D. NAVINACHANDRA & CO., BOMBAY & ANR. ETC.versusUNION OF INDIA & ORS.

        D. NAVINACHANDRA & CO., BOMBAY & ANR ETC
                                                                            A
                             v.
                   UNION OF JNDIA & ORS.

                                APRIL JS, 1987

          [R.S. PATHAK, CJ. SABYASACHI MUKHARJI AND                         B
                     RANGANATH MISRA, JJ.I

          Import Policy, 1978-79-Diamond Exporters granted Export
     House Certificates and Additional Licences pu~suant to orders of Court
     dated April 18, 1985-Entitlement for import of items under the Import
     Policy current at the time of import-Effect of subsequent ded,ions
     rendered by the Court.                                                 C

           By a common order dated April 18, 1985 in C.A. No. 1423 of
.\   1984, etc., Union of India v. Rajnikant Bros. the Court had directed
     issue of Export House Certificates and Additional Licences to the
     petitioners and other diamond exporters under the Import Policy 1978- D
     79 stating: "Save and except items which are specifically banned under
     the prevalent Import Policy at the time of import, the respondents shall
     be entitled to import all other items whether canalised or otherwise in
     accordance with the relevant rules". The petitioners, who were issued
     Additional Licences pursuant to this order, imported several consign-
     ments of items falling under Appendices 2B, 3 and 5 of Import Policy, E
     1985-88, and, while clearing them, the Customs Authorities imposed a
     fine of Rs.45,000 in respect of certain items falling in Appendix 2B and
     issued show cause notices in respect of certain other items falling in
     Appendices 2B and S. The petitioners challenge was directed not only
     against these orders, but extended to certain subsequent decisions of the
     Court which, according to them, had cut down the effect of the Court's F
     earlier order dated April 18, 1985 in Union of India v. Rajnikant Bros.

          Dismissing the petitions,

            HEJ,D: The decislons rendered subsequent to the decision dated
     April 18, 1985 in Union of India v. Rajnikant Bros. do not take any G
     different or contrary view. Indeed, they give effect to the letter and
     spirit of that decision. The basic background in which the decision in
     Union of India v. Rajnikant Bros. was rendered was that Export
     Houses had been refused Export House Certificates on the ground that
     they had not dfversified their exports. It was found that was wrong. The
     wrong was undone by directing issue of Export House Certificates for H
                                      989
    990                   SUPREME COURT REPORTS            11987] 2 S.C.R.

A the year 1978-79 though the order was passed ih Aprii, 1985. That was a
  measure of restitution, bot the Court, while doing so, ensured that
  nothing illegal was done. It is a presumption of law that the courts act
  lawfully and will not ask any authority to do anything which is illegal. It
  was directed that except those items which were specifically banned
  under the prevalent import policy at the time of import, the respon-
B dents therein were entitled to import all other items whether canalised
  or not canalised in accordance with the relevant rules. Analysing the
  said order, it is apparent: (1) that the importhtion that was permissible
  was of goods which were not specifically banned, (2) that such banning
  must be under the prevalent import policy at the time of import, and (3)
  whether items which were canalised or uncanalised would be imported
  in accordance with the relevant rules. These conditions had to be flillil-
C led. The court never did and could not have said that canalised items
  could be imported in any manner not permitted nor it could have given
  a go-bye to the canalisation policy. ltoOOC-H)

        (ii) In Raj Prakash Cilemicals v. Union of India, it was explained
D that only such items could be imported by diamond exporters under the
  Additional Licences granted to them as could have been imported under
  the Import Policy 1978-79 and were also importable tinder the Import
  Policy prevailing at the time of import. These were the items which had
  not been 'specifically banned' under the prevalent Import Policy. The
  items had to pass through two tests, firstly, they should have been
E importable under the Import Policy 1978-79 and, secondly, they should
  also have been importable under the Import Policy, 1985-88 in terms of
  the Order dated 18th April, 1985 and if one may add, in such terms 'in
  accordance with the import rules' whether canalised or not canalised.
  The Court had no occasion to consider in that case the significance of
  the words 'whether canalised or otherwise' mentioned in the Order
F dated 18th April, 1985 in Union of Tndia v. Rajnikant Bros., because
  that point did not arise there. I JOOOH; JOOIA-D]

         (iii) What did the court then intend by the words 'whether cana-
  lised or otherwise' used in the order dated 18th April, 1985 in Union of
  India v. Rajnikant Bros? The diamond exporters could import the items
G which they were entitled to import under the Import Policy 1978-79
  provided they were importable also under the Import Policy ruling at
  the time of import. These are items which were· open to import by
  Export Houses holding Additional Licences for Sale to the Actual Users
  (Industrial). These are items which were directly imported, for exam-
  ple, items in Part II List 8 of Appendix 6 of Import Policy 1985-88.
H These are items which are not canalised. Canalised items are those
                           NAVINCHANDRA & CO. v. U.0.1.                     991

       items which are ordinarily open to import only through a public sector A
       agency. Althogh generally these are importable through public sector
       agencies, it is permissible for any Import Policy to provide an exception
       to the rule and to declare that an importer might import a canalised
       item directly. It is in that sense and that sense only that the Court could
       have intended to define the entitlement of diamond exporters. They
       would be entitled to import items which were canalised or not if the B
       Import Policy prevailing at the time of import permitted them to import
       items falling under such category. [100 ID-G]

--t          (iv) In the Order dated 18th April, 1985 in Union of India v.
       Rajnikant Bros., this Court did not do away with canalisation. That
       was not the issue before this Court. This expression 'whether canalised      C
       or not canalised' was to include both. This Court did not say that
    ,\ canalised items contd be imported directly by the importers ignoring
     • the canalisation process. High public policy, it most be emphasised, is
       involved in the scheme of canalisation. This purpose of canalisation was
       examined by this Court in Daruka & Co. v. Union of India & Ors.,
       where the Constitution Bench of this Court observed that the policies of     D
       imports or exports were fashioned not only with reference to internal or
       international trade, but also on monetary policy, the development of
       agriculture and industries and even on the political policies of the
       country and rival theories and views may he held on such policies. If the
       Government decided an economic policy that import or export should

-      be by a selected channel or through selected agencies, the court would
       proceed on the assumption that the decision was in the interest of the
       general p!Jblic unless the contrary was shown. Therefore, it could not
                                                                                    E


       be collaterally altered in the manner suggested. The policy of canalisa-
       tion which is a matter of policy of the Government was not given a
       go-bye by the observations referred to in the Order of 18th April, 1985.
       Indeed, it is possible to read the Order in a manner consistent with         F
       canalisation scheme In the way we have indicated. If that is so, then it
       should be so read. When this Court observed that the fact whether
       items were sought to be imported by diamond merchants were cana-
       lised, would not be an impediment to the import directly by them, the
        Court meant to say that this could be imported directly by them
        through the canalisation organisation. The need for canalisation stands     G
        on public policy and that need cannot be lightly or inferentially given a
       go-bye. It should not be presumed that collaterally the court had done
        away with the system of canalisation based on sound public policy. We
        have found nothing in the different authorities on this subject, which
        militate against the above views. Therefore, the action taken by the
        Customs Authorities in issu)ng adjudication notice and proceeding in        H
           992                    SUPREME COURT REPORTS            (1987] 2 S.C.R.

.. A the manner they did we are of the opinion that they have not acted "
     illegally or without jurisdiction. This must proceed in accordance with '(
     law as laid down by this Court which, in our opinion is clear enoagh.       '
     The fact that in subsequent decision, the petitioner is not a party is not
    ·relevant. Generally legal positions laid down by the court would be binding
     on all concerned even though some of them have not been made parties nor
  B were served nor any notice of such proceedings given. [tOOlH; 1002A-G]
                                                                        #



                 -• Union of India v. Rajnikant Bros., C.A. No. 1423 of 1984 decided
           on April 18, 1985; Raj Prakash Chemicals Ltd. & Anr. v. Union of
           India &_Ors., (1986] 2 S.C.C. 291; M/s. Indo Afghan Chambers of
           Commerce & Anr., etc. v. Union of India & Ors., etc., [1986) 3 S.C.C.
  C        352; Union of India v. Godrej Soaps Pvt. Ltd. & Anr., [J986] 4 S.C.C.
           260; and M/s. Star Diamond Co. India v. Union ofIndia & Ors., lt98tl]
           4 S.C.C. 246, discussed, explained and reiterated. Daruka & Co. v.
           Union ofIndia & Ors., (1974] 1SCR570, referred to.

         ORIGINAL JURISDICTION; Writ Petition Nos. 1483, 1494
  D and 1544 of 1986 etc.
                   '
                  Under Article 32 of the Constitution of India.

          Dr. Y.S. Chitale, Satish Chandra, P.K. Banerjee, S.N. Kacker,
     K.C. Agarawal, S.S. Rathore, L.K. Garg, M.K.D. Namboodiary,
  E. P.M. Amin, Ashok. Grover, Bulchandani, M.N. Shroff, P.H. Parekh
     and Sohail Dutt for the Petitioners.

                - K. Parasaran, Attorney General, G. Ramaswamy Additional
           .Solicitor General, G. Subramaniam, A.S. Rao, Ms. Relan and P.P.
            Parmeshwaran for the Respondents .
   .,_
           '·· R.S. Nariman, (Indo Afghan Chamber of Commerce). Kapil
           Sibal, (M/s Raj Prakash Chemicals) and Rajiv Dutta for the Interveners.
       '            '··                                                     .
                  The Judgment of the Court was delivered by
                                                   ('

 G '. :/ SABYASACHI MUKHARJI, J. Writ Petition No. 1483 of 1986
      is directed against the Show Cause Notices dated 21st August, 1986,
      11th September, 1986 and 26th September, 1986 issued to the peti·
    - tioners-Messrs. D .. Navinchandra & Company, a partnership firm
      and Dilip Kumar Dalpatlal Mehta, a partner of the said firm. In order
      to appreciate this challenge, it is necessary to refer to certain facts.
 1-1 This· petition raises the question of the rights of the petitioners and
                   NAVINCHANDRA & CO. v: U.0.L (MUKHARJI,         J.]       993

        other diamond exporters who were entitled to export house certifi- A
        cates and <1dditional licences under import policy of 1978-79 and who
        were gra'!ted the same pursuant to the judgment an·d ·o.rder of this
        Court dated 18th April, 1985. As we shall explain later, there is no
        con(lict with this decision of a .Bench which consisted of a bench of
        three judges and the subsequent decisions of this Court which .we shall.
        presently refer. It is necessary also that i.n order to make out· a case; B
        the petitioners have sought to emphasise on the point that the decision
        dated 18th April, 1985 was a decision of three learned Judges, in .order
-
.--t·
    \
        to spin out a cas~ of some sort of conflict wit.h this deCision and certain
        subsequ1:11I decisio11s of this Court consisting of benches of two· learn.ed
        jµ,\1ges, It ap1w;1rs that the import policy issued by the Government of
        lrv;!ia for tl\e year 1978-79 by paragraph 176 provided for additional c
        li~n.ws, Oq. 29th April, 1979, the firsi petitioner, a. diamond
        ~11por\ers, was refused Export House Certificate. The said petitioner
        filed a writ petition before the High Court of Bombay ·being MiSc,.
        P(ltitio11 No. 1293/1979. By his order and judgment; Pendse; l made
        the rule absolute holding that canalised.items were not. banned: items
        and there was no reason why the first petitioner should not lie. compel- · D
        led to approach the canalising agency for lmpor\°of the same. On 7th..
        April, 1983, the Delhi Hi9h Cmirt delivered a judgment in Civil Writ :
        Petition No. 1501of1981 (which for the sake of convenience, the party ·
        has chosen to describe as Rajnikant Bros. & Ors. case allO>Ving ·the. ·
        <.li<!ro(1lld Cl\porters the same and holding thai merely canalisinl! an
        it~lll \lOUld not be regarded as import of that item being absolutely · ·E
        l:mnn~d. Against these judgments special leave petitions were filed in · ·
        this Court.                                                             ·
                                                                        .
.>-                                              '           '



              Appeal was also filed on 27th March, 1984 by thelmportControl
        Authorities and Union of India against .the judgmel)t ·dated 11th
·_)     November, 1983 mentioned herein before passed by Pendse, J. ~nd the. F
        said appeal as dismissed on that date. Against ihe same, the Export
        Control authorities and Union of india filed special leave ·petition No ..
        7190 of 1984 in this Court. Similar special leave petitionsw~re.filed in
        this Court against similar judgments of the Bombay High CourL ·

              On 18th April, 1985, by a common judgment~ the special leave, G
        petitions were disposed of. As much has been made out·of thfa.judg-·
        ment and order, it is necessary to refer to the same,' The matter was ·
        disposed of by the. order in Civil Appeal No. 1423 of 1984 by a bench
        consisting Fazal Ali, J., Varadarajan, J. and one of us (Sabyasachi
        Mukharji, J.). It was held by the said order that there was no require-
        ment of diversification of exports as a condition for the gran.t of Export H
    994                    SUPREME COURT REPORTS              [1987] 2 S.C.R.

A House Certificate in the Import Policy for 1978-79. Therefore, while
  confirming the High Court's judgment, quashing the order impugned
  in the writ petitions in the High Court, this Court directed the appel-
  lants namely Union of India and Import Control authorities to issue
  necessary Export House Certificates for the year 1978-79. It was
  further directed that Export House Certificates should be granted
B within three months from that date. The order stated that 'save and
  except items which are specifically banned under the prevalent import
  policy at the time of import, the respondents shall be entitled to import
  all other items whether canalised or otherwise in accordance with the
  relevant rules'. The appeals were disposed of accordingly with no
  order as to costs.
c       Pursuant to the aforesaid order, on 29th July, 1985, import
  licence was issued, it is claimed, to the first petitioner of the c.i.f. value
  of Rs.71,15,900. Pursuant to the said import licence, the first peti-
  tioner imported several consignments of items falling either under
  Appendix 3 (List of Limited Permissible Items), Appendix 2B (List of
D Restricted Items) or Appendix 5 (Canalised Items). According to the
  petitioner, in the matter of clearance of such consignments different
  standards were applied by .the Custom authorities.

          On 18th October, 1985, in special leave petition No. 11843 of
    1985-In the case of Raj Prakash Chemicals Ltd. v. Union of India this
E   Court directed that Acrylic Ester Monomors would not be perm.itted to
    be cleared until further orders unless they had already been clear~d,
    Similarly, on 31st January, 1986, interim order was passed in the c~se
    of Mis Inda-Afghan Chambers of Commerce v. Union of India (Writ
    Petition No. 199 of 1986) directing that Dry Fruits in respect of which
    Custom clearance had been obtained till 30th January, 1986 would be
F   allowed to be cleared and no clearance of Dry fruits from 31st January,
    1986 onwards would be made by the Custom authorities until further
    orders.

         On 5th March, 1986, judgment was delivered in the case of Raj
  Prakash Chemicals Ltd. and Another v. Union of India and Others,
G [ 1986] 2 SCC 297 by a bench consisting of three learned Judges-
  Tulzapurkar, J. and two ofus (R.S. Pathak, J. as the Chief Justice then
  was, and Sabyasachi Mukharji, J .). This Court held that additional
  licence holders were entitled to import items permissible to Export
  Houses under Import Policy 1978-79 excluding those items which :fell
  in Appendix 3 (List of Banned Items) of the Import Policy 1985-88.
H This Court observed that diamond exporters who were granted Addi-
                       NAVINCHANDRA & CO. v. U.0.1. IMUKHARJI, J.]              995

            tionaf Licences had formed a bona fide belief that they could import all A
 i          the i,tems accessible to them under Open General Licence under the
           Import Policy of 1978-79 except those placed in Appendix 2 Part A of
            the Banned List under the Import Policy 1985'88. This belief was
           formed on the basis of consistent orders of the High Courts and consis-
           tent manner in which Import Control authorities construed. those
           orders. In view of such a belief, it was further held by this Court, in the B



,          interest of broad principles of justice, equity and fair play and to avoid
           undeserved hardship, without going to the legat technicalities that
           those diamond exporters who were granted Additional Licences under
           the Import Policy 1978-79 and had opened and established irrevocable
           letters of credit before 18th October, 1985 i.e. the date on which the
           interim order was passed by this Court in Raj Prakash's case as
           mentioned hereinbefore, should be permitted, notwithstanding the
                                                                                      c
     .,\   construction placed by this Court on the order dated 18th April, 1985
           of this Court, to clear the goods imported, or to-be imported by them
           pursuant to such irrevocable letters of credit. In other words, all
           imports effected pursuant to such letters of credit should be deemed to
           have been legally and properly made, and should entail no adverse D
           consequences whatsoever. This Court further reiterated that the Court
           must be presumed to have given effect to law-That presumption can
           be rebutted only upon evidence showing a clear intention to the con-

 +         trary, either expressly or by necessary implication. This Court noted
           that the order dated 18th April, 1985 which we have set out herein-
           before used the expression "specifically banned" and the controversy E
           before this Court in Raj Prakash's case was on the meaning of the
           expression 'specifically banned' and the controversy between the parties
           cent_ered round the meaning of the words 'specifically banned'. It was
~-
           ll}!!ntioned that Appendix 3 is the list of items which could not be
           impqrted by an Export House on additional licence, it was a ban with
_)         referen~e IP the category of importers. Appendix 4 is the list of items F
           which could not be imported by anyone whosoever. This Court, there-
           fore, was of the view that when regard is had to the Import Policy
           1984-85, reference must necessarily l)e mad~ to the corresponding Ap-
           pendix 3, formerly described as the List of Banned Items and now

.,         described as the List pf Limited Permissible Items, and Appendix 2
           Part A which is now the list of Banned Items replacing Appendix 4 G
           (List of Absolutely Banned lt~IJls), In other words, said the Court, the
           Additional Licences to be issued to diamond exporters entitled them
           to import items permissible to Export Houses under such licence under
           the Import Policy 1978-79 ~xcluding those items which fell within
           Appendices 3 and 4 of the Import Policy 1978-79 and also excluding
           items which fell in Appendix 3 and Appendix 2 Part A of the Import H
    996                     SUPREME COURT REPORTS              I \987] 2 S.C.R.
A Policy 1984-85. This Court was of-!hc view that tl]is is the meaning
  which must be given to the terms of the order datc;i 18t\1 !\pril, 1985..
  This Court noted t.hat when this Court ma~e the previous order mi
  18th April, 1985 when the Import Policy of 1985-88 was in forco; there
  were only two items which were absolutely panned, and these were
  animal tallow and. animal rannot. Thar was also substantially the posi-
B tion under the Import Policy 1984-85,                     ·

          This Court was of the view that in the Import Policies of 1984-85
    and 1985-88 the items open to import under Open General Licence
    were then set forth, when Raj Prakash's judgment was delivered i.e. in
    Appendix 6. A perusal of Part II of List 8 in Appendix 6 indicated that
                                                                                     t    I
C   it enumerated in fairly long detail the items allowed to be imported by
    the Export Houses holding Additional Licences for sale of those item~
                                                                                          '
    to eligible Actual Users (Industrial) subject to Actual \)~er co,l\ditio,11,~.
    That was the entitlement of the holder of an, A~qiti(\nal Licel'ce u.nd~r
    paragraph 265(4) of the Import Policy 1985,&8. ·

D .      It is necessary to set out in detail the aforesaiP j\,\d!lJIWnt ancl also
  to refer to the order of 18th April, 1985 to emphasise th~t whcth~r
   non-canalised items could be imported directly, and nP! through cana-
   lised agency, was not in issue in either of tliese two cases, nor decided
   or adjudicated upon ..
                                                                                     +
E          In the judgment in Raj Prakash's case (supra), it was held that
     Additional Licence holders were entitled to import items permissible
      to Export Houses under the Import Policy 1978-79 excluding th.o~~
      items which fell in Appendix 3 (List of Banned Itel\1~) of the inip,ort        __,
    . Policy 1985-88.
                                                                                     ;.
F         On 17th March, 1986, letter was written by the Joint Chief Con-             ."-
    !roller of Imports to Messrs. B. Vijay Kumar a.nct Co. statlng that
                                           in
    against Additional Licences issued terms of this Court's Order dated
    18th April, 1985, import of items permissible' against Additional
    Licences in terms of Policy for 1978-79 would be allowep evrn if such
    items were in the list of canalised items in Policy for 1978-79.
G
         On 3rd April, 1986, there was a meeting with Member of
   C.B.E.C. and Principal Collector where the minutes recorded that
   items which were under O.G.L. during 1978-79 and subsequently
   canalised in Policy for 1985-88 would be allowed to be imported. On
 · 23rd April, 1986, a circular was issued from the Under Secretary to the
H Government of India to port authorities stating that canalised items
                   NAVINCHANDRA & CO. v. U.0.1; [MU~HARJI, J.I           997

       . were not cover~P ~ithi~ ihe purview of this Court's decision in Raj A
  ~·     Prakash's ca'se and Additional Licence Jiolders would be allowed to
         import canalised item. By a letter on 14fl5th May,'1986 from.Principal
       ·collector"to Chairman, Western Region, Federation of Indian Export
        Organisation, the matter hac! peen clarified and clearance of canalised
         items against Aqditional Licences wa·s unconditionally allowed.
                                                                               B
                This Court again dealt with the question in the case ofM/s lndo
        ·Afghan Chambers of Commerce and Another etc. v. Union of India
         and Others etc., (1986] 3· SCC 352. In that decision two of u& (R.S.
         Pathak, J. as the learned Chief Justice then ·was and Sabyasachi
         Mukharji, J.) were parties. It was held that under the import policy of
          19.78-79 _dry fruits (excluding cash.ewnuts) could be imported by all C
         persons under the Open General Licence. There was no need to obtain
         any Additional Licence· for importing iteins in the y'ear 1978-79 and
         \herefore, the wrongful denial of Additional Licences to diamond ex-
       . porters in i~e year 1978-79, could riot justify any restitution subse-
         quently in regard to the import of dry fruits (other than cashewnuts). It
         was furth~r observeq that under the Import Policy 1985-88, dry fruits. D
         (excluding cas)jewnuts anc! dates) were no longer open to imp.art under
         the Open· General Liceµce. The sanction for importing them must be
         found under some other provision of the Import Policy. The diamond
         exporters, it was held, could not be regarded as dealers engaged in the
         trade of stocking· and selling dry fruits (excluding cashewnuts and
       ·dates). They were, therefore, not entitled to the advantage of para- E
         graph 181 (3) of the Import Policy 1985-88. Dry fruits, it was further
         held, must be regarded as consumer goods of agricultural .origin. The
"--·
         words "agricultural origin" in Item 121 of Appendix 2 Part B are used
       . in the broadest sense. The words 'consumer goods' in item 121 refer-
         red to dry fruits imported for supply to Actual Users (Indusirial). It
J        was further held that ·dry fruits do not appear in Appendix 3 Part A F
         and 5 nor can be imported under the Open General Licence under the
         Import Policy. 1985-88.. Inasmuch as they fall within Item 121 of
       . Appendix 2 Part B th~y arc .excluded from the scope of I iem I of
         Appendix 6, anq cannot be imported as raw materials and consum- ·
        ablys fcir s.ate to Actu~l Users (Industrial). Appendix 2 Part B (List of
        Restricted Items) was also successor of Appendix 4 (List of Absolutely G ·
         Banned Items) under the Import Policy 1978-79. This Court reitera-.
        ted; and "it was important to emphasise, thar on the reasoning which
        found favour with this Coµrt in Raj Prakash's case, it must b.e held that
        diamond exporters holding Additional. Licences were not entitled to
        import .goods enumerated in Appendix 2 Part B of the Import Policy
         1985-88. As held in that case, holders of Additional Licences were H
    998                   SUPREME COURT REPORTS             [1987] 2 S.C.R.

A entitled to import only those goods which were included in Appendix 6
  Part 2 List 8 of the Import Policy 1985-88 .. Dry fruits were not included     .,,_.
  in that list and therefore they could not be imported under Additional
  Licences.

        It is stated that on 20th May, 1986, there was an order of adjudi-
B cation in respect of one consignment of the first petitioner in this case
  i.e. Messrs. D. Navinchandra & Co. of items falling in Appendix 2B
  (List of Restricted Items) (JO Bills of Entry) imposing fine aggregating
  to Rs.45,000. Then on 21st August, 1986, a show cause notice was
  issued to the first petitioner in this petition in respect of consignment
  falling in Appendix 5 (Canalised Items) of the Policy for 1985-88.
C Reply was duly given on 9th September, 1986 and a show cause notice
  was issued on 11th September, 1986 to the first petitioner in respect of
  one consignment falling in Appendix 2B (List of Restricted Items) of
  Policy for 1985-88. In the meantime, this Court had occasion to ex-
  amine some passage of this decision. This questioq was examined and
  it is necessary to refer to the said two subsequent decisions of this
D Court.

         The first one is the decision in Union of India v. Godrej Soaps
  Pvt. Ltd. and Another, [1986) 4 SCC. 260 and the second one is the
  decision in Mis Star Diamond Co. India v. Union of India and Others,
  [ 1986) 4 SCC 246. It is necessary first to refer to Godrej Soaps' case. It
E was held that a diamond exporter could import the items he was
  entitled to import under the Import Policy 1978-79 provided they were
  importable also under the Import Policy ruling at the time of import.
  These are items which are open to import by an Export House holding
  an Additional Licence for sale to eligible Actual Users (Industrial).
  These are items which could be directly imported, for exaqiple, the
F items enumerated in Part 2 of List 8 of Appendix VI of the Import
  Policy 1985-88. These are items which are not 'canalised'. 'Canalised'
  items are those items which are ordinarily open to import only through
  a public sector agency. There is, however, no\hing to prevent an
  Import Policy from providing in the future that an Export House hold-
  ing an Additional Licence can directly import certain canalise~ items
G also. In that event, an Export House holding an Additional Licence
  would be entitled to import items "whether canalised or otherwise'',
  meaning thereby items open ordinarily to direct import (non-canalised
  items) as well as items directly importable although on the canalised
  list. It is in that sense that the Court had intended to define the entitle-
  ment of a diamond exporter by using the words "whether canalised or
H otherwise" in its order dated 18th April, 1985.
               NAVINCHANDRA & CO. v. U.0.1. [MUKHARJI, J.l               999

           In that case this Court found that in respect of Palm Kernel Fatty   A
    Acid which was a canalised item listed as Item 9(v) in Appendix V Part
    B of the Import Policy 1985-88, there is no provision in that policy
    which permitted the import of such item by an Export House holding
    an Additional Licence. Therefore, both on grounds of equity and con-
    struction the claim of the diamond exporters, or, as in that case, a        B
    purchaser from the diamond exporter, was held to be not maintain-
    able. As importation of canalised items, this Court reiterated, directly
    by holders of additional licences was banned, it should not be con-
    strued to have been permitted by virtue of the order of this Court and
    the items sought to be imported do not come within List 8 of Part 2 of
    Appendix 6 of the Import Policy of 1985-88 against additional licences.
    It was found that the goods were purchased by the respondents in that       C
    case after they were aware of the position of law as enunciated in Raj
    Prakash's case as well as Inda Afghan Chambers of Commerce's case.
    No question of any restitution of rights, therefore, arose. Goods in
    question being specially banned goods, these could not be imported
    under Item I of Appendix 6 (Import of items under Open General              D
    Licence) of Import Policy, 1985-88, more so the import being not by
    the Actual User (Industrial) but by somebody else from whom the
    respondent purchased the goods. This position was reiterated in the
    case of Mis Star Diamond Co. India v. Union of India and others
    (supra).
                                                                                E

-        This Court further reiterated that a decision of this Court is
    binding on all.

          To complete the narration of events, reply was given by the first
    petitioner to the show cause notice dated 11th September, 1986 on
    18th September, 1986.
                                                                                F
          On 26th September, 1986, another show cause notice was issued
    to the Petitioner in respect of another consignment falling in Appendix
    2B (List of Restricted Items) of Policy for 1985-88. Personal hearing
    was given to the first petitioner thereafter. The petitioner moved this
    Court under Article 32 of the Constitution, for quashing the show
                                                                                G
    cause notices dated 2 lst August, 1986, 11th September, 1986 and 26th
    September, 1986 and the order of adjudication dated 20th May, 1986
    and for consequential relief.

          We are, however, unable to find any merit in this application
    either in law or in equity.                                                 H
    1000                   SUPREME COURT REPORTS            [1987] 2 S.C.R.

A         One of the points on which an argument was sought to be built
    up was that the Bench qf two judges of this Court in the subsequent
    decisions had cut down the effect of the decision of this Court dated
    18th April, 1985 in the case of Union of India v. Rajnikant Bros. It has
    been stated that in subsequent decisions referred to hereinbefore, this
    Court had deviated and indeed differed from the view expressed in
B that case. It was urged that in Rajnikant Bros. case a bench of three
    judges categorically stated that the respondents would be entitfed "to
    import all other items whether canalised or otherwise" except those
    which were specifically banned under the prevalent import policy at
    the time of import, with the relevant rules. In our opinion, the subse-
    quent decisions referred to hereinbefore do not take any different or
C" contrary view. Indeed it gives effect to the letter and spirit of the said
 , decision.IJt has to be borne in min~ that the basic background under
    which the Rajnikant's decision was rendered, the Export Houses had           ).
    been refused Export House Certificates because it was insisted that
    they should have diversified their export and that was a condition for
    the grant or entitlement of an export house certificate .• It was found
D and it is common ground now that that was wrong. Therefore, the
    wrong was undone. Those who had been deDied Export House Certifi-
    cates on that wrong ground were put back to the position as far as it
    could be if that wrong had not been done. To do so, the Custom
    authorities and Govt. authorities were directed to issue necessary
    Export House certificates for the year 1978-79 though the order was          -+ "·
E passed in April, 1985. This was a measure of restitution, but tqe Court,
 / while doing so, ensured that nothing illegal was done./It is a presump-
    tion of law that the courts act lawfully and will not ask any authority to
                                                                                      -
    do anything which is illegal. Therefore, the court directed that except
    those which were specifically banned under the prevalent import
    policy at the time of import, the respondents shall be entitled to import
F all other items whether canalised or not canalised in accordance with           ·~ .
 .' the relevant rules. Analysing the said order, it is apparent, (1) that the
    importation that was permissible was of goods which were not specifi-
    cally banned, (2) such banning must be under the prevalent import
    policy at the time of import, and (3) whether items which were cana-
    lised or un-canalised would be imported in accordance .with the rele-
G vant rules. These conditions had to be fulfilled. The court never did
    and could not have said that canalised items could be imported in any
    manner not permitted nor it could !rave given a go-bye to canalisation
    policy.

        It must be emphasised that in the case of Raj Prakash (supra),
H this position has been explained by saying that only such items could
            NAVINCHANDRA & CO. v. U.O.I. IMUKHARJ!, J.I              1001

 be imported by diamond exporters under the Additional Licences
                                                                            A
granted to them as could have been imported under the Import Policy
of 1978-79, the period during which the diamond exporters had applied
for Export House Certificates and had been wrongly refused and were
also importable under the import policy prevailing at the time of
import which in the present case would be during the import policy of
 1985-88. These were the items which had not been 'specifically ban- B
ned' under the prevalent import policy'The items had to pass to two
                                                                           _.,.·
tests, firstly, they should have been importable under the import
policy 1978-79 and secondly they should also have been importable
under the import policy 1985-88 in terms of the Order dated 18th
April, 1985 and if one may add; in such terms 'in accordance with the
import rules' whether canalised or not canalised; It must be emphasised (:
that in this case also. the Court had no occasion to consider the signifi-
cance of the words 'whether canalised or otherwise' mentioned in the
Order dated 18th April. 1985 because that point did not arise in the
case before it. What did the court then intend by these words used by
the court? We have seen that diamond exporters could import the
items which they were entitled to import under the Import Policy D
 1978-79 provided they were importable also under the import policy
ruling at the time of import. These are items which were open to
import by Export Houses holding Additional Licences for sale to the
Actual Users (Industrial). These are items which were directly impor-
ted, for example, items in Part 2 List 8 of Appendix 6 of Import Policy
 1985-88. These are items which are not canalised .. Canalised items are 'E
those items which are ordinarily open to import only through a public
sector agency. Although generally these are importable through public
sector agencies, it is permissible for any import policy to provide an
exception to the rule and to declare that an importer might import a
canalised item directly. It is in that sense and that sense only that the
Court could have intended to define the entitlement of diamond ex- F
porters. They would be entitled to import items which were canalised
or not if the import policy prevailing at the time of import permitted
them to import items falling under such category. This was also viewed
in that light in the case of Inda Afghan Chambers of Commerce
(supra). 1
                                                                            G
    I It must be emphasised that in the Order dated 18th April, 1985, ~
this Court did not do away with canalisation. That was not the issue
before this Court. The expression 'whether canalised or not canalised'
was to include both. This Court did not say that canalised items could
be imported directly by the importers ignoring the canalisation pro-
cess. We are of the opinion that this Court did not say that canalisation H


                                            '
            '1':'




     1002                 SUPREME COURT REPORTS            [1987] 2 S.C.R.

A could be ignored. That was not the issue. High public policy, it must be
     emphasised, is involved in the scheme of canalisation./This purpose of
/ .canalisation was examined by this Court in Daruka & Co. v. Union of
     India & Ors., [1974) 1 SCR 570 where the Constitution Be.nch ofthis
     Court observed that the policies of imports or exports were fashioned
      not only with reference to internal or international trade, but also on
B monetary policy, the development of agriculture and industries and
     even on the political policies of the country and rivai theories and
     views may be held on such policies. If the Government decided an
     economic policy that import or export should be by a selected channel
     or. through selected agencies the court would proceed on the assump-
     tion tl).at the decision was in the. interest of the general public unless   -~-
                                                                                   '
c·   the contrary was shown. Therefore it could not be collaterally altered
  . in the manner suggested/Tue policy of canalisation which is a matter
     of. policy of the Government was not givell a go-bye by the observa-
                                                                                )
  .· lions referred to in the Order of 18th April, 1985. Indeed it is possible
     to read the Order in a manner consistent with canalisation scheme in
     the way we have indicated. If that is so, then it should be so read.
D When this Court observed that the fact whether items were sought to
     be imported by diamond merchants were canalised, would not be an
     impediment to. the import directly by them, the Court meant to ~ay
     that this could be imported directly by them through the canalisation
     organisation. The need for canalisation stands on public policy and
     that need.cannot be lightly or inferencially given a go-bye. It should
E not be presumed that collaterally .the court had done away with the
     system Of canalisation based o~ sound public policy.1We have found
     nothing. in the different authorities on. this subject, which militate
  . against the above views. Therefore, the action taken by the Custom
     authorities in issuing adjudicati9n notice and proceeding in the man-
   . ner thefdid, we are of th.e opinion that they have not acted illegally or
F ·without jurisdiction. This muslptoceed in accordance with.law as laid
   -downby;this Court which, in our opiniOn, is clear enough. The fact
                                                       a
    'that in subsequent. decision, the petitioner is not .party is not rele-
     viint.Generally legal po'sitions laid down by the court would be binding
     on all concerned even though some of them have not been made
     parties' nor were served Iior any notice of such proceedings given.
G
        As. held in Star Diamond's case (supra), the meaning of the
  expression "whether .canalised or otherwise" used by this Court in
  Rajnikant Bros' case as exaplained in Godrej Soaps Pvt. Ltd. case and
  reiterated and followed in the preseµt case is applicable to the present
H petitioner.

                               I
            NAVINCHANDRA '& CO. v. U.0.1. (MUKHARJI, J.]            1003

      We see no substance in the submission made in the petition and A
reiterated before us in this Court for a reconsideration of this question
by a larger Bench. In the aforesaid view of the matter, we are unable
to sustain the grounds urged in support of this petition. We are, there·
fore, of the opinion that proceedings must go in accordance with Jaw.
The government's understanding of the matter at one point of time is
irrelevant.                                                               B

     There are several applications for impleadment. These are
allowed, and they are impleaded. Their statements are taken on
record.

       Before parting with this case, certain factors must be noted. The C
diamond exporters and dry fruit exporters have their full round in this
Court. Speaking entirely for myself, my conscience protests to me that
when thousands remediless wrongs await in the queue for this Court's
intervention and solution for justice, the petitions at the behest of
diamond exporters and dry fruit exporters where large sums are in·
volved should be admitted and disposed of by this Court at such a D
quick speed. Neither justice nor equity nor good conscience deserves
these applications to be filed or entertained. There is no equity of
restitution against the law declared categorically and repeatedly by this
Court and no principle of estoppel involved in these applications.

      The Writ petition is dismissed and in the facts and circumstances    E
of this case, we direct that the petitioner must pay cost of this appli·
cation.

      It has been prayed that clear-cut date must be fixed where con·
tracts had been entered into and in which letters of credit prior to 15th
April, 1986 have been entered into, there should be no pro~ecution. It F
has been further prayed that where however contracts have been en-
tered into but no letters of credit have been opened, such parties
should not be penalised in the facts and circumstances of the case. No
direction. is necessary by this Court on this aspect. The authorities
concerned will decide the same in taking into consideration all the
facts and circumstances and taking into consideration the case of the G
petitioners and the alleged claim of bona fide on their part.

      A submission was made on the principle of promissory estoppel
at)d reliance was placed on the several observations of serveral cases
including the case in Union of India and Others etc. v. Godfrey Philips
India Ltd. etc., AIR 1986 S.C. 806. It is true that the doctrine of · H
    , 1004                 SUPREME COURT REPORTS            (1987] 2 S.C.R.

\ A promissory estoppel is applicable against the Government in the exer- ·,
       cise: of its government, public or executive functions and the doctrine ~.
       of executive necessity or freedom of future executive action ,. ;;->< t be
    __ invoked to defeat the applicability of the doctrine of promissory estop-
       pel. But in this case no such case of promissory estoppel has been
  B, made out. The intervention applications filed in this connection are
       allowed and the submissions contrary to what we !J,ad stated herein-
    . before are rejected.                         ·

           As the points'involved in Writ Petition No. 1494 of 1986 are
      same, _this is also dismissed with costs. Interim orders, if any. are
      vacated forthwith. The proceedings will proceed as expeditiously as
 -C - possible in accordance with law. For the same reasons, Writ Petition.
      No. 1544 of 1986 is also dismissed with costs with the same obser-
      vations.

     H.L.C.                                               Petition, dismissed.

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