gopi 1 wp-4743-11-A & other connected matters.sxw IN THE HIGH COURT OF JUDICATURE AT BOMBAY CIVIL APPELLATE JURISDICTION WRIT PETITION NO.4743 OF 2011 WITH CIVIL APPLICATION NO.1419 of 2011 M/s.Anil Ginning and Pressing Factory & Anr. ..Petitioners Vs. Union of India & Ors. ..Respondents WITH WRIT PETITION NO. 5230 OF 2011 M/s.Lesha Impex Pvt. Ltd. ..Petitioner Vs. Union of India & Ors. ..Respondents WITH WRIT PETITION NO.5008 OF 2011 WITH CIVIL APPLICATION NO.1416 OF 2011 M/s.ORS Trading Company (HUF) ..Petitioner Vs. Union of India & Ors. ..Respondents WITH WRIT PETITION NO.5009 OF 2011 WITH CIVIL APPLICATION NO.1418 OF 2011 M/s.A.K. Corporation ..Petitioner Vs. Union of India & Ors. ..Respondents gopi 2 wp-4743-11-A & other connected matters.sxw WITH WRIT PETITION NO.5010 OF 2011 WITH CIVIL APPLICATION NO.1417 OF 2011 M/s.Shree Shiv Trading Company ..Petitioner Vs. Union of India & Ors. ..Respondents Mr. Chirag Balsara with Ms. Meenakshi Dhanuka Rungta for the petitioners in the above Writ Petitions and Civil Applications. Dr. G.R. Sharma along with Mr. A.S. Rao and Mr. Rajinder Kumar and Smt. Purnima Awasthi for respondent – UOI in the above Writ Petitions and Civil Applications. WITH WRIT PETITION LODGING NO.1437 OF 2011 (ORIGINAL SIDE) Murli Exports ...Petitioner Versus The Union of India & Ors. ..Respondents Mr. Amit Sale for petitioner Dr. G.R. Sharma along with Mr. A.S. Rao and Mr. Rajinder Kumar and Smt. Purnima Awasthi for respondent – UOI. WITH WRIT PETITION NO.5254 OF 2011 Shah Govardhandas Bhikaridas & Ors. ...Petitioners Vs. Union of India & Ors. ..Respondents Mr. R.S. Apte, Senior Advocate with Mr. Girish Paryani and Yatish Gujarathi for petitioner. Mr. R.V. Desai, Senior Advocate with Dr. G.R. Mishra and Smt. N.V. Masurkar and Smt. Purnima Awasthi for respondent – UOI. gopi 3 wp-4743-11-A & other connected matters.sxw WITH WRIT PETITION LODGING NO.1458 OF 2011 (ORIGINAL SIDE) M/s.Sun Export Private Ltd. ..Petitioner Versus Union of India & Ors. ..Respondents Mr. Vikram Nankani with Mr. J.H. Motwani, for the petitioner. Dr. G.R. Sharma along with Mr. A.S. Rao and Mr. Rajinder Kumar and Smt. Purnima Awasthi for respondent – UOI. CORAM : MOHIT S. SHAH, C. J. AND GIRISH S. GODBOLE, J. 20 July 2011 ORAL ORDER: Rule. By consent Rule made returnable forthwith. 2. Heard the learned Counsel for the parties for final disposal of the petitions. 3. By these petitions the validity of clause 4(i) and the consequential clause 4(iii) of the public notice No.55 dated 17 June 2011 issued by the Director General of Foreign Trade (DGFT) has been challenged on several grounds. Pursuant to the interim order dated 1 July 2011 passed in the Writ Petition No.4743 of 2011 as also the interim orders passed by the other Benches of this Court, the Andhra Pradesh High Court, the Karnataka High Court and the Calcutta High Court, the DGFT has passed an order making allocation as on 6 July 2011 which has also been gopi 4 wp-4743-11-A & other connected matters.sxw impugned by filing Civil Application No.1419 of 2011 and in some petitions. The petitioners in all the petitions claimed to be engaged in the business of exporting of cotton and are aggrieved by condition No. 4(i) and 4(iii) of the public notice No.55 dated 17 June 2011 which read thus:- “4. Allocation will be made as per the following criteria:- (i) An applicant must have exported cotton in either of the two previous cotton years (1st October to 30th September) 2008-09, 2009-10; (ii) Allocation will be done on a pro-rata basis with a ceiling of 4,250 MTs per IEC (equal to 25,000 bales) and floor of 100 MTs per IEC. (100 MTs would come to 4 container load; if a standard bale of cotton contains 170 kgs, then 150 such bales would constitute approximately 25 MTs or 1 container load; so 600 bales would be 4 container load); (iii) An applicant can apply for a quantity which is the higher of its export of cotton in the two previous cotton years (2008-09 and 2009-10) subject to a quantity ceiling of 4,250 MTs. All applications must be in Metric Tons (MTs) only”. 4. The challenge is two fold; (i) The DGFT does not have any jurisdiction under the provisions of the Foreign Trade (Development and Regulation) Act, 1992 (hereinafter referred to as the Act) to impose a condition which will have the result of excluding certain category of exporters or making eligible only those persons who have exported cotton in the two previous cotton years and (ii) Such a condition is violative of Articles 14 and 19 of the Constitution of India and the classification done by the DGFT is unreasonable classification having no nexus with the purpose of exporting 10 lakh bales of cotton till 15 September 2011. gopi 5 wp-4743-11-A & other connected matters.sxw 5. An affidavit in reply has been filed by J.K. Singh, Joint DGFT and reliance has been placed upon para.2.4 of the Foreign Trade Policy as the source of power for imposing a restriction on the class of persons, who can export cotton. It is contended that the DGFT has power to fix the eligibility criteria. 6. Before considering the rival submissions, it is necessary to note the provisions of the Act. Section 2(d) reads thus:- “2(d) "Director-General" means the Director-General of Foreign Trade appointed under section 6.” Section 3 which has been amended by amending Act 25 of 2007 provides for the power of the Central Government to pass an order published in the official gazette making provision for the development and regulation of foreign trade. Sub-section (2) of Section 3 empowers the Central Government by an order published in the official gazette to make provision for prohibiting, restricting or otherwise regulating the import or export of goods. Sections 5 and 6 read thus: “5. Export and Import policy.- The Central Government may, from time to time, formulate and announce, by notification in the Official Gazette, the export and import policy and may also, in like manner, amend that policy. 6. Appointment of Director-General and his functions.- (1) The Central Government may appoint any person to be the Director-General of Foreign Trade for the purposes of this Act. (2) The Director-General shall advise the Central Government in the formation of the export and import policy and shall be responsible for carrying out that gopi 6 wp-4743-11-A & other connected matters.sxw policy. (3) The Central Government may, by Order published in the Official Gazette, direct that any power exercisable by it under this Act (other than the powers under Sections 3,5,15,16 and 19) may also be exercised, in such cases and subject to such conditions, by the Director-General or such other officer subordinate to the Director-General, as may be specified in the Order.”. 7. On 22 July 2008 the Government of India issued Notification No. 26 (RE-2008)/2004-09 under Section 5 of the Act read with para.1.3 and 2.1 of the earlier FTP 2004-2009 and Chapter 52, S.No.161A was added and it was provided that cotton will be traded in free export category with the following restriction:- “The contracts for export of cotton shall be registered with the Textile Commissioner prior to shipment. Clearance of cotton consignments by Customs should be after verifying that the contracts have been registered”. 8. In exercise of powers conferred by Section 5 the Central Government has issued Notification dated 27 August 2009 and the Foreign Trade Policy, 2009-2014 has been published. Clause 2.4 of the said FTP reads thus:- “2.4 DGFT may, specify procedure to be followed for an exporter or importer or by any licensing or any other competent authority for purpose of implementing provisions of FT (D&R) Act, the Rules and the Orders made there under and FTP. Such procedures shall be published by means of a Public Notice, and may, in like manner, be amended from time to time”. 9. Thereafter, another Notification No. 58/09-14 dated 17th August 2010 was issued under Section 5 of the Act read with paragraphs 1.3 and 2.1 of the Foreign Trade Policies, 2009-14 and earlier Notification No. gopi 7 wp-4743-11-A & other connected matters.sxw 44/2009-14 dated 21st May 2010 and entry against S No. 161A of the Notification dated 21st May 2010 was amended whereby while retaining cotton in the category of free export, the following restriction was imposed :- “The contracts for export of cotton shall be registered with the Textile Commissioner prior to shipment. Clearance of cotton consignment by Customs should be after verifying that the contracts have been registered.” By another Notification dated 30th September 2010, the earlier Notification dated 17th August 2010 was made applicable w.e.f. 1st November 2010. 10. Thereafter, the Central Government issued Notification No. 12(RE-2010)/2009-14 dated 16th December 2010 and the earlier Notification dated 17th August 2010 read with 30th September 2010 was further amended and while retaining cotton in the category of free export articles, the following restriction was imposed:- “The contracts for export of cotton shall be registered with the Directorate General of Foreign Trade prior to shipment. Clearance of cotton consignment by Customs, should be after verifying that the contracts have been registered.” 11. It appears that the group of Ministers of the Central Government decided to allow export of 55 Lacs bales of cotton during the cotton season 2010-2011 and hence Circular No. 06(RE-2010)/2009-14 dated 16th December 2010 was issued, the relevant portion whereof reads thus:- “Notification No. 12 dt. 16.12.2010 has been issued today, gopi 8 wp-4743-11-A & other connected matters.sxw stipulating that henceforth registration of contracts for export of cotton will be done by DGFT. Exact modalities of such registration & conditions that needs to be fulfilled/observed would be notified separately, once the balance quantity that remains to be exported is ascertained.” “The decision to permit export of 55 lakh bales only in the current cotton season stands. Further registration would only be done by DGFT as indicated in the notification cited above.” 12. The Central Government, thereafter, issued Policy Circular No. 09(RE-2010)/2009-14 dated 29th December 2010 and the applications were invited for grant of registration certificate for export of 55 lakh bales of raw cotton. The applications were to be submitted from 31st December 2010 to 6th January 2011. Clauses 3(i) and (ii) of the said Policy Circular reads thus: “3. Allocation will be made after scrutiny of applications, as per the following criteria:- (i) Allocation will be done on a pro-rata basis with a ceiling of 1,00,000 bales per IEC and floor of 500 bales per IEC. Therefore, no application below 500 bales will be considered. (ii) Exporters who did not export full quantity for which registration certificate was obtained by them from Textile Commissioner, Mumbai in October, 2010, would be disincentivised by reduction of their pro-rata quantity by the percentage of such default.” 13. Though this circular is issued by Joint DGFT, Clause (6) thereof specifically states that the same has been issued with the approval of Commerce Secretary. Annexure 2 to the said Circular gives an gopi 9 wp-4743-11-A & other connected matters.sxw illustrative example regarding the system for prorata allocation and the relevant portion thereof reads thus: “ Suppose 5 exporters have applied for allocation of quota. Let us assume that the total quantity to be allocated is 1,00,000 bales. But, we have received applications for 10,00,000 bales. Accordingly, each applicant will get 10% of the quantity he / she has applied for. The percentage share which each exporter will be allocated of the total quantity as below :- (1) Allocation of quantity on pro-rata basis {See Para 3(i) of Policy Circular dated 29 th December 2010} Exporter Quantity applies in bales Quantity allotted in bales A 1,00,000 10,000+1,111.11=11,111.11 B 1,50,000 15,000+1666.66=16,666.66 C 2,00,000 20,000+2,222.23=22,222.23 D 2,50,000 25,000 E 3,00,000 25,000* Total 10,00,000 1,00,000 “The maximum ceiling is say 25,000 bales. Therefore, applicant E does not get 10% of quantity applied for (10% of 3,00,000 is 30,000, which is more than the prescribed ceiling of 25,000) so, allocation for E is limited to 25,000 bales only. The balance quantity of 5,000 bales has been distributed in proportion to the applied quantity among A, B & C.” 14. Thereafter, the Central Government issued another Notification No. 32(RE-2010)/2009-14 dated 14th March 2011 under Section 5 of the gopi 10 wp-4743-11-A & other connected matters.sxw Act read with para 2.1 of the Foreign Trade Policy, 2009-14 and earlier Notification No. 12(RE-2010)/2009-14 dated 16th December 2010 was amended and the relevant portion of paragraph 2 of the said Notification reads thus: “Notification No. 12(RE-2010)/2009-14 of 16.12.2010 had stipulated the export policy for cotton (Tariff Code 5201, 5202 and 5203) under Serial No. 161A. In respect of all these three tariff codes, the existing entry in the column “Nature of Restriction” shall be substituted, with immediate effect, as under: “Nature of Restriction” “The contract for export of cotton shall be registered with the Directorate General of Foreign Trade prior to shipment. During the Cotton Season, 2010-11 (upto 30.09.2011) the export of cotton will be subject to a cap of 55 lakh bales or as notified by DGFT from time to time. Clearance of cotton consignment by Customs should be after verifying that the contracts have been registered.” 15. Clause 4 of this Notification restates the effect of that notification as :- “The export of cotton is free subject to registration of export contracts with DGFT. The cap on export during the Cotton Season, 2010-11 (01.10.2010 to 30.09.2011) will be 55 lakh bales or as notified by DGFT from time to time.” 16. Thereafter by another Notification No. 57(RE-2010)/2009-14 dated 9 June 2011 issued by Central Government in exercise of the powers conferred by Section 5 of the Act read with para 2.1 of the Foreign Trade Policy, 2009-14, a further amendment was made in the original Notification dated 16th December 2010 which reads thus:- “Nature of Restriction” “The contract for export of cottons shall be registered with the Directorate General of Foreign Trade prior to shipment. During the Cotton Season, 2010-11( upto 30.09.2011) the export of gopi 11 wp-4743-11-A & other connected matters.sxw cotton will be subject to a cap of 65 lakh bales or as notified by DGFT from time to time. Clearance of cotton consignment by Customs should be after verifying that the contracts have been registered. 2. The effect of this notification:- Cap on export of cotton during the current Cotton Season is increased to 65 lakh bales from 55 lakh bales as was notified earlier. Other conditions remain unchanged.” 17. It is thereafter that the DGFT issued the impugned Public Notice 55 dated 17 June 2011 containing condition number under (1) and 4(iii) which are the subject matter of challenge in these Petitions. 18. We have heard Advocate Shri Balsara, Shri R.S. Apte, Senior Advocate and Advocate Shri Amit Sale and Advocate Shri Vikram Nankani on behalf of the petitioners. We have also heard Senior Advocate Shri R.V.Desai and Advocate Dr. G.R. Sharma on behalf of the respondents. 19. The learned Advocates for the petitioners contend that considering the provisions of Sections 3, 5 and 6 of the F.T.A., 1992, the power to impose any condition for prohibiting, restricting or otherwise regulating the import or export of goods in all cases or any specified classes of cases and subject to such exceptions, if any, which may be thought fit to be imposed by the Central Government, is conferred on the Central Government alone. Relying on sub-section (3) of Section 6, it is submitted that even the Central Government has no power to delegate its authority to exercise the power conferred on the Central Government, under Section 3, amongst other Setions, to the DGFT. It is submitted that consequently, when the Central Government has not exercised its power of restriction on the classes of persons who can make the export gopi 12 wp-4743-11-A & other connected matters.sxw of 10 lakh cotton bales, the DGFT has no jurisdiction to impose such restriction. It is also submitted that since the subject public notice is only in respect of additional 10 lakh bales of cotton in addition to the 55 lakh bales of cotton for which the export was already permitted earlier, there was absolutely no justification for the DGFT to impose such restrictions and conditions particularly when the Central Government had never imposed such restrictions or conditions eliminating the class of exporters while permitting the export of originally sanctioned quantity of 55 lakh cotton bales. Based on this it was submitted that the impugned conditions are completely without jurisdiction and are otherwise also arbitrary and unconstitutional and have been imposed without any authority of law. Relying on Article 19(1)(g) of the Constitution of India, it is submitted that assuming for the sake of argument that such restriction could have ever been imposed by the DGFT, it will not satisfy the test of reasonable restriction and cannot be held to be a restriction imposed for achieving the interests of the general public. 20. The learned Counsel on behalf of the respondents on the other hand supported the impugned conditions by relying upon Clause 2.4 of the FTP, 2009-2014. Shri R.V. Desai and Dr. Sharma submitted that according to the provisions of the Act, FTP and the various notifications issued from time to time the DGFT was within his power and had an authority in law to impose the impugned restrictions. It was contended that the impugned restrictions only lay down eligibility criteria which are reasonable and the same have been laid down with a view that the exporters must get allocation of reasonable quantity of bales to make exports commercially viable and economical. Relying on Clause 2.4 of FTP it was contended that the power conferred on the DGFT “to specify gopi 13 wp-4743-11-A & other connected matters.sxw procedure” to be followed by an exporter for the purpose of implementing the provisions of the Act, the Rules and the orders made thereunder and the FTP would essentially include the power to impose the impugned restrictions/conditions and the same having been done within the authority of law and for making the exports commercially viable, the action of the DGFT who is to act as a facilitator of exports and imports and has to ensure a good governance cannot be challenged. It was also submitted that the impugned decision of the DGFT is in the nature of a policy decision relating to a financial matter and hence the Court should not exercise its jurisdiction under Article 226 of the Constitution of India. It was further submitted by the learned Counsel for the respondents that many of the petitioners and several other persons who had applied after the cut-off date of 25 June 2011 which was prescribed in the calendar of events annexed as Annexure III to the public notice dated 17 June 2011 cannot be considered at all and that such persons have no locus standi to maintain a petition particularly when they have not even applied prior to the cut-off date of 25 June 2011. The learned Counsel submitted that in view of the interim orders passed in 82 Writ Petitions by the High Courts of Bombay, Karnataka and Andhra Pradesh and the two orders passed by the Calcutta High Court, the Trade Notice dated 6 July 2011 has been issued and since various quantities of cotton bales have already been allocated to 227 persons indicated in Annexure I to the said Trade Notice, this Court cannot interfere in the said allocation since any interference in favour of the petitioners would certainly result in reduction in the quantity already allocated to the said 227 persons, who must have started the process of exports and who are not represented before the Court. The learned Counsel pointed out that Annexure II and Annexure III to the said Trade Notice dated 6 July 2011 contained the list of 82 petitioners in the 3 High gopi 14 wp-4743-11-A & other connected matters.sxw Courts and two petitioners in the Calcutta High Court to whom no allocation has been made, but only certain quantities had been sequestered. It was alternatively submitted that even if this Court decides to entertain the Writ Petitions, the said sequestered quantity may be made available for allocation to the petitioners without disturbing the allocation already made to the persons described in Annexure I. 21. Heavy reliance was placed by the learned Advocate Shri R.V. Desai on the judgment of the learned Single Judge of the Calcutta High Court in the case of Bally Exports Pvt. Ltd. vs. Union of India, 2011 (269) E.L.T. 181 (Cal.) and it was submitted that an identical condition which had been imposed by issuing Circular No.17 (RE 2010)/2009-14 dated 10 February 2011 in respect of export of cotton yarn has been upheld and hence the said ratio must be followed. Reliance was also placed on paragraph 39 of the said judgment to buttress the submission that even the Supreme Court in the case of Hindustan Granites vs. Union of India & Ors. (2007) 12 S.C.C. 178 has upheld a similar policy Circular. 22. Having carefully considered the rival submissions, we are of the view that the petitions deserve to be allowed by accepting the arguments of the petitioners that the DGFT had no authority under the Act to impose the impugned conditions. 23. Section 3(2) of the Act undoubtedly confers power on the Central Government to make provision for prohibiting, restricting or otherwise regulating export and imports, in all cases or in specified classes of cases and subject to such exceptions as may be indicated in the order. Section 6(3) empowers the Central Government to delegate some of the powers gopi 15 wp-4743-11-A & other connected matters.sxw exercisable by it under the Act, but expressly prohibits delegation of powers under Section 3 of the Act. It is worthwhile to note that after the FTP 2009-2014 was formulated and announced under Section 5, the Central Government had issued Notification dated 17 August, 2010 referred hereinabove and the only restriction which was imposed for export of raw cotton was that the contracts for export shall be registered with the Textile Commissioner prior to shipment. Further the notification dated 16 December 2010 and the policy circular of even date merely modified the said condition and provided that registration of contracts for export of cotton will be done by the DGFT and this was made applicable even in respect of the balance un-exported quantity from out of the original quota of 55 lakh bales. The earlier Circular dated 29 December 2010 which prescribes the procedure for export of 55 lakh bales, as seen from Clause 3(i) and (ii) quoted herein above, does not impose any such restriction though it imposes the ceiling of 1 lakh bales per IEC and floor of 500 bales per IEC. This Circular is in fact issued with the approval of the Central Government through its Commerce Secretary. In such a situation, when even the subsequent Notification dated 14 June 2011 and 9 June 2011 are issued by the Central Government which are expressly issued in exercise of the power conferred by Section 5 of the Act read with para.2.1 of FTP 2009-2014 (which power cannot be delegated to the DGFT); though the said Notifications are signed by the DGFT, they are issued by the Central Government and also do not impose any such restriction, no such restriction could have been imposed by the DGFT while issuing the Public Notice No.55 dated 17 June 2011 which contains impugned restrictions/prohibitions. In our opinion, in so far as the impugned conditions (i) and (iii) of Clause 4 of the Public Notice are concerned, the DGFT had no jurisdiction to impose the impugned conditions (i) and gopi 16 wp-4743-11-A & other connected matters.sxw (iii). Clause 2.4 of the FTP which is relied upon as a source of power of the DGFT to impose the impugned conditions relates only to the procedure and empowers the DGFT only to specify procedure for the purpose of implementing the provisions of the Act, the Rules and the orders issued under the Act. The power