Daewoo Motors India Limited vs Union Of India (Uoi) And Ors.
2002 Latest Caselaw 1059 Del

JUDGMENT

S. Mukerjee, J.

1. The petitioner (Daewoo Motors India Ltd.) have preferred this writ petition praying for the issuance of writ commanding respondent No. 1 to withdraw certain demand notices issued by the Customs Department, for invoking the related band guarantees provided by the respondents No. 2 and 3 on behalf of the petitioner and have further prayed for direction to respondents No. 2 and 3 not to pay the amount of guarantees to the respondent No. 1.

2. These bank guarantees were furnished by the petitioner company to the Customs Department at the time of availing exemption from customs duty in relation to plants and equipment etc. imported by the petitioner under licenses covered by the EPCG Scheme in terms of the Export and Import Policy of the relevant period i.e. 1995-1999. It was a condition of the said exemption notification No. 111/95/customs dated 5.6.1995 issued under Section 25(1) of the Customs Act, 1962 that upon the importer issuing a bond for such amount as is specified by the customs officials and also upon the importer binding himself to fulfill the export obligation equivalent to six times the CIF value of the goods which have imported on FOB basis, or alternatively four times the CIF value of the goods imported on net foreign exchange basis, within a period of eight years in the under-mentioned prescribed proportion, duty of customs would be fully exempt while in the case of additional duty only an amount up to 10% would be payable.

   S. No.        Period from the date of         Proportion of total
              issue of license                export obligation.

   1.          Block of 1st and 2nd year         Nil
   2.          Block of 3rd and 4th year         15%
   3.          Block of 5th and 6th year         35%
   4.          Block of 7th and 8th year         50%  

 

3. It was also provided that export obligation of a particular block, may be set off by the excess exports made in the said preceding blocks.

4. It is the admitted case of the petitioner that the petitioner was unable to perform the proportion of export obligations required to be undertaken by it. Not only that, it is further conceded by the petitioner that it did not come even remotely close to performing the export obligation undertaken by it.

5. During the course of arguments, Mr. Shanti Bhushan, learned Senior Counsel for the Petitioner conveyed that the company had been able to achieve only about a little over 4%, which figure was well below the required and stipulated figure of 15% applicable to the second block of 3rd and 4th year.

6. This writ petition was filed on special mention of urgency, and was listed before us on 22.3.2002, because the Bench to whom this case was assigned was not available and the Courts were to remain close for the entire next week. In these circumstances, after going through the paper book and hearing the submissions of learned counsel for the petitioner, we expressed our concern regarding maintainability of the writ petition. However, as on that date it was pointed out that the validity period for discharging of export obligations, stood extended till August 2002 and beyond, and that bank guarantees have been invoked by Customs Department ignoring this decision of the Licensing Authority, as such we called upon the learned counsel for the respondent to get the facts verified, and listed the case immediately on re-opening for 3rd April, 2002 with the direction that subject to the petitioner continuing to keep the bank guarantees in question alive, the amount corresponding to the said bank guarantees, need not be remitted back to the respondent banks.

7. On 3rd April, 2002, learned Standing Counsel for the respondents, took time to file a short reply, also pointing out that the impugned order was appealable and requesting for early date of hearing in view of the large amount involved. Thereupon, we listed the case for 12.4.2002. Furthermore, in addition to the condition of the interim stay imposed earlier on keeping the bank guarantees alive, we also added an additional condition to the effect that the petitioner will not transfer, alienate or part with their assets till the further orders of this Court.

8. On 12.4.2002, we were informed that though respondent No. 1 had filed a counter affidavit a day earlier, the same was not on record. Thereupon the matter was kept for 17th April, 2002 with permission to the petitioner to file any rejoinder on or before the 17th April, 2002. The case was next taken up on 19th April, 2002.

9. On 19th April, 2002, the rejoinder was not on record and on this ground the matter was posted to 29th April, 2002 on which date petitioner filed an application for amendment which was allowed by us considering that the case is at the very initial stages. While hearing arguments on the amendment, and passing orders on the amendment application (CM 3593/2002) learned Senior counsel for the petitioner submitted that the petitioner will not press for prayer 'B' as set out in the amended writ petition.

10. We also felt that considering the issues involved, this matter required formal notice to show cause to be issued. Since Standing Counsel Mr. Sanjay Jain was present and accepted notice on behalf of respondent No. 1 while Mr. Yashpal Sharma, advocate accepted notice on behalf of respondent No. 2, it was directed that respondent No. 3 (HDFC Bank Ltd.), be served by ordinary process as well as by dusty notice. A schedule for completing the pleadings was directed whereby reply was to be filed by 13th May, 2002 and the rejoinder to be brought on record by 20th May, 2002. It was further directed that responsible officer of the two banks (respondent No. 2 and 3) shall remain present in Court during the hearing. The matter was listed for 23rd May, 2002 at 2.00 P.M. with the idea that the same will be heard and disposed of, in view of stay operating in relation to such large amount which stood covered by the bank guarantees.

11. On 23rd May, 2002, reply affidavit of the Union of India was not on record. The learned Attorney General drew our attention to the communication dated 25.2.2002 issued by the petitioner and an order dated 22.2.2002 of the Deputy Director General of Foreign Trade, revoking the extension of export obligation period granted earlier (which was the basis of our entertaining the petition and granting the interim orders on the very first day when the matter came up for hearing on special mention). Copies of these documents were handed over to learned counsel for the petitioner and were also placed on record as per our directions.

12. The matter thereafter came up on 25.2.2002 when the petitioner filed yet another application seeking amendment of the writ petition by incorporation of additional grounds (CM No. 6078/2002). Since Sh. Shanti Bhushan learned Senior counsel for the petitioner and Sh. Altaf Ahmad, Additional Solicitor General for the Union of India were both available and ready to go with the matter, we therefore heard them at some length, and reserved the orders. However, in view of the fact that interim stay granted initially, was continuing over several hearings, we therefore directed that the interim order will continue pending our pronouncement of the orders.

13. At the outset, we may state that considering the nature of the matter and the large amount involved and the delay which could have taken place otherwise, we did not limit ourselves to any technicalities. As such while passing formal orders on the amendment application, we allowed Senior counsel on both sides to address arguments on all relevant aspects which according to them had a bearing on the matter.

14. Upon taking note of the order of the Deputy Director General of Foreign Trade's order dated 22.5.2002 revoking the export obligation extension period granted earlier, Mr. Shanti Bhushan, learned Senior counsel for the petitioner confined himself primarily to one contention. According to him, the ECGC Scheme itself having been recently liberalised by the Government of India under the same very statutory provision viz. under Section 25(1) of the Customs Act, 1962, enlarging the stipulated period for completion of export obligation from 8 years to 12 years and furthermore Government having accordingly amended the original exemption notification No. 111/95-Customs dated 5th June, 1995 towards making the period for completion of export obligations to be 12 years as compared to 8 years earlier, therefore, as a result of the amendment there was no obligation cast upon petitioner to show any export obligation performance at all for the block of first five years. As such according to Shri Shanti Bhushan there was no default on the part of the petitioner in relation to the performance of its export obligations under ECGC Scheme and therefore, the invocation of the bank guarantees in question by the Customs Department was nothing else but a fraudulent exercise of powers which therefore required to be quashed, with stay orders being granted in the meanwhile in favor of the petitioner, during the pendency of the hearing.

15. Sh. Altaf Ahmad, learned Additional Solicitor General appearing on behalf of the Union of India, has taken us through the original notification of the year 1995 and also Clauses referring to the licenses being ones which are covered by the Import Policy of 1995-1998, and on this basis he has submitted that the recent relaxation on behalf of the government of India, Ministry of Commerce extending the period for performing export obligations up to 12 years, would be applicable only prospectively in relation to current year's licenses and not retrospectively in relation to the licenses of the earlier periods.

16. The alternative submissions of the learned Additional Solicitor General is that, in any case, for those parties who fell in default in respect of the previous period, cannot on any view of the matter, claim to be covered under the present ECGC relaxed policy of 12 years, even assuming that the same would also be applicable to those whose export obligations, are under on-going consideration.

17. The third submission of learned Additional Solicitor General is that in any case, the conferment of the power to consider a request for extension, and to allow the same, involves necessarily an assessment of whether the party is in a position to ultimately perform export obligations or not and the track record up to that time as well as all factors including the dire financial and business fortunes of the petitioner and there is no automatic extension simply for the asking, simply because under the liberalised current policy, the total period permissible is 12 years.

18. Having heard the parties at length and on account or our firm view that except in the context of a submission to the effect that it is the admitted position that extension stood granted (as was claimed on the very first date when the matter came up before us and basis of which has now disappeared with the revocation dated 22.5.2002), not only the matter would be ousted from scope of writ jurisdiction as involving disputed question of facts, but also it would not be appropriate for this Court in the extraordinary jurisdiction to entertain the grievance relating to encashment of bank guarantees which primarily is a contractual matter constituting an independent contract between the bank and the beneficiary as per the Apex Court decisions on the subject.

19. There is also a submission by the respondents that the decision dated 22.5.2002 is appealable and therefore the normal statutory remedies should be availed by the petitioner.

20. Accordingly, we do not propose to deal in great detail with the contentions of both the parties lest it might prejudice them in the proceedings before the appropriate forum. However taking into account the admittedly negligible record of petitioner's performance of the export obligations till date and the admission of the petitioner itself in its own communication relied upon by it, that it is going through a grave financial crisis and also the contents of the petitioners's communication dated 21.5.2002 by which the petitioner declined to furnish bank guarantees even after assuring so during a detailed hearing on the subject, we feel that there is no inherent jurisdictional error in the respondent/ customs department invoking the bank guarantees. Therefore for reasons of existence of alternative remedy and keeping in view the disputed question of fact involved we find it to be not a fit case for grant of relief under Article 226 of the Constitution of India in view of the catena of authoritative pronouncements of the Apex Court and as recently reiterated in State of Bihar and others vs. Jain Plastics and Chemicals Ltd. and S.P. Forest Cell, Adyar and another vs. Kannans Co., (2001) 9 SCC 209.

21. The writ petition is accordingly dismissed and the interim orders stand vacated.