1 wpl2790-10+ agk IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION WRIT PETITION (L) NO.2790 OF 2010 1. Eurotex Industries & Exports Limited, a Company incorporated under the Companies Act, 1956 having its registered office at 809, Raheja Chambers 8 th Floor, 213, Nariman Point, Mumbai – 400 021 2. Shri H.P. Siotia, Adult, Indian Inhabittant, residing at 80, Neelam, Marine Drive, Mumbai – 400 002 ...Petitioners Versus 1. Union of India, through Ministry of Textile, having its office at Udyog Bhavan, New Delhi – 110 011 2. Textile Commissioner, having his office at 48, Vithaldas Thakarsee Marg, New Marine Lines, Post Bag No.11500, Nishtha Bhavan, New C.G.O. Building, Mumbai – 400 020 3. Director General of Foreign Trade, having his Office at New CGO Building, New Marine Lines, Churchgate, Mumbai – 400 020 ..Respondents. WRIT PETITION (L) NO.2789 OF 2010 M/s.Technocraft Industries (India) Limited, a Company formed under the Companies Act, 1956 and having its registered office at A-25, MIDC Marol Industrial Area Road No.3, Andheri (East), Mumbai 400 093 ..Petitioner Versus 2 wpl2790-10+ 1. Union of India (i) Through the Secretary, Ministry of Textiles, Udyog Bhavan, New Delhi – 110 011. (ii) Through the Secretary, Ministry of Commerce, Department of Commerce, Udyog Bhavan, New Delhi 110 107 (iii) Through Jr. Secretary, Ministry of Law & Justice, Aayakar Bhavan, Churchgate, Mumbai – 400 020 2. The Textile Commissioner, having his office at Nishta Bhavan, New C.G.O. Building, Mumbai – 400 020 3. Director General of Foreign Trade, having his Office at Udyog Bhawan, New Delhi. 4. The Commissioner of Customs (Exports), having his office at : (a) New Customs House, Ballard Estate, Mumbai – 400 005. (b) Jawahar Customs House, JNPT, Nhava Sheva, Dist. Raigad ..Respondents WRIT PETITION (L) NO.3010 OF 2010 1. Indo Count Industries Limited, a company incorporated under the Companies Act, 1956, having its registered office at 301, “Arcadia”, 3rd Floor, Nariman Point, Mumbai – 400 021 2. J.R. Ranka, Aged 53 years, residing at B/52/1383, MIG Adarsh Nagar, Worli, Mumbai – 400 025 ..Petitioners Versus 3 wpl2790-10+ 1. Union of India, through Ministry of Textile, having its office at Udyog Bhavan, New Delhi – 110 011. 2. Textile Commissioner, having his office at 48, Vithaldas Thakarsee Marg, New Marine Lines, Post Bag No.11500, Nishtha Bhavan, New C.G.O. Building, Mumbai – 400 020. 3. Director General of Foreign Trade, having his office at New CGO Building, New Marine Lines, Churchgate, Mumbai – 400 020. 4. The Commissioner of Customs (Exports) New Customs House, Ballard Estate, Mumbai – 400 038 ..Respondents. AND CIVIL APPELLATE JURISDICTION WRIT PETITION NO.10085 OF 2010 1. Nagreeka Exports Limited, a Company formed under the Companies Act, 1956 and having its registered office at 18. R.N. Mukherjee Road, 6th Floor, Kolkata, West Bengal. 2. Mr.Vinod Garg, Age 49, residing at B-1, 304, Tapovan View, Pathanwadi Road, Malad (East), Mumbai – 400 097, Shareholder and Assistant General Manager, Finance and Shareholder of Petitioner No.1 ..Petitioners Versus 1. Union of India, (i) Through the Secretary, Ministry of Textiles, Udyog Bhawan, New Delhi – 110 011. (ii) Through the Secretary, 4 wpl2790-10+ Ministry of Commerce, Department of Commerce, Udyog Bhawan, New Delhi 110 107 (iii) Through Jr. Secretary, Ministry of Law & Justice, Aayakar Bhavan, Churchgate, Mumbai 400 020 2. The Textile Commissioner, having his office at Nishtha Bhavan, New CGO Building, New Marine Lines, Mumbai – 400 020. 3. Director General of Foreign Trade, having his office at H-Wing, Gate No.2, Udyog Bhavan, Maulana Azad Road, New Delhi – 110 011. 4. The Commissioner of Customs (Exports), having its office at New Customs House, Ballard Estate, Mumbai – 400 005 ..Respondents. Mr.Haresh Jagtiani, Senior Counsel with Mr.Anil D’Souza and Mr.Suprabh Jain for the petitioners in WP (L) No.2790 of 2010 and WP (L) No.3010 of 2010. Mr.Vikram Nankani with Mr.Sushant Murthy and Mr.Nitya Begaria i/by Mr.M.R. Baya for the petitioner in WP (L) No.2789 of 2010. Mr.Abhay Nevagi for the petitioner in WP No.10085 of 2010. Mr.A.J. Rana, Senior Counsel with Mr.B.M. Chatterjee and Ms.S.V. Bharucha for respondent Nos.1 to 3 in WP (L) No.2789 and 2790 of 2010. Mr.B.M. Chatterjee with Ms.S.V. Bharucha for respondent Nos.1 to 3 in WP No.10085 of 2010. Mr.A.J. Rana, Senior Counsel with Mr.Riyaz Chagla i/by Mr.H.V. Mehta for respondent Nos.1 to 3 in WP (L) No.3010 of 2010. Mr.Pradeep S. Jetly for respondent No.4 in WP Nos.10085, WP (L) Nos.2789 & 3010 of 2010. 5 wpl2790-10+ CORAM : J.P. Devadhar & Mrs.Mridula Bhatkar, JJ. Judgment Reserved on : 1 st March, 2011 . Judgment Pronounced on : 9 th March, 2011 . JUDGMENT : (Per J.P. Devadhar, J.) 1. Rule, returnable forthwith. By consent taken up for final hearing. 2. In all these writ petitions, validity of the office memorandum / press release dated 1-12-2010, notification dated 22-12-2010 issued under Section 5 of the Foreign Trade (Development and Regulation) Act, 1992 (“1992 Act” for short) and validity of the policy circular dated 22-12-2010 issued by the Director General of Foreign Trade (“DGFT” for short) are challenged. Since the basic dispute in all these writ petitions is common, all these writ petitions are heard together and disposed off by this common judgment. 3. The petitioners are engaged in the manufacture / export of cotton yarn. In all the Foreign Trade Policy (“FTP” for short) announced by the Central Government from time-to-time, cotton yarn was freely exportable. For manufacture and export of cotton yarn, the petitioners have large establishments and have engaged thousands of workers. 6 wpl2790-10+ 4. Para 2.1 of the current policy i.e. FTP 2009-2014 announced by the Central Government provides that exports and imports shall be free, except where regulated by FTP or any other law in force. Thus, even under the current FTP 2009-14 cotton yarn was freely exportable. 5. By a notification dated 9-4-2010 issued under Section 5 of the FTP 2009-2014, the Central Government for the first time imposed restriction on export of cotton yarn by directing that the contracts for export of cotton yarn shall be registered with the Textile Commissioner prior to shipment and clearance for export of cotton yarn consignments shall be given by customs authorities after verifying that the contracts have been registered. 6. On 9-4-2010 itself, the Textile Commissioner by a memorandum, prescribed the procedure for obtaining Export Authorization Registration Certificate (“EARC” for short) for export of cotton yarn. As per that procedure, every cotton yarn exporter was required to apply for EARC by submitting application in the prescribed form inter alia with a copy of the export contract for which registration was sought. Accordingly, from 9-4-2010 the exporters have been exporting cotton yarn after obtaining EARC from the office of the Textile Commissioner. 7. By a office memorandum dated 23-11-2010, the Office of the Textile Commissioner introduced the on-line registration for export of cotton 7 wpl2790-10+ yarn instead of receiving the application form physically. Thus, from 23-11-2010 the EARC's were issued by receiving applications under the on- line registration system. 8. Suddenly, on 1-12-2010, the on-line registration system was stopped as per office memorandum / press release dated 1-12-2010 issued by the Under Secretary to the Government of India, Ministry of Textiles. In the press release dated 1-12-2010, it was stated that the Cotton Yarn Advisory Board (“CYAB” for short) constituted by the Government in September 2010 for the purpose of formulating cotton yarn balance sheet on the basis of the cotton yarn production / consumption / export situation in the country, had opined that in view of the increased domestic demand / price volatility, the cotton yarn exports beyond 720 million kgs. should not be permitted for the year 2010-11 and accordingly the Government has decided that there shall be no further registration of the cotton yarn exports beyond 720 million kgs. The office memorandum dated 1-12-2010 reads thus :- “No.7/32/2010-CT-II Government of India Ministry of Textiles ..... New Delhi Date : 01-12-2010 Office Memorandum Government has decided that theres shall be no further registration of cotton yarn exports beyond 720 million kg. All applications in pipeline above the export registration of 720 8 wpl2790-10+ million kgs shall not be considered by the Textiles Commissioner, Mumbai. You are advised to take necessary action in pursuance of the above decision. A press release to be issued in this regard is enclosed. (Anita Puri) Under Secretary to the Government of India Tel. No. 23062256." Thus, with effect from 1-4-2010 the office of the Textile Commissioner abruptly and without any prior intimation stopped registration of cotton yarn exports, as a result whereof, the petitioners who had firm contracts could not export cotton yarn which were manufactured and kept ready for export. 9. Challenging the office memorandum / Press Note dated 1-12-2010, writ petitions were filed in this Court. During the pendency of these writ petitions, the Central Government issued a notification on 22-12-2010 under Section 5 of the 1992 Act. By the said notification, the earlier notification dated 9-4-2010 was amended to the effect that export of cotton yarn with effect from 1-12-2010 would be permitted under licence instead of permitting export under EARC. The notification dated 22-12-2010 reads thus : “Notification No. 14 (RE-2010)/2009-14 New Delhi, dated 22nd December, 2010 9 wpl2790-10+ Subject : Restriction on export of cotton yard – regarding. 10. (E) In exercise of the powers conferred by Section 5 of the Foreign Trade (Development & Regulation) Act, 1992 (No.22 of 1992) read with Para 2.1 of the Foreign Trade Policy, 2009-14, the Central Government hereby makes the following amendments in respect of Sl. No. 161 B {ITC (HS) Classification} in the Notification No.38/2009-14 dated 9-4-2010. The existing entries of Notification No.38/2009-14 dated 9-4-2010 are substituted as follows with effect from 1-12-2010. Sr. No. Tariff Item Code Unit Item of Description Export Policy Nature of Restriction 161B 5205 Cotton yarn (other than sewing thread), containing 85% or more by weight of cotton not put up for retail sale. Restri- cted Export permitted under licence. 5206 Cotton yarn (other than sewing thread), containing less than 85% by weight of cotton not put up for retail sale. 5207 Cotton yarn (other than sewing thread), put up for retail sale. Transitional Arrangement :- (i) The Transitional Arrangements as available under para 1.4 and 1.5 of FTP. 2009-14 will not be applicable to the export of Cotton Yarn, under this notification. (ii) However, Exporters who have obtained Registration Certificate from Textile Commissioner, Mumbai before 1st 10 wpl2790-10+ December 2010 would be permitted to export Cotton Yarn within the quality limit for which such registration certificate has been issued and within the validity of such registered contract. (iii) If the validity of such registered contract has expired then the registered contract holder will have no right to export under such registered contract. The effect of this notification :- The export of cotton yarn (Tariff Codes 5205, 5206 & 5207) was earlier subject to registration of export contracts with Textile Commissioner, Mumbai. Now, the export of Cotton yarn has been restricted and export will now be permitted under licence. Sd/- (Anup K. Pujari) Director General of Foreign Trade E-mail : dgft@nic.in” 10. Simultaneously, the Jt. DGFT with the approval of the DGFT issued a policy circular dated 22-12-2010, which reads thus :- “Policy Circular No.07(RE-2010)/2009-14 Dated : 22-12-2010 To, All Regional Authorities All Custom Authorities. Sub. : Conditions and modalities for applications for grant of export licence for export of cotton Yard- regarding. 1. It has been decided in the meeting of Group of Ministers (GoM) on 21-12-2010 that for the present, 720 million kgs. of Cotton Yarn is to be allowed for export during the year 2010-11 (i.e. upto 31-03-2011). 2. Accordingly, Notification No.14(RE-2010)/2009-14 dated 11 wpl2790-10+ 22-12-2010 has been issued today, stipulating that henceforth export of cotton yarn will be restricted and will be allowed to be exported under licence. However, Exporters who have obtained Registration Certificate from Textile Commissioner, Mumbai before 1st December, 2010 would be permitted to export Cotton Yarn within the quantity limit for which such registration certificate has been issued and within the validity of such registered contract. The data for the quantity that has already been exported in 2010-11 is being collected. The representations received to review the extent of exportable surplus are also being examined. 3. Exact modalities for submitting applications for grant of export licence would be notified once the quantity of exports already made has been ascertained and the extent of exportable surplus has been reassessed. 4. This issue with the approval of Director General of Foreign Trade. Sd/- (Hardeep Singh) Joint Director General of Foreign Trade) Email : hardeep.singh@nic.in” Thus, notification dated 22-12-2010 was issued to permit export under licence with retrospective effect from 1-12-2010 and the policy circular dated 22-12-2010 was issued to implement the policy decision taken in the meeting of Group of Ministers on 21-12-2010, imposing restriction on the export of cotton yarn during the year 2010-11 (upto 31-03-2011) at 720 million kgs. The policy circular further provides that henceforth export of cotton yarn will be restricted and will be allowed to be exported under a licence. By a corrigendum notification dated 29-12-2010, the phrase "before 1st December 2010" in the notification dated 22-12-2010 has been 12 wpl2790-10+ substituted by the phrase "on or before 1st December 2010" so that exporters who have obtained Registration Certificates from the Textile Commissioner on or before 1-12-2010 could export cotton yarn within the quantity limit for which such registration certificate has been issued. Writ Petitions have been amended to challenge the notification dated 22-12-2010 as also the policy circular dated 22-12-2010. 11. Mr.Jagtiani, learned Senior Advocate appearing on behalf of some of the petitioners, submitted that : (a) Neither the press release nor the office memorandum dated 1-12-2010 constitute an order or notification under Section 3 or Section 5 of the 1992 Act and hence do not have legal force. Therefore, the press release / office memorandum dated 1-12-2010 which seek to restrict the export of cotton yarn in excess of 720 million kgs. are illegal and bad in law. In support of the above contention, reliance is placed on the decision of the Apex Court in the case of Atul Commodities Private Limited V/s. Commissioner of Customs reported in 2009 (235) ELT 385 (SC), decision of this Court in the case of Parag Milk & Milk Products Limited V/s. Union of India reported in 2007 (5) Bom. C.R. 544, Narendra Udeshi V/s. Union of India reported in 2003 (1) Bom. C.R. 500 and a decision of the Delhi High Court in the case of Agri Trade India Services Private Limited V/s. Union of India reported in 2006 (204) ELT 161 (Del.). 13 wpl2790-10+ (b) Notification dated 22-12-2010 which seeks to restrict export of cotton yarn subject to obtaining licence cannot be applied retrospectively because on 1-12-2010 when the exporters applied for on-line registration, the licensing system was not in existence and, therefore, the vested right of the exporters to export cotton yarn by obtaining EARC that existed on 1-12-2010 cannot be taken away by issuing a notification on 22-12-2010 with retrospective effect from 1-12-2010. (c) As held by the Delhi High Court in the case of Agri Trade (supra) which is approved by the Apex Court in the case of Union of India V/s. Asian Food Industries reported in (2006) 13 SCC 542, the notification dated 22-12-2010 issued under Section 5 of the 1992 Act cannot have retrospective effect. (d) Assuming that the notification under Section 5 of the 1992 Act could be issued by the Central Government retrospectively, the notification dated 22-12-2010 has been issued by Shri Anup K. Pujari in his capacity as DGFT and not on behalf of the Central Government and, therefore, bad in law. (e) As there were no quantity restrictions for export of cotton yarn under the FTP and the only restriction was to obtain EARC, the exporters as 14 wpl2790-10+ on 1-12-2010 had entered in to firm contracts with their foreign customers for export of cotton yarn and had exposed themselves to commercial liability. The raw cotton procured by the petitioners were all meant for executing export orders and it would be impossible for them to dispose off such quantities in the domestic market. Petitioners have employed large task force and if they are not allowed to execute the export orders, the same will entail unaffordable expenses of labour cost. Moreover, the petitioners have hedged their foreign currency risks by making commitments with their bankers. Sudden imposition of ceiling on export of cotton yarn without giving any opportunity to the exporters to execute the contracts already entered into is wholly arbitrary and illegal. (f) The policy circular issued by the Jt. DGFT / DGFT on 22-12-2010 fixing a ceiling on export of cotton yarn at 720 million kgs. is beyond the scope of the powers vested in them. The restriction on export of cotton yarn can be imposed by the Central Government and not by the Jt. DGFT / DGFT. Moreover, the Central Government can impose such restrictions only in public interest. No material is produced to show that the ceiling fixed is in public interest. (g) The corrigendum issued on 29-12-2010 provides that the EARC’s obtained on 1-12-2010 are valid and eligible for export as 15 wpl2790-10+ contemplated in paragraph 3(ii) of the notification dated 22-10-2010. Since the petitioners had applied for registration on or before 1-12-2010 and their applications were complete and valid in all respects, the petitioners be treated as EARC holders in respect of the contracts for which registration was sought and must be allowed to export cotton yarn under those contracts. 12. Mr.Nankani, learned counsel appearing on behalf of some of the petitioners while adopting the arguments of Mr.Jagtiani submitted that neither the office memorandum / press release dated 1-12-2010 nor the notification dated 22-12-2010 nor the policy circular dated 22-12-2010 are valid, because, the above memorandum / notification / circular have not been issued under Section 3 of the 1992 Act. He submitted that an item can be restricted for export only by an order issued by the Central Government under Section 3 of the 1992 Act. Therefore, the impugned memorandum / notification / circular which are not issued under Section 3 of the 1992 Act are liable to be declared illegal and contrary to law. 13. Mr.Nankani further submitted that an order under Section 3 of the 1992 Act cannot be equated with the notification issued by the Central Government under Section 5 of the 1992 Act. Although both Section 3 and Section 5 of the 1992 Act confer power on the Central Government, there is a vital difference between the two. He submitted that Section 3 specifically 16 wpl2790-10+ contains the power to restrict export of any goods or class of goods. Section 5 provides for formulation and announcement of the Export and Import Policy. Order under Section 3 has to be laid before the House of Parliament in terms of Section 19(3) of the 1992 Act and thus subject to scrutiny by the Parliament. Notification under Section 5 is not required to be laid before the Parliament. Relying on a decision of the Apex Court in the case Bhavnagar University V/s. Palitana Sugar Mills Private Limited reported in (2003) 2 SCC 111, Mr.Nankani submitted that when the statute requires an act to be done in a particular manner, the same must be done in that manner or not at all. Accordingly, he submitted that what cannot be done directly, cannot be done indirectly. Accordingly, he submitted that the impugned memorandum / notification / circular which are not passed under Section 3 of the 1992 Act are legally unsustainable. 14. Mr.Nankani further submitted that the quantity restriction or ceiling on export of cotton yarn cannot be imposed by way of a policy circular. Such a circular which is administrative in nature has no statutory force. He submitted that the policy circular cannot add any condition or restriction to the notification dated 22-12-2010 and as such the ceiling or quantity limit contained in the policy circular dated 22-12-2010 would have effect of amending the impugned notification which is not permissible in law. 15. Mr.Nankani further submitted that Section 9(1) and (2) of the 17 wpl2790-10+ 1992 Act provides for grant of licence subject to the conditions as may be prescribed. As per Section 2(i) of the 1992 Act, the expression “prescribed” means prescribed by Rules made under the 1992 Act. Rule 7 of the Foreign Trade (Regulation) Rules, 1993 prescribes the grounds on which licence can be refused. The ceiling or the quantity limit has not been “prescribed” by the Rules prescribed under the 1992 Act and, therefore, the restriction sought to be imposed by way of policy circular dated 22-12-2010 is illegal and unauthorized. 16. Mr.Nevagi, learned counsel appearing on behalf of Nagreeka Export Limited, while adopting the argument of Mr.Jagtiani and Mr.Nankani submitted that the object of the 1992 Act is to provide a level-playing field for all domestic exporters and importers and not meant to restrict the exports. If the Government wishes to restrict export of a particular item, it can do so only under the Essential Commodities Act or Section 3 of the 1992 Act or under Section 11 of the Customs Act, 1962. The notification dated 22-12-2010 is not issued under any of the aforesaid provisions and, therefore, the restrictions imposed cannot be said to be legally tenable. He further submitted that the purpose for which the notification dated 22-12-2010 was issued does not fall within the scheme of Section 11(2) of the Customs Act, 1961 and, therefore, the DGFT has exceeded its power under the 1992 Act read with the Customs Act, 1962. 18 wpl2790-10+ 17. Mr.Rana, learned senior Advocate appearing on behalf of the respondents, on the other hand, submitted that the decision to ban export of cotton yarn beyond 720 million kgs. during 2010-2011 (upto 31-3-2011) is a policy decision taken by the Central Government based on CYAB report. The CYAB arrived at the above conclusion after considering the total production, domestic requirement of cotton yarn and after hearing representatives from all sections connected with Textile Industry including representatives who are engaged in the manufacture and export of cotton yarn. 18. Mr.Rana submitted that once the Central Government has taken a policy decision in public interest based on the recommendations of the Advisory Board constituted by the Central Government, it is not open to the Courts to go into the sufficiency of the materials so as to hold that the decision taken is not in public interest. Strong reliance was placed on an unreported decision of the Delhi High Court in the case of Gujarat Ambuja Exports Limited V/s. Union of India (Writ Petition No.8406 of 2010) decided on 17-2-2011 by the learned counsel for the Revenue wherein the policy decision of the Central Government to ban export of cotton yarn in excess of 720 million kgs. has been upheld. 19. Mr.Rana further submitted that the right to export is not a fundamental right and it is open to the Central Government to impose such restrictions as are deemed fit in public interest. In the present case the policy 19 wpl2790-10+ decision taken by the Textile Ministry on 1-12-2011 to ban export of cotton yarn has been further approved by the Group of Ministers in their meeting held on 21-12-2010 and accordingly notification and policy circular to implement the policy decision of the Government have been issued. Assuming that the office memorandum / press release dated 1-12-2010 has no legal sanctity, in view of the notification / policy circular issued on 22-12-2010, export of cotton yarn beyond 720 million kgs. cannot be permitted. 20. Relying on a decision of the Apex Court in the case of Union of India V/s. C. Damani & Company reported in 1980 (Supp) SCC 707, Mr.Rana submitted that the policy decision of the Government should not be interfered by Courts unless compelled by glaring unconstitutionality. 21. Relying on the