2004 (12) TMI 388 - HC - Companies Law

Summary

Issues Involved:
1. Authority of the Apparel Export Promotion Council (AEPC) to levy penalties for non-utilization of export quotas.
2. Methodology for determining the utilization of export entitlements.
3. Individual grievances and factual issues in specific cases.

Detailed Analysis:

1. Authority of AEPC to Levy Penalties:
The petitioners, garment exporters, challenged AEPC's authority to levy penalties for non-utilization of export quotas, arguing that such penalties amount to compulsory exaction of money, which must be specifically authorized by law. They contended that the Foreign Trade (Development & Regulation) Act, 1992 (the said Act) already provides a complete mechanism for violations, and thus, the Export and Import Policy cannot separately authorize such penalties. The petitioners relied on several judgments, including State of Madhya Pradesh v. Thakur Bharat Singh and Ahmedabad Urban Development Authority v. Sharad Kumar Jayanti Kumar Pasawalla, to argue that any compulsory exaction must be explicitly authorized by law.

The respondents countered that Section 5 of the said Act empowers the Central Government to issue the Export and Import Policy, which has statutory force. They argued that the penalties under the Policy are not truly penalties but performance guarantees to ensure maximum utilization of quotas, which is crucial for augmenting foreign exchange. The court agreed with the respondents, noting that the Export & Import Policy and the Garment Export Entitlement Policy (GEEP) have statutory force under Section 5 of the said Act. The court held that the conditions for granting entitlements, including the requirement to utilize quotas by a specified date and the provision for extensions backed by Earnest Money Deposit (EMD) or Bank Guarantee (BG), are valid and in furtherance of the objectives of the said Act. The court concluded that Section 11 of the said Act, which deals with penalties for violations during export, does not apply to the pre-export stage of quota utilization.

2. Methodology for Determining Utilization of Export Entitlements:
The petitioners challenged the methodology used by AEPC to determine the utilization of export entitlements, arguing that the default should be calculated based on the total entitlement rather than the extended quota. For example, if an exporter had a quota of 100,000 units and utilized 90,000 by September 30, the default should be calculated on the remaining 10,000 units, not just the extended quota.

The court rejected this argument, stating that the entitlement to export is initially up to September 30, and any extension to December 31 is an additional opportunity. The performance should be judged based on the extended quota. The court upheld AEPC's methodology, which considers the performance during the extended period to determine the percentage of utilization.

3. Individual Grievances and Factual Issues:
The court addressed individual grievances in specific cases, remanding some for reconsideration due to procedural issues or factual inconsistencies:

- WP (C) No. 8043/2003: The appellate authority's order was set aside and remanded due to a four-year delay in decision-making.
- WP (C) No. 13102/2004: No interference was warranted as the appellate authority had given proportionate relief.
- WP (C) No. 9435/2004: No remand was necessary as the performance was only 9.87%, and the revalidation occurred after the World Trade Centre attack.
- WP (C) No. 9681/2004: The matter was before the second appellate authority, and no interference was required.
- WP (C) No. 3674/2004: No interference was warranted despite the short notice for the second appeal hearing.
- WP (C) No. 16319/2004: No ground for interference as the quota was revalidated after the September 11 attack.
- WP (C) No. 3677/2004: The order of the second appellate authority was set aside and remanded for reconsideration due to lack of notice.
- WP (C) No. 3679/2004: The order was set aside and remanded due to a 4.5-year delay in decision-making.
- WP (C) 6925/2004: The petitioner was directed to approach the second appellate authority first.
- WP (C) No. 2422/2004: No interference was warranted as the plea of embargo was found unsustainable.
- WP (C) No. 3680/2004: No interference was warranted despite the delay in the first appellate committee's decision.
- WP (C) No. 5916/2003: No interference was warranted as the petitioner failed to file necessary documentary evidence.
- WP (C) No. 3275-78/2004: No specific factual plea was raised, and the general principles were decided against the petitioner.
- WP (C) No. 16102/2004: No interference was warranted as the findings were correctly arrived at by the appellate committees.
- WP (C) No. 4584/2004: No interference was warranted as the change in policy came after the quota year.
- WP (C) No. 13154/2004: No interference was warranted as the additional pleas were considered and rejected by the second appellate committee.
- WP (C) No. 2347/2004: No interference was warranted as the benefit could not be extended due to the lack of unallocated balance.
- WP (C) No. 7178/2004: No interference was warranted as the disputes were pending since 1996, and the revalidation was in 1998.
- WP (C) No. 3678/2004: The order was set aside and remanded due to a three-year delay in decision-making.
- WP (C) No. 7125/2003: No interference was warranted as the appellate authorities had considered the closure of units and reduced the forfeited amount.

The court emphasized the importance of timely submissions and the need for expeditious disposal, especially with the new regime for garment exports starting from January 1, 2005. The writ petitions were disposed of with directions for individual cases as noted, and the parties were directed to bear their own costs.