Court Invalidates Office Memo & Circular; Upholds Export License Notification. Export Restrictions Must Follow Legal Procedures.

The court quashed the office memorandum/press release and policy circular as they were not issued in accordance with the law. However, the notification allowing export under a license from a certain date was upheld. Petitioners not granted EARC were directed to seek licenses for export, dismissing their claim for vested rights. The court emphasized the need for legal procedures to be followed in imposing export restrictions under the relevant act.

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Issues Involved:

1. Validity of the office memorandum/press release dated 1-12-2010.
2. Validity of the notification dated 22-12-2010 issued under Section 5 of the Foreign Trade (Development and Regulation) Act, 1992.
3. Validity of the policy circular dated 22-12-2010 issued by the Director General of Foreign Trade (DGFT).
4. Whether the policy decision to ban export of cotton yarn beyond 720 million kgs. during 2010-2011 (upto 31-3-2011) was justified.
5. Whether the policy decision was imposed in the manner provided under the 1992 Act.
6. Whether the retrospective application of the notification dated 22-12-2010 was valid.
7. Whether the petitioners, who applied for on-line registration on or before 1-12-2010, had a vested right to export cotton yarn.

Detailed Analysis:

1. Validity of the Office Memorandum/Press Release dated 1-12-2010:

The petitioners challenged the office memorandum/press release dated 1-12-2010, which abruptly stopped the registration of cotton yarn exports beyond 720 million kgs. The court noted that this memorandum/press release was neither an order under Section 3(2) nor a notification under Section 5 of the 1992 Act and was not published in the Official Gazette. Therefore, it lacked legal force and the ban imposed under it could not be considered lawful.

2. Validity of the Notification dated 22-12-2010 Issued Under Section 5 of the 1992 Act:

The notification dated 22-12-2010 amended the earlier notification to permit the export of cotton yarn under a license instead of EARC, effective from 1-12-2010. The court examined whether this notification could be applied retrospectively. It was held that notifications under Section 5 of the 1992 Act cannot have retrospective effect, as established by the Supreme Court in the case of Asian Food Industries. However, the notification did not disturb the vested rights of exporters who had obtained EARC on or before 1-12-2010, allowing them to export within the quantity limit specified in their EARC.

3. Validity of the Policy Circular dated 22-12-2010 Issued by the DGFT:

The policy circular dated 22-12-2010, issued by the Jt. DGFT with the approval of the DGFT, imposed a ceiling on the export of cotton yarn at 720 million kgs. The court found that the policy circular was not published in the Official Gazette and was not an order/notification issued by the Central Government under the 1992 Act. Therefore, it lacked the force of law and was quashed.

4. Justification of the Policy Decision to Ban Export of Cotton Yarn Beyond 720 Million Kgs. During 2010-2011 (Upto 31-3-2011):

The court acknowledged the Central Government's power to impose such a ban if the situation demanded it. The decision was based on the recommendations of the Cotton Yarn Advisory Board (CYAB), which had considered the total production, domestic requirement, and export situation. The court held that public interest must outweigh individual interest, and the policy decision to ban export beyond 720 million kgs. was justified.

5. Imposition of the Policy Decision in the Manner Provided Under the 1992 Act:

The court emphasized that any restriction on export must be imposed in the manner specified under the 1992 Act, i.e., by an order under Section 3(2) or a notification under Section 5, both of which must be published in the Official Gazette. The office memorandum/press release dated 1-12-2010 and the policy circular dated 22-12-2010 did not meet these requirements and were therefore invalid.

6. Retrospective Application of the Notification dated 22-12-2010:

The court reiterated that notifications under Section 5 of the 1992 Act cannot have retrospective effect. The notification dated 22-12-2010, which was made effective from 1-12-2010, could not retrospectively take away the vested rights of exporters who had obtained EARC on or before 1-12-2010. However, since no EARC had been issued from 1-12-2010, the question of directing the respondents to issue EARC till 22-12-2010 did not arise.

7. Vested Right of Petitioners Who Applied for On-line Registration on or Before 1-12-2010:

The court held that the petitioners who applied for on-line registration on or before 1-12-2010 could not claim to be EARC holders because their applications had not been granted. They were entitled to apply for a license, which would be considered and granted in accordance with the law.

Conclusion:

The office memorandum/press release dated 1-12-2010 and the policy circular dated 22-12-2010 were quashed and set aside as they were not issued in accordance with the provisions of the 1992 Act. The notification dated 22-12-2010 was upheld, and the petitioners who had not been granted EARC were directed to seek licenses for export. The court dismissed the application for a stay of the operation of this order.

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