable, the latter must yield.”

18 (1984) 2 SCC 534

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20.

In Jolly George Varghese and Another v. The Bank of Cochin

this Court, while dealing with the application of an international

covenant pertaining to prohibition of civil imprisonment on non-

discharge of decree debt, observed that even though India be a

signatory of a covenant and Article 51(c) of the Constitution

obligates the State to “foster respect for international law and

treaty obligations in the dealings of organised people with one

another”, the provisions of the international covenant is to be

applied by an Indian Court when there is a specific provision in the

Indian law. The positive commitment in the international

agreement ignites legislative action at home but does not

automatically make the covenant an enforceable part of the

corpus juris of India. The international conventional law must go

through the process of transformation into municipal law before

the international treaty can become an internal law. The Court,

dealing with the enforceability of the international law at the

instance of individuals, observed that the remedy for breaches of

International Law in general is not to be found in the law courts of

the State because International Law per se or proprio vigore has

not the force or authority of civil law, till under its inspirational

impact actual legislation is undertaken. The individual citizens, 19 (1980) 2 SCC 360

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		20

therefore, cannot complain about their breach in the municipal

courts even if the country concerned has adopted the covenants and ratified the operational protocol.

21. Afore-quoted decisions are on the legal effect of international

treaties in the domestic law in India. The ratio of these decisions

primarily relates to and is confined to the requirement and

mandate of the need for ‘act of transformation’ to be a part and

parcel of domestic law, which confers a right to invocability. The

ratio of the above decisions has to be distinguished from decisions

interpreting domestic law after the ‘act of transformation’

consequent to which portions of GATT-1994 stand enacted

thereby conferring right of invocability to parties. The decisions

referred to in paragraphs 41 to 44 and relied upon by the importers fall in the second category.

22. This Court had the occasion to examine and interpret Customs

Valuation Rules, 1988 that were framed keeping in view the GATT

protocol and WTO agreement in Associated Cement

Companies Ltd. v. Commissioner of Customs and it was observed:

“45. It will be appropriate to note that the Customs

Valuation Rules, 1988 are framed keeping in view the

20 (2001) 4 SCC 593

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		21

GATT protocol and the WTO agreement. In fact our

rules appear to be an exact copy of GATT and WTO.

For the purpose of valuation under the 1988 Rules the

concept of “transaction value” which was introduced

was based on the aforesaid GATT protocol and WTO agreement. The shift from the concept of price of goods, as was classically understood, is clearly discernible in the new principles. Transaction value may be entirely different from the classic concept of price of goods. Full meaning has to be given to the rules and the transaction value may include many items which may not classically have been understood to be part of the sale price.”

23. Similarly, in State of Punjab and Another v. Devans Modern

Breweries Ltd. and Another , this Court while examining the

rationale behind imposition of countervailing duty had referred to the WTO agreement to observe and hold as under:

“305. The economic rationale is very doubtful, as the

effect of a countervailing duty is to make the product

more expensive in the importing country. However,

there has been some level of an explanation provided.

Every time a tariff barrier is negotiated and agreed on,

WTO members have reasonable expectations that they

can profit from the conditions of competition established in the market of the member, binding its

tariff and gain market share. Moreover, members have

“paid” for the binding by promising to open up their market, that is, by binding their own tariffs. WTO members may not frustrate their promises by subsidising their domestic industry producing the product for which a tariff binding has been previously offered. If this were allowed WTO members might lose the incentive to make concessions in the future. (See The World Trade Organisation — Law, Practice and Policy by Mitsuo Matsushita, Thomas J. Schoenbaum and Petros C. Mavroidis, p. 279.)”

21 (2004) 11 SCC 26

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	23		22

24.

In S&S Enterprise v. Designated Authority and Others , this

Court while examining the question of levy of anti-dumping duty had referred to the terms of GATT and WTO to observe:

“4. In our opinion, the interpretation of Rule 14( d) by Respondent 1 and the Tribunal is incorrect and contrary to its language. The imposition of 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 on Tariff and Trade (GATT) to which India is a party. The purpose behind the imposition of the duty is to curb unfair trade practices resorted to by exporters of a particular country of flooding the domestic markets with goods at rates which are lower than the rate at which the exporters normally sell the same or like goods in their own countries so as to cause or be likely to cause injury to the domestic market. The levy of anti-dumping duty is a method recognised by GATT which seeks to remedy the injury and at the same time balances the right of exporters from other countries to sell their products within the country with the interest of the domestic markets. Thus the factors to constitute “dumping” are (i) an import at prices which are lower than the normal value of the goods in the exporting country; ( ii) the exports must be sufficient to cause injury to the domestic industry.”

25. In Commissioner of Customs, Bangalore v. G.M. Exports and

Others , again while examining the question of levy of anti-

dumping duty, this Court had emphasised that the correct

approach to the construction of a statute made in response to

international treaty obligation is to give effect to the obligations in

international law. If there be a difference in the language of the 22 (2005) 3 SCC 337

23 (2016) 1 SCC 91

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		24

statutory provision and that of the corresponding provision of the

convention, then the statutory language should be construed in

the same sense as that of the convention if the words of the

statute are reasonably capable of bearing that meaning. It was

emphasised that the municipal law should not only carry out the

treaty obligation but should be construed in a way not to be

inconsistent with the terms of the treaty. This principle of

interpretation is embodied in the principle that the statute needs to

be construed uniformly by all member nations who are signatories

and should, therefore, not be controlled by domestic precedents.

The interpretation should be based on broad principles of general

application in a purposive and not in a narrow literal manner. At

times the answer to ambiguity can be found in the object and the

structure of the convention, the language used and the subject

matter with which it deals and what was sought to be achieved is

a uniform international code. The legal position was summarised as under:

“23. A conspectus of the aforesaid authorities would

lead to the following conclusions:

(1) Article 51(c) of the Constitution of India is a Directive Principle of State Policy which states that the

State shall endeavour to foster respect for international

law and treaty obligations. As a result, rules of international law which are not contrary to domestic law

are followed by the courts in this country. This is a

24 The Eschersheim Anr v. The Jade Erkowit And Anr . (1976) 1 All ER 920 (HL)

T.P. (C) Nos. 496-509 of 2020 & Anr. Page 48 of 86

situation in which there is an international treaty to

which India is not a signatory or general rule of international law are made applicable. It is in this situation that if there happens to be a conflict between domestic law and international law, domestic law will prevail.

(2) In a situation where India is a signatory nation to an

international treaty, and a statute is passed pursuant to

the said treaty, it is a legitimate aid to the construction

of the provisions of such statute that are vague or ambiguous to have recourse to the terms of the treaty

to resolve such ambiguity in favour of a meaning that is consistent with the provisions of the treaty.

In a situation where India is a signatory nation to an international treaty, and a statute is made in furtherance of such treaty, a purposive rather than a narrow literal construction of such statute is preferred. The interpretation of such a statute should be construed on broad principles of general acceptance rather than earlier domestic precedents, being intended to carry out treaty obligations, and not to be inconsistent with them.

In a situation in which India is a signatory nation to

an international treaty, and a statute is made to enforce

a treaty obligation, and if there be any difference between the language of such statute and a corresponding provision of the treaty, the statutory language should be construed in the same sense as that of the treaty. This is for the reason that in such cases what is sought to be achieved by the international treaty is a uniform international code of law which is to be applied by the courts of all the signatory nations in a manner that leads to the same result in all the signatory nations.”

This Court also referred to clause (c) of Article 51 of the

Directive Principles of State Policy, which states that the State

shall endeavour to foster respect for international law and treaty obligations.

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	26		25

26. We would also refer to Entertainment Network (India) limited

and Anr. v. Super Cassette Industries Ltd and Ors. , wherein

this Court dealt with the application of international conventions in

India and observed that while interpreting the domestic/municipal

laws, conventions/norms can be relied for the following purposes:

(i) as a means of interpretation; (ii) justification or fortification of a

stance taken; (iii) to fulfil spirit of international obligation which

India has entered into, when they are not in conflict with the

existing domestic law; (iv) to reflect international changes and

reflect the wider civilisation; (v) to provide a relief contained in a

covenant, but not in a national law; and (vi) to fill gaps in law.

Thereafter, reference was made on case-laws, beginning

from His Holiness Kesavananda Bharati Sripadagalvaru v.

State of Kerala and Another , wherein it was held that

international conventions or the norms of international law can be

used to interpret domestic law provided they are not inconsistent

with domestic legislation i.e. by reason thereof, the tenor of

domestic law should not be breached, and further in case of

inconsistency the domestic legislation shall prevail. It was also

observed that if there is no statutory law in India in the field, 25 (2008) 13 SCC 30

26 (1973) 4 SCC 225

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		27

interpretation, if any, must give a regard to the ever-changing

global scenario. This principle was accordingly applied in Pratap

Singh v. State of Jharkhand and Anr to interpret Juvenile Justice Act. It was further elucidated:

“78. However, applicability of the international conventions

and covenants, as also the resolutions, etc. for the purpose of interpreting domestic statute will depend upon

the acceptability of the conventions in question. If the country is a signatory thereto subject of course to the provisions of the domestic law, the international covenants can be utilised. Where international conventions are framed upon undertaking a great deal of exercise upon giving an opportunity of hearing to both the parties and filtered at several levels as also upon taking into consideration the different societal conditions in different countries by laying down the minimum norm, as for example, the ILO Conventions, the court would freely avail the benefits thereof.

79. Those conventions to which India may not be a signatory but have been followed by way of enactment of

new parliamentary statute or amendment to the existing enactment, recourse to international convention is permissible. This kind of stance is reflected from the decisions in People’s Union for Civil Liberties v. Union of India, Madhu Kishwar v. State of Bihar, Kubic Darusz v. Union of India, Chameli Singh v. State of U.P., C. Masilamani Mudaliar v. Idol of Sri Swaminathaswami Swaminathaswami Thirukoil , Apparel Export Promotion Council v. A.K. Chopra , Kapila Hingorani v. State of Bihar , State of Punjab v. Devans Modern Breweries Ltd. and Liverpool & London S.P. & I Assn. Ltd. v. M.V. Sea Success I.”

GATT-1994 is an international convention framed after great

deliberation and exercise, to develop and promote international trade.

27(2005) 3 SCC 551

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27. While interpreting the domestic law enshrining Human Rights (and

sometimes environment issues) this Court on some occasions has

relied on international conventions and treaties where the terms of

any legislation are absent, not clear or are reasonably capable of

more than one meaning. In such cases, where there are statutes,

rules etc. the meaning which in consonance with the treaties can

be relied upon, for there is a prima facie presumption that the

Parliament did not intend to act in breach of international law,

including State treaty obligations. Part-III of the Indian

Constitution a-priori incorporates and recognises the Human

Rights, consequently recourse to international conventions can be

made to interpret and borrow explicit terminologies and nuances

to bailiwick Human Right jurisprudence. However, in the present

case we are examining an economic and fiscal legislation or

rather economic policy decision taken by the Union of India.

These decisions on human rights therefore would not be of much assistance.

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

28. Having regard to the general law on the question of treaties and

its application in domestic law in India and other countries, we

T.P. (C) Nos. 496-509 of 2020 & Anr. Page 52 of 86

would now reproduce Articles XI and XIX of the GATT-1994, which read as under:

“

Article XI

General Elimination of Quantitative Restrictions

1. No prohibitions or restrictions other than duties,

taxes or other charges, whether made effective through quotas, import or export licences or other measures,

shall be instituted or maintained by any contracting

party on the importation of any product of the territory

of any other contracting party or on the exportation or

sale for export of any product destined for the territory

of any other contracting party.

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

Export prohibitions or restrictions temporarily applied to prevent or relieve critical shortages of foodstuffs or other products essential to the exporting contracting party;

Import and export prohibitions or restrictions

necessary to the application of standards or regulations

for the classification, grading or marketing of commodities in international trade;

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

(i) to restrict the quantities of the like domestic product permitted to be marketed or produced,

or, if there is no substantial domestic production

of the like product, of a domestic product for

which the 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 be directly substituted, by making the

T.P. (C) Nos. 496-509 of 2020 & Anr. Page 53 of 86

surplus available to certain groups of domestic consumers free of charge or at prices below the current market level; or

(iii) to restrict the quantities permitted to be produced

of any animal product the production of which is directly dependent, wholly or mainly, on the imported commodity, if the domestic production of that commodity is relatively negligible.

Any contracting party applying restrictions on the

importation of any product pursuant to sub-paragraph

(c) of this paragraph shall give public notice of the total quantity or value of the product permitted to be imported during a specified future period and of any change in such quantity or value. Moreover, any restrictions applied under (i) above shall not be such as will reduce the total of imports relative to the total of domestic production, as compared with the proportion which might reasonably be expected to rule between the two in the absence of restrictions. In determining this proportion, the contracting party shall pay due regard to the proportion prevailing during a previous representative period and to any special factors* which may have affected or may be affecting the trade in the product concerned.

xx xx xx

Article XIX

Emergency Action on Imports of Particular

Products

1. (a) If, as a result of unforeseen developments and of

the effect of the obligations incurred by a contracting

party under this Agreement, including tariff concessions, any product is being imported into the territory of that contracting party in such increased quantities and under such conditions as to cause or threaten serious injury to domestic producers in that territory of like or directly competitive products, the contracting party shall be free, in respect of such product, and to the extent and for such time as may be necessary to prevent or remedy such injury, to suspend the obligation in whole or in part or to withdraw or modify the concession.

T.P. (C) Nos. 496-509 of 2020 & Anr. Page 54 of 86

(b) If any product, which is the subject of a concession

with respect to a preference, is being imported into the

territory of a contracting party in the circumstances set

forth in sub-paragraph (a) of this paragraph, so as to

cause or threaten serious injury to domestic producers

of like or directly competitive products in the territory of

a contracting party which receives or received such

preference, the importing contracting party shall be

free, if that other contracting party so requests, to suspend the relevant obligation in whole or in part or to withdraw or modify the concession in respect of the product, to the extent and for such time as may be necessary to prevent or remedy such injury.

2. Before any contracting party shall take action

pursuant to the provisions of paragraph 1 of this Article,

it shall give notice in writing to the CONTRACTING

PARTIES as far in advance as may be practicable and

shall afford the CONTRACTING PARTIES and those contracting parties having a substantial interest as exporters of the product concerned an opportunity to consult with it in respect of the proposed action. When such notice is given in relation to a concession with respect to a preference, the notice shall name the contracting party which has requested the action. In critical circumstances, where delay would cause damage which it would be difficult to repair, action under paragraph 1 of this Article may be taken provisionally without prior consultation, on the condition that consultation shall be effected immediately after taking such action.

3. (a) If agreement among the interested contracting parties with respect to the action is not reached, the contracting party which proposes to take or continue the action shall, nevertheless, be free to do so, and if such action is taken or continued, the affected contracting parties shall then be free, not later than ninety days after such action is taken, to suspend, upon the expiration of thirty days from the day on which written notice of such suspension is received by the CONTRACTING PARTIES, the application to the trade of the contracting party taking such action, or, in the case envisaged in paragraph 1 (b) of this Article, to the trade of the contracting party requesting such action, of such substantially equivalent concessions or other

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obligations under this Agreement the suspension of which the CONTRACTING PARTIES do not disapprove.

(b) Notwithstanding the provisions of sub-paragraph (a)

of this paragraph, where action is taken under paragraph 2 of this Article without prior consultation

and causes or threatens serious injury in the territory of

a contracting party to the domestic producers of

products affected by the action, that contracting party

shall, where delay would cause damage difficult to repair, be free to suspend, upon the taking of the action

and throughout the period of consultation, such concessions or other obligations as may be necessary

to prevent or remedy the injury.

29. Indian Parliament, two years prior to the signing of GATT-1994,

had enacted the FTDR Act which was enforced with effect from 7

August 1992. Sections 11 to 14 of the FTDR Act came into force

immediately and other provisions came into force on 19 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 under the Ordinance shall be deemed to

have been done or taken under the corresponding provisions of

the FTDR Act. The Statement of Objects and Reasons for

enacting the FTDR Act, as recorded, are to acknowledge that

foreign trade is the driving force of economic activity as this spurs

economic growth and there is increasing interdependence and

that the goals of the new policy were to increase productivity and

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competitiveness by ensuring that the trade policies serve as an

instrument to create an environment that will provide a strong

impetus to exports, facilitate imports and render export activity more profitable.

30. In order to appreciate the contentions of the parties, we would

now like to reproduce Sections 3 and 9A of the FTDR Act, which read as under:

“3. Powers to make provisions relating to imports

and exports.– (1) The Central Government may, by Order published in the Official Gazette, make provision

for the development and regulation of foreign trade by facilitating imports and increasing exports.

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

Provided that the provisions of this sub-section

shall be applicable, in case of import or export of services or technology, only when the service or technology provider is availing benefits under the foreign trade policy or is dealing with specified services or specified technologies.

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

Without prejudice to anything contained in any other

law, rule, regulation, notification or order, no permit or licence shall be necessary for import or export of any goods, nor any goods shall be prohibited for import or

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export except, as may be required under this Act, or

rules or orders made thereunder.

xx xx xx

9A. Power of Central Government to impose quantitative restrictions.– (1) If the Central Government,

after conducting such enquiry as it deems fit, is satisfied that

any goods are imported into India in such increased quantities and under such conditions as to cause or threaten

to cause serious injury to domestic industry, it may, by notification in the Official Gazette, impose such quantitative restrictions on the import of such goods as it may deem fit:

Provided that no such quantitative restrictions shall be

imposed on any goods originating from a developing country

so long as the share of imports of such goods from that country does not exceed three per cent. or where such goods originate from more than one developing country, then, so long as the aggregate of the imports from all such countries taken together does not exceed nine per cent. of the total imports of such goods into India.

(2) The quantitative restrictions imposed under this section

shall, unless revoked earlier, cease to have effect on the

expiry of four years from the date of such imposition:

Provided that if the Central Government is of the opinion

that the domestic industry has taken measures to adjust to

such injury or threat thereof and it is necessary that the quantitative restrictions should continue to be imposed to prevent such injury or threat and to facilitate the adjustments, it may extend the said period beyond four years:

Provided further that in no case the quantitative restrictions shall continue to be imposed beyond a period of

ten years from the date on which such restrictions were first imposed.

The Central Government may, by rules provide for the manner in which goods, the import of which shall be subject to quantitative restrictions under this section, may be identified and the manner in which the causes of serious injury or causes of threat of serious injury in relation to such goods may be determined.

For the purposes of this section—

(a) “developing country” means a country notified by the

Central Government in the Official Gazette, in this regard;

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		28

(b) “domestic industry” means the producers of goods (including producers of agricultural goods)—

(i) as a whole of the like goods or directly competitive

goods in India; or

(ii) whose collective output of the like goods or directly

competitive goods in India constitutes a major share of

the total production of the said goods in India;

“serious injury” means an injury causing significant overall impairment in the position of a domestic industry;

“threat of serious injury” means a clear and imminent danger of serious injury.]

31. Section 9A of the FTDR Act is the only section in Chapter IIIA with

the heading ‘Quantitative Restrictions’ and this section was

inserted by Amendment Act 25 of 2010 with effect from 27

August 2010. Subsequently, in exercise of powers conferred by

sub-section (3) to Section 9A of the FTDR Act, the Central

Government had published and notified the Safeguard Measures

(Quantitative Restrictions) Rules, 2012, which became applicable

on the date of their publication in the Gazette of India dated 24 May 2012, the relevant portion of which reads as under:

xx xx xx

2. Definitions

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

28 The report of WTO Dispute Settlement Body’s panel on “India-Quantitative Restrictions on Imports of Agricultural, Textile and Industrial Products ” has interpreted the expression ‘Quantitative Restrictions’ in Art.XI of GATT,1994. The decisions of the 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.

T.P. (C) Nos. 496-509 of 2020 & Anr. Page 59 of 86

“interested party” includes –

(i) an exporter or foreign producer or the importer

of goods (which is subject to investigation for purposes of imposition of safeguard quantitative restrictions) or a trade or business association, majority of the members of which are producers, exporters or importers of such goods;

the Government of the exporting country; and
a producer of the like goods or directly competitive goods in India or a trade or business association, a majority of members of which produce or trade the like goods or directly competitive goods in India;

(e) “like goods” means goods which is identical or alike

in all respects to the goods under investigation, or in

the absence of such goods, other goods which has

characteristics closely resembling those of the goods

under investigation;

(f) “quantitative restrictions” means any specific limit on

quantity of goods imposed as a safeguard measure

under the Act;

(g) “specified country” means a country or territory

which is a member of the World Trade Organization

and includes the country or territory with which the

Government of India has an agreement for giving it the

most favoured nation treatment;

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

(1) The Central Government shall, by notification in the Official Gazette, designate an officer not below the

rank of Additional Director General of Foreign Trade as

an Authorised officer for making investigation for the purpose of this rules.

(2) The Authorised Officer shall be responsible for conducting investigation, under sub-section (1) of section 9A, for the purpose of imposition of safeguard

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quantitative restrictions and making necessary recommendation therein to the Central Government.

(3) The Directorate General of Foreign Trade shall provide secretarial support and the services of such

other persons and such other facilities as it deems fit.

4. Duties of Authorised Officer .– It shall be the duty

of the Authorised Officer —

(a) to investigate the existence of serious injury or

threat of serious injury to domestic industry as a consequence of increased import of a goods into India;

to identify the goods liable for quantitative restrictions as a safeguard measure;

to submit its findings, to the Central Government as

to the serious injury or threat of serious injury to domestic industry consequent upon increased import of goods into India from the specified country;

(d) to recommend–

(i) the nature and extent of quantitative restrictions

which, if imposed, shall be adequate to remove the serious injury or threat of serious injury to the domestic industry; and

(ii) the duration of imposition of safeguard quantitative restrictions and where the period so recommended is more than one year, to recommend progressive liberalisation adequate to facilitate positive adjustment; and

(e) to review the need for continuance of the safeguard quantitative restrictions.

5. Initiation of investigation.—

(1) The Authorised Officer shall, on receipt of a written

application by or on behalf of the domestic producer of

like goods or directly competitive goods, initiate an

investigation to determine the existence of serious

injury or threat of serious injury to the domestic industry, caused by the import of a goods in such increased quantities, absolute or relative to domestic production.

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(2) The application referred to in sub-rule (1) shall be

made in Form appended to these rules and be supported with-

(a) the evidence of –

increased imports as a result of unforeseen development;
serious injury or threat of serious injury to

the domestic industry; and

(iii) a causal link between imports and the

alleged serious injury or threat of serious

injury;

a statement on the efforts being taken, or planned to be taken, or both, to make a positive adjustment to increase in competition due to imports; and

a statement mentioning whether an application

for the initiation of a safeguard action on the goods

under investigation has also been submitted to the Director General of Safeguards, Department of Revenue.

(3) The Authorised Officer shall not initiate an investigation pursuant to an application made under sub-rule (1), unless, it examines the accuracy and adequacy of the evidence provided in the application and satisfies himself that there is sufficient evidence regarding–

increased imports;
serious injury or threat of serious injury; and
a causal link between increased imports and alleged serious injury or threat of serious

Injury.

(4) Notwithstanding anything contained in sub-rule (1),

the Authorised Officer may initiate an investigation suo

moto, if, it is satisfied with the information received

from any source that sufficient 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

initiate investigation to determine serious injury or

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threat of serious injury to domestic industry,

consequent upon the increased import of a goods into

India, issue a public notice notifying its decision which,

inter alia, contain information on the following, namely:-

the name of the exporting countries, the goods involved and the volume of import;
the date of initiation of the investigation;
a summary statement of the facts on which the

allegation of serious injury or threat of serious

injury is based;

reasons for initiation of the investigation;
the address to which representations by interested parties should be directed; and
the time-limits allowed to interested parties for making their views known.

(2) The Authorised Officer shall forward a copy of the

public notice to the Central Government in the Ministry

of Commerce and Industry and other Ministries concerned, known exporters of the goods, the

Governments of the exporting countries concerned and

other interested parties.

(3) The Authorised Officer shall also provide a copy of

the application referred to in sub-rule (1) of rule 5, to-

the known exporters, or the concerned trade association;
the Governments of the exporting countries;

and

Provided that the Authorised Officer shall also make available a copy of the application, upon request

in writing, to any other interested person.

(4) The Authorised Officer may issue a notice calling for

any information in such form as may be specified in

the notice from the exporters, foreign producers and governments of exporting countries and such information shall be furnished by such persons and governments in writing within thirty days from the date of receipt of the notice or within such extended period as the Authorised Officer may allow on sufficient cause being shown.

Explanation.–For the purpose of this rule, the public

notice and other documents shall be deemed to have

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been received one week after the date on which these documents were put in the course of transmission to

the interested parties by the Authorised Officer.

(5) The Authorised Officer shall provide opportunity to

the industrial user of the goods under investigation and

to representative consumer organisations in cases

where the goods is commonly sold at retail level to furnish information which is relevant to the investigation including inter alia, their views if imposition of safeguard quantitative restrictions is in public interest or not.

(6) The Authorised Officer may allow an interested

party or its representative to present the information

relevant to investigation orally but such oral information

shall be taken into consideration by the Authorised Officer only when it is subsequently submitted in writing.

(7) The Authorised Officer shall make available the

evidence presented 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

or otherwise does not provide necessary information

within a reasonable period or significantly impedes the investigation, the Authorised Officer may record its findings on the basis of the facts available and make such recommendations to the Central Government as it deems fit under such circumstances.

xx xx xx

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

The Authorised Officer shall determine serious injury or

threat of serious injury to the domestic industry taking

into account, inter alia, the following principles, namely:-

(a) in the investigation to determine whether increased imports have caused or are threatening to cause serious injury to a domestic industry, the Authorised

T.P. (C) Nos. 496-509 of 2020 & Anr. Page 64 of 86

Officer shall evaluate all relevant factors of an objective

and quantifiable nature having a bearing on the situation of that industry, in particular, the rate and amount of the increase in imports of the goods concerned in absolute and relative terms, the share of the domestic market taken by increased imports, changes in the level of sales, production, productivity, capacity utilisation, profits and losses, and employment; and

(b) the determination referred to in clause (a) shall not

be made unless the investigation demonstrates, on the

basis of objective evidence, the existence of the causal

link between increased imports of the goods concerned

and serious injury or threat thereof:

Provided that when factors other than increased imports are causing injury to the domestic industry at

the same time, such injury shall not be attributed to increased imports and in such cases, the Authorised Officer may refer the complaint to the authority for anti- dumping or countervailing duty investigations, as appropriate.

9. Final findings.– (1) The Authorised Officer shall,

within eight months from the date of initiation of the investigation or within such extended period as the Central Government may allow, determine whether, as a result of unforeseen developments the increased imports of the goods under investigation has caused or threatened to cause serious injury to the domestic industry, and a casual link exists between the increased imports and serious injury or threat of serious injury and recommend –

(i) the extent and nature of quantitative restrictions

which, if imposed, would be adequate to prevent or remedy ‘serious injury’ and to facilitate positive adjustment, as the case may be;

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

T.P. (C) Nos. 496-509 of 2020 & Anr. Page 65 of 86

(iii) the quota to be allocated among the supplying

countries, and the allocation of shares in the quota

for such specified countries which have a substantial interest in supplying the goods;

(iv) the duration of imposition of quantitative restrictions and where the duration of imposition of quantitative restrictions is more than one year, the progressive liberalisation adequate to facilitate positive adjustment.

(2) The final findings if affirmative shall contain all information on the matter of facts and law and reasons

which have led to the conclusion.

The Authorised Officer shall issue a public notice recording his final findings.

The Authorised Officer shall send a copy of the

public notice regarding his final findings to the Central

Government in the Ministry of Commerce and Industry

and a copy thereof to the interested parties.

10. Imposition of safeguard quantitative restrictions.—

The Central Government may based on the recommendation of the 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 the goods covered under the final determination, a safeguard quantitative restrictions not exceeding the amount or quantity which has been found adequate to prevent or remedy serious injury and to facilitate adjustment.

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

Any safeguard quantitative restrictions imposed on goods under these rules shall be applied on a non- discriminatory basis to all imports of the goods irrespective of its source.

12. Date of commencement of safeguard quantitative restrictions.—

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The safeguard quantitative restrictions levied under these rules shall take effect from the date of publication

of the notification in the Official Gazette, imposing such quantitative restrictions.

13. Duration .—

(1) The safeguard quantitative restrictions imposed

under rule 10 shall be for such period of time as may

be necessary to prevent or remedy serious injury and

to facilitate adjustment.

(2) Notwithstanding anything contained in sub-rule (1),

safeguard quantitative restrictions imposed under rule

10 shall, unless revoked earlier, cease to have effect

on the expiry of four years from the date of its

imposition: Provided that if the Central Government is

of the opinion that the domestic industry has taken measures to adjust to such serious injury or threat thereof and it is necessary that the safeguard quantitative restrictions should continue to be imposed, to prevent such serious injury or threat and to facilitate adjustments, it may extend the period beyond four years: Provided further that in no case the safeguard quantitative restrictions shall continue to be imposed beyond a period of ten years from the date on which such restrictions were first imposed.

14. Liberalization of safeguard quantitative restrictions. –

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

(v) Contention of the importers on Sections 3 and 9A

of the FTDR Act and the response by the Union of India.

32. Before we go on the interpretation of respective sections, namely,

Sections 3 and 9A of the FTDR Act, we would like to reproduce in

brief the contentions of the importers. The importers submit that

T.P. (C) Nos. 496-509 of 2020 & Anr. Page 67 of 86

the FTDR Act was introduced and enacted for development and

regulation of foreign trade by facilitating imports and augmenting

exports from India and to make India competitive in conformity

with GATT-1994 obligations. Section 3 of the FTDR Act reflects

the said position and incorporates Article XI of the GATT-1994

which stipulates that there shall not be any provision or restrictions

other than duty, taxes and other charges by any contracting party.

Section 9A is almost a replica of Article XIX of the GATT-1994 and

this is the only provision which confers power on the Central

Government to impose ‘quantitative restrictions’ on imports. It,

therefore, follows that unless the conditions of Section 9A of the

FTDR Act are satisfied and the procedure prescribed under the

Rules is followed, no ‘quantitative restrictions’ could have been

imposed by the Union of India through the medium of the

impugned notifications. Section 9A is a special provision dealing

with ‘quantitative restrictions’, whereas Section 3 is a general

provision. The Union of India cannot take recourse to Section 3

when conditions of Section 9A are not satisfied and impose

‘quantitative restrictions’, otherwise, Section 9A would become

redundant for the reason that Union of India could always impose

‘quantitative restrictions’ under the general power. This would be

in conformity with the India’s obligation under GATT-1994 and the

T.P. (C) Nos. 496-509 of 2020 & Anr. Page 68 of 86

domestic or municipal law must be construed in consonance with the GATT-1994 obligations.

33. For quantitative restrictions to be imposed under Section 9A of the

FTDR Act, following conditions must be cumulatively satisfied,

namely, (a) increased quantities of imports (b) that have caused

industries. Further, as per the procedure prescribed by the Rules,

the Appropriate Authority has to initiate proceedings, investigate,

hear parties and adjudicate on the satisfaction of the conditions.

In the present case, there has been no increase in imports as per the following table:

1 Apr – 31 Mar Peas in metric ton 2014-2015 19,51,973

2015-2016 22,45,390

2016-2017 31,02,757

-2018 28,77,032
-2019 8,51,408

2019-2020 6,66,696

‘Quantitative restrictions’ were imposed in the financial year

2018-19. Further, the Union of India has themselves stated that

there was serious injury to the domestic industry due to import of

pulses and Peas. Our attention was drawn to paragraphs 5 and 9

As per the Union of India, the import of Peas in 2016-17 was 31,72,758 MT.
As per the Union of India, the import of Peas in 2016-17 was 6,52,607 MT.

T.P. (C) Nos. 496-509 of 2020 & Anr. Page 69 of 86

of the written submissions filed by the Union of India, which read as under:

“5. It is submitted that the farmers are one of the most important stakeholders in matters related to import / export of agricultural goods and the Government is required to strike a balance between the interests of domestic producers and importers. Thus, whenever it is observed that large scale imports of an item is adversely impacting the interest of the domestic producers, due to fall in prices in the local market, the Government in consultation with stakeholders concerned, tries to uphold the interests of domestic producers through suitable measures like restriction on import quotas etc.

Xx xx Xx

9. It is submitted that since domestic production of pulses / grams has been very good, therefore the Government has imposed restrictions on the import of peas. Yellow Peas which are largely imported to India are mainly grown in countries like Canada, Russia, Ukraine etc. Due to agro-climatic conditions of these countries they export peas in bulk. Therefore, price of Yellow Peas is lower in comparison to other imported / domestically available pulses, including Gram. It is to be noted that the end use of Gram is mainly flour, commonly known as “Besan”, used in preparations of Indian savouries. As per industry estimates, about 70% of the Gram produced is used in manufacture of Besan. It is informed that Yellow Peas are a near perfect substitute for Gram in the making of Besan. As the price of imported Yellow Peas in India is cheaper than the domestic market price of Gram, a huge shift in industry usage from Gram to Yellow Peas had happened. Increased supply of Yellow Peas had taken away Gram demand, the resulting in fall in prices of Gram. Thus, despite large scale procurement of Gram under the PSS scheme in Rabi 2018 and 2019, prices of Gram continued to be below the MSP announced by the government.”

T.P. (C) Nos. 496-509 of 2020 & Anr. Page 70 of 86

34.

Thus, the Union of India themselves have accepted that the

conditions of Section 9A had impelled then to issue the impugned

notifications but they did not follow the procedure prescribed by the applicable Rules.

The Union of India, in their affidavit filed on 26 June 2020, have

pleaded that they were required to strike a balance between the

farmers and the importers as largescale imports would adversely

impact the 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 the Commission for Agricultural Costs and

Prices. Further, the Central Government under the schemes

being run had procured 85 lakh MT of pulses directly from 53 lakh

farmers by paying them MSP in the last five years. There was

also increase in production of pulses from 25.42 Million MTs in

2017-18 to 26.66 Million MTs in 2020-21. Imported Yellow Peas

are the perfect substitute for Gram in making of Besan which is

primarily used in preparation of Indian savouries. As the price of

imported Yellow Peas in India is cheaper than the domestic price

of Gram, a huge shift in industry usage from Gram to Yellow Peas

has taken place. In these circumstances that the government has

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	th		st

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 6,52,607

MTs in 2018-2019 and 2019-2020 respectively, though the annual

quota for these two years was 1/1.50 lakh MTs. The Government

is presently holding a buffer stock of 26.94 lakh MT of Gram,

against the target quantity of 3 lakh MTs. The Gram is being sold

at Rs.4,000 – 4,200 per quintal, which is below the MSP of

Rs.4,875/- per quintal. Imported CIF value of Yellow Peas is

Rs.2,028/- per quintal. Due to the pandemic, the farmers could be

compelled to make panic disposal at much lower prices. In the

further affidavit filed on 1 July 2020, the Union of India has stated

that they had not issued any quota for Peas, Yellow Peas etc. as

inspite of restricted quota of 1 lakh and 1.5 lakh MTs for Peas in

the Financial Years 2018-19 and 2019-20, due to interim orders

passed by the various High Courts, the actual import was 8.51

lakh MTs and 6.67 lakh MTs during the Financial Years 2018-19

and 2019-20, respectively. Consequently, it has been decided not

to import Yellow Peas in the current Financial Year 2020-21. In

the affidavit filed on 6 July 2020, with reference to Section 9A of

the FTDR Act, the Union of India has stated that the said section

T.P. (C) Nos. 496-509 of 2020 & Anr. Page 72 of 86

is attracted only when the goods are imported into India in

increased quantity and under such conditions as to cause or

threaten to cause serious injury to domestic industry. Section 9A

is enacted as a safeguard mechanism in terms of Article XIX of

the GATT-1994 and Article II of the WTO Agreement on

Safeguards vide the Amendment Act, 2010. The notifications

under challenge have been issued within the express terms of

Section 3 of the FTDR Act which permits the Central Government

to impose restrictions without any qualification of the nature

specified in Section 9A. Power of the Central Government to

restrict imports to limited quantities under Section 3 and

quantitative restrictions under Section 9A of the FTDR Act are

completely distinct and have no connection or interplay. The

power under Section 3(2) of the FTDR Act is of a wide amplitude.

Reference is also made to Rule 5(2) to assert that there is

necessity of evidence that the imports had increased as a result of

‘unforeseen developments’ in addition to the necessity for

evidence disclosing serious injury or threat of serious injury to

domestic industry and a causal link between imports and serious

injury. The restrictions have been imposed not due to increased

quantities of imports but to prevent panic disposal by farmers as

the prices of Gram would come down. It is submitted that special

T.P. (C) Nos. 496-509 of 2020 & Anr. Page 73 of 86

provisions like 9A of the FTDR Act would be limited to areas within

its scope leaving the general provision free to operate in other areas.

(vi) Discussion and interpretation of Sections 3 and 9A of the FTDR Act.

35. Section 3 of the FTDR Act, as enacted, had undergone

amendments by addition of proviso to sub-section (2) and by

insertion of sub-section (4) vide Act 25 of 2010 with effect from

25 August 2010. Sub-section (1) of Section 3 states that the

Central Government may, by an Order published in the Official

Gazette, make provision for the development and regulation of

foreign trade by facilitating imports and increasing exports. It is a

general provision which has no reference to GATT-1994. It

authorises the Central Government to publish an order in the

Official Gazette for development and regulation of foreign trade,

i.e. imports and exports. Sub-section (2) states that the Central

Government can, by an order in the Official Gazette, make a

provision 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 Act 25 of

2010, services or technology. Sub-section (2) to Section 3,

therefore, authorises the Central Government to, by an Order

T.P. (C) Nos. 496-509 of 2020 & Anr. Page 74 of 86

published in the Official Gazette, make provisions restricting the

imports or exports. Imposition of quantitative restrictions on

imports or exports would clearly fall within sub-section (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

Section 3 states that where an order is passed under sub-section

(2) whereby the import or export of goods is prohibited, restricted

or otherwise regulated, the goods in question would be deemed to

be prohibited goods under Section 11 of the Customs Act, 1962 and accordingly the provisions of the latter Act would apply.

36. Sub-section (4) to Section 9A of the FTDR Act introduced by Act

25 of 2010 with effect from 27 August 2010, requires some

elucidation. The sub-section on one hand states that no permit or

licence shall be necessary for imports or exports of goods, nor any

goods shall be prohibited from import or export, except as may be

required under the FTDR Act, or the rules or orders made

thereunder. At the same time, by using the phrase ‘without

prejudice to anything contained in any other law, rule, regulation,

notification or order ’, it protects the operation of the other law, rule,

regulation, notification or order to the extent that they do not

directly or indirectly deal with the permit or licence necessary for

T.P. (C) Nos. 496-509 of 2020 & Anr. Page 75 of 86

import or export of goods or prohibit import or export of goods.

Operation of such law, rule, regulation, notification or order not

dealing with the permit or licence necessary for import or export

on a prohibition of import of goods is, therefore, protected and not

overridden. Sub-section (4) to Section 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 Section 18A of the FTDR Act which was also

enacted and inserted by Act 25 of 2010 with effect from 27 August 2010 and reads as under:

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

The provisions of FTDR Act, therefore, are in addition to,

and not in derogation of, the provisions of any other law for the

time being in force. This would be the correct way to

harmoniously read and interpret sub-section (4) to Section 3 and

Section 18A of the FTDR Act. We may, 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 the contradiction

and also the object and purpose behind enacting sub-rule (4) and

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		31

37.

had recommended that the said expression should be replaced

with the expression ‘Without prejudice to anything contained in

any other law, rule, regulation, notification or order ’. Sub-section

(4) to Section 3 of the FTDR Act, therefore, in the context of import

and exports or prohibition of imports or exports of goods states

that no permit or licence shall be necessary or required except as

may be required under the FTDR Act, rules or orders made

thereunder. The expression ‘order ’, as per clause (h) to Section

(2) of the FTA means any Order made by the Central Government

under Section 3. It is, therefore, clear to us that there is no

violation of Section 3 of the FTDR Act in the issuance of the

impugned notifications or orders, which are intra vires and not ultra vires.

We have already reproduced and quoted Article XI of the GATT-

1994 and have to say that the same has not been statutorily made

a subject of ‘act of transformation’ and incorporated in the

domestic legislation, i.e. the FTDR Act. The FTDR Act does not

legislate and transform Article XI of the GATT-1994. As noticed

above, Section 3 of the FTDR Act empowers and authorises the

Central Government, i.e. the Union of India to frame policy, rules

31 Paragraph 47 (supra).

T.P. (C) Nos. 496-509 of 2020 & Anr. Page 77 of 86

or regulations for import or export of goods. The policy is framed under Section 5 of the Act, which reads as under:

“5. Foreign Trade Policy. – The Central Government

may, from time to time, formulate and announce, by notification in the Official Gazette, the foreign trade

policy and may also, in like manner, amend that policy:

Provided that the Central Government may direct

that, in respect of the Special Economic Zones, the

foreign trade policy shall apply to the goods, services

and technology with such exceptions, modifications

and adaptations, as may be specified by it by notification in the Official Gazette.”

Thus, the Central Government i.e. the Union of India has

been given the necessary discretion and election with regard to

framing of policies for import and export of goods, services and

technology. Therefore, implementation of GATT-1994, including

Article XI, is left to the Central Government by means of delegated legislation.

38. Clause (2) of Article 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 on any agricultural or fisheries product, imported in

any form necessary for enforcement of governmental measures

specified therein. Similarly, Article XII of GATT-1994 states that

notwithstanding the provisions of paragraph (1) of Article XI, any

contracting party, in order to safeguard its external financial

T.P. (C) Nos. 496-509 of 2020 & Anr. Page 78 of 86

position and its balance of payments, may restrict the quantity or

value of merchandise permitted to be imported, subject to the

provisions of paragraphs of that Article. Paragraph 23 (supra) lists

a number of other provisions, which allow and permit exceptions.

We have referred to these provisions to highlight that paragraph

(1) to Article XI is not an absolute rule. It is subject to exceptions

in the form of paragraph (2) to Article XI, Article XII and other

provisions. Of course, the conditions specified the respective

Articles have to be satisfied for a contracting party to be GATT- 1994 compliant.

39. Reference to this position is necessary and required when we

interpret Section 9A of the FTDR Act which we would accept

incorporates into the domestic law Article XIX of GATT-1994, but

neither Article XI and nor all exceptions by implication.

Consequently, Section 9A for the FTDR Act, is to be understood

an enabling provision empowering imposition of ‘quantitative

restrictions’ after following the procedure in the situations referred

to therein. However it does not limit and restrict the expans and

power of the Central Government to prohibit, regulate or restrict

imports of goods in terms of Section 3(2) of the FTDR Act. As a

sequitur, it has to be held that notwithstanding Section 9A, the

T.P. (C) Nos. 496-509 of 2020 & Anr. Page 79 of 86

Central Government continues and has authority to impose

quantitative restrictions by an order under Section 3(2) of the

FTDR Act. Principle of Lex specialis derogat legi generali , therefore, is not applicable to the case in hand.

40. Section 9A of the FTA was enacted by Act 25 of 2010 pursuant to

the recommendations of the Standing Committee which has opined as under:

Clause 9 seeks to insert a new Chapter IIIA, with

heading “Quantitative Restrictions”, after Section 9 of

the Act, pertaining to Power of the Central Government

to impose Quantitative Restrictions. The Committee

was informed that the proposed amendment seeks to make a clear provision in the Foreign Trade (Development and Regulation) Act for allowing Quantitative Restrictions (QRs) to be imposed to protect domestic industry from serious injury in case of a surge in imports. While such measures are available for all the WTO member countries, yet safeguard measures in the form of Quantitative Restrictions are not provided for under any Indian law. This is in accordance with the provision to incorporate safeguard measures in the form of Quantitative Restrictions, as provided in Article XIX of GATT and the WTO Agreement on Safeguards.

Section 9A substantially incorporates, with some

modifications, provisions of Article XIX of GATT-1994. Rules

made in 2012 are also in conformity with the provisions of the

WTO Agreement on Safeguards made in terms of Article XIX of

GATT-1994. Sub-rule (3) to Rule 5 of the Safeguard Measures

(Quantitative Restrictions) Rules, 2012 states and sets out the

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		32

conditions for applicability of Rule 9A, which are: (i) increased

imports; (ii) serious injury or threat of serious injury; and (iii) a

causal link between increased imports and alleged serious injury

or threat of serious injury. The expression ‘increased imports’ has

been defined in terms of increased quantity to mean increase in

imports in absolute terms or relative to domestic production. The

expressions ‘serious injury’ and ‘threat of serious injury’ have been

defined in clauses (c) and (d) of sub-clause (4) to Section 9A to

mean injury causing significant overall impairment in the position

of a domestic industry and a clear and imminent danger 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-rule (d) to Rule 2 of the Safeguard Measures (Quantitative

Restriction) Rules, 2012 and includes exporter or foreign producer

or the importer of goods for the purposes of imposition of

safeguard quantitative restrictions on trade or business

association. It also includes the government of the exporting

country or producer of goods or directly competitive goods in India or a trade or business association .

32 The words “unforeseen developments” are not to be found in Section 9A of the FTDR Act and Rule 5(3) but they find mention in Rule 5(2). It is clarified that we have not examined and decided the need to establish “unforeseen developments”.

T.P. (C) Nos. 496-509 of 2020 & Anr. Page 81 of 86

41. The need to enact Section 9A arose from the obligations flowing

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’ was required. Article XIX of GATT-1994 is an

escape provision, i.e. a provision which entitles a contracting state

to escape from the rigours of paragraph (1) of Article XI of GATT-

1994. Similar ‘acts of transformation’ have been undertaken by

enacting Custom Valuation Rules, provision of antidumping,

countervailing duty etc. but the entire GATT-1994 does not stand

transposed and enacted by way of statutory law or delegated legislation.

42. This being the position, Section 9A has to be interpreted as an

escape provision when the Central Government i.e. the Union of

India may 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 necessary implication. To hold to the contrary, we

would be holding that the Central Government has no right and

power to impose ‘quantitative restrictions’ except under Section 9A

of the FTDR Act. This would be contrary to the legislative intent

T.P. (C) Nos. 496-509 of 2020 & Anr. Page 82 of 86

and objective. Section 9A of the FTDR Act does not elide or

negate the power of the Central Government to impose

restrictions on imports under sub-section (2) to Section 3 of the FTDR Act.

43. In other words, the impugned notifications would be valid as they

have been issued in accordance with the power conferred in the

Central Government in terms of sub-section (2) to Section 3 of the

FTDR Act. The powers of the Central Government by an order

imposing restriction on imports under sub-section (2) to Section 3

is, therefore, not entirely curtailed by Section 9A of the FTDR Act. 44. To be fair, learned counsel appearing for the importers had

conceded that they cannot enforce or claim violation of paragraph

(1) of Article XI of GATT-1994 in the domestic courts in India

unless the said Article has been expressly or by necessary

implication incorporated and transposed in the domestic law, that is, the FTDR Act.

45. In the present case, this Court is not called upon to decide and

examine the obligations of the Contracting Parties in terms of

GATT-1994. Our findings and ratio are confined and restricted to

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		33

interpretation of Section 3 and 9A of the FTDR Act and in that context we have referred to GATT-1994.

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

46. Learned counsel for some of the importers had placed reliance on

Raj Prakash Chemical v. Union of India , which judgment, in

our opinion, has no application. In Raj Prakash Chemical

(supra), the petitioner had acted under a bona fide belief in view of

judgments and orders of High Courts and the interpretation placed

by the authorities. In this background, observations were made to

giving benefit to the importers, despite the contrary legal

interpretation. In the instant case, the importers rely upon the

interim orders passed by the High Court’s whereas on the date

when they filed the Writ Petitions and had obtained interim orders,

the Madras High Court had dismissed the Writ Petition upholding

the notification. Similarly, the High Court of adjudicature at

Bombay, High Court of Gujarat and the High Court of Madhya

Pradesh had dismissed the Writ Petitions filed before them and

upheld the notifications and the trade notices. Notwithstanding the

dismissals, the importers took their chance, obviously for personal

gains and profits. They would accordingly face the consequences

33 (1986) 2 SCC 297

T.P. (C) Nos. 496-509 of 2020 & Anr. Page 84 of 86

in law. In these circumstances, the importers it cannot be said had bona fide belief in the right pleaded.

E. What is not decided

47. Learned counsel for some of the importers had submitted that

they have preferred statutory appeals against orders suspending

or terminating import export code. The said aspect has not been

examined and decided and hence we make no comment and

observation. The statutory appeals, if any, preferred by the importer(s) will be decided in accordance with law.

F. Conclusion

48. Accordingly, we uphold the impugned notifications and the trade

notices and reject the challenge made by the importers. The

imports, if any, made relying on interim order(s) would be held to

be contrary to the notifications and the trades notices issued

under the FTDR Act and would be so dealt with under the

provisions of the Customs Act 1962. The Writ Petitions subject

matter of the Transfer Petitions, subject to E above (What is not

decided) are dismissed. Writ Petitions filed by the intervenors

before the respective High Courts shall stand dismissed in terms

of this decision. Pending application(s), if any, also stand disposed of in the above terms. No order as to costs.

T.P. (C) Nos. 496-509 of 2020 & Anr. Page 85 of 86

………………………………..J.

(A.M. KHANWILKAR)

………………………………..J.

(DINESH MAHESHWARI)

………………………………..J.

(SANJIV KHANNA)

NEW DELHI;

AUGUST 26, 2020.

T.P. (C) Nos. 496-509 of 2020 & Anr. Page 86 of 86

sc01 UoI-Vs-Agricas-LLP Case no TP(C) No. 496-509-2020

AUTHOR: admin

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