Oswal Agro Furane Ltd. And Anr. vs Union Of India (Uoi) And Ors.
1992 Latest Caselaw 229 Del

JUDGMENT

Sat Pal, J.

1. In this writ petition the petitioner has challenged the amendment dated 14th October, 1991 to the Export (Control) Order, 1988 issued by the Ministry of Commerce, Office of the Chief Controller of Imports & Exports, New Delhi, whereby it was stipulated that exports shall be allowed against registration-cum-allocation certificate issued by the Agricultural & Processed Food Export Development Authority, New Delhi, (hereinafter referred to as "APEDA") and notice dated 15th October, 1991 issued by APEDA fixing the minimum export price of non-basmati rice as US Dollars 231 F.O.B. per Metric Tonne.

2. Briefly stated the facts of the case are that the Punjab State Industrial Development Corporation, (in short PSIDC), which was a Punjab Government Undertaking, submitted an application dated 9th/22nd July, 1982 to the Government of India, Ministry of Industry, Department of Industrial Development, New Delhi for grant of industrial license to manufacture furfural 6000 MT per annum and other allied products 100 per cent export oriented project. In this application (a copy of which is Annexure - P III to the writ petition) it was stated that it was envisaged to put up a composite unit consisting of two paddy shelling units, each with a shelling capacity of 30 Tonnes/HR and after shelling, rice produced on custom basis would be returned back to the paddy suppliers i.e. Food Corporation of India, (for short FCI), and other State agencies. It was further stated that the residual rice husk would be subjected to furfural extraction and edible oil would be extracted from the rice bran obtained as a bye product.

3. Pursuant to the aforesaid application, the Government of India, Ministry of Industry, Department of Industrial Development vide their letter dated 20th October, 1982 offered to issue an Industrial license under the Industries (Development & Regulation) Act, 1951 to PSIDC for the establishment of a 100 per cent Export Oriented Undertaking for the manufacture of furfural, etc. The issue of this Industrial license was subject to certain conditions including the condition that the entire (100 per cent) production shall be exported.

4. The PSIDC incorporated a new Company by the name of M/s. Punjab Agro Furane Limited on 7th April, 1983 for the purpose of setting up the Unit mentioned hereinabove. In the year 1986, M/s. Oswal Agro Mills Limited, Ludhiana entered into an agreement with the PSIDC in establishing the Unit. The Government of India also approved this collaboration agreement vide letter dated 7th March, 1986. Subsequently the name of Punjab Agro Furane Limited was changed to Oswal Agro Furane Limited. Finally, Government of India, Ministry of Industries, Department of Industrial Development vide their letter dated 19th May, 1986 granted an industrial license to the petitioner for establishment of a 100 per cent export oriented Undertaking for the manufacture of furfural, etc., subject to same terms and conditions mentioned in the letter of offer dated 20th October, 1982.

5. Under the Import Export Policy at the relevant time, the petitioner being 100 per cent Export Oriented Unit was entitled to import capital goods in the shape of plant and machinery without any restriction. Government of India, Ministry of Industry, however, by their letter dated 18th May, 1987 informed the petitioner that Rice Shelling Plant will not be a part of their 100 per cent Export Oriented Unit and as such import of machinery for Rice Shelling Plant could not be allowed.

6. Aggrieved by the aforesaid letter dated 18th May, 1987, the petitioner filed writ petition being Civil Writ Petition No. 3622/87 in the High Court of Punjab and Haryana, Chandigarh. In this writ petition, counter-affidavit on behalf of the Union of India was filed by a Joint Secretary, Ministry of Commerce and, inter alia, it was stated therein that industrial units approved as 100 per cent Export Oriented Units were eligible to import their requirements of capital goods, etc., subject to the condition that the entire production shall be exported except permissible level of rejects. It was, however, contended that in the original application, the petitioner had undertaken to procure rice husk from the domestic tariff area and thus the permission to import the rice shelling plant could not have been given even by implication of part of 100 per cent Export Oriented Project.

7. Rejecting the contention of Union of India, it was held by a Division Bench of Punjab & Haryana High Court in its judgment dated 2nd June 1989 that the letter of intent and the Industrial license have to be read along with the application of the petitioner which has been duly referred therein. In the covering letter of the application, it was clearly mentioned that the petitioner envisages to put up a composite unit consisting of two paddy shelling units each with a shelling capacity of 30 tonnes. After shelling, rice produced on custom basis would be returned back to the paddy suppliers, i.e., FC1 and other State agencies. The residual rice husk would be extracted from the rice bran obtained as a bye-product. It was also noticed in this judgment "that the scheme envisaged for the proposed project is a comprehensive one designed to ensure maximum efficiency. The proposed unit would:-

(a) Produce valuable furfural from capacity that can be utilised by the Food Corporation of India to obtain white rice, while at the same time meeting part of the rice husk requirements of the project.

(b) Provide rice milling capacity that can be utilised by the Food Corporation of India to obtain white rice, while at the same time meeting part of the rice husk requirements of the project.

(c) Generate enough steam and power (based on exhausted rice husk) to meet entire internal requirements and supply surplus to neighbouring units.

(d) Utilise rice bran obtained in the manufacture of edible rice bran oil.

8. Finally, quashing the restriction imposed in the letter dated 18th May, 1987,it was held by the Division Bench that the permission to the import of rice shelling plant had already been granted by the Government of India by necessary implication while issuing the letter of intent and industrial license by according approval to the entire project of the petitioner as proposed and thus, there is no justification for restricting the value of goods required to be imported. It may be pointed out here that the aforesaid judgment of Punjab & Haryana High Court was not challenged by the Union of India in the Supreme Court.

9. Thus, it will be seen that in terms of the judgment of the Punjab & Haryana High Court the rice shelling plant of the petitioner was allowed to be a part of the 100 per cent export oriented unit.

10. In the year 1988, Government of India, Ministry of Commerce issued Export (Control) Order, 1988 under Section 3 of the Imports & Exports (Control) Act, 1947, and export of various articles is governed by the aforesaid order. In terms of Clause 15(j) of the said order, nothing in this order shall, apply to the products manufactured in and exported from the respective free trade zones and approved 100 per cent Export Oriented Units except textile items covered by bilateral agreements. It may also be pointed out here that under Clause 52 of Import & Export Policy 1990-1993, Volume. 11 no export license is required, for goods following [falling?] within the purview of Clause 15 of the Exports (Control) Order, 1988.

11. The aforesaid Export (Control) Order, 1988 was amended vide notification dated 14th October, 1991 and in part (c) of the order entry No. 65 was inserted. As per this entry it was stipulated that export of non-basmati rice shall be allowed against registration, allocation certificate issued by the APED A. Pursuant to this amendment, APED A issued a trade notice dated 15th October, 1991 which is Annexure-9 to the writ petition, and in terms of the said trade notice, the minimum export price (MEP) of non-basmati rice was fixed as US Dollars 231 F.O.B. per metric tonne.

12. It may be pointed out. here that under the scheme of the project, the petitioner had put up a composite unit consisting of two paddy shelling units and after shelling, rice produced on custom basis was to be returned back to paddy suppliers, Le., FCI and other State agencies. It has, however, been stated in the additional affidavit dated 15th January, 1992 filed on behalf of the petitioner that the Punjab Government formulated a policy that the State agencies will provide paddy to the millers on custom milling basis and the quantity would be matching the quantity of the paddy procured by the millers on their own account, lite decision of the Punjab Government is evident from Annexure B and C annexed with the additional affidavit. In this affidavit it has also been stated that in terms of the said policy of the Punjab Government, the petitioner had no option other than procuring paddy on its own account in order to get the matching quantity of paddy from the State agencies. Accordingly in 1991 the petitioner procured about 175,000 metric tonnes of paddy on its own account. However, up till 3rd December, 1991 the State agencies could provide only about 58,000 metric tonnes of paddy to the petitioner on custom milling basis. It has also been mentioned in this affidavit that out of these 58,000 metric tonnes, the petitioner has already returned to the State agencies 17,400 metric tonnes of rice after milling.

13. The case of the petitioner is that the rice produced out of the paddy procured by the petitioner on its own is required to be exported under the terms and conditions of the industrial license as the entire production of the 100 per cent export oriented units is required to be exported and such rice cannot be sold in the local market. It has been stated in the writ petition that consignments of 45 MT of such non-basmati rice were exported by the petitioner in the month of November, 1991 and respondent No. 3 did not create any hurdle in the said export nor it pressed for any minimum export price.

14. The petitioner on 16th, 18th and 21st October, 1991 entered into three contracts with their foreign customers, namely, Continental Grain Company, New York (USA) for sale of 1,07,000 MT of Indian long bran non- basmati rice at the rate of US Dollars 213 F.O.B. per metric tonne. The shipment of the goods was to begin from October-November 1991 to December 1991/January 1992. Pursuant to these orders the petitioner dispatched 13,200 MT of non-basmati rice to Kandla port for export. While the said goods were being loaded into the vessel on or around 2nd January, 1992, the Chairman APEDA sent a telegram to the Customs authority at Kandla port wherein it was stated that even 100 per cent export oriented units are required to register their contracts with APEDA and obtain allocation certificate prior to export and further they are required to adhere to the minimum export price fixed by APEDA. On receipt of this telegram the Customs authority stopped the loading of the goods.

15. Aggrieved by the aforesaid action of APEDA the petitioner filed the present writ petition and has challenged the notification dated 14th October, 1991 by which entry No. 65 was inserted in the Export (Control) Order, 1988 and the Trade Notice dated 15th October, 1991 issued by APEDA pursuant to the said notification.

16. Mr. Milan Banerjee, the learned Counsel for the petitioner, submitted that the notification dated 14th October, 1991 by which entry No. 65 was inserted under the Export (Control) Order, 1988 and the Trade Notice dated 15th October, 1991 which was issued by APEDA pursuant to the said notification are not applicable to the export of non-basmati rice by the petitioner inasmuch as the unit of the petitioner is a 100 per cent export oriented one. He further contended that by virtue of notification dated 14th October, 1991, the Export (Control) Order, 1988 has been amended and since the said order itself is not applicable to 100 per cent export oriented units in terms of Clause 15(j) of the Order, the amendment will also not be applicable to such units including the unit of the petitioner. In the same way the Trade Notice dated 15th October, 1991 which was issued pursuant to the amendment made vide notification dated 14th October, 1991 is not applicable to the unit of the petitioner. In view of this the petitioner could export non-basmati rice directly and the minimum price fixed by APEDA vide Trade Notice dated 15th October, 1991 was not applicable to such exports being made by the petitioner. He also submitted that the Public Notice dated 7th June, 1991 (which is Annexure-P VI to the writ petition) is also not applicable to the petitioner's unit in view of Clause 52 of the Import & Exports Policy 1990-93 Volume III.

17. The contention of Mr. Banerjee, the learned Counsel for the petitioner appears to have force. As stated hereinabove, in terms of Clause 15(j) of the Export (Control) order 1988 nothing in this order shall apply to the 100 per cent export oriented unit. In view of the aforesaid clause the notification dated 14th October, 1991 by which the said order has been amended, would not apply to the petitioner's unit which is admittedly a 100 per cent export oriented unit. Since the Trade Notice dated 15th October, 1991 has been issued pursuant to the notification dated 14th October, 1991, the same will also not apply to the exports being made by 100 per cent export oriented units.

18. Mr. Sapra, learned Counsel for respondent No. 3 raised a preliminary objection to the effect that the petition has not been signed by a competent officer of the petitioner. There is no merit in this objection inasmuch as vide resolution dated 26th November, 1901 (copy of which is Annexure - PI to the writ petition), Mr. S.M. Ghosh, the Secretary of the petitioner- company, who has signed and sworn the affidavit in support of the writ petition was duly authorised to sign any application, petition, vakalatnama or any other document for instituting or pursuing necessary legal proceedings.

19. On merits the learned Counsel for respondent No. 3 contended that the petitioner was issued an industrial license for manufacturing furfural and edible rice bran oil but the petitioner does not possess any industrial license for the manufacture of rice and as such Clause 5(j) of the Export (Control) Order 1988 was not applicable to the petitioner's unit. The contention is, however, without any force. As stated hereinabove, in terms of the judgment of Punjab & Haryana High Court in Civil Writ petition No. 3622/87 the rice shelling plant of the petitioner was allowed to be a part of 100 per cent export oriented unit. It was also noticed in the said judgment that the petitioner's unit would produce white rice. Since rice is one of the products of the petitioner's unit, the petitioner is not required to posses any separate industrial license for production of rice.

20. The learned Counsel for respondent No. 3 further contended that as per application submitted by the petitioner for grant of industrial license, after shelling rice produced on custom basis, the petitioner was required to return back the rice to the paddy suppliers, Le., FCI and other State agencies and as such the petitioner was not entitled to export any rice produced in its unit. There is no merit in this contention also. As stated above the Punjab Government formulated a policy in 1991 that the State agencies will provide paddy to the millers on custom basis and the quantity would be matching to quantity of the paddy procured by the millers on their own account. In terms of the said policy the petitioner had no option but to procure paddy on its own account in order to get the matching quantity of paddy from State agencies. The petitioner in fact has procured about 1,75,000 MTs of paddy on its own account in 1991. The rice produced out of the said paddy cannot be returned to the State agencies as the said paddy was not received from those agencies. The petitioner being a 100 per cent export oriented unit is thus required to export the entire rice produced out of this paddy.

21. On the same ground the contention of the learned Counsel for respondent No. 3 that there is no bar for the petitioner to sell its rice in the local market, has no merit.

22. Here we may also refer to the Export (Control) Order 1991 which came into force with effect from 3rd September, 1991 (Annexure-A to the writ petition). The item regarding grains and flour including non-basmati rice appears at part B of list II and it will be seen that there is no provision for fixing minimum export price against this item. On the other hand basmati rice appears at item No. 5 of part C and against this item there is a remark "export allowed subject to minimum export price announced from time to time by the Central Government." From this amendment it is also evident that there is no provision for fixing minimum price for non-basmati rice under the provision of Export (Control) Order 1988.

23. In view of the above discussion we allow the writ petition and hold that the amendment dated 14th October, 1991 to Export (Control) Order 1988 (Annexure-P7 to the writ petition) and the Trade Notice dated 15th October, 1991 (Annexure P-9 to the writ petition) and Public Notice dated 7th June, 1991 (Annexure P-VI to the writ petition) are not applicable in respect of the export of 1,07,000 MT of non-basmati rice by the petitioner for which the petitioner had entered into three contracts with Continental Grain Company of New York (USA) and the petitioner will be entitled to complete the said export.

24. By our order dated 15th January, 1992 we had allowed the petitioner to export 13,200 MT of non-basmati rice against the aforesaid total quantity of 1,07,000 MT. During the course of arguments our attention was drawn to letter dated 15th October, 1991 (Annexure R-VIII to the counter affidavit filed on behalf of respondent No. 3) wherein it has been stated that the entire quantity of non-basmati rice is to be exported before 31st March, 1992. We were further informed that not more than 4,00,000 MT of non-basmati rice have been exported so far.

25. Since the entire quantity of 7,00,00 MT (sic) was to be exported before 31st March, 1992, the learned Counsel for the petitioner submitted before us on 13th March, 1992 that the petitioner should be permitted to export 15,500 MT of non-basmati rice immediately. Since we were not inclined to allow further export to the petitioner without hearing the complete arguments in the case, we had passed the orders on 13th March, 1992 that in case the petitioner is found to be entitled to export the goods, the time to complete the export would be extended. Accordingly we grant three months time from today to the petitioner to complete the export of remaining quantity of rice in terms of the above mentioned three contracts. However, we make no order as to costs.