1996 (5) TMI 413 - SC - FEMA

Whether the Government is bound by the previous policy or whether it can revise its policy in view of the changed potential foreign markets and the need for earning foreign exchange? Held that - Grant of licence depends upon the policy prevailing as on the date of the grant of the licence. The Court, therefore, would not bind the Government with a policy which was existing on the date of application as per previous policy. A prior decision would not bind the Government for all times to come. When the Government are satisfied that change in the policy was necessary in the public interest, it would be entitled to revise the policy and lay down new policy. The Court, therefore, would prefer to allow free play to the Government to evolve fiscal policy in the public interest and to act upon the same. Equally, the Government is left free to determine priorities in the matters of allocations or allotments or utilisation of its finances in the public interest. It is equally entitled, therefore, to issue or withdraw or modify the export or import policy in accordance with the scheme evolved. We, therefore, hold that the petitioners have no vested or accrued right for the issuance of permits on the MEE or NQE, nor the Government is bound by its previous policy. It would be open to the Government to evolve the new schemes and the petitioners would get their legitimate expectations accomplished in accordance with either of the two schemes subject to their satisfying the conditions required in the scheme. The High Court, therefore, was right in its conclusion that the Government are not barred by the promises or legitimate expectations from evolving new policy in the impugned notification. SLP dismissed.

Summary

Issues:
Challenge to change in export policy based on promissory estoppel and legitimate expectation.

Analysis:
The case involved special leave petitions challenging a change in the export policy for readymade garments. The petitioners, exporters of readymade garments, challenged the introduction of a new policy that withdrew the Manufacturer Export Entitlement (MEE) and Non-quota Exporters Entitlement (NQE) systems. The petitioners argued on the grounds of promissory estoppel and legitimate expectation. The High Court negatived all three contentions raised by the petitioners, leading to the special leave petitions before the Supreme Court.

The petitioners contended that the Government had promised quotas under MEE and NQE for exporters who upgraded their quality by purchasing new machines or met certain criteria. However, the Government introduced a new policy in line with the GATT agreement, withdrawing the previous quota systems. The new policy focused on Past Performance Entitlement (PPE) and First Come, First Serve (FCFS) systems, allocating 80% to PPE and 20% to FCFS. The Government's decision aimed to enhance competitiveness in foreign markets and boost export potentiality. The elimination of MEE and NQE quotas was justified by the need to prevent misuse and promote genuine exporters.

The Court emphasized that the Government has the authority to revise policies in the public interest, especially in economic matters. The doctrine of legitimate expectation does not restrict the Government's power to evolve new policies or withdraw existing ones. Export or import licenses are granted based on prevailing policies at the time of application, and applicants have no vested right to licenses under previous policies. The Court upheld the Government's right to change policies to suit changing market conditions and public interest. The petitioners were not entitled to MEE or NQE quotas as a vested right, and the Government was not bound by its previous policy.

In conclusion, the Supreme Court dismissed the special leave petitions, affirming the Government's discretion to modify export policies and rejecting the petitioners' claims based on promissory estoppel and legitimate expectation. The Court upheld the Government's authority to evolve new schemes and allocate quotas based on public interest considerations, without being restricted by previous policies or promises.