Karnataka High Court
Gokaldas Exports Ltd. Rep. By Its ... vs Union Of India (Uoi) Rep. By Its ... on 17 December, 2007
Equivalent citations: AIR2008KANT65, AIR 2008 KARNATAKA 65, 2008 (2) AIR KANT HCR 491, 2008 A I H C (NOC) 693 (KAR), (2008) ILR (KANT) 3286
Author: Ram Mohan Reddy
Bench: Ram Mohan Reddy
ORDER Ram Mohan Reddy, J.
1. The petitioner, a manufacturer/garment exporter when allotted export entitlements under New Investors Entitlement, Non-quota Transfer, Bast Performance Transfer, quota in country category US-3410. US/342, US/2GR, EU/8, EU/27, CA/2GR during the year 1998, in terms of the Government Export entitlement policy 1996-1998 for short 'Policy', exported 84.37% of the entitlement, resulting in the 3rd respondent Apparel Export Promotion Council (for short 'AEPC), Bangalore, forfeiting Rs. 36,10,378/- by order dated 17-12-1999 Annexurc-'C", confirmed in First Appeal by order dated 12-02-2002 Annexure-'D' of the First Appellate Authority and dismissal of the Second Appeal by order dated 14-09-2002 Annexure-'E' of the Second Appellate Committee. Hence, this writ petition.
2. Petition is opposed by filing Statement of objections dated 7-1-2003 of the 3rd respondent and Statement of objections dated 1-6-2004 of Respondents 1 and 2. In the Statement of objections of Respondents 1 and 2, it is contended that export of textiles and clothing from India is based on bilateral agreements entered into between Government of India and Governments of developed countries under the aegis of the erstwhile Multi Fibre Arrangement (MFA) governing international textile trade from the year 1974. The Textile Importing countries are referred to as "Quota countries" who have placed restraints on import of specified textile categories "Quota items" within the annual levels prescribed in the bilateral agreement and that the coming into force of the World Trade Organisation (WTO) in 1995, quantitative restrictions known as "Import quotas" in the bilateral agreements were changed under the WTO relating to Agreement on Textiles and Clothing (ATC). The quotas also known as export entitlements are allocated amongst individual exporters, for which a system of allocation of quotas is formulated so as to optimize the export revenue in the economic interest of the country. It is stated that in furtherance of the said aim, the Government of India framed policies from time to time known as "Export Entitlement (Quota) Policies" and allocations of quotas are mainly done under the following categories in case of readymade garments:
a) 70% quota based on past performance of the exporter under the Past Performance entitlement (PPE);
b) 15% quota based on new investments made for modernization of machinery under the New Investors Entitlement (NIE), to encourage investments in industry;
c) 5% under Non-quota export (NQE) entitlement to encourage diversification of exports to non-quota countries;
d) 10% on First Come First Serve (FCFS) to provide equal opportunities to all exporters on basis of High Value Realisation.
The framing of policies, it is said, is in exercise of power conferred under Section 5 of the Foreign Trade (Development and Regulation) Act, 1992 (No. 22 of 1992) and Item No, 8 of Appendix-I Schedule-2 of ITC (HS) Classification of Export and Import published under the Export and Import policy. It is further stated that in order to implement the policy, an Apparel Export Promotion Council (AEPC) headed by Director General is designated as Quota Administering Authority, on behalf of the Government, responsible for allocation of quota in terms of the policy. The availability of quota, it is said, vastly over strips the demand and in view of the restricted availability, commands a premium. Major importers of textile garments being the quota countries, it is essential to ensure quotas are fully utilised and are not allowed to go waste due to speculative trading by unscrupulous elements and therefore, the policy envisages utilisation of the quota by 30th September of the relevant year and failure to do so, the exporter is required to surrender the quota and seek invalidation of unutilised quota allocated in the categories, in the manner and procedure as laid down in the policy. Revalidation of quota beyond 30th September and upto 31st December of the relevant year is in the form of a Bank guarantee or a fixed deposit receipt or Demand Draft while the policy in operation till the year 2000, star exporters cover the amount of EMD by a letter of undertaking or post dated cheques. The condition imposed for revalidation is that an exporter who exports not less than 90% of the export entitlement, its EMD shall be released in full. In case of utilisation upto 75% of fast moving items and upto 50% in case of slow moving items, EMD is forfeited in proportion to the shortfall of utilization. If an exporter is aggrieved by any order of forfeiture, it could maintain an appeal to the First Appellate Committee and thereafter to a Second Appellate Committee. The Appellate Committees rejected the petitioner's claim of force-majeure, as no relevant material constituting substantial legal evidence of the fact that failure to fulfil the export obligation was due to acts beyond the control of the exporter. It is further stated that during the pendency of appeals, the practice is not to effect any recovery and therefore, it is profitable for exporters to delay the recovery as long as possible since no interest clause is provided in the quota policy.
3. The Statement of objections of the 3rd respondent raises almost identical contentions as are advanced by Respondents 1 and 2 in their Statement of objections. In addition, it is contended that the exporter having taken the benefit of the garment export entitlement policy, sought for extension of time by furnishing a bank guarantee and having failed to export garments in terms of the quota provided, cannot be permitted to approbate and reprobate. It is stated that the petitioner is estopped from contending that no amount could be forfeited. The further contention of the 3rd respondent is that the exporter did not place relevant material in support of its claim of force-majeure.
4. Learned Counsel for the petitioner advances the following contentions:
a) that Sub-clause 'F' of Clause 8 of the garment export entitlement policy (1996-1998) for short 'Policy' in so far as it relates to forfeiture of the earnest money deposit, in its entirety, for exports less than 75% and proportionate forfeiture for exports between 75% and 90% under Past Performance Entitlement (PPE), is irrational and unreasonable.
b) the appellate authority fell in error in not considering the documentary evidence laid by the petitioner to establish the claim of force-majeure, while directing forfeiture of the EMD.
c) that the petitioner having exported garments upto 84.37% of the total export quota, the non-fulfillment of the export obligation was not due to willful failure on the part of the petitioner but for reasons beyond its control.
d) In earlier appeals involving identical issues and identical set of facts, the authorities having taken a conscious decision to extend the benefit of the claim of force-majeure, cannot refuse to extend the very same relief in the fact situation of this case.
5. Per contra, learned Senior counsel Sri. G.L. Rawal for Respondent No. 3 contends that the challenge to the policy is unavailable to the petitioner as the garments exported having fallen short of the quota allotted to it within the period stipulated, that is 30-09-1998, voluntarily sought for invalidation of the entitlement beyond 30th September upto 31st of December, by filing an application in the required proforma XII to the policy, and a Bank guarantee in the proforma Annexure-VI to the policy. According to the learned Senior counsel, in terms of the policy, the petitioner was fully aware of the consequences of proportionate forfeiture of Bank guarantee on failure to export garments upto 90% but not less than 75%, and forfeiture in full if less than 75%. Petitioner having accepted the terms of invalidation, it is argued, cannot be heard to contend that the policy in so far as it relates to forfeiture is either irrational or unreasonable. Learned Senior counsel further contends that an identical contention over the validity of the policy, when advanced, in the case of Gokaldas Images Limited v. Union of India, a learned Single Judge of the High Court of Delhi rejected the plea in the decision reported in 2007 (7) STR 347 (DEC). Learned Senior counsel, in addition, contends that the petitioner having not laid relevant material constituting substantial legal evidence of a claim of force-majeure, the authorities rightly considered and rejected the said plea. Lastly it is contended that the petitioner having exported garments upto 84.37% of the total export quota allotted, the authorities were well within their powers to direct forfeiture of the amounts in bank guarantee, in proportion, to the extent of non-exported quota.
6. Sri. Devadass, learned Senior counsel for Respondents 1 and 2 contends that the petitioner having secured an allotment of a quota to export garments under the policy, without questioning the terms and conditions of invalidation, cannot be permitted to approbate and reprobate by calling in question the policy that too, after short export of garments. According to the learned Senior counsel, quota for export of garments once allotted to an exporter, it is presumed that the exporter would discharge its obligation to export garments to fulfill the quota allotted and in order to ensure such compliance, Sub-clause P of Clause 8 of the policy providing for forfeiture of the bank guarantee, cannot be characterised as either irrational or unreasonable. Learned Senior counsel hastens to add that garment export is peculiar in its nature since quotas provided for each country, under the policy is to maximise foreign exchange. The Government, according to the learned Senior counsel, is well within its right to provide for forfeiture of the Bank guarantee, so as to ensure full and maximum utilisation of the quota and that is precisely what has been done.
7. Having heard the learned Counsel for the parties, perused the pleadings, there can be no more dispute that in terms of the "Policy, the petitioner applied for and secured allotment of a quota to export garments and having failed to do so within 30-09-1998, voluntarily sought for and obtained revalidation of the quotas upto 31st of December 1998, despite which there was a shortfall in the export of garments. Due to non-fulfillment of the export obligation, in its entirety, despite the extended period of time, and in terms of the revalidation, the AEPC issued a notice calling upon the petitioner to show cause as to why action should not be taken to forfeit the monies from out of bank guarantee, which was responded to by the petitioner. The AEPC, not being satisfied with the explanation offered, forfeited Rs. 36,10,378/-, calculated in proportion to the percentage of non-exported quota, from out of the amounts in the bank guarantee, by order dated 17-12-1999 Annexure-"C". This order when carried in appeal before the First Appellate Committee, was confirmed by order dated 12-02-2002 Annexure-"D". So also, the Second Appellate Committee dismissed the petitioner's appeal by order dated 14-09-2002 Annexure-"E".
8. In the admitted facts noticed supra, the questions that arise for decision making are
(i) whether the challenge to the policy in so far as it relates to forfeiture, for non-fulfillment of the export obligation within 31st of December of the relevant year, is sustainable?
(ii) Whether the AEPC and the Appellate Committees, were justified in rejecting the petitioner's claim of existence of force-majeure conditions?
9. Indisputably, the invalidations of the quotas allotted to the petitioner was at the instance of the petitioner who filed applications to permit it to export garments for the balance of the quotas on or before 31st of December and voluntarily furnished a bank guarantees, inter alia, covenanting that in case of failure to fulfill the export obligation, in its entirety, would be subject to Sub-clause 'F' of Clause 8 of the 'Policy'. The petitioner consciously agreed to the terms of the policy that if it exported garments beyond 75% upto 90% of the quota, it would be liable for proportionate forfeiture and if less then 75%, forfeiture would be in full, from out of the amount in the Bank guarantee. The consent of the petitioner to be subjected to the terms of the policy, more appropriately Sub-clause V of Clause 8, the condition of forfeiture in the event of failure to export garments upto 100% of the quota, in the circumstances cannot be permitted to approbate and reprobate nor be permitted to assume inconsistent positions. So also having failed to establish by cogent evidence the claim of force-majeure, the reasons for not fulfilling the entire export obligation, in the appeals before the First and Second Appellate Committees, are disentitled from questioning the validity of the forfeiture clause in the 'Policy'.
10. The contention that the terms of forfeiture are irrational and unreasonable in the circumstances is beyond pale of consideration. I say so because, the entire policy of allotting quotas is with the purpose of augmenting foreign exchange, which is of vital importance for the country and as a consequence, export of garments under the quota allocated is imperative and it is with the avowed object of maximising the utilisation of the quota, the policy provides a clause for forfeiture. The Central Government entitled to formulate a policy based on precise timing and manner of implementation of the quota to achieve a particular objective, more appropriately in the matters of bilateral trade, in my opinion, being peculiar in its nature, the Government was well within its rights to provide for forfeiture and therefore, cannot be termed as either irrational or unconstitutional. It must be borne in mind that there must be free play with the Government in matters of economic policies which are not subject to judicial review, unless demonstrated to be contrary to statutory provisions or the Constitution. It is well settled law that courts, in exercise of their jurisdiction, will not transgress into the field of policy decision, as they are ill equipped to adjudicate on a policy decision. The court, no-doubt has a duty to see that in the undertaking of a decision, no law is violated and people's fundamental rights are not transgressed upon except to the extent permissible under constitution.
11. In almost identical circumstances, a learned Single Judge of this Court in the case of Gokaldas Images Limited v. Union of India in W.R. No. 8539/2003 and connected writ petitions, by order dated 12-03-2003, repelled the contention that the policy providing for forfeiture and imposition of penalty for non-fulfillment of the obligation under the export quota could be challenged by an exporter who had had the benefit of a policy, following the decision of the Apex Court in the case of PTR Exports (Madras) Pvt. Ltd. and Ors. v. Union of India and Ors. , in the matter of interference by writ courts with policy matters, by observing thus:
4 An applicant has no vested right to have export or import licences in terms of the policies in force at the date of his making application. For obvious reasons, granting of licences depends upon the policy prevailing on the date of the grant of the licence or permit The authority concerned may be in a better position to have the overall picture of diverse factors to grant permit or refuse to grant permission to import or export goods. The decision, therefore, would be taken from diverse economic perspectives which the executive is in a better informed position unless, as we have stated earlier, the refusal is mala fide or is an abuse of the power in which event it is for the applicant to plead and prove to the satisfaction of the Court that the refusal was vitiated by the above factors.
5. It would, therefore, be clear that grant of licence depends upon the policy prevailing as on the date of the grant of the licence. The Court, therefore, would not bind the Government with a policy which was existing on the date of application as per previous policy. A prior decision would not bind the Government for all limes to come. When the Government are satisfied that change in the policy was necessary in the public interest, it would be entitled to revise the policy and lay down new policy. The Court, therefore, would prefer to allow fire play to the Government to evolve fiscal policy in the public interest and to act upon the same. Equally, the Government is left free to determine priorities in the matters of allocations or allotments or utilisation of its finances in the public interest It is equally entitled, therefore, to issue or withdraw or modify the export or import policy in accordance with the scheme evolved....
12. In yet another decision of a learned Single Judge of the High Court of Delhi in Gokaldas Images Limited supra 2007(7) STR 347(OEC) took the view that garment export being peculiar in its nature on account of quotas being provided for each country, the Government was well within its right to formulate a policy for full and maximum utilisation of the quota which cannot be interfered with. Having read the entire text of the judgment, I find no good reason to deviate from the reasons, findings and conclusions arrived at by the learned Judge.
13. In order to appreciate the contention of the petitioner over the plea of force-majeure, it is necessary to extract the relevant portion of Sub clause 'F' of the policy, which leads thus;
(iv) All provisions relating to forfeiture of EMD will be subject to Force-Majeure conditions which are established with documentary evidence which would be considered by the Appellate Authority.
14. From the above, what is disceraable is that in the event the petitioner is unable to fulfil the export obligation of 100% of the quota allotted, resulting in forfeiture of the bank guarantee, the Appellate Authority is required to consider and pass orders by taking into account documents placed by the petitioner in support of the plea of force-majeure.
15. In the instant case, petitioner claims to have received letters Annexures "B1", "B2" and "B3", from the suppliers of fabrics expressing their inability to supply the fabric due to incessant rains in Tamilnadu. In addition, petitioner states that it placed before the authority a certificate Annexure-"B4" of the Meteorological Department and press clippings Annexure-"B5" series relating to water logging in Chennai on account of incessant rains on 8th, 9th and 10th of December 1998. It is not disputed that the Appellate Authority took into consideration this material and rejected the same in its order dated 12-02-2002 Annexure-"D". An examination of the said order discloses that the chart showing daily rainfall for Coimbatore as recorded by the Meteorological Department for Coimbatore and Salem during December 1998 discloses heavy rainfall on the 11th and thereafter no rainfall for the remaining days in the month while for Salem, there was rainfall on 10th and no rainfall thereafter, In that view of the matter, the Appellate Authority declined to accept the explanation of the petitioner that non-supply of the fabric was due to incessant rains. Even otherwise, relevant material that is to say the documents relating to purchase orders, invoices the quantity of material supplied before 30th September and the balance quantity to be supplied thereafter are not forthcoming. There is no material whatsoever to establish that the letters Annexures "B1", "B2" and "B3" were in fact from suppliers who had entered into valid contracts with the petitioner to supply the fabric. In my opinion, no exception can be taken to the findings and conclusions arrived at by the Appellate Committees while rejecting the plea of force-majeure.
16. The last contention that the benefits extended by the authorities in identical circumstances in pre-decided cases, were not applied in the present case, is also without any merit I say so because, claim of force-majeure is dependant upon facts of each case, based on documentary evidence to establish the existence of such conditions. It is possible that in other cases the authority may have extended benefits based on relevant documents in support of the plea of force-majeure, The decision to extend the benefit of the claim of force-majeure being dependant upon the facts and circumstances) and material on record in a particular case, it goes without saying that any decision rendered in that case, would not, unless facts and circumstances are shown to be identical, have application in another case.
17. In the result, this writ petition is without merit and is accordingly dismissed.