Legal principle

Under Section 3(2) of the Foreign Trade (Development and Regulation) Act, 1992, the Central Government may, by way of an 'exception', validly prohibit or restrict the import of particular goods through particular ports, provided the measure is backed by sound reasons and serves a public good and is not arbitrary or irrational.

Court decision

The Supreme Court dismissed all the appeals and upheld the Kerala High Court's judgment validating the Notifications, holding that Section 3(2) of the 1992 Act empowers the Central Government to make exceptions—including prohibiting or restricting import of particular goods through particular ports—provided such action is not arbitrary or irrational and is backed by sound reasons, which the Court found satisfied here.

Facts

The appellants, Kerala-based refiners of edible oils (vanaspathi, bakery shortening, margarine etc.), imported crude palm oil—chiefly from Indonesia and Malaysia—through the ports of Kochi and Beypore for their factories at Kozhikode and Malappuram. By Notification No.39 (RE-2007)/2004-2009 dated 16.10.2007 the Central Government prohibited import of palm oil through Kochi port, and by Notification No.63 (RE-2007)/2004-2009 dated 24.12.2007 extended the prohibition to all ports in Kerala, in exercise of powers under Section 5 read with Section 3 of the Foreign Trade (Development and Regulation) Act, 1992. The stated object was to protect Kerala's coconut farmers (about 35 lakhs), since cheap imported palm oil was depressing coconut oil prices. The appellants' writ petitions against the Notifications were dismissed by the learned single Judge, and the Division Bench of the Kerala High Court dismissed their appeals by judgment dated 21.10.2008, leading to these civil appeals before the Supreme Court.

Key provisions

• Section 11, Customs Act, 1962 — Power to prohibit importation or exportation of goods
• Section 5, The Foreign Trade (Development and Regulation) Act, 1992 — Foreign Trade Policy.
• Section 7, Customs Act, 1962 — Appointment of customs ports, airports
• Section 3, The Foreign Trade (Development and Regulation) Act, 1992 — Powers to make provisions relating to imports and exports.