Delhi High Court
Sahibabad Impex Pvt. Ltd. vs Union Of India (Uoi) And Ors. on 3 September, 2007
Author: S. Ravindra Bhat
Bench: S. Ravindra Bhat
JUDGMENT S. Ravindra Bhat, J.
1. In these proceedings under Article 226 of the Constitution the petitioner questions concurrent orders of the Apparel Export Promotion Council; the Appellate Textile Commissioner and the Second Appellate Committee constituted to decide grievances, by the Central Government, Ministry of Textiles.
2. The Petitioner was allocated a quota in terms of the Garment Export Policy prevalent in 1997, under provisions of the Foreign Trade (Development and Regulation) Act, 1992 (hereafter, "the Regulations"). At that time, garment exports were entitled to benefits/Schemes such as Past Performance Entitlement (PPE); Past Performance Transfer (PPT); First Come First Served (FCFS); Non-Quota Entitlement (NQE) NQT & NIE (New Investment Entitlement) etc. These enabled exporters to a slew of concessions/ quota. In terms of these schemes if an exporter completed his obligations before 30th of September of the concerned calendar year, he was unconditionally, eligible, to benefits without submission of legal undertakings or bank guarantees. However, if quantities were left over and were sought to be exported on or after October, till December of the year, extension was to be obtained from the fourth respondent (AEPC). This was usually given, subject to the exporter furnishing an undertaking that in case the targeted exports were not fulfillled, he would be subjected to levy of a quantified amount as penalty.
3. The policies further stipulated that if the exporter fulfillled 90% or more of the targeted quantity, no amounts could be forfeited; on the other hand, if the export was between 75 to 90% a proportionate benefit was given after deduction of some amount. In case the export was less than 75% the amount stipulated was forfeited as penalty, in entirety.
4. In this case the grievance is that the quantity revalidated was 45937 PCS and quantity exported was 32920 PCS/NSE. The shortfall thus was 130137 PCS/NSE; in terms of percentage, the actual quantity exported was 71.66% of the quota which the petitioner had to fulfill. The petitioner claims that its inability to achieve the export target was because fabrics to be manufactured into garments and exported to the foreign buyer, could not be processed. This was on account of labour problems in the supplier's unit. It was contended that the order for processing was placed well in advance; yet the processor could not fulfill its commitments to complete the dyeing and printing of the fabrics. It was contended that the petitioner had confirmed orders and procured raw material which were sent for processing. However, due to the unforeseen factor i.e labour problems of the Processor's unit, there was delay in obtaining the fabrics and manufacturing which in turn led to short utilization of the quota.
5. The AEPC had issued show cause notice before proceeding to levy penalty of Rs. 3,54,130/-. The petitioner preferred an appeal to the Appeal committee in the Office of the Textile Commissioner, Government of India. By its order dated 31.8.2001, the committee rejected the appeal. The said order is as follows:
We have carefully gone through the records of the case and it is clear that the exporters could not substantiate their claim that their performance was affected because of any force majeure condition, as spelt out under para 13 of Ministry of Textiles, Govt. of India's Notification No. 1/50/96-EP(T&J)-I dt. 16.10.96.
ORDER On a perusal of the records and on examination of the circumstances as stated by the exporter in his appeal the Committee is satisfied that the circumstance as stated in the appeal are not the force-majeure conditions.
Therefore, the Committee hereby uphelds the forfeiture imposed by AEPC in PPE, NQE systems. However, the oeverall performance in NIE system being more than 75%, the Committee performance in NIE system being more than 75%, the Committee hereby orders AEPC to give proportionate relief based on overall performance, if not already given in respect of NIE system. If the overall performance benefit has been already given by AEPC in NIE system then in that case the forefeiture imposed by AEPC in NIE system is also upheld by this Committee.
This order is passed by us on 31.8.2001.
Sd/- Sd/- (SMT. P.I. MUKHIJA) (B.S. PAL) DIRECDtor (EXPORTS) TEXTILE COMMISSIOENR (T)
6. The petitioner preferred a second appeal to a constituted Second Appellate Committee. It was contended before it that the export commitments could not be achieved on account of factors beyond the control of the petitioner which amounted to a fore majure condition. This plea was rejected. The Second Appellate Committee held as follows:
The Appellate Committee considered the appeal in detail during the feeling and has gone through the evidence produced in support of the appeal and also heard the representatives of the appellant firm besides AEPC. The Committee noted that the exporter is doing the plea of labour problem in the job workers factory and lates their factory. It noted that the same plea was earlier taken before the 1st Appellate Committee, which had rejected the plea; vide its order dated 31.8.2001 for the reason that there was labour problem from 18.9.97 in the factory. The exporter knew this fact. However, they still went ahead and revalidated the quota from 1.10.1997 knowing full well that strike was on in the job workers factory. The exporter has thus caused loss of foreigner huge to the country besides allowing the quota to go waste. That there was another strike later on in the factory of the exporter cannot be accepted since the strike happened at a very late stage leaving no scope for exports. The initial miscalculation on the part of the exporter in revalidating quota on 1.10.97 while strike was going on in the job workers factory had already done the damage and the alleged subsequent strike would have had no impact even otherwise. Therefore, the plea of force majure is not made out. The appeal is rejected.
7. It is contended that the orders impugned are unsustainable and have to be set aside because the non-fulfillment of the export conditions did not result any loss to the respondents. On the other hand, the facts pointed to existence of circumstances beyond the petitioners control which clearly fell within the description of force majure conditions. It was contended that having regard to the object of the Scheme a force majure condition stipulated had to be construed in a liberal and expansive manner. In this case since the petitioner had substantially achieved the condition of export of almost 72%, the invocation of the bank guarantee and forfeiture of the amount resulted in arbitrariness and recovery of excessive amounts.
8. It was contended on behalf of the respondent that the First Appellate Committee which had considered the petitioner's case, recorded that the plea of non-utilization due to labour problems was unsupported by documentary evidence. The same Committee also took into account the overall percentage of utilization under PPE and NQE which was below 75%; yet it gave proportionate utilization under the NIE system since in that case the exports made were 79% of the allotted quota as against the level of 90% in which case alone no penalty could be levied.
9. Learned Counsel relied upon the observations of the Second Appellate Committee which had rejected the petitioners plea and noted that the labour problem alleged to have existed in the processors unit was from 18.9.1997. Counsel contended that second Appellate Committee has assumed this fact to be correct and further analysed the circumstances. Despite knowledge of this labour problem as in September 1997, the petitioner went ahead and got the quota revalidated from 1.10.1997 consciously and with deliberation. In this circumstances, knowing fully well that it was depending on a unit facing labour uncertainties, the petitioner chose to take a risk. therefore, its plea regarding application of a force majure situation could not succeed.
10. The object of the Act is to develop and regulate foreign trade as well as augment exports in terms of the Rules and Orders as well as policies evolved from time to time. Section 11(2) authorises imposition of penalty not exceeding Rs. 1,000/-, or five times of value of goods in case of violation of provisions of the Acts, Rules and Orders.
11. In the judgment reported as Gokaldas Images Ltd. v. UOI 116(2005) DLT 47 this Court had occasion to consider the effect of the export and import policies as well as the Act on the issue of power to impose penalty. The Court found that having regard to the garment export trade, which at the relevant stage had depended on quotas, the Central Government acted within its right to provide for optimising of quotas and utilization of foreign exchange. In order to ensure proper utilization of such quotas and implementation of the scheme, the system of requiring fulfillment of export obligation by a stipulated date, was put in place. In case an exporter failed to achieve it he could yet attain it within an extended period subject to his furnishing certain undertakings. In the event of non-fulfilment, the undertakings were enforced. These could not be characterized as penalties as traditionally understood.
12. As to whether strikes and other such like conditions fall within description of force majure, the Court applied the rule in Dhanrajamal Gobindram v. Shamji Kalidas and Co. . The Supreme Court in that case held as follows:
17. McCardie J. in Lebeaupin v. Crispin 1920-2 KB 714 has given an account of what is meant by 'force majeure' with reference to its history. The expression 'force majeure' is not a mere French version of the Latin expression 'vismajor'. It is undoubtedly a term of wider import. Difficulties have arisen in the pasdt as to what could legitimately be included in 'force majeure'. Judges have agreed that strikes, breakdown of machinery, which, though normally, not included in 'vis major' are included in 'force majeure'. Judges have agreed that strikes, breakdown of machinery, which, though normally, not included in 'vis major' are included in 'force majeure'. An analysis of rulings on the subject into which it is not necessary in this case to go, shows that where reference is made to 'force majeure', the intention is to save the performing party from the consequences of anything over which he has no control. This is the widest meaning that can be given to 'force majeure', and even if this be the meaning, it is obvious that the condition about 'force majeure' in the agreement was not vague. The use of the word 'usual' makes all the difference, and the meaning of the condition may be made certain by evidence about a force majeure clause, which was in contemplation of parties.
13. In this case the only plea put forward for not achieving the export quota within the extended or revalidated period is the strike and the labour unrest in a processors' unit. All the three orders of the authorities below disclose that the petitioner did not reveal details or particulars about the unit or units where the strike occurred. The Second Appellate Committee in fact went further and noticed that according to the petitioners claim the strike in the unit of its processors had occurred on 18.9.1997; yet revalidation of quota was sought couple of weeks later. The petitioner was fully aware about a real possibility of default by the processing, dying/printing unit. In spite of such knowledge, it proceeded to handover the fabrics and applied for revalidation later. In these circumstances, on an application of the law in Dhanrajamal Gobindram v. Shamji Kalidas and Co. (supra) it is evident that the possibility of the petitioner being unable to fulfilll its export commitments after revalidation, of its quota could not be ruled out - indeed it was within its contemplation when it applied for exports. Therefore, I find no infirmity or arbitrariness in the approach of the respondents findings that force majure could not be applied.
14. In view of the above findings this petition has to fail. It is accordingly dismissed without any orders as to costs.