1. These two petitions involve almost identical facts. Such, therefore, are being disposed of through a common order.
2. The petitioners are engaged in the business of export. The items of export, involved in the proceedings, are bed-sheets and pillow cases (the products). Respondent No.1 is the Textile Quota Management Directorate (TQMD). The exports of the products have a nexus with a Bilateral Textile Agreement which relates to trade in textiles and textile products, the agreement being between the Governments of Pakistan and the United States. In focus here is a multilateral trade agreement termed as the Agreement on Textiles and Clothing (ATC): Both agreements relate to imposition of quotas. The Government of Pakistan, relevant to textile quotas, from time to time, issues notifications prescribing the procedures for management and allocation of textile quotas. One such notification, which has a nexus with these disputes, was issued on 22-1-1996 under the Imports and Exports (Control) Act, 1950. The following paragraph in that notification, to the extent reproduced below, has a bearing on the controversy here:--- "3 Basis of Entitlement and Allocation.
3. 3.1. The performance holders shall receive allocation of quotas on the basis of actual quantity exported by them under each category during the preceding year to a specific quota country: Provided that where a non-quota textile product is brought under restraint, the entire ceiling shall be allocated to the performance-holders on the basis of the quantities (with no premium for value) exported by them in the twelve months preceding the date of issuance of the consultation call: Now it is an admitted position that, as of 22-1-1996, there were no quota restrictions on the products involved. It, however, came to transpire that between March 20 and 22, 1996, representatives of the Governments of United States and Pakistan met in Geneva, Switzerland, and signed and subscribed to a Memorandum of Understanding (MOU) which, for the sake of convenience, may be reproduced here:--- "MEMORANDUM OF UNDERSTANDING: Representatives of the Government of United States and Pakistan met in Geneva, Switzerland on 20-22 March, 1996.
4. Without prejudice to their rights and obligations under the Uruguay Round Agreement on Textiles and Clothing, the Governments agreed that:
(1) The United States shall reduce the deductions made on 11th August, 1995 to Pakistan's category 361 quota for 1995 to the extent of and in respect to fitted sheets (346, 483 Nos.).
(2) Accordingly, Pakistan decided to withdraw its requests, dated 30 November, 1995 and 4th March, 1996 for Textiles Monitoring Body review of U.S. Charges to category 361 dated 4th October, 1994 and 11 August, 1995.
(3) A base limit for category 666-s for 1996, before proration, will be established at 3.6 million kgs.
5. (in YE December, 1995, this was equal to 6.9 million Nos.). A base limit for category 666-p, before proration, will be established at 680,000 kgs. (in YE December, 1995, this was equal to 5.9 million Nos.). The 1996 base limit for category 361 (cotton bed sheets) will be increased to 5,000,000 Nos.
6. The 1996 base limit for 360 (cotton pillow cases) will be increased to 4,300,000 Nos.
(4) Category 666-s and 666-p (manmade fiber sheets and pillow cases respectively) will have annual limits beginning in 1996, with 6 per cent. Growth, 7 per cent swing, with a maximum combined carry-over and carry-forward of 11 per cent. There will be no carry-over in the first agreement year, and no carry-forward in the last agreement year. There will be annual limits on 666-s and 666-p through 31st December, 2004. The limits for 1996 will be prorated to correspond to the number of days remaining in 1996, beginning today, 22nd March, 1996.
(5) This agreement also resolves matters concerning U.S. Rule of origin changes with respect to bed-sheet and pillowcase imports from Pakistan into the U.S. The Government of Pakistan accepts without reservation U.S. Rules of origin embodied in section 334 of the Uruguay Round Agreement Act with respect to products of category 360, 361, 666-s and 666-p.
7. This agreement will enter into force upon signature.
8. (Sd.)(Sd.)
9. For the Government For the Government of of Pakistanthe United States 22nd March, 1996."
10. The background in which the reproduced MOU came to be signed is set out by the petitioners in paragraph 9 of each of the petitions which runs thus:--- "9. That the two Governments' representatives met in Switzerland from 20th to 22nd March, 1996 in order to resolve the pending differences. In these discussions the United States' Government also made complaints regarding category 666 with specific reference to bed sheets and pillowcases. At that point of time there was no restraint or quota in relation to bed-sheets and pillowcases, although in earlier years a quota did exist. The grievance of the United States' Government was that some Pakistani exporters were deliberately misdeclaring the fiber content under these categories.
11. The United Sates Government was threatening to take action for circumvention whereas the Government of Pakistan denied the allegations of circumvention and contended that, if at all, the United States' Government wished to impose quotas it should issue a consultation call under Article 6 of the Agreement on Textiles and Clothing and then follow the procedure for a negotiated settlement. Ultimately a compromise was arrived at in terms of which the Government of Pakistanth voluntarily agreed to accept quotas on bed---sheets and pillow-cases without resorting to the consultation call mechanism and the United States Government reduced the deductions made by it on 11th August, 1995 in relation to the category 361 quota (fitted-sheets) to' the extent of 346,483 units. The Government of Pakistan accordingly also withdrew its complaints which were pending before the Textile Monitoring Body. These agreements were embodied in a Memorandum of Understanding ("MOU"), dated 22nd March, 1996. "
12. The respondents Nos. 1 and 2 in their comments have not denied the contents of the reproduced paragraph and, in effect, have only added that the Government of Pakistan did not voluntarily agree to accept quota on sheets and pillowcases but that such came about only after due consultation.
13. Be that as it may, the fact remains that quota was imposed on the products in dispute. The question that, in the consequence, has been thrown up is as to what would be the period that may be taken as the base for allocation of quotas to the exporters. To be explicit, the case of the petitioners is that their entitlement is to be determined "on the basis of actual quantity exported by them------.During the preceding year---------..". The respondents, which, upon joinder, also include respondents Nos.4 and 5, contesting exporters, maintain that the case is not covered by the main notified provision (quoted and relied upon by the petitioners) in para. 3.1 but falls within the first proviso to the paragraph. In other words, the respondents' contention is that because the non-- quota textile products were brought under restraint subsequent to the date of the notification (22-1-1996), the ceiling shall come to "be allocated to the performance holders on the basis of quantities" exported by such performance holders in the 12 months "preceding the date of issuance of the consultation call". The applicable period, according to the respondents, therefore, would not be the entire calendar year 1995 (January 1 to December 31) but the period of 12 months preceding the date of the MOU viz. 22-3-1996. It may be observed here that if the petitioners' plea is accepted, the petitioners would stand to get a much larger proportion of the quota and the contesting exporters, Respondents Nos.4 and 5, may get little or nothing. On the other hand, if the position taken by the respondents jointly is accepted, a larger body of exporters would benefit. It is, therefore, claimed that a more equitable approach would be to construe the provision beneficially extending relief to a larger body of persons than may be the position otherwise. Even so, while equities may suitably qualify for consideration in proper cases, disputes are to be decided upon interpreting the law and giving effect to such rights as may emerge upon due examination.
14. Reverting to the controversy, it has been pointed out by Mr. Khalid Anwar for the petitioners that, in the instant case, no "consultation call" has issued and while the representatives of the Governments of Pakistan and the United States were grappling with quite another dispute, again without any consultation call as such, restraint on the products in dispute was agreed to be introduced. For such reasons, he has urged that it is the main provision in paragraph 3.1 above which would be attracted and not the first proviso appended thereto.
15. It does not appear to be disputed that no formal consultation call was made. It remains undisputed also that a formal call being there or no, consultation in fact took place. The procedure in context and in detail is set out in the Agreement on Textiles and Clothing (ATC), and, besides, in the agreement itself, is envisioned a body known as the Textiles Monitoring Body (TMB) to whom inter-State disputes may be taken. TMB was established under Article 8(1) of he said agreement.
16. Central to the controversy are Articles 5 and 6 of the ATC and we may, therefore. Examine whether the MOU in question came to be executed under one or the other such Article. If it be Article 5 that was applicable, there, apparently, may be no applicability of the first proviso to paragraph 3.1 in the notification dated 22-1-1996. That is the case of the petitioners. On the other hand, if Article 6 applies, invocation of such proviso may become arguable.
17. Going through Articles 5 and 6, we find that each of these Articles proceeds in a different area of operation though the out come of the exercise, under the applicable Article, may not be dissimilar.
18. Thus, Article 5 relates to circumventions, false declarations and falsification of official documents, resulting in frustration of the implementation of the ATC. In such context, consultations can take place and disputes can be mutually resolved or a reference to the TMB for prompt review and recommendations can be made. Correspondingly, Article 6 envisages that, during the transition period, a specific transitional safeguard action may become necessary. The matter may be resolved, not dissimilarly, by arriving at a mutual understanding or, failing that, intervention of the TMB may be sought. However, none of these Articles contemplates any "consultation call" as such, visualised in the first proviso to paragraph 3.1 in the referred notification. Mr. Farooq H. Naek, the learned D.A.-G., has, however, correctly pointed out that the word "call" carries the meanings of a "request" or "demand". This being so, the word "request" does occur in Article 6 of the ATC but finds no mention in Article 5. Such in turn, implies that the consultation, upon which the MOU is founded, may have had a nexus with Article 6 alone and particularly clause (7) thereof. Clause (7) postulates that the member proposing to take safeguard action shall seek consultations with the member or members, which could be affected by such action. The member, to whom the consequential request be addressed, is required to respond to the request promptly and consultations should be held without delay, normally being completed within 60 days of the date on which the request was received. Clause (8) of Article 6 provides that if, in the consultations, there is mutual understanding that the situation calls for "restraint" on the export of a particular product, "the level of such restraint shall be fixed at a level not lower than the actual level of exports or imports from the Member concerned during the 12 months' period terminating two months preceding the month in which the request for consultation was made". If, therefore, the conclusion is that the MOU, imposing restraint on the "products", came to be issued under Article 6 of the ATC, the relevant period for fixation of quota for the products should exclude the month in which the request was made as also the two months preceding that month, the applicable period being "the 12 months' period terminating two months preceding the month in which the request" was made.
19. Respondents say that the date of call, in the absence of cognate material, may be taken to be the first day of the consultations. That was March 20, 1996. Even if we accept the proposition, such may not take the respondents' case any higher. It should only demonstrate the argument of Mr. Khalid Anwar for the petitioners to be correct and the applicable period, the 12 months ending December 31, 1995; in other words and actually, the period contemplated in the main part of paragraph 3.1 in the notification. Above all, this would transpire irrespective of the fact whether such main part or the first proviso to the paragraph applied. On either of these planes the petitioners should succeed.
20. Now we take up the possible situation where Article 5 of the ATC may be treated to have been applicable. From the record, it would appear that no circumvention, false declaration or falsification of official records was involved, at least in relation to the relevant products in the petitions. For that reason, applicability of Article 5 may be far-fetched If we assume, for the sake of argument. That such Article was yet invoked, the dispute could, apparently, be aid to have been resolved in terms of clause (2) of Article 5 of the ATC. The MOU may have been the outcome.
21. Officially, as the record would reveal, this is not a conventional case of restraint at all. No wrongdoing pertaining to the products came under consideration between the contracting States.
22. It was in another context that the dispute arose and while Pakistan was able to extract some benefit pertaining to those complaints, pertinent category being 361, it, apparently, because of mounting exports in categories 666-s and 666-p (man--made fibre-sheets and pillowcases respectively), entered into a voluntary arrangement, ex facie, connected with the safeguards in Article 6 of the ATC. Whatever way, accordingly, we look into the matter, it is either Article 6 of the ATC which applied or in any case the matter is covered by the main provision in paragraph 3.1 of the notification.
23. However, the MOU itself expressly excludes the Uruguay Round Agreement on Textiles and Clothing
(ATC) and operate without prejudice to the rights and obligations of the two States under such agreement. The matter, therefore, would continue to remain covered by the main provision in paragraph 3.1 of the notification, which confers entitlements generally on export performance holders, the base year being the year preceding the notification, dated 22-1-1996 namely, the year 1995. The proviso being an exception to the rule is to be interpreted strictly and there being no "call" as such and mere consultation, the same, in all likelihood, would not apply. See Hamdard Dawakhana v. Commissioner of Income Tax, Karachi PLD 1980 SC 84 (100). There is another reason why it is the performance during the year 1995 which alone has to be seen. That consists of the MOU itself visualising the figures of actual exports to be those having a nexus with exports during the year 1995. We note that unless export performances based in the year 1995 are brought into the reckoning, there would be a disparity between the export quota allocated to the Government of Pakistan relative to the products and that which the Government, in turn, would apportion amongst the exporters, an obvious anomaly, which does not appear to have been in contemplation anywhere.
24. On our part, irrespective of the applicability of Article 5 or Article 6 or indeed of the ATC itself, we are of the view that the quota to be allocated, under paragraph 3.1 of the notification, by the Government of Pakistan to the exporters, operating from the soil of Pakistan, can be no different than the one which the Government, to turn, itself stands credited with, as a result of an inter-State bilateral arrangement. That emerges from the circumstance that neither the Government of Pakistan can give more than the quota allocated to it nor can it routinely curtail the same, without impinging upon the rights of the exporters concerned. At the same time, whatever quota the Government of Pakistan gets, normally, is none other than the cumulative exports of our exporters in a given period or a proportion of it. Correspondingly, it follows that whatever quantity (or proportion thereof) each of the exporters could be credited with during the base period, the same, without any change, shall normally remain allocable to it. As to proration, such poses no problems.
25. That applies to the current year alone and all the exporters would be affected on prorata considerations.
26. A word now about the allegations from the side of the petitioners that mala fides were involved in the Government of Pakistan's first introducing the entries in the petitioners' pass-book in accordance with para. 3.1 of the notification and later on reversing the same. These allegations, in turn also refer to an opinion obtained from the Ministry of Law and Justice, which is claimed to have been exploited. In our view, in the circumstances of the case, such aspect does not require any explicit examination or finding.
27. Yet another aspect of the matter pertains to the claim from the side of the private respondents that such like matters are to be left to the discretion of the Textile Quota Management Directorate and do not call for interference in the Constitutional jurisdiction of the Court. Mr. Abrar Hasan for such respondents has also urged that the support which respondent No.3, Pakistan Bedwear Exporters Association, has extended to the petitioners' pleas is without significance because that respondent is the petitioners' hand-picked association. However, out of the other associations, a more relevant has neither been pointed out nor sought to be joined. Reverting, it remains an admitted fact that entries in the petitioners' pass-books were initially made taking the year 1995 as the base. Such were, avowedly, reversed without according any hearing to the petitioners. There does not appear to be any appellate forum to which disputes may be taken. Thus, no alternative remedy is envisaged in law. It is now well settled that export quotas in the present day trade oriented world are property, carry vested rights and unlawful impingement thereof is actionable.
28. Mr. Khalid Anwar on the point has aptly referred to Export Promotion Bureau v. Qaiser Saifullah, 1994 SCM R 859. In the circumstances, the petitions are maintainable.
29. At this stage, we may take note of a plea from the side of the petitioners that the Government of Pakistan, in agreeing to the MOU in question, has succumbed to the pressures of a super power and has failed to safeguard the commercial interests of the country. It has further been pointed out by Mr. Khalid Anwar that while third world countries are subjected to export quotas and pushed into situations wherein import duties, applied by them, have to be progressively reduced and no countervailing quotas imposed, the advanced nations keep extracting uncalled fox economic advantages for self-suiting purposes. In context, some news-items have been placed on record with supporting affidavits from either side. For such a plea, this Court has to confine itself to the facts of the present petitions. It does not seem to us, as established, clearly or otherwise, that in concluding the above MOU, national interests came to be disregarded. There was a quid pro quo.
30. In the Process, Pakistan gained something in lieu of giving away something. Such may have been dictated by larger national interests. As a general proposition, however, it can hardly be over- emphasised that every citizen or institution of the State, whatever and wherever he or it may be, should always keep the national interest foremost and above all else, deviations being actionable.
31. For such reasons as above, the petitions are allowed. The matters would be re-examined and the official respondents shall take necessary steps to allocate quotas to the petitioners in consonance with their performance during the preceding year, commencing January 1 and ending December 31, 1995. At the same time, however, such respondents shall remain free to apply all other provisions in the notification dated 22-1-1996, as be attracted from time to time.