G.P. Singh, C.J.
1. Petitioner No. 1 in this petition is a company incorporated under the Indian Companies Act, 1913, and petitioner No. 2 is a shareholder of that company. The company is inter-alia engaged in the manufacture of different types of asbestos cement products. For the manufacture of the said products, the company uses raw asbestos fibre (non-combustible) which is imported from abroad. The company has its factories at Kymore in Madhya Pradesh. The Company was granted a licence on 25th March 1977 under Section 58(1) of the Customs Act, 1962 for having a private bonded warehouse at Kymore wherein the imported raw asbestos fibre was stored without payment of duty subject to the conditions set out in the licence. The licence was to remain in force for one year but under Clause 7 of the conditions attached to it the company was permitted to apply for renewal of the same. The licence was renewed from time to time and the last renewal was granted on 24th November 1981 for the period from 1st January 1982 to 31st December 1982. By a notice dated 18th September 1982 purporting to have been issued under Section 58(2)(a) of the Act, the Assistant Collector, Central Excise (Division Satna) wrote to the company that it was being given a notice of two months after which its licence to run the private bonded warehouses will be deemed to have been cancelled. By the same notice the company was intimated that a public customs bonded warehouse had started functioning at Bhopal and that the company may warehouse its goods in that warehouse at Bhopal. The company protested but it was informed by letter dated 23rd September 1982 issued by the Assistant Collector that it is the Government's policy not to grant licence for private bonded warehouse. The company wrote to the Collector, Customs and Central Excise, on 25th September 1982 to permit it to operate its private bonded warehouse at Kymore. The company also wrote to the Director, Central Board of Excise & Customs, New Delhi, on the same subject by letter dated 5th October 1982. In this letter the company requested the Director to issue necessary instructions to the Assistant Collector, Satna, to withdraw the notice relating to cancellation of the licence and to grant its renewal. On 27th November 1982 the company was intimated that it was granted permission to continue the private bonded warehouse till 31st December 1982. By order dated 3rd December 1982 the company was informed by the Superintendent, Central Excise, Kymore, that the company's application for renewal of the licence could not be entertained for the facility of private bonded warehouse had been dispensed with. The company in this petition under Article 226 of the Constitution prays for quashing of the notice dated 18th September 1982 (Ex. C) issued by the Assistant Collector regarding cancellation of the licence, the Assistant Collector's letter dated 23rd September 1982 (Ex. E) intimating the Government's policy not to grant licence for private bonded warehouse, and the order dated 3rd December 1982 (Ex. J) issued by the Superintendent, Central Excise, Kymore, that the application for renewal of the licence cannot be entertained.
2. The return filed on behalf of the respondents supports the cancellation of the licence and non-renewal thereof on the basis of the policy decision contained in Trade Notice No. 87/80-Customs, dated 1st August 1980 which is exhibited as Annexure R-I. Clause 2 which is the relevant clause of this policy statement reads as follows :
'It is accordingly been decided that, rather than licensing private warehouses in the interior, public warehouse will be appointed at selected places keeping in view the requirements of the Trade and Industry, the proximity to the ports of import, and the availability of customs expertise.'
3. Before taking up the contentions raised by the parties, it is convenient to notice the relevant statutory provisions. Clause (43) of this section defines 'warehouse' to mean a public warehouse appointed under Section 57 or a private warehouse licensed under Section 58. Clause (45) of the same section defines 'warehousing station' to mean a place declared as a warehousing station under Section 9. The Central Board of Excise and Customs is empowered under Section 9 to declare by notification in the official Gazette places to be warehousing stations at which alone public warehouses may be appointed and private warehouses may be licensed. Section 57 provides that at any warehousing station the Assistant Collector of Customs may appoint public warehouses wherein dutiable goods may be deposited without payment of duty. Section 58 which deals with the licensing of private warehouses reads as follows :
'58. Licensing of private warehouses.-(1) At any warehousing station, the Assistant Collector of Customs may license private warehouses wherein dutiable goods imported by or on behalf of the licensee, or any other imported goods in respect of which facilities for deposit in a public warehouse are not available, may be deposited without payment of duty.
(2) The Assistant Collector of Customs may cancel a licence granted under Sub-section (1) -
(a) by giving one month's notice in writing to the licensee ; or
(b) if the licensee has contravened any provision of this Act or the rules or regulations or committed breach of any of the conditions of the licence :
Provided that before any licence is cancelled under clause (b), the licensee shall be given a reasonable opportunity of being heard.
(3) Pending an enquiry whether a licence granted under Sub-section (1) should be cancelled under Clause (b) of Sub-section (2), the Assistant Collector of Customs may suspend the licence.'
4. By notification No. 1/77 (Customs), dated 2nd March 1977, Kymore was declared to be a warehousing station under Section 9. Bhopal was then not a warehousing station. It was, however, later declared to be a warehousing station. A public warehouse has been appointed under Section 57 at Bhopal. Kymore still continues to be a warehousing station under Section 9, for the notification issued under that section declaring it a warehousing station still continues to be operative and has not been annulled. There is no public warehouse at Kymore.
5. Learned counsel for the petitioners contended before us that on a true construction of Section 58, the licence for a private warehouse at Kymore granted in favour of the company could not be cancelled and its renewal could not be refused on the ground that the company could utilise the public warehouse at Bhopal which was 440 kilometres away from Kymore for storing the imported raw asbestos fibre. It is argued by the learned counsel that the licence could be cancelled or its renewal refused in case facilities for deposit in a public warehouse at Kymore were available but availability of facilities at Bhopal which was a different warehousing station and which was at a very long distance from Kymore could not be made a ground for denial of the licence. It was also contended by the learned counsel that no policy could be formulated contrary to the provisions of the Act and even if there existed a valid general policy each case for licence had to be decided having regard to its special features and the customs authorities could not close their mind on the basis of a policy in the matter of grant or renewal of licence under Section 58. The learned counsel placed reliance on the decision of the Court of Appeal in Regina v. Flintshire County Council Licensing (Stage Plays) Committee Ex parte Barrett  1 Q.B. 350 (C.A.).
6. In our opinion, the contentions raised by the learned counsel for the petitioners have considerable force. We have already stated that Kymore continues to be a warehousing station and that no public warehouse has been appointed under Section 57 at that place. In considering an application for grant of a licence for private warehouse at a warehousing station the Assistant Collector of Customs has to see whether 'facilities for deposit in a pubic warehouse are not available.' The availability of these facilities, on a proper construction of Section 58, must be considered with reference to the particular warehousing station for which the application is made to license a private warehouse. If an application for licensing a private warehouse can be rejected under Section 58 on the consideration that facilities for deposit in a public warehouse at any warehousing station are available, it will make Section 58 a dead letter, for such facilities would always be available at some warehousing station at any rate in the public warehouses appointed at the ports of import which are all warehousing stations. When under Section 9 the Board declares a place to be a warehousing station it must be presumed that it has considered that it is such place where having regard to the needs of Trade and Industry public warehouses may be appointed and private warehouses may be licensed. If at a particular warehousing station a public warehouse has been appointed under Section 57, the Assistant Collector will refuse licence for private warehouses at that station unless he rinds that the storage capacity of the public warehouse is small or for some other reason facilities for storing the goods in that warehouse are not available. But when at a particular warehousing station there is no public warehouse appointed under section 57, the licensing authority cannot refuse application for a licence or cancel a licence or refuse renewal of a licence for a private warehouse on the ground that facilities are available in a public warehouse at a different warehousing station. For example, if an application is made for a private warehouse of a warehousing station in the interior which has no public warehouse it would not be open to the Assistant Collector to refuse the application on the ground that facilities are available at the ports of importation such as Bombay or Calcutta for deposit of imported goods in a public warehouse. On the same reasoning it was not open to the customs authorities to cancel the petitioner company's licence of private warehouse at Kymore or refuse its renewal on the ground that there was now a public warehouse at Bhopal where facilities for storing are available.
7. We have already quoted Clause (2) of the policy statement contained in the Trade Notice dated 1st August 1980 (Annexure R-I). The policy is that rather than licensing private warehouses in the interior, public warehouses will be appointed at selected places keeping in view the requirements of the Trade and Industry, the proximity to the ports of import and the availability of customs expertise. The policy does not say and could not say anything contrary to what is provided in Sections 9, 57 and 58 of the Customs Act. A proper implementation of this policy would be to appoint public warehouses at warehousing stations in the interior and then not to grant or renew licences for private warehouses at those stations but it is not a proper implementation of the policy to refuse to grant or renew a licence for a private warehouse at a warehousing station where there is no public warehouse on the ground that there is a public warehouse at a different warehousing station.
8. It is well settled that an authority vested with a statutory discretion must exercise its power in good faith for furtherance of the object of the statute; it must not proceed upon a miscontruction of the statute ; it must take into account matters relevant for exercise of the power and it must not be influenced by irrelevant matters. The leading authority on this point is the statement of principle by Lord Greene MR in Associated Provincial Picture Houses Ltd. v. Wednesbury Corporation,  2 All ER 680 (C.A.) at p. 682, wherein he said : 'A person entrusted with a discretion must direct himself properly in law. He must call his own attention to the matters which he is bound to consider. He must exclude from his consideration matters which are irrelevant.' These words of Lord Greene MR have been cited with approval by the House of Lords and the Supreme Court [Padfied v. Minister of Agriculture, Fisheries and Food (1968) 1 All ER 694 (H.L.) ; United Kingdom Association of Professional Engineers and Anr. v. Advisory, Conciliation and Arbitration Service, (1910)1 All ER 612 (H.L.) at p. 620 ; Rohtas Industries Ltd., v. S.D. Agarwal, A.I.R. 1969 SC 707 at p. 717). In the instant case the customs authorities in cancelling the company's licence and in refusing to renew the same under Section 58 misdirected themselves in law in that they proceeded upon a misconstruction of the section, and took into account an irrelevant fact that there was a public warehouse at Bhopal.
9. Further, by acting blindly upon the policy statement in the Trade Notice they virtually shut their ears and eyes to the company's application for continuance of the licence and its renewal. The guiding principle as to how far adoption of a policy can curtail a statutory discretion was laid down by Bankes LJ in R. v. Port of London Authority  1 KB 176 (C.A.) at p. 184. To quote his words : 'There are on the one hand cases where a tribunal in the honest exercise of its discretion has adopted a policy, and, without refusing to hear an application, intimates to him what its policy is, and that after hearing him it will in accordance with its policy decide against him unless there is something exceptional in his case. If the policy has been adopted for reasons which the tribunal may legitimately entertain, no objection could be taken to such a course. On the other hand, there are cases where a tribunal has passed a rule, or come to a determination, not to hear any application of a particular character by whomsoever made. There is a wide distinction to be drawn between these two clauses.' This passage was quoted with approval by Lord Reid in British Oxygen Co. Ltd. v. Minister of Technology  3 All ER 165 (H.L.) at p. 170. After quoting it Lord Reid observed : 'The general rule is that anyone who has to exercise a statutory discretion must not shut his ears to the application. I do not think that there is any great difference between a policy and a rule. There may be cases where an officer or authority ought to listen to a substantial argument reasonably presented urging a change of policy. What the authority must not do is to refuse to listen at all. But a Ministry or large authority may have had to deal already with a multitude of similar applications and then they will almost certainly have evolved a policy so precise that it could well be called a rule. There can be no objection to that provided the authority is always willing to listen to anyone with something new to say-of course I do not mean to say that there need be an oral hearing.' The policy formulated, however, must not be extraneous or irrelevant in the context of the statutory discretion conferred on the authority [Fletcher v. London (Metropolis) Licensing Planning Committee (1975) 2 All ER 916 (H.L.)]. Putting it briefly, there is no objection if a licensing authority adopts a general policy which is fair and just and consistent with the statute under which it functions. Once such a policy is laid down, the authority is entitled to apply the policy in the individual cases which come before it. The only qualification is that the authority, must not apply the policy so rigidly as to reject an application without affording an opportunity to the applicant to put forward reasons urging that the policy should be changed or that it should not be applied to him [Saqnata Ltd. v. Norwich Corporation (1971) 3 W.L.R. 133 (C.A.) at pp. 149-141 (Lord Denning M.R.)]. As a necessary corollary, the licensing authority should not pursue consistency on the basis of a policy at the expense of the merits of individual cases [Regina v. Flintshire County Council Licensing (stage plays) Committee Exporte Barrett, supra at p. 368]. These principles were accepted by the Supreme Court in Shri Rama Sugar Industries v. State of A.P., AIR 1974 SC 1745 at p. 1750) subject to a doubtful exception upheld by a majority of three against two that the amplitude of a discretionary power in a given case may be so wide that the competent authority may be impliedly entitled to adopt a fixed rule never to exercise its discretion in favour of a particular class of persons. The customs authorities in the instant case not only misconstrued Section 58 but they also misunderstood the policy. If their understanding of the policy was correct it was inconsistent with Sections 9, 57 and 58 and, therefore, invalid. In any case, the authorities should have been prepared to listen the company that its case was such that the policy should not be applied to it. Section 58 does not confer so wide a discretion that the Assistant Collector may adopt a fixed rule never to grant the licence in favour of a particular class of persons. Thus the customs authorities in cancelling the company's licence and in refusing to renew it misconstrued the statute and the policy and did not apply correct principles and their action cannot be upheld.
10. The petition is allowed. We quash the Assistant Collector's notice dated 18th September 1982 (Ex. C), the order of the Assistant Collector dated 23rd September 1982 (Ex. E) and the order of Superintendent, Central Excise, Kymore, dated 3rd December 1982 (Annexure-'J). We direct the respondents to consider the petitioner Company's application for renewal of the licence under Section 58 of the Customs Act and to decide it in accordance with law within one month. We further direct the respondents to continue the facility of private bonded warehouse to the company at Kymore till the disposal of the application for renewal of the licence. The petitioners will get costs of this petition from respondent No. 1, the Union of India. Counsel's fee Rs. 500, if certified. Security amount be refunded to the petitioners.