Case Note & Summary
The dispute pertained to the change in the export and import policy for readymade garments by the Union of India. The petitioners were exporters of readymade garments to various countries and challenged the withdrawal of the Manufacturer Export Entitlement (MEE) and Non-quota Exporters Entitlement (NQE) quotas under the 1994-95 export policy. The export and import of goods was governed by the Foreign Trade Development Regulations Act, 1992. The Government of India, Ministry of Commerce, formulated the 1994-95 export policy for readymade garments through notification No.1 1-29-93 dated September 4, 1993, which classified allotments under Past Performance Entitlement (PPE), Manufacturer Export Entitlement (MEE), and Non-quota Exporters Entitlement (NQE). Following the Uruguay round of GATT negotiations and the Agreement on Textiles and Clothing (ATC), India committed to phase out quotas by December 2004 and introduced changes effective January 1, 2005. Consequently, the Government introduced a new export policy effective January 1, 1996, initially notified on November 28, 1995, which totally withdrew MEE and NQE systems and provided only two methods: Past Performance Entitlement (PPE) at 80% and First Come, First Serve (FCFS) at 20%. The petitioners challenged this policy change in the High Court on three grounds, including promissory estoppel and legitimate expectation. The Madras High Court Division Bench, by judgment dated March 7, 1996, in writ petitions 17490 and batch and 147/96 and batch, negatived all three contentions. The petitioners then filed special leave petitions before the Supreme Court. The main legal issue was whether the Government was bound by the previous export policy or could revise it in view of changed potential foreign markets and the need for earning foreign exchange, and whether the doctrines of promissory estoppel and legitimate expectation barred the withdrawal of MEE and NQE quotas. The petitioners argued that the Government had promised to grant MEE and NQE quotas, including to those who upgraded quality by purchasing new machines, and that the respondents were estopped from resiling from such promise to their detriment. The respondents/Union of India contended that the change in policy was necessitated by the GATT agreement and ATC commitments, that the MEE system was beset with floods of false declarations of productive capacity by unscrupulous traders, and that NQE incentives led to indirect subsidisation causing foreign buyers to prefer other countries, resulting in severe suffering in clothing exports from 1994 onwards. Therefore, the Government abolished NQE and MEE to preserve genuine quota exporters under PPE and FCFS. The Supreme Court reasoned that the power to lay policy by executive decision or legislation includes the power to withdraw the same unless there is mala fide exercise of power or abuse of power. The doctrine of legitimate expectation plays no role when the appropriate authority is empowered to take a decision by an executive policy or under law. In matters of economic policy, courts give large leeway to the executive and legislature. An applicant has no vested right to have export or import licences in terms of policies in force at the date of making application; grant of licence depends upon the policy prevailing on the date of grant. The Court held that the Government is not bound by a policy existing on the date of application for all times to come and is entitled to revise the policy in public interest. Accordingly, the Supreme Court dismissed the special leave petitions, holding that the petitioners had no vested or accrued right for issuance of permits on MEE or NQE and the Government was not barred by promises or legitimate expectations from evolving the new policy. The petitioners would get their legitimate expectations accomplished in accordance with either of the two new schemes subject to satisfying the conditions required.
Headnote
A) Constitutional Law - Administrative Law - Promissory Estoppel and Legitimate Expectation in Economic Policy - No promissory estoppel against withdrawal of export-import policy when change is in public interest - Foreign Trade Development Regulations Act, 1992 - The petitioners claimed that the Government promised MEE and NQE quotas and could not resile; the Court held that the doctrine of legitimate expectation plays no role when the authority is empowered to take a decision by executive policy or under law, and in matters of economic policy the Court gives large leeway to the executive. Held that the Government is not barred by promises or legitimate expectations from evolving new policy. B) Constitutional Law - Administrative Law - Vested Right in Licences - No vested or accrued right to export/import licences under Foreign Trade Development Regulations Act, 1992 - An applicant has no vested right to have export or import licences in terms of the policies in force at the date of making application; grant of licence depends upon policy prevailing on the date of grant. Held that petitioners had no vested or accrued right for issuance of permits on MEE or NQE, nor is Government bound by previous policy. C) Constitutional Law - Administrative Law - Executive Power to Revise Policy - Power to lay policy includes power to withdraw unless mala fide or abuse of power under Foreign Trade Development Regulations Act, 1992 - The power to lay policy by executive decision or legislation includes power to withdraw the same unless mala fide exercise of power or decision taken is in abuse of power; when Government satisfied change in policy necessary in public interest, it is entitled to revise and lay down new policy. Held that the Court would not bind Government to a policy existing on date of application; new policy of PPE 80% and FCFS 20% is valid.
Issue of Consideration
Whether the Government is bound by the previous export policy or can revise its policy in view of changed potential foreign markets and the need for earning foreign exchange; whether the doctrine of promissory estoppel and legitimate expectation barred the withdrawal of MEE and NQE quotas and introduction of new PPE/FCFS policy.
Final Decision
The special leave petitions are dismissed. The Court held that the petitioners have no vested or accrued right for issuance of permits on MEE or NQE, nor is the Government bound by its previous policy. It would be open to the Government to evolve new schemes and the petitioners would get their legitimate expectations accomplished in accordance with either of the two new schemes subject to satisfying the conditions. The High Court was right in concluding that the Government are not barred by promises or legitimate expectations from evolving new policy.
Law Points
- The power to lay policy by executive decision or legislation includes power to withdraw the same unless mala fide or abuse of power
- doctrine of legitimate expectation plays no role when appropriate authority is empowered to take a decision by executive policy or under law
- in matters of economic policy
- court gives large leeway to executive and legislature
- an applicant has no vested right to have export or import licences in terms of policies in force at date of application
- grant of licence depends upon policy prevailing on date of grant
- prior decision would not bind Government for all times to come
- Government entitled to revise policy in public interest and issue
- withdraw or modify export or import policy.
