Delhi High Court
Agri Trade India Services Pvt. Ltd. And ... vs Union Of India (Uoi) And Ors. on 18 August, 2006
Equivalent citations: 132(2006)DLT500, 2006(204)ELT161(DEL)
Author: S. Muralidhar
Bench: Mukul Mudgal, S. Muralidhar
JUDGMENT S. Muralidhar, J.
Introduction
1. Important questions of law concerning the interpretation of Section 5 of the Foreign Trade (Development and Regulation) Act, 1992 (hereinafter `the Act') and certain notifications issued there under arise for consideration in this writ petition. The cause for this invitation to judicial determination is a cross-border transaction that requires the petitioners before us to export 30,000 metric tonnes (MT) of Chick Peas from this country to her neighbour, Pakistan.
2. For those needing proof that globalisation of trade is not a recent phenomenon one has only to look at the history and the evolution of cuisines around the world. In many countries, the currently popular cuisine is an adaptation of a foreign one. The popularity in our country of Chinese, Italian and recently Lebanese food bears testimony to this growing trend. Indian spices and pulses were among the earliest to be traded at the height of the ancient civilizations of Egypt, Greece and Rome. As much as we relish our chick peas (chana) and the imported Kabuli variety, our `desi' chick peas it seems is equally popular abroad. Chick peas are devoured in many forms: The Arab speaking world relishes its falafel (ground chickpeas shaped into balls and fried) and hummus (a smooth thick mixture of mashed chickpeas with garlic). Global trade in chick peas as in other pulses has indeed grown.
The Act and the Policy
3. The relevant provisions of the Act may be first noticed. Section 3 of the Act reads as follows:
3(1) The Central Government may by order published in the Official Gazette, make provisions for the development and regulation of Foreign Trade by facilitating imports and increasing exports;
(2) The Central Government may also, by order published in the Official Gazette, make provisions for prohibiting, restricting or otherwise regulating in specified classes of cases and subject to such exceptions, if any, as the case may be made by or under the order, the import and export of goods;
(3) All goods to which any order under Sub Section (2) applies shall be deemed to be goods the import of export of which has been prohibited under Section 11 of the Custom Act, 1962 and all the provisions of that Act shall have effect accordingly.
The power to formulate and announce the export and import policy as well as amend that policy is contained in Section 5 of the Act which reads thus:
5. The Central Government may, from time to time formulate and announce by notification in the Official Gazette the import and export policy and may also in the like manner amend that policy.
The power to amend the policy, therefore, flows from Section 5 itself. This power to make the policy and to amend the policy has been delegated by the Act to the Central Government.
4. For some years now there have been major changes in India's Foreign Trade Policy (`Policy'). The Preamble to the Policy, which is itself a document of statutory character notified under Section 5 of the Act, records the objectives of the Policy as under:
OBJECTIVES Trade is not an end in itself, but a means to economic growth and national development. The primary purpose is not the mere earning of foreign exchange, but the stimulation of greater economic activity. The Foreign Trade Policy is rooted in this behalf and built around two major objectives. These are:
(i) To double our percentage share of global merchandise trade within the next five years; and
(ii) To act as an effective instrument of economic growth by giving a thrust to employment generation.
Para 1.3 of the Policy spells out the power of the Central Government to amend the Policy in public interest and reads as under:
Amendments 1.3 The Central Government reserves the right in public interest to make any amendments to this Policy in exercise of the powers conferred by Section 5 of the Act. Such amendment shall be made by means of a Notification published in the Gazette of India.
Para 2.1 of the Policy reflects the general policy direction in the following words:
Exports and Imports 2.1 Exports and Imports shall be free unless regulated free, except in cases where they are regulated by the provisions of this Policy or any other law for the time being in force. The item wise export and import policy shall be, as specified in ITC(HS) published and notified by Director General of Foreign Trade, as amended from time to time.
5. Whenever there is an amendment to the Policy, either in the area of the import or export, such change will doubtless affect transactions that are underway in the form of contracts already entered into prior to the change. To account for such transactions that may have already been entered into prior to the change, the Policy itself sets out the consequence of the change on such transactions in Para 1.5 which reads as under:
1.5 In case an export of import that is permitted freely under this Policy is subsequently subjected to any restriction or regulation, such export or import will ordinarily be permitted notwithstanding such restriction or regulation, unless otherwise stipulated, provided that the shipment of the export or import is made within the original validity of an irrevocable letter of credit established before the date of imposition of such restriction.
6. The very idea of introducing Para 1.5 in the Policy itself is with a view to permitting transactions which have reached a stage of certainty, but which have been concluded prior to the change, to proceed as if the change had not taken place. The second aspect that requires to be noticed is that the mode of making the change, which is by way of a notification in the Official Gazette, is also specified in Section 5 of the Act itself.
Factual Matrix
7. With the background of the above statutory scheme and Policy, we now turn to examine the factual conspectus of the present writ petition. Petitioner No. 1, a Company having its registered office in Mumbai, is a subsidiary of Petitioner No. 2 (Agrocorp International Pte. Ltd.) which is a company incorporated in Singapore. It is the case of the petitioners that on 12.6.2006, the Trading Corporation of Pakistan (TCP) invited international bids for the supply of 150,000 MT of Chick Peas. Petitioner No. 2 is stated to have submitted its bids some time in the first week of June 2006. On 17.6.2006 it was awarded two contracts for supply of 15,000 MT each of Chick Peas at USD 624 per MT and USD 650 per MT respectively. One of the terms of the contract was that the awardee of the contract was required to submit, by 22.6.2006, a Performance Guarantee equivalent to 5 per cent of the value of the contracted quantity. It is stated that on 20.6.2006 the Petitioner No. 2 furnished a combined Performance Guarantee equivalent to 5 per cent of the value of the contracted quantity under the two contracts, through a bank in Singapore. The petitioners submit that the contract for supply of Chick Peas to TCP in the agreed quantities stood concluded by this date.
8. The petitioners state that from 21.6.2006 they started mobilizing Chick Peas for export and for this purpose engaged the services of Emmsons International Limited located in Delhi, to procure and arrange for the consignments to reach the port at Kandla from where they would be shipped either to the Bin Qasim Port or the Karachi Port.
9. Around this time, the Cabinet Committee on Pricing was engaged in finding means to tackle the seasonal rise in the prices of some essential commodities. The Central Government identified three essential commodities that were driving the prices up - wheat, sugar and pulses. At a Meeting of the Cabinet Committee on Pricing held on 22.6.2006, it was decided that there would be a ban on the export of pulses with a view to augmenting the supply side. It was decided to allow private players to import wheat and to a limited extent, sugar.
10. The Finance Minister met the Press soon after the Meeting of the Cabinet Committee on Pricing and announced these decisions. The newspapers of 23.6.2006 (photocopies of the news clippings have been placed on record) prominently announced the aforesaid decision of the Government of India. The Asian Age and the National Herald from New Delhi, both dated 23.6.2006, indicated in the headlines that the export of pulses was banned. The government claims that the electronic media also carried this news on 22.6.2006 itself.
11. Admittedly, the aforementioned ban on the export of pulses was not issued in the form of a notification simultaneously. That notification was issued on 27.6.2006, five days after the news of the ban appeared in the press.
12. Three days prior to the notification, on 24.6.2006, pursuant to the contract entered into between the TCP and Petitioner No. 2, and the furnishing of the Performance Guarantee by the petitioners, two irrevocable letters of credit (LCs) were opened by the TCP in favor of Petitioner No. 1 through M/s Habib Bank Limited for USD 10,237,500 and USD 9,828,000 respectively. On 27.6.2006, the petitioners filed their shipping bills, proforma invoices for export of the 30,000 MT of Chick Peas at Kandla. However, the Customs authorities did not permit the shipment to take place and orally asked the petitioners to seek clarification from the Director General of Foreign Trade (DGFT).
13. On 27.6.2006 by a notification the Central Government made amendments to the Policy prohibiting the export of several pulses in the following manner:
S.O.(E) In exercise of the powers conferred by Section 5 of the Foreign Trade (Development & Regulation) Act, 1992 (No. 22 of 1992) read with Para 1.3 and Para 2.1 of the Foreign Trade Policy, 2004-2009, the Central Government hereby makes the following amendments in the ITC(HS) Classifications of the Export and Import items, 2004-2009 as amended from time to time.
2. With immediate effect the following new entry may be inserted after entry at Sl. No. 44 in Chapter 7 of Table B under Schedule 2 of ITC(HS):
Sl. No. Tariff Item HS Code Unit Item Description Export Policy Nature of Restriction 44 A 0713 Kg.
Dried Leguminous Vegetables, Shelled, whether or not skinned or split Prohibited Not permitted to be exported.
07131000 Kg.
Peas (Pisura sativum) Prohibited Not permitted to be exported.
07132000 Kg.
Chickpeas (garbanzos) Beans (Vigna spp., Phaseolus spp.):
Prohibited Not permitted to be exported.
07133100 Kg.
Beans of the species Vigna mungo (L.) Hepper or Vigna radiata (L.) Wilczek Prohibited Not permitted to be exported.
07133200 Kg.
Small red (Adzuki) beans (Phaseolus or Vigna angularis) Prohibited Not permitted to be exported.
07133300 Kg.
Kidney beans, including white pea neams (Phaseolus vulgaris) Prohibited Not permitted to be exported.
071339 Other:
Prohibited Not permitted to be exported.
07133910 Kg.
Guar seeds Prohibited Not permitted to be exported.
07133990 Kg.
Other Prohibited Not permitted to be exported.
07134000 Kg.
Lentils Prohibited Not permitted to be exported.
07135000 Kg.
Broad beans(Vicia faba var major) and horse beans (Vicia faba var equina, vicia faba var minor) Prohibited Not permitted to be exported.
071390 Kg.
Other:
Prohibited Not permitted to be exported.
07139010 Kg.
Tur(arhar) Prohibited Not permitted to be exported.
Other:
07139091 Kg.
Split Prohibited Not permitted to be exported.
07139099 Kg.
Other Prohibited Not permitted to be exported.
3. The above amendment shall remain in force for a period of six months from the date of its issue and shall not apply to imports already effected against Advance licenses/Authorisations issued prior to the date of issue of this notification.
4. This issues in Public Interest.
(K.T. CHACKO) DIRECtor GENERAL OF FOREIGN TRADE AND EX-OFFICIO ADDITIONAL SECRETARY TO THE GOVT. OF INDIA (Issue from File No. 01/91/180/304/AM07/PC-III)
14. On 28.6.2006, Petitioner No. 1 wrote to the DGFT pointing out that they had already concluded a deal for export of 30,000 MT Chick Peas to Pakistan and that two irrevocable LCs had already been opened on 24.6.2006 by the buyer. In this letter it was stated as under:
We have come to know that The Government of India has issued a Notification No. 15 dated 27th June'2006, restricting export of pulses under various heading of Tariff Item H.S. Code 0713. In this regard we would like to refer Para 1.5 of Legal framework of Export/Import Policy 2005 - 09 for transitional arrangement which allows the export of restricted items provided an irrevocable Letter of Credit is established before the date of such notification.
In our case, notification was issued on 27-06-2006 and an irrevocable Letter of Credit was established on 24-06-2006 before the date of notification and as per terms of L/C's, shipment is allowed up to 23-07-2006 and 21-08-2006 being the final validity of the L/C's.
We request you to please clarify whether we can export to Pakistan, under the said L/C's and up to what period. We would also like to request you to please communicate to the concerned authorities suitably in order to enable us to proceed further.
15. It is stated that on 29.6.2006, the petitioners' representatives meet the DGFT and handed over the above representation dated 28.6.2006. It is claimed that there was no reply to this representation. A further representation was made on 3.7.2006 to the Commissioner of Customs at Kandla Port.
16. On 4.7.2006 a second notification was issued by the Central Government purporting to amend the earlier Notification dated 27.6.2006. The said Notification dated 4.7.2006 reads thus:
DGFT NOTIFICATION NO. 19(RE-2006)/2004-2000 dated 4.7.2006 Amendments in Para-3 of Notification No. 15 dated 27.6.2006 of the Foreign Trade Policy, 2004-2009.
S.O.(E) In exercise of the powers conferred by Section 5 of the Foreign Trade (Development & Regulation) Act, 1992 (No. 22 of 1992) read with Para 1.3 and Para 2.1 of the Foreign Trade Policy, 2004-2009, the Central Government hereby makes the amendment in para 3 of Notification No 15 dated 27th June 2006, to include the following sentence, at the end of the said para:
Further the transitional arrangements notified under para 1.5 of the Foreign Trade Policy, 2006 shall not be applicable for export of pulses against irrevocable Letters of Credit opened on or after 22.6.2006 as the decision of the Government prohibiting the export of pulses was announced and got widely publicised on 22.6.2006 in the electronic and print media.
2. This issues in Public Interest.
(K.T.CHACKO) DIRECtor GENERAL OF FOREIGN TRADE AND EX-OFFICIO ADDITIONAL SECRETARY TO THE GOVT. OF INDIA.
17. The Petitioners made two further representations - one to the Prime Minister and the other to the Union Agriculture Minister. Thereafter, on 20.7.2006, the petitioners filed this writ petition seeking inter alia the following reliefs:
(a) for quashing the Notification dated 4.7.2006 on the ground that it is ultra vires Section 5 of the Act as well as Article 14 and 300A of the Constitution.
(b) that the benefit of Para 1.5 of the Foreign Trade Policy would be available to the petitioners notwithstanding the impugned Notification dated 4.7.2006 and
(c) a mandamus to the respondents to allow the petitioners to export the contracted quantity of Chick Peas as per the letters of credit already opened.
On 21.7.2006, this Court directed notice to issue in the writ petition.
Pleadings of the Parties
18. The writ petition set out all the above facts and enclosed copies of the documents showing a concluded contract between the exporter and importer. It enclosed copies of the LCs dated 24.6.2006.
19. The main ground on which the petitioners have questioned the validity of the Notification dated 4.7.2006 is that it was a piece of a delegated legislation and that even if the Central Government could restrict or prohibit the export of certain goods it could not seek to make it retrospective with a view to adversely affect contractual and property rights and obligations, which have already accrued. It was further averred that the manner of bringing about the amendment was already stipulated in Section 5 of the Act, which was by a notification in the Official Gazette. What in effect the Notification dated 4.7.2006 sought to do was to treat the date of the ban as 22.6.2006 when a decision to that effect was taken by the Cabinet Committee on Pricing and not 27.6.2006 when it was in fact notified in the Official Gazette and that this was in the teeth of the Section 5 of the Act. In particular in ground VI of the writ petition it was stated thus:
VI. Because the adoption of a date of an opening of LC i.e. 22nd June 2006 as a cut-off date (in Notification No. 19 dated 4th July 2006) for restricting and prohibiting exports on the ground that the decision to prohibit exports of pulses was announced and widely published in the electronic and print media on that date is wholly contrary to and in the teeth of the mandate under Section 5 which permits the export policy to take effect only from such date it is formulated and announced by a means a notification in the official gazette, that is to say, from the date of notification.
20. In reply to the writ petition, the Union of India and the DGFT, respondents 1 and 2 respectively, contended that the Central Government was fully within its powers to amend the Policy from time to time in public interest. Explaining the steps leading to the imposition of the ban, the counter affidavit stated thus:
...the respondent Government in its bid to check the seasonal rise in prices of some essential commodities banned the export of pulses on 22.06.2006 and allowed the private sector to import wheat and sugar to augment the supplies and supplement the Government efforts through PDS route. The States have been asked to clamp down on holding and black marketing to bring down the prices. This decision was taken by the Government in a high level meeting to look into such regulations of exports of essential commodities and in the public interest. The decision on export were restricted to two commodities such as pulses and sugar. It was also reported in various newspapers of such decision of the respondent regarding the above ban and prohibition on the export of pulses and sugar. The only idea of the respondent was to check and control the rise in prices of essential commodities and to liberalise import of wheat through private sector and sugar in strictly time bound manner, beside placing a blanket ban on the export of pulses and sugar in the public interest. It was also reported and informed to all the exporters about the intention and decision of the Government for making such prohibitions and publishing the relevant notifications banning the export of pulses and other essential commodities.
Accordingly, the respondents decided to ban the export of pulses with immediate effect with a view to control spiraling prices of some of the commodities and this decision was announced by Union Finance Minister on 22.06.2006 duly covered by the Electronic Media and was also widely reflected in the print media on subsequent date. Accordingly, the notification No. 15 (RE-2006)/2004-2009 dated 27.06.2006 was issued by Director General of Foreign Trade for giving effect to the export ban on pulses.
21. The counter affidavit also relied on three newspaper clippings to substantiate the point that the fact of ban was already widely known in the print media. It was further claimed that it was made known in the electronic media on 22.6.2006. The counter affidavit stated:
Although, the above notifications were published in the Gazette on 27.06.2006 and 04.07.2006, however, the trading and exporting community was well aware of the ban on exports announced by the Government on 22.06.2006, hence, any export related transactions entered into or confirmed by an Exporter on or after 22.06.2006 is with a view to circumvent the export ban and cannot be allowed in the public interest.
22. The main thrust of the counter affidavit, apart from providing justification for the imposition of the ban on 27.6.2006, as well as the later notification dated 4.7.2006 by which the ban was made effective retroactively, i.e., from 22.6.2006, is to show that the petitioners and other exporters had acted with malafide intentions with a view to causing wrongful loss to the public exchequer and wrongful gain to themselves. The precise assertion in the counter affidavit is in the following words:
The respondent is under domain to issue such notifications in public interest and also regulate and check the high-rise prices of various essential commodities. Therefore, there is a rational and justification of the prohibition imposed by the respondents on the export of pulses and other essential commodities and the approach of utmost caution adopted by the respondents on the issue of abovementioned public interest for controlling the prices of essential commodities and such action of the respondents has in fact, dampen inflation and brought restrain in the market.
It is also not out of place to mention here that the malafide intentions of the petitioners and other exporters could be evident and judged from the fact that as per the information received by DGFT, so far (the actual figures may be much higher), irrevocable Letter of Credits were opened for exporting more than 1.20 lacs MTs of pulses between 22.06.2006 and 27.06.2006. 'This is close to 45% of the Country's entire pulses export during the financial year 2004-2005 (2.75 lacs MTs). Thus, in this respect, it is clear that intentionally and deliberately, the petitioners procured the Letter of Credits within the above period after the pronouncement of the Policy and decision of respondents banning and prohibiting the export of pulses with a view to cause wrongful loss to the respondents and wrongful gain to themselves. Hence, it shows the utmost malafides and manipulations on the part of the petitioners and hence, they are not entitled for any relief sought, therefore, the present petition is liable to be dismissed with exemplary costs.
23. The counter affidavit did not specifically deny any of the correspondence relied upon by the petitioners or the fact of the furnishing of the bank guarantee or opening of the LCs on 24.6.2006. However, the respondents contended that there was a manipulation by the petitioners, to the following effect:
That the contents of the para No. 15 of the writ petition as stated are the facts stated by the petitioners on the basis of some records for which the petitioners be put to strict proof of the same and are wrong and specifically denied. However, there is a manipulation disclosed by the petitioners itself in the petition in para 15 (viii) in which it is mentioned that the shipping invoices for the export were dated 22.06.2006 and that the irrevocable Letter of Credits are dated 24.06.2006, this shows the malafide intention and ulterior motives of the petitioners and hence, they are not entitled even otherwise for any relief from this Hon'ble Court.
24. In rejoinder to the above counter affidavit, the petitioners have maintained that the amendment to the Policy could not have been effected retroactively from a date when the ban on export of Chick Peas was not notified as required by Section 5 of the Act. The petitioners contend that reference by the respondents to the total export of pulses was irrelevant since the petitioners were concerned only with their respective transaction which was less than 0.6 per cent of the total domestic production of Chick Peas. It was stated thus:
...Furthermore, it is not the Government policy or any policy decision which has been challenged in the present petition. As a matter of fact the Petitioners have only challenged the retroactive operation of the same, which in our respectful submission is beyond the powers conferred under Section 5 of the Act.
25. As regards the allegation pertaining to the manipulation in the shipping invoice, the petitioners sought to explain it as under:
As stated earlier Petitioners had given a performance guarantee of approximate US$ 1.0 million to ensure the timely performance/supply. To save time the petitioners had started mobilizing Chick Peas from 21st June 2006. The Shipping Invoices cum packing lists were prepared on 22nd June 2006 to expedite the process at the end of the Petitioner. The said Shipping Invoices were forwarded to the Clearing and Handling Agent (CHA) at Kandla for further submitting with Customs, Kandla. The publication of the news of prohibition on export of pulses created confusion with the Custom Authorities as they were not sure about the pending/transitional exports. Thus the Customs Authorities informally refused to accept the Shipping Invoice till the time position was clear to them. Finally, the Notification was issued on 27th June 2006. The Petitioner asked its CHA to claim that the petitioner already has irrevocable L/Cs in their favor and thus their shipment is saved/protected under paragraph 1.5 of the Foreign Trade Policy. Accordingly, the CHA mentioned the details of L/C in the Shipping Invoices already lying with it. The inconsistency in the document is due to the above circumstances.
Submissions of the counsel
26. Considering the urgency of the matter and with the consent of the parties, the Court took up the writ petition for final hearing on 8.8.2006 and 11.8.2006. The submissions of Dr. A.M. Singhvi, the learned senior counsel appearing for the petitioners, are as under:
(a) The express wording of Section 5 of the Act does not permit a change or an amendment to the Policy in a manner other than what is contemplated by that Section. In other words, the amendment could only be by way of a notification in the Official Gazette. The Central Government cannot rely on Press releases and Press announcements to construe the actual date the amendment became effective.
(b) The wording of Section 5 of the Act indicates that such amendments can only be prospective in nature. The words "from time to time" occurring in Section 5 are indicative of the prospective nature of the amending power.
(c) While a legislation can certainly be given retrospective effect, a delegated legislation, in the form of a notification as in the instant case, cannot be given retrospective effect unless such a power to give retrospective effect is expressly indicated in the statute itself.
(d) Any amendment to the Policy made contrary to the mode stipulated in Section 5 of the Act is ultra vires Section 5 of the Act and, therefore, illegal. The Notification dated 27.6.2006 was effective only from the date of the notification and could not be given retrospective effect from any earlier date.
(e) Since the Notification dated 4.7.2006 is bad in law, the petitioners cannot be denied the benefit of Para 1.5 of the Policy, the conditions of which are fully satisfied. Therefore, with the striking down of the impugned notification dated 4.7.2006, a mandamus should issue to respondents to permit the petitioners to export the contracted quantity of Chick Peas to Pakistan.
27. In support of his submissions, Dr. Singhvi placed reliance, inter alia, on the decisions of the Hon'ble Supreme Court in Union of India v. Ganesh Das Bhojraj ; Arjan Singh v. State of Punjab ; K. Narayanan v. State of Karnataka and Mst. Rafiquennessa v. Lal Bahadur Chetri .
28. In reply, Mr. P.P. Malhotra, the learned Additional Solicitor General of India, submitted as follows:
(a) The power of the Central Government to either announce or amend the Policy is undeniable. By the very wording of the statutory provisions, the power to give effect to such change retroactively was implied.
(b) It was permissible for the Central Government to introduce an amendment to the earlier notification dated 27.6.2006 so as to take away the benefit of Para 1.5 of the Policy. The impugned Notification dated 4.7.2006 was in effect only adding a further paragraph to the original Notification dated 27.6.2006 and if so read, the retrospective nature of the change would become apparent.
(c) The petitioners cannot claim the benefit of Para 1.5 of the Policy as a matter of right since that paragraph only states that in certain circumstances the export pursuant to a concluded transaction would "ordinarily be permitted". Mr. Malhotra submitted that the word "ordinarily" meant that it was not invariable and that therefore the Central Government would be within its powers to withdraw this benefit in the larger public interest.
(d) In a span of just 5-6 days exports constituting 45 per cent of the total export of pulses were sought to be made by the traders. Therefore, public interest required the withdrawal of the benefit under Para 1.5 and this necessitated the subsequent Notification dated 4.7.2006. There was nothing illegal or arbitrary therefore about this subsequent Notification dated 4.7.2006.
(e) The respondents in their counter affidavit had taken a specific objection that the deponent of the affidavit in support of the writ petition had not shown how he was authorised to swear the said affidavit on behalf of the petitioners. In rejoinder, the petitioners had only shown the authorisation of the deponent vis-a-vis Petitioner No. 2 and not Petitioner No. 1. This was fatal to the maintainability of the petition in the present form.
(f) Considering the fact that the Petitioner No. 1 is a company registered in Mumbai, Petitioner No. 2 in Singapore and the place from where the export is to be made Kandla in Gujarat, this Court did not have the territorial jurisdiction to entertain this writ petition.
29. In support of his submissions, Mr. Malhotra relied upon the judgments of the Hon'ble Supreme Court in Kailash Chandra v. Union of India , Kusum Ingots and Alloys Ltd. v. Union of India and R.C. Tobacco v. Union of India . Both parties have also filed their written submissions.
Issues that arise for consideration
30. On the basis of the above pleadings and submissions, the following issues arise for consideration in this writ petition:
(1) Is the writ petition liable to be dismissed for lack of an appropriate authorisation by Petitioner No. 2 of the deponent of the supporting affidavit?
(2) Does this Court lack territorial jurisdiction to entertain this writ petition?
(3) Is the impugned Notification dated 4.7.2006 ultra vires Section 5 of the Act and does it deserve to be declared to be illegal as such?
(4) If the petitioners succeed on points 1 to 3 above, are they entitled to proceed with the export of the contracted quantity of Chick Peas?
It may be mentioned her that in their written submissions, the respondents have made submissions and referred to case law on the point whether the petitioners could base their claim on promissory estoppel. However, since no such argument was advanced by the petitioners, we refrain from examining such issue.
Re: Issue No. 131. In support of the writ petition, an affidavit has been filed of Shri Pradeep Jindal, son of Shri Faqir Chand Jindal, describing himself as the authorized representative of Petitioner No. 2. He also claims to be authorized to file the supporting affidavit on behalf of Petitioner No. 1. In response to the objection raised in a counter affidavit by the respondents to the effect that the petitioners have not disclosed how the deponent is authorized to file the writ petition, the petitioners have along with their rejoinder produced a Resolution dated 17.7.2006 passed by the Directors of the Petitioner No. 2 Company authorizing Shri Pradeep Jindal to take all necessary steps including legal action in connection with the transactions that form the subject matter of the present petition. Dr. A.M. Singhvi, the learned senior counsel for the petitioners, during the course of arguments on 11.8.2006 submitted that a specific authorisation by Petitioner No. 1 did exist and sought time to produce it on or before 17.8.2006. The said authorisation has been since produced and we are satisfied, therefore, that there is no merit in the first preliminary objection of the respondents as to the authority of the deponent of the affidavit in support of the writ petition. Issue No. 1 is accordingly answered in favor of the petitioners and against the respondents.
Re: Issue No. 232. The issue of territorial jurisdiction in the context of Article 226 of the Constitution has come up for consideration time and again before the Hon'ble Supreme Court of India. In Oil and Natural Gas Commission v. Utpal Kumar Basu , it was held that the question whether the Court had territorial jurisdiction to entertain a writ petition under Article 226 had to be resolved with reference to the pleadings in the writ petition, the truth or otherwise of such averments not being material for deciding such question. In Union of India v. Adani Exports Ltd. , it was held that in order to confer jurisdiction on High Court, the petition was required to disclose that the entire or part of the cause of action which arose within the jurisdiction of the Court. The question really was whether the facts pleaded constituted an integral part of the said cause of action. More recently in Kusum Ingots v. Union of India (supra) it was held (AIR: p. 2325, para 18):
The facts pleaded in the writ petition must have a nexus on the basis whereof a prayer can be granted. Those facts which have nothing to do with the prayer made therein cannot be said to give rise to a cause of action which would confer jurisdiction on the Court.
In the instant case it is no doubt true that Petitioner No. 1 is registered in Mumbai and Petitioner No. 2 in Singapore and the shipment of the export is to be made from Kandla in Gujarat. However, the impugned Notification dated 4.7.2006, and the earlier Notification dated 27.6.2006 imposing the ban on export of Chick Peas were issued by the DGFT in Delhi. What is centrally challenged in this writ petition is the Notification issued by the DGFT in Delhi. The petitioners admittedly made a representation on 28.6.2006 and handed it over in person during meeting with the DGFT in Delhi on 29.6.2006. This fact has been pleaded in the writ petition itself and not denied in the counter affidavit filed by the respondents. Applying the ratio of the aforementioned decisions of the Hon'ble Supreme Court to the facts on hand we are of the view that the facts pleaded in the writ petition show that these facts are integral to the cause of action which arose in Delhi, namely, the issuance of Notification dated 4.7.2006 by the DGFT, Delhi. We accordingly hold that this Court has the jurisdiction to entertain this writ petition. This point is accordingly answered in favor of the petitioners and against the respondents.Re: Issue No. 3
33. The principal ground on which the petitioners assail the validity of the impugned Notification dated 4.7.2006 is that even if the power to amend the Policy exists in the Central Government in terms of Section 5 of the Act, such an amendment cannot be sought to be given retrospective effect, and in any event not from a date on which the prohibition was in fact not in force.
34. In order to appreciate this argument, it requires to be broken into its constituent elements. The admitted position is that the notification announcing the ban on the export of Chick Peas was issued only on 27.6.2006. Section 5 of the Act recognises this as the only possible mode of amending an existing Policy. Although it is perhaps possible that the effect of the ban was made known earlier in the electronic media on 22.6.2006 itself, soon after the Meeting of the Cabinet Committee on Pricing, and in the print media on 23.6.2006, the Official Notification in terms of Section 5, was issued only on 27.6.2006. The petitioners therefore contend that the ban could not have been imposed on any earlier date, i.e., on a date earlier than 27.6.2006. They contend that what in effect the impugned Notification dated 4.7.2006 seeks to do is to extend the ban period to a date prior to the date of the notification, i.e., from 22.6.2006 and this, they say is impermissible and ultra vires Section 5 of the Act.
35. The plea of the respondents on the other hand is that the fact of the ban was common knowledge on 22.6.2006 and, therefore, it is pointless to contend that the ban was made known only when the Notification was issued on 27.6.2006. Further, given the volume of trade sought to be transacted in the short period following the announcement in the Press and preceding the date of the actual notification, it was in public interest to issue the second Notification dated 4.7.2006 extending the ban from 22.6.2006 itself, i.e., from the date of the announcement in the media. The question which, therefore, arises is this. What is the actual date on which the ban became effective? Is it the date of announcement in the media or the date of the Official Notification. Fortunately this question has arisen earlier before the Courts and, therefore, we are not required to traverse an untrodden path.
36. In order to examine the principal contention concerning the power to make a change to the Policy retrospective, it is necessary to examine the source of power. Section 5 of the Act, which has been extracted hereinabove, delegates to the Central Government the power to "formulate and announce" the export and import policy and also to amend that policy "from time to time". The Foreign Trade Policy itself has been announced by a notification made by the Central Government in exercise of the power delegated to it under Section 5 of the Act. The Notification issued on 27.6.2006 as well as the impugned Notification dated 4.7.2006 are both instances of delegated legislation made by the Central Government in exercise of the power under Section 5 of the Act.
37. Mr. Malhotra sought to place heavy reliance upon the judgment of the Hon'ble Supreme Court in R.C. Tobacco v. Union of India (supra) to contend that as long as the measure was in public interest, it was open to the Central Government to impose a restriction from a retrospective date. The general power of imposing a ban through legislation from a retrospective date is undeniable. That general proposition hardly needs reiteration. However, what we are dealing here is a delegated legislation and the rules concerning retrospective delegated legislation are not identical with those governing legislations themselves. The power to make a retrospective delegated legislation has to be either conferred in express words or inferred by necessary implication. The law in this regard requires the express words of the statute to be examined for this purpose. In Shri Vijayalakshmi Rice Mills v. State of AP the question was whether the price to be paid for certain supplies of rice made by the appellants in January-February, 1964, would be governed by the Price Control Order dated 23.3.1964 or by the one which was in force in 1963 when the sales in fact took place. The Hon'ble Supreme Court held (at p.1473):
It is a well recognised rule of interpretation that in the absence of express words or appropriate language from which retrospectivity may be inferred, a notification takes effect from the date of its issue and not from any prior date. The principle is also well settled that statutes should not be construed so as to create new disabilities or obligations or impose new duties in respect of transactions which we are complete at the time the Amending Act came into force.
38. Is there is an express indication in Section 5 of the Act that a notification by the central government can be given retrospective effect? A bare reading of the provision indicates contrariwise. Section 5 uses the expression 'announce'. The word "announce" has been defined in Black's Law Dictionary [8th Edition 2004, p.98] to mean: "to make publicly known; to proclaim formally". The word "announce" indicates that the action by the Central Government in terms of this provision is prospective in nature. The words "time to time", occurring in Section 5, are also indicative of their prospective character. Stroud's Judicial Dictionary [5th Edition, pages 1053 and 2640] states: "the meaning of the words 'from time to time' is that after once acting the donee of the power may act again; and either independently of, or by adding to, or taking from, or reversing altogether, his previous act".
We therefore hold that there is no power in the central government in terms of Section 5 of the Act to give retrospective effect to a notification issued under that provision.
39. It is next contended that what the impugned Notification dated 4.7.2006 does is only to clarify that the ban was effective from 22.6.2006, the date on which it became widely known in the electronic and print media. Therefore, it is submitted, there is nothing illegal or invalid in making the subsequent notification dated 4.7.2006. The question whether a change becomes effective only when persons affected by such change actually know of it, or it becomes effective from the date when it is officially notified has arisen earlier before the Courts.
40. In State of Maharashtra v. M.H. George , a ban was imposed on 25.8.1948 by the Central Government under Section 8 of the Foreign Exchange Regulation Act, 1947 on the bringing of gold into India. By a Notification of the same date issued by the Reserve Bank of India (RBI), this ban was not to apply provided the gold brought into India was on through-transit i.e. from places outside India for the purposes of transhipment to places similarly situated and where the gold so brought is not removed from the aircraft. On 8.11.1962, the RBI modified its notification dated 25.8.1948 and added an additional condition for exemption, i.e., the gold must have been declared in the "Manifest" of the aircraft as transhipment cargo. Admittedly, this change was not officially notified till 24.11.1962. The respondent, Mayer Hans George was on an aircraft from Zurich to Manila transiting through Mumbai. On 28.11.1962, when his plane arrived in Mumbai, the Customs authorities, acting on a tip off and finding that George had not disclosed in the manifest that he was carrying Gold, stopped the aircraft and searched his person. He was found carrying 34 gold slabs. He was prosecuted and convicted of an offence under Section 8 read with Section 23(1-A) of the Act. In challenging his conviction, it was contended that even if what was prescribed by Section 8(1) of the Act was an offence, the exact point at which the person accused of the offence actually knew that it was an offence, was a relevant factor in determining whether such a person was guilty of the offence or not. The argument was that but for the subsequent notification dated 8.11.1962, George was not guilty of any offence. If on 27.11.1962, when the accused boarded the flight in Zurich, he had no means of knowing that it was an offence to be carrying gold in transit from Zurich to Manila, he could not be punished for such an offence. However, the Hon'ble Supreme Court by a majority (2 : 1) negatived this contention and held that the effective date was the date of the publication of the notification in the Gazette which in that case was 24.11.1962. The Court held that "that ignorance of it by the respondent who was a foreigner is, in our opinion, wholly irrelevant". The Court noticed that (AIR: 743 para 45):
...In most of the Indian statutes, including the Act now under consideration, there is provision for the rules made being published in the Official Gazette. It therefore stands to reason that publication in the Official Gazette viz., the Gazette of India is the ordinary method of bringing a rule or subordinate legislation to the notice of the persons concerned. As we have stated earlier, the notification by the Reserve Bank was published in the Gazette of India on November 24, 1962 and hence...the notification must be deemed to have been published and brought to the notice of the concerned individuals on the 25th of November, 1962. The argument, therefore, that the notification dated November 8, 1962 was not effective, because it was not properly published in the sense of having been brought to the actual notice of the respondent must be rejected.
41. In Pankaj Jain Agencies v. Union of India , a further attempt was made, although unsuccessfully, to get the Hon'ble Supreme Court to accept the contention that a notification would become effective only on the date that it was made available to persons affected by such notification and not from the date of its being published in the Official Gazette. The Court referred to M.H. George's case (supra) and B.K. Srinivasan v. State of Karnataka and held that once the prescribed mode of publication was complied with, it was immaterial whether the notification was actually made known to persons affected by it. The issue there was whether a notification dated 13.2.1986 under Section 25(1) of the Customs Act 1962 prescribing higher rates on import duties was effective from the date of such notification or only from the date when copies of which were made available to the importers, because admittedly such notification was not made available till 19.2.1986. The Hon'ble Supreme Court held that Section 25 of the Customs Act, 1962 had already prescribed the mode of granting exemption which was by a notification in the Gazette and once that mode was complied with and the notification was published on 13.2.1986 that would be the date on which it became effective irrespective of the fact that a copy of it was not made available till 19.2.1986.
42. The correctness of the view taken in Pankaj Jain Agencies' case (supra) was put in doubt on account of two subsequent decisions of the Hon'ble Supreme Court in Collector of Central Excise v. New Tobacco Company and Garware Ltd. v. Collector, Customs . However, a Bench of three Judges of the Hon'ble Supreme Court in Union of India v. Ganesh Das Bhojraj (supra) has authoritatively ruled that the decision in Pankaj Jain Agencies' case (supra) is the correct exposition of law on the subject.
43. What remains to be dealt with is the contention of the respondents that the date on which the ban became effective was in fact the date on which it was announced both in the electronic and print media, i.e., on 22.6.2006. This question came up for consideration earlier in the Hon'ble Supreme Court in I.T.C. Bhadrachalam Paper Boards v. Mandal Revenue Officer, AP . There, a certain Government Order issued in 1976 was been given wide publicity in the press in the same year. It had however not been gazzetted or laid on the floor of the Legislature as required by the concerned statute. The contention of the beneficiary of the GO was that the failure to do so would not make it invalid since in any event it had been given wide publicity in the press in 1976 itself. Negativing this contention, the Hon'ble Supreme Court held (SCC, p.646):
The object of publication in the Gazette is not merely to give information to the public. Official Gazette, as the very name indicates, is an official document. It is published under the authority of the Government. Publication of an order or rule in the Gazette is the official confirmation of the making of such an order or rule. The version as printed in the Gazette is final. The same order or rule may also be published in the newspapers or may be broadcast by radio or television. If a question arises when was a particular order or rule made, it is the date of Gazette publication that is relevant and not the date of publication in a newspaper or in the media. In other words, the publication of an order or rule is the official irrefutable affirmation that a particular order or rule is made, is made on a particular day (where the order or rule takes effect from the date of its publication) and is made by a particular authority; it is also the official version of the order or rule.
In conclusion, after referring to two earlier decisions, the Court held as under (SCC, p.647):
The above decisions of this Court make it clear that where a parent statute prescribes the mode of publication or promulgation that mode has to be followed and that such a requirement is imperative and cannot be dispensed with.
In our view, the above decision in ITC Bhadrachalam Ltd. (supra) is a complete answer to the contention of the respondents that the ban became effective from a date earlier than the date of the actual notification.
44. Therefore, as far as the present case is concerned, applying the above law, there could be no manner of doubt that the only acceptable mode of bringing about the change in Policy is by a notification in the Official Gazette. Admittedly the ban on export of Chick Peas was notified on 27.6.2006 and it must be held that this was the date on which the ban became effective. We accordingly hold that there is no merit in the submission of the respondents that the ban imposed on the export of pulses became effective on 22.6.2006 when it was announced in the media and not on 27.6.2006 when it was actually notified in accordance with the mandatory requirements of Section 5 of the Act.
45. This brings us to the next contention of the petitioners that the impugned Notification dated 4.7.2006 is ultra vires Section 5 of the Act. As already noticed hereinbefore Section 5 of the Act requires any amendment to the Foreign Trade Policy to be made "in like manner" i.e,. in the same way as the earlier amendment is made. In other words an amendment of the policy will also have to be made only by way of a notification in the Officer Gazette and in no other manner. The amendment in public interest in terms of Para 1.3 of the Policy also indicates that "such amendment shall be made by means of a notification published in the Gazette of India". Unless Section 5 itself is amended by the Parliament, this mode of publication of the amendment has to be strictly followed. This mode cannot be sought to be deviated from or changed by the Central Government by way of a notification issued under that Section. That is precisely what the impugned Notification dated 4.7.2006 seeks to do. A delegated legislation cannot seek to override the main section under which it is made, in this case, Section 5. On this short ground it must be held that the impugned Notification dated 4.7.2006 is ultra vires Section 5 of the Act.
46. At this juncture we must deal with one more submission of Mr. Malhotra, the learned ASG. He urged that all that was required to be done, was to read the operative portion of the Notification dated 4.7.2006 in continuation of the Notification dated 27.6.2006 and if so read it will become apparent that the Notification dated 27.6.2006 is in fact retrospective with effect from 22.6.2006. We are unable to agree with this submission. If as suggested by Mr. Malhotra we read the impugned Notification dated 4.7.2006 as an addendum to the earlier Notification dated 27.6.2006, it would make a very confused reading of the Notification dated 27.6.2006. This is because a plain reading of the Notification dated 27.6.2006 indicates that the ban is "with immediate effect", i.e., with effect from the date of the said notification which is clearly indicated in the body of the notification itself, i.e., 27.6.2006. To this if we add, the Notification dated 4.7.2006 it would appear that the transitional arrangement would become unavailable from 22.6.2006, i.e., which is not a date from which the notification dated 27.6.2006 could possibly have had "immediate effect". We are afraid that it is not possible to construe the impugned Notification dated 4.7.2006 in this manner at all.
47. There is yet another problem with the impugned Notification dated 4.7.2006. What it in effect seeks to do is to make unavailable the benefit of the Para 1.5 of the Policy. In other words, the transitional arrangements that otherwise would stood protected notwithstanding the ban by the Notification dated 27.6.2006, would now by virtue of the impugned Notification dated 4.7.2006, not stand so protected. Mr. Malhotra urged that the volume of exports in the short period was so large that the public interest involved in the matter constituted sufficient justification for the government making the ban retrospective and at the same time make unavailable the benefit of para 1.5 of the Policy. He repeatedly stressed that the word "ordinarily" occurring in Para 1.5 of the Policy indicated that the petitioners could not seek the benefit there under as a matter of right and therefore there was nothing arbitrary in taking away the benefit of Para 1.5 altogether.
48. The issue requires further examination to glean what is in fact intended by the Act and the Policy. The legal domain of fiscal statutes often witnesses exercises of imposition of or lifting of prohibition, granting of or withdrawal of exemptions in the form of notifications and other devices of delegated legislation. At any given point of time, when such an exercise is performed, there are bound to be persons who fall on either side of the line that gets drawn. Transactions that are at various stages of execution, are bound to be affected. However, there is also an element of public interest in getting our citizens to honour their commitments in the course of international trade. What is at stake is not merely the money involved in the trans border transactions but the reputation of our traders that they will be able to deliver as assured. That is the very purpose of the elaborate documentation that accompanies such transactions in the form of performance guarantees, LCs and so on. This has received acknowledgment in the form of para 1.5 of the Policy which seeks to permit such 'in progress' transactions to proceed unhindered by the change. In other words, para 1.5 is a restraint on the power of the government under Section 5. It does two things. It classifies the pending transactions into those in which LCs have been opened before the date of the change and those in which they have not. For the former class, which is based on an intelligible differentia, it seeks not to apply the change retrospectively. That is how the power under Section 5 is saved form the vice of irrationality or arbitrariness. Otherwise the two distinct classes of transactions would receive a uniform treatment thus aggravating unequal consequences. Accrued interests and rights would get adversely affected. If the government were to take away this very element that saves its power from the attack of arbitrariness then it would be unable to defend its constitutionality.
49. We certainly appreciate the situation in which the Central Government found itself when perhaps it realised that a large number of transactions had indeed taken place in the intervening period between then and 22.6.2006 when the ban was announced in the Press and 27.6.2006 when it was formally notified. However, it is for the government to explore other means of overcoming such difficulties in future by appropriate amendments to the Act which can permit the Courts to consider the effect of date of the notification to be the date on which it is announced by the Government in the media. In the present age of the internet, it is also possible that it might be the date on which it is posted on the official website of the Central Government. However, for the present, we have to apply the law as we find it.
50. Also, we are afraid that the public interest mantra cannot be repeated as a panacea for avoiding the consequence of mandatory legal provisions. As explained by the Hon'ble Supreme Court in ITC Bhadrachalam Ltd. (supra) there is a certain logic in stipulating the date on which a notification is officially gazetted to be the effective date. The Government may announce several policies and several changes to such policies in different fora. However, the specifics of such changes, the nuts and bolts of the scheme, may be required to be worked out before the formal notification can be published. Usually the Government gives itself time to work these details out. Merely because such a requirement is not convenient to the government in the instant case, it cannot be dispensed with. It is not possible to adopt one yardstick when the Government seeks to grant a benefit and the other when it seeks to withdraw it. Government's decisions are to be expressed in a certain form. In the area of export and imports, the Act under Section 5, prescribes the specific mode by which the Government will announce Policy changes. That has to be strictly construed. It is not possible to avoid the mandate of Section 5 by resorting to a broad argument of public interest.
Re: Issue 4
51. We must hasten to add that public interest would be one of the relevant factors that will weigh with the Government when it is called upon to grant, upon a case-by-case basis, the benefit of Para 1.5 of the Policy. We are not called upon to decide this at the present juncture because as of now, by virtue of the impugned Notification dated 4.7.2006, the Government has disabled itself from considering the applicability of Para 1.5 to the transactions on hand. Therefore, the stage where these transactions should ordinarily be permitted to go through in terms of Para 1.5 has not yet arisen for consideration. Dr. Singhvi is right in his submission that the transactions in the instant case satisfy the requirements of Para 1.5 given the fact that the two irrevocable LCs have indeed been established before the date of the imposition of the restriction. These facts have indeed not been denied in the counter affidavit filed by the respondent. We are not impressed by the contention of the respondents that the transactions entered into by the petitioners are malafide. Such an assertion is not backed by any concrete data. If indeed the documents produced by the petitioners are genuine, there is no reason why their request should not be considered within the ambit of para 1.5 of the Policy.
52. However, we are of the view that the stage for issuing a mandamus to the Government to permit the shipments pursuant to the contracts entered into by the petitioners with their importer has not arisen yet. We do not have the benefit of a decision by the Central Government refusing to grant such relief under Para 1.5. We cannot presume that even after the impugned Notification dated 4.7.2006 is held to be invalid, the Central Government would nevertheless refuse the benefit to the petitioners in terms of Para 1.5. In such eventuality, a separate cause of action might ensue and the petitioners will not be without a remedy.
53. Dr. Singhvi requested that the government should be directed to consider the petitioners' request for extending the time for completing the shipments and also render a decision on permitting them at the earliest. We have no doubt at all that given the urgency attending the transactions on hand, the government will consider the petitioners' request and take a decision in terms of para 1.5 of the Policy without delay.
54. For all the above reasons, we hold that the impugned Notification dated 4.7.2006 is ultra vires Section 5 of the Act and strike down the said Notification as such. The writ petition is allowed in the above terms.