2016 (10) TMI 754 - HC - Customs

Export Permission Denied: Court Upholds National Interest

The court dismissed the writ petition seeking permission to export crude oil, emphasizing that the right to export is subject to India achieving ... Permission to direct export or in the alternative permission/facilitation for canalised export - crude oil extracted from the Rajasthan Block RJ-0N-90/1 - maintainability of petition - contractual matters - Held that: - the present writ petition is maintainable as a writ court is empowered to entertain a writ petition even in contractual matters when the contract has been executed in pursuance to a constitutional provision and the issues involved are alleged to have a public law character. Merely because the product ‘crude oil’ is mentioned as STE and Export through Indian Oil Corporation Limited, it does not create a legal vested right in anyone to export crude oil. The said paragraph and Chapter provide that if STE itself wants to export/import, it can do so and if 'any other person' intends to import/export, it will have to apply to IOC, who will consider the same in its wisdom and after consulting anyone it deems appropriate. The ultimate decision to permit export/import is always a decision to be taken by the STE which is, of course, justiciable. Consequently, in the present case, it is for the IOC to allow or refuse permission for export on germane grounds - The other option to a party wanting to export crude oil is to apply under para 2.20(c) for an authorisation from DGFT and if so authorised, then to export it directly. The reasons given by the Empowered Committee of Secretaries are legal, germane and valid grounds to decline the request for export of crude oil. In fact, the policy prohibiting export of crude oil has concurrence of all the departments of the Union of India and has nexus with the energy security of the country. It is pertinent to mention that the respondent-UOI's argument with regard to mismatch between indigenously produced oil and the energy demand within the country is not denied by the petitioners. The petitioners' argument of loss to the exchequer is presumptuous and a disputed question of fact as according to the respondent- UOI the crude generated by the petitioners is Dated Brent and not Bonny Light. This is all the more relevant as it is an admitted position that the crude oil generated by the petitioners is of very heavy quality, high viscosity and wax with high pour point and residues. Even the petitioners during arguments admitted that the only way to ascertain the international price is to allow export of the crude generated. Consequently, it cannot be said with certainty today that the petitioners and UOI are suffering a loss on account of non-export of crude oil - The allegation that the respondents have denied permission to the petitioners to export crude oil only to benefit Reliance and Essar cannot be examined behind their back. Despite this fact being pointed out during the hearing, the petitioners did not implead Reliance and Essar to the present writ petition. Petition dismissed with liberty to invoke the dispute resolution mechanism in the contract, but with no order as to costs. Issues Involved:1. Permission for Export of Crude Oil2. Foreign Trade Policy and Production Sharing Contract (PSC)3. National Interest and Energy Security4. Arbitration Clause and Contractual Dispute5. Government's Policy DecisionDetailed Analysis:1. Permission for Export of Crude Oil:The petitioners sought a writ of mandamus for necessary permissions to export crude oil from the Rajasthan Block, either directly or through canalization. They argued that they had a legal right to export under the Foreign Trade Policy and the PSC, specifically under Article 18.7, which allows export if the government or its nominees are unable to lift the crude oil. The respondents contended that the relationship between the petitioners and the government is contractual, governed by the PSC, and any disputes should be resolved through arbitration.2. Foreign Trade Policy and Production Sharing Contract (PSC):The petitioners argued that the Foreign Trade Policy permits canalized export of crude oil through respondent no. 3 or direct export with approval from respondent no. 1. They claimed that Article 18.7 of the PSC grants them the right to export if the government cannot lift the crude oil. The respondents countered that Article 18.1 obligates the petitioners to sell to the government until India attains self-sufficiency. The court examined the Foreign Trade Policy, concluding that it does not create a legal vested right to export crude oil and that the ultimate decision lies with the STE (Indian Oil Corporation Limited).3. National Interest and Energy Security:The respondents emphasized that the policy decision to prohibit crude oil export is driven by national interest and energy security concerns. They highlighted the mismatch between domestic production and energy demand, arguing that allowing exports would undermine energy security and increase dependence on foreign oil. The Empowered Committee of Secretaries, in its meeting on 27th January 2016, concluded that permitting export would be detrimental to national interest and energy security, as India imports a significant portion of its crude oil requirements.4. Arbitration Clause and Contractual Dispute:The respondents argued that the dispute qualifies as arbitrable under the PSC, thus making the writ petition not maintainable. The court, however, held that it could entertain the writ petition as it involves public law character issues and reliefs against respondents who are not parties to the PSC. The court also noted that the petitioners have the right to seek compensation under Articles 18.10 and 18.11 if the government fails to lift the crude oil.5. Government's Policy Decision:The court upheld the government's policy decision, noting that it is not arbitrary, irrational, or mala fide. The policy prohibiting crude oil export has the concurrence of all relevant departments and is linked to energy security. The court found that the Empowered Committee of Secretaries' reasons for rejecting the export request were valid and germane. The PSC articles clearly stipulate that the right to export is contingent upon India attaining self-sufficiency, which has not been achieved.Conclusion:The court dismissed the writ petition, stating that the petitioners' right to export crude oil is conditional upon India attaining self-sufficiency, as per the PSC. The decision to deny export permission is a policy matter aligned with national interest and energy security. The petitioners were advised to seek compensation through the dispute resolution mechanism in the PSC. The court found no merit in the allegations of arbitrary or mala fide intent in the government's decision.