DGFT Notification Prohibiting Export Of Non-Basmati White Rice Can't Have Retrospective Effect: Andhra Pradesh High Court

The Andhra Pradesh High Court has held that the trade notification issued by the Directorate General of Foreign Trade (DGFT) prohibiting export of non-basmati white rice cannot have retrospective effect.

The bench of Justice Ninala Jayasurya has observed that the Foreign Trade (Development and Regulation) Act-1992 does not confer any right to the authorities/department or enable them to issue any notification that has the effect of imposing prohibition with retrospective effect or take away the vested rights accrued to the petitioners by virtue of the Foreign Trade Policy, 2023, prior to the issuance of the notification.

All the petitioners are engaged in the business of procurement and export of rice. They entered into supply contracts with their foreign buyers on different dates for export of the non-Basmati India white rice for the quantities mentioned in the respective contracts and agreements. The foreign buyers have issued irrevocable Letters of Credit in favor of the petitioners, who in turn, to fulfill the contractual obligations, placed purchase orders on their local suppliers for procuring the rice. The petitioners are required to supply the agreed quantities as per the schedule mentioned in the agreements and contracts.

On 20.07.2023, the department issued Notification No. 20 of 2023 prohibiting export of non-Basmati white rice (semi-milled or wholly-milled rice, whether or not polished or glazed) with immediate effect. Subsequently, the department issued Trade Notice No. 23 of 2023, dated 18.08.2023, clarifying certain conditions in Para No. 2 of the Notification dated 20.07.2023.

The petitioners have challenged the action of the department/respondent in issuing Notification No. 20 of 2023 dated 20.07.2023 and the clarification in Trade Notice No. 23/2023 dated 18.08.2023.

The issue raised was whether the impugned notification is in conformity with the Foreign Trade Policy, and if not, the same is liable to be set aside. Whether the policy can be given retrospective effect and allowed to take away the vested rights. Whether the policy decision can be set aside if the same is found arbitrary or violative of fundamental rights. Whether the policy decision can be interfered with, if the same is violative of principles of natural justice or the doctrine of legitimate expectation.

The petitioner contended that the notification is not in conformity with the Foreign Trade Policy-2023. Acting on the policy, which was in force, the petitioners have entered into contracts/agreements with the foreign buyers, secured Letters of Credit, and placed orders/procured the non-basmati white rice from the local dealers. The vested rights accrued to the petitioners by virtue of the policy that was in existence prior to the issuance of the notification cannot be taken away under the guise of a change in the policy, that too without any notice or opportunity to the petitioners.

The petitioner contended that notification is discriminatory in as much as the authorities, despite the petitioners having the Letters of Credit in their favor, are prohibiting them from exporting the non-Basmati white rice, whereas the exporters, who fulfilled the conditions, are permitted to export the same. He submitted that such a classification is without any rationale or the object sought to be achieved, i.e., prohibition of export of non-Basmati white rice in public interest.

The court held that the existing policy with regard to the export of non-Basmati white rice is changed in “public interest, and the export of the same is prohibited by carving out certain exceptions. Therefore, the notification cannot be held to be contrary to the foreign trade policy.

The court, while rejecting the petitioner's contention that the action of the department is arbitrary and hit by Article 14 of the Constitution of India, held that the petitioners are still at the stage of procurement of the non-Basmati white rice and they cannot be equated with those of exporters who made all arrangements for shipment.

The court disposed of the Writ Petitions holding that the Notification shall have prospective effect only and it shall not impede the petitioners' exports of non-Basmati white rice in fulfillment of their contractual obligations with the foreign buyers, provided the Letters of Credit are issued in their favor prior to 20.07.2023. It would be open to the concerned authorities to verify the genuineness of letters of credit in a given case.

Counsel For Petitioner: S.Srinivasa Reddy

Counsel For Respondent: B.Narasimha Sarma

Case Title: Sree Murali Mohana Boiled & Raw Rice Mill Pvt. Ltd. Versus UOI

Case No.: Writ Petition Nos. 33148, 32183, 33149, 33153, 33163, 33164, 33171, 33172, 33179 of 2023&168 of 2024

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