Holding

The Notification de‑reserving integrated plants for zip‑fastener manufacturing is within the statutory power under Section 29‑B(2B) and is not violative of Article 14; the petition is dismissed.

Summary

The Zippers Karamchari Union filed a writ petition under Article 32 seeking to quash the Central Government's permission to YKK for setting up an integrated plant for zip fasteners and to set aside Notification No. S.O. 309(E) dated 30 May 1986, alleging that the de‑reservation of zip‑fastener manufacturing from the small‑scale sector violated Section 29‑B(2B) of the Industries (Development and Regulation) Act, 1951 and Article 14 of the Constitution. The Government argued that the notification was issued on the basis of an advisory committee’s recommendation, that an integrated plant constitutes a distinct class of large‑scale industry, and that the move was intended to improve quality and compete in world markets. The Supreme Court held that the power under Section 29‑B(2B) permits the government to exempt specific classes, that the advisory committee’s advice was valid, and that the classification was neither arbitrary nor discriminatory. Consequently, the petition was dismissed.

Issues considered

The validity of Notification No. S.O. 309(E) dated 30 May 1986 de‑reserving integrated plants for zip‑fastener manufacturing under Section 29‑B(2B) of the Industries (Development and Regulation) Act, 1951.
Whether the de‑reservation violates Article 14 of the Constitution by being arbitrary, irrational or discriminatory.
Whether the permission granted to YKK is illegal or contrary to the 1991 Industrial Policy.

Legislation cited

Constitution of Indias. Article 14, s. Article 32
Industries (Development and Regulation) Act, 1951s. 29-B(2), s. 29-B(2B)

Subjects

Industries (Development and Regulation) ActSection 29-B(2B)Integrated plantZip fastenersSmall‑scale industryArticle 14Foreign investmentIndustrial policyDe‑reservationSupreme Court

Judgment

ZIPPERS KARAMC,HARI UNION A
v.
UNION OF INDIA AND ORS.

SEPTEMBER 3, 1998

[S.C. AGRAWAL, S.P. KURDUKAR AND. B
S. RAJENDRA BABU, JJ.)

Indusflies (Development and Regulation) Act, 1951: Section 29-B(2B),
Schedule I Item 38(3 ).

Notification dated 30.5.1986-Provided de-rese1Vation of integrated
c
plants of manufacture of zip fasteners (metallic and non-metal-
lic rVa/idity-Held : Notification not violative of provisions of Act and A1t.
14-Notification also not illegal or irrational or arbitra1y or dis-
criminatory--Constitution of India, 1950. A1t. 14.
D
The Central Government vide Notification date 30.5.1986 granted
permission to respondent No. 3 to set up integrated plants for manufac-
turing zip fasteners (metallic and JJ.on- metallic) with hundred per cent
own capital investment with no export obligation.

The petitioners filed a writ petition before this Court for c1uashing E
the said permission granted to respondent No. 3 and also to set aside the
· aforesaid Notification and for a declaration that the new Industrial Policy
of 1991 was in violation of Industries (Development and Regulation) Act,
1951.

On behalf of the petitioners it was contended that under Section
F
29-B(2B) of the Act, zip fasteners (metallic and non- metallic) industry was
reserved as a small-scale industry under Item 38 of Schedule I of the Act
and the de-reservation by the said Notification was ultra vires Section
29-8(28) of the Act, and that the said Notification was arbitrary, irrational
and discriminatory. G
Dismissing the petition, this Court

(Per Kurdukar, J., for himself, and Agrawal, J.)

HELD: 1.1. From the preamble of the Notification dated 30.5.1986, H
379
380 SUPREME COURT REPORTS [1998) SUPP.1 S.C.R.

A it is quite clear that in view of the recommendations made by the Advisory
Committee constituted under Section 29-B(2B) of the Industries (Develop-
ment and Regulation) Act, 1951 the Government of India de-reserved the
integrated plant manufacturing all components. The concept of integrated
plant is well known in the business circle to mean that all components
B needed for the end product are manufactured under one roof. [385-D]

1.2. What has been de-reserved is an integrated plant. It is taken out
from the purview of small-scale industry. This change was made on the
basis of the recommendation of the Advisory Committee constituted under
Section 29-B(2B) of the Act. [385-G-H]
c 1.3. The Government of India accepted the report of a study team
and with a view to have ljUality zip fasteners (metallic and non-metallic)
and in order .. to compete with the world market and also to generate
employment in the field of readymade garments and leather industry, it
thought fit to de- reserve and integrated plant manufacturing fasteners.
D The object seems to be that all components of zip fasteners if manufac-
tured in an integrated plant, the same will have a quality control which
will compete with the world market in that behalf. Therefore, in the
circumstances, the Notification dated 30.5.1986 is neither illegal, irration-
al, arbitrary nor discriminatory and does not violate either Article 14 of
E the Constitution or any provisions of the Act. [387-D-E]

State of Bihar v. K.Jipalu Shankm; [1987] 3 SCR 1, referred to.

(Per Rajendra Babu, J., concurring) :

F In matters of trade and commerce or economic policy, the wisdom
of the Government must be respected and courts cannot lightly interfere
with the same unless such policy is contrary to the provisions of the
Constitution or any law or such policy itself is wholly arbitrary. In the
present case, the two categories of articles considered in the Notification
dated 30.5.1986 are 'zip fasteners' manufactured by small-scale industries
G and 'zip fasteners' manufactured by large-scale industries in integrated
units. In order to improve the quality of 'zip fasteners' produced, the
Advisory committee opined that 'zip fasteners' must be allowed to be
manufactured by integrated units which would certainly fall \\ithin the
category oflarge-scale industries as the investment has to be heavy in such
H cases. Articles manufactured by one industry adopting one process can be
ZIPPERS KARAMCHARI UNION v. U.O.I. [S.P. KURDUKAR, J.] 381

commercially different from the goods manufactured by other industrial A
units. Such categorisation of goods depending upon the process adopted
is well known in fiscal statutes and is not unknown commercially. If same
principle is extended in categorisation of articles for the purpose of
production of quality goods and in 11uality if the two types of article are
different, those manufactured by adopting the integrated process and the
other by ordinary process, certainly the two articles will fall into separate
B
categories and thus, satisfy the provisions of Section 29-B(2B) of the
Industries (Development and Regulation) Act, 1951. Therefore, there is no
substance in the argument that the classification into zip fasteners
manufactured by small-scale industries' and zip fasteners manufactured
by integrated units is violative of the provisions of the Act. c
[395-F-H; 396-A-C]
CIVIL ORIGINAL JURISDICTION : Writ Petition (C) No. 781 of
1996.

(Under Article 32 of the Constitution of India.) D
Shanti Bhushan, E.C. Agrawal and Atui Sharma for the Petitioner.

C.S. Yaidyanathan, Additional Solicitor General, F.S. Nariman, Arnn
Jaitley, A. Subba Rao, D.S. Mehra, Ms. Mukti Chaudhry, O.P. Khaitan and
..'!'> < Subhash Sharma for the Respondents. E

The Judgments of the Court were delivered by

S.P. KURDUKAR, J. M/s. Y.K.K. Corporation, Japan, (for short
'YKK') an international group company, having worldwide net of com-
panies and business locations in various courtries, on April 29, 1995 sub- F
mitted a proposal representation to the Foreign Investment Promotion
Board, New Delhi (for short 'FIPB') seeking approval to set up integrated
plants for manufacturing zip fasteners (metallic and non-metallic) with
hundred per cent own capital investment with no export obligation. On
consideration of this proposal the FIPB forwarded the same with its G
recommendation to the Central Government. The Deputy Secretary to the
Government of India, Ministry of Industry, Department of Industrial Policy
and Promotion vide its letter dated 7th July, 1995 communicated the
approval on behalf of the Government of India to YKK. Accordingly, YKK
through its subsidiary company M/s YKK Zippers, Singapore (P) Ltd., the
third respondent set up integrated plants at Bawa! in Haryana. · H
382 SUPREME COURT REPORTS [1998] SUPP. 1 S.C.R.

A (2) The petitioners claiming to be the members of various trade
unions operating in the companies engaged in manufacture of zip fasteners
have filed this Writ Petition under Article 32 of the Constitution of India
seeking mandamus to quash the permission granted to YKK for setting up
"INTEGRATED PLANTS" for manufacturing metallic and non-metallic
B zip fasteners in India. In addition to this prayer, a Writ of Mandamus is
also sought to set aside the Notification No.S.O. 309(E) dated 30th May,
1986 and for declaration that new industrial policy of 1991 is in violation
of the Industries (Development and Regulation) Act, 1951 (for short 'the
Act'). First respondent is the Union oflndia and the second respondent is
Foreign Investment Promotion Board (FIPB).
c
(3) It is alleged by the petitioners that zip fasteners and its com-
ponents were being manufactured in India since 1949. Eversince 1971 the
manufacturing of zip fasteners has been reserved exclusively for the small
scale sector. Zip fasteners are broadly classified into two categories, metal-
D lie and non-metallic zip fasteners. It is undisputed that the zip fastener is
the final product of various components. There are about 150 small scale
units in India engaging over 45,000 workers in the manufacturing process
of various components for the end product i.e. zip fastener. Most of these
manufacturers fall within the parameters of small scale industry. These
manufacturers after putting their hard work and on obtaining knowhow
E have been manufacturing the zip fasteners and successfully competing with .,_
the international market of zip fasteners. They have been supplying zip
fasteners to the manufacturers of readymade garments, leather garments
and allied articles. As of today the high technology used by these manufac-
turers is successfully competing the, world market and earning valuable
F foreign exchange for India. Notwithstanding this factual position the reser-
vation contained in Section 29-B(2B) read with item 38 (3) in the First
Schedule of the Act, the Central Government dereserved this item provid-
ing exception in case of integrated plant - manufacturing zip fasteners
(metallic and non-metallic) by violating the said provisions of the Act and
extending favourable treatment to the foreign investor for extraneous con-
G sideration. The action of the Central Government is illegal and be quashed.

(4) Before we deal with the contentions raised on behalf of the
petitioners it may not be out of place to mention certain other proceedings
in which an identical challenge was made to the Notification No. S.O. 309
H (E) dated 30th May, 1986 as also to the new industrial policy in Bombay
ZIPPERS KARAMCHARI UNIONv. U.0.1. [S.P. KURDUKAR, J.] 383

and Delhi High Courts. Writ Petition No.1987/1986 was filed in the Bom- A
bay High Court challenging the validity of Notification No. S.O. No. 309(3)
dated 30th May, 1986 issued under Section 29-B(2B) of the Act. This writ
petition was filed by three petitioners, namely, (1) Zipper India Pvt. Ltd.;
(2) Kishore J. Vora; and (3) Zipper Association of India. Of course to this
writ petition YKK could not be a party as it got the approval to start its
integrated plant on 7.7.1995. Learned Single Judge of the Bombay High
B
. Court upheld the Notification No.S.0.No.309(3) dated May 30, 1986 and
dismissed the writ petition. Appeal No. 220 of 1988 filed on behalf of
unsuccessful writ petitioners was dismissed by the Division Bench by its
judgment and order dated February 28, 1997. The Special Leave Petition
was allowed to be withdrawn by this Court. c
(5) Zipper Association of India then filed Civil Writ Petition No.
3297 of 1975 in the High Court of Delhi, at New Delhi under Article 226
of the Constitution of India challenging the New Industrial Policy, 1991 and
office Memorandum No.9(90)/91-FC (1) dated 22.8.1991. There was also a
challenge to the Notification No.309/E dated 30.05.1986. In these proceed- D
ings respondent Nos.3 and 4 were arrayed as respondents. The High Court
of Delhi vide its judgment and order dated 1.7.1996 dismissed the writ
petition. Special Leave Petition (C) No.1952 of 1996 was also dismissed by
this Court on 15.7.1997. The present Writ Petition was filed on September
23, 1996 under Art. 32 of the Constitution of India by Zippers Karamchari E
Union and it was tagged and heard along with Special Leave P1ttition. This
Court by its order dated 12.8.1997 admitted Writ Petition for final disposal
but dismissed the Special Leave Petition. It is in this backdrop we have to
examine various challenges led by the petitioners in this Writ Petition. The
third and fourth respondent are thus required to face the second round of
litigation in this Court at the instance of Zippers Karamchari Union. F

(6) Mr. Shanti Bhushan, learned Senior Counsel appearing in sup-
port of this Writ Petition urged that ever since 1973 the policy of the
Central Government was to promote small scale industries as reflected in
the Notification dated 16.2.1973 wherein 53 industries were exclusively G
reserved for the small scale sector which included zip fastener industry.
This policy underwent various changes from time to time but zip fastener
industry remained untouched. However, the Notification dated 30.05.1986
brought about a change making an exception in respect of integrated plant
manufacturing zip fasteners vide Notification No.S.0.309 dated 30.5.1986.
It is under this notification YKK was granted permission to set up an H
384 SUPREME COURT REPORTS (1998) SUPP. 1 S.C.R.

A integrated plant in India. This approval granted by the 1st respondent
(Union of India) is ultra vires the provisions of Section 29-B(2B) of the
Act. To supplement this submission he relied upon the provisions of
Section 29-B (2B) of the Act which read as under:-

"29-B Power to exempt in special cases:- (1) If the Central Govern-
B ment is of opinion, having regard to the smallness of the number
of workers employed or to the amount invested in any industrial
undertaking or to the desirability of encouraging small undertak-
ings generally or to the stage of development of any scheduled
industry, that it would not be in public interest to apply all or any
of the provisions of the Act thereto, it may, by notification in the
c Official Gazette, exempt, subject to such conditions as it may think
fit to impose, any industrial undertaking or class of industrial
undertakings or any scheduled industry or class of scheduled
industries as it may specify in the notification from the operation
or all or any of the 'provisions of this Act or any rule or order made
D thereunder.

(2B) The Central Government shall, with a view to determining
the nature of any article or class of articles that may be reserved
for production by the ancillary, or small scale industrial undertak-
ings, constitute an Advisory Committee consisting of such persons
E as have, in the opinion of that Government, the necessary eXpertise .-.
to give advice on the matter.

Item 38 in Schedule 1 reads thus:

!.. .............. ;
F
2................ ; and

3. Zip fastener metallic and non-metallic.

(7) The reading of the above provisions and Entry 38 in Schedule,
G the Legislature's intent is quite clear that the zip fasteners (metallic and
non-metallic) were reserved for small scale industry under Section 29-
B(2B) read with Entry 38(3) in the Schedule of the Act. But however, the
Central Government may constitute an Advisory Committee consisting of
such persons as have in the opinion of the Government necessary expertise
to give advice on that matter. The question that needs to be considered is
H as to whether the Notification dated 30.5.1986 issued under the Act is valid
ZIPPERS KARAM CHARI UNION v. U.O.L [S.P. KURDUKAR, J.] 385

and sustainable. The relevant portion of the said Notification reads as A.
under:-

Against SI. No.148, for the entries in the second and third columns,
the following shall be substituted namely:-

"30391301 Zip fasteners non-metallic except in the case of in- B
tegrated plants manufacturing all components".

Against Sl.No.387, for the entries in the second and third columns,
the following shall be substituted, namely:-

"34090601 Zip Fas'tencrs metallic except in the case of integrated C
plant manufacturing all components".

(8) From the preamble ol the notification itself, it is quite clear that
in view of the recommendations made by the Advisory Committee con-
stituted under sub-section 2-B of Section 29(B) of the Act, the Government
of India dereserved the integrated plant manufacturing all components. D
The concept of integrated plant is well known in the business circle to mean
that all components needed for the end product are manufactured un~er
one roof.

(9) Mr. Shanti Bhushan, learned Senior Counsel urged that under
E
Section 29-B (2B) of the Act, the Central Government thought it fit to
·reserve Zip Fasteners (Metallic and Non-Metallic) industry under Item 38
of Schedule I for small scale industry. Any change in the policy of dereser-
vation by notification would be illegal and ultra vires Section 29-B(2B) of
the Act. In our considered view, the rigidity of such a construction to
section 29-B(2B) would not promote the object and spirit underlying the F
said section. The industry engaged in manufacture of zip fasteners (metallic
and non-metallic) still continues to be in the province of small scale
industry. The Notification dated May 30, 1986 however, dereserved only an
integrated plant.

(10) It is, therefore, quite clear that even today manufacturing of zip G
fastener (metallic and non-metallic) would continue to be a small scale
industry. What has been de~eserved in an integ;ated plant. It is taken out
from the purview of small scale industry. This change was made on the
basis of the recommendation of the Advisory Committee constituted under .
sub-section 2(B) of Section 29-B of the Act. H
386 SUPREME COURT REPORTS [1998] SUPP. 1 S.C.R.

A (11) A very identical question was raised before the Bombay High
Court in Appeal No. 220 of 1988 decided on February 28, 1991 by the
Division Bench. The Report of the Advisory committee was also tendered
before the said court. The Bombay High Court reproduced a passage from
the Report of the Advisory Committee which reads as under:-

B "Although there are some units in the small scale sector, most of
these are small in operation and they do not carry out all the
operations in-house. This has resulted in indifferent quality. Smug-
gling of zip fasteners is taking place on a very large scale. Much
of the technology is in the machines itself which has been
c developed by the manufacturers of zip-fasteners. An integrated
unitfor manufacture of components in-house to ensure high quality
will require large investment, with which it is possible to get
specially designed machines through foreign collaboration."

(12) The Advisory Committee therefore, made recommendations to
D the Central Government which thought it fit to accept the same and
consequently the Notification came to be issued on May 39, 1986.

(13) The Bombay High Court after considering the ambit of sub-
section (2B) of Section 29-B and Sections 10, 11, 11-A and 13 of the Act
E held that the Notification dated 30th May, 1986 was not violative of any of
the provisions of the Act. This dereservation is holding the field since then.

(14) It was then contended by Mr. Shanti Bhushan, Learned Senior
Counsel that the Notification <lated May 30, 1986 issued by the Central
Government is arbitrary, irrational and discriminatory. This Notification
F has brought about an artificial classification in the small scale units and an
integrated plant which is vioiative of Guarantee of Equality contained in
Article 14 of the Constitution of India. The said Notification is totally
detrimental to the small scale units which are manufacturing zip- fasteners
(metallic and non-metallic). In our considered view, there is no substance
G in this submission because the integrated plant is a class by itself and totally
different from the small scale industry which is engaged in manufacturing
zip fasteners metallic and non-metallic. The submission raised on behalf of
the petitioner must, therefore, fail.

(15) There is also another aspect which needs to be considered in
H the light of the expanding market of readymade garments, 1eather garments
ZIPPERS KARAM CHARI UNION i·. U.O.I. (S.P. KURDUKAR, J .] 387

and other articles where zip fastrners metallic and non- metallic are used. A
Since 1983, the export of these goods gaining a good support in the
international market and naturally if India wants to compete with other
countries engaged in the said business will have to improve upon the quality
of its goods. In 1983, the Directorate General of Technical Development,
Government of India had appointed a study team and the said team was
entrusted with the work of finding out as to (1) whether small .~cale units
B
manufacturing zip fasteners (metallic and non-metallic) have necessary
machinery for the manufacture of zip colla/teeth or they are simply import-
ing zip chain and components and assembling the same into finished zips;
and (2) the quality of indigenous zips vis-a-vis the imported ones. The
quality of indigenous zip fasteners would be an important factor. The ·study c
team during its survey found that zip fasteners were smuggled into India
on large scale and they were being used by the manufacturers of readymade
garments and leather garments and other allied articles. The Government
of India accepted the report of the said study team and with a view to have
quality zip fasteners (metallic and non-metallic) and in order to compete D
with the world market and also to generate employment in the field of
readymade garments and leather industry, it thought fit to dereserve an
integrated plant m<tnufacturing zip fasteners. The object seems to be that
all components of zip fasteners if manufactured in an integrated plant, the
same will have a quality control which will compete with the world market
in that behalf. It is in these circumstances we are of the considered opinion E
that the Notification dated May 30, 1986 is neither illegal, irrational nor
discriminatory.

(16) It was then contended by Mr. Shanti Bhushan, Learned Senior
Counsel that the integrated plant of YKK owns hundred percent equity F
capital of foreign national without any corresponding export obligation.
The manufacture of zip fasteners (metallic and non-metallic) does not
require access to high technology and world markets and if this be so, the ·
Central Government had committed a serious illegality while permitting
YKK to set up an integrated plant for manufacturing zip fasteners (metallic
and non-metallic) with its hundred percent equity capital without any G
export obligation. He submitted that grant of such permission to YKK
would mean that they can expand the industry as they like. They could also
use the sophisticated machinery where minimal labour is needed. The
production would be on huge scale and resultantly thousands of labourers
engaged in the small scale units in manufacturing zip fasteners (metallic H
388 SUPREME COURT REPORTS (1998] SUPP. 1 S.C.R.

A and non-metallic) would be rendered jobless and that is how the petitioners
would be vitally affected in a very immediate near future. In a social welfare
state and particularly India being a developing country when labour is
available in abundance who are equally competent to meet the needs of
the country in producing zip fasteners (metallic and non-metallic), their
B talent will go waste and they would be rendered jobless. He, therefore ,
urged that the Notification dated May 30, 1986 must be struck down. To
supplement this submission, he drew our attention to the statement on
Industrial Policy of Government of India and in particular paragraph 39-B
(I), (III) and (V) which read as under:-

C "(I) Approval will be given for direct foreign investment up to 51
percent foreign equity in high priority industries (annexure III).
There shall be no bottlenecks of any kind in this process. Such
clearance will be available if foreign equity covers the foreign
exchange requirement for imported capital goods. Consequential
amendments to the Foreign Exchange Regulation Act, 1973, shall
D
be carried out.

(II) xxx xxx xxx

(III) Other foreign equity proposals, including proposal involving
E 51 percent foreign equity which do not meet the criteria under (i)
above, will continue to need prior clearance. Foreign equity
proposals need not necessarily be accompanied by foreign tech-
nology agreements.

(IV) xxx xxx xxx
F
(V) A specially empowered Board would be constituted to
negotiate with a number of large international firms and to approve
direct foreign investment in select areas. This would be a special
programme to attract substantial investment that would provide
G access to high technology and world markets. The investment
programmes of such firms would be considered in totality, free
from pre-determined parameters or procedures".

(17) Relying upon this policy statement, Mr. Shanti Bhushan urged
H that government policy is to promote 51 % equity share holding by the
ZIPPERS KARAM CHARI UNION v. U.O.L [S.P. KURDUKAR, J.] 389

foreign companies/nationals that too in a field where it would provide A
access to high technology and world mai*ets. According to learned counsel,
there is nothing on the record to indicate that the government while
granting permission to YKK to set up an integrated plant for manufactur-
ing zip fasteners (metallic and non-metallic) had considered that an in-
tegrated plant would be such which "would provide access to high B
technology and world markets". The integrated plant for manufacture of
zip fasteners (metallic and non-metallic) does not involve an access to high
technology and world markets. If this be so, Counsel urged that the
approval granted to YKK was totally contrary to the above policy statement
on Industrial Policy. He however, conceded that expression and used in
Clause V "............. access to high technology and world markets" could be c
read as 'or' yet the approval granted to YKK to start integrated plant for
manufacture of zip fasteners (metallic and non-metallic) would be totally
opposed to the Industrial Policy of Government of India. This submission
again does not appeal to us. Because it has come on the record that YKK
has acquired a world wide reputation in the manufacture of zip fasteners D
(metallic and non-.metallic). Mr. Hiroshi Mitani, Managing Director of 4th
respondent in his affidavit dated July 31, 1997 has highlighted the salient
features of YKK corporation in the field of manufacturing zip fasteners all
over the world. It is stated "YKK have the world richest variety of items
which are required by customers. YKK Zippers are produced by using high
technology. The chart prepared with the nucleus technology along with new E
technology is annexed as Annexure "B". In paragraph 14, it is stated "a large
number of Indian exporters, manufacturers etc. are already using Zippers
made by YKK to meet the standard required in International Market. In
the domestic market a number of counter-feit zip fasteners bearing the
brand YKK have appeared and are in circulation for which the answering F
respondent has instituted the suit for perpetual injunction, infringement
of trade marks, passing off and rendition of Account etc. which shows that
the product manufactured by YKK is in demand in India. We wish to state
that counterfeiting of YKK brand in India is rampant because many
international buyers specify use of YKK zippers. Many of them have had G
their own brand names damaged due to supply of garments with counter-
fiet Zippers from India and are becoming wary of sourcing such garments
from Indian suppliers."

(18) After giving our careful thought to the pleadings of th.e parties H
before us, we are of the considered opinion that having regard to the
390 SUPREME COURT REPORTS (1998) SUPP. 1 S.C.R.

A quality and worldwise reputation carried by YKK zip fasteners, it would
be reasonable to conclude that it would provide aeeess to the world market
which is indic;i.ted in .the statement on Industrial Policy in paragraph V sub
clause V quoted hereinabove.

B (19) Mr. Nariman, learned Senior Counsel urged that the integrated
plant which has already been set up by YKK through its subsidiary com-
pany, the third and 4th respondent at Bawa! in Haryana is highly sophisti-
cated plant involving high technology. He also urged that the third
respondent the subsidiary of YKK corporation, Japan being world leaders
in zip fasteners have acquired high reputation because of use of the high
C technology used in their integrated plant for manufacture of metallic and
non-metallic zip fasteners. Having considered the pleadings of the parties
before us we are of the firm opinion that having regard to the quality and
worldwide reputation earned by YKK zip fasteners, it would not be out of
place to mention that it would provide access to the world market which
D is indicated in the Statement on Industrial Policy in paragraph 39 Clause
V quoted hereinabove. Consequently we hold that approval granted to
YKK is neither illegal nor contrary to the Industrial Policy, 1991..
'
(20) Coming to the other limb of the argument of Mr. Shanti
E Bhushan Learned Senior Counsel that many workers of the present
petitioner association would be rendered jobless has also no force. We are
told that as of today, there are as many as 17 Indian companies which have
been granted licences and are outside the purview of small scale units. This
statement appearing in the affidavit of Shri Hiroshi Mitani in paragraph 12
F is contested on behalf of the petitioners contending that many of these
Indian companies have been rendered non-functional because of variety of
reasons. But, however, the fact remains that some of the Indian companies
have started integrated plants for manufacture of metallic and non-metallic
zip fasteners, whether they are successful in their attempt or not is really
not a decisive factor. In this behalf, it is also necessary to highlight the ratio
G between the production and requirement of zip fasteners (metallic and
non-metallic) in India. In paragraph 7, Shri Hiroshi Mitani has stated that
in 1997, the production of YKK was 2.2 crore pieces. The said figure was
calculated on the basis that Indian Market size is about 100 crore pieces.
Therefore, YKK production was 2- 3% of the Indian Market in the year
H 1997. In °1998 onwards the production of YKK is going to be 9.2 crore
ZIPPERS KARAMCHARI ONIONv. U.O.I. [S.P. KURDUKAR, J.] 391

pieces i.e. 9-10% of the local market. There is no effective denial to this A
statement in the rejoinder filed on behalf of the petitioners and if this fact
has any bearing upon the factual state of requirement, it is quite clear that
yet a sizeable market is available to the Indian manufacturers and the
apprehension entertained by the petitioner appears to us a mere figment
. . . I
of 1magmat10n. B
(21) On 15th July 1997, when this Court heard this writ petition for
preliminary hearing, it observed as under:-

WP. (C) No. 781/96.

"One of the submissions of the learned counsel for the
c
petitioner is that even according to the opinion of the Minister of
State, Industries Department as contained in his Note dated
5/9/1995 (at pages 109-110 of the paperbook), entry to the multi-
national company should be allowed with a 75 per cent export
commitment as is normally done in clearing cases of 100 percent D
foreign equity where relatively low technology is involved, this ...
condition should have been imposed on the respondent company".

(22) Mr. Shanti Bhushan, Learned Senior Counsel urged that non-
imposition of condition of export commitment on YKK wa~ totally wrong,
irrational and contrary to the note submitted by the Minister of State while
E
allowing entry to the multi national company in India. A strong reliance
was sought to be placed by Mr. Shanti Bhushan on the note of Minister of
State dated 5th September, 1995 which reads thus:-

"Secretary's point that YKK would help domestic readymade gar- F
ment industry is valid. It is quite clear that YKK was allowed
·primarily as a result of Ministry of Textiles intervention in em-
phasizing the need lo supply an internationally acceptable brand
for the export oriented Ready Made Garment Industry. This ob-
jective could be better served if YKK is a:Iowed entry with a 75%
export commitment as is normally done in clearing cases of 100% G
foreign equity where relatively low technology is involved. YKK
could supply to domestic readymade garment units against their
advance licences on a deemed export basis. In no circumstances
should we permit the decimation of the small scale sector in a low
technology/low priority industry. It is therefore, recommended, H
392 SUPREME COURT REPORTS [1998] SUPP. I S.C.R.

A that permission to YKK be amended to include a 75% export
commitment."

(23) Admittedly, YKK was 1,rranted permission to set up integrated
plant for manufacture of zip fasteners (metallic and non-metallic) by the
B Government of India on 7th July, 1995. It is thus clear that the note of the
Minister of State is dated 5th September, 1995 after the permission was
granted to YKK The question is what is the effect of such a note. Shri Om
Prakash, Deputy Secretary to the Government of India. Ministry of In-
dustry, in his affidavit has stated:

c "........... A copy of a note allegedly signed by the then Minister of
State for Industry, dated 5-9-1995 has been filed from which it
appears that Shri M. Arunachalam on 5-9-1995 as the then Mini-
ster of State for Industry had recommended that the permission
granted to M/s. YKK Corporation be amended to include a 75%
export commitment. In this connection, I submit that the file in
D
which this note is said to have been written by the then Minister
of State for Industry is not available in the concerned office, i.e.
Office of the Development Commissioner for Small Scale In-
dustries. I am making this submission on the basis of communica'
tion No. 9(10)/95-Chem. dated 22-7-1997 from the office of the
E Development Commissioner for Small Scale Industries."

(24) He further stated that the Industry Minister is a cabinet rank
minister and a note made by the Minister of State can only be his view-
point/recommendation to the Industry Minister who has to take a final
F decision on such recommendation. The grant of approval to M/s. YKK
Corporation With the approval of the Empowered committee on foreign
investment under the Chaii:,manship of Finance Minister (Dr. Manmohan
Singh), preceded the saiB note of the then Minister of State for Industry.
The approval letter was issued on 7th July, 1995 and the note of the
Minister of State was made on 5th September, 1995. This note was con-
G sidered in the department of Industrial Policy and Promotion which is the
department dealing With the foreign investment violation as well as matters
relating to approval of foreign and domestic investment. The department
of Industrial' Policy and Promotion expressed the view that the approval
granted to Mis. YKK Corporation is in consonance With the notification
H dated 25th July, 1991 incorporating the list of items reserved for small scale
ZIPPERS KARAMCHARI UNION v. U.O.L [S.P. KURDUKAR, J.] 393

sector. According to the guidelines for the Foreign Investment Promotion A
Board issued through press note No. 3(1997 series) dated 17th July, 1997,
no conditions specific to the letter of approval issued to a foreign investor
would be changed or additional condition be imposed subsequent to the
issue of letter of approval. The stand of the central government contained
in the affidavit in reply is that it would neither be desirable nor legally
permissible to prescribe 75% export obligation on YKK The industry
B
Minister on 13th March, 1997 having considered all aspects of the matters
and the note of the Department of International Policy and Promotion has
granted approval to YKK Corporation and did not impose any export
obligation on YKK.
c
{25) Mr. Vaidyanathan, Learned Addi. Solicitor General appearing
for the Union of India urged that since the said note of the Minister of
State dated 5th September, 1995 was after letter of approval issued to the
YKK corporation on 7th July, 1995 and that there is no material on the
record to indicate that such a note was approved by the Minister of D
Industry. He further stated that it would not be possible to impose such a
condition after a lapse of such a long period. He, therefore, urged that no
relief whatsoever could be granted to the petitioner on the basis of the said
note.

(26) Mr. Nariman, Learned Senior Counsel urged that noting made E
by the officer/Minister of State on the government file cannot be used to
alter the situation and, therefore, a letter of approval granted lo YKK
Corporation on 7th July, 1995 cannot be varied. In support of his submis-
sion, he drew our attention to the decision of this Court in State of Bihm·
Etc. Etc. v. Kripalu Shanker Etc. Etc., [1987] 3 SCR L In our considered F
view, it would not be possible to direct the first respondent to impose the
condition in tune with the note dated 5th September, 1995 made by the
Minister of State. The Minister of the cabinet rank holding the portfolio
of Industry has granted the approval to YKK Corporation on 7th July, 1995.
It is a matter of government policy and in our opinion no sustainable
0
ground was urged before us to hold that the approval granted to YKK was G
contrary to the government policy. The Court would not be justified in inter
fering in such matters when it is satisfied that a grant of approval to YKK
was neither irrational, nor for any extraneous consideration. Incidentally,
it may also be mentioned that the third and fourth respondent have
commenced the production of zippers in their factory at Bawa!, Haryana H
394 SUPREME COURT REPORTS [1998] SUPP. 1 S.C.R.

A on 21st March, 1997 with the investment of 90 crores. Any change in the
terms and conditions of the approval at this stage may lead to several legal
complications.

(27) For the foregoing conclusions, we are of the considered view
that the petitioner has made out no case for grant of any of the reliefs
B claimed in this petition under Article 32 of the Constitution of India. The
Writ Petition is thus devoid of any m·erit. The Writ Petition, therefore,

c
stands dismissed. In the circumstances of the case, parties arc directed to
bear their own costs.

(28) When I circulated my draft judgment for approval to Brother
Rajendra Babu, J., he agreed with my judgment. But, however, he has given
-
a separate concurring judgment to which both of us agree.

RAJENDRA BABU, J. I agree with what has been proposed by
learned Brother Kurdukar, J. in the course of his order. However, con-
D sidering the nature of the arguments addressed before us, I wish to add a
few words of my own.

Shri Shanti Bhushan contended that the legislative policy had been
declared by the enactment of the Industrial Development Regulation Act;
that under Section 29- B (2B) thereto reservation had been made for
E small-scale sector of certain industries; that reservation was with reference
to certain articles such as 'zip fastener'; that when the manufacture of 'zip
fastener' was reserved for small-scale sector, there could not have been any
dilution of such reservation or amending that notification; that carving out
an exception thereto would only result in destruction of the reservation in
F favour of small-scale industry; that when 'zip fastener' as an article had
been reserved for manufacture of small-scale industries, the same article
could not have been allowed to be manufactured by other industries by
whatever process adopted - inteip-ated or otherwise; that when there has
been reservation in favour of small scale sector, the large scale sector
-
industries are allowed to take over any part of that activity will hamper and
() G may ultimately even devour the small-scale industries; that when reserva-
.;,
tion is made to articles by the legislature, the Executive could not have
tinkered with the expression thereto so as to create a loophole by which
large-scale industries can anhilitate the small-scale industries. On behalf of
the respondents, Shri C.S. Vaidyanathan, learned Additional Solicitor
H General and Shri F.S. Nariman, Senior Advocate apart from pointing out
ZIPPERS KARAMCHARI UNION v. U.O.L [RAJENDERA,BABU, J.] 395

the decision of the Bombay and Delhi High Courts submitted that the A
Notification impugned herein was in conformity with the provisions of the
Act and no interference is called for.

The Central Government can exercise the powers under Section 29-B
(2B) of the Act to determine the nature of any article or class of articles
that may be reserved for production by any small-scale industrial under- B
taking and to determine the same, must constitute an Advisory Committee
consisting of such persons as have the necessary expertise to give advise on

- such matters. In the leading judgment, my learned Brother has set out the
details of the constitution of Advisory Committee and the advice tendered
by it to the Government before issuing Notification impugned herein. If
c
that Committee was of the opinion that any article or class of articles must
be taken out of the category of small-scale industrial undertakings, certain-
ly, the same could be done and such exercise of power will not be ultra
vires the said provision. However, the thrust of argument of Shri Shanti
Bhushan is that such determination could be with reference to only nature
or class of any article that could be reserved for production of small-scale . D
industry and, therefore, there cannot be classification on the basis of the
size of the industry or the process adopted to produce such articles. In
other words, if such a course is adopted by taking out any category of
article or class of articles from the scope of small-scale industries, it is
obvious that there cannot be a competition between small-scale industry
and large scale industry thereby the small-scale industry would be routed E
out of the market.

In matters of trade and commerce or economic policy, the wisdom
of the Government must be respected and courts cannot lightly interfere
with the same unless such policy is contrary to the provisions of the F
constitution or any law or such policy itself is wholly arbitrary. In the
present case, the two categories of articles considered in the Notification
are 'zip fasteners' manufactured by small-scale industries and 'zip
fasteners' manufactured by large scale industries in integrated units. In
order to improve the quality of 'zip fasteners' produced, the Advisory
Committee opined that 'zip fasteners' must be allowed to be manufactured G
by integrated units which would certainly fall within the category of large
scale industries as the investment has to be heavy in such cases. Articles
manufactured by one industry adopting one process can be commercially
different from the goods manufactured by other industrial units. Such
categorisation of goods depending upon the process adopted is well-known· H
396 SUPREME COURT REPORTS (1998] SUPP. lS.C.R.

A in fiscal statutes and is not unknown commercially. If same principle is
extended in categorisation of articles for the purpose of production of
quality goods and in quality if the two types of articles are different, those
manufactured by adopting the integrated process and the other by ordinary
process, certainly the two articles will fall into separate categories and thus,
B satisfy the provisions of Section 29-B (2B).

Therefore, there is no substance in the argument addressed by Shri
Shanti Bhushan that the classification into 'zip fasteners' manufactured by
small-scale industries and zip fasteners manufactured by integrated units
is violative of the provisions of the Act and that contention deserves to be
C rejected. I rest with the expression on this aspect of the matter.
-
V.S.S. Petition dismissed.