7 Jun 2010

Judicial Review of Administrative Action: The law revisited

One of the key chapters taught to law students in an Administrative Law course relates to 'judicial review of administrative action' in as much as judicial review has been declared by the courts as a part of the basic structure of the constitutional ethos in India and also that in as much as all administrative bodies are required to act in consonance with the legal regime and principles of natural justice in dealing in pursuance of their actions. 

In a recent decision, called upon the examine the validity of a Circular issued by the Director General of Foreign Trade (DGFT) in respect of import of marbles in India, Justice S. Muralidhar is the Delhi High Court culled out the following tests which are required to be observed to test the validity of administrative action by the judiciary;
37. Two essential legal principles govern the exercise of the power of judicial review by a High Court in matters such as these. First, the court will not sit in appeal over the ultimate decision of the administrative body. It is really concerned about the procedure adopted in arriving at such decision. Was it a fair, reasonable and just procedure? Were relevant materials considered and irrelevant materials kept out? As far as the final decision is concerned, is it vitiated by malafides or is it so arbitrary that no reasonable person would, in the circumstances, have arrived at it. Second, in policy matters, the Court will be slow to interfere. As the case law reveals, where the question is of reasonableness of restrictions imposed through an import policy, the degree of deference shown by the judicial wing to the executive is greater. In Dy. Assistant Iron & Steel Controller v. L. Manichand the Supreme Court explained: (SCC p. 337) 
“11…… In granting licences for imports, the authority concerned has to keep in view various factors which may have impact on imports of other items of relatively greater priority in the larger interest of the over-all economy of the country which has to be the supreme consideration; and an applicant has no absolute vested right to an import licence in terms of the policy in force at the time of his application because from the very nature of things at the time of granting the licence the authority concerned may often be in a better position to have a clearer over-all picture of the various factors having an important impact on the final decision on the allotment of import quota to the various applicants.” 
38. It was observed in Liberty Oil Mills v. Union of India (SCC p. 477):
“6….. The import policy of any country, particularly a developing country, has necessarily to be tuned to its general economic policy founded upon its constitutional goals, the requirements of its internal and international trade, its agricultural and industrial development plans, its monetary and financial strategies and last but not the least the international political and diplomatic overtones depending on 'friendship, neutrality or hostility with other countries' (Glass Chotans Importers and Users' Association v. Union of India [1962]1SCR862 . There must also be a considerable number of other factors which go into the making of an import policy. Expertise in public and political, national and international economy is necessary before one may engage in the making or in the criticism of an import policy. Obviously courts do not possess the expertise and are consequently incompetent to pass judgment on the appropriateness or the adequacy of a particular, import policy. But we may venture to assert with some degree of accuracy that our present import policy is export oriented. Incentives by way of import licences are given to promote exports…..” 
39. In M.P. Oil Extraction v. State of M.P. it was held (SCC, p.611):
“41…….The executive authority of the State must be held to be within its competence to frame policy for the administration of the State. Unless the policy framed is absolutely capricious and, not being informed by any reason whatsoever, can be clearly held to be arbitrary and founded on mere ipsi dixit of the executive functionaries thereby offending Article 14 of the Constitution or such policy offends other constitutional provisions or comes in conflict with any statutory provision, the Court cannot and should not out step its limit and tinker with the policy decision of the executive functionary of the State. This Court, in no uncertain term, has sounded a note of caution by indicating that policy decision is in the domain of the executive authority of the State and the Court should not embark on the unchartered ocean of public policy and should not question the efficacy or otherwise of such policy so long the same does not offend any provision of the statute or the Constitution of India. The supremacy of each of three organs of the State i.e. legislature, executive and judiciary in their respective field of operation needs to be emphasised. The power of judicial review of the executive and legislative action must be kept within the bounds of constitutional scheme so that there may not be any occasion to entertain misgivings about the role of judiciary in out stepping its limit by unwarranted judicial activism being very often talked of in these days. The democratic set up to which the polity is so deeply committed cannot function properly unless each of the three organs appreciates the need for mutual respect and supremacy in their respective field.”
40. In Secretary to Govt. of Madras v. P.R. Sriramulu the Supreme Court observed (SCC p. 358):
“15. As pointed out earlier with reference to the decisions of this Court the State enjoys the widest latitude where measure of economic regulations are concerned. These measures for fiscal and economic regulation involve an evaluation of diverse and quite often conflicting economic criteria, adjustment and balancing of various conflicting social and economic value and interests. It is for the State to decide what economic and social policy it should pursue. It is settled law that in view of the inherent complexity of the fiscal adjustments, the Courts give a large discretion to the legislature in the matter of its references of economic and social policies and effectuate the chosen system in all possible and reasonable ways. If two or more methods of adjustment of an economic measure are available, the legislative preference in favour of one of them cannot be questioned on the ground of lack of legislative wisdom or that the method adopted is not the best or there are better ways of adjusting the competing interests and the claims as the legislature possesses the greatest freedom in such areas. It is also well settled that lack of perfection in a legislative measure does not necessarily imply its unconstitutionality as no economic measure has so far been discovered which is free from all discriminatory impact and that in such a complex area in which no fool proof device exists, the Court should be slow in imposing strict and rigorous standard of scrutiny by reason of which all local fiscal schemes may be subjected to criticism under the Equal Protection clause.”
41. In P.T.R. Exports (Madras) P Limited v. Union of India, the Supreme Court observed: 
“5. It would, therefore, be clear that grant of licence depends upon the policy prevailing as on the date of the grant of the licence. The Court, therefore, would not bind the Government with a policy which was existing on the date of application as per previous policy. A prior decision would not bind the Government for all times to come. When the Government are satisfied that change in the policy was necessary in the public interest, it would be entitled to revise the policy and lay down new policy. The Court, therefore, would prefer to allow free play to the Government to evolve fiscal policy in the public interest and to act upon the same. Equally, the Government is left free to determine priorities in the matters of allocations or allotments or utilisation of its finances in the public interest. It is equally entitled, therefore, to issue or withdraw or modify the export or import policy in accordance with the scheme evolved. We, therefore, hold that the petitioners have no vested or accrued right for the issuance of permits on the MEE or NQE, nor the Government is bound by its previous policy.”
42. In Ugar Sugar Works Limited v. Delhi Administration the Supreme Court observed thus (SCC p. 643): 
“18. ………. It is well settled that the Courts, in exercise of their power of judicial review, do not ordinarily interfere with the policy decisions of the executive unless the policy can be faulted on grounds of mala fide, unreasonableness, arbitrariness or unfairness etc. Indeed, arbitrariness, irrationality, perversity and mala fide will render the policy unconstitutional. However, if the policy cannot be faulted on any of these grounds, the mere fact that it would hurt business interests of a party, does not justify invalidating the policy. In tax and economic regulation cases, there are good reasons for judicial restraint, if not judicial deference, to judgment of the executive. The Courts are not expected to express their opinion as to whether at a particular point of time or in a particular situation any such policy should have been adopted or not. It is best left to the discretion of the State.” 
43. As far as the present case is concerned, it is not possible to hold that the transition from the dual policy to a unified policy was either arbitrary or irrational. The decision-making process itself appears to be a well deliberated one where matters were considered at different levels. The Respondents were faced with an unenviable task of accommodating several competing interests. How these should in fact be resolved should be left to the Respondents. The court cannot be expected to sit in appeal over the decision of the government to introduce a requirement for eligibility for grant of an import licence and opine that one criterion is more appropriate than the other.

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