Union of India (Uoi) Vs. Godrej Soaps Pvt. Ltd. and anr. - Court Judgment

Excerpt:
commercial - canalised items - appeal against order of high court allowing respondent to import goods - canalised items are category of items open to import only through a public sector agency unless existent import policy provides some exception - paragraph 75 (1) of import policy 1985-88 entitles trading house to directly import canalised items listed in appendix v part a against additional license - goods imported by respondent falls under item 9 (v) in appendix v part b of import policy 1985-88 which is a canalised item not open to direct import against additional license - held, goods cannot be imported directly against additional license. - [ a.k. sarkar, c.j.; j.m. shelat,; j.r.mudholkar,; m. hidayatullah, jj.] the company law board was constituted under section 10e of the companies act, 1956, and the central government delegated some of its powers under the act, including those under section 237, to the board. the government also framed rules under section 642(1) read with section 10e(5) called the company law board (procedure) rules 1964, rule 3 of which empowered the chairman of the board to distribute the business of the board among himself and other member or members and to specify the cases or classes of cases which were to be considered jointly by the board. on february 6, 1954, under the power vested in him by rule 3 the chairman passed an order specifying the cases that had to be considered jointly by himself and the only other member of the board and distributing the remaining business between himself and the member. under this order the business of ordering investigations under sections 235 and 237 was allotted to himself to be performed by him singly. on may 19, 1965 an order was issued on behalf of the company law board under section 237(b) of the companies act. appointing four inspectors to investigate the affairs of the appellant company, on the ground that the board was of the opinion that there were circumstances suggesting that the business of the appellant company was being conducted with intent to defraud its creditors, members or any other persons and that the persons concerned in the management of the affairs of the company had in connection therewith been guilty of fraud, misfeasence and other misconduct towards the company and its members. soon afterwards the appellants filed a petition under art. 226 of the constitution for the issue of a writ quashing the order of the board on the grounds, inter alia, that the order had been issued mala fide that there was no material on which such an order could have been made, etc. one of the affidavits filed in reply to the petition was by the ,chairman of the company law board, in which it was contended, inter alia, that there was material on the basis of which the impugned order was issued and he had himself examined this material and formed the necessary opinion within the meaning of sec. 237(b) before the issue of the order; and that it was not competent for the court to go into the question of the adequacy or otherwise of such material. in the course of replying to some of the allegations in the petition it was stated in paragraph 14 of the affidavit, however, that from memoranda received from some ex-directors of the company and other examination it appeared, inter alia, that there had been delay, bungling and faulty planning of the company's main project ,resulting in double expenditure; that the company had incurred huge losses; there had been a sharp fall in the price of the company's sci-22 shares; and some eminent persons had resigned from the board of directors of the company because of differences with the managing director on account of the manner in which the affairs of the company were being conducted. the appellant's petition was dismissed by the high court. in the appeal to this court it was contended on behalf of the appellants: (1) that the order was made made fide on account of the competing interests of a firm in which the minister in charge of the department was interested and also because of his personal hostility against the second petitioner who was the managing director of the company; that the high court had erred in deciding the petition on the footing that the first respondent board was an independent authority and that it was its chairman who on his own had formed the requisite opinion and passed the order and therefore the motive or the evil eye of the minister was irrelevant; the high court also erred in failing to appreciate that even though the impugned order was by the chairman, as under s. 10e(6) it had to receive and in fact received the minister's agreement, if the minister's mala fides were established, that would vitiate the order; furthermore, in the circumstances of the case. the high court ought to have allowed the appellants an opportunity to establish their case of mala fide by the cross-examination of the minister and the chairman, both of whom had filed affidavits. (2) that clause (b) of section 237 required two things: (i) the requisite opinion of the central government, in the present case, of the board, and (ii) the existence of circumstances suggesting that the company's business was being conducted as laid down in sub-clause (i) or that the persons mentioned in sub-clause (ii) were guilty of fraud, misfeasance or misconduct towards the company or any of its members; though the opinion to be formed is subjective, the existence of circumstances set out in cl. (b) is a condition precedent to the formation of such opinion and therefore even if the impugned order were to contain a recital of the existence of those circumstances, the court can go behind that recital and determine whether they did in fact exist, that even taking the circumstances said to have been found by the respondent board, they were extraneous to see. 237(b) and could not constitute a basis for the impugned order. (3) that the impugned order was in fact made on the basis of allegations contained in memoranda submitted by four ex- directors of the company who continued to be shareholders; and by ordering an investigation under s. 237(b) the respondent board had in effect enabled these shareholders to circumvent the provisions of s. 235 and s. 236. on this ground also the impugned order was therefore made mala fide or was otherwise invalid. (4) that the impugned order was in any case bad as it was passed by the chairman of the respondent board alone acting under rules under which such a power was conferred in contravention of the provisions of section 10e. the power under s. 237 was delegated by the central government to the board as a whole and could not in turn be sub-delegated to the chairman alone in the absence of a provision such as sub-sec. (4a) added to sec. 10e after the impugned order was issued, and which now enabled the solidarity of the board to be broken. such sub-delegation could not be done in accordance with rules made under s. 10e(5) which merely enabled the procedure of the board to be regulated.  (5) that the impugned order was bad because section 237(b) itself was bad as offending against arts. 14 and 19 of the constitution. held: (by hidayatullah. bachawat and shelat, jj., sarkar c.j. and mudholkar j. dissenting): the impugned order must be set aside. (1) (by the court): the respondents had failed to show that the impugned order was passed mala fide. l330 e; 335 b-c; 342 f; 354 f-g]. (per sarkar c.j. and mudholkar j.3: the decision to order the investigation was taken by the chairman of the respondent board and there was nothing to indicate that in arriving at that decision he was influenced by the minister. if the decision arrived at by the chairman was an independent one, it could not be said to have been rendered mala fide because it was later approved by the minister. [320 d]. in a proceeding under art. 226 of the constitution, the normal rule is, as pointed out by this court in the state of bombay v. purshottam jog naik [1952] s.c.r. 674, to decide disputed questions on the basis of affidavits and that it is within the discretion of the high court whether to allow a person who has sworn an affidavit before it to be cross- examined or not. the high court having refused permission for the cross-examination, it would not be appropriate for this court, while hearing an appeal. by special leave, to interfere lightly with the exercise of its discretion. [320 g-h; 321 a]. (per shelat j.): the allegations of mala fides in the petition were not grounded on any knowledge but only on "reasons to believe". even for their reasons to believe, the appellants had not disclosed any information on which they were founded. no particulars of the main allegations were given. although in a case of this kind it would be difficult for a petitioner to have personal knowledge in regard to an averment of mala fides, where such knowledge is wanting, he must disclose his source of information so that the other side gets a fair chance to verify it and make an effective answer. in the absence of tangible materials, the only answer which the respondents could array against the allegations as to mala fides would be one of general denial. [352 d-h]. in a petition under art. 226, there is undoubtedly ample power in the high court to order attendance of a deponent in court for being cross-examined. where it is not possible for the court to arrive at a definite conclusion on account of there being affidavits on either side containing allegations and counter-allegations, it would not only be desirable but in the interest of justice the duty also of the court to summon a deponent for cross-examination in order to arrive at the truth. however, the high court was rightly of the view that in the present case even if the two deponents were to be called for cross-examination, they could in the absence of particulars of allegations of mala fides and the other circumstances of the case, only repeat their denials in the affidavits of the allegations in the petition and therefore such cross-examination would not take the court any further than the affidavits. [353 d-h]. (2) (per hidayatullah, bachawat and shelat jj. sarkar, c. j. and mudholkar j. dissenting,):the circumstances disclosed in paragraph 14 of the affidavit must be regarded as the only materials on the basis of which the respondent board formed the opinion before ordering an investigation under section 237(b). these circumstances could not reasonably suggest that the business of the company was being conducted to defraud the creditors, members or other l/s5sci-22(a) persons or that the management was guilty of fraud towards the company and its members; they were therefore, -extraneous to the matters mentioned in s. 237(b) and the impugned order was ultra vires the section. [339 a-d, g-h; 340 a; 342 g-h; 343 ac; 365 d-e; 367 a-c]. (per hidayatullah j.): the power-under section 237(b) in a discretionary power and the first requirement for its exercise is the 'honest formation of an opinion that an investigation is necessary. ,the next requirement is that "there are circumstances suggesting" the inferences stout in the section. an action, not based on circumstances suggesting an inference of the enumerated kind will not be valid. no doubt the formation of opinion is subjective but the existence of circumstances relevant to the inference as the sine qua non for action must be demonstrable. if their existence is questioned, it has to be proved at least prima facie. it is not sufficient to assert, that the circumstances exist and give no clue to what they are, because the circumstances must be such as to lead to conclusions of certain definiteness. the conclusions must relate to an intent to defraud, a :fraudulent or unlawful purpose, fraud or misconduct or the withholding of information of a particular kind. [335 f-h; 336 g-h] an examination of the affidavit filed by the chairman of the respondent board showed that the material examined by the chairman merely indicated the need for a deeper probe. this was not sufficient. the material must suggest certain inferences and not the need for "a deeper probe". the former is a definite conclusion the 'latter a mere fishing expedition. [338 e-h]. (per shelat j.): althouugh the formation of opinion by cen- tral government is a purely subjective process and such an opinion cannot be challenged in a court on the ground of propriety, reasonableness or sufficiency, the authority concerned is nevertheless required to arrive at such an opinion from circumstances suggesting what is set out in sub-clauses (i), (ii) or (iii) of s. 237 (b). the expres- sion "circumstances suggesting" cannot support the construction that even the existence of circumstances is a matter of subjective opinion. it is hard to contemplate that the legislature could have left to the subjective process both the formation of opinion and also the existence of circumstances on which it is to be founded. it is also not reasonable to say that the clause-permitted the authority to say that it has formed the opinion on 'circumstances which in its opinion exist and which in its opinion suggest an intent to defraud or a fraudulent or unlawful purpose. if it is shown that the circumstances do not exist or that they are such that it is impossible for any one to form an opinion therefrom suggestive of the matters enumerated in s. 237 (b) the opinion is challengeable on the ground 'of non-application of mind or perversity or on the ground that it was formed on collateral grounds and was beyond the scope of the statute. [362 h; 363 a-g]. (per sarkar c.j., and mudholkar j.. dissenting): an examina- tion of section 237 would show that cl. (b) thereof confers a discretion upon the 'board to appoint an inspector to investigate the affairs of a company. the words "in the opinion of" govern the word "there are circumstances suggesting" and not the words "may do so". the words 'circumstances' and 'suggesting' cannot be dissociated without making it impossible for the board to form an 'opinion' at all. the formation of an opinion must, 'therefore, be as to whether there are circumstances suggesting the existence of one or more of 'the matters in sub-cls. (i) to (iii) and not about anything else. the opinion must of course not have been arrived at mala fide. to say that the, opinion to be formed must be as to the necessity of making an investigation would be making a clear departure from the language in which s. 237(b) is couched. it is only after the formation of certain opinion by the board that the stage for exercising the discretion conferred by the provision is reached. the discretion conferred to order an investigation is administrative and not judicial since its exercise one way or the other does not affect the rights of a company nor does it lead to any serious consequences as, for instance, hampering the business of the company. as has been pointed out by this court in raja narayanalal bansilal v. maneck phiroz mistry and anr. [1961] 1 s.c.r. 412, the investigation undertaken under this provision is for ascertaining facts and is thus merely exploratory. the scope for judicial review of the action of the board must, therefore be strictly limited. if it can be shown that the board had in fact not formed an opinion its order could be successfully challenged. there is a difference between not forming an opinion at all and forming an opinion upon grounds, which, if a court could go into that question at all, could be regarded as inapt or insufficient or irrelevant. the circumstances set out in paragraph 14 of the affidavit of the chairman of the respondent board were nothing more than certain conclusions drawn by the board from some of the material which it had before it. moreover, the expression "inter alia" used by the chairman would show that the conclusions set out by him specifically were not the only ones which could be drawn from the material before the board. it would not therefore be right to construe the affidavit to mean that the only conclusions emerging from the material before the board were those set out in paragraph 14. [352 a-e]. (3) (per sarkar c. j. and mudholkar j.): as it could not be said that the investigation had been ordered either at the instance of 4 ex-directors of the company or on the sole basis of the memoranda submitted by them, there was no contravention of the provisions of sections 235 and 236 of the act. [328 c, e]. (4) (per sarkar c. j., mudholkar and bachawat jj., hidayatullah and shelat jj., dissenting): rule 3 of the company law board (procedure) rules, 1964, and the order dated april 6, 1964 made pursuant thereto distributing the business of the board, were both valid. the impugned order was not therefore invalid because it was made by the chairman alone and not by the board. [330 c. d; 342 b-c]. (per sarkar c.j. and mudholkar j.): bearing in mind the fact that the power conferred by section 237(b) is merely administrative, the allocation of the business of the board relating to the exercise of such power must be regarded as a matter of procedure. strictly speaking the chairman to whom the business of the board is allocated does not become a delegate of the board at all. he acts in the name of the board and is no more than its agent. but even if he is looked upon as a delegate of the board and, therefore, sub- delegate vis-avis the central government, he would be as much subject to the control of the central government as the board itself, for sub-s. (6) of s. 10e provides that the board shall, in the exercise of the powers delegated to it, be subject to the control of the central government and the order distributing the business was made with permission of the central government. bearing in mind that the maxim delegates non protest delegable sets out what is merely a rule of construction, subdelegation can be sustained if permitted by an express provision or by necessary implication. where, as here, what is sub-delegated is an administrative power and control over its exercise is retained by the nominee of parliament, that is, here the central government, the power to make a delegation may be inferred, [329 f-h; 330 a-c].  (per bachwat j.): the function under s. 237(b) involves the exercise of a discretion. prima facie all the members of the board acting together were required to discharge this function and they could not delegate their duty to the chairman. however, under ss. 10e(5) and 642(1), the central government may frame rules regulating the procedure of the board and generally to carry out the purpose of the act. in the context of s. 10e, the rule making power should be construed liberally. the central government has power to constitute the company law board, to delegate its function to the board and to control the board in the exercise of its delegated functions. in this background, by conferring on the central government the additional power of framing rules regulating the procedure of the board and generally to carry out the purposes of s. 10e parliament must have intended that the internal organisation of the board and the mode and manner of transacting its business should be regulated entirely by rules framed by the government. the government had, therefore, power to frame the company law board (procedure) rules. 1964 authorising the chairman to distribute the business of the board. in the exercise of the power conferred by this rule, the chairman assioned the business under s. 237 to himself. the chairman alone could, therefore, pass the impugned order. [341 f-h; 342 a-c]. (per hidayatullah j.): the new sub-section 4a of section 10e, which was not there when the impugned order was made. enables the work of the board to be distributed among members, while sub-s. (5) merely enables the procedure of the board to be regulated. these are two very different things. one provides for distribution of work in such a way that each constituent part of the board, properly autho- rised. becomes the board. the other provides for the procedure of the board. what is the board is not a question which admits of solution by procedural rules but by the enactment of a substantive provision allowing for a different delegation. such an enactment has been framed in relation to the tribunal constituted under s. 10b and has now been framed under s. 10e also. the new sub-section involves a delegation of the powers of the central government to a member of the board which the act previously allowed to be made to the board only. the statute, as it was formerly, gave no authority to delegate if differently or to another person or persons. when it spoke of procedure in sub-section (5) it spoke of the procedure of the board as constitlited. the lacuna in the act must have felt; otherwise there was no need to enact sub-section (4a), [334 b-e]. (per shelat t.): the statute having permitted the delegation of powers to the board only as the statutory authority the powers so delegated have to be exercised by the board and not by its components. to authorise its chairman to hand over those functions and powers to the. board only as the statutory authority, the powers so by the act. the effect of r. 3 and the order of distribution of work made in pursuance thereof was not laying down a procedure but au- thorising and, making a sub-delegation in favour of the members. the only procedure which the government could prescribe was the procedure in relation to board the manner in which it should discharge and exercise the functions and powers delegated to it, but it could not make a provision which under the cloak of procedure authorised sub- delegation. [369 f-h; 370 a, b]. (5) (by the court): the provisions of section 237(b) were not violative of articles 14 and 19 of the constitution. [328 f-g; 342 d-f; 371 h]. sections 234, 235, 236 and 237(b) gave power to different authorities i.e. the registrar and the government, provided powers which are different in extent and nature, exercisable in sets of circumstances and in a manner different from one another. therefore, there is no question of discriminatory power having been vested in the government under these sections to pick and choose between (one company and the other. [370 g, h]. when investigation is ordered, there would be inconvenience in the carrying on of the business of the company. it might also perhaps shake the credit of a company. but an investigation directed under section 237(b) is essentially of an exploratory character and it is not as if any restriction is placed on the right of the concerned company to carry on its business and no restrictions are imposed on those who carry on the company's affairs. even if it is regarded as a restriction, it is not possible to say that it is not protected as a reasonable restriction under clause 6 of art. 19(1). [371 b-d]. case law referred to. - in that event, in view of the aforesaid discussion, an export house holding an additional licence will be entitled to import items open ordinarily to direct import (non-canalised items) as well as items directly importable although on the canalised list. therefore, the claim of the diamond exporters, or, as in this case a purchaser from the diamond exporter, must fail because it is not open to import by the diamond exporter under any provision of the import policy 1985-88. 15. therefore, we are unable to accept the contentions of the respondents and both on grounds of equity and construction, we are of the opinion that this appeal must be allowed and decision of the high court of bombay impugned in this appeal must be set aside. the goods were purchased by the present petitioners only on 27th june, 1986 after they were aware of the judgment of this court in raj prakash's case (supra) as well as indo afghan chambers of commerce's case (supra). no question of any restitution of rights arises.sabyasachi mukharji, j.1. this is an application for special leave to appeal against the order of the division bench of the bombay high court dated 22nd/23rd july, 1986 filed on behalf of the union of india.2. m/s. godrej soaps (p) limited, and a shareholder and director of the said company, mr. a.b. godrej who were petitioners went before the bombay high court in writ petition no. 1665 of 1986. the said petitioners who are respondents herein (hereinafter described as respondents) purchased 544.860 metric tonnes of palm karnel fatty acid on high sea basis imported under an additional licence. they challenged the action of the customs authorities refusing to permit the clearance of the said palm karnel fatty acid in view of the decision of this court in raj prakash chemical's case [1986] 2 scr 297 and indo afghan chamber of commerce's case : 1986(10)ecc131 .3. it may be mentioned that one messrs. dimexon a firm carrying on business of importing rough diamonds and exporting cut and polished diamonds were issued export house certificate under the import policy for the period 1978-79 and certain additional licences in or about the month of july, 1986 covered by the licensing period am-79. the said licence was claimed to have been issued in compliance with the order of this court dated 18th april, 1985. as the purport of that order was the subject matter of two subsequent decisions of this court and the genesis of the right of the present respondents was claimed from the said decision, it may not be inappropriate to refer to the said decision. the said decision was given in civil appeal no. 1423 of 1984. this court held that there was no requirement of diversification of exports as a condition for the grant of export house certificates in the import policy for the year 1978-79. in that appeal, this court confirmed the high court's judgment quashing the order whereby the government had refused export house certificates on the ground that the petitioners in those cases had not diversified its export and as such were not entitled to export house certificates. the high court quashed that order. this court confirmed that direction of the high court and further directed the union of india and its employees to issue the necessary export house certificates for the year 1978-79 within a period of three months from the date. this court further directed as follows:save and except items which are not 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. appeals are disposed of accordingly with no order as to costs.' (emphasis supplied in view of the contentions now sought to be raised in these proceedings).this direction was given by a bench of three learned judges consisting of s. murtaza f. ali, a. varadarajan and one of us (sabyasachi mukharji, j.)4. according to the petitioners before the bombay high court in pursuance of the order of this court, import trade control authority issued diverse additional licences expressly covered by the licensing period am-79 whereunder the description of the goods was as under:this licence is valid for import of items permissible to export houses under additional licence category as per para 176 of import policy for 1978-79 excluding those items which were banned in the policy for the period 1978-79 and which have been banned in the import export policy volume 1, 1985-88. the additional licence category import shall be subject to the provisions of para 176 of the import policy for 1978-79.5. it was the contention of the petitioners before the bombay high court that it was absolutely clear that the holders of the said licences would be entitled to import items permissible to export houses under the additional licence category as per para 176 of the import policy for 1978-79.6. it may be mentioned that the said direction of this court came up for consideration before this court again in civil appeal no. 4978 of 1985-raj prakash chemicals ltd. and anr. v. union of india and ors. (supra). this court clarified the decision in that case which was rendered by a bench of three learned judges consisting of v.d. tulzapurkar, j. and both of us (r.s. pathak and sabyasachi mukharji, jj).7. as this court has observed in m/s. lndo afghan chambers of commerce and anr. v. union of india and ors. (supra) the order dated 18th april, 1985 has been considered by this court in raj prakash chemicals ltd. and anr. v. union of india and ors. (supra) to mean 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, the period during which the diamond exporters had applied for export house certificates and had been wrongfully refused, and were also importable under the import policy prevailing at the time of import, which in the present case is the imort policy 1985-88. these were the items which had not been 'specifically banned' under the prevalent import policy. the items had to pass through two tests. they should have been importable under the import policy 1978-79. they should also have been importable under the import policy 1985-88 in terms of the order dated april 18, 1985.the court had no occasion to consider the significance of the words 'whether canalised or otherwise' mentioned in the order dated april 18, 1985 because that point did not arise in the case before it. the respondents rely on those words in this case in order to justify the import of the commodity under consideration.8. what did the court intend by those words? we have seen that a diamond exporter can import the items he was entitled to import under the import policy 1978-79 provided they are importable also under the import policy ruling at the time of import. they are items which are open to import by an export house holding an additional licence for sale to eligible actual users (inudustrial). these are items which could be directly imported, for example, the 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. now although generally they are importable through a public sector agency only, it is permissible for the import policy to provide an exception to that rule, and to declare that an importer may import a canalised item directly. for instance, paragraph 75(1) of the import policy 1985-88 entitles a trading house holding an additional licence to directly import canalised items in appendix v part a to the extent laid down in that policy. there is nothing to prevent an import policy from providing in the future that an export house holding an additional licence can directly import certain canalised items also. in that event, in view of the aforesaid discussion, an export house holding an additional licence will be entitled to import 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 could have intended to define the entitlement of a diamond exporter. he would be entitled to import items 'whether canalised or not', if the import policy prevailing at the time of import permitted him to import items falling under each category. the court would not know whether in the future certain canalised items could be imported directly by an export house holding an additional licence. the possibility of a policy being framed in the future enabling an export house holding an additional licence to directly import items which are 'non-canalised' and also items which are 'canalised' cannot be ruled out. it is in this light that the court can be said to have used the words 'whether canalised or otherwise' in its order dated 18th april, 1985.9. the point from a slightly different angle was considered in writ petition no. 199 of 1986 in indo afghan chambers of commerce with civil appeal no. 664 of 1986 (supra) dated 15th may, 1986 by a bench consisting of both of us (r.s. pathak & sabyasachi mukharji, jj). there indo afghan chambers of commerce and its president aggrieved by the grant of additional licences to the respondents, m/s. rajnikant brothers and m/s. everest gems for the import of dry fruits came to this court. this court examined some of the contentions. this court reiterated that by the order dated 5th march, 1986, this court has construed its order dated 18th april, 1985 referred to hereinbefore to mean 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, the period during which the diamond exporters had applied for export house certificates and had been wrongfully refused, and were also importable under the import policy prevailing at the time of import which in the present case was the import policy 1985-88, i.e., it meant to say that those importable at the time when licence was refused and must continue to be importable at the time when import is sought, i.e., 1985-88. these were the items which were not specifically banned under the prevalent import policy. that is the construction. the items had to pass through two tests. these should have been importable under the import policy 1978-79. these should have been importable under the import policy 1985-88 in terms of the order dated 18th april, 1985. the court examined the facts of that case.10. regarding dry fruits, this court observed as follows:in our opinion the respondents diamond exporters are not entitled to import dry fruits under the import policy 1985-88 under the additional licences possessed by them. they are also not entitled to the benefit extended by the judgment of this court dated 5th march, 1986 to those diamond exporters who had imported items under irrevocable letters of credit opened and established before 18th october, 1985. it appears from the record before us that the respondents diamond exporters opened and established the irrevocable letters of credit after that date.11. bearing in mind the aforesaid ennunciation of law, we have to examine this case. it is the case of the respondents, godrej soaps co. ltd. and its director that they have purchased 544.860 metric tonnes of palm karnel fatty acid (now called 'the said acid') on high seas basis from m/s. dimexon. m/s. dimexon had imported the said acid on the strength of an additional licence issued to it pursuant to the order of this court dated 18th april, 1985 in civil appeal no. 1423 of 1984-union of india v. rajnikant brothers. the customs authorities, according to the said respondents, refused to permit clearance of the said acid on the ground that the canalised items could not be imported even under such additional licence. the respondents, therefore, filed a writ petition in this court requiring the union of india and the customs authorities to permit clearance of the said acid. it may be mentioned, the said acid was not a canalised item under the import policy 1978-79. it is a canalised item under the current import policy 1985-88.12. as the government refused to permit clearance of the said goods because the said goods were canalised, the learned single judge of the bombay high court by its order dated 10th july, 1986 permitted the clearance of the goods in question.13. aggrieved by the said order, union of india preferred an appeal before the division bench of the bombay high court. the division bench was pleased to, by its order dated 23rd july 1986, allow clearance of the goods. it is the submission of the union of india that this direction was contrary to the directions given in raj prakash's case (supra) and indo afghan chamber's case (supra).14. in respect of palm karnel fatty acid which is 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 permits the import of such item by an export house holding an additional licence. therefore, the claim of the diamond exporters, or, as in this case a purchaser from the diamond exporter, must fail because it is not open to import by the diamond exporter under any provision of the import policy 1985-88.15. therefore, we are unable to accept the contentions of the respondents and both on grounds of equity and construction, we are of the opinion that this appeal must be allowed and decision of the high court of bombay impugned in this appeal must be set aside. as importation of canalised items directly by holders of additional licences are banned, it should not be construed 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. the goods in question which were sought for by the respondents fall under item 9 part b of appendix 5 which is the canalised item and such cannot be allowed to be imported against additional licence granted pursuant to the order of this court dated 18th april, 1985. as we have mentioned hereinbefore the respondents were fully aware of the position in law and they purchased goods on 27th june, 1986, there is no equity in their favour.16. in this case no injustice would be done by this order. the goods were purchased by the present petitioners only on 27th june, 1986 after they were aware of the judgment of this court in raj prakash's case (supra) as well as indo afghan chambers of commerce's case (supra). no question of any restitution of rights arises.17. it was further submitted that in any event under item 1 of appendix 6 (import of items under open general licence) of the import policy, 1985-88, raw materials, components and consumables (non-iron and steel items) other than those included in the appendices 2, 3 part a, 5 and 8 will be permissible by the actual user (industrial). it was submitted that the respondents herein were actual users (industrial) because these were used by them for their production. this contention cannot be accepted firstly because it comes within specific prohibition of item 9 in part-b of appendix 5 being fatty acid and acid oil which were importable only by the state trading corporation of india under open general licence on the basis of foreign exchange released by the government in its favour. secondly the actual importation was not by the petitioners but by somebody else is mentioned hereinbefore, being m/s. dimexon co. in the premises, the view of the bombay high court cannot be sustained.18. in that view of the matter special leave is granted. the appeal is allowed. the order of the high court under challenge is set aside. the appellant is entitled to the costs.