Bombay High Court
Premchand Somchand Shah vs The Union Of India (Uoi) And Ors. on 18 February, 1987
Equivalent citations: 1987(12)ECC273
JUDGMENT S.M. Daud, J.
1. This petition under Article 226 of the Constitution is now restricted to the quashing of the order incorporated in Ex. H and for a mandamus in terms of prayer (b) to the petition.
2. The petitioner is a partnership registered under the Partnership Act and is engaged in the business of importing rough diamonds and exporting these after cutting and polishing. It is a registered exporter and the holder of an Export House Certificate. The aforesaid are terms appearing in the Import and Export Policy for the period April, 1978 to March, 1979 as also April, 1985 to March, 1988. For some reason, petitioner's application for the grant of an Export House Certificate was rejected by the Chief Controller of Imports and Exports. The rejection was of an application dated 25-5-1978. Having failed to secure redress by recourse to supplicatory methods, the petitioners moved this Court under Article 226 to which, the respondents 2 and 3 of this petition (R.B.I.), were not parties. The reliefs claimed by the petitioner in that petition were:--
(a) That this Hon'ble Court be pleased to issue a writ....calling for the records of the case orders dated 18th August, 1978, 25th October, 1978 and 28th February, 1981 and after entering into the question of the legality thereof, be pleased to quash and/or set aside the same.
(b) That this Hon'ble Court be pleased to issue a writ of mandamus...against the respondents, ordering and directing them
(i) to forthwith withdraw and/or cancel the 2nd respondent's said orders dated 16th August, 1978, 25th October, 1978 and 28th February, 1981 and
(ii) to forthwith grant to the petitioners an Export House Certificate for the year April, 1978 to March, 1979 together with all concomitant benefits and facilities available pursuant thereto during the year 1978-79.
Petitioner's eligibility to the claim was covered by a decision of Pendse, J. in Writ Petition No. 761 of 1983 decided on 23-12-1983 and the order of the Supreme Court dated 18-4-1985 in C.A. No. 1423 of 1984 Union of India v. Rajnikant Brothers. For this reason, the Judge before whom the aforesaid Writ Petition No. 2889 of 1982 came up, passed the following order:--
Rule is made absolute in terms of prayers (a) and (b). Export house certificate shall be granted to the petitioner under the Import Policy for 1978-79 within three months from today. It is clarified that save and except for items which are specifically banned under the prevalent import policy at the time of imports, the petitioner shall be entitled to import all other items whether canalised or otherwise in accordance with relevant rules.
In accordance with this direction, the respondents to that petition, issued on 29.11.1985 an Export House Certificate which is at Ex. A. The relevant features of that certificate were (i) that it was for the year 1978-79 granted on the basis of the evidence produced by the petitioner, (ii) that the certificate would be subject to the conditions contained in the Import Policy for Registered Exporters for 1978-79, (iii) that it was to be valid for the period 1-7-1978 to 30-6-1979 and (iv) that for the purpose of para. 179 of the Import Policy for 1978-79 for the F.O.B. value of exports during 1978-79 as admitied was Rs. 269.89 lacs. Having received Ex. A, petitioner approached the R.B.I. vide Ex. B. This was on 4th February, 1986. They demanded from the R.B.I. a blanket permit under the ITC scheme. It is conceded that though the value for which the blanket permit was claimed was specified as Rs. 6,74,000, petitioner cannot get a permit for more than Rs. 5,00,000. The reply given by the respondents on 19-2-1986 to the aforementioned application is at Ex. C and two of the requirements of which compliance was desired were (i) a valid Export House Certificate and F.O.B. value certificate for 1984-85 and (ii) Bank certificate for 1985. On 14-3-1986, the petitioner complied with the conditions to the extent it could and prayed for an early issue of the blanket permit under ITC scheme for the year 1978-79. There was no reply, and therefore, reminders were issued. The reminders having failed to yield any result, petitioner moved this Court in September 1986. During the pendency of the petition, the R.B.I. on September 20, 1986, ruled upon the application vide Ex. H and rejected the same. To the extent relevant, Ex. H reads thus:--
As the blanket exchange permit under I.T.C. scheme is granted on the basis of f.o.b. value of exports as certified by the Chief Controller of Imports and Exports for the previous financial year, we had advised your client to furnish such certificate for the period 1984-85 (April-March) as they were not eligible for the issue of blanket exchange permit under I.T.C. scheme on the basis of their 1977-78 export performance after expiry of the validity of the certificate, i.e., 31st March, 1979.
...your client's export outstanding since 1982 has been very high reaching the level of almost 85% in 1985. In terms of the current exchange control regulation, blanket exchange permit facility is not admissible wherever the value of the unrealised export exceeds 10% of the last annual export realisation. Therefore, your client was not eligible for the blanket exchange permit facility on this ground also.
We, therefore, regret to advise that we are unable to grant the blanket exchange permit to your client, as applied for on 4th February, 1986 for the past period of 1978-79. We however, add that we have been issuing ad hoc travel permits to your client as and when your client had applied, on merits for undertaking export promotional visits abroad and therefore, no prejudice whatsoever is caused to your client in this behalf.
3. Petitioner complains that the reasons given in Ex. H for the rejection of his application for a blanket exchange permit under the I.T.C. scheme were not tenable. They were extraneous to the factors which had to be taken into consideration for the facility sought by it. The first ground mentioned in Ex. H. was a contradiction in terms having regard to the order passed in the earlier petition. All that could be taken into consideration, had been specified in the said order. Petitioner's export performance in 1984-85 was irrelevant. The permit sought for being for the year 1978-79, the only performance which could be looked into, was, for the preceding year, i.e., 1977-78. In relation to the second ground set out in Ex. H, it had no statutory sanction. The third reason mentioned in the order about the grant of ad hoc travel permits to the petitioner, was totally irrelevant. Petitioner had earned the right to get a blanket exchange permit under the I.T.C. scheme. The right had been sought to be availed of after getting an Export House Certificate under the flat of a Court. Grant of ad hoc travel permits did not preclude the petitioner from getting its advantages under the I.T.C. scheme. Ex. H deserved to be quashed and a mandamus had to be issued in terms of prayer (b) to the petition. Respondent No. 1, the Union of India, has not put in a return. The R.B.I. has tendered an affidavit in reply, the affiant being the Deputy Controller in Exchange Control Department of R.B.I.'s Central Office at Bombay. Briefly stated, this affidavit is a justification of the order incorporated in Ex. H. The R.B.I, is said to be the prime body regulating matters connected with foreign exchange. This was under the Foreign Exchange Regulation Act of 1973 (FERA). Under Section 76 of FERA, the R.B.I., along with the Central Government, had been vested with power to grant permission, and, for the objects specified in that section. The R.B.I.'s powers are governed by the Exchange Control Manual, in particular, various sub-paragraphs of Para. 15C. Even in terms of the Import Policy 1978-79, it could not be said that Ex. H was flawed. Petitioner's entitlement to a blanket exchange permit for the period 1978-79 did not mean that its export performance for the year 1977-78 alone had to be taken into consideration. The question of grant of this permit arose later, and, the situation then prevalent could not be ignored. The area of consideration could not exclude the prevalent economic situation, availability of foreign exchange generally speaking, and, the character and antecedents of the claimant inclusive of its doings after 1977-78. Having regard to these circumstances, ground No. 1 squarely fell within Section 76, FERA. Ground No. 2, as explained in Ex. 1, established that large sums had remained unutilised from out of the foreign exchange blanket permits granted to the petitioner between years 1978 to 1982. Exhibit 3 showed that the unrepatriated proportion of foreign exchange earned by the petitioner was nearly 86% of the total value of the goods exported by it. For these reasons, petitioner had been penalised under Section 50 of the FERA and the penalty imposed was Rs. 1,25,000. This penalty was imposed on June 30, 1986 and the petition was liable to be rejected because of the studied omission to refer to it. The omission amounted to suppression of a very material fact. Availment of foreign exchange was not a right of every citizen. It was more in the nature of grant of a privilege by the sovereign. Where the administering body--in this case the R.B.I.--had acted fairly and after taking the relevant circumstances into consideration, the writ Court should not interfere.
4. Having sketched out the background and a summary of the stand taken by the parties, I will now take up for consideration one by one the points at issue. The contention that availment of foreign exchange by a citizen is not a matter of unfettered right, does not appear to have much bearing upon the crucial questions that arise for determination in this case. Counsel for the R.B.I. concedes that even where the facility involved is that in the realm of privilege, rather than, right, the authority which has to decide cannot act capriciously or without regard to considerations of rationality and fairness. The second misconception which requires to be removed at the very inception is that the Import Policy is a mere statement of policy not having statutory sanction. This is not correct. The Import-Export Policy is a statement of the Government and those in trade and industry act on the basis of the promises and deterrents held out in the Policy. The Imports and Exports (Control) Act, 1947 empowers the Union Government to prohibit, restrict or otherwise control imports. The Import-Export Policy which is an annual exercise has to be formulated after taking into consideration various economic factors. The Policy formulated and proclaimed in publications titled "Import Policy" are in the nature of a statement of the Government as to how imports and exports in any particular year will be regulated. In the Import Policy 1978-79 a "Registered Exporter" has been defined in para. 5(6) as:--
a person holding a valid Registration Certificate issued by an Export Promotion Council, Commodity Board or other registering authority designated by Government for the purposes of export promotion.
The next clause defines an "Export House" to mean:--
A Registered Exporter holding a valid Export House Certificate issued by the Chief Controller of Imports and Exports, New Delhi.
To get the certificate of being an Export House, the claimant has to fulfil certain conditions. These conditions are by no means within the reach of anyone or everyone to attain. The conditions required to be fulfilled are, rightly described by learned Counsel appearing for the patitioner, "stringent and onerous". The import facilities available to Export Houses are specified in para. 174 to the Import Policy 1978-79. Apart from the facilities specified in para. 174, there are paras. 179 to 181. In view of the case of the petitioner falling under these paragraphs, it is necessary to point out that para. 179 speaks of the R.B.I. allowing an Export House to utilise foreign exchange up to 2.5% of the f.o.b. value of its total exports in 1977-78 for foreign exchange expenditure on promotional activities permitted under the Code of Grants-in-Aid for export efforts. Para. 180 speaks of the limit of 2.5% mentioned above being subject to a maximum of Rs. 5,00,000--the amount in excess thereof being adjustable against the REP entitlement of the Export House on its own exports. Para. 181 lays down that the procedure to be followed in availment of the above will be as set out in Appendix 28. The 28th Appendix will be found at page 169 of the Import Policy, 1978-79. Three paragraphs therefrom are of importance and they are worded thus:--
2. The above limit of 2.5% is in addition to the blanket foreign exchange facility separately available to export houses and large exporters from Reserve Bank of India and it is subject to a maximum of Rs. 5 lakhs. The amount exceeding Rs. 5 lakhs but within the overall 2.5% will be adjusted against the REP entitlements earned by the export house on its own exports.
3. During 1978-79 the facility will be available on the basis of 2.5% of the exports made in 1977-78 of all products, subject to the provision indicated in para. 2 above.
7. After the blanket foreign exchange permit has been fully utilised, it should be surrendered to the Reserve Bank of India (Exchange Control Department) for post scrutiny, if any, as decided by the Reserve Bank of India.
Read as above, it is clear that an Export House is not excluded from the blanket exchange permit under the I.T.C. scheme because it is the recipient of such a permit under the general scheme or an ad hoc travel permit. The facility under para. 179 is no doubt couched in language indicating the vesting of a discretionary power in the R.B.I. This however does not mean that the claim to a facility under para. 179, is something in the nature of a bounty awardable by the R.B.I. Learned counsel for the petitioner submits that the use of the word "may" in para. 179 is indicative not of an uncanalised or uncontrolled discretion, but the vesting of a discretion coupled with an obligation, and virtually, in the nature of a mandate. In this connection, reliance is placed upon the meaning given to the word occuring in a particular rule of the U.P. Disciplinary Proceedings (Administrative Tribunal) Rules, 1947. The submission which learned Counsel wishes to urge is best brought out in head-note (a) to the judgment (State of Uttar Pradesh v. Jogendra Singh). It is thus:--
The word 'may' generally does not mean 'must' or 'shall'. But it is well settled that the word 'may' is capable of meaning 'must' or 'shall' in the light of the context. Where a discretion is conferred upon a public authority coupled with an obligation, the word 'may' which denotes discretion should be construed to mean a command. Sometimes, the Legislature uses the word 'may' out of deference to the high status of the authority on whom the power and the obligation are intended to be conferred and imposed.
With respect, this applies to the discretion conferred upon the R.B.I. under para. 179. Import and export, in the very nature of things, involve receipt and disbursment of foreign exchange. If the regulation of inflow and outflow of foreign exchange is vested in the R.B.I. it is for the purpose of there being some authority to administer a matter of vital importance. It is impossible to countenance the argument that irrespective of what the Import Policy lays down, the R.B.I. acting within the FERA, is not bound to effectuate privileges secured by concerns under the Import-Export Policy. The Government in the Commerce Ministry holds out assurances to concerns in trade and industry. These concerns give a certain performance and become entitled to various facilities. If having earned these facilities, they are to be met with a claim by the R.B.I. that it will make its own assessments to the entitlement earned, we would have the sorry spectacle of the traders and manufacturers not knowing where to turn to. In the instant case, the petitioner was entitled to an Export House Certificate for the year 1978-79. The Chief Controller of Exports and Imports withheld that certificate and compelled petitioner to come to the Court. It was argued that petitioner came to the Court nearly four years after the rejection of its application for an Export House Certificate. But the intervening time was not wasted. Petitioner had approached other authorities, which it was bound to do, lest a premature approach to the writ Court by him, be met with the retort that it had not exercised alternative remedies before moving that Court. In any case, the delay in the moving of the writ Court was a point not taken by the instrumentalities of respondent No. 1 then arraigned by the petitioner.
5. Now I turn to the defence based upon various paragraphs of the Exchange Control Manual (ECM). It is not and cannot be disputed that the ECM is, to quote Chinnappa Reddy, J. in L.I.C. v. Escorts Ltd. and Ors.
a sort of guide-book for authorised dealers, money changers, etc. and is a compendium or collection of various stautory directions, administrative instructions, advisory opinions, comments, notes, explanations, suggestions, etc. This surely shows that instructions contained in the ECM will not prevail over the statute. Neither will the same suffice to override a judicial verdict given in the presence of proper parties. That apart what exactly do different sub-paragraphs of para. 15C of the ECM say ? Para. 15C.3 speaks of the R.B.I. being vested with the power to grant a blanket permit or revoke a blanket permit, if already granted to the exporters, in various circumstances. One of the circumstances in which the power can be exercised is:--
unsatisfactory record in regard to compliance with foreign exchange regulations.
Now what is the unsatisfactory record of the petitioner ? The so-called penalty imposed under Section 50 of the FERA was not referred to in Ex. H. Whether it can be taken into consideration to refuse a discretionary relief in this petition, need not be gone into at this stage. Petitioner admits that Ex. 3 is correct and that it rightly says that petitioner has not been able to repatriate nearly 86% of the foreign exchange earned by it by the goods exported. But it is no one's case, and certainly not that of the respondents that the non-repatriation is on account of a wilful default on the part of the petitioner. It is true that it has been penalised under Section 50 of the FERA by a recourse to a presumption under Section 18(3) of the FERA. But an appeal has been preferred against that penalty, and that appeal is pending. This is mentioned in the rejoinder tendered by the petitioner. That apart, a penalty imposed on the basis of a presumption is not necessarily evidence of a factor which can be said to disqualify one entitled to a blanket exchange permit under the I.T.C. scheme. The power given to the R.B.I. is not as wide as is assumed by the Bank. The R.B.I. while giving or granting any permission or licence has to take into consideration various factors, viz., the need to conserve foreign exchange resources of the country, that there is a proper account for all the foreign exchange accruing to the country, that the foreign exchange resources of the country are utilised as best to subserve the common good and such other relevant factors as circumstances of the case may require. But this, it is enjoined to do, for various reasons. It surely cannot be said that entitlements under the Import Policy can be negatived by a recourse to the powers of the R.B.I. under Section 76. Autonomy of the R.B.I, within the parameters of the powers conferred upon it, is wide, and, rightly so. This however does not mean that it is at liberty to ignore the obligations placed upon it under instructions which do not contravene the statute. The Import Policy 1978-79 does not contravene the FERA, and, in particular Section 76. The R.B.I. cannot set up for itself the task of ruling upon the wisdom or otherwise of entitlements conceded by other statutory authorities in statutory instructions or policies. The sub-paragraphs of para. 15C of the ECM relied upon by the R.B.I. are rather broadly worded. Para. 15C.6 which deals with blanket permit under the I.T.C. scheme ends with these sentences upon which reliance is placed by counsel for the R.B.I.:--
Permits will be issued by Reserve Bank with validity period restricted to one year from the date of issue. The validity period cannot be extended in any circumstances.
The R.B.I. may act upon this instruction, but not to the detriment of one who has obtained relief under a Court order. It is true that the R.B.I. was not a party to the petitioner's first writ petition. But once petitioner obtained an Export House Certificate under the judicial fiat, it was not open to the R.B.I. to devise other methods to foil the victory that petitioner had somehow attained. Ex. A which is the Export House Certificate gives all the relevant details which had to be taken into consideration for the grant of a blanket exchange permit under the I.T.C. scheme. Learned Counsel for the R.B.I. contends that other circumstances cannot be ignored. In this connection, he refers to the following passage from the Supreme Court's decision in the Deputy Assistant Iron and Steel Controller, Madras and Another v. L. Manickchand :--
In granting licences for imports, the authority concerned has to keep in view various factors which may have impact on imports of other items of relatively greater priority in the larger interest of the overall economy of the country which has to be the supreme consideration, and an applicant has no absolute vested right to an import licence in terms of the policy in force at the time of his application because from the very nature of things at the time of granting the licence the authority concerned may often be in a better position to have a clearer over-all picture of the various factors having an important impact on the final decision on the allotment of import quota to the various applicants.
This passage, as has been rightly pointed out by petitioner's counsel, has to be read in the context of the factual position. Para. 2 of the judgment at page 936 shows that the case arose out of an application for a licence to impart under the actual user category. Now a person seeking under an AU category is not as of right entitled to import facilities. Petitioner-importer here is in a different position. It has earned that entitlement by complying with the rigorous requirement of one desiring an Export House Certificate. That certificate was unjustifiably refused to the petitioner, compelling it to come to this Court under Article 226 of the Constitution. Therefore, the observations mentioned above which are more appropriate to a favour seeker, would not be attracted to the case of one, who, by dint of toil and merit has earned the blanket exchange permit entitlement under the I.T.C. scheme.
6. Therefore, the first ground advanced in support of the rejection is totally misconceived. The limitations relied upon under para. 15C.3 or 6 of ECM do not apply. It is conceded that the use of the word "regulation" occurring therein is an error. In fact, the second reason put forth has the support of nothing stronger than an administrative instruction contained in a letter which is at Ex. Y. This letter lays down--
As you are aware, in terms of the Book of Instructions, if the Officer-in-
Charge of a regional office is of the view that an exporter, who otherwise satisfies the eligibility criteria for blanket permit, should be declined the facility because his export outstandings are more than 10% of the last annual export realisation, the matter is required to be referred to Central Office. It is, however, observed that the Offices do not follow a uniform procedure in calculating the quantum of outstandings for this purpose. It is, therefore, clarified for information of regional offices that the following amounts should be excluded, provided satisfactory documentary evidence is produced, while calculating 10% outstanding export bills.
One of the items specified is that the amount is in respect of export bills which have been protested and/or have become subject matter of law suits. It is no one's case that the unrepatriated portion of the foreign exchange earned by the petitioner, is attributable to a wilful default on its part. Whether the accumulation deserves a penalty under the FERA is not for me to say. But certainly it cannot be taken into account to disentitle petitioner from a right conferred upon it under the Import Policy, and, affirmed to so exist by a competent Court in a properly instituted proceeding between the appropriate parties. If the non-repatriation or accumulation of more than 10% of the earned foreign exchange is punishable under the FERA, that will be done. It is not as if the R.B.I. is without a remedy in case of a possible misutilisation of the blanket exchange permit under the I.T.C. scheme. Clause (7) of Appendix 28 of the Import Policy 1978-79 permits a scrutiny by the R.B.I. if any mis-utilisation is detected. In this scrutiny, petitioner will get what it deserves. But because there has been an accumulation in excess of what is deemed desirable under an administrative instruction, the R.B.I. cannot withhold the issue of a blanket exchange permit. The only requisite condition for obtaining such a permit was, compliance with the terms of paras. 179 and 180. Those conditions have been complied with. To a limited extent the past performance of the petitioner can be taken into account. But if it is not seeking to import an item prohibited under the current Import Policy and has not been guilty in the past of wilful accumulation of foreign exchange, I do not see how the R.B.I. can set up itself as a censor in the matter of the relief which petitioner was claiming vide the application at Ex. B.
7. One more reason urged in support of the rejection, though not so specified in Ex. H, is the non-utilisation (see Ex. Z) of different proportions of foreign exchange released in favour of the petitioner in the past. To a certain extent, this may justify the relevant authority to say that a claimant has been demanding more than what it is legitimately entitled to. In view of foreign exchange being a scarce commodity, its appropriation has to be so made as not to create a glut in one quarter and scarcity in another,. But the entitlement in the present case, is that which has been earned. Moreover, the non-utilisation of a benefit which does not prejudice the country should not be a ground for refusing to further an entitlement earned by a party. Even otherwise, the proportion of non-utilisation to the sum awarded is not very much. At least from 1978 to 1982, the balance remaining unutilised was fairly small vis-a-vis the amount utilised. There is a, reference in Ex. H to petitioner having not really suffered because of the grant of ad hoc travel permits. These permits are one which a traveller gets every time he has to go out of the country. Now there is no comparison between an exporter armed with ad hoc permit and one with a blanket exchange permit under the I.T.C. scheme. At the least in the latter case, the number of visits which the traveller will have to make to the R.B.I, will be far less than that which he is required to make in the previous case. Visiting administrative offices is an ordeal and if one type of permit curtails the number of visits required to be made that itself is a privilege which should not be denied to a person otherwise entitled thereto.
8. Having considered all the defences set forth in Ex. H or put forth in the affidavit in reply, I find no substance in them. Therefore, the order.
Order Petition allowed. Ex. H quashed. Mandamus as sought in terms of prayer (b) do issue. In the circumstances of the case, parties are left to bear their own costs. Rule, in the above terms made absolute.