SC Says GOI Can Impose Quantitative Restriction on Import Under S. 3(2) FDRT Act

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The Supreme Court heard a set of pleas filed by various importers against the restrictions imposed by GOI on import quantity. The bench held that the GOI is empowered to do so under Section 3(2) of the Foreign Trade (Development and Restriction) Act, 1992.

Brief facts of the case

This case is an amalgamation of various petitions filed in different High Courts of the country by many importers. They challenged a set of notifications issued by the GOI restricting import of pulses and peas. In some cases, the HCs passed interim orders putting a stay on the notifications.

The GOI passed the impugned orders under Section 3 of the FTDR Act read with paragraphs 1.02 and 2.01 of the Foreign Trade Policy, 2015-2020. 

Arguments by the Petitioners

The main contention of the petitioners was that the notifications amounted to quantitative restrictions under Section 9A of the FDTR Act. As per the provision the Government has to inquire before imposing the quantitative restrictions. They must ensure that the importing of those goods in such quantity would cause harm to the domestic industry.

Further, in the exercise of power under sub-section (3) to Section 9A the Central Government has framed the Safeguard Measures (Quantitative Restrictions) Rules, 2012. They prescribe a mandatory and detailed procedure which has not been followed.

Also, the intention behind the FTDR Acts the development and regulation of foreign trade by facilitating imports and augmenting exports from India to make India competitive in conformity with GATT-1994 obligations. Section 3 incorporated Article XI of the GATT-1994 and Section 9A is almost a replica of Article XIX of the GATT-1994. The latter is the only provision allowing quantitative restrictions. It, thus, follows that unless the conditions of Section 9A of the FTDR Act are satisfied and the procedure prescribed under the Rules is followed, no ‘quantitative restrictions’ could have been imposed by the Union of India through the medium of the impugned notifications.

They assert that the GOI cannot use Section 3 when conditions of Section 9A are not satisfied and impose ‘quantitative restrictions’. This would render Section 9A redundant. It would allow the GOI to circumvent Section 9A and impose ‘quantitative restrictions’ under Section 3.

Arguments by the Respondents

The Union of India accepted that they did circumvent the conditions of Section 9A. They did not follow the procedure prescribed by the applicable Rules.

But, they asserted that the provision is attracted only when the goods are imported into India in increased quantity under such conditions that might cause serious injury to the domestic industry. 

Section 9A is enacted as a safeguard mechanism. It flows from Article XIX of the GATT-1994 and Article II of the WTO Agreement. 

Further, the notifications under challenge were issued under Section 3 of the Act. It permits the GOI to impose restrictions without any qualification of the nature specified in Section 9A.

The powers vested on the Central Government via Section 3 and Section 9A are distinct and have no connection or interplay. The former is a general provision and of wide amplitude.

Court’s Observations

The Court observed that under Section 3(2) of the Act the Central Government has the power to make provisions restricting the imports and exports. The imposition of quantitative restrictions would fall under this.

Further, they referred to Section 9A for the Act as an enabling provision. It empowers the imposition of quantitative restrictions after following the procedure in the situations referred to therein. 

Yet, it does not limit and restrict the power of the Central Government under Section 3(2) of the FTDR Act. Thus, despite Section 9A, the Central Government has the authority to impose quantitative restrictions by an order under Section 3(2) of the FTDR Act. 

Section 9A has to be interpreted as an escape provision. It allows the Union of India to escape the rigours of paragraph (1) of Article XIX of GATT-1994. 

Holding that the Government can impose quantitative restrictions only through Section 9A would be contrary to the legislative intent.

Court’s Order

The Bench upheld the impugned notifications and notices rejecting all challenges made by the petitioners. The Customs Act of 1962 would be used to deal with any imports made relying on interim orders as they would be contrary to the trade notices issued.

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