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TMI Blog2010 (5) TMI 416X X X X Extracts X X X X X X X X Extracts X X X X ..... rection to keep it alive till the adjudication is complete - absence of any financial liability as on date against the petitioners no security much less by way of bank guarantee can be ordered by this Court - absence of any financial liability against the petitioners as on date, in our considered view, no security much less by way of bank guarantee can be ordered. - 952 of 2006 with W.P. Nos. 2241-2243, 2252-2253 an - - - Dated:- 7-5-2010 - V.C. Daga and K.K. Tated, JJ. Writ Petition No., decided on 7-5-2010 REPRESENTED BY: S/Shri S. Venkateswaran , with T.N. Subramanian, Sr. Counsels, i/b. S. Priya, for the Petitioner. S/Shri D.J. Khambatta, ASG, with Mandar Goswami and Vinod Joshi, Z.B. Kamdin with R.J. Cama i/b Mulla Mulla Craigie Blunt Caroe and P.S. Jetly, for the Respondent. [Judgment per : V.C. Daga, J.]. - The restricted challenges set up to the orders-in-original in Writ Petition Nos. 952/2006 and 2259/2007 are dated 13th June, 2005; whereas in other petitions they are dated 20th June, 2005. The orders in appeal in all these petitions are dated 16th November, 2005. The facts involved in these petitions are more or less common and issues involve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e exporter was to be noted at the relevant port/destination of the exported textiles. These were noted to ensure that the exporting country abides by the quantitative restrains as per the bilateral agreements entered into between the countries. Once quota levels are reached, no further export was allowed. Due to the quota restrictions the quotas are distributed among exporters in such a manner so as to maximise foreign exchange earnings of the country. Those exporters, who had obtained quotas but failed to export were required to compensate the exchequer for loss of foreign exchange, accordingly, Texprocil tallied from time to time the statements received from the destination countries to ensure that the allotted quotas had been exported. The ex porters were also required to furnish to Texprocil proof of shipment and realisation of export proceeds. Accordingly, the aforesaid procedure was being followed for several years. The Texprocil was used to receive what was known in the trade as "Namesake Statements" from the US authorities containing details of shipments cleared by them. 5. The petitioners had been exporting their goods under the Quota Policy 2000-04 and had been allotted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . In view of the aforesaid lapses noticed by the respondents, the petitioners, vide order dated 23rd November, 2004, were temporarily debarred from making any further exports pending detailed investigations in the matter. Show cause notices were issued to the petitioners wherein the full details were pro vided and they were called upon to submit their explanation and/or documentary evidence in support of their stand. The petitioners were asked to appear at the personal hearing. The petitioners in reply to the show cause notices maintained that they had done no wrong and reserved their right to prove the same. 9. The petitioners also denied allegations of fraud and forgery. In the course of investigation and hearing, a letter dated 20th December, 2004 was received from the Bombay Mercantile Bank alleging serious nature of fraud perpetuated by the petitioners alleging that number of endorsements were forged and the bank release certificates (BRCs) were never issued by the Bank. 10. The petitioners, representative, according to the respondents, during the course of hearing admitted that there were possibilities that the goods of other exporters had been cleared under the concerned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs to the extent they impose a penalty, compensation and make recommendations to the Director General of Foreign Trade (DGFT), inter alia, to cancel the Import Export Code (IEC) Number granted to the petitioners, is clearly ultra vires the powers conferred upon respondent No. 1, under the Quota Policy. 17. Mr. Venkateswaran further urged that the Quota Policy in para 17(v) only envisaged debarment from obtaining entitlements under the policy and participating in the Export Entitlement Distribution for a specified period and made no provision for the imposition of financial penalty, let alone the imposition/demand for compensation and the illegal and arbitrary recommendations of the nature made therein. According to him, as per the WTO agreement on Textiles and Clothing (ATC), the textile quota regime has been completely abolished with effect from 1st January, 2005. India has been implementing the provisions of the WTO agreement on clothing and textiles by means of the quota policy notified by the notification dated 12th November, 1999, the substantive provisions of which policy and notification was co-terminus with the end of the quota regime. He, thus, submits that the impugned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s urged that first and foremost the amount set out in the order al though labelled as 'compensation', was, in fact, in the nature of 'penalty' for the unlawful gain procured by the petitioners and the loss of foreign exchange caused to the State exchequer. That the power to impose penalty rests squarely with the respondent No. 1 and was rightly imposed on the petitioners. He would further submit that as a statute or rules framed thereunder, the Quota Policy conferred a substantive powers upon an authority, all incidental and ancillary powers necessary for giving effect to the said substantive powers must be inferred and are deemed to implicitly be vested in the concerned authority. According to him, the respondent No. 1 was authorized to deal with quota maipractices and violations of the Quota Policy and had power to take all necessary steps to en sure that the non-compliant parties like petitioners herein were suitably punished for the gross malpractice and fraud committed by them and to pass necessary directions to ensure that the State exchequer was suitably compensated for the loss caused to it on account of the violation committed by the petitioners. 21. Mr. Khambatta submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . He placed reliance on the judgment of the Apex Court in the case of A.R. Antulay v. Ramdas Sriniwas Na yak, (1984) 2 SCC 500; wherein the Apex Court was pleased to hold as under: "……nor does any canon of construction permit the court to read the section in such manner as to render it to some extent otiose." 24. Mr. Khambatta further submits that the well established principle of law laid down by the Supreme Court on several occasions that, where a statute or rules framed thereunder (as in the case of the instant Quota Policy) confers a substantive power upon a judicial authority, all the incidental and ancillary powers necessary for giving effect to the said substantive power must be inferred and treated to be implicitly vested in the judicial authority. In support of his sub mission he placed reliance on the judgments of the Apex Court (i) I.T.O. v. M.K.Mohammed Kuni, (1969) 2 SCR 65; (ii) Chief Executive Officer and Vice Chairman, Gujarat Maritime Board v. Haji Daud Haji Harun Abu Ors., (1996) 11 SCC 23; and (iii) Jamal Uddin Ahmad v. Abu Sale Najmuddin Anr, AIR 2003 SC 1917. 25. Mr. Khambatta further submits that in the instant case the Quota Policy read with provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... posed may be imposed made as f the above Not had been in force." (Emphasis supplied) 28. Mr. Khambatta submits that the aforesaid notification dated 9th November, 2004 is a subordinate legislation issued by the Central Government in exercise of the powers expressly conferred in the Central Government under Section 3 of the Foreign Trade (D R) Act. He, thus, urged that it being a policy decision the court ought not to interfere with bona fide policy decision made by the Central Government. He further submits that merely because the act constituting the offence occurred prior to the issuance of the notification dated 9th November, 2004, the same in no manner implies that the imposition of a penalty under the said notification constitutes giving retrospective operation to the provisions of the said notification. According to him, it is not retrospective but it gives powers to punish, if punishment is to be imposed during the subsistence of the notification. In support of his submission he relied upon judgment of the Supreme Court in Rafiquennessa v. Lal Bahadur Chetri, (1964) 6 SCR 876 as also judgment of this Court in Bharat Put rohit Mithaiwala v. Union of India, AIR 2005 Bom. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the genuine quota holders, who, actually suffered a loss by reason of the petitioners fraud. 31. Mr. Khambatta having made his submissions or the aforesaid counts switched on to the provisions of the Foreign Trade (D R) Act and relying upon Sections 3, 5, 7, 8, 11, 13 and 15 thereof went on to urge that upon con joint reading of the said provisions it is evident that if a person violates any of the provisions of the Act and/or any rules and orders made thereunder, then such person is liable for punishment by way of imposition of a penalty. The said penalty may be imposed by the Director General or by such officer as the Central Government may by notification authorize in that behalf. According to him, the expression "officer" could logically include a Committee of officers such as respondent No. 1. 32. While summarising, Mr. Khambatta reiterated that notification dated 12th November, W99 confers an express power on respondent No. 1 to deal with any offences/violations of the Quota Policy, and to take necessary steps for punishing the said offenders and such a power is implicitly vested in respondent No. 1. In the alternative, he submits that at any rate the second notific ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the surety accordingly as Principal Debtor in all respects." 34. Based on the aforesaid text of the bank guarantee, Mr. Khambatta urged that so far as compensation directed in the impugned orders are concerned, the same can be justified on the basis of the terms of the bank guarantee. In addition to this submission he also urged that the bank guarantee was in the nature of EMD amount as such the order against the petitioners can very well be justified on the terms and conditions of the bank guarantee notwithstanding the fact that the impugned orders imposing liability by way of compensation/penalty exists more than the amount of bank guarantee. In his submission, balance amount can always be recovered by way of arrears of land revenue. 35. Mr. Venkateswaran, learned senior counsel appearing for the petitioners, in rejoinder, submits that the notification referred to as dated 9th Noember, 2004, under para-II(vi)(2), does not entitle any punishment to be imposed, for, it simply says: "any such proceeding or remedy may be instituted, continued or enforced and any such penalty, confiscation or punishment imposed or may be imposed or made as if the above Notification as boon in forc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity in original) or in appeal before the Enforcement Appellate Committee (authority in appeal). 40. If one turns to the specimen show cause notice issued to the petitioners, the relevant para of the notice reads as under: "In case the required satisfactory explanations and/or documentary evidences are not submitted by the party by 27th December 2004, please in form why action against the party should not be initiated in terms of Textile Export Entitlement Policy (2000-2004) as detailed at para 17 of Notification No. 1/129/99 Exports-1 dated 12-11-1999 and subsequent amendments made from time to time by Ministry of Textiles, Government of India and P 10 of the Guidelines of Textile Export Entitlement (Quota) Policy 2003-2004 issued by the Cotton Textiles Export Promotion Council. In case the said party fails to respond by 27th December 2004 and/or do not provide explanations and/or documentary evidences to the satisfaction of Quota Administering Authority the matter will be referred to the Enforcement Committee under the Chairmanship of The Textile Commissioner Mumbai to take a final view in the matter. The action will be taken against the said company under the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the decision impugned in the petition, operative part of the impugned order reads as under: "X. Decisions The evidence available before the Committee establish the grave offense covered under Para 17(ii)a, b and c of Notification No. 1/129/99 Exports I dated 12-11-1999 amended from time to time and Para 11(1 )(b) of Notification No. 1/61/2004 Exports I dated 9-11-2004, beyond any doubts. In view of the gravity of the offense, the Committee vested with powers under Para 17 of the Notification No. 1/129/99 Exports I dated 12-11-1999, amended from time to time, by the Government of India, in conjunction with Para 11(1)(b) of Notification No. 1/61/2004 Exports I dated 9-11-2004 hereby decides to (a) Confirm the Temporary Debarment Order No. TEXPROCIL/ EC/2004/1 dated 23-11-2004 issued by the Executive Director of the Cotton Textiles Export Promotion Council under Para 17(vi) of Notification No. 1/129/99 Exports I dated 12-11-1999, amended from time to time by the Government and debars the exporter from exporting textile products viz yarns, fabrics, and made-ups to the erstwhile "Quota Countries" viz Canada, European Union and USA for a period of three years from the date of T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usly, read the Order-in-original passed by respondent No. 1 and confirmed by respondent No. 2 incorporated in para-X(a) of the impugned order, reproduced hereinabove, debarring the petitioners from exporting textile products for a period of three years can be justified on the basis of text of sub-clause (v) of clause-17 of the notification. 43. So far as demand for compensation and imposition of penalty in corporated in para-X(b) of the impugned order and further directions to the petitioners to deposit the amount commensurate with the amount of the EMD are concerned, the same sought to be justified on the basis of the text of the Quota Policy notification dated 12th March, 1999 followed by another notification dated 9th November, 2004. But, if one turns to the show cause notices, there is absolutely no reference to the notification dated 9th November, 2004 or any indication indicating exercise of power flowing from clause-II(vi)(2) of the said notification is being involved. Though in the Order-in-original passed by respondent No. 1 a reference to the notification and powers flowing from para-II(1)(b) of the notification dated 9th November, 2004 As to be found. But so far as par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts and omissions alleged against the petitioners were not forming part of the earlier show cause notices like one dated 20th December, 2004 issued to M/s. Minar Exports, the adjudication of which is still pending. 47. In the aforesaid view of the matter, the impugned orders are liable to be quashed and set aside and all these matters are liable to be remanded back to the authority-in-original i.e. respondent No. 1 for consideration afresh restricted to the question as to whether or not payment of compensation can be ordered, penalties can be levied and directions to the petitioners to deposit various amounts with further recommendation to the DGFT to suspend IEC number could be issued by the authority-in-original, respondent No. 1. 48. We make it clear that the remanded proceedings can be heard afresh. The show cause notice dated 20th December, 2004 or such similar show cause notices in other petitions followed by another show cause notice dated 11th January, 2010, if found to be issued in other petitions, can be proceeded with simultaneously by the authority competent to adjudicate upon the same following principles of natural justice. Needless to mention that considering th ..... 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