Indemnity bond accepted for replenishment gold release under the Foreign Trade Policy in place of bank security.

Replenishment gold under the Foreign Trade Policy was considered in relation to export of gold jewellery and the conditions for release under paragraphs 4.32 and 4.33, as amended by paragraph 4.34(i). The court accepted that, on the facts, the authorities need not insist on a fixed deposit or bank guarantee where the exporter executed an indemnity bond protecting the nominated agency against claims by competent authorities. The operative effect was that the replenishment gold was to be released on execution of the indemnity bond, reflecting a fact-specific substitution of security under the Policy framework.

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Issues: Whether, in the facts of the case, replenishment gold under the Foreign Trade Policy could be released without insisting on a fixed deposit or bank guarantee, and whether an indemnity bond could be accepted in its place.

Analysis: The relief sought arose under the Foreign Trade Policy framed under section 5 of the Foreign Trade (Development and Regulation) Act, 1992. The petitioner had already exported gold jewellery and had sought replenishment of gold under paragraphs 4.32 and 4.33 of the Policy, as amended by paragraph 4.34(i). The respondents insisted on a fixed deposit or bank guarantee because the transactions were under investigation and they apprehended exposure to customs and excise liabilities. The Court accepted that, in the peculiar facts of the case and in view of the petitioner's willingness to indemnify the nominated agency against all claims that may be raised by the competent authorities, an indemnity bond would sufficiently protect the respondents.

Conclusion: The respondents were directed not to insist on a fixed deposit or bank guarantee if the petitioner executed an indemnity bond in the terms directed by the Court, and the replenishment gold was to be released thereafter.

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