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PETITIONER: P.T.R. EXPORTS (MADRAS)PVT. LTD. & ORS.

       Vs.

RESPONDENT: THE UNION OF INDIA & ORS.

DATE OF JUDGMENT:       09/05/1996

BENCH: RAMASWAMY, K. BENCH: RAMASWAMY, K. FAIZAN UDDIN (J) G.B. PATTANAIK (J)

CITATION:  JT 1996 (6)   435        1996 SCALE  (5)362

ACT:

HEADNOTE:

JUDGMENT:                          O R D E R      These special  leave petitions  arise from the judgment and order  of the  Division Bench  of the Madras. High Court dated March  7, 1996  made in  writ petition  Nos.17490 and, batch and  147/96 and batch. The admitted facts are that the petitioners are  exporters of  readymade garments  to divers countries. The  export and  import is  governed  by  Foreign Trade Development  Regulations Act,  1992. The Government of India, Ministry  of  Commerce  evolved  1992-93  Export  and Import Policy  declaring that  the export  policy to augment productivity,  modernization   and  competitiveness  of  the Indian agriculture industry and services. For the year 1994- 95, export policy for the readymade garments was notified in notification No.1-29-93  dated September 4, 1993. The policy classified  allotment   under  heads,   namely,   (a)   Past Performance Entitlement  (for short,’PPE’); (b) Manufacturer Export  Entitlement  for  short,’MEE’);  and  (c)  Non-quota Exporters Entitlement  (for short, ’NQE’). The Uruguay round of negotiations  of the  GATT received final approval of the negotiations incorporating  separate agreements  to  diverse sectors including  the  Textile  and  Clothing  sector.  The latter is  known as  the Agreement  on Textile  and Clothing (ATC). Thereunder,  the Government  of  India  committed  to phase-out incentives  or quota by December, 2004 and planned to introduce  changes in  quota also  w.e.f January 1, 2005. The goal  thereby sought to be achieved is that an exporter, whether in  India or  abroad, would  export garments  to any other part  of the  would without any quota restrictions for providing  right   environment  for   textile  and  clothing exporters to be ready to achieve the goal. Consequently, new export policy  from ATC  w.e.f January 1,1996 was introduced withdrawing the previous policy referred to hereinbefore. It was initially notified on November 28, 1995 announcing total change in  the garment  quota policy,  the allotment for MEE and NQE  system were thereby totally withdrawn under the new

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policy. The  new policy  envisages only two methods, namely, Past Performance Entitlement (PPE) 80%, and (ii) First Come, First Serve (FCFS) 20%. The petitioners have challenged this change in  the policy in the High Court on three grounds one of which  is promissory  estoppel on legitimate expectation. The High  Court in  the impugned  judgment negatived all the three contentions. Thus, these special leave petitions.      Shri Vaidyanathan,  learned counsel, contended that the Government had  promised to  grant MEE  and NQE  quotas  for those who  upto date their quality of products by purchasing new machines  after expiry  of 5  years life  span or  given promise that  all those who performed their applications MEE were  entitled   to  NQE  quota  and  that,  therefore,  the respondents are  estopped to recile from the promise made to them.  They  cannot  act  in  a  way  detrimental  to  their legitimate expectations. We find no force in the contention. It is  seen that  the change in the policy is as a result of GATT agreement  with all  contracting countries.  The  quota system was  available to  export garments  and  clothing  to European countries,  viz., U.S.A,  Canada, Norway  etc.  The Government took  the policy  that with  a view  to meet more competitive quality  in the  foreign markets introduced FCFS system giving  20% of  the export. PPE was provided with 80% of the export. The new dynamism in the policy would make the trade more  competitive and  it will be in the best interest of the  country and  to boost  in  export  potentiality  and foreign exchange, on account thereof MEE and NQE quotas were eliminated and large allocation was issued to PPE system and rest of  20% was marked for FCFS system. It was also pointed that the  Government encountered  that MEE  system was beset with floods of false declarations of the productive capacity by unscrupulous  traders masquerading  as exporters.  Though action was  being taken  against persons who committed fraud but it became difficult to stop misutilisation of the scheme completely. Consequently,  MEE system was eliminated. Though incentives were  provided under  NQE system,  the growth  of non-quota exports  was not  commensurate with the quantum of quota allocated to the scheme to encourage such exports. The idea of  permitting quotas obtained as incentives to be sold at premium is to cross-subsidy the non-quota export and thus to lower  the actual  selling  price  of  the  item,  as  an indirect subsidisation to the NQE exporters. But the foreign buyers indirectly  are constrained to bear the subsidy. With the potential  development of  the developed  and developing countries in  the international garment and clothing market, the foreign  buyers preferred  other countries,  instead  of purchasing from  the Indian  exporters to  bear the indirect subsidy.  Resultantly,   export  of  clothing  has  severely suffered at the 1994 end onwards. The Government, therefore, took policy  to abolish NQE system so that the genuine quota exporters could  do business so as to stop the malady and to preserve PPE and FCFS system.      In the  light of  the  above  policy  question  emerges whether the  Government is  bound by  the previous policy or whether it  can revise  its policy  in view  of the  changed potential foreign  markets and  the need for earning foreign exchange? It  is true  that in  a given,  set of  facts, the Government may  in the  appropriate case  be  bound  by  the doctrine of  promissory estoppel  evolved in  Union of India Vs.  Indo-Afghan  Agencies  [(1968)  2  SCR  366].  But  the question revolves upon the validity of the withdrawal of the previous policy  and introduction  of the  new  policy.  The doctrine of  legitimate expectations  again requires  to  be angulated thus:  whether it  was revised  by a policy in the public interest  or the  decision is based upon any abuse of

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the power?  The power to lay policy by executive decision or by legislation includes power to withdraw the same unless in the former  case, it is by malafide exercise of power or the decision or  action taken is in abuse of power. The doctrine of legitimate expectation plays no role when the appropriate authority is  empowered to  take a  decision by an executive policy or  under law.  The Court  leaves  the  authority  to decided its  full range  of choice  within the  executive or legislative power.  In matters  of economic  policy, it is a settled law  that the  Court gives  the large  leeway to the executive and  the legislature. Granting licences for import or export  is by executive or legislative policy. Government would take  diverse factors  for formulating  the policy for import or  export of  the goods  granting relatively greater priorities to  various items  in the overall larger interest of the  economy of the country. It is therefore, by exercise of the  power given  to the executive or as the case may be, the legislature is at liberty to evolve such policies.      An applicant  has no  vested right  to have  export  or import licences  in terms  of the  policies in  force at the date  of   his  making  application.  For  obvious  reasons, granting of  licences depends  upon the policy prevailing on the date  of  the  grant  of  the  licence  or  permit.  The authority concerned  may be in a better position to have the overall picture of diverse factors to grant permit or refuse to grant permission to import or export goods. The decision, therefore, would be taken from diverse economic perspectives which the executive is in a better informed position unless, as we have stated earlier, the refusal is mala fide or is an abuse of the power in which event it is for the applicant to plead and  prove to  the satisfaction  of the Court that the refusal was vitiated by the above factors.      It would,  therefore, be  clear that  grant of  licence depends upon  the policy  prevailing as  on the  date of the grant of  the licence.  The Court,  therefore would not bind the Government  with a policy which was existing on the date of application  as per  previous policy.  A  prior  decision would not  bind the  Government for  all times to come. When the Government  are satisfied  that change  in the policy as necessary in  the public  interest, it  would be entitled to revise the  policy  and  lay  down  new  policy.  The  Court therefore would  prefer to allow free play to the Government to evolve  fiscal policy  in the  public interest and to act upon the  same. Equally,  the Government  is  left  free  to determine  priorities  in  the  matters  of  allocations  or allotments or  utilisation of  its finances  in  the  public interest. It  is equally  entitled, therefore,.  to issue or withdraw or modify the export or import policy in accordance with the  scheme  evolved.  We,  therefore,  hold  that  the petitioners have no vested or accrued right for the issuance of permits on the MEE or NQE, nor the Government is bound by its previous  policy. It  would be open to the Government to evolve the  new schemes  and the petitioners would get their legitimate  expectations  accomplished  in  accordance  with either of  the two  schemes subject  to their satisfying the conditions required in the scheme. The High Court therefore; was right  in its  conclusion that  the Government  are  not barred by  the  promises  or  legitimate  expectations  from evolving new policy in the impugned notification.      The special leave petitions are accordingly dismissed.