Court Invalidates DGFT Notice on Broken Rice Export Quotas; Criteria Violates Articles 14 and 19(1)(g) of Constitution.

The court set aside Trade Notice No. 08/2023 issued by DGFT, which restricted export quota allocation for broken rice to exporters with past exports to specific countries. The court found the classification of exporters based on past exports to Senegal, Gambia, and Indonesia arbitrary and lacking a rational nexus with the policy's objective. The notice was deemed violative of Articles 14 and 19(1)(g) of the Constitution of India. The respondents were instructed to re-evaluate the criteria for quota allocation, and all pending applications were disposed of.

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Issues Involved:
1. Validity of Trade Notice No. 08/2023 issued by DGFT.
2. Restriction of eligibility for export quota allocation to exporters with past exports to specified countries.
3. Alleged violation of Article 14 and Article 19(1)(g) of the Constitution of India.

Summary:

Issue 1: Validity of Trade Notice No. 08/2023 issued by DGFT:
The petitioners, engaged in the rice trading business, challenged Trade Notice No. 08/2023 dated 20.06.2023 issued by the Directorate General of Foreign Trade (DGFT). This notice set conditions for eligibility and procedures for allocating quotas for the export of broken rice on humanitarian food security grounds.

Issue 2: Restriction of eligibility for export quota allocation to exporters with past exports to specified countries:
The petitioners were aggrieved by the conditions that restricted eligibility for securing allocation of quotas to only those exporters who had exported rice to Senegal, Gambia, and Indonesia in the three preceding financial years. They argued that they had a verifiable track record of exporting rice and that this restriction was discriminatory.

Issue 3: Alleged violation of Article 14 and Article 19(1)(g) of the Constitution of India:
The petitioners contended that the restriction violated Article 14 (equality before law) and Article 19(1)(g) (freedom to practice any profession) of the Constitution of India. They argued that the restriction had no rational nexus with the objective of ensuring that rice is exported in the given quantities to the specified countries.

Factual Matrix:
The export of broken rice was initially classified as 'free' under the export policy. However, on 08.09.2022, the Central Government prohibited the export of broken rice through Notification No. 31/2015-2020. Exceptions were made for certain consignments, and subsequent notifications extended these exceptions. The DGFT permitted exports to certain countries on an ad-hoc basis based on specific requests from foreign governments.

Submissions:
The petitioners argued that the eligibility condition was unreasonable and discriminatory, favoring only a few exporters. They cited Supreme Court decisions to support their contention that state actions must be reasonable and not arbitrary. The respondents countered that the policy was based on strategic and humanitarian considerations and was not amenable to judicial review. They argued that the classification was rational and aimed at ensuring capacity and quality.

Reasons and Conclusion:
The court examined whether the policy to allocate quotas only to exporters with past exports to the specified countries violated Articles 14 and 19(1)(g). The court noted that the challenge was not to the prohibition of broken rice exports or the limited export permissions but to the eligibility criteria for quota allocation. The court found that the classification of exporters based on past exports to specific countries did not have a rational nexus with the objective of ensuring capacity and quality. The court concluded that the classification was arbitrary and set aside the impugned trade notice.

Judgment:
The impugned trade notice was set aside, and the respondents were directed to re-evaluate the criteria for the allocation of quotas for the export of broken rice. The pending applications were also disposed of.

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