2003 (4) TMI 490 - HC - Indian Laws

Summary

Issues Involved:
1. Validity of the Advice Memo issued by the Joint Director General of Foreign Trade.
2. Alleged violation of principles of natural justice.
3. Requirement of show cause notice and opportunity of being heard before issuing the Advice Memo.
4. Legal consequences of blacklisting/debarment without due process.

Detailed Analysis:

1. Validity of the Advice Memo Issued by the Joint Director General of Foreign Trade:
The petitioners, engaged in import and export activities, challenged the Advice Memo dated 23rd March 2001, issued by the Joint Director General of Foreign Trade. This Advice Memo was issued following investigations into alleged fraudulent exports and misdeclaration of goods by the petitioners, leading to their placement on the Denied Entity List. The memo advised all licensing branches not to allow the petitioners or their directors/partners to avail of any licences or benefits under the EXIM Policy.

2. Alleged Violation of Principles of Natural Justice:
The petitioners argued that the Advice Memo amounted to a debarment/blacklisting order, which violated Article 19(1)(g) of the Constitution of India. They contended that such a drastic order, depriving them of their right to trade, was issued without any cause, reason, show cause notice, or hearing, thus violating the principles of natural justice.

3. Requirement of Show Cause Notice and Opportunity of Being Heard Before Issuing the Advice Memo:
The court examined whether it was necessary for the respondents to issue a show cause notice and provide an opportunity of being heard before issuing the Advice Memo. The court noted that the Foreign Trade (Development and Regulation) Act, 1992, and the relevant rules require adherence to natural justice principles. The court referred to Section 9 of the Act, which mandates recording reasons in writing for refusal, suspension, or cancellation of licences and provides for a reasonable opportunity of being heard.

4. Legal Consequences of Blacklisting/Debarment Without Due Process:
The court emphasized that the Advice Memo effectively blacklisted the petitioners, preventing them from applying for licences or availing benefits under the EXIM Policy, which amounted to civil consequences. The court cited the Supreme Court's judgment in M/s. Erusian Equipment and Chemicals Ltd. v. State of West Bengal, which held that blacklisting involves civil consequences and requires adherence to principles of natural justice. The court concluded that the petitioners were entitled to a show cause notice and an opportunity of being heard before such an action could be taken.

Conclusion and Directions:
The court held that the impugned Advice Memo was in the nature of an interim order, and pre-decisional hearing was not necessary. However, post-decisional hearing was required to satisfy the principles of natural justice. The court directed the petitioners to make an appropriate representation against the Advice Memo. The respondents were instructed to provide the investigation report within one week, and the petitioners were to submit their representation within two weeks thereafter. The competent authority was to consider the representation, provide a personal hearing if requested, and decide within four weeks.

Final Order:
The writ petitions were disposed of with the direction for a post-decisional hearing, ensuring compliance with the principles of natural justice. There was no order as to costs.