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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: K. RAMASWAMY, FAIZAN UDDIN, G.B. PATTANAIK

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 service.  For the year 1994- 95, export policy for the readymade garments was notified in notification No.1  1-29-93 dated  September 4,  1993.    The policy classified  allotment under  heads, namely  (a)  Past Performance  Entitlement   (for  short,   ’PPE’);  and   (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 world 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announcing total change in the garment quota policy,  the allotment  for MEE  and NQE  system  were thereby totally  withdrawn under  the new  policy.   The new policy  envisages   only  two   methods,  namely,  (i)  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

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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 GAAT  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  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 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 the power?  The power to lay policy by executive decision or

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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 decide 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 was 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.