The Hindu Business Line : HC quashes DGFT order

The Bombay High Court has quashed an order of the Director General of Foreign Trade (DGFT) that rejected a plea from a skimmed milk powder (SMP) exporter to fulfil its commitments to buyers abroad after the Centre imposed a ban on milk and SMP exports on February 9.

In its order, a bench comprising Mr Justice Swatanter Kumar and Mr Justice S.C. Dharmadhikari, asked the DGFT to hear the exporting firm Parag Milk and Milk Products again and allow the exports within three weeks. The Court was disposing of a writ filed by Parag Milk challenging the ban after the DGFT had rejected its plea on an earlier order asking it to consider the firm’s request.

Stating that the DGFT’s order was not in conformity with settled canons of law, the bench said the ban order was not retrospective and, therefore, the firm’s request should not have been turned down.

According to Parag Milk and Milk Products, it had open three irrevocable letters of credit for export of SMP to buyers in Thailand, France on January 24 and 31 this year. It had agreed to supply 1,000 tonnes of SMP each to these buyers every month until May 2007 and February 2008, respectively. Besides, the company said it had expanded its SMP business and it made up 12 per cent of its total exports.

When the company initially moved the Court, the Centre on March 16 was asked to hear the petitioner and pass an order. But the Commerce Ministry failed to pass any order and the court was approached again. This time, too, the court asked the Centre to examine the issue expeditiously following which the DGFT passed the order barring export.

(The ban on milk and SMP exports runs till September 30 but the Centre has eased it after milk prices stabilised.)

The bench said when the letters of intent were issued in favour of Parag Milk, there was no ban in force. Therefore, the petitioner had the right to export SMP. Stating that the expression “export obligation” as defined in the Foreign Trade Policy had to be given a cogent meaning, it said unnecessary restricted meaning should not be attached to it.

Also, the Union Cabinet Committee, while deciding to go for the ban on February 1, had given power to the authorities to examine case-by-case and permit discharge of existing export obligation.

“The authorities concerned in their wisdom retained unto themselves power to permit such export. This, it was not the intent of the authority to operate the absolute ban even in relation to the existing liability,” it said.

Stating that the Government has powers to decide policies and take action, it said these, however, were expected to be in conformity with law and not arbitrary or ultra vires.

The court said the DGFT had refused export permission, despite Parag Milk offering to restrict its shipments to 5,000 tonnes. It, however, did not make any comment on the ban order as the petitioner in his initial writ did not challenge it.