2019 (6) TMI 800 - HC - Customs

Renewal and extension of the petitioners Letter of Approval - permission to petitioner to function within the Special Economic Zone (SEZ) for manufacture of plastic bags etc. out of plastic waste/scrap - HELD THAT - It is the Central Government which would frame the policy and the Board would be bound by the directions of the Central Government which are to be given in writing. The fact that sub-section (5) of section 9 of the SEZ Act specifically provides for policies to be framed by the Central Government means that the general provisions contained in sub-section (1) of section 9 would not include the power to take policy decisions. Therefore, the Board while discharging its duties and functions, is bound by the policies framed by the Central Government, but has no power to frame policies on its own. The Board, therefore, is not a policy making body but only an implementing one. In view of the fact that the petitioners are similarly situated to the other two units which were granted extension of Letter of Approval by the Board, the Board had no option but to grant extension of the Letter of Approval to the petitioners, it has now come up with a totally new case by taking shelter behind rule 18(4) of the SEZ Rules, reading into it a policy decision to phase out units which were already established in the SEZ and the petitioners case is the first case for implementing such so called policy. It appears that the new stand adopted by the Board for not considering the case of the petitioners, is presumably to wriggle out of the above order passed by this court. Considering the manner in which the petitioners case has been either deferred or rejected on one ground or the other, while similarly situated parties have been granted extension of Letter of Approval, it appears that the Board for reasons best known to it is not inclined to grant approval to the petitioners without any valid reasons for such refusal - the decision of the Board taken in its meeting held on 5th October, 2018 rejecting the request of the petitioners for renewal of Letter of Approval for extension of recycling of plastic waste scrap, suffers from the vice of being discriminatory, arbitrary and capricious and flies in the face of the order dated 8th May, 2018 of this court, and cannot be sustained. Petition allowed - decided in favor of petitioner.

Summary

Issues Involved:
1. Legality of the Board of Approval's decision to reject the renewal of the petitioners' Letter of Approval.
2. Allegations of discrimination and arbitrariness in the Board of Approval's decision.
3. Compliance with the court's previous directions.
4. Interpretation and application of Rule 18(4) of the SEZ Rules.

Issue-wise Detailed Analysis:

1. Legality of the Board of Approval's Decision:
The petitioners challenged the decision of the Board of Approval (BoA) taken in its 84th meeting on 5.10.2018, which rejected their proposal for the extension/renewal of their Letter of Approval (LoA). The petitioners argued that this decision was illegal, without jurisdiction, and contrary to the court's specific directions for reconsideration of their case. The BoA's decision was based on a purported policy to phase out plastic recycling units, which the court found to be non-existent as no such policy was presented or proven.

2. Allegations of Discrimination and Arbitrariness:
The petitioners contended that their case was similar to other units, such as M/s R.R. Vibrant Polymers Ltd. and M/s Plastic Processors and Exporters Pvt. Ltd., which were granted renewal despite being non-operational for extended periods. The court noted that the BoA had granted extensions to 28 similar units on 22.11.2018, indicating discriminatory treatment towards the petitioners. The court found the BoA's rejection of the petitioners' renewal request to be discriminatory, arbitrary, and capricious.

3. Compliance with the Court's Previous Directions:
The court had previously directed the BoA to reconsider the petitioners' case and examine its similarity with other existing units. Despite the Development Commissioner's report confirming the similarity, the BoA rejected the petitioners' renewal request, citing a new ground of a policy to phase out plastic recycling units. The court found that the BoA's actions did not comply with its previous directions and appeared to be an attempt to evade granting the renewal.

4. Interpretation and Application of Rule 18(4) of the SEZ Rules:
The respondents argued that Rule 18(4) of the SEZ Rules barred the setting up of new units for recycling plastic waste but allowed the BoA to decide on the extension of existing units' LoAs. The court clarified that Rule 18(4) did not imply a policy to phase out existing units and that the BoA had consistently granted extensions to other units under this rule. The court concluded that the BoA's interpretation of Rule 18(4) in the petitioners' case was inconsistent and unjustified.

Judgment:
The court quashed and set aside the BoA's decision dated 5.10.2018, rejecting the petitioners' renewal request. The petitioners were granted an extension of their LoA for one year, in line with the extensions granted to 28 other units. The court directed that the petitioners be treated on par with these units for any future extensions. The court ruled that the BoA's decision was discriminatory, arbitrary, and contrary to its previous order, thus making the rule absolute with no order as to costs.