Kavita Exports Private Limited vs Union of India

The petitioners by this petition claim re-validation of their two REP Licences copies whereof are annexed at Exhibits ''A'' and ''B'' to the Petition. In the alternative, they pray for issue of two fresh Licences.

The Petitioners are exporters of stainless steel castings. On the 19th of March 1984 the Petitioners were issued two REP Licences copies whereof are annexed at Exhibits ''A'' and ''B'' to the Petition. They were valid for a period of 12 months with an additional grace period of two months, for imports of stainless steel melting scrap. Under these licences the petitioners were to open Letters of Credit by 31st of March 1985 and effect shipment on or before 31st of May 1985. The foreign suppliers Messrs. Donarson Ltd., issued their Proforma Invoice dated 3rd December 1984 whereunder the shipment was to be effected between January and March 1985. On the 11th of December, 1984, the Petitioners applied for an irrevocable Letter of Credit in favour of their foreign suppliers through Laxmi Commercial Bank Ltd. On the 13th of December 1984 an irrevocable Letter of Credit was accordingly opened. The petitioners, however, on the 19th of March, 1985, received a Telex message from their foreign suppliers that the Letter of Credit was required to be amended i.e., the country of origin which was mentioned as U.S.A. was required to be amended as U.K. The shipment could not be effected by March 1985 on account of the aforesaid requirement of the amendment. After the said amendment was carried out, a fresh Proforma Invoice was issued whereunder the shipment was to be effected within the grace period of two months i.e. by May 1985. On the 16th of May 1985, the Petitioners received Telex messages from Laxmi Commercial Bank Ltd., informing them that the Reserve Bank Of India had granted it moratorium from 27th April, 1985 to 23rd August 1985 and the Petitioners should not negotiate any documents under the Letter Of Credit as the Bank would not be able to honour the same. On the 29th of May 1985, the Petitioners requested the Joint Chief Controller of Imports and Exports, the 2nd Respondent herein to re-validate the licences, and by his order dated 21st of June 1985, the request was rejected on the ground that there was no provision in the existing Policy to re-validate the licences of Merchant Exporters. The Petitioners, on the 19th of July 1985 renewed their request but the same was once again rejected by the 2nd Respondent by his order dated 5th August 1985. On the 2nd September 1985 the Petitioners preferred an Appeal to the Joint Chief Controller of Imports and Exports, the 3rd Respondent herein, and by order dated 18th of March 1986, the Appeal was dismissed and the Petitioner were informed that the decision of the 2nd Respondent cannot be altered for the reason that there is no provision for re-validation of the licences in the existing Import policy. On the 12th of February 1986, Canara Bank informed the Petitioners that it had taken over the Laxmi Commercial Bank Ltd., On the 23rd of December 1985, the Petitioners requested Ministry of commerce, New Delhi, to re-validate their licences but that requested was rejected by the Controller of Imports and Exports, Ministry of Commerce, New Delhi, by his letter dated 28th January 1986. On the 7th of April, 1986, the Petitioners moved a Review Application but the same was rejected by the Order dated 19th of May, 1987 passed by the 1st Respondent. The Petitioners, thus, being dissatisfied with the decisions of the Respondents, were constrained to file the present petition.

Mr. Bulchandani, learned counsel appearing on behalf of the Petitioners, submitted that the Department has seriously erred in taking the view that it had no power to re-validate the licences under the existing Import and Export Policy. It is in the case of the Respondents that the Petitioners'' claim for re-validation would be governed by the Import and Export Policy for April 1985-March 1988. Mr. Bulchandani, by placing reliance on clauses 63, 72, 73, 74 and 80 of the said Policy, contended that such a power was specifically conferred upon the Department.

Clause 63 provides that the Import-Export Policy sets down the periods of validity applicable to the different categories of licences granted thereunder. It further provides that unless otherwise provided the validity period of an import licence will be 18 months. Clause 72 provides that no grace period for shipment of goods over and above the validity period prescribed will be admissible. Clause 73 provides that no revalidation of import licences or emergency licences or CCP will be allowed. However, in case capital goods licence could not be utilised within the validity period, requests for extension of the period of shipment upto a maximum period of 12 months beyond the period set down in the licence, may be considered, on merits, by the licensing authority having regard to the period of delivery of the Capital Goods as contracted for by the overseas suppliers in the case of licences issued against tied credits or aids however, the terminal date will be kept in view while considering such requests for revalidation. The aforesaid clause would itself indicate that though under Clause 72, it is provided that no grace period for shipment for goods will be admissible, that provision is not a rigid embargo. Clause 74 clarifies that the period of validity means the period of shipment/dispatch permissible for the goods concerned. Clause 80, on which Mr. Bulchandani placed emphasis, reads as under :-

"80. On certain occasions such as dockyard strike in the country of shipment when the importers faced genuine difficulties and the goods cannot be shipped on time, the CCI and E may, by a general authorisation extend the period of validity of any licence on an ad-hoc basis for a specific period. Such extension, were granted, will not be available for opening any letter of credit or placing orders for the supply of goods during such extension".

Placing reliance upon the aforesaid clause, Mr. Bulchandani submitted that the power to extend the period of validity was not confined in any case of Dockyard strike alone. The instance of Dockyard strike is by way of an illustration is not exhaustive especially because "the Dockyard strike" is preceded by the words "such as". He pointed out that the Petitioners had applied for an irrevocable Letter of Credit well within time and such a Letter of Credit was duly opened also well within time. It was on account of the foreign suppliers requiring the Petitioners to change the country of origin from U.S.A to U.K. that a fresh Letter of Credit was required to be opened, and this was also done well within time and under the amended Letter of Credit the shipment was to be effected within the grace period i.e. by the end of May 1985. It was only on the 16th of May 1985 that the Petitioners were informed that their Laxmi Commercial Bank Ltd. had being granted moratorium from 27th April 1985 to 23rd August, 1985. Surely, the Petitioners were not responsible for this development. Consequently, the Petitioners were required to request the Respondents to revalidate their licences. Consequently they also required the extension of time to open fresh Letter of Credit in favour of their foreign suppliers.

4A. In my judgment, the view taken by the Respondents is clearly erroneous, in view of the aforesaid clauses found in the Hand Book of Import & Export Policy for April 1985-March 1988. If one peruses the Import & Export Policy April 1985-March 1988, it would be clear that under Clause 37, there is a clear power conferred for relaxation of the policy. Clause 37 provides :

"Cases for relaxation of the existing policy/procedure where it creates genuine hardship or where a strict application of the existing policy is likely to affect exports adversely, may be considered by the Government or by any other person authorised on this behalf."

In my view, the aforesaid clause would clearly come into play in the facts and circumstances of this case. The Respondents have denied the Petitioners'' prayer only on the ground that there is no power. No other reason has being assigned for refusing to grant the Petitioners'' prayer. Since I am of the view that the power to revalidate does exist, I see no reason why the prayers contained in the Petition should not be granted.

In the result, the Petition succeeds. The 2nd Respondent is directed to revalidate the two Replenishment Licences for a period of six months from the date of the intimation of the revalidation on the Petitioners. The Petitioners would consequently be entitled to open fresh irrevocable Letters of Credit in favour of their foreign suppliers. Rule made absolute in the aforesaid terms. In the facts and circumstances of the case, there will be no order as to costs.