AI Champdany Industries Limited and Others vs Union of India and Others

Samapti Chatterjee, J.

Nature of the business of the petitioner No. 1 is to deal with process, manufacture, sell and export of different jute products.

Petitioner No. 2 is one of the directors of the petitioner No. 1.

Case of the petitioner in brief is as follows :--

"Central Government, respondent No. 1, with effect from 8th February, 1998 introduced External Market Assistance Scheme (hereinafter referred to as the ''EMA Scheme'') with the intention to promote export of jute products from India to various countries. The said ''EMA Scheme'' right from its inception was extended from time to time and also modified and was valid till 31st March, 2007."

"Food Grade Jute Products" enjoyed 5 per cent rate of EMA with effect from 1st April, 2005 till 31st March, 2007 of FOB value realisation. Inclusion of Food grade Jute Products under the ''EMA Scheme has been made with effect from 14th September, 1998 by virtue of a notification issued by the respondent No. 1 vide letter dated 25th September, 1998 addressed to the respondent No. 2. The Central Government imposed some terms and conditions on which grant of External Market Assistance on export of Food Grade Jute Bags were stipulated. Clause VI and Clause VII of the said terms are quoted below:--

"Clause vi) Pre-shipment inspection certificate will be signed by duly constituted authority of IJIRA and/or their licensee for the purpose.

Clause viii) None of the above conditions will preclude the office of the Jute Commissioner and/or JMDC to ask for any other documents and/or take all such necessary steps including inspection to satisfy themselves about the products and facilities procession of claims."

Pursuant to the said terms and conditions the exporters in order to claim the ''EMA Scheme'' would have to submit pre-shipment certificates to the respondent No. 2 along with relevant document as required. Such pre-shipment certificates ought to be signed by duly constituted authority of the respondent No. 3 and/or their licensee for the said purpose.

On the basis of such "EMA Scheme the petitioners submitted its claim with the respondent No. 2 and the goods which were manufactured and exported by the petitioner were inspected either by the respondent No. 4 or by the respondent No. 3, IJIRA as per decision dated 3rd December, 1999. After inspection of the products made by the respondent No. 4, SGS payment was also received by the petitioner No. 1 in respect of such claim which would be reflected from Annexure P6 Page 73 of the writ petition. All on a sudden vide letter dated 12th December, 2007 issued by the Central Government to the respondent No. 2 it was inter alia indicated that Food Grade Jute Products Certificate issued by respondent No. 4, SGS does not follow the procedure laid down in the ''EMA Scheme, therefore, the claim made on the basis of the certificate issued by respondent No. 4, SGS would not be entertained. Relevant extract of the letter dated 12th December, 2007 is quoted below :

"Sub Clause (b) of Clause 1: The above procedure of EMA scheme stated to have been approved by the Ministry is actually the Para-7 (under Product Certification Scheme) of the minutes of the meeting held on 19.09.1998, which was attended JS and JC amongst other. The same has been approved in the File as well. The Ministry''s approval dated 25.09.1998 mentions at Clause-vi, ''Pre-shipment Inspection Certificate will be signed by duly constituted authority of IJIRA and/or their licensee for the purpose.'' However the procedure stipulated in para (a) was being followed by JMDC, IJIRA as well as SGS initially.

(d) Since the procedure for approval of EMA cases was decided by the Government, JMDC was not competent to change the same without the approval of the Ministry. It is now revealed that neither SGS nor IJIRA has not amended the MoU nor monitored the certification by SGS so much so that they have not even bothered to raise bills on SGS for their part of facilitation charges of 10% on the business executed by SGS. SGS also failed to inform UJIRA about the Certificates issued by it.

(g) Therefore, the certificates so issued by SGS can be termed as those issued under clause 11 of MOU-i.e., for their own contractual obligations and NOT for the purpose of claiming EMA. SGS certificates therefore do not confirm to the MOU as well as the prescribed procedure for claim of EMA.

Sub Clause (2) Even in respect of the certificates issued by IJIRA, it has been reported that IJIRA seems to have issued product certificates even to mills that did not have any process Capability Certificate. Process Capability is a mandatory requirement in order to be able to produce the FGJB, (And it is a procedural requirement for EMA claim as well). Thus even in case of IJIRA certificates, cases where the Mills did not have proper process capability certificate, the claim is required to be rejected.

Para-2: In view of above, it has been decided that it would be appropriate that the cases involving certification during invalid process capability certificate/license period either by IJIRA or SGS should directly be rejected. Simultaneously, where only SGS certification is the base, the same should also not be entertained.

Para-3- It is further observed that there are some cases in which testing and certification was done without prior knowledge/information to the effect of its use for EMA claims. These instances also reflect the deceptive motives and accordingly, should not be considered.

Para-4- It is a matter of great concern and grave consequences to record that there have been instances since 1998-99 where EMA claims have been disbursed based on certification from SGS only. These cases tantamount to appropriation, which is extra legal, and is not by due procedure as prescribed. There is a necessity to look into these cases from recovery point of view separately."

The application form prescribed by the respondent No. 2 for claiming ''EMA inter alia provides under Sub Clause E of Clause 2 that EMA application should accompany the certificate issued by "IJIRA/SGS" in case of export of Food Grade Jute Products.

Mr. Joydip Kar, learned Senior counsel appearing for the petitioner contended that the decision taken by the impugned order dated 12th December, 2007 is contrary to the decision of the respondent No. 2 taken on 3rd December, 1999 whereby the respondent No. 4, SGS was recognised as the authorised service provider of the respondent No. 3, IJIRA and the respondent No. 4, SGS has the authority to test and certify the Food Grade Jute Products manufactured and exported from India as per the terms and conditions of memorandum of understanding.

Mr. Kar further contended that the claims raised by the petitioner on the products manufactured and exported were inspected by the respondent No. 4/SGS and had also been allowed and payment was received by the petitioner No. 1 in respect of such claim. A chart showing the payment received by the petitioner in respect of EMA schemes for products inspected by respondent No. 4/SGS is given below:--

"SCHEDULE SHOWING PAYMENT RECEIVED BY AI CHAMPDANY INDUSTRIES LIMITED

Rupees SEVENTY EIGHT LAKHS SIXTY SEVEN THOUSAND SIX HUNDRED SEVENTY SEVEN ONLY."

Mr. Kar further strongly urged that pursuant to the impugned notice dated 12th December, 2007 the claims of the petitioner No. 1 amounting to Rs. 10.50 crores was rejected by giving effect to the impugned order with retrospective effect which is bad in law.

Mr. Kar further contended that it is a settled proposition of law that every government order/notification/circular would be given effect in a prospective manner and should not be given effect retrospectively, but the impugned order dated 12th December, 2007 was wrongly given retrospective effect instead of prospective effect which adversely affected the petitioner''s right already accrued in its favour in terms of the money paid by them.

Mr. Kar also urged that the petitioner had no knowledge that the claims made by the petitioner in terms of the procedure would be arbitrarily, whimsically rejected on the basis of of a subsequent notification giving retrospective effect. In support of his contention Mr. Kar relied on a Supreme Court decision reported in 1994 (1) SCC Page 437 Para-11 (Govind Prasad v. R.G. Prasad and Others) which is quoted below:

"Para-11-para 3 of the memorandum gives deeming effect-from July 1, 1978-to the provisions in paras 1 and 2 of the memorandum. It is settled law that an executive order of the Government cannot be made operative with retrospective effect. It is, this, clear that the memorandum contained various proposals which were to be incorporated in the statutory rules."

Mr. Kar further vehemently urged that the settled position of the terms of the procedure laid down by the respondent authority for claims was arbitrarily, erroneously, whimsically, altered without giving any opportunity of hearing to the petitioners who was the most affected person for this arbitrary alteration of the settled position by the impugned order dated 12th December, 2007.

Per contra Mr. Asis Mukherjee appeared for the Union of India contended that as long as IJIRA and SGS complied with the terms of the memorandum of understanding there was no problem and payment was released against valid FMA schemes for export of foodgrade jute products. Only when deviation from the memorandum of understanding dated 16th October, 1998 accrued, difficulties cropped up as SGS started unilaterally issuing certificates without involving IJIRA or even without informing IJIRA. Furthermore, IJIRA on its part also failed to keep track of the records and/or exercise control over issuance of certificates of SGS in contravention of the guidelines, as a result the Ministry of Textiles, Government of India considered the certificates issues by SGS as invalid for the purpose of EMA scheme (Page 4 of the affidavit-in-opposition on behalf of the respondent No. 2).

After considering the arguments advanced by the learned Advocates appearing for the respective parties and after meticulously perusing the records I find that after satisfying the requirements of condition (vi) of the said EMA scheme dated 25th December, 1998 the officials of IJIRA, respondent No. 3 signed the certificates and therefore, such certificates ought to have been accepted.

I also find that there is some substance in the argument of Mr. Kar that no government order, notification, circular could be issued with retrospective effect which would undo the acts already done. It is settled proposition of law that government circular, notification, order are issued with prospective effect unless there is special reason given for retrospective effect. But in the present case the notification dated 12th December, 2007 has been arbitrarily, erroneously, whimsically, given with retrospective effect by the authority without any valid reason therefor which cannot be accepted by a Court of law. In the present case in my considered view that the impugned action of the government is totally contrary to Articles 14, 16 and 19(I)(g) of the Constitution of India and is also very much against the principles of natural justice.

Therefore, in my considered view the justice would be sub-served if the Secretary, Ministry of Textiles and his delegate is directed to consider the petitioners'' claim in accordance with law and in the light of the observations made in this judgment after giving an opportunity of hearing to the petitioners within eight weeks from the date of communication of this order and also communicate the decision of the hearing to the petitioner within two weeks thereafter.

Therefore, the Secretary, Ministry of Textiles and his delegate is hereby directed to consider the petitioners'' claim in accordance with law and also in the light of the observation made in this judgment after giving an opportunity of hearing to the petitioners within eight weeks from the date of communication of the order and thereafter communicate the decision of the hearing within two weeks.

The official should also consider the interest claimed by the petitioners. If any amount is found payable to the petitioner the said sum may be forthwith disburse to the petitioners by the respondent authority.

with the above observations and directions the writ petition is disposed of without any order as to costs.

Urgent photostat certified copy if applied for, be supplied to the parties after fulfilling all the formalities.