Karnataka High Court
Garments International Pvt. Ltd. And ... vs Union Of India And Another on 12 June, 1990
Equivalent citations: AIR1991KANT52, AIR 1991 KARNATAKA 52
ORDER
1. The petitioners have questioned the legality and propriety of the decision and order contained in Circular No. STT-36(1)/100 dated 6-1-1979, a copy of which is Annexure-B, and have sought for quashing of the same. The petitioners have also sought for a mandamus directing the respondents to pay cash assistance accrued and due to all the petitioners for the periods January to March, 1979.
2. The following are the material facts of the case :--
The petitioners are manufacturers and exporters of readymade garments. They are members of the Cotton Textiles Export Promotion Council. The Union of India (respondent-1 herein) with the object of promoting export of goods from the country, announced Export Assistance Schemes from time to time. Under these schemes are contemplated replenishment licence and/or cash incentives. These are extended through various Export Promotion Councils and Federations in India. The petitioners are concerned with export of cotton textile and fabrics and the 1st respondent renders such assistance through the 2nd respondent which is the Indian Cotton Mills Federation.
3. On 19-4-1978 for and on behalf of and as the agent of the Ministry of Commerce, Government of India, respondent-1 declared and/or announced through respondent-2 Export Assistance Scheme in respect of cotton textiles and goods effective for the period 1-4-1978 to 31-3-1979. Item 6 of the said circular refers to the said export goods and the rates of cash assistance allowed and/or granted on the F.O.B. value of the said export goods. Item 6 is excerpted below:--
"Item No. 6: Cotton Readymade Gar ments made/powerloom/ handloom/khadi
(a) Industrial garments/children's garments : 12.5%
(b) Other items of readymade garments : 7.5%"
The circular was forwarded to the petitioners by the Cotton Textiles Export Promotion Council through its circular dated 22-4-1978. Annexure-A is the circular dated 19-4-1978 and 22-4-1978.
4. It is stated that the petitioners with implicit faith in the said circulars and relying and acting upon the same, entered into various contracts with foreign buyers for the sale and export of readymade garments. According to the petitioners, the said contracts were entered into by the petitioners with the foreign buyers as a price lesser than the usual market price bearing in mind the cash assistance assured by the Government of India under the said Export Promotion Scheme. In pursuance of the said contracts, the petitioners de facto exported readymade garments and thus discharged their obligations to be entitled to the benefits offered by respondent-1. The export of the garments was in fulfilment of the contractual obligations which the petitioners owed to the foreign buyers for the months of January to March 1979. It is stated that since the petitioners exported the garments at a price lower than the actual cost of the export of the goods and also less than the margin of profits of the petitioners, the petitioners hopefully looked forward to the fulfilment of the promises and assurances held out by the respondents through the circulars already referred to. The action of the respondents in withdrawing and/or rescinding the cash assistance for the period of April 1978 to 31-3-1979 was devoid of lawful justification, according to the petitioners.
5. The petitioners, in accordance with the procedure prescribed, submitted to respon-dent-2 their applications seeking cash assistance for the months of January to March 1979 in respect of exports made by the petitioners during the relevant period. Whereas respondent-2 accepted the petitioner's applications for assistance in regard to various other items, it did not accept their applications for cash assistance in relation to the goods exported and covered by item 6 already referred to even though those goods were covered by the official quota for export as fixed by the Government of India. The reason given for not accepting the said applications was that respondent-1 had withdrawn the cash assistance in respect of the said export goods. This was the reason communicated by respondent-2 to the petitioners. The petitioners attention was drawn to circular dated 6-1-1979 besides another circular dated 7-3-1979 which purported to announce the withdrawl of the cash assistance by respondent-1 in respect of item 6.
6. The relevant portion of the said circular reads thus:--
"It has since been decided that Cash Compensatory Support applicable to the exports of following items of cotton garments will be discontinued with effect from 1st January 1979:--
1. Shirts
2. Blouses
3. Dresses
4. Skirts
5. Trousers The names of the quota countries to which this decision is applicable are :
1. USA
2. EEC countries
3. Austria
4. Finland
5. Sweden
6. Norway."
7. It is stated that the petitioners are exporters registered with the Cotton Textiles Export Promotion Council and yet the respondents did not afford any opportunity to show cause why the cash compensatory support should not be withdrawn in respect of the items for which cash assistance was denied. Aggrieved by the unilateral action taken by the respondents, the petitioners have preferred these writ petitions.
8. The questions of fact and law urged in these writ petitions are common to all the petitioners and the reliefs sought are identical.
9. The learned Counsel appearing for the petitioners submitted that the respondents represented to the petitioners at all material point of time before the impugned decision was taken and order passed by circular dated 6-1-1979, that they would be entitled to receive cash compensatory assistance provided they were made in accordance with the earlier circular instructions. Relying on the said promises and assurances of the Government of India, the petitioners enterted into numerous export contracts with foreign buyers. It is submitted that the Government of India is in the process, the recipient of the benefit and advantage incidental to the exports made by the petitioners by way of considerable foreign exchange. In short, the contention of the petitioners is by the principle of promissory estoppel, the respondents are estopped from discontinuing cash compensatory support.
10. The second contention is that the petitioners have been subjected to invidious discrimination, because the impugned circular purports to discontinue cash assistance only in respect of readymade garments like Shirts, Blouses, Dresses, Skirts and Trousers exported to U.S.A., E.E.C. countries, Austria, Finland, Sweden and Norway. It is further contended that the action of the Government by adopting pick and choose attitude in respect of selected countries and selected garments is bereft of rational basis. Therefore, it is submitted that the consequence of the order is hostile discrimination and violation of Art. 14 of the Constitution of India. It is further contended that the respondents are bound by the earlier circulars, both in law and equity, and are bound to fulfil and perform their obligations and extend the benefit of cash assistance which has been denied to the petitioners.
11. Lastly it is submitted that the petitioners having peformed their contractual obligation and also by conforming to the requirements of the circulars issued by the Government of India from time to time, as of right, are entitled to the continuation of the cash assistance in respect of the relevant period and denial of such assistance is illegal.
12. The point to be considered is whether the denial or discontinuation of cash compensatory assistance to the petitioners for the period commencing from 1-1-1979 as notified in the impugned circular is sustainable in law and whether the petitioners are entitled to the cash compensatory assistance for the period of January to March, 1979.
13. The learned Counsel appearing for the petitioners has invited my attention to a decision of the High Court of Judicature at Madras (Special Original Jurisdiction) in the case of Transworld Trading Corporation v. Union of India, rendered on 19-4-1983 in Writ Petition Nos. 1877 and 1878 of 1979 wherein it was held that the principle laid down in Robertson v. Minister of Pensions (1949) IKB 227, is squarely applicable to the facts therein. The principle of law had commended acceptance to the Madras High Court as enunciated by Lord Denning is to be found in the following passage :--
"The Crown cannot escape by saying that the estoppels do not bind the crown for that doctrine has long been exploded. Nor can the crown escape by praying in aid the doctrine of executive necessity, that is the doctrine that the crown cannot bind itself so as to better its future executive action".
"We are in this case not concerned to deal with the question whether Denning, LJ was right in extending the rule to a different class on cases as in Falmouth Boat Construction Co. Ltd. v. Howell, (1950) 1 All ER 538, where he observed at page 542."
"Whenever Government Officers in their dealings with a subject take on themselves to assume authority in a matter with which the subject is concerned, he is entitled to rely on their having the authority which they assume. He does not known, and cannot be expected to know, the limits of their authority, and he ought not to suffer, if they exceed it."
14. The principle summarised in the above passage is apposite to the facts of this case. The facts of these cases disclose that respondent-1 has taken a unilateral action by issuing the impugned circular retrospectively denying benefit of the cash assistance to the petitioners without any consideration of the consequences attendant upon the petitioners who have acted upon the earlier circulars assuring cash assistance in respect of their items of exporl to the authorised countries and particularly when they have already concluded their contractual obligations to the foreign buyers at a reduced price which is lower than the market price hopefully anticipating the proclaimed cash compensatory assistance from the Government of India based on the solemn undertaking manifested in the circulars which preceded the impugned circular. It is too late in the day for the petitioners to undo the transactions which they have already done and they have in fact reached the point of no return. In these circumstances, I am of the opinion that respondent-1 has acted without due diligence and in violation of its own earlier promises in which the petitioners reposed absolute faith and confidence and ventured to continue their export business with the foreign buyers. After all the petitioners are seeking the cash assistance which is compensatory in nature promised by respondent-1. The benefit flowing from the export of garments made by the petitioners is not one-way traffic. On the other hand, not only the petitioners, but also the Government of India is an undisputed beneficiary inasmuch as the petitioners are earning valuable foreign exchange which the country badly needs. By these observations, I am not for a moment suggesting that the Government of India does not enjoy the privilege of changing its policy from time to time in the exercise of its executive discretion. But what I am pointing out is that if only the circular had been made prospective in operation, injustice to the petitioners could have been averted. It is not the case of the respondents that the petitioners have not fulfilled all the obligations contemplated by the circulars which were issued by respon-dent-1 from time to time preceding the decision under the impugned circular. It is also not the case of the respondents that they did not hold out any promises to the exporters assuring cash compensatory assistance. In these circumstances, the impugned circular is detrimental to the legitimate interest of the petitioners. The facts of these cases warrant the application of the principle of promissory estoppel and I am of the opinion that the petitioners are entitled to the cash compensatory assistance for the period of January to March, 1979 to the extent of the value of the garments exported by the petitioners to the countries authorised under the earlier circulars.
15. In the context, what was articulated by Lord Atkin in Eshugbayi Eleko v. Government of Nigeria (1931) AC 662 : (AIR 1931 PC 248 at p. 252) is relevant :--
"In accordance with British jurisprudence no member of the executive can interfere with the liberty or property of a British subject except on the condition that he can support the legality of his action before a Court of Justice."
As observed by Patanjali Sastri, J. (as he then was) in Gopalan v. State of Madras, :
"Thus even in monarchical Britain the struggle between prerogative and law has long since ended in favour of the latter."
One of the principles of rule of law enunciated by Dicey is :--
"The absolute supremacy or predominance of regular law as opposed to the influence of arbitrary power excludes the existence of arbitrariness of prerogative or even of wide discretionary authority on the part of the Government. Englishmen are ruled by the law and the law alone."
Another postulate of Dicey is.:--
"The rule of law is again used as a formula for expressing the fact that with us, the law of the Constitution, the rules which in foreign countries naturally form part of the constitutional code, are not the source, but the consequence of the rights of individuals as defined and expressed by Courts."
It is a well established and recognised principle that Art. 14 of the Constitution of India is more in the nature of admonition to the State and does not directly purport to confer any right on any person as some of the other articles like Art. 19(2). Art. 14 is an injunction to both the legislature and the executive.
Since I have taken the view that the principle of promissory estoppel is applicable to the facts of these cases and that the petitioners are entitled to the relief sought, it is not necessary for me to express my view as to whether or not the impugned circular is violative of Art. 14 inasmuch as it is made applicable specifically and only to select items exported to select countries.
I am in entire agreement with the view taken by the Madras High Court in the case of Transworld Trading Corporation referred to above.
16. For the reasons stated above, these writ petitions are allowed and the impugned circular, in so far as the petitioners are concerned, is quashed. The respondents are directed to extend the cash assistance accrued and due to the petitioners in accordance with their entitlements for the period of January to March, 1979. The payment shall be made within 45 days from the date of receipt of a copy of this order. A copy of this order shall be forthwith communicated to the respondents. In the circumstances of these cases, there will be no order as to costs.
17. Petitions allowed.