Modgill Hosiery Exports Pvt. Ltd. vs Union Of India & Others
2009 Latest Caselaw 3508 Del

   *         IN THE HIGH COURT OF DELHI AT NEW DELHI

   + W.P.(C) 1408/2008
     MODGILL HOSIERY EXPORTS P.LTD.

        W.P.(C) 1409/2008
        MODGILL FASHION EXPORTS

        W.P.(C) 1411/2008
        MODGILL HOSIERY EXPORTS P.LTD.
                                                           ..... Petitioners
                          Through      Mr. Alok K. Aggarwal, Adv. with Mr.
                                       Sanjay S. Chhabra, Advocate.

                    versus

        UOI & ORS                                           ..... Respondent
                          Through      Mr. Vineet Malhotra, Advocate for the
                                       respondent Nos. 1 to 3.
                                       Mr. Kuljeet Rawal, Advocate with Mr.
                                       Ankur Sehti, Adv. for the respondent
                                       No.4.

CORAM:
HON'BLE MR. JUSTICE SANJIV KHANNA

                                 ORDER

% 02.09.2009

With the consent of the parties, these writ petitions are taken up

for final hearing and disposal.

2. M/s. Modgill Fashion Exports is the petitioner in W.P.(C)

1409/2008 and M/s. Modgill Hosiery Exports Pvt. Ltd. is the petitioner in

W.P.(C) Nos.1408-09/2008 & 1411/2008 Page 1 W.P.(C) 1408/2008 and 1411/2008. The petitioners have impugned the

orders passed by the Apparel Export Promotion Council, the Textile

Commissioner and the second Appellate Committee directing the

petitioners that they were not entitled to waiver of forfeiture amount for

failure to comply with the terms of the quota obligation.

3. Prior to 1st January, 2005, the export of textiles and clothing was

governed by the bilateral agreements entered into between the

Government of India and United State of America, countries of European

Union and Canada. In view of the said international agreements, policies

were framed from time to time for allocation of quota amongst exporters

to ensure the effective administration of the quota system and for

optimizing the export revenue in the interest of the country. Under the

Garments and Knitwear Export Entitlement (Quota) Policy 2000-2004,

quotas in various categories were allocated in case of exporters wanting to

export readymade garments.

4. In order to ensure that the quotas allocated to the exporters do

not remain unutilized and lapse and to prevent speculative trading in

quotas by unscrupulous elements, the exporter to whom the quota was

issued in terms of the policy, was required to submit earnest money in the

W.P.(C) Nos.1408-09/2008 & 1411/2008 Page 2 form of bank guarantee, fix deposit receipt or demand draft. Sometimes

exporters were required to submit legal undertaking or post dated cheque.

In case of default by the exporter, the quota administering authority was

entitled to forfeit the earnest money deposit in terms of the policy and

guidelines issued in this regard.

5. It is admitted case of the petitioners that they were issued first

come first serve quotas for export of readymade garments and there was

under/non utilization of the said quota and the petitioners did not export

readymade garments for the full quantity of quota allocated to them. The

Apparel Export Promotion Council, which is the quota administering

authority, issued show cause notice to the petitioners for forfeiture of the

earnest money etc. on account of under/non utilization of the quota and

thereafter forfeiture orders were passed. These orders have been upheld

by the first Appellate Committee and the second Appellate Committee with

some modifications. Right of forfeiture of the earnest money deposited in

cases of under/non-utilization of quota has been upheld in Gokaldas

Images Ltd. Vs. Union of India, 2005 (116) DLT 47 and Bhuvan Exports Vs.

Union of India, W.P.(C) 1690/1982.

6. Counsel for the petitioners submitted that the petitioners were

W.P.(C) Nos.1408-09/2008 & 1411/2008 Page 3 unable to fulfill or utilize the quota allocated to them on account of

unscheduled and long power cuts in the city of Ludhiana. It is further stated

that in view of the directions given by the Electricity Board, the petitioners

were compelled not to operate the manufacturing units on one day of the

week. It is also pointed out that in respect of quota subject matter in

W.P.(C) 1411/2008, the petitioner therein had fulfilled the quota obligation

to the extent of 88.94%. It is stated that in case the petitioner had fulfilled

or utilized 90% of the quota allocated, no forfeiture would have been

attracted in view of the policy.

7. Similar contentions were raised before the respondent authorities

and have been rejected, inter alia holding that power cuts in Ludhiana were

a normal feature and the petitioner should have taken this aspect in

consideration at the time when he had applied for allocation of the said

quota. The order passed by the second Appellate Committee specifically

records that the Committee was of the unanimous opinion that power cuts

were normal business hazards and did not fall in the category of force

majeure exception to warrant relief. The aforesaid findings by the

authorities cannot be regarded as perverse or one which requires

interference while exercising power of judicial review under Article 226 of

W.P.(C) Nos.1408-09/2008 & 1411/2008 Page 4 the Constitution of India. This Court cannot reexamine merits of the

impugned orders as an appellate forum and substitute its opinion to upset

the findings. The authorities have taken into account the said contention of

the petitioner but rejected the same holding that power cuts were normal

and a business hazard that had to be taken into consideration by an

exporter when they had applied for quota.

8. Similarly, the contention the petitioner in W.P.(C) 1411/2008 that

they had utilized the quota allocated to the extent of 88.94% and therefore

no forfeiture should have been enforced, has no merit. Short fall or under-

utilization of the quota is accepted. Forfeiture is imposed in view of the

under-utilization or short-fall of the quota. The question whether any

forfeiture should be imposed, even when the short-fall is marginal or

slightly less than 90% is not for this Court to determine or decide. As per

policy decision taken by the respondents, no forfeiture is to be affected in

case of under utilization by 10% or less. However, forfeiture is to be

affected where there is under/non utilization of quota above 10%. If the

petitioner had made exports and utilize the quota to the extent of 90 %,

they would have not suffered forfeiture. Whenever cut of point/line is

fixed, there can be marginal cases but this alone does not result in

W.P.(C) Nos.1408-09/2008 & 1411/2008 Page 5 discrimination or arbitrariness. It may be noted that in cases of under/non

quota utilization from 75 to 90%, forfeiture is proportionate. The petitioner

has been given benefit of the said proportionate forfeiture.

9. In W.P.(C) 1411/2008 filed by the Modgill Hosiery Exports Pvt. Ltd.,

the first appellate authority, the Textile Commissioner by order dated 4th

December, 2006 had reduced the forfeiture amount to Rs. 1,75,826/- from

Rs.4,68,761/- directed to be forfeited by the Apparel Export Promotion

Council. The petitioner filed an appeal against this order dated 4th

December, 2006 before the second Appellate Committee, Government of

India, Ministry of Textile. The second Appellate Committee vide order dated

11th April, 2007 on an appeal filed by the petitioner has enhanced the

penalty from Rs. 1,75,826/- to Rs. 3,01,441/- on the basis of a report

submitted by the Apparel Export Promotion Council. The enhancement of

forfeiture by the second Appellate Committee cannot be sustained in view

of clause 16 of the Garment Export Entitlement Policy 2000-2004, which

stipulates that only an exporter was entitled to file an appeal before the

second Appellate Committee. Paragraph (vii) of the Clause 16 of the said

policy reads as under:-

"16. APPEAL AGAINST FORFEITURE OF EMD/BG/POST

W.P.(C) Nos.1408-09/2008 & 1411/2008 Page 6 DATED CHEQUE

(i) xxxxxxxxxxxxxxxxxx

(ii) xxxxxxxxxxxxxxxxxxx

(iii) xxxxxxxxxxxxxxxxxxx

(iv) xxxxxxxxxxxxxxxxxxx

(v) xxxxxxxxxxxxxxxxxxx

(vi) xxxxxxxxxxxxxxxxxxx

(vii) An exporter who is not satisfied with the decision of the Textile commissioner in the matter of a stay application or an appeal, may prefer an appeal against such decision within 45 days of the dispatch of the order of the 1st appellate authority to the 2nd appellate authority for a decision thereon."

10. The aforesaid clause did not give any power to the second Appellate

Committee to enhance the quantum of forfeiture and increase the same. Clause

16(vii) quoted above gives right only to one party i.e. the exporter to file an

appeal in case he was not satisfied with the decision of the first Appellate

Committee. No right to appeal was given to Apparel Export Promotion Council or

any third person to file an appeal before the second Appellate Committee. In fact,

in the present case no appeal was preferred by the Apparel Export Promotion

Council or any third person for enhancement of forfeiture amount.

11. In these circumstances, the order of the second Appellate Committee to

enhance the forfeiture amount from Rs.1,75,826/- to Rs. 3,01,441/- is liable to be

set aside. Ordered accordingly. It is clarified that it will be open to the

W.P.(C) Nos.1408-09/2008 & 1411/2008 Page 7 respondents to take remedial steps, if required, by filing appropriate proceedings.

The W.P.(C) Nos.1408/2008 & 1409/2008 are accordingly dismissed and W.P.(C)

1411/2008 is partly allowed to the extent indicated above. There will be no order

as to costs.

SANJIV KHANNA, J.

SEPTEMBER 02, 2009
NA




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