Legal undertaking may replace bank guarantee under import-export procedure; refusal on an insufficient ground was unsustainable.

The governing import-export procedure under Para 340 of the Hand Book of Import Export Procedures, 1985-1988 permitted acceptance of a legal undertaking instead of a bank guarantee for an advance licence. Registered exporters were therefore entitled to seek that facility, and refusal could not rest on the fact that their exports for one year consisted of re-export of rough diamond rejections. Because the stated ground was insufficient under the procedure, denial of the undertaking in place of a bank guarantee was unsustainable.

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Issues: Whether the petitioners were entitled to furnish a legal undertaking in lieu of a bank guarantee for the advance licence.

Analysis: The relevant note under Para 340 of the Hand Book of Import Export Procedures, 1985-1988 permitted acceptance of a legal undertaking in place of a bank guarantee. The petitioners were registered exporters, and the refusal was based only on the circumstance that for one year their exports consisted of re-export of rough diamond rejections. That ground did not justify denial of the facility where the procedure itself allowed a legal undertaking in lieu of bank guarantee.

Conclusion: The petitioners were entitled to the facility of a legal undertaking in lieu of bank guarantee, and the refusal was unsustainable.

Ratio Decidendi: Where the governing import-export procedure permits a legal undertaking in lieu of bank guarantee, denial of that facility on an irrelevant or insufficient ground cannot be sustained.

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