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Transworld Trading Corporation Vs. Union of India (Uoi) and ors. - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtChennai High Court
Decided On
Case Number W.P. No. 1877 of 1979
Judge
Reported in1993(42)ECC177
AppellantTransworld Trading Corporation
RespondentUnion of India (Uoi) and ors.
DispositionPetition allowed
Cases ReferredFalmouth Beat Construction Co. Ltd v. Howell
Excerpt:
.....of all relevant factors and the question of giving any prior intimation before withdrawing the scheme to exporters like the petitioners could not arise. thus the main question for consideration that arises here is whether the first respondent who had notified a scheme for cash compensatory assistance to garment exporters which was introduced for the period from 1.4.1978 to 31.3.1979 could be withdrawn on 1.1.1979 as has been done by the first respondent and whether the first respondent is bound by the principle of promissory estoppel to pay such cash compensatory assistance to those garment exporters like the petitioners who had manufactured garments in the hope of getting such benefit and in fact exported the same after 1.1.1979 till 31.3.1979. 5. according to the petitioners, since..........council which has been entrusted by the union government, ministry of commerce for giving export assistance for cotton textiles. the rate of such assistance was decided by the said export promotion council for the period 1.4.1978 to 313.1979. the terms and conditions of their assistance were informed to all garment exporters. the petitioners, relying on the said announcement, began to prepare for the export by buying huge stocks of cloth and cutting then in various expos! garment specifications and the quantities as and when they were ready duly exported to the foreign buyers. the petitioners firms and other exporters received a circular from the export promotion council informing the exporters of the constitution of a sub-committee under the chairmanship of shri b.l. dass,.....
Judgment:
ORDER

Ramanujam, J.

1. Since the points involved in both the writ petitions are the same, they are dealt with together.

2. The petitioner in each of these writ petitions is carrying on garment export business at Madras. They have been granted necessary export quota on the strength of their past export performance. The nature of their export business involves considerable preparatory work. The requisite quality cloth has to be purchased in bulk in advance and the cloth has to be cut into pieces as per the designs required by the foreign purchaser and stitched as export garment. The foreign contract for purchase has to be concluded sufficiently early so that there could be no delay in shipping for export.

3. The Cotton Textiles Export Promotion Council which has been entrusted by the Union Government, Ministry of Commerce for giving export assistance for cotton textiles. The rate of such assistance was decided by the said Export Promotion Council for the period 1.4.1978 to 313.1979. The terms and conditions of their assistance were informed to all garment exporters. The petitioners, relying on the said announcement, began to prepare for the export by buying huge stocks of cloth and cutting then in various expos! garment specifications and the quantities as and when they were ready duly exported to the foreign buyers. The petitioners firms and other exporters received a circular from the Export Promotion Council informing the exporters of the constitution of a sub-committee under the Chairmanship of Shri B.L. Dass, Joint Secretary, Ministry of Commerce to streamline the procedure for disbursement of cash assistance to the exporters of cotton textiles. The period of validity of the said scheme of assistance was from 1.4.1978 to 31.3.1979. All of a sudden, the petitioners learnt from th6 Clothing Manufacturers Association of India that it has been decided that the cash compensatory support applicable to the export of garments will be discontinued with effect from 1st January, 1979. The Petitioners' contention is that the Union Government has no, jurisdiction to withdraw the export compensation scheme retrospectively when the validity of the scheme is upto 31.3.1979 and that whatever exports had been made will be entitled to have the benefit of the said scheme notwithstanding its withdrawal. It is also contended by the petitioners that the Union Government is bound in law to make good its representation that it will make compensatory payments on the strength of which the petitioners had incurred very huge sum of Rs. 40 lakhs upto March, 1979 to implement the scheme for the period of its validity and that the doctrine of promissory estoppel will apply to this case. Thus the petitioners' main contention is that once the scheme providing compensatory support on specified items of garment which have been exported has been introduced for the period from 1.4.1978 to 31.3.1979 and the exporters like the petitioners having acted upon the terms of the said scheme, the benefit of the scheme cannot be withdrawn in the middle of the period and that in any event, notwithstanding the withdrawal the Government is bound by the doctrine of promissory estoppel and that, therefore, the exports made during the period are entitled to get the benefit of the said compensatory support scheme.

4. In the counter affidavit filed by respondents 1 and 2, the Union of India and 'he Cotton Textile Export Promotion Council, Bombay it has been averred that the cash assistance having been withdrawn with effect from 1.1.1979 in the case of give varieties of garments, the petitioners are not entitled to seek any cash assistance for exports is not granted directly to exporters by the Government (sic), that the scheme of cash assistance for cotton textiles exports was being operated by the Indian Cotton Mills Federation, Bombay on a voluntary basis and that, therefore, the petitioners cannot complain of the withdrawal of the said scheme. In the counter affidavit it has been admitted that from April, 1968 the Government decided to contribute purely on a voluntary basis to the Export Promotion Fund at the rate of 5% of FOB value of all exports of cotton textiles, that this assistance was sanctioned to supplement the contribution made by the mills themselves under the Indian Cotton Mills Federation's self-supporting incentives scheme then in existence subject to the industry's own sanctioned for one year was extended on a year to year basis until it was withdrawn with effect from 1.1.1979 for five varieties of garments. In the counter affidavit it has been denied that the petitioner made ready huge quantities of garments for export and that the stocks of garments for export were built up only in the expectation that cash assistance would be available and that in any event, the petitioners should have acted as prudent businessmen and should not have proceeded to produce goods despite the withdrawal of the assistance and that the right of the first respondent to grant or withdraw the assistance could not be made to depend upon whether or not exporters have begun manufacturing garments for export. It has been claimed in the counter affidavit that the withdrawal of cash assistance was in exercise of sovereign executive power and that it was done after due deliberation and consideration of all relevant factors and the question of giving any prior intimation before withdrawing the scheme to exporters like the petitioners could not arise. Thus the main question for consideration that arises here is whether the first respondent who had notified a scheme for cash compensatory assistance to garment exporters which was introduced for the period from 1.4.1978 to 31.3.1979 could be withdrawn on 1.1.1979 as has been done by the first respondent and whether the first respondent is bound by the principle of promissory estoppel to pay such cash compensatory assistance to those garment exporters like the petitioners who had manufactured garments in the hope of getting such benefit and in fact exported the same after 1.1.1979 till 31.3.1979.

5. According to the petitioners, since originally the scheme was introduced for the period 1.4.1978 to 31.3.1979, they manufactured garments for export throughout the said period and in view of the sudden withdrawal of the scheme with effect from 1.1.1979 there were huge stocks left on 1.1.1979 which were exported later between 1.1.1979 to 31.3.1979 and, therefore, since the petitioners have acted upon the terms of the scheme which was in force from 1.4.1978 to 313.1979 and have suffered a detriment, the Government is bound by the principle of promissory estoppel and they cannot deny the benefit of that scheme for the exports made between 1.1.1979 to 31.3.1979. The petitioners claim that they have exported garments to the value of Rs. 40 lakhs between 1.1.1979 to 31.3.1979 and in respect of those exports they will be entitled to the cash assistance under the scheme in a sum of Rs. 4 lakhs.

6. It cannot be disputed that as per the original scheme notified, the scheme was to be in force for the whole period, that is from 1.4.1978 to 31.3.1979 but it was suddenly withdrawn in the middle of the year. The petitioners assert that since the scheme was to be for the whole year, they have made preparations for the purchase of cloth and manufacture garments as per the specifications of the foreign buyers even prior to 1.1.1979, the date of withdrawal of the notification and that they have already acted upon the scheme earlier notified, it is not open to the respondents to deny the benefit under the scheme for the exports made by the petitioners for the period from 1.1.1979. The petitioners rely on the decision of the Supreme Court in Union of India v. Anglo Afghan Agencies AIR 1968 SC 718, where on more or less similar facts the Supreme Court has held that the Government is bound by the principle of promissory estoppel and they are bound to carry out the promise made by them if the promise has been acted upon by the other party. In that case the Central Government had evolved an import trade policy which was notified. In the year 1962 it promulgated the Export Promotion Scheme providing incentives to exporters of woollen textiles and goods. It provided for the grant to an exporter, certificates to import raw materials of a total amount equal to 100% of the F.O.B. value of his exports. Clause 10 of the scheme provided that the Textile Commissioner could grant an import certificate for a lesser amount if he is satisfied, after holding an enquiry, that the declared value of the goods exported is higher than the real value of the goods. The scheme was extended to exports of woollen textiles and goods to Afghanistan. A company by name Indo-Afghan Agencies Limited exported woollen goods to Afghanistan and were issued an import entitlement certificate by the Textile Commissioner not for the full F.O.B. value of the goods exported, but for a reduced amount. Its representations to the Central Government having failed, filed writ petitions in the High Court and the High Court set aside the orders of the Textiles Commissioner and the Government and held that the respondents therein were entitled under the scheme to obtain import licences for an amount equal to 100% of the F.O.B. value of their exports, unless it was found on enquiry duly made under Clause 10 of the scheme that the respondents had by over-invoicing the goods disentitled themselves to the import licences of the full value. The matter was taken to the Supreme Court by the Union of India on the ground inter alia that the Government on grounds of executive necessity was the sole judge of the validity of its action in matters relating to Import and Export Policy, because the policy depended upon the economic climate and other related matters and had to be in its very nature flexible with power to modify or adjust it as the altered circumstances necessitate it. The Supreme Court held that the Government is not exempt from liability to carry out the representation made by it as to its future conduct and it cannot on some undefined and undisclosed ground of necessity or expediency fail to carry out the promise solemnly made by it; nor can it claim to be the judge of its own obligation to the citizen on an ex parte appraisement of the circumstances in which the obligation had arisen. The Supreme Court also held that even if the import trade policy is only executive or administrative in character, courts have power in appropriate cases to compel performance of the obligation imposed by the Scheme upon the departmental authorities. It was further held that the executive necessity, if any does not release the Government from honouring its solemn promise relying on which citizens have acted to their detriment and that where a person has acted upon representations made in an Export Promotion Scheme that import licence upto the value of the goods exported will be issued and had exported goods his claim for the import certificate for the maximum value permissible by the Scheme cannot be arbitrarily rejected. To the same effect is the decision in Robertson v. Minister of Pensions (1949) I KB 227 where Lord Denning observed:

The Crown cannot escape by saying that the estoppels do not bind the Crown for that doctrine has long been exploded. Nor can the Crown escape by praying in aid the doctrine of executive necessity, that is, the doctrine that the crown cannot bind itself so as to fetter its future executive action.

We are in this case not concerned to deal with the question whether Denning, LJ. was right in extending the rule to a different class of cases as in Falmouth Beat Construction Co. Ltd v. Howell (1950) I All ER 538, where he observed at page 542.

Whenever Government Officers in their dealings with a subject take on themselves to assume authority in a matter with which the subject is concerned, he is entitled to rely on their having the authority which they assume. He does not know, and cannot be expected to know, the limits of their authority, and he ought not to suffer, if they exceed it.'

The principle laid down in the above decisions will squarely apply to the facts in this case. In this case also an export compensation scheme was notified to all the exporters assuring them that they will get the benefit of that scheme in respect of their exports of garments during the period from 1.4.1978 to 31.3.1979. On the basis of that assurance exporters like the petitioners had made arrangements for the purchase of cloth and manufacture of garments for the purpose of export. In the middle of the year the scheme has been given up so as to make the exports after 1.1.1979 disentitle to the benefit of the scheme. Therefore the petitioners have acted to their detriment relying on the scheme notified by the respondents. Since the petitioners have suffered a detriment relying on the notification, the respondents are bound to give effect to the scheme in respect of the exports made after 1.1.79 to 31.3.1979 as per the said decision of the Supreme Court.

7. However, in this case the petitioners have asserted in the affidavit that they have exported garments to the value of Rs. 40 lakhs and, therefore, they are entitled to the cash assistance of Rs. 4 lakhs under the said scheme. The respondents have to verify the factual position and determine the quantum of assistance based on their export of garments for the three months period from 1.1.1979 to 31.3.1979. Since the relief to which the petitioner in each of these writ petitions will be entitled will have to depend on the value of the exports made during 1.1.79 to 31.3.1979, the writ petitions are allowed as against the first respondent alone and the order dated 6.1.79 of the first respondent in quashed with a direction to the first respondent to implement the scheme of export assistance upto 31.3.1979 in respect of the actual export of garments during the period from 1.1.1979 to 31.3.1979. The petitioners will have their costs from the first respondent counsel's fee Rs. 500/- (one set).

(Memo of costs and Writ of Certiorarified Mandamus will follow)


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