Policy-based dereservation and integrated plant approval upheld where rational classification and industrial policy supported the decision.

A policy-based dereservation of zip fasteners for integrated plants was upheld because the Central Government acted within its statutory power on expert advice and treated integrated plants as a distinct class. The classification was held to have a rational basis linked to quality control, anti-smuggling objectives, competitiveness, and world-market standards, so the Article 14 challenge failed. Approval of the integrated plant was also sustained as consistent with industrial policy, and the absence of a separate export commitment did not vitiate the permission. A later ministerial note, issued after approval, was treated as non-binding and incapable of altering the completed decision.

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Issues: (i) Whether the notification dereserving integrated plants manufacturing zip fasteners was ultra vires Section 29-B(2B) of the Industries (Development and Regulation) Act, 1951 and Item 38 of the First Schedule; (ii) whether the notification was arbitrary, irrational, or discriminatory under Article 14 of the Constitution of India; (iii) whether approval granted for the integrated plant was contrary to the industrial policy and could be invalidated for want of an export commitment; (iv) whether the later ministerial note could alter the approval already granted.

Issue (i): Whether the notification dereserving integrated plants manufacturing zip fasteners was ultra vires Section 29-B(2B) of the Industries (Development and Regulation) Act, 1951 and Item 38 of the First Schedule.

Analysis: The reservation of zip fasteners for the small scale sector continued in substance, but the notification carved out only integrated plants manufacturing all components. The statutory power under Section 29-B(2B) permitted the Central Government to determine what article or class of articles could be reserved for small scale production on the basis of expert advice. The change was made after consideration of the Advisory Committee's recommendation, and the integrated plant was treated as a distinct class.

Conclusion: The notification was not ultra vires the Act.

Issue (ii): Whether the notification was arbitrary, irrational, or discriminatory under Article 14 of the Constitution of India.

Analysis: The integrated plant and the small scale units were found to be different classes. The policy basis for the change included quality control, reduction of smuggling, improved competitiveness, and the need to meet world market standards. In that background, the classification was held to have a rational basis and to be connected with the object sought to be achieved.

Conclusion: The challenge under Article 14 failed.

Issue (iii): Whether approval granted for the integrated plant was contrary to the industrial policy and could be invalidated for want of an export commitment.

Analysis: The approval was considered consistent with the industrial policy because the enterprise had international reputation and its products were capable of providing access to the world market. The Court also held that the absence of a post-approval export condition did not vitiate the permission, especially when the approval had already been granted and the policy did not justify judicial interference with the administrative decision.

Conclusion: The approval was not contrary to the industrial policy and could not be struck down for absence of an export commitment.

Issue (iv): Whether the later ministerial note could alter the approval already granted.

Analysis: The note was made after the approval had already been issued. It was treated only as a recommendation and not as a binding amendment to the approval. No legal basis was found to reopen or vary the completed decision on that basis.

Conclusion: The later note could not affect the approval already granted.

Final Conclusion: The writ petition disclosed no ground for interference, and the challenged notification and approval were upheld in substance.

Ratio Decidendi: A policy-based exemption or dereservation made on expert recommendation under the statutory power, creating a rational distinction between a reserved sector unit and an integrated plant, is valid if it is neither arbitrary nor inconsistent with the governing industrial policy; a subsequent internal governmental note cannot undo an approval already granted.

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