Delhi High Court
Shri M.K. Jain And Anr. vs Union Of India (Uoi) And Anr. on 16 September, 2002
Author: Manmohan Sarin
Bench: Manmohan Sarin
JUDGMENT Manmohan Sarin, J.
1. Arguments in the writ petition were concluded on 10.9.2002 and judgment was reserved. In view of urgency in the matter, operative portion of the judgment/order was announced on 13.9.2002. The fact and reasons for the judgment are as follows:
2. Petitioners are exporters, registered with respondents No. 2, M/s. Apparel Export Promotion Council, (n short "AEPC") and are engaged in the manufacture and export of garments and claim to have turnover of Rs. 300 crores. Petitioners are aggrieved by the notice dated 20.8.2002, notifying that the Government vide its letter No. 1/1/2002-Exports-I dated 19.8.2002, has decided that respondent No. 2/AEPC may immediately release 10 per cent additional quantities in the categories 338/339-USA under the FCFS, i.e. first cum first served quota, after giving usual notice to the trade. Further, it was notified that transfers of quota in the above categories would be permitted only up to 30.8.2002. The said notice is Annexure-D to the petition. This was follows by policy instruction dated 21.8.2002, Annexure-E, notifying that the request for transfer under categories 338/339-USA would be accepted only up to 29.8.2002, 30.8.2002 being a holiday.
3. Petitioners by the writ petition, seek quashing of the impugned letter No. 1/1/2002-Exports-I dated 19.8.2002, issued by respondent No. 1 and notice dated 20.8.2002. Petitioners also impugn the policy instructions No. 02/14 dated 21.8.2002, issued by respondent No. 2, by which the last date of transfer of quotas was further preponed from 30.8.2002 to 29.8.2002 in view of 30.8.2002 being a holiday. Petitioners seek a writ of prohibition, prohibition respondents to give effect to the aforesaid communications and policy instructions. Petitioners also seek a mandamus to the respondent to ensure that petitioners would not face any embargo for their quota certificates and the same would remain valid and usable.
4. The writ petition had come up before the Court on 28.8.2002, when notice to show cause was directed to be issued for 3.9.2002, and the impugned notices and decisions were made subject tot eh outcome of writ petition. Another CM. 9295/2002, was moved by the petitioner, wherein petitioners contended that certain vital aspects could not be urged by them on 28.8.2002, relating to international fairs, which were currently in the offing. It was urged that petitioners and others had scheduled their purchases of quotas and negotiations for obtaining export orders based on the transfer of quotas being allowed till 20.9.2002. This was sought to be changed suddenly by preponing the date from 20.9.2002 to 29/30.8.2002. An interim order directing that the decision preponing the last date of transfer of quota to 30.8.2002 was stayed till the next date i.e. 3.9.2002.
5. Learned counsel for the petitioner, Ms. Rani Jethmalani as well as Mr. K.K. Sud, Additional Solicitor General with Ms. Jyoti Singh, counsel for Union of India and Mr. G.L. Rawal and Mr. Kuljeet Rawal, counsel for respondent No. 2/AEPC have been heard. Arguments were concluded on 10.9.2002, when judgment was reserved. Written synopsis have also been filed by the parties.
6. Petitioners' case, as made out during the submissions by Ms. Rani Jethamlani is as follows:-
(i) Respondent No. 2/AEPC under the directions of the Ministry of Textiles, comes out with Garments Export Entitlement Policy, which is effective for every 3 to 4 years. The Garments Export Entitlement Policy is formulated, keeping in mind international business quota restriction imposed by different countries and the requirements of the exporters of garments. As per the policy, Indian exporters are allotted quotas under different regimes viz. Past Performance Entitlement (PPE), New Investment Entitlement (NIE), Non-quota Exporters Entitlement (NQEE) and First Cum First Served Entitlement (FCFS).
The aforesaid export entitlement are allowed to exporters, who are registered with respondent No. 2/AEPC. In the instant case, Ministry of Textile, Government of India, issued the garment policy, by public notification No. 1/28/99/Export dated 12.11.1999. The policy covers the period 2000-2004. The allocation of quotas, in different categories is as under:-
i) Past performance Entitlement-70%; ii) New Investment Entitlement-15%; Non-quota Exporters Entitlement-5% and iv) First Cum First Served System-1-%.
ii) In the present writ petition, we are concerned with categories 338/339-USA, which are knit wears, knit blouses, WG and T. Shirts, in respect of which the last date for permitting quota transfers was advanced. The annual export level allocated to exporters within India is stated to be 60112841 for these items.
iii. Petitioners have been allocated quotas under the Past Performance Entitlement (PPE) i.e. their quotas are based on their fulfillment of export orders in the past. The utilisation of the quotas granted under the PPE is into two parts. Part-A and Part-B. Part-A is valid up to 30.5.2002. Part-B is valid up to 30.9.2002 of the year in which quota is granted. The transfer of quotas i.e. buying and selling is permitted up to 20.9.2002, if not validity extended and/or treated as surrendered. Revalidation beyond 30.9.2002 up to 31.12.2002, if sought, is required to be backed by an earnest money deposit/bank guarantee. The exporters are also required to specify the buyers. These requirements are intended to ensure utilisation of the quotas. It is entrusted with implementation of the Government policy pertaining to Export of Garments and Textiles. It has the responsibility to promote and increase the export of garments.
7. It would be worthwhile to reproduce the relevant text from the notice dated 20.8.2002, which is as under:-
"1. It has been decided that the AEPC may immediately release 10% additional quantities in category 338/339-USA under the FCFS system after giving usual notice to the trade.
2. It has also been decided that the transfer in this category shall be permitted only up to 30th August, 2002.
3. AEPC is requested to ensure proper monitoring of quota utilization so that no category faces any threat of embargo in respect of the above releases.
4. While certifying shipments or otherwise, it would be ensured by AEPC that no embargo gets imposed in any category."
8. Petitioners have impugned the above notice, as not being in public interest. The notice is also assailed as imposing unreasonable restriction on the right to carry on business of exports is an infringement of Article 19(1)(g) of the Constitution of India. Notice is also assailed as being against principles of promissory estoppel, principles of legitimate expectation and rule of audi alteram partem. The notice/order is alleged to have been issued without any prior consultation or complying with the principles of natural justice. It is assailed as being without authority of law. It is claimed that any amendment of the export policy can be done only by a notification published in the official Gazette, as is required under Sections 3 and 5 of the Foreign Trade (Development and Regulation) Act, 1992. No notification, as is envisaged under the statute had been issued, while purporting to amend and alter the provisions of a well formulated and defined policy that had been announced in 1999 for the year 2000-2004. The notice/order is said to be a mala fide exercise of power, without any transparency and consultation ignoring the general well being and interest of the exporters at large.
9. Ms. Rani Jethmalani submitted that the impugned notices/order were a mala fide distortion of a well considered garment textile policy that had stood the test of time and had been formulated with application of mind and taking into account all relevant considerations. It was urged that the dates up to which transfers were permitted had been set out well in advance. Petitioners and other exporters keeping the date schedule stipulated in the policy, had planned and scheduled their negotiations to conclude contracts and orders with foreign importers and buyers. This was sought to be changed suddenly without sufficient notice. It would prejudice the interest of the exporters and adversely affect the exports and buyers would shift to other countries for imports. Learned counsel also assailed the impugned notice as being discriminatory and intended to target only the garment exports of the categories 338/339-USA. In this connection, she submitted that even though respondents No. 2/AEPC in its recommendation Annexure R-1 had recommended non-transferability of various categories with immediate effect i.e. from 7.6.2002 till 20.9.2002. Respondent failed to act on the said recommendation and instead targeted only two categories, by which petitioners were affected i.e. 338-339-USA. Besides short notice of only 8 days was given. Learned counsel submits that the above exposes hollowness of the Government stand that it was attempting to bring down high premium prevailing on the quotas. There is no evidence or report of any action being taken against those indulging in malpractices or hoarding the quotas under the agreement/policy. She submits that the main purpose of the impugned notice was to have the quotas unloaded by creating a panic in the market and trigger distress sales and speculative purchases resulting in cornering of quotas so released, by some of the major favored buyers in the market. She submits that the preponement of the dates would hit exporters, who cannot utilise the short time frame to obtain orders from foreign buyers at a time, when export negotiations were in the process due to various international trade fairs, in particular, she referred to the "Magic Show Information, scheduled at Las Vegas Convention Centre, USA from 26.8.2002 to 29.8.2002.
10. Ms. Jethamalani submitted that the impugned order/ notices would adversely affect and bring about distortion and perversion in the existing well formulated garment policy. These cannot be justified as protected from judicial review under Article 226 by giving them the semblance of a new economic policy. She also assailed the impugned notices/orders, which while recognising the distinct possibility of embargo being imposed have accepted a bald statement that AEPC should ensure that it does not result in an embargo. No steps or mechanism for preventing embargo has been created or devised to ensure that no embargo takes place despite there being over utilisation of quotas up to 117 per cent. She submits that if the fill rate per week is 2%, there is likely to be an overall increase of 32% in September and October, which is bound to lead to an embargo Ex-USA and result in serious financial consequences to the detriment of the exporters and the export trade.
11. Ms. Ram Jethamalani elaborating her argument that any change in the export and import policy or amendment thereto can be done only by means of notification, relied on the provisions of Section 5 of the Foreign Trade (Development & Regulation) Act, 1992 which reads as under:
"The Central Government may from time to time, formulate and announce by notification in the official gazette, the export and import policy and may also in the like manner amend that policy."
She submitted that the Garment Export Entitlement policy itself was issued by notification No. 1/128/99 Export I dated 12.11.1999. Further, subsequent notification is also a gazetted notification. In support of her contention that the impugned notices were against principles of promissory estoppel and the Government could not effect these changes, contrary to the assurances of keeping transferability of quotas alive up to 20th September, 2002, reliance was placed by learned counsel on a number of authorities on promissory estoppel. Reference may be usefully be made to Shri Hari Exports v. Director General of Foreign Trade 1994(73) ELT
794. The petitioner had been granted a value based import license entitling it to import duty free raw material components etc. The respondents issued a notification placing goods in sensitive list affecting petitioners' right to import. It was held that estoppel does to bind the State if the public interest is the cause for the change in its stand. The respondents have not placed any material to show that this equitable doctrine of promissory estoppel must yield in this case in view of other equitable circumstances or public interest. Counsel submitted that in the instant case the respondents had failed to show any such circumstances. She also attempted to distinguish the judgment in Balco Employees Union (Regd.) v. Union of India and Ors. .
12. Affidavit in opposition to the writ petition has been filed by the Under Secretary in the Ministry of Textiles. Affidavit in opposition has also been filed on behalf of the Apparel Export Promotion Council (for short AEPC).
13. The main contentions urged by the respondents are that the decision to advance the last date by which the petitioners were to be permitted to transfer quotas from 20.9.2002 to 30.8.2002, was taken in public interest with a view to contain the high premium prevalent for certain items, such as, 338 & 339 USA. It has been claimed that these high premiums were prevalent on account of boarding of the PPE quotas and utilization of the FCFS quotas.
14. For the sake of convenience, before going further into this aspect, the plea raised by the petitioners that the impugned notices/orders are bad on account of the absence of requisite notification in terms of Section 5 of the Foreign Trade (Development and Regulation) Act, 1992 having not been issued, is taken up for consideration. The respondents acknowledge that if there is any amendment of the Import Export Policy that has to be brought about in terms of Section 5 of the Foreign Trade (Development and Regulation) Act, 1992. The case of the respondents is that the impugned notices do not constitute any amendment of the Import and Export policy. The amendments relate to changes in the garment policy and that too on its procedural aspect. Reference is drawn to Para 4.11 of the Export and Import policy, which empowers the Director General of Foreign Trade, to specify the procedure to be followed by an exporter or importer or any licensing department etc. for the purposes of implementing the provisions of the Act. The said procedures are included in the Hand Book (Volume I), Hand Book (Volume II and in ITC (HS). These can be brought about by the publication of a public notice. The amendment in the said procedure is also permitted in like manner that would be by a public notice in contra-distinction to the requirement of a gazette notification. The Import and Export Policy had been notified in terms of Section 5 of the Foreign Trade (Development and Regulation) Act, 1992 on 31st March, 1997. The Director General of Foreign Trade in pursuance to the provisions of Para 4.11, notifying the compilations known as Handbook or Procedures Volume I, Handbook of Procedures, Volume II and ITC (HS) classifications of Export and Import items. Schedule II appendix I of the ITC (HC classifications) of Export and Import items in Para 9 clearly provides for export of certain textile products of cotton, wool and man made fibres and blankets, which are subject matter of trade between India and Canada or EEC Norway or the USa, as the case may be. The said exports are made subject to the conditions notified by the Government from time to time. This notification, it is the respondents case, has been validly, as required, made by a public notice. In the notification to the Garment & Knitwear Export Entitlement (Quota) Policy 2002-2004, it is stated as under:
"Pursuant to the provisions contained in item No. 8 of Appendix I Schedule II of ITS (HS classifications) of Export and Import published under the Export and import policy in respect of export of ready-made garments and knit-wares to the USA, Canada and European world, the policy for allotment of entitlement (hereinafter referred to the allotment policy) for the years 2000-2004, especially as hereinafter detailed."
The Union of India in its affidavit has also supported the above position.
15. From the foregoing it would be seen that while any amendment to the Import and Export policy has to be brought by a gazette notification, there is no such requirement for garment policy as is there is Section 5 as well as Para 1.3 for the Import Export policy. The requirement of Gazette notifications is neither there in the Handbook of Procedures nor in Para 4.11 of the policy and item No. 8 appendix 1 of the Schedule 2 of ITC (1 HS). Thus, there is no mandate of the statute for having the amendment in garment policy being brought about by a gazette notification. I find the aforesaid reasons correct. The amendments in the procedural aspect of the garment policy as are sought to be done by issuance of public notice, cannot be equated with the amendments of the Import and Export Policy under Section 5, which can only be done by resorting to publication in gazette notification. Reference may usefully be made to the decision of the Division Bench in CWP No. 4713/1995 in All India Garments Non Quota Manufacturers Association and Ors. v. Union of India and Ors. The challenge in this respect of the petitioner, therefore, fails.
16. The Director General of AEPC is designated as the quota administering authority. Further, para 20 of the quota policy gives the Government the right to make any amendment to the above system in public interest without giving prior notice. The case of respondent No. 1 is that pursuance to the aforesaid the impugned notices were issued bona fide in public interest to correct the high quota premiums, which were prevailing especially in the category 338/339-USA. The records of the Ministry and the correspondence with AEPC have also been produced. These have been perused.
17. It is the case of Union of India that from the beginning of the quota year 2002, there had been increased activity of speculation and hoarding of quotas, creating artificial scarcity in several export items, including USA category 338 and 339. The increased premium eroded the margin of the profit of exporter and adversely affects its competitiveness in global market. The Quota Administering Authority (QAA) had addressed communication to respondent No. 1 that although there was no spurt in export of certain categories, their premiums were ruling unusually high owing to speculative activity. It was expressed that this might result in genuine exporters especially manufacturer exporters, not being able to meet their committed obligations. The case of the Union of India is that it had been monitoring and studying these trends and after careful deliberation and consideration of all relevant factors, it decided to intervene under Para 20 of the policy to bring down the premium and to ensure that the quota was available to exporters on a continuing basis. Based on this, as recorded earlier, the following decisions were taken.
"1. It has been decided that the AEPC may immediately release 10% additional quantities in category 338/339-UA under the FCFS system after giving usual notice to the trade.
2. It has also been decided that the transfer in this category shall be permitted only up to 30th August, 2002.
3. AEPC is requested to ensure proper monitoring of quota utilization so that no category faces any threat of embargo in respect of the above releases.
4. While certifying shipments or otherwise, it would be ensured be AEPC that no embargo gets imposed in any category.
18. The rationale and justification for the aforesaid decisions as stated by the respondent's counsel is that a higher quota premium results in high cost price for the exporters, rendering him non-competitive as an exporter. The importers would then prefer to import from a country which offers the most competitive rates. It is also stated that as buyers generally place orders for co-ordinate sets of garments such as Jacket and Trousers a higher quota premium in one could affect the export of the other item. It was urged that high quota premiums could have the effect of permanent loss of foreign exchange to the country. The Government, therefore, has a duty to check the manipulation of quota premium by vested interests who buy the quotas or trade in them and sit over it for making a fast profit. The impugned actions were, therefore, necessary and in public interest. Respondents submitted that the prevailing quota premium in respect of category 338/339-USA was only 40 to 50 per cent of the present level in the month of May and June, 2002. The present steep rise could result in the exporter either not effecting shipment or effecting shipment of sub-standard goods, which will ultimately affect the exports. It was stated that the value realization for category 338/339-USA had dropped to US Dollars 4.85 from US$ 6.03 last year. In such a situation, there was no occasion to permit high premium in the quota to the tune of Rs. 150-170/- per piece in the cost price of Rs. 220-230/-. Counsel urged that the persons responsible for high premium are those who were primarily trading in quotas. The Government had in the past released additional quota under the FCFS quota so that exporters at large could purchase their quotas without buying them at exorbitant prices. This action, however, has to be circumscribed in view of the quantitative ceiling imposed by the quota countries, which if utilized in excess of limits, could result in an embargo.
19. As regards the petitioner's criticism that category 338/339-USA had been singled out while the AEPC had recommended the banning of transfer of quotas in a number of categories. Respondents have sought to explain that while the quota premium may be high in number of categories, the respondents found that there was not much gap between the actual release and utilization for categories, such as, 347USA. As against it, for category 338/339-USA against the release of quantity to the extent of 125 the actual utilization was only 77 per cent, which demonstrates that nearly half the quantity was being hoarded or not being made available for utilization. Respondents have stated that for category USA 347, the gap between the quantities allotted and quantities utilized was 22.6% as against 4.67 for USA 338. Respondents submitted that the decision taken was an administrative decision as a regulatory measure, without changing the basic policy and these decisions cannot be described as amendments to the policy in general. Respondents have further clarified that the impugned order could hurt only those people who were involved in trade of quotas rather than who are exporting the goods. As regards those holding PPE quotas, no restrictions have been put on utilization of quotas for self-use. These exports can be affected against the quotas up to 30.9.2002 without earnest money deposit and thereafter up to 31st December, 2002, with earnest money deposit. Counsel submits during oral arguments that the measures taken by the respondents had a salutary effect and premium fell from 160 to 60 or 70. It is also claimed that as a result of interim stay, which was granted, the premium rose to 110 after having dropped to 60 and 70. Respondents also state that a notice of 8 days had been duly given rather if both the days are counted it comes to 10 days. Counsel also submitted that reliance placed by the petitioners on the letter of the Chairman of AEPC as well as other letters from the Associations of exporters, one thing was clear that while there have been protests and representations against opening of additional quantities in FCFS quotas, there has been no representation against advancing or preponement of the last date of transfer. Counsel submitted that the present petition has been filed mala fide at the behest of few exporters having vested interests, who want to have undeserved benefit of speculative trade in quotas.
20. The Government records as produced and the correspondence exchanged with AEPC, show that the question of high premium rates in numerous items have been subject mater of concern and consideration by the AEPC and Ministry of Textiles. The respondents had been monitoring these trends on receiving feed back from AEPC and other sources. The records reveal that recommendations as made by AEPC, the view points of the Ministry of Textiles and different perspectives and possibilities were duly considered and the decision taken at the level of the Minister. Considering that undoubtedly, the quota premium was prevailing at high rates, in respect of item Nos. 338/339-USA, the decision taken by the respondents to prepone the last date of transfer so as to bring down the premium, cannot in these circumstances, be called arbitrary, irrational, unreasonable, or a decision which calls for interference in judicial review.
21. The respondents have also satisfactorily explained the reasons for banning the transfer in respect of 2 items at this stage USA 338 and 339 as against recommendations made by AEPC for a similar ban for other items. This has been done on the basis of the gaps between actual releases and utilizations. Besides, once a reasonable explanation for exercise of administrative discretion, especially in economic matters is available, it is not for the Court to substitute its own opinion and decision, for that of the authorities, unless the decision can be shown to be perverse or wholly arbitrary. It is for the Administrators and experts to decide on the precise timings and the manner of implementation to achieve a particular objective. It may also be noted that though the respondents had taken the decision to simultaneously release additional quantities of quotas under FCFS scheme in view of the views expressed by the AEPC as well as major associations of the exporters, the Government has stated in its affidavit that the same is under review. This appears to have been done in view of the apprehensions and reservations expressed and with a view to avoid the possibility of the embargos by the importing countries on these items if the export quota is sought to be exceeded.
22. I also do not find any merit in the submission of learned counsel for the petitioners that these decisions were intended to create a panic and to have distress sale of quota in the market so that few favored buyers can receive the benefit of export orders and purchase at distress prices. As noticed earlier, in my view, in terms of Para 20 of the Garment policy the Government was fully justified to take the impugned actions with a view to regulate and control the high premiums that were prevailing and take corrective measures under the garment policy. The decisions cannot be said to be against public interest.
In view of the urgency of the matter, the operative part of the judgment had already been announced. As regards the Government decision to release additional quantities of the FCFS quotas, the same are under review with the Government. It is hoped and expected that the respondents would duly consider all factors and take an appropriate decision as warranted to safeguard the exports in public interest to avoid imposition of embargo.
The writ petition is dismissed with no order as to costs.