IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE P.R.RAMACHANDRA MENON WEDNESDAY, THE 22ND JUNE 2011 / 1ST ASHADHA 1933 WP(C).No. 11195 of 2011(Y) -------------------------------------- PETITIONERS: --------------------- M/S.CHELUR SATELLITE COMMUNICATION SYSTEMS LTD., REP.BY ITS MANAGING DIRECTOR, M/S CHELUR SATELLITE COMMUNICATION SYSTEMS LTD., R.MADHAVAN NAIR ROAD, ERNAKULAM, COCHIN-682 016. BY ADV. SRI.ALEXANDER THOMAS. RESPONDENTS: ------------------------ 1. UNION OF INDIA (UOI) REP.BY THE SECRETARY TO GOVT. OF INDIA, MINISTRY OF COMMERCE & INDUSTRY, DEPARTMENT OF OF COMMERCE, UDYOG BHAVAN, NEW DELHI-110 007. 2. THE APPELLATE COMMITTEE U/SEC.15 OF FOREIGN TRADE, (REGULATION & DEVELOPMENT)ACT, REP.BY ITS CHAIRMAN, DEPARTMENT OF COMMERCE, (APPELLATE COMMITTEE DIVISION) MINISTRY OF COMMERCE & INDUSTRY, GOVT. OF INDIA, UDYOG BHAVAN, NEW DELHI-110 007. 3. DEVELOPMENT COMMISSIONER, GOVT. OF INDIA, MINISTRY OF COMMERCE, COCHIN SPECIAL ECONOMIC ZONE (CSEZ), ADMINISTRATIVE BUILDING, KAKKANAD, COCHIN-682 030. R1 TO R3 BY SRI.P.PARAMESWARAN NAIR,A.S.G.I. THIS WRIT PETITION (CIVIL) HAVING COME UP FOR ADMISSION ON 22/06/2011,THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: W.P.(C). NO.11195/2011-Y: APPENDIX PETITIONERS' EXHIBITS: EXT.P.1: COPY OF THE LETTER DTD. 26/11/1988 ISSUED BY THE KSIDC. EXT.P.1.A: COPY OF THE LETTER DTD. 07/06/1989 OF THE KSIDC. EXT.P.1.B: COPY OF THE LETTER DTD. 24/06/1991 OF THE KSIDC. EXT.P.1.C: COPY OF THE LETTER DT. 31/08/1992 OF R.3. EXT.P.2: COPY OF THE SHOW CAUSE NOTICE F NO.31/03/2000/ADJ/CSEZ/389 DTD. 10/01/2001 ISSUED BY R.3. EXT.P.3: COPY OF THE LETTER DT. 28/01/2001 OF THE PETITIONER. EXT.P.4: COPY OF THE ORDER F.NO.31/3/2000 ADJ:CSEZ/7368 DT. 6/10/2001 ISSUED BY R.3. EXT.P.5: COPY OF THE PETITIONER'S APPEAL DT. 19/11/2001 SUBMITTED TO R.2. EXT.P.6: COPY OF THE LETTER NO.12013/1/2002-ADJ/AC DT. 17/7/2002 OF R.2. EXT.P.7: COPY OF THE PETITIONER'S LETTER NO.P/2002/3029 DT. 1/8/2002. EXT.P.8: COPY OF THE LETTER NO.12013/1/2002-ADJ/AC DT. 13/9/2002 OF R.2. EXT.P.9: COPY OF THE PETITIONER'S LETTER DT. 8/10/2002. EXT.P.10: COPY OF THE LETTER NO. 12013/1/2002-ADJ/AC DT. 23/12/2002 OF R.2. EXT.P.11: COPY OF THE PETITIONER'S LETTER DT. 13/1/2003. EXT.P.12: COPY OF THE LETTER NO.12013/2002-ADJ/AC OF R.2. EXT.P.13: COPY OF THE PETITIONER'S LETTER DT. 25/2/2010 SUBMITTED TO R.2. EXT.P.13.A: COPY OF THE PETITION DT. 7/12/2009 OF THE PETITIONER SUBMITTED TO R2. EXT.P.14: COPY OF THE LETTER F.NO.12013/5/2010-ADJ/AC DT. 21/4/10 OF R.2. EXT.P.14.A: COPY OF THE LETTER F.NO.12013/5/2010-ADJ/AC DT. 24/9/10 OF R.2. W.P.(C). NO.11195/2011-Y: EXT.P.15: COPY OF THE PETITIONER'S LETTER DT. 25/11/2010 ENCLOSING BANK GUARANTEE. EXT.P.16: COPY OF THE LETTER F.NO.12013/5/2010-ADJ/AC DT. 15/3/11 OF R.2. RESPONDENTS' EXHIBITS: NIL. //TRUE COPY// P.A. TO JUDGE. Prv. P.R.RAMACHANDRA MENON, J -------------------------------------- W.P.(C) No.11195 OF 2011 -------------------------------- Dated this the 22nd day of June 2011 JUDGMENT The petitioner is stated as aggrieved of the mischievous stand taken by the respondents in forcing the petitioner to meet some impossible extent of 'pre-deposit' ordered to be effected under Section 15(1) so as to have entertained the Appeal challenging the order passed imposing a penalty under Section 11(2) of the Foreign Trade (Regulation & Development) Act 1992. 2. The sequence of events is as follows. The petitioner Company was engaged in the manufacture and export of Satellite Receivers chose to import certain materials from abroad and license was granted subject to terms and conditions specifying the Export obligation. However, shortly after commencement of the business, the petitioner's unit was compelled to be closed down, as a result of which, the export obligation could not be satisfied. This led to the proceedings initiated by the 3rd respondent, leading to Ext.P4, order imposing penalty of Rs.1.22 crores. Being aggrieved of Ext.P4, the petitioner filed Ext.P5 appeal, along with an application for waiver of the 'pre-deposit' as contemplated under Section 15(1) of the Foreign Trade (Regulation & Development) Act 1992. W.P.(C) No. 11195/2011 - 2 - 3. On considering the application for waiver of the 'pre-deposit', the 2nd respondent issued Ext.P6, asking the petitioner to deposit a sum of Rs.18.3 lakhs by way of 'bank guarantee'. The said condition was virtually onerous to the petitioner, who filed Ext.P7 seeking for complete waiver. However, the 2nd respondent/Appellate Authority stuck to the stand and issued Ext.P8 demanding the 'pre-deposit' of Rs.18.30 lakhs. The petitioner preferred Ext.P9 representation for re consideration. This was to the chagrin of the 2nd respondent, who issued Ext.P10, virtually raising the quantum of 'pre-deposit' from Rs.18.30 lakhs to Rs.33 lakhs, absolutely without any reason or justification. Later, saying that the petitioner did not satisfy the requirement, Ext.P5 appeal was dismissed as per Ext.P12, thus leaving the petitioner in the dark. 4. While so, new norms were introduced, whereupon, the petitioner turned up again by filing Ext.P13(a) petition dated 07-12-2009, followed by Ext.P13 reminder dated 25-02-2010 seeking to consider the appeal on merits, agreeing to effect the maximum prescribed 'pre-deposit' of Rs.1 lakh. This was considered by the 2nd respondent, who issued Ext.P14 communication, whereby the I.A for waiver of 'pre-deposit' was W.P.(C) No. 11195/2011 - 3 - considered and the petitioner was directed to furnish 'bank guarantee' to the tune of Rs.1 lakh for entertaining the appeal, which in turn was satisfied by the petitioner, as borne by Ext.P15. However, the petitioner was served with Ext.P16, cancelling the decision already taken by the 2nd respondent, expressing inability to have the matter considered on merits, pointing out that the appeal was dismissed earlier and returned the 'bank guarantee', which form the subject matter of challenge in this Writ Petition. 5. A counter affidavit has been filed from the part of the respondents pointing out the facts and events, a detailed discussion of which may not be much necessary for adjudication of this case. Paragraph 8 and 9 of Ext.P4 order are enough to give a clear picture, which are extracted below: 8. “I have examined the facts of the case. The unit has commenced production on 1-11-1994 and after a short while, ceased its operations. The entire export obligation of Rs.410.25 lakhs on the unit stands unachieved except for a negligible portion of Rs.3.73 lakhs resulting in shortfall in export performance to the extent of Rs.406.52 lakhs and causing an overall foreign exchange loss of Rs.121.83 lakhs. Having admitted the default as regards shortfall in export obligation and net foreign exchange earning, it is only regarding the culpability for the same that is under question. It is a fact that timely and adequate finance was not available to the unit, whatever be the reason. Keeping this in view, I am inclined to take a lenient view. W.P.(C) No. 11195/2011 - 4 - 9. Therefore, in exercise of the powers vested in me under Section 11 read with Section 13 of the Foreign Trade (Development & Regulation) Act 1992, I hereby impose a fiscal penalty of Rs.1.22 crores equivalent to the foreign exchange lost to the country because of non-performance of the unit.” 6. Going by the undisputed facts and figures, the 3rd respondent who imposed the punishment as per Ext.P4 has clearly observed that the production was commenced on 01-11-1994 and immediately after a short while, the petitioner had ceased the operations. It is also referred to therein, that the petitioner was virtually denied timely and adequate finance by the financing institution and a lenient view has to be taken. It is desite the said observation, that the 3rd respondent chose to impose a penalty to the tune of Rs.1.22 crores, simply observing that the export obligation was not made by the petitioner. It has been stated in paragraph 11 of the counter affidavit that the assets of the petitioner were taken over and sold in public auction procuring a sum of Rs.35,35,104/- which was distributed among the creditors proportionately and that the respondents received a sum of Rs.3,10,479/- towards a portion of the rent arrears. The petitioner has also got a serious contention that the penalty as W.P.(C) No. 11195/2011 - 5 - imposed by Ext.P4 does not come within the purview of Section 11(2) of the Act, however adding that this issue would be agitated by the petitioner before the 2nd respondent in the appeal if an opportunity is given, which accordingly is sought for. 7. After hearing both the sides, this Court cannot but observe that, there is absolutely no justification on the part of the 2nd respondent for having enhanced the original 'pre-deposit' of Rs.18.33 lakhs (as per Ext.P8) to Rs.33 lakhs (as per Ext.P10) inspite of the mandate of third proviso to Section 15(1) of the Foreign Trade (Regulation and Development) Act, which shows that the 'pre-deposit' is not compulsory. This only shows the total non application of mind on the part of the concerned authority. In any view of the matter, the appeal preferred by the petitioner ought to have been considered on merits, especially in view of the revised Guidelines issued and by virtue of allowing the I.A to have waiver of the 'pre-deposit' as per Ext.P14 subject to satisfaction of 'Bank Guarantee' for Rs.1 lakh, which in fact was satisfied by the petitioner as per Ext.P15. 8. In the above circumstances, this Court finds that the course pursued by the 2nd respondent in rejecting the appeal as per Ext.P16 is liable to be deprecated. Exts.P12 and P16 are set W.P.(C) No. 11195/2011 - 6 - aside and the 2nd respondent is directed to take back Ext.P5 appeal and pass appropriate orders on merits, in accordance with law, after giving an opportunity of hearing to the petitioner, subject to the condition that the petitioner furnishes 'bank guarantee' either by re submitting the original one (which was returned to the petitioner as per Ext.P16) or by otherwise within 'three weeks'. The proceedings shall be finalised by the 2nd respondent, within 'two months' thereafter; dealing with all issues concerned including the question of law as to the sustainability of the punishment under Section 11(2) of the Act, more so when question of law need not be pleaded and can be raised anytime. Writ Petition is allowed to the said extent. No cost. vdv P.R.RAMACHANDRA MENON, JUDGE