2007 (8) TMI 427 - HC - Customs

Ban on export of Skimmed Milk Product SMP - nature of restriction - Held that - Public interest is a term of wide connotation and it has to be considered keeping in view the facts and circumstances of each case. The Authorities concerned while passing the order dated 30th April, 2007 had ignored these aspects of the matter while it has taken into consideration what is not on record. There is nothing even on the court file to show as to what is intended by existing export obligation, simplicity except obligation in relation to free trade items. We may also notice that on 20th April, 2007 some discussion had taken place between the Director General of Foreign Trade, Ministry of Commerce and the petitioner. Vide their letter of the same date they had stated that as per the discussions the petitioner may be allowed to export 5000 M.T. Skimmed Milk Powder against existing contractual obligations. Thus the petitioner was even willing to restrict its trade to export of 5000 M.T. The impugned order does not even touch this aspect of the matter in its proper perspective. We have already noted that it is not even the case of the respondent that the Notification dated 9th February, 2007 is to have a retrospective effect in its strict sense and still they are not permitting theexport of the goods as is done in the present case.For the reasons aforestated, we quash and set aside the order dated 30th April, 2007 passed by the Director General of Foreign Trade, Ministry of Commerce and Industry, Udyog Bhawan, Delhi, and direct the said Authority to hear the petitioner and pass appropriate order afresh in accordance with law and keeping in view the decision of the Court as aforereferred within four weeks from today.

Issues Involved:
1. Retrospective application of the export ban on Skimmed Milk Powder (SMP).
2. Petitioner's right to fulfill existing export obligations.
3. Arbitrary denial of relief to the petitioner.
4. Application of the doctrine of legitimate expectation and promissory estoppel.
5. Judicial review of policy decisions.

Issue-wise Detailed Analysis:

1. Retrospective Application of the Export Ban on SMP:
The petitioner challenged the retrospective application of the export ban on SMP imposed by the Central Government through Notification No. 45 (RE-2006)/2004-2009 dated 9th February 2007. The petitioner argued that the ban, applied retrospectively, hindered their ability to fulfill existing export contracts. The court noted that the petitioner was not opposing the ban itself but the retrospective effect, which unsettled pre-existing contractual obligations. The court referenced the Supreme Court's judgment in *Union of India v. M/s. Asian Food Industries*, emphasizing that a policy change cannot retrospectively affect vested or accrued rights.

2. Petitioner's Right to Fulfill Existing Export Obligations:
The petitioner had entered into several export contracts before the notification, which were to be executed over a specified period. The court observed that the petitioner had made substantial investments based on the existing policy, which did not restrict SMP exports. The court held that the petitioner's right to fulfill these obligations should be protected, as the contracts were partially executed before the ban. The court emphasized that the term "export obligation" should be interpreted broadly to include contractual commitments made before the ban.

3. Arbitrary Denial of Relief to the Petitioner:
The petitioner argued that the denial of relief by the respondent was arbitrary, especially given the heavy investments made and the validity of the export contracts. The court found that the respondent's decision lacked plausible reasoning and was arbitrary. The court highlighted that the respondent's order dated 30th April 2007 failed to consider the petitioner's existing export obligations and the investments made. The court referenced the Supreme Court's judgment in *Mahabir Vegetable Oils (P) Ltd. v. State of Haryana*, which distinguished between vested and accrued rights and emphasized that a right cannot be taken away retrospectively through delegated legislation.

4. Application of the Doctrine of Legitimate Expectation and Promissory Estoppel:
The court applied the doctrine of legitimate expectation and, to a limited extent, constructive promissory estoppel. The petitioner had a legitimate expectation based on the declared policy to operate from 2004 to 2009. The court noted that the respondent had reserved the right to examine existing export obligations on a case-by-case basis, indicating that the ban was not intended to apply absolutely to pre-existing commitments. The court referenced the Supreme Court's judgment in *MRF Limited v. Assistant Commissioner (Assessment) Sales Tax*, which emphasized that state actions must be fair and not arbitrary.

5. Judicial Review of Policy Decisions:
The court acknowledged that policy decisions fall within the executive domain but emphasized that such decisions must be in conformity with the law and not arbitrary. The court referenced the Supreme Court's judgment in *Federation of Railway Officers Association v. Union of India*, which stated that judicial review of policy matters is limited but necessary when decisions are tainted with unfairness or arbitrariness. The court held that the respondent's decision to deny the petitioner relief was arbitrary and not in line with the principles of fairness and justice.

Conclusion:
The court quashed the order dated 30th April 2007 passed by the Director General of Foreign Trade, Ministry of Commerce and Industry, and directed the authority to hear the petitioner afresh and pass an appropriate order in accordance with the law within four weeks. The court emphasized the need to consider the petitioner's existing export obligations and investments made based on the declared policy. The writ petition was disposed of, with each party bearing its own costs.

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