PETITIONER: UNION OF INDIA & ORS. Vs. RESPONDENT: <ORG>. DATE OF JUDGMENT: 22/11/1967 BENCH: <NAME>, J.C. BENCH: <NAME>, J.C. SIKRI, S.M. <NAME>, J.M. CITATION: 1968 AIR 718 1968 SCR (2) 366 CITATOR INFO : R 1971 SC1021 (11) D 1971 SC1997 (8) D 1971 SC2399 (13) D 1972 SC1126 (5) R 1972 SC1311 (24) R 1972 SC2112 (18) RF 1973 SC 106 (145) R 1973 SC 303 (10) RF 1973 SC 381 (16) RF 1973 SC2232 (15) RF 1976 SC 386 (15) RF 1977 SC1496 (13) D 1977 SC2149 (14) R 1978 SC 803 (11) E&R 1979 SC 621 (20,21,22,24,25,26,29,30,31) RF 1980 SC1285 (13,20,26,36,37,41,42,44) F 1985 SC 941 (4) RF 1986 SC 806 (10) RF 1986 SC 872 (179,180) RF 1986 SC1021 (13,21) RF 1988 SC1247 (3) E&F 1991 SC 14 (11) RF 1992 SC1075 (3) ACT: Imports and Exports (Control) Act (18 of 1947), s. 3--Import Trade Policy--Notifications under--If executive instructions--Whether enforceable--Representation to exporters that they will be given certificates to import material equal to 100% of the value of the exports--When quantum in import certificate can be reduced--Claim of exporters if founded on equity. HEADNOTE: Section 3 of the Imports and Exports (Control) Act, 1947, authorises <ORG> to make, by order, provisions for prohibiting, restricting or otherwise controlling import, export, carriage etc. of goods of specified description. In exercise of this power, <ORG> issued the Imports (Control) Order, 1955, and other orders setting out the policy governing the grant of import and export licences. <ORG> also evolved an Import Trade Policy to facilitate the mechanism of the Act and the orders issued thereunder. and it was modified from time to time by issuing fresh Schemes in respect of new commodities. In 1962, <ORG> promulgated the Export Promotion Scheme providing incentives to exporters of woolen textiles and goods. It provided for the grant to an exporter, certificates to import raw materials of a total amount equal to 100% of the F.O.B. value of his exports. Clause 10 of the Scheme provided that the Textile Commissioner could grant an import certificate for a lesser amount if he is satisfied, after holding an enquiry, that the declared value of the goods exported is higher than the real value of the goods. The Scheme was ex.tended to exports of woolen textiles and goods to Afghanistan. The respondents exported woolen goods to Afghanistan and were issued an Import Entitlement Certificate by the Textile Commissioner not for the full F.O.B. value of t,he goods exported, but for a reduced amount. In doing so, the Textile Commissioner collected evidence ex parte and acting upon the report of a <ORG> appointed by him passed orders without informing the respondents or giving them an opportunity to explain the materials on the basis of which the 'import entitlement' of the respondents was reduced. Some of the exporters had appeared before the <ORG> and explained the circumstances in which they made the exports, but the report of the <ORG> was not made available to them. The respondents made representations to <ORG> but the <ORG> confirmed the orders. The respondents then filed writ petitions in <ORG>. <ORG> set aside the orders of the Textile Commissioner and <ORG>, and held that the respondents were entitled under the Scheme to obtain import licences for an amount equal to 100% of the F.O.B. value of their exports, unless it was found on enquiry duly made under el. 10 of the Scheme that the respondents had by 'over-invoicing' the goods disentitled themselves to the import licences of the full value; and that the Textile Commissioner without making any such enquiry. proceeded upon his subjective satisfaction' that the respondents had 'over invoiced' the goods exported; and that <ORG> also acted in a similar manner in dealing with the representation of the respondents. 367 In appeal to this Court, it was contended: (1 ) that the Export Promotion Scheme was administrative in character, that it contained mere executive instructions issued by <ORG> to the Textile Commissioner. and created no enforceable rights in the exporters who exported their goods in pursuance of the Scheme and that it imposed no obligations upon the <ORG> to issue import certificates, (2) that the textile Commissioner was the sole judge of the reasons for reducing the import entitlement, that the Scheme did not require him to set out the reasons for reducing the import entitlement, or to give an opportunity to the respondents because, the exercise of the power to reduce, conferred upon the Textile Commissioner, was not limited by the terms of el. 10 of the Scheme, and was not, except on proof of mala fide exercise, open to judicial review; (3) that the <ORG> on grounds of 'executive necessity' was the sole judge of the validity of its action in matters relating to import and export policy, because the policy depended upon the economic climate and other related matters and had to be in its very nature flexible with power in the <ORG> to modify or adjust it as the altered circumstances necessitate; and (4) that if the <ORG> is held bound by every representation made by it regarding its intentions, the <ORG> would be held bound by a contractual obligation even though no formal contract in the manner required by Art. 299 of the Constitution was executed. HELD: The <ORG> is not exempt from liability to carry out the representation made by it as to its future conduct and it cannot on some undefined and undisclosed ground of necessity or expediency fail to carry out the promise solemnly made by it, nor claim to be the judge of its own obligation to the citizen on an ex parte appraisement of the circumstances in which the obligation had arisen. [385 E-F] (1) Whether the Schemes for implementing the Import Trade Policy are merely executive or administrative instructions, or are legislative directions as well, depends not on their form, or the method of publication or the source of their authority. but it is their substance that determines their true character. It cannot be assumed merely because the policy is general in terms and deals with the grant of licences for import of goods and related matters, that it is statutory in character. But even if it is only executive or administrative in character, courts have power in appropriate cases to compel performance of the obligations imposed by the Schemes upon the departmental authorities. [376 H; 377 B--C, F--G] (2) The Textile Commissioner was not the sole judge of the quantum of import licence to be granted to an exporter and courts are competent in appropriate cases to grant relief, if, contrary to the Scheme, the <ORG> and its officers at their mere whim ignore the promises made by the <ORG> and arbitrarily decline to grant the promised import licence to an exporter who has acted to his prejudice relying upon the representation r381 C--D] Where a person has acted upon representations made in an Export Promotion Scheme that import licence upto the value of the goods exported will be issued, and had exported goods, his claim for the import licence for the maximum value permissible by the Scheme cannot be arbitrarily rejected. In such a case reduction in the amount of import certificate may be justified on the ground of misconduct of the exporter in relation to the goods exported or on special considerations such as difficult foreign exchange position, or other matters having a bearing on the general interests of the <ORG>. But, where, as in the present case, the Scheme provided for the rant of import entitlement of the value and not 368 up to the value, of the goods exported, the Textile Commissioner should in the ordinary course, grant import certificate for the full value of the goods exported: he may reduce that mount only after the enquiry contemplated by cl. 10 of the Scheme, that is, enquiry made after giving an opportunity to the respondents and held in a manner consistent with the rules of natural justice and the basic concepts of justice and fair-play. [379 H: 380 <CITATION> .  3 S.C.R. 72, <CITATION> . A.I.R. 1966 S.C. 1044- <CITATION> ,  1 S.C.R. 262, followed. (3) Executive necessity, if any, does not release the <ORG> from honoring its solemn promises relying on which citizens have acted to their detriment especially when the representation in the Scheme was not' subject to any implied term that the <ORG> will not be bound to grant the import certificate for the full value of the goods exported if they deem it inexpedient [376 <CITATION> ,  3 K.B. 500 and Robertson v. Minister of Pensions,  1 K.B. 227, referred to. (4) The respondents were not seeking to enforce any contractual right: they are seeking to enforce compliance with the obligation which is laid upon the Textile Commissioner by the terms of the Scheme. The claim of the respondents was rounded upon the equity which arose in their favour as a result of the representation made on behalf of the <ORG> in the Export Promotion Scheme, and the action taken by the respondents acting upon the representation. Even though the case did not fall within the terms of s. 115 of the Evidence Act, it was still open to a party who had acted on a representation made by the <ORG> to claim that the <ORG> should be hound to carry out the promise made by it, though not recorded in the form of a formal contract as required by the Constitution. [382 D-G, 383 H] <NAME> & Ors. v. Secretary of <ORG> for India in Council and Anr. L.R. 28 I.A. 211, <CITATION> for India in Council, I.L.R. 29 Born. 580 and <ORG> v. <NAME>, I.L.R. 5 Cat. 669, applied. <CITATION> .  S.C.R. 43. referred to. JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 885893 of 1967.

Appeals from the judgment and order dated February 2, 1967 of <ORG> in Civil Writs Nos. 1947, 1921 to 1927 and 1949 of 1965.

AND Civil Appeals Nos. 973 to 975 of 1967.

Appeals from the judgment and order dated April 26, 1967 of <ORG> in Letters Patent Appeal Nos. 127 to 129 of 1967.

<NAME>, <NAME> and <NAME>, for the appellants (in all the appeals).

<NAME>, <NAME> and <NAME>, for the respondents (in C.As. Nos. 885 and 893 of/967). <NAME>, for the respondents (in C.As. Nos. 886 to 890 and 892 of 1967).

<NAME> and <NAME>, for the respondent (in C.A. No. 891 of 1967).

<NAME> and <NAME>, for the respondents (in C.As. Nos. 973 and 974 of 1967).

<NAME>, <NAME> and <NAME>, for the respondent (in C.A. No. 975 of 1967).

The Judgment of the Court was delivered by <NAME>, J. The facts which give rise to Appeal No. 885 of are these: The Textile Commissioner published on October 10, 1962, a scheme called the Export Promotion Scheme providing incentives to exporters of woollen goods. The scheme was extended by a Trade Notice dated January 1, 1963, to exports of wooden goods to Afghanistan. Messrs. Indo-Afghan Agencies-hereinafter called the respondents--a firm dealing in woollen goods at Amritsar exported to Afghanistan in September, 1963, woollen goods of the f.o.b. value of Rs. 5,03,471-73 nP. The Deputy Director in the office of the Textile Commissioner, Bombay issued to the respondents an Import Entitlement Certificate for Rs. 1,99,459 only/-. Representations made by the respondents to the Deputy Director and to <ORG> that they be granted Import Entitlement Certificate for the full f.o.b value- of the goods exported failed to produce any response. But in a petition under Art. 226 of the Constitution moved before <ORG> by the respondents for a writ or an order directing <ORG>, the Textile Commissioner and the Joint Chief Controller of <ORG>, Bombay, to issue a licence "permitting import of wool-tops, raw wool, waste and rags of the value of Rs. 3,04,012-73 nP", the orders of the Textile Commissioner and <ORG> were set aside. <ORG> held that the Export Promotion Scheme specifically provided for granting certificates to import materials of the "value equal to 100% of the f.o.b. value of the goods exported", and the respondents were entitled to obtain import licences for an amount equal to 100% of the f.o.b. value, unless it was found on enquiry duly made under el. 10 of the Scheme that the respondents had by "over- invoicing" the goods disentitled themselves to the import licences of the full value; that no such enquiry was made by the Textile Commissioner and that officer merely proceeded upon his "subjective satisfaction" that the respondents had 'over-invoiced" the goods exported; and that <ORG> acted on irrelevant grounds. <ORG>, the Textile Commissioner and the Joint Chief Controller of <ORG> have appealed to this Court with certificate granted by <ORG>.

The genesis of the export control scheme may first be noticed. The Imports and Exports (Control) Act 18 of 1947 was enacted on March 24, 1947 with the object of enabling <ORG> to continue to exercise the power to prohibit, restrict or otherwise control imports and exports which had till then been controlled by orders issued in exercise of the powers conferred by r. 84 of the Defence of India Rules, 1939, as extended by the Emergency Provisions (Continuance) Ordinance 20 of 1946. By s. 3 of that Act it was provided:

"(1) The Central Government may by order published in the Official Gazette, make provisions for prohibiting, restricting or otherwise controlling 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 :--

(a) the import, export, carriage coastwise or shipment as ships stores of goods of any specified description;

(b) the bringing into any port or place in India of goods of any specified description intended to be taken out of India without being removed from the ship or conveyance in which they are being carried.

By s. 4 the orders made under r. 84 of the Defence of India Rules, 1939, or under that rule as continued in force by the Emergency Provisions (Continuance) Ordinance, 1946, and in force immediately before the commencement of the Act were, insofar as they were not inconsistent with the provisions of the Act, to continue to remain in force and to be deemed to have been made under the Act.

In exercise of the powers conferred on <ORG> by s. 3, <ORG> issued the Imports (Control) Order, 1955. By paragraph-3 of the Order it was enacted that:

"(1) Save as otherwise provided in this Order, no person shall import any goods of the description specified in Schedule I, except under, and in accordance with, a licence or a customs clearance permit granted by the Central Government or by any officer specified in (2) If, in any case, it is found that the goods imported under a licence do not conform to the description given in the licence or were shipped prior to the date of issue of the licence under which they are claimed to have been imported, then, without prejudice to any action that may be taken against the licence under the Customs Act , 1962 , in respect of the said importation, the licence may be treated as having been utilised for importing the said goods."

<ORG> also issued periodical orders which were published in biannual official publications setting out the policy governing the grant of import and export licences. By paragraph 52 of the notification published in the Gazette Extraordinary dated December 29, 1954, it was declared that in certain items there was "direct and intimate" inter-relationship between imports and exports, and since the ability to export some of those manufactured goods depended largely on the facility with which the exporter or the manufacturer could procure the basic raw materials required in the manufacture, a scheme had been devised with a view to promote export of such goods for the grant of special import licences to replace the imported raw material content of the exported product, and to provide an inducement for larger exports. The details of the Scheme were set out in Appendix-23 to the Notification. The Scheme covered a number of commodities of which export was permitted. From time to time this Appendix was modified and fresh schemes were issued in respect of new commodities. On October 10, 1962, <ORG> promulgated the Export Promotion Scheme for woollen textiles and woollen goods. Clause 2 of that Scheme provided, insofar as it is material:

"It has been decided that manufacturers--exporters and

merchants--exporters of the above woollen textiles and woollen goods will be entitled to import raw materials, namely, raw wool, wool tops, shoddy, man-made fibres and tops, permissible types of dyes and chemicals and machinery and machinery parts and spare parts for woollen industry for a total amount equal to 100% of the f.o.b. value of the exports."

Clause 4 provided:

"Only such exporters who satisfy <ORG> that they are interested in export (either by past performance or by showing proof of action taken to obtain firm order etc.) will be registered by <ORG>."

Clause 6 imposed certain obligations upon the registered exporters, such as adherence to the code of conduct as and when evolved; adoption of the standard contract form with suitable clauses for arbitration and settlement of disputes; abiding by the decision of <ORG> in the matter of dispute between the exporter and his foreign customers; forwarding figures of exports of woollen goods made by him every month to <ORG> and abiding by such quality control and pre-shipment inspection procedures as may be evolved Clause 7 provided for the application for grant of import licences against actual exports effected on a monthly or on a quarterly basis. Clause 9 provided:

"After scrutiny of the applications, the Textile Commissioner shall issue an entitlement certificate indicating the items and value for which licence should i ssued to the applicant. On receipt of the application and entitlement certificate, the Joint Chief Controller of Imports and Exports, Bombay, shall issue the license."

Clause 10 provided:

"In case where the Textile Commissioner considers that the declared value of the goods exported is higher than the real value of the goods, the matter may be investigated further by calling for further evidence, e.g.

purchase vouchers and any other corroborative evidence to facilitate scrutiny. It shall be the duty of the registered exporter to furnish such evidence as is called for in this connection. On the basis of his enquiry, the Textile Commissioner may assess the correct value of the goods exported and issue an entitlement certificate on the basis of such assessed value."

By notification dated January 1, 1963, the Scheme was extended to exports of woollen textiles and woollen goods to Afghanistan with effect from October 1, 1962. It was urged on behalf of <ORG> that the Export Promotion Scheme was administrative in character and the recital therein that the exporters will be entitled to import certificates equal to 100% of the f.o.b. value of the exports was a mere instruction issued by <ORG> to the Textile.Commissioner: it created no rights in the public generally or in the exporters who exported their goods in pursuance of the Scheme and imposed no obligations upon the Government to issue the import certificates. On behalf of the respondents it was contended that the Scheme was statutory in character and obliged the Textile Commissioner, unless the exporter was after due investigation under cl. 10 of the Scheme, shown to have "overinvoiced" the goods exported, to issue import certificates of the full value of the exports, and a person exporting goods in pursuance of the Scheme who was denied an import certificate of the full f.o.b. value could seek the assistance of <ORG> by a petition for the issue of a writ under Art. 226 of the Constitution, for an order compelling the Textile Commissioner to carry out the obligations imposed upon him by the Scheme.

The Textile Commissioner in the present case made his order without informing the respondents and giving them an opportunity to explain the materials on the basis of which the "import entitlement" of the respondents was proposed to be reduced. It was stated in the affidavit of <ORG> that it was not a necessary requirement of the Scheme to set out the reasons for reducing the import entitlement: that under paragraph 20(d) to Appendix 23 of the Import Trade Control Policy for the year April 1962 to March 1963 the licensing authority was authorised to refuse the issue of a licence or "to reduce the value of the licence to such amount as he deemed fit" in cases where he considered the value of the goods exported was over- invoiced, and the Trade Notice having been issued in exercise of the executive power of the State, attack by the respondents on the ground set up was "completely misplaced and without any.foundation in law".

In passing the orders impugned by the respondents, the Textile Commissioner did not hold an enquiry consistent with the rules of natural justice. Counsel for <ORG> submitted that for good reasons of which the Textile Commissioner was the sole judge, it was open to that Officer to reduce the import entitlement below the f.o.b. value of the goods exported, and exercise of the power conferred upon him is not limited by the terms of cl. 10 of the Scheme, and is not, except on proof of mala fide exercise open to judicial review. This exalted claim about the nature of the authority conferred upon the Textile Commissioner as representative of the <ORG> may first be examined.

Counsel for the Union said that the import and export policy of the <ORG> is based on availability of foreign exchange.requirement of goods of foreign origin for internal consumption, economic climate in the country, and other related matters, and has in its very nature to be flexible, and on that account the power of the <ORG> to modify or adjust it as the altered circumstances necessitate, cannot be restricted on the ground that promises made by the <ORG> in different situations are not carried out, however amoral that claim may appear to be According to Counsel the <ORG> is the sole judge of the validity of its actions in matters relating to Import and Export Policy, and the citizens who have acted on the representations of the <ORG> have only such rights as the <ORG> in its wisdom chooses to recognise or accept at any given time. He relied in support of his submission upon the doctrine of "executive necessity" on which <NAME>, relied in <ORG> v. The King.(1) In that case during the First World War certain neutral shipowners obtained an undertaking from the British <ORG> that if the shipowners sent a particular ship to the United Kingdom with a specified cargo, she shall not be detained. On the faith of that undertaking, the owners sent the ship to a British port with that specified cargo. The British <ORG> withdrew their undertaking and refused her clearance. On a petition of right for damages for breach of contract it was held that the <ORG>'s undertaking was not enforceable in a Court of law, it not being within the competence of the <ORG> to make a contract which would have the effect of limiting its power of executive action in the future. <NAME>, J., observed at p. 503:

" ...... what I have to consider is whether this was a contract at all. I have not to consider whether there was anything of which complaint might be made outside a Court, whether that is to say what the Government did was morally wrong or arbitrary that would be altogether outside my province." He then proceeded to state:

"No doubt the Government can bind itself through its officers by a commercial contract, and if it does so it must perform it like anybody else or pay damages for the breach.

But this was not a commercial contract, it was an arrangement whereby the Government purported to give an assurance as to what its executive action would be in the future in relation to a particular ship in the event of her coming to this country with a particular kind of cargo. And that is, to my mind, not a contract for the breach of which damages can be sued for in a Court of law. It was merely an expression of intention to act in a particular way m a (1) [1921] 3 K.B. 500.

certain event. My main reason for so thinking is that it is not competent for the <ORG> to fetter its future executive action, which must necessarily be determined by the needs of the community when the question arises. It cannot by contract hamper its freedom of action in matters which concern the welfare of the <ORG>."

This observation is, "clearly very wide and it is difficult to determine its proper scope": Anson's "English Law of Contract", 22nd Ed., p. 174. It may also be noticed that before <NAME>, J., the applicants Claimed enforcement of a contract against the <ORG>, and the learned Judge came to the conclusion that there was no contract and no damages could be awarded. In <NAME> v. Minister of Pensions(1), <NAME>, J. observed at p. 231:

"The <ORG> cannot escape by saying that estoppels 'do not bind the <ORG> for that doctrine has long been exploded. Nor can the <ORG> escape by praying in aid the doctrine of executive necessity, that is, the doctrine that the <ORG> cannot bind itself so. as to fetter its future executive action. That doctrine was propounded by <ORG>, in <ORG> v. The King but it was unnecessary for the decision because the statement there was not a promise which was intended to be binding but only an expression of intention. <NAME>, J., seems to have been influenced by the cases on the right of the <ORG> to dismiss its servants at pleasure, but those cases must now all be read in the light of the judgment of Lord <NAME> in <NAME> v. The King--(1954) A.C. 176, 179).. In my opinion the defence of executive necessity is of limited scope. It only avails the <ORG> where there is an implied term to that effect or that is the true meaning of the contract."

<NAME>, I was dealing with a case of a serving army officer, who wrote to <ORG> regarding a disability and received a reply that his disability had been accepted as attributable to "military service". Relying on that assurance he forbore to obtain an independent medical opinion. The Minister of Pensions later decided that the appellant's disability could not be attributed to war service. It was held that as between subjects such an assurance would be enforceable because it was intended to be binding intended to be acted upon, and was in fact acted upon; and the assurance was also binding on the <ORG> because no term could be implied that the <ORG> was at liberty to revoke it.

(1) [1949] 1 K,B- 227.

The defence of executive necessity was not relied upon in the present case in the affidavit filed on behalf of <ORG>. It was also not pleaded that the representation in the Scheme was subject to an implied term that <ORG> will not be bound to grant the import certificate for the full value of the goods exported if they deem it inexpedient to grant the certificate. We are unable to accede to the contention that the executive necessity releases the <ORG> from honouring its solemn promises relying on which citizens have acted to their detriment. Under our constitutional set-up no person may be deprived of his fight or liberty except in due course of and by authority of law: if a member of the executive seeks to deprive a citizen of his right or liberty otherwise than in exercise of power derived from the law-common or statute--the <ORG> will be competent to and indeed would be bound to, protect the rights of the aggrieved citizen. The orders which the Central <ORG> may issue in exercise of the power conferred by s. 3 of the Imports and Exports Control Act may be executive or legislative. In exercise of that power, the Order was issued on December 7, 1955, that was clearly legislative in character. It appears 'that prior to the issuance of this notification several orders had been issued under the Defence of India Rules and under the Imports and Exports Act dealing with the grant of licences to import certain classes of goods. Those orders which are set out in the IVth Schedule to the Order were repealed by cl. 12 of the Order of 1955, and. machinery for granting licences was set up by the Order dated December 7, 1955. Counsel for the respondents submitted that the Export Promotion <ORG> published by the <ORG> under paragraph-52 of the <ORG> Notification dated December 29, 1954, must be deemed to be issued under s. 3 of the Imports and Exports Control Act, 1947, since the <ORG> have been published in <ORG>, and contain general provisions relating to the grant of licences and impose restrictions upon the rights of citizens to carry on business in certain commodities. Being general provisions, restricting the rights of citizens to carry on business in certain commodities, the <ORG> were, it was said, legislative in character, and the obligations imposed or the sanctions prescribed thereby must on that account be deemed to be enforceable by command of the <ORG>. cannot be assumed merely because the Import Trade Policy is general in terms and deals with the grant of licences for import of goods and related matters, it is statutory in character. The Imports and Exports (Control) Act, 1947, authorises the Central <ORG> to make provisions prohibiting, restricting or otherwise controlling import, export, carriage etc. of the goods and by the Imports (Control) Order, 1955, dated December 7, 1955, and by the provisions which were sought W, be repealed restrictions were already imposed. The order was clearly legislative in character. The Import Trade Policy was evolved to facilitate the mechanism of the Act and the orders issued thereunder. Even granting that the Import Trade Policy notifications were issued in exercise of the power under s. 3 of the Imports and Exports (Control) Act, 1947, the Order as already observed authorised the making of executive or administrative instructions as well as legislative directions. It is not the form of the order, the method of its publication or the source of its authority, but its substance, which determines its true character. A large majority of the paragraphs of the Import & Export <ORG> are in the form of instructions to departmental officers and advice to persons engaged in the export and import business with their foreign counterparts. It may be possible to pick out paragraphs from the Scheme which appear in isolation to be addressed generally and have direct impact upon the rights and liberties of the citizens. But a large number of paragraphs of the Scheme refer to matters of procedure. of departmental officers and heterogeneous material: it sets out forms of applications, the designations of licensing authorities, amounts of application and licensing fees, last dates for applications, intermixed with definitions of 'Established/reporters', 'Actual users', 'New comers', and others and details of different schemes such as Quota Registration <ORG>, Export Promotion <ORG> etc. There is no pattern of order or logical sequence in the policy statement: it is a jumble of executive instructions and matters which impose several restrictions upon the rights of citizens. Some of the provisions which impose restrictions upon citizens in the exercise of their right to carry on trade without statutory limits may be open to serious objection, but we do not find it necessary to embark upon an enquiry whether the provision which authorises the issue of import entitlement certificate for the full f.o.b. value of the goods exported is legislative in character. Granting that it is executive in character, this <ORG> has held that <ORG> have the power in appropriate cases to compel performance of the obligations imposed by the <ORG> upon the departmental authorities. The question whether the Import Trade Policy is legislative in character has not been expressly dealt with in any decision of this <ORG>. It appears to have 'been assumed in certain eases, that it is. executive in character, but even so it has been held that when it is declared under an export policy that a citizen exporting goods shall be entitled to certain import facilities, in appropriate cases the <ORG> have the power to direct the concerned authority to make that facility available to the citizen who has acted to his prejudice acting upon the representation in the policy, and has been denied that facility. In M/s <NAME> v.

<ORG> and Ors.(1) this Court was called upon to decide whether a person who had, pursuant to a representation in the Export Promotion Scheme that exporters will be awarded import licences upto a certain percentage of the export value of the goods was entitled to call upon the <ORG> to issue in his favour import entitlement of the value of the goods exported. Under the 'Export Promotion Scheme" relating to artificial silk fabrics it was represented that with a view to stimulate exports of Indian "artsilk fabrics" etc. it was decided to grant import licences for the import of permissible varieties. of artsilk yarn upto the percentages specilied. The Scheme empowered the Controller of Imports and Exports to issue a licence upto 66 2/3 per cent. of the export value in the case of Indian "artsilk sarees" and upto 100 per cent in the case of other Indian "artsilk fabrics". M/s <ORG>, a firm of exporters relying upon the Scheme exported Indian "artsilk" goods and earned foreign exchange and applied for an import licence equivalent to the value of the goods it had exported. They were, however, not given an import licence for the value of the goods exported. They thereafter filed a writ petition in this Court for an order that the import certificate had been arbitrarily reduced and thereby the fundamental right of the exporter to carry on trade in artsilk was infringed. The Court held in that case that the <ORG> had the right to impose control in the larger interest of the general public on imports and to make orders in exercise of the powers conferred by the Imports and Exports (Control) Act providing for imposition of restrictions by permitting import of certain goods only in accordance with the licences or customs permits granted by <ORG>. Since in that case the power granted to the licensing authority was to grant licences only upto the maximum specified in cl. 2 of Appendix. 42, the restriction imposed was held not to be unreasonable. It was also observed that it did not impose an obligation upon the controller enforceable at the instance of the exporter, to issue a licence for the amount (subject to the maximum prescribed) claimed by the exporter, and since the order of the Controller granting a licence only for 45% of the value of goods exported did not infringe the fundamental right of the exporter under Art. 19(1)(g) of the Constitution, the petition filed by the exporter was liable to be dismissed. But the Court observed:

"The licensing authority would normally issue an import licence for 100% of the value of the goods exported, but having regard to special considerations such as difficult foreign exchange position or other matters which have a bearing on the general interest of the <ORG>, import licences for a smaller percentage may be granted to the exporters. But by the use of the expression 'up-

(1) [1962] 3 S.C.R. 72.

to the following percentage of the rupee equivalent' power to fix arbitrarily a percentage of the value of the goods exported for awarding an import licence is not granted."

Opinion was therefore expressed that if the power granted to the Controller was arbitrarily exercised, it was open to judicial review. In <NAME> case(1) a Committee was appointed to determine the value of the goods exported by the exporter and the Committee scrutinised the claim of the exporter and found that the rates of some of the items could not be accepted as reasonable, and recommended an import licence approximately of the value of 45 per cent. of the goods exported. The exporter was given a right to make a representation and to be heard before the order was passed to his prejudice. <CITATION> (2), a Special Exports Promotion Scheme for Engineering goods was promulgated by <ORG>. To give incentives to the manufacturers of engineering goods in India to export their products outside India, it was declared by the Scheme that import licences will be granted to exporters for materials upto the specified percentage of the f.o.b. value of the goods exported. An exporter claimed that he had exported goods of the f.o.b. value exceeding Rs. 9.44 lakhs and demanded import licence of the value of Rs. 4.39 lakhs odd. The licensing authorities issued to the firm import licences for Rs. 3.77 lakhs odd. The exporter then moved this Court by a petition under Art. 32 of the Constitution for the issue of a writ against <ORG> granting an import licence for the balance of Rs. 62,337/- in accordance with the provisions of the Special Exports Promotion Scheme, and this Court held that even though there was no absolute right to the grant of an import licence for the maximum amount prescribed, the Controller could impose restrictions if special considerations such as 'difficult foreign exchange position or other matters which have a bearing on the general interest of the <ORG> warranted, but the discretion to be exercised by him was to be reasonable and not arbitrary. On a consideration of the affidavit filed, and the power given to the Controller to grant licences upto and not of the value of the goods exported, it was held that no case of arbitrary exercise of the power to reduce the import entitlement was made out. In these cases it was clearly ruled that where a person has acted upon representations made in an Export Promotion Scheme that import licences upto the value of the goods exported will be issued, and had exported goods, his claim for import licence for the maximum value permissible by the Scheme could not be arbit(1)  3 S.C.R. 72. (2) A.I.R. 1966 S.C. 1044.

rarily rejected. Reduction in the amount of import certificate may be justified on the ground of misconduct of the exporter in relation to the goods exported, or on special considerations such as difficult foreign exchange position, or other matters which have a bearing on the general interests of the <ORG>. In the present case, the Scheme provides for grant of import entitlement of. the value, and not upto the value, of the goods exported. The Textile Commissioner was, therefore, in the ordinary course required to grant import certificate for the full value of the goods exported: he could only reduce that amount after enquiry contemplated by el. 10 of the Scheme. The judgment of this Court in Joint Chief Controller of Ira,ports and <CITATION> etc.(1) may also be usefully referred to. In that case, after the dissolution of a firm which was the holder of quota fight as an established importer, one of the partners applied to the Chief Controller to make a division of the quota rights between the partners. He also applied to the Joint Chief Controller who was the licensing authority for grant of a licence for the period January to June 1957 but in the application he could not mention his share in the quota right because the Chief Controller had not before the date of the application approved of the division of the quota right. After expiry of the period for which the licence was to be issued, the Chief Controller informed the applicant that instructions had been issued to the Joint Chief Controller about the division of the quota right. But the Joint Chief Controller declined to grant a licence to the applicant on the ground that the order of the Chief Controller had no retrospective operation. The applicant succeeded in obtaining an order from <ORG> directing the Joint Chief Controller to grant a licence. This Court confirmed the order of <ORG>. It was held that the licensing authority had to deal with the application for a licence on the footing that the approved quota was given to the partners of the dissolved firm from the date of dissolution and the agreement divide, and could not refuse the licence solely on the ground that the approval of the Chief Controller was granted after the expiry of the import period. The Court observed that the Chief Controller had no power to refuse division of the quota right if he was satisfied about the dissolution of the inn, and it followed that when he gave his approval it must take effect from the date of the agreement, and on that interpretation of the order of the Chief Controller, the application for the issue of the licence should have been granted by the licensing authority. The Court proceeded to observe that as no order of <ORG> prohibiting the import of the articles for which the licence was. :applied for was published in the <ORG>, it was open. to. the (1)  1 S.C.R. 262.

licensing authority to issue a licence for the period January to June 1857, even if there was a change in the import policy of <ORG> with respect to those articles. In <NAME> case(1) the Court enforced compliance with the provisions relating to the grant of a licence under the licensing instructions issued by <ORG>.

In each of the three cases, the <ORG> observed that the <ORG> was competent to grant relief in appropriate cases, if, contrary to the Scheme, the authority declined to grant a licence or import certificate or the authority acted arbitrarily. Therefore even assuming that the provisions relating to the issue of Trade Notices offering inducement to. the prospective exporters are in character executive, <ORG> and its officers are, on the authorities of tiffs <ORG>, not entitled at their mere whim to ignore the promises made by the Government. We cannot therefore accept the plea that the Textile Commissioner is the sole judge of the quantum of import licence to be granted to an exporter, and that the <ORG>s are powerless to grant relief, if the promised import licence is not given to an exporter who has acted to his prejudice relying upon the representation. To. concede to the Departmental authorities that power would be to. strike at the very root of the rule of law.

By the Export Promotion Scheme for woolen textiles as extended to exports to Afghanistan, the exporters were invited to get themselves registered with <ORG> for exporting woolen goods, and it was represented that the exporters will be entitled to import raw materials, of the total amount equal 100% of the f.o.b. Value of the exports. Machinery for scrutiny of the applications and the issue of import entitlement was provided by s. 9 of the Scheme, and <ORG> was invested with the authority to determine whether in any given case the declared value of the goods exported was higher than the real value of the goods and to, assess-the correct value of the goods exported and to issue import certificates on the basis of such assessed value. Undoubtedly <ORG> had authority, if it was found that a fraudulent attempt was made to secure an import certificate in excess of the true value of the goods exported, to reduce the import certificate. But the authority vested in <ORG> by the rules even though executive in character was from its nature an authority to deal with the matter in manner consonant with the basic concept of' justice and fair-play: if he made an order which was not consonant with the basic concept.s of justice and fair-play his proceeding was open to scrutiny and rectification by the <ORG>. The Textile Commissioner acted upon a report of the <ORG> appointed by him, and before that <ORG> the respondents had no oppor- (1)  1 S.C.R. 262. up. C.I/68--10 Sup.C.I/68--10 tunity to present their case. He collected evidence ex parte and did not disclose it to the respondents and without giving an opportunity to them to represent their case reduced the import certificate. In dealing with a representation made by the respondent, <ORG> also acted similarly and declined either to make available the evidence on which <ORG> had acted or to give a hearing to the respondents. The Textile Commissioner and <ORG> did not purport to act in exercise of the power under cl. 10 of the Scheme: they have sought to support the order on the plea that the subjective satisfaction of <ORG> is determinative of the extent of the import certificate which may be granted to the respondents. It was somewhat faintly urged that if the <ORG> is held bound by every representation made by it regarding its intention. when the exporters have acted in the manner they were invited to act, the <ORG> would be held bound by a contractual obligation eve.n though no formal contract in the manner required by Art. 299 of the Constitution was executed, and the exporter would be entitled to claim damages contrary to that provision for breach of the contract even though no formal written contract had been executed in the manner provided by that Article. But the respondents are not seeking to enforce any contractual fight: they are seeking to enforce compliance with the obligation which is laid upon <ORG> by the terms of the Scheme, and we are of the view that even if the Scheme is executive in character, the respondents who were aggrieved because of the failure to carry out the terms of the Scheme were entitled to seek resort to the Court and claim that the obligation imposed upon <ORG> by the Scheme be ordered to be carried out. We hold that the claim of the respondents is appropriately rounded upon the equity which arises in their favour as a result of the representation made on behalf of <ORG> in the Export Promotion Scheme, and the action taken by the respondents acting upon that representation under the belief that the <ORG> would carry out the representation made by it. On the facts proved in this case, no ground has been suggested before the Court for exempting the <ORG> from the equity arising out of the acts done by the exporters to their prejudice relying upon the representation. This principle has been recognised by the <ORG> in India and by the Judical <ORG> of the Privy Council in several cases. <CITATION> for India in Council(1), it was held by <ORG> that even though there is no formal (1) I.L.R. 29 Bom. 580.

contract as required by the statute. the Government may be bound by a representation made by it.' In that case in answer to a requisition by <ORG> addressed to the Municipal Commissioner to remove certain fish and vegetable markets to facilitate the construction of an arterial road, the Municipal Commissioner offered to remove the structures if the Government would agree to rent to the <ORG> other land mentioned in his letter at a nominal rent. The Government accepted the suggestion and sanctioned the application of the Municipal Commissioner for a site for tabling and establishing the new markets. The Municipal Commissioner then took possession of the land so made available and constructed stables, workshops and chawls thereon. Twenty-four years thereafter <ORG> served notices on the Municipal Commissioner determining the tenancy and requesting the Commissioner to. deliver possession of the land occupied by the markets, and to pay in the meantime rent at the rate of Rs. 12,000/- per annum. The <ORG> declined to pay the rent, and the Secretary of State for India filed a suit against the Municipal Commissioner for a declaration that the tenancy of the <ORG> created by Government Resolution of December 9. 1865, stood determined and for an order to pay rent at the rate of Rs.. 12,000/- per annum. It was urged before <ORG> that the events which had transpired had created an equity in favour of the <ORG> which afforded an answer to the claim of the Government to eject the <ORG>. <NAME>, C.J.. delivering the judgment of the Court observed:

"The doctrine, involved in this phase of the case is often treated as one of estopped, but I doubt whether this is a correct, though it may be a convenient name to apply. It differs essentially from the doctrine embodied in section 115 of the Evidence Act, which is not a rule of equity, but is a rule of evidence that was formulated and applied in <ORG>; while the doctrine. with which I am now dealing, takes its origin from the jurisdiction assumed by <ORG> to intervene in the case of, or to prevent fraud."

After referring to <NAME> v. Dyson(1), the learned Chief Justice observed that the <ORG> comes within the range of equity and proceeded to examine whether the facts of the case invited the application of that principle. This case is, in our judgment a clear authority that even though the case, does not fall within the terms of s. 115 of the Evidence Act, it is still open to, a party who has acted on a representation made by the <ORG> to claim that the <ORG> shall be bound to. carry out the promise made by it, even though the promise is not recorded in the form of a formal contract as required by the Constitution. In <NAME> and others v. Secretary of <ORG> for India in Council and another(3), the plaintiffs claimed title to a canal supplied with water from the Sutlej having been constructed at great expense by their predecessors for purposes of irrigation, with the sanction and encouragement of the <ORG>, partly on <ORG> lands and partly on the lands of private owners under arrangements with them. It was held that the plaintiffs became proprietors of the canal and entitled to' have the waters of the Sutlej admitted into it so long as it was used for the purpose for which it was originally designed. Similarly in <ORG> v. <NAME>), <NAME> observed that a man may be estopped not only from giving particular evidence. but from doing any act or relying upon any particular argument or contention, which the rules of equity and good conscience prevent him from using as against his opponent.

Counsel for the Union invited our attention to the observations made by <NAME>, in <CITATION> (3). The learned Judge observed that equity cannot be enforced so as to violate an express statutory provision, and he was therefore unable to share the view expressed by <NAME> in <CITATION> for India in Council(1). <CITATION> (a) the facts were these: Acting upon a representation made by the Government of Bombay, the Municipal Commissioner of Bombay had given up certain old markets and had constructed new markers on a site made available to the <ORG> by the Government at considerable expense. The Resolution under which the Government had granted the land stated expressly that no rent should be charged to the <ORG> as the markets will be like other buildings for the benefit of the whole community. When the Collector of Bombay sought to enhance the land revenue, the <ORG> sued for a declaration that the order of assessment was ultra vires and that it was entitled to hold the land for ever without payment of any assessment. <ORG> held that the Government had lost its right to assess the land in question because of the equity arising on the facts of the case in favour of the <ORG> and a limitation on the right of the Government to assess under s. 8 of the Bombay City Land Revenue Act arose. A majority of the Judges of this Court held that (1) L.R. 28 I.A. 211. (2) I.L.R. 5 Cal. 669.

(3) [1952] S.C.R. 43. (4) I.L.R. 29 Bom.

the <ORG> was not, under the circumstances of the case, entitled to assess land revenue on the land in question, because the <ORG> had taken possession of the land in terms of the <ORG> resolution and had continued in such possession openly, uninterruptedly and as of right for over 70 years, and had thereby acquired the limited title it had been prescribing for during the period, the right to hold the land in perpetuity free of rent. <NAME>, observed that even if it be assumed that there was no representation in fact that the land was rent free at the time when it was given to the Municipality, if there was a holding out of a promise that no rent will 'be charged in the future, the <ORG> must be deemed in the circumstances of the case to have bound themselves to fulfill it, and <ORG> must prevent the perpetration of a legal fraud. <NAME>, observed at p. 63:

"Whether it is the equity recognised in <NAME>'s case, or it is some other form of equity, is not of much importance, Courts must do justice by the promotion of honesty and good faith, as far as it lies in their power."

<NAME>, expressed a contrary view holding that the express provisions of the statute could not be over- ridden by considerations of equity.

Under our jurisprudence the Government is not exempt from liability to, carry out the representation made by it as to its future conduct and it cannot on some undefined and undisclosed ground of necessity or expediency fail to carry out the promise, solemnly made by it, nor claim to be the judge of its own obligation to the citizen on an ex parte appraisement of the circumstances. in which the obligation has arisen. We agree with <ORG> that the impugned order passed by the Textile Commissioner and confirmed by <ORG> imposing cut in the import entitlement by the respondents should be set aside and quashed and that the Textile Commissioner and the Joint Chief Controller of Imports and Exports be directed to issue to the respondents import certificates for the total amount equal to 100% of the f.o.b. value of the goods exported by them, unless there is some decision which fails within cl. 10 of the Scheme in question.

The facts which give rise to. the other appeals are substantially the same as the facts in Civil Appeal No. 885 of 1967, except that in four out of those appeals the exporters had appeared before the <ORG> appointed by the Textile Commissioner and had explained the circumstances in which the exports were made by them. But it is common ground that the report of the <ORG> was not made available to them and the Textile Commissioner, before he passed the orders, did not call for their explanations. It must therefore be held that enquiry in a manner consonant with the rules of justice was not made in the case of those four exporters also.

The appeals therefore fail and are dismissed with costs. One heating fee.

V.P.S. Appeals dismissed.


JUDGMENT <NAME>, J.

1. The limited question that arises in this application, preferred by the <ORG> Under Section 12-B of the Madras General Sales-tax Act is whether the arecanuts sold by the respondent in the assessment year 1951-52 constituted "agricultural or horticultural produce grown by (the assessee) himself or grown on any land which he had an interest, whether as owner, usufructuary mortgagee, tenant or otherwise" within the meaning of the proviso to Section 2 (1) of the Act.

2. The Deputy Commercial Tax Officer rejected the accounts of the petitioner and estimated the turnover of the cured nuts' sold by the petitioner, during 1951-52 at Rs. 40,736 and assessed him to a tax of Rs. 636-8-0 on that turnover. An appeal to the Commercial Tax Officer failed. The assessee took the matter up on further appeal to <ORG>. The <ORG> rejected the assessee's contention that he was not a "dealer" at all as defined by the Act. The <ORG>, however, accepted the contentions of the assessee : (1) that what the assessee sold was horticultural produce within the meaning of the proviso to Section 2 (i) of the Act, and (2) that the assessee had an interest in the land in which that produce was grown, within the meaning of Section 2 (i) of the Act. It was only the correctnees of the finding of the <ORG>, that what was sold by the assessee in 1951-52 was horticultural produce, that the Government challenged in the proceedings before us.

3. The assessee's appeal was heard by <ORG> along with appeals preferred by others similarly situate. They were all persons who grew and marketed arecanuts in Coimbatore District in accordance with the practice that prevailed in that district. It was not disputed at any stage that there was no market for the arecanuts' as gathered from the tree. While the practice in South Kanara District is to gather the nuts after they are ripe, the practice in Coimbatore district to gather them while they are still raw. After gathering the produce, the areca-nuts are peeled, and the kernels are then sliced, boiled and dried.

In the course of boiling, the tannin content of the nuts gets minimised, and that Itself colours the nuts, and that colour persist after the nuts are dried. It is only after they are dried that they are fit to be marketed. So much was common ground. While the assesses contended that what was sold was still horticultural produce, the contention of the <ORG> was that it was produce subjected to a manufacturing process that was sold, and that what was sold had ceased to be horticultural produce as such before it was sold.

4. The <ORG> disposed of the question before it on a very natrow basis. In an earlier batch of appeals of 1952 preferred by assessees of Coimbatore District, the <ORG> discussed the question at some length and came to the conclusion that despite the processing to which the raw arecanuts had been subjected, what was sold was still horticultural produce. The respondent before us was one of the appellants in that batch of 1952 appeals. In that batch of appeals the question whether the assessees had any interest in the land on which the arecsnut was grown, within the meaning of Section 2 (i), had also to be considered.

Against the decisions of the <ORG> in the 1952 appeals, petitions were preferred to this Court; under Section 12-B of the Act, and the Judgment in that batch of petitions was reported in <CITATION> ). In that batch of cases, this Court had no occasion to go into the question whether what was sold was agricultural or horticultural produce. In that judgment It was recorded "The finding of the Appellate <ORG>, which differed from the <ORG> authorities on that point, was that the cured arecanut sold by the assessee was agricultural or horticultural produce. The correctness of that finding was not challenged, and the argument before us proceeded on the assumption that the arecanut sold by the assessee was horticultural produce within the meaning of Section 2 (i) of the Act."

The <ORG> referred to this, aspect in its judgment in the batch of 1954 appeals, of which the respondent assessee's was one; and held that what was sold was horticultural produce. We have had to set out all this only to show that the reasons for the view taken by the <ORG>, that what was sold was horticultural produce, will have to be sought not in its judgment in the 1954. batch of appeals now before us but in the 1952 hatch of appeals.

5. We cannot, of course, treat the question at issue as concluded by authority, because the question was certainly not decided in (A).

6. What the proviso to Section 2 (i) of the Act excludes from the turnover of a dealer is "the proceeds of the sale by a person of agricultural or horticultural produce grown by himself or grown on any land in which he has an interest.

It is true, no specific provision has been made in the Sales-tax Act to correspond to "the process ordinarily employed by a cultivator or receiver of rent in kind to render the produce raised or received by him fit to be taken to market,"

which the Income-tax Act specifies in Section 2 (i) (b) (ii) of that Act. If the principle of that test can be applied in deciding whether what was sold by the assessee was still horticultural produce, it should be obvious that the question at issue should be answered in favour of the assessee.

7. As we have pointed out, it was common ground that there is no market in Coimbatore or elsewhere for arecanuts as they are when plucked from the trees, and it should be remembered they are gathered when they are still unripe. The proviso to Section 2 (i) of the Act is obviously conceived in the interests of agriculturists. It excludes from any tax liability under the Act sale of agricultural and horticultural produce, the primary condition to be satisfied being that it must be produce of the land which either belongs to the seller or of the land in which he has an interest as specified by Section 2 (i).

To restrict that concession to sale of areca-nuts, for instance, only if those arecanuts are sold in the state in which they are immediately on being gathered from the trees, would render the statutory exclusion meaningless. The person who grew that produce could not sell it in that form. He could not use it. It was not, of course, the contention of the learned Government Pleader that the arecanuts could retain their character as horticultural produce only in the state in which they were immediately after being gathered from the trees. That what was horticultural produce ceases to be horticultural produce when it is subjected to a manufacturing process, and what is sold is that manufactured produce, does not admit of any doubt.

In the present case, however, it could hardly be said that the marketed commodity was the product of a manufacturing process, to which the arecanuts as horticultural produce had been subjected. No doubt, the arecanuts gathered have to be processed before they could be sold at all. But that processing falls far short of what is normally understood as a manufacturing process. That was not seriously denied. The processing is just to preserve the commodity against its eventual sale. The difficulty which the learned Government Pleader experienced was in drawing a line where arecanuts ceased to be horticultural produce within the meaning of Section 2 (i) of the Act, especially when he was asked to consider the comparable cases of paddy, rice and particularly boiled rice.

8. Under the Act , tax liability is imposed only on sales by a dealer, and the agriculturist who sold his agricultural produce has to satisfy the statutory requirements of the definition of a "dealer" before any question of tax liability or exclusion therefrom could arise. In the present case that the assessee was a "dealer" as defined by the Act did not admit of any controversy, at any rate before us. The limitations the court can impose in cons tilling the statutory expression "horticultural produce" must conform to the scheme of the Act, particularly the scheme that underlies Section 2 (1) of the Act the object of the scheme, of course, being gathered in the first instance from the language of the statutory provision itself.

We are of opinion, that, where any agricultural produce has to be subjected to a minimum processing before that produce can be marketed at all. it will still retain its character as agricultural produce or horticultural produce, despite that minimum processing. In the case of arecanuts, We have pointed out earlier that what the goods sold by the assessee were subjected to was that minimum processing, absolutely necessary before his horticultural produce could be sold at all. We have confined ourselves only to the case of arecanuts, because what the minimum processing should be for any other kind of horticultural produce may not determine the question, what is the minimum processing to which the arecanuts have to be subjected before they are sold.

9. The processing to which the arecanut was subjected, which we have described above, did not really change the character of the produce. There was no process of manufacture. Something was no doubt excluded, for example, tannin. The size shrunk by the process of boiling and drying. But otherwise it was the same produce. That the produce coloured itself during the process of boiling and drying still left in tact the real nature of the commodity, the nut that was eventually Sold, collected from the green nut that had been gathered from the tree. The process to "cure" the arecanuts was only to preserve the commodity.

Once again, we have to point out that the process the assessee had subjected the produce as he gathered it from the tree was in accord wish the established practice of such agriculturists in that locality, Coimbatore district. We are, therefore, of opinion, that despite the process, the minimum necessary, that the goods sold had been subjected to, what the assessee sold still retained its character as horticultural produce within the meaning of the proviso to Section 2 (i) of the Act.

As we said, any narrow construction of the term "horticultural produce'' would tend to defeat the very object of the <ORG> with which the proviso to Section 2 (1) was enacted. The view taken by the <ORG> is correct.

10. The learned Government Pleader referred to the decision in <CITATION> for India, ILR 48 Cal 161: (AIR 1921 Cal 40) (B). That case dealt with tea and the decision was under the Indian Income-tax Act . At page 171 (of ILR Cal): (at p. 42 of. AIR) the learned Judges pointed out the tea that was sold had been subjected to a manufacturing process. We fail to see any scope for applying the tent laid down in that decision to the question now before us.

11. The petition fails and is dismissed with costs. Counsel's fee Rs. 100.


JUDGMENT <NAME>, C.J.

1. The question for this Full Bench is:

Is an Abkari-officer, who, in the conduct of investigation of an offence punishable under the Bombay Abkari Act. exercises the powers conferred by the Code of Criminal Procedure 1898, upon an officer in charge of a police station for the investigation of a congizable offence, a Police officer within the meaning of Section 25 of the Indian Evidence Act ?

2. The case itself has a somewhat sordid, if not petty, origin. The accused are alleged to have fallen into a trap laid for them by an <ORG> officer, and to have sold to him two bottles of beer under the mistaken belief that he was visiting the brothel in which the accused are apparently interested. The Magistrate has fined the accused Rs. 10 and Rs. 20 respectively, and they applied in revision to <ORG>.

3. In convicting the accused, the Magistrate has relied upon a certain confession alleged to have been made by them to the Excise officer. It is contended that this confession was inadmissible in evidence having regard to Section 25 of the Evidence Act. Accordingly, <ORG> have submitted, this question to <ORG> for decision.

4. Now Section 25 of the Indian Evidence Act provides:

No confession made to a Police officer shall be proved as against a person accused of any offence

5. I may also refer to Section 125 , which provides:

No Magistrate or Police officer shall be com-pelted to say whence he got any information as to the commissions of any offence, and no Revenue officer shall be compelled to, say whence he got any information as to the, commission of any offence against the public revenue.

Explanation.--'Revenue officer' in this section means any officer employed in or about the business of any branch of public revenue.

6. Was then the Excise officer, in the present case, a Police officer within the meaning of Section 25 ? Now, it is quite clear that, under the Bombay Abkari Act 1878 as amended by subsequent Acts, certain important powers possessed by the ordinary police under the Criminal P.C. are given to particular Abkari officers.

7. Section 41 provides:

(1) Every Abkari officer not below such rank as Government may prescribe shall within the area for which he is appointed have power to investigate all offences punishable under this Act.

(2) Every such officer shall in the conduct of such investigation exercise the powers conferred by the Code of Criminal Procedure, 1898, upon an officer in charge of a police station for the investigation of a cognizable offence....

8. Then by Section 36 of the Abkari Act they have powers of entry into buildings, and of detention, search and arrest of persons, who, they have reason to believe, are; guilty of offences under the Abkari Act. There are also certain special powers of arrest under Section 38 A ; and Section 38 B provides for what is to be done as regards a person arrested under Section 38 A. Section 38 C provides:

The provisions of Section 61 of the Code of Criminal Procedure, 1898, shall apply to all arrests made without warrant by Abkari officers.

9. Then, under Section 40 , any Abkari officer' duly empowered in this befalf may issue a warrant for arrest and search.

10. Next, if one turns to the Criminal P.C. it will be found in Chapter XIV, what are the powers conferred upon an officer in charge of a police station with regard to cognizable offences. The sections in that Chapter mainly deal with investigation. They include the important power of examining persons supposed to be acquainted with the facts : see Section 161 . The. powers of arrest, so far as the Criminal P.C. is concerned, are contained in other sections. But, even though an arrest by an Abkari officer in any particular case may be under the express provisions of the Abkari Act, yet it is clear that the highly important stage of investigation, which is conducted ordinarily under the Criminal P.C. by an officer in charge of a police station, may here be conducted, not by that officer, but by an <ORG> officer. The result, in my opinion, is that either under the one Act or the other, viz., the Abkari Act or the Criminal P.C., the learned Magistrate has been correct in saying:

The powers of the <ORG> and police officers are identical as regards the arrest of accused persons, their detention in custody, and investigation of offence.

11. Substantially, therefore, to all intents and purposes, we get here a person exercising all the material powers of a <ORG> officer, although he is not officially called by that name, but by the name of an <ORG> officer.

12. Now, what was the object of Section 25 of the Evidence Act ? It was, I take it to prevent the abuse of their powers by the police in this country in extorting confessions from persons in their custody ; and I take it that one of the most important periods, during which the accused persons were intended to be protected by the <ORG>, was when the case was being investigated by the Police officers and when the accused were perhaps solely in police custody and not allowed to see any other person. Therefore, so far as the spirit of the Act is concerned, we have the same possibilities of evil, when an Excise officer investigates a case as we should have in the case of an investigation by Police officers in charge of a police station under the Criminal P.C.,

13. How, then, have the Indian High Courts interpreted Section 25 of the Evidence Act ? The case of <CITATION>  1 Cal. 207, decided by Chief Justice Sir <NAME> and Mr. Justice <NAME>, (who also became Chief Justice) is generally regarded as the leading case, and has, at any rate, been followed in this Court. That was a case as to whether a Deputy Commissioner of Police could properly be described as a Police officer within the meaning of Section 25 of the Evidence Act. He was also a Magistrate and it was accordingly contended that the confession having been made to him as a Magistrate, it was admissible under Section 26 , and that Section 26 overrode Section 25 . Dealing with this argument the Chief Justice at p. 215 says with respect to Section 25 :

Its humane object is to prevent confessions obtained from accused persons through any undue influence, being received as evidence against them....I consider that the term 'police officer' should be read not in any strict technical sense, but according to its more comprehensive and popular meaning.

14. Then he remarks at p. 216:

...and I think it better in construing a section such as the 25th, which was intended as a wholesome protection to the accused, to construe it in its widest and most popular signification.

15. Accordingly, it was held that the confession in question was made to a <ORG> officer and was, therefore, inadmissible.

16. <CITATION>  17 Bom. 485, the question arose as to a Police Patel. It was there held by a Division Bench of this Court that a Police Patel is a Police officer within the meaning of Section 25 . The judgment states (p. 486):

We follow <CITATION>  1 Cal. 207, in which it was held that the term 'police officer' in these sections should be read not in any strict technical sense, but according to its more comprehensive and popular meaning, and we are of opinion that the evidence of 'the confession was inadmissible.

17. There is another case in <CITATION>  26 Cal. 411, which was a case of a chowkidar in Bengal, and it was there held, by Mr. Justice <NAME> and Mr. Justice <NAME>, that a chowkidar is a Police officer within the meaning of Section 25 .

18. I next turn to a decision in <CITATION>  46 Cal. 411, by Sir <NAME>, and Mr. Justice <NAME>. Now, that was not a decision under the Abkari Act, but was a decision under the Opium Act . Moreover, this important distinction is to be borne in mind, that though, under the Opium Act of 1878, there was given to the <ORG> officers certain limited powers of arrest, yet in Bengal, as opposed to Bombay, there have not been conferred on an <ORG> officer the powers of investigation and so on, which I have already alluded to. Accordingly, <ORG> was dealing with a case where the officer at most had a limited power of arrest. It is urged by the pleader for the accused in his able argument, that this decision of <ORG> was obiter, because the Court held that, in any event, the alleged confessions were not confessions within the meaning of Section 25 or Section 30 , as they were really in the nature of exculpatory statements : see page 418. But I am not prepared to distinguish that case on that ground. The Court took the point as? to Section 2S first and held that the alleged confessions were admissible under Section 25 . Consequently, that was sufficient to dispose of the case, and they need not have gone in to the further point as to whether the alleged confessions could be taken into consideration against the co-accused under Section 3O . The judgment of Sir <NAME> does not deal in any detail with the point which we have to consider. Substantially, his judgment is contained in these words (p. 419):

I do not think it is possible that the Excise Officers in this case could be said to be Police Officers, and that the statements made by the first and the second accused were not admissible by reason of the fact that they were made to Police officers.

19. Next, we come to the decision of Sir <NAME> and Mr. Justice <NAME>, on April 7 last, in <CITATION> . This was another opium case, and the <ORG> followed the above Calcutta decision. The learned Magistrate in the present case felt himself bound by this Bombay decision, and, accordingly, contrary to his own view, admitted the alleged confession of the present accused in evidence. It appears from the report that the learned Chief Justice considered that the point they had to consider was exactly the same point as in the Calcutta case ; for he says : "The same point was considered in <CITATION>  46 Cal. 411." Then, after quoting the Calcutta decision he states: "In my judgment that judgment should be followed. We, therefore, dismiss the appeal."

20. Now, with great respect to the learned Chief Justice, it does not appear to have been made clear to him that in Bombay the powers of the Excise officers under the Abkari Act are far more extensive than in Calcutta. In Bombay the Opium Act has been expressly amended so as to confer upon Abkari officers certain wide police powers, which are very similar to those conferred on them as regards offences under the Abkari Act, e.g., the same powers of investigation as those possessed by an officer in charge of a police station. Under these circumstances, it seems to me that the Calcutta case is clearly distinguishable, and that in following that case, without referring to the important distinction which at present exists between the, powers possessed by the Calcutta and <ORG> officers respectively, the tamed Judges in the Bombay case fell into an error.

21. The result is, that there is no authority precisely in point in this case, and we have really to determine, a new point. After giving then my best attention to the arguments, which have been addressed to us, in my judgment we should hold that as <ORG> has deliberately conferred upon these <ORG> officers substantially all the powers of a <ORG> officer, they have thereby, in effect made them <ORG> officers within the meaning of Section 25 , and that, accordingly, any confession made, to such an officer in the course of his investigation under the <ORG> Act, or the Criminal Procedure Code , is inadmissible in evidence.

22. In this connexion, I should like to point out that it was open to the <ORG> or to <ORG> to do one of two or three things. It could detach ordinary Police officers to investigate excise offences. Or, on the other land, it could appoint other officers of <ORG> or new officers to perform the duties of investigation and arrest and so on, which had previously been performed by ordinary Police officers. Whichever course was adopted, any alleged offence would, in effect, be investigated by persons in the position of policemen. In this very case it would appear that the effect of the above sections of the Abkari Act is that certain duties, which previously fell upon ordinary Police officers, are in fact now being carried out by the Abkari-officers, who have been given these particular police powers. We have even been told by counsel that persons arrested for Excise offences are not now taken to the ordinary police station, but are kept under arrest in the excise chowkies. Whether this is so or not I do not know. At any rate it is sufficient for present purposes to say that many extensive powers were thus conferred on Excise officers which previously could only have been exercised by ordinary members of the police under the Criminal Procedure Code . It seems to me, therefore, not to be an unduly wide construction of Section 25 to say that a Police officer there includes an officer of <ORG> with such wide police powers as those we find here.

23. I should mention an argument addressed to us on Section 125 of the Evidence Act to the effect that, as the <ORG> distinguishes there between Police officers and <ORG> officers a similar distinction should be made in construing Section 25 . I think the answer to that is given by Mr. <NAME>. The Evidence Act was passed in 1872, and this particular provision in Section 125 was passed in 1887, and, therefore, before the present amended sections of the Bombay Abkari Act came in force. For instance the police powers given by the present Sections 41, 41 A, 41 B and 410, were conferred by Section 25 of the Bombay Abkari (Amendment) Act; 1912 (Bom. Act XII of 1912). It may, therefore, be that, since the amending Act of 1912, certain <ORG> officers in Bombay are Police officers as well as <ORG> officers under Section 125 . On the other hand it does not follow that every <ORG> officer under Section 125 is also a Police officer. It will depend on whether he has had conferred upon him the exceptional powers referred to in the Abkari Act.

24. On a careful consideration, then, of the whole case I would answer the question submitted to us in the affirmative and hold that the confession in question was inadmissible in evidence.

<NAME>, <NAME>

25. I am of the same opinion, generally, for the reasons given by my Lord the Chief Justice. Having regard to the importance of the point, as also to the fact that in effect we are differing from the view taken by <NAME>, C.J., and <NAME>, J., in <CITATION> desire to add a few words by way of further reasons for this conclusion.

26. Having regard to the reason of the rule laid down in Section 25 of the Indian Evidence Act, and having regard to the decisions which have been already referred to, it is clear to my mind that the term <ORG> officer used in the section is not to be understood in any technical sense, but includes an officer who is vested with the powers of the police by law. In the present case the officer concerned has got certain powers under the sections of the Bombay Abkari Act. It is not necessary for me to refer to all the sections under which he has got certain limited powers of arrest and search. But it is important to note that, before the present Section 41 was enacted by the Amending Act (Bom. Act XII of 1912), under the old Section 41 he had practically no powers of investigation, and that, after an accused person was arrested it was part of his duty to send , him to an officer in charge of a police station. That section, as it stood before 1912, was altered by the <ORG> and it has been provided in Sub-section (2) of Section 41 that:

Every such officer [i. e. the officer referred to in Sub-section (1)] shall in the conduct of such investigation exercise the powers conferred by the Code of Criminal Procedure, 1898, upon an officer in charge of a police station for the investigation of a cognizable offence.

27. Taking the other sections of the Act under which he has got certain limited powers of arrest and search along with the powers contained in the Criminal Procedure Code , which a <ORG> officer in charge of a police station is able to exercise, it is clear to my mind that the officer contemplated by Section 41 , Sub-section (1), is virtually in the same position as a <ORG> officer with regard to the investigation of the offences under the Abkari Act. It seems to me a perfectly fair interpretation of Section 25 to say that the <ORG> officer within the meaning of that section is an officer who exercises the powers of police conferred upon him by law, whether he is called a <ORG> officer or he is called by any other name and exercises other functions also under other provisions of law. He is a <ORG> officer within the meaning of Section 25 , if, in the investigation of offences under a particular Act, he exercises the powers of an officer in charge of a police station for the investigation of a cognizable offence conferred upon him by that Act. Section 25 of the Indian Evidence Act embodies an important rule, which is to be given effect to as a matter of substance and not as a mere matter of form. It is not merely the name given to an officer that should determine whether he is a <ORG>-officer, but the substantial fact whether he exercises the powers of a <ORG> officer conferred upon him by law should determine it.

28. In taking this view of Section 25 , it is essential and quite proper to bear in mind the purpose of the section. That purpose has been already stated. It has been discussed in <CITATION>  6 All. 509. In the words of <NAME>, J., (p. 513):

The broad ground for not admitting confessions made to a <ORG> officer is to avoid the danger of admitting false confessions. 27. That ground would apply as much to an <ORG> officer exercising the powers conferred upon him by Section 41 of the Abkari Act as amended as to a <ORG> officer.

29. I should add a word with regard to the case of <CITATION> . It is perfectly true, as appears from the judgment, that the learned Judges had before them Section 20 of the Opium Act as amended by Bombay Act II of 1923. But, it is not clear from the judgment as to whether they had before them the fact that Section 20 of the Opium Act was not so amended by any Bengal Act . However that may be the case shows that the learned Judges were prepared to hold that <ORG> officers exercising the powers, under Section 20 of the Opium Act as amended by the Bombay Act, would not be Police officers. With the utmost respect I am unable to accept that view, which does not appear to me to accord with the true "meaning of Section 25 of the Indian Evidence Act.

Fawcett, J.

30. I am of the same opinion. The view taken in the leading case. <CITATION>  1 Cal. 207, that the term 'Police officer' in Section 25 of the Evidence Act should be read not in any strict technical sense, but according to its more comprehensive and popular meaning, is one which was arrived at only four years after the Evidence Act was enacted. That construction has been followed by this <ORG>, as well as other High <ORG>s; and, if the <ORG> had considered that that was a wrong construction to put upon the term 'Police officer' in Section 25 of the Evidence Act, the probability is that the section would have been amended so as to overrule such a construction. Therefore, when the learned Advocate-General contends that Section 25 of the Evidence Act does not cover a <ORG> officer, or any other officer on whom by statute certain powers of the police are conferred, and that to say it does cover such an officer is to read' the section as if it said " including officers who can reasonably be regarded as Police officers, then the answer is that we are merely acting on a construction adopted by the <ORG>s long ago and tacitly accepted by the <ORG>.

31. I think an important fact to be borne in mind is that, prior to the amendment of the Abkari Act by Bombay Act XII of 1912, an Excise officer, after arresting a person, had forthwith to send him to the nearest police station, and the investigation was then conducted by Police officers, whereas now, an Excise officer, if empowered under Section 41 , can exercise police powers of investigation, which, cover a certain amount of detention of the accused while the, investigation is going on, so that he has similar opportunities of extorting a confession from an accused. This is an all important difference which distinguishes this case from that of <CITATION>  46 Cal. 411, as has been pointed out by my Lord the Chief Justice.

<NAME>, <NAME>

32. I think the question should be answered in the affirmative. I consider, however, that the matter is not entirely free from doubt. It may, with some show of reason, be contended by the <ORG> that after all an <NAME> Inspector is not a '<ORG> officer'. His pay, pension prospects, and the conditions of his service are different to those of a <ORG> officer. So he is not as an actual fact a '<ORG> officer.' Moreover, it does not follow that because some of the duties of a particular officer are conferred on any other officer, the second officer thereby becomes a member of the service of the first officer. Nevertheless, I am of opinion that, under the circumstances of this case, the <NAME> Inspector, invested with the powers of an officer in charge of a police station under the Criminal Procedure Code , should be regarded as a '<ORG> officer' under Section 25 of the Evidence Act. It will be noted that, prior to the Bombay Amending Act XII of 1912, any confession made to a <ORG> officer in charge of a police station in the course of his investigation of any offence was disallowed.

33. <ORG> could not have intended, by delegating the investigation of offences under the Abkari Act to an Abkari Inspector, to deprive a person accused of an offence under the Abkari Act of the protection he enjoyed under Section 25 of the Evidence Act before Bombay Act XII of 1912 was passed. To hold otherwise would be to cut down the protection intended to be afforded by Section 25 of the Evidence Act, which is an Act of <ORG>, to accused persons. Although I agree that the term 'police officer' should not be construed as strictly as the Advocate-General contends, I do not, at the same time, agree that it is safe to lay down generally that the term should be construed in its popular and most comprehensive sense. The popular meaning of the term when <CITATION>  1 Cal. 207 was decided may not be co-extensive with the popular meaning of the term at any time thereafter.

34. I do not consider it necessary to further discuss the cases. I arrive at my conclusion on the particular circumstances of this case. My answer to the question is in the affirmative.

Mirza, J.

35. I agree that the answer to the question submitted" should be in the affirmative.