1 IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION NO. 952 OF 2006 1. Minar Exports. 2. M/s.Minar International Ltd. ... Petitioners. V/s. 1. Enforcement Committee, 2. Enforcement Appellate Committee. 3. The Executive Director, Cotton Textile Export Promotion Council (TEXPROCIL) 4. Chief Commissioner of Customs. 5. Union of India. ... Respondents. WITH WRIT PETITION NO. 2241 OF 2007 Kapadia Exports. ... Petitioner. V/s. Enforcement Committee and others. ... Respondents. WITH WRIT PETITION NO. 2242 OF 2007 Em Es Textiles Pvt.Ltd. ... Petitioner. V/s. Enforcement Committee and others. ... Respondents. 2 WITH WRIT PETITION NO. 2243 OF 2007 Alaghusiva Textiles Pvt.Ltd. ... Petitioner. V/s. Enforcement Committee and others. ... Respondents. WITH WRIT PETITION NO. 2252 OF 2007 Chandiwala Exports. ... Petitioner. V/s. Enforcement Committee and others. ... Respondents. WITH WRIT PETITION NO. 2253 OF 2007 Zain Exim Pvt.Ltd. ... Petitioner. V/s. Enforcement Committee and others. ... Respondents. WITH WRIT PETITION NO. 2259 OF 2007 Minaxi Weaving Mills Pvt.Ltd. ... Petitioner. V/s. Enforcement Committee and others. ... Respondents. S.Venkateswaran, senior counsel with T.N.Subramanian, senior counsel i/b. S.Priya for the petitioners. D.J.Khambatta, Additional Solicitor General with Mandar Goswami and Vinod Joshi for respondent Nos. 1, 2 and 5. 3 Z.B.Kamdin with R.J. Cama i/b. Mulla & Mulla Craigie Blunt & Caroe for respondent No.3. P.S.Jetly for respondent No.4. CORAM : V.C.DAGA AND K.K.TATED, JJ. DATED : 7th May 2010. JUDGMENT : (Per V.C.Daga, J.) The restricted challenges set up to the orders-in-original in Writ Petition Nos.952/2006 and 2259/2007 are dated 13th June, 2005; whereas in other petitions they are dated 20th June, 2005. The orders in appeal in all these petitions are dated 16th November, 2005. The facts involved in these petitions are more or less common and issues involved are identical. Hence all these petitions were heard together and are being disposed of by this common judgment. For the sake of clarity, facts are borrowed from the representative petition No.952 of 2006 filed by M/s.Minar Exports (hereinafter referred to as the “petitioners” for short which shall mean and include all the petitioners herein). 2. The petition by M/s.Minar Exports filed under Article 226 of the Constitution of India, is directed against the order in Appeal dated 16th November, 2005 (Exh.H) passed by the respondent No.2- Enforcement Appellate Committee and the order in original dated 13th June, 2005 (Exh.F) passed by the respondent No.1- Enforcement Committee to the extent it directs payment 4 of compensation, penalties with further direction to deposit amounts mentioned therein more particularly as set out in para- X(a) to (c) extracted in para-4 appearing hereinafter. Both these orders are passed by the authorities constituted under the the Yarn, Fabrics and Made-ups Export Entitlement (Quota) Policy for 2000-2004 framed by the Government of India, Ministry of Textiles, New Delhi (“Quota Policy, 2000-04” for short). Factual Backdrop : 3. The factual backdrop leading to these petitions lie in committing alleged breach of Quota Policy, 2000-04 by the petitioners arising in the following factual circumstances. The WTO agreement on Textiles and Clothing (ATC) laid down annual quantitative restrictions on the quota for certain textile products categories from India to the United States, member nations of the European Union and Canada. Accordingly, Ministry of Textile, Government of India vide its notification No.1/129/99 Export-1 dated 12th November, 1999 announced the Quota Policy 2000-04. 4. Under the said policy the Executive Director of respondent No.3 (Texprocil) was appointed as the Quota Administrating Authority (QAA). The Texprocil and QAA issued visas which mentioned quantity and type of textile which exporter was entitled to export. At the time of clearance of exports at the Indian ports, quota endorsements containing details such as the name of the exporter, category/group details (type of textile), FOB value and the validity of the period of shipment were to be stamped by the Texprocil on the copies of the 5 proforma invoices furnished by the exporters. Similarly, the quantity and type of textile along with the name of the exporter was to be noted at the relevant port/destination of the exported textiles. These were noted to ensure that the exporting country abides by the quantitative restrains as per the bilateral agreements entered into between the countries. Once quota levels are reached, no further export was allowed. Due to the quota restrictions the quotas are distributed among exporters in such a manner so as to maximise foreign exchange earnings of the country. Those exporters, who had obtained quotas but failed to export were required to compensate the exchequer for loss of foreign exchange, accordingly, Texprocil tallied from time to time the statements received from the destination countries to ensure that the allotted quotas had been exported. The exporters were also required to furnish to Texprocil proof of shipment and realisation of export proceeds. Accordingly, the aforesaid procedure was being followed for several years. The Texprocil was used to receive what was known in the trade as “Namesake Statements” from the US authorities containing details of shipments cleared by them. 5. The petitioners had been exporting their goods under the Quota Policy 2000-04 and had been allotted quotas in respect of Group-I and Group-II textiles. As quotas for Group-II (which covered items like bed linen which were in grater demand) were difficult to obtain and were highly sought after by the exporters, in the year 2004. According to the respondents, the petitioners by forging various export documents, used the quota allotted to them in Group-I to actually export 6 goods falling under Group-II in the open market to the other exporters from time to time. As a result, the petitioners, according to the respondents, made huge monitory gains for themselves but were not able to make full use of their own quota under Group-I which was allotted to them and thereby deprived the country of the foreign exchange that the country would have earned on the export of quotas allotted under Group-I. Moreover, according to the respondents, the actions of the petitioners in forging Group-I quotas to export Group-II quotas resulted in the complete quota for total exports from India under Group-II being used up well before the year end resulting in an embargo being imposed by the authorities. With the result, all subsequent exports of Group-II textiles to the USA were prevented. The other law abiding exporters, who had been allotted quotas under Group-II, were thus could not export and suffered great loss as they were unable to fulfill their export contracts. In this game, according to the respondents, not only the country lost its foreign exchange earnings as aforesaid but the country was brought into disrepute. 6. According to the respondents, the aforesaid factual matrix came to light while reconciling the details of exports and imports in the Namesake Statements for the period up to October, 2004 on verifying the details of shipments permitted by Texprocil for the said period. It was noticed that there were wide variations between the quantities which were certified by Texprocil and those cleared at the US end. These discrepancies related to the allotment of quotas made to the petitioners. 7 7. The detailed enquiries with the US authorities revealed that the variations were not typographical or clerical errors, but the same were deliberate attempts by the petitioners to circumvent and/or forge the export documents by obtaining quotas under one category of products/items viz. Group-I and actually clearing items falling in another category, USA Group-II (Made-ups). 8. In view of the aforesaid lapses noticed by the respondents, the petitioners, vide order dated 23rd November, 2004, were temporarily debarred from making any further exports pending detailed investigations in the matter. Show cause notices were issued to the petitioners wherein the full details were provided and they were called upon to submit their explanation and/or documentary evidence in support of their stand. The petitioners were asked to appear at the personal hearing. The petitioners in reply to the show cause notices maintained that they had done no wrong and reserved their right to prove the same. 9. The petitioners also denied allegations of fraud and forgery. In the course of investigation and hearing, a letter dated 20th December, 2004 was received from the Bombay Mercantile Bank alleging serious nature of fraud perpetuated by the petitioners alleging that number of endorsements were forged and the bank release certificates (BRCs) were never issued by the Bank. 10. The petitioners’ representative, according to the respondents, during the course of hearing admitted that there were possibilities that the goods of other exporters had been cleared under the concerned 8 documents which were produced by the respondents during the course of enquiry. The admissions, according to the respondents, facts leading to variation in the product, category, numbers and existence thereof were also admitted by the petitioners and that no reasonable explanation for these serious discrepancies was offered by them. 11. The respondent No.1 not satisfied with the stand taken by the petitioners held that the petitioners had not only forged the visas but also submitted forged Entry Summary Sheets. This was done to support their contention that the items exported were under Group-I. That proof of shipment in the form of bank attested invoices and BRCs were also found to be forged attracting penal provisions. 12. On the basis of the above findings, the respondent No.1 passed an order dated 13th June, 2005 whereunder the petitioners were, inter alia, debarred from making any export for the period of three years from 23rd November, 2004 to 22nd November, 2007 and petitioners were called upon to pay compensation, penalty and make good loss specified in the said order. 13. The petitioners, not satisfied with the order- in-original preferred appeals and stay applications before the appellate authority- the respondent No.2. The appeals were heard and decided vide order dated 16th November, 2005; wherein the orders-in-original were upheld. 9 14. Being aggrieved by the aforesaid orders, the petitioners have invoked writ jurisdiction of this Court raising technical contention that the impugned orders to the extent they travel beyond the show cause notices and the scope of Quota Policy 2000-04 are bad, illegal and violative of principles of natural justice. Needless to mention that the findings relating to the acts and omissions constituting foundation for debarment are not challenged in any of the petitions. No submissions on that count were advanced. 15. At this juncture, it is relevant to place on record that a fresh show cause notices dated 13th January, 2010 and 20th January, 2010 have been issued by the Joint Director General of Foreign Trade (Enforcement) during the pendency of these petitions in Writ Petition No.952 of 2006 and Writ Petition No.2259 of 2007 respectively, which are yet to be adjudicated upon. Rival Submission : 16. Mr.Venkateswaran, learned senior counsel appearing for the petitioners submits that the impugned orders to the extent they impose a penalty, compensation and make recommendations to the Director General of Foreign Trade (DGFT), inter alia, to cancel the Import Export Code (IEC) Number granted to the petitioners, is clearly ultra vires the powers conferred upon respondent No.1, under the Quota Policy. 10 17. Mr.Venkateswaran further urged that the Quota Policy in para-17(v) only envisaged debarment from obtaining entitlements under the policy and participating in the Export Entitlement Distribution for a specified period and made no provision for the imposition of financial penalty, let alone the imposition/ demand for compensation and the illegal and arbitrary recommendations of the nature made therein. According to him, as per the WTO agreement on Textiles and Clothing (ATC), the textile quota regime has been completely abolished with effect from 1st January, 2005. India has been implementing the provisions of the WTO agreement on clothing and textiles by means of the quota policy notified by the notification dated 12th November, 1999, the substantive provisions of which policy and notification was co-terminus with the end of the quota regime. He, thus, submits that the impugned orders were issued under the provisions of the Quota Policy, the substantive provisions of which have ceased to exist. 18. Mr.Venkateswaran would further submit that the penalty envisaged under the Quota Policy is restricted only to debarring the guilty exporter from availing of benefits and participating in the export entitlement schemes specified under the said policy as such any penalty imposed under the Quota Policy can at the most relate to the period during which the Quota Policy operated or was in existence and not beyond the period of the quota regime. That the impugned orders in so far as they debar the petitioners from exporting textile products for three years were beyond the period of quota regime constitutes an unjust restriction on the petitioners’ right to trade guaranteed under Article 11 19(1)(g) and right to livelihood guaranteed under Article 21 of the Constitution as such bad and ought to be set aside. 19. Mr.Venkateswaran sought to canvass that the Quota Policy was a self-contained and self-structured policy, para-17 of which dealt with quota malpractices by exporters. The types of malpractices, the authorities to deal with the same, their powers, punishment and the other procedure were well defined in the said quota policy. He submits that the respondent No.2 failed and neglected to inform the petitioners the order passed in appeal for an inordinately long period of time which has caused irreparable harm to the goodwill, reputation and financial interests of the petitioners. He urged that the authorities ought to have issued show cause notice and should have give opportunity of hearing before refusing to debit the DEPB licences/ credits earned by the petitioners against imports. That the order-in-original was based on unsubstantiated allegations and assumptions and was passed in absence of concrete evidence. According to him the only way the charges leveled against the petitioners could have been ascertained by resorting to the verification of the Entries Summary Sheets issued by the US Customs. Lastly, he submits that the impugned orders preventing exports of the petitioners’ goods are arbitrary, unreasonable, unjustified and violative of Articles 14, 19 and 21 of the Constitution of India and thus liable to be quashed and set aside. 12 Per Contra : 20. Mr.Khambatta, learned Additional Solicitor General while opposing petitions urged that first and foremost the amount set out in the order although labeled as `compensation’, was, in fact, in the nature of `penalty’ for the unlawful gain procured by the petitioners and the loss of foreign exchange caused to the state exchequer. That the power to impose penalty rests squarely with the respondent No.1 and was rightly imposed on the petitioners. He would further submit that as a statue or rules framed thereunder, the Quota Policy conferred a substantive powers upon an authority, all incidental and ancillary powers necessary for giving effect to the said substantive powers must be inferred and are deemed to implicitly be vested in the concerned authority. According to him, the respondent No.1 was authorized to deal with quota malpractices and violations of the Quota Policy and had power to take all necessary steps to ensure that the non-compliant parties like petitioners herein were suitably punished for the gross malpractice and fraud committed by them and to pass necessary directions to ensure that the state exchequer was suitably compensated for the loss caused to it on account of the violation committed by the petitioners. 21. Mr.Khambatta submits that settled legal position clearly provides that the concerned adjudicating authority is deemed to have power to do all such acts and/or employ all such means as are necessary 13 to give effect to the statute, including exercising substantive powers. He, thus, submits that none of the notifications relied upon by the learned counsel for the petitioners state that the officers mentioned therein were the only persons, who could function as authorities under the Act. 22. Mr.Khambatta, in support of the impugned orders borrowed support from the notification dated 12th November, 1999 which was valid till 31st December, 2004 issued by the Government of India, Ministry of Textile under the EXIM Policy issued under section 5 of the Foreign Trade (Development & Regulation) Act, 1999 [“Foreign Trade (D & R) Act” for short]. He placed reliance on clause 17 of the said notification which, inter alia; provided that the respondent No.1 – Enforcement Committee had the authority to deal with all cases involving fraudulent activities, misrepresentation of facts, falsification of documents, forgery etc. According to him, the expression “deal with” is of the widest amplitude and must be understood to vest power in the respondent No.1 to impose any punishment or pass any order as may be necessary for giving effect to the Quota Policy. In support of his submission he placed reliance on the judgments of the Apex Court in the case of Delhi Administration v. Ram Singh, AIR 1962 SC 63 and another in the case of Assistant Collector of Customs, Calcutta v. Sitaram, AIR 1966 SC 955 followed by another in the case of Directorate of Enforcement v. Deepak Mahajan & Anr., (1994) 3 SCC 440. 14 23. Mr.Khambatta further submits that to take narrow view that clause-17 only provides the power to debar a party committing an offence is erroneous and would defeat the object and purpose of the notification and of the Foreign Trade (D & R) Act. In his submission, if the narrow view is taken that the party has committed a relatively minor infraction of the Quota Policy, the only remedy available to the respondent No. 1 would be the harsh punishment of debarring the said party. He also tried to interpret other sub-clauses of clause-17 and went on to urge that no statute can be interpreted in such a way so as to render a part of it otiose. He placed reliance on the judgment of the Apex Court in the case of A.R.Antulay v. Ramdas Sriniwas Nayak, (1984) 2 SCC 500; wherein the Apex Court was pleased to hold as under: “..... nor does any canon of construction permit the court to read the section in such manner as to render it to some extent otiose.” 24. Mr.Khambatta further submits that the well established principle of law laid down by the Supreme Court on several occasions that, where a statute or rules framed thereunder (as in the case of the instant Quota Policy) confers a substantive power upon a judicial authority, all the incidental and ancillary powers necessary for giving effect to the said substantive power must be inferred and treated to be implicitly vested in the judicial authority. In support of his submission he placed reliance on the judgments of the Apex Court (i) I.T.O. v. M.K.Mohammed Kuni, (1969) 2 SCR 65; (ii) Chief Executive Officer and Vice 15 Chairman, Gujarat Maritime Board v. Haji Daud Haji Harun Abu & ors., (1996) 11 SCC 23; and (iii) Jamal Uddin Ahmad v. Abu Saleh Najmuddin & Anr, AIR 2003 SC 1917. 25. Mr.Khambatta further submits that in the instant case the Quota Policy read with provisions of the EXIM Policy, the Foreign Trade (D &R) Act, 1992 and the notification forming part of the present proceedings, makes it abundantly clear that there existed a substantive power to enforce compliance with quota limits and that respondent No.1 was authorized to take all such measures as were necessary to punish, penalise for breach and secure compliance with the provisions thereof. Being so authorized to deal with quota malpractices and violations of the Quota Policy, it is logical to infer that respondent No.1 must be deemed to have power/ authority to take all necessary steps to ensure that the non-compliant party, being the petitioners herein, are suitably punished for the gross malpractice and fraud committed by him and to pass necessary directions to levy penalties etc. 26. Mr.Khambatta, without prejudice to the above submission and in the alternative, went on to submit that notification dated 12th November, 1999 was valid till 31st December, 2004. However, Ministry of Textile vide notification dated 9th November, 2004 continued the operation of certain provisions of the Quota Policy for further period. Thus, though the notification initially was up to 31st December, 2004, it was further extended to 31st December, 2007 and from time to time it has been 16 extended and is still holding the field. In this view of the matter, Mr.Khambatta submitted that the notification dated 12th November, 1999 itself conferred power and authority on respondent No.1 to take all necessary steps for enforcing the Quota Policy. He further submits that power to impose such a penalty and/or to take any such penal measures is also expressly provided in the notification dated 9th November, 2004. He placed reliance on clause-1 of said notification by which earlier notification dated 12th November, 1999 was not only continued permitting authorities to deal with cases of violation of the prevailing Quota Policy but also given additional power to impose penalty. 27. Mr.Khambatta while expanding the scope of his submission, strongly placed reliance on para-2 of the said notification, specifically, providing for imposition of penalty as if the said notification had been in force from inception. Para-2 thereof reads as under: “(2) Apart from the above, any such proceeding or remedy may be instituted, continued or enforced and any such penalty, confiscation or punishment imposed may be imposed made as if the above Notifications had been in force.” (Emphasis supplied) 28. Mr.Khambatta submits that the aforesaid notification dated 9th November, 2004 is a subordinate legislation issued by the Central Government in exercise of the powers expressly conferred in the Central 17 Government under section 3 of the Foreign Trade (D & R) Act. He, thus, urged that it being a policy decision the court ought not to interfere with bonafide policy decision made by the Central Government. He further submits that merely because the act constituting the offence occurred prior to the issuance of the notification dated 9th November, 2004, the same in no manner implies that the imposition of a penalty under the said notification constitutes giving retrospective operation to the provisions of the said notification. According to him, it is not retrospective but it gives powers to punish, if punishment is to be imposed during the subsistence of the notification. In support of his submission he relied upon judgment of the Supreme Court in Rafiquennessa v. Lal Bahadur Chetri, (1964) 6 SCR 876 as also judgment of this Court in Bharat Purohit Mithaiwala v. Union of India, AIR 2005 Bom 355. 29. Mr.Khambatta further submits that under the Quota Policy prevailing at the relevant time, all the exporters including the petitioners herein were required to submit to the Quota Administering Authority Earnest Money deposit/ Bank Guarantees as provided under clause-11 of the Quota Policy, as and by way of security for ensuring that the exporters complied with the terms and conditions of the Quota Policy and properly utilised the quotas alloted to them. As such, the exporters were required to produce and submit to the Quota Administrating Authority, documents like BRCs as and by way of proof of exports made and foreign exchange recovered by virtue thereof. Upon submission of the said BRCs, the respondent No.3 was to release the bank 18 guarantees which had been furnished by the concerned exporters. According to him, the petitioners have obtained quotas for export of goods under Group-I and Group-II, by submitting Earnest Money Deposit/ Bank Guarantees as per the Quota Policy. However, the petitioners had forged various documents and thereby exported Group-II goods under the quota allotted to them for Group-I goods. This was clearly done to circumvent the difficulty in obtaining further Group-I quotas, which were in high demand at the relevant time and were hard to come by. Upon completion of the exports, the petitioners submitted 55 BRCs to respondent No.3 and, in turn, the respondent No.3 bonafidely relying upon the same released bank guarantees furnished by the petitioners. These documents and BRCs were found to be forged. It was subsequently discovered that these documents were forged by the petitioners and relying upon such documents alleged to have