Federation Of Karnataka Chamber … vs Hubli Electricity Supply Co Ltd on 13 March, 2008

1996-1999 IS”iL_LEGA”L’AN’I) U.1.;TRA’.WFE’F.S ii»: RELA’T’iON ‘TO
SECTION 11′ THE FOREIGN–._TRAI)E REGULATION ACT
1992[FI’DVR-A ?;3.c:1’]e, _’FURTl+}ER DECLARING THAT THE
.A.:.»._rur_wr:..A.1*1t:.~u~: 9 meaczggpgnag ADOPTED BY
RESPQNDV!£.N’l’S_.V_NO,_1 mm. m BE ILLEGAL AND ULTRA
‘VIIRES :rz9¥F.R}.£9’ 99 13 09 THE 9999199 TRADE
RE€}ULATIONV~e-AGT ‘*[F”l’-DRA] 1992, DECLARE THAT THE
CCILLEC’:_’i”i(iN ‘i:,LEG;aL PENAL’I”r’ 3’1′ RESPGND’:5′.N’I’S
FROM’-.’l’H9L3 I=F:riT:oN9:Rs TO THE CONSOLlDA’l’ED FUND

O]? INDIATO ILLEGAL AND U”‘T’RA VIRES;

;__:’THIS ‘APE’!-‘.!.’.!’.!ON, COMING on FOR PREIJMINARY

‘;._I::..A;».9,:2~.r G= -9’ f.}R£_)l_.IP, THIS DAY THE COURT MADE THE
‘ F. Lmwma:

£$.E.E_B

H :The petitioner, a manufacturer] garment exporter

V * .,_9§rhen allotted an export entitlement under the Fimt Come

First Serve (FCFS), quota, in country catacgozry US-340, 633.
EU-6, CA-‘7 duzing the year 1998 in terms of the notification

dated 16- 10-1996 (for short ‘Po]icy’), efiected 58.6% tllle

#fi’\

fi’zndn.rK “-1*
« ‘.’ 4:31.:-pr’uN.I}EN :3

entitieinent, resiiiting in- the Appmel E.’q1-tl_1er by older
dated 26-10-2004 Second Appellate

Cglllinitteeglv

__ is Statement of objections
dated respondent and Statement of

objections dafiacl of Respondents 1 and 2.

3.». In tl1eStatement of objections of Respondents 1 and

V 2._ that export of textiles and clothing from

on bilateral agreements entered into between

Clove:f:1ine11t of India and Governments of developed

Al I lg;-unt1_Les under Ll-.. aegis of the erstwhile Multi Fibre

the year 1974. T e
to as “Quota countries” who have placed restraints on i1n:)ort
_.;J

L)’\

o” ‘peoified textile categories “Quou-.. ___t;..g:.
annuai levels pnoaoiibed in the th”t 2
the coming into force of the Woiflgj f
in 1995, quantitative rest:ri(:tionsiko;o’wn as”5’F;’ii:1io1ti’ii;£oota§”‘
in the bilateral ag1eementaiiii’vieViwe_’ohai1geic:I ‘iontig-;1*iit11e
relating to Agmemeggfgm aiiidtolotiiingg (ATO). The
quotas also l’mow-11 are allocated
amongst ivsirllich a system of
so aa to optimize the

export reveiitxe fiat.’-7_r” ‘”‘”r°–“t “f toe country. ! t i-..

stated that in the said aim, the Governme” t *f

h1_c1ia policies time to time Icnown as “Export

.,’:t_jI§i3nt;itie331entii i(i()1w-ta) Policies” and allocations of quotas are

i * ifdiolie under the following categories in case of

it A V gmments:

” a) 70% quota based on past performance of the
exporter under the Past Perfi*»”in’anu=- enfiuement

l DDR1-

‘; a .4’,

b) 15% quota based on new investments made for

fir’?

t

\

modcmizafioli of machineijr ‘”‘d”i’- the

=—–::

I

E

c) 5% uncler Non-quota Lé_)q;1o3’ti_ ”

.-u-u–c.-u-sl~:-u 3-an. ‘ _..i’I’I’Il’|:
I .rhw1_ _

7 , – _._ ..1_–_..__1:’._… ….. _ . ‘
I CUU. 8 (.1 V 1 LI ‘uti u g_c set.’ uuuu uwta
\ ..u.1t1’ies.,

d) 10% on Come’ i(iFVC3F’SV) to provide
equal oppo1*tu”uii:ie*v.3_vifio on h”””.-to “f High

‘F:-1.1113: _’e9__’I_i9fi.4.-inI”«.-

The    is  in exercise of power
"   Trade (Development

a11t’i.e.ARegu1V:éitiioi:sV).»:1’s*::t; (No.22 of 1992) and Item No.8 of

Appendiixc-A! ITC. (HS) Classificatzioli of Export

g;.:¢1 Import.” under the Export and Import policy. It

.l_.r t._ i1_1p1_._ .111; the policy, an

Genemi is desiglated as Quota t’\cim:’u1:ister1n’ g

_ tLA1it}1o1ity, on behalf of the Government, responsible for

” oilocation of quota in terms of the policy. The availability of

quota, it is said, vastly over strips the demand and n1 view of
the restricted availability, oonnnands a premium. Major

importers of textile ganzients being the quota c:ou11t:ries,_ it is

UK

<3'!

es"-=11t.ial to ensure quotas 9…, 1v 1 ti' –~£_m;::.. not

allowed to 0 Waste ('re to 's""oti.:~–t'.Es-fé–:'..v ¢*1"ad7in" 'av

unscrupulous elements and therefore, jthe ..euvieages '*

utilisation of the quota by §O'h 'Sefiember
year and failure to do isrkizvetttliltzd
sunvencler the quote'; of unutflised
quota allocated in the manner and
prooedule Revalidafion of quota

11.-e,..n..€ “semi upto 31″ December of the

‘av

TE1T3″*?|i’1’t” y~”f’?’ Va ._.:-:-.12.. gI…,.1..11t.e.. -1′ 9. fi_,ed_
deposit leoeiot firaft Whii’ the pohoy “1 o””r”‘a’*11
the exporters cover the amount of EMD
kzttex’ of ‘i~.£”.’.1′.’1C1’tBl{‘iIlgj or post dated cheques. The
Cfilitliilfitfiill’ for forfeiture is that an exporter who
tjhotvtess than 90% of the export entitlement, its EMD
‘.é.ha.’ivl.;bexs1eleased in full. In case of utilisation upto 75% of

fast” moving items and upto 5&6 in case of slow moving

1+n1*nc I-‘0’.

-I-3

3:3′

Jr:

is fiarfeited. L1 pmportioh to the shortfall of

11 If are .,…,,~…. 3 uggieveu by ..ny order 9.

raises aimost identicai co11ie13,fi” is Hf.-‘is iiii=’~}’i;€””‘eed
Respondents 1 and in tliei1″~A.ii_Si.eife1i1enti iofeeoiijectioiis. in
addition, it is eonteiiicilecii ‘f}is.~!ci’it.3;1e having taken the
benefit of? .tAl:ie–.-_ eniiiilement policy by
fi1nJis11i1i’giii’Ve.V fiiieielitee failed to
ga1’1:ieI1ts;”A~ ;i’:’1ietmeji.i» provided. cannot be
“a1id’ire1J1’obatc. It is stated that the

mtitioiieriiie, eetop’gmd,;i_rv.m ..-nt..11_i1_1g that no amount could

izée fo1’fei’fe(i. ” =’.F’11* f’frth”r c’*11’ceI1t:1’*11 of We ‘1’” 1*”-W”-4e ‘t i

–. that the. e§:por’rer did not Jiaee fefvaiat “*”t”1-“”” ‘*1 5″”-‘”11.
.v % .___ 1-‘

Vgf ifs:’;3§91;1′;’aii.’;’ of fome-majetme.

1′ 5. Learned oounsei for the petitioner ec’:v””-s the

a) that the ‘Policy’ providing for forfeiture of the
earnest money deposit. in its entiiety, for exports less than
75% and proportionate forfeiture for exports between 75%

\J
U\

‘P

and $}’& under the F-‘irr.t. meme Fimt. SP It

irratzioizial and umeasonable.

b) the appellate authoiity -.¢:i’1’oi’V:”ei1i’x<;1iot .

consiclering the doomnenttmjy evidence proxlnioed the
petitioner in support. of the, of .i'o'roe&»n1E:jei1i1é, Whiie
4,:_.__4.:__ 1.'… – V i " if
CIIIDU lg lull luu .I_— l.lJ.

..-¢…… 15:’. I-‘rue EMEL

c) that the garments uptao
58.6%: of th-s.§;;33o1*i;; eutitiemeiifi._t11e”:no11-fulfillment of the
obligation iarssiI;11ot”due ‘to wiilfial on the part of the

petitionerhut Jwasutfort beyond its control.

.;s.,%*1′-11.;-;ee;g.1:¢r%ae¢imqns in apnea1_ s involving identical
iss11es=.gxnd icleliticai of facts, the authorities having

a;:cepteciu”th_e elejguepfiiome-majeuie, cannot 1BfuBC to accept

. gpetitioneiis’ of tome-majeure, in the fact situation of

‘- i this

V. r:_1_t.ra_, _1ea_med Senior counsel Sri. G.L. Rawal

fGi’i:.’1a’;S””‘;}de31t No.3 mnt.e1.c1-s. .11..t the r_:1_u_a_1_nge to the

it is unavailable to us pet:’u.’r”-T as the gar.-.r.ents

exported tell short of the quota ailotted to it within the
stipulated. Accoxtling to the learned Senior oounsel, in

terms of the policy, the petitioner was fully aware of the
\ J

U'”\

\D

ca-315:-;q-dense cf }.’I’JI%Z”!”.’.O!1|.9.t_E foifeitnne of fg__u;i1ia_nbee

on faiiuie to “i*’t ‘Tn-“in’nt’ ‘mte 9m{~..bei.t”‘hnet-lees flies;
P _ . _ V >

mu’ 4 “I-‘ I ‘- _«_

75%, and forfeituie, in u
having accepted the said teiine, itdiei_ni’gued._V
to contend that the policy ash’ toifeituie
is either irrational i~.ean1ed”Sei1io1* counsel
further contends over the

validity of; tinted in the case of

pleahill the .deeisid1i_.iepQi*ted in AUU

Lea1ned””~.SenioI§_ enuncaiei, in addition, contends that the

not laid ielevant material constituting

legal evidence of a claim of force-majeure, the

“rightly oonsideied and rejected the said plea.

Lastly is contended that the petitioner having expoited

A it ignnnents upto 58.6%» of the export entitlement, the

autiieiides we}- jI..st:i.fi-.1 in clnecting forfeiture of the

7. Sh. Devadass, learner’ ‘~’-“”1″” f’I”*’-mi -9-

Respondents 1 ans’: 2 C T] d’

secured an allotment of a quota o_.n(ie1′ ”

the policy. without questionillg t1ie._te:ms :?Jlz1VV’.oot1ditioi1sV:of
forfeitme, cannot be Vleprobate
by calling in quesfioljfthe oltezeshort export
of garments. counsel, quota
for expo1’t§’oi” an exporter. it is
p. osufiil tjtot1–l;1’Vdischa1~g;e its obligation to

eiqio-1*t ‘*e”*ii-“tn an t.t.-W’

ensi13.esuoi1.,f:he “‘1fu.i.T1g ‘ u: e

forfeitute..of”tl1e’v._ai1¢o1i}1ts from out of’ the bank guarantee as

.. t1;eIeili”e.’2.I2:.r:ot be characterised as either irrational or

. ualretiistiiitatble. Learned Senior oounsel hastens to add that

” . H is peculiar in its nature since quotas

for each county. under the policy is to maximise

AA ‘ tforelflgu exchange. The Government, aoooltlisng to the learned

SA.-.;1:r.i-:,-I counsel. is wefl its rigt to provide for

53.;

forfeitraie of “M D-“1: maaaantee, so as to ensure -….I” an

t

K) \

EL

ulaximum uiili””‘”i ‘f the qaata and ‘mat is. :;;’.v.i.$3,},r”%.:er_;-.t

has been done.

8. Having heard t11eplea1’1iec_1

*1′

wt.’-user} the pl:-;.=:.d1_.-g-.., .he13_Vpe&«3; be meIe_’dispute”‘that in’

terms of ‘the “‘P01i<':.3r",—-, tiie wti€?i.*i3,ei~..a**p1ia=fl,e1v§(J1iA.:ind $911.. -..

'-.—' A …_ .. 4.

an export entitlement’quota,ui1fie15 if ‘~, no expefi gai-in ms

and having tcg}-:15 he iihe: specui’ “ed, in its
e11ti1wety,:.11a:btii«f.;f::3’caviliii1g upon the petitioner
toish.-mw eliould not be taken to forfeit

thei’:,_ molzievsiufrpimpp _ of? bank guarantee, which was

iespexidecl ~tJie’–..e.iipefifione1*. The AEPC, not being

,, eiiplaliation ofi’ered, forfeited Rs.1,48.854]-

i””appgéai-liefore the Appellate Comniiiztee, steed crr’uu- eu

.. Vi ciicler dated 10-05-2002 Almexure-“F'”. while the further

0′ to the Second Appellate Committee was dismissed by

oltlezr dated 26-10-2004 Annexuive-“H’°’.

9. In the admit.tec”l facts noizieeci supra, ‘Le q”esti~as
I-‘—-. —1——-L-1 awn.-5’:-:-no-n.|-Ir I311: &
101 u 1.21 11 u.u:uu.u5 nab, r-L

12

a) whether the challenge to the it

relates to forfeiture, for ‘t e Aexpiort,

o’o'”‘g- tfrn withiii the tiife stiy-base

1:.) Whether the AEPC’.-..a.nd ithe”‘Appefiet§
wen: jusfified in Iejeothig claim of

fo1t:e–majeI.m=;. fie ‘£’i1j3″pcu1:’ “5?

10. 1ndi_s.putabA1y,.Vi;he e$§p;;:t”e1itié1gm1ent quota allotted

ya ‘Inf…–.4.-.-…«.. ..-.I-I-.—‘—.—.——- —- _’_–.–…………_V – _
g”-‘m”nt.~=:-. “‘1t”r_uu'” a ‘*-‘M ssipalah;-(4.. and …:311’.ehe{‘. a b….=-fik

gueiehtee; that in case of faiitre to
fulfiiithe in its entixety, would be subject

to.forfeitit:eio3a1Ese”of ‘Policy’. The petitioner consciously

to “terms of the forfeitune that if it exported

V : heyond 75% upto 90% of the export entitlement, it

liable for proportionate “forfeiture and if less then

gforfeitule would be in full. fmm out of the amount in

the ..9.11.. gu… ._11t..e -1-.. -_1_._..n_t of the petitioner to be
suojeoteo t’ fir ‘”1315 *3’ the “‘*”**y, reiatmg to foatfeituae in

the event of fiaiiure to fuJ:l1u’ “” the export entitlement, in the

circumstances, c:a1111ot be permitted to approbatc and

pleat
‘U \

mpmbate -101’ assume iae-‘n–‘5’-=nt. “‘””‘t”i”ns. F” *’*” “._f’ –

been ulisuccnessful in the appeais bef3’it:= 7

Second Appellate Committeee, A

questioning the validity of ti1e__fo1ieiture clause the

1 1. The coiitentioli “ternie of forfeiture are
irrational and 11n1easioi1a3VJ1ei’v*iii is beyond
pale of eoiiais1e1*a.tio1itiiii the entire policy of
allottingf ” the of augmenting foieign
is for the couiitry and as

a gannents under the quota

hi

u o ‘- e ‘ n a u . . . .

‘1 I H» I I 1- F _
B }l}’;wI”E?’.5u.:”v”-‘3 331C’: 1′?-.’v5}t:} 1.115 ¢’3’|’v”\”‘}”v’§”s°’.»{¢ ‘”‘v.}’€C:. G1. ‘:H SH}g

fiie u”ti1isatioi1~Qf the quota, the provides a eiause for

.,fo1’fTeitu1e,:i”The Central Govermnent entitled to formulate a

~. .ba§§e§i on precise timing and nianner of

iinp1eine;itation of the quota to achieve a particular objective,

it A ;1_no1e”app1op1’iate]y in the matters of bilateral trade, in my

i'”D13iI1iD]1,, being peculiar in its nature, the Government was

well within its rights to provide for forfeiture and therefore,

cannot be ternied a_ id; 3’ Ilrrational or nn-e,ne.titntiona_L It

Iiiugt be b9}}}3 -in ‘li’l’:’l’ll’l fhnf 1- 1311::

subject to juciiciai review. unrss d’:ne:-fefcffatef’ . he

czontiary to statutory pmvisione__o1fi.the Coiiefitntioiiti i ”

well settled law that eotut-3, eieioifi of
will not transgiess into the of as tlieir
are 1’11 equipped to Jeg¢iud:a§§§§ ~-.polir:fiV’At1eeision. The
court, no–dout)t has at undertaking of
a decisioii,” Ji.-5:: 1Jeople’s fundamental

ri’*hte am not. t;-“9.n;-=2;-,,i:’es.g.—.,E u}.I;in except to the extent

snag’: of we , cum in the ease of GO.’-{ALDAS zwmees

LIMI_TED,i:Vive, UNION OF INDEX in W’.P.No.853′?Ii2003 and

petitions, by order dated 12-03-2003,

the contention that the policy pmviding for forfeiture

* : ,en<i''iinposit.ion of penalty for non-fulfilhnent of the obligation

it 'tinder the export quota could be challenged by an exporter

who had had the benefit of a policy, following the decision of
the Apex …4:.-1.1. .. ii the ease of PTR Exports (Madras) Pvt. Ltd.

"id Gtirr" 'J3. Union of India and 0*" » 11- Pd. in IR

menu; -1 atrrriwa -w – _

l

19" SC 3461, L1 .1.e 1natt_.1' _f i__t_,,,re11ce eomts
11-1 1' ,, ,;.LA_.__ 'I_.._ ..1__..__.._….. 4.1.'–.-u
Wltfl PO Cy 1118 '.5, U1: V1115 u1uu
"-4. An ajeplieant '*1…-=ew__1i'<3eV_'*.'e..-emit; 1'~ig:2t

have export or i1npo'rt"-.l_Viceno'e.a in ter1I1e]oif the
policies in force at "e:e–, date '-of iziaieing
applicatiozu. For obvioiu-9 reaao11"s,._g1'a11ti;11g of
licences depetidg upoii' prevailing' on
the date of tlie grant of .the_"1ibe11ce or permit.
The authority cc.ncet1ied' in a better
meiti.4:.r11._ to ha.ve._the 'overa1I'v1pic:t1;ue of diverse
f£iGtO1_.'?.'."t1'} giant _"pe1'.niit"-..or' iiefuse to grant
_'or"e§'.-'- "rt. "NV" The
deeieio.1i,"~t11e1efo:?e,"~svo'é1ldV_'he talcen from diverse
economic pet's_pectives"'Which the executive is

SKI'-I'-aluii I

~-1-at.bet.te1*"'1ig11'o1'*zned poeifioii unless, as we have

stated_..ee1'1ier,.'the refusal is mala fide or is an
abuse 'of"the.e,powe:' in which event it is for the

applicant' topic;-;td«.n3ind prove to the satisfaction

r.;-{the (.Z'.Jt'_=I_.11*i:,th:.:1't'._.'e»tl__1_e refusal was vitiated by the

— . above’ feature;

‘ v i

5, itmereuldg tlieiefore, be clear that grant

depends upon the policy prevailing as

fee” date of the giant of the lioenee, The
Cowft, therefore, would not bind the

V_ > fiovemmerit with a which was eruzisting on
H the date of application as per pmevious policy. A
V prior decision wouid not bind the Government

for all times to come. When the Government. are
satisfied that change in the policy was necessary
hi. the public interest, it would be entitled to
revise the policy and lay down new policy. The
Court, ‘dizerefeze, ‘=.=.=-cu’.-:1 11-zefer .4.) allow free play
to the Government to evolve fiscal policy 1’11 the
pubiic interest arid to act upon the same.

Equally, the Government is left flee to determine I

UK

pun
Ch

pitiorities in the $.33 of 9.lL.”(‘..”-‘.’._”.’J:..”‘L.’.l.”1S’> «M
allotments or utilisation of its finaneee’ in-tdhe” e ‘
public interest. it is entitied; .-fierefere,
to issue or withdraw or the _.expr);’t 01’} ..
import policy in accordance ,with ¥fl:1e_ scheme 1, f
evolved. . . .” ” –. . ” V

13. In yet another decteion of a Judge of
the High Court of Delhi ./1;nagee'”Liinnited supra.
2007(7) STR 347(OE§1)v’d’teei{__’Vtt1e tljat garment export
being natnle of quotas being

pmvided theeacl1″–c.o1i;;t:-y’,’—-tla- ‘Gr_’wv…nm_nt was well within

ufiliéaation of which cannot. be inue 1 ieu “‘it.h.

Hayring the et1a~_t’i1V’e”ttVtext of the judgment, i find no good

to dewirxivate–firom the masons. findings and conclusions

V £1t:}§y.the learned Judge.

‘ ,. The contention of the learned counsel for the

2 ~ ‘d gpetzittionel’ that the order of the Second Appellate Committee

Smqnfn Fr’:-r I1fl1}–lJl;’I*’Qi’Ie

\.u.na J\.l.l ….. …… 7..J:L_1_ _£ __.evnnt grounds of appeal

_.1-_
1

and non assigning

say so because, the petitioner whiie responding to the eirw

\Ja
U”\

cause netiee issued by Le AEPC, e_ve_ee::I”‘ti1e~.._ple:;1 “-of

of fabzics and change in style i3iei;:?uete€’i._by4’tl1e__l:$11yeIs ”

resulting in change of category

were coneideaed and “‘t.11_e in its
order dated 1- 10- ln tllievletter dated 18-
11-1999 Axinexule-“[A)V’_”V_eii,;V:leeilIlViV;; of appeal to the
First plea was urged and

mjeeteg: b},r.;-4.r’;~._»..1″e.”‘—«_i.;=I.’t.., . IQ.-Q5-‘£L?.()O2 Annexme-“F”. Before
ti:-1’$5?;~*”%§’.A1§§§el!ete’VV.:’Cnmmi*’ee. the apmn’ .1-:1

titionei’ i1l.tl1’e”1 “uiiecli feiirrt is “”6 uu uv C” the vex”

same pleas.” petitizinel’ however, did not produce a copy

eeid «along with the writ papers. The learned

V i’ for the Second Appellate Committee submits

” inaintainecl by the said authority does not

lithe filing of the appeal in a required format, except

At ‘T ‘for letter. Thus, it is\not known es to whether the Second

C___n_1_ittee oensidered the letter addlessecl by the

]’iEtiLi”‘iiE}’ a” an am”-‘=’ er en the basis 91′ fe-met -f ..1;.rpe.a_l

allegedly med by the petitioner. bk

the plea of shortfall in export ‘*

Ieoeipt of fabrics. for jio»
unable to place material to
in style by the as
having been In addition,
learned any material placed
befo– Committee over the

I.l’\a.J\.n

sari “f ‘*-lrfnge by t’;’~.’e’h–v 1*. Memly ad.v;-‘-_11_.’_11g a.
pleafis inauii’1<':§.ent;' vasf petitioner W"E r""'aii"ed to ""-ee

1e_leva11t'"1natenalV' eonetitufing substamltiai evidence over the

._i)ie.e not done so, no exception can be taken

V to "the of the authorities, rejecting the plea of

of fome–majeu1e conditions. In these

it cannot be said that the order of the Second

At 't 'Appellate Committee is not a speaking order or that there

16. The last wntenfion t…!.=.- Le befle ngiesi bv

the authorities in identicai .._

cases. were not appiied in the fnesent .is’–.oisovv.,ifithT”A’ut ”

any 1nen’t. I say so because, claim of oVfo¢1oe?1naj’é;ui*c is:

dependant upon facts of
evidence to establiss’h;_f11e ~-such’ eonoitiolls. The
petitioner has not that in identical
cimumstance?.§§:VZfl1§ I the claim of force-

benefit of the claim of

f”nf3e-inajeiixe “7§.’.ei.’.’1?*~.2″*.’;e1:-:a:”i.’:’1Ii.=;1.I.t. noon the facts and
ci1cu311stances’ai1ci’Tn1Eiioseri,nl on nr-.r:”i’d “” a “‘””r.i’=i.ik1* re-“se. it

goes without fihit any decision rendered in that case,

not. nnleae-«facts and circumstances are shown to be

_ A nave application.

V * : ,:nejeo’ted.

‘This writ petition is without merit and is accordingly.

I

$6.!-=
Judge
KS