By TIOL News Service

AHMEDABAD, APR 27, 2014 : PETITIONERS have challenged the action of the respondents in restricting the Letter of Permission {"LOP" for short} granted in favour of the petitioners as also a decision of the Board of Approval dated 8th October 2013 by which the Board refused to accept the petitioners' representation to withdraw the restrictions on the LOP. The petitioners have also challenged para 7 of Appendix 14IC of the Exim policy as being ultra vires Articles 14, 19(1)(g) of the Constitution of India. There are consequential prayers but all revolve around these main two challenges.

The petitioner No. 1 is a company registered under the Companies Act, 1956. The petitioner No. 2 is its Chairman and Managing Director. The petitioners are engaged in the business of manufacture of textile products like fibers and clips and are recognized as 100% Export Oriented Undertaking [" EOU " for short].

On 1st October 1997, the Government of India granted LOP to the petitioners which was subject to the conditions contained in such letter as well as in a separate annexure annexed to the LOP.

At the end of the period of validity of first LOP, the petitioners were granted periodic extensions, the last one on 29th November 2010 granting extension up to 23rd October 2015.

In spite of the extension up to 23rd October 2015, the petitioners received a letter from Deputy Development Commissioner {I/C} , Kandla Special Economic Zone dated 28th September 2012 informing them that the validity of the LoP has been curtailed from 23.10.2015 to 31.03.2013.

The petitioners, therefore, approached this Court challenging the abrupt restriction on the validity of the LoP . The Court, by an order dated 6th March 2013 granted ad interim relief to the petitioners. Eventually, the writ petition was disposed of by an Order dated 26th June 2013 requiring the petitioners to make a detailed representation to the Board of Approval and the Board of Approval to decide such representation within the time frame, after granting personal hearing to the petitioners.

The Board rejected the representation and so the petitioner is again before the High Court.

The High Court observed,

Could the validity of LoP be curtailed ? In this respect, our answer is to be in the negative, and it is so for the following reasons -

After granting LoP in the year 1997, the same was extended from time to time. First extension was made in the year 2000. Thereafter in 2005, for a further period of five years. When this extension was granted on 25th May 2005, the change in policy had already been brought into effect despite which, for the reasons best known to the respondents, extension for a period of five years was granted. Even after completion of these five years, fresh extension was granted by an order dated 29th November 2010. Thus, being fully aware of the limitations of the new policy, two extensions were granted. By the last extension, the period or LoP was extended upto 23rd October 2015.

It was only while examining extension application of another unit engaged in the same activity that the Board of Approval suddenly woke up to an idea that several other units carrying out same activity, extension has been granted despite change in the policy. At one stage, therefore, unilaterally and without hearing the petitioners and other similarly situated units, BoA terminated their LoPs . When the High Court quashed such order and placed the matter back before the BoA , in the fresh round after hearing the petitioners, such termination was made effective w.e.f 30th September 2013.

The petitioners had raised detailed submissions before the Board of Approval as well as before us with respect to the promissory estoppel.

In the present case, as we have noticed, the petitioners were granted LoP for manufacturing yarn as an EOU , which permission is effective upto 23rd October 2015. Though right from the year 2004, a conscious decision was taken not to permit such activities in the EOU , two extensions were granted to the petitioners, after such a change in the policy. Thus, as a conscious decision, the respondents twice permitted the petitioners to carry on the same activity as an EOU . It was only when another unit engaged in the same activity, also an EOU , applied for fresh extension in the year 2012 that the competent authority decided to terminate all such licenses of similar industries, even without granting them opportunity of hearing. The case of M/s. Prayas Industries was for grant of an extension. The said case could not have been equated with that of the petitioners in whose case, the extension was already granted. May be, after the period of extension is over on 23rd October 2015, the respondents may implement the Government policy to derecognize such unit as EOU , if that is what the uniform decision to apply in all cases is. However, when the petitioners were granted such extension and on the basis of which, the petitioners would and in the present case, as stated by the petitioners had, managed its affairs, it would not be open for the respondents to curtail the period of licence merely on the ground that the policy of the Government of India does not permit such activity to a unit covered under EOU scheme.

In the modern day, the complex requirements of import export and manufacturing activities would require a certain prospective planning. When an industrial unit is conveyed that its licence /permission for carrying on a certain activity is valid for a period of five years, such a unit would be in a position to manage its affairs on such basis. In the present case, the activity would require import of used clothes, extracting yarn from such clothes and reexporting such yarn. This would not only require fine tunning of import of the raw materials, having export orders on hand but also require executing the order which would require deployment of manpower and machineries. It is pointed out that for such purpose, the petitioners had made substantial investments and also employs on regular basis hundredths of the workers - many of them are women workers. Such prospective planning would require not only capital investment but also engaging manpower on permanent or semipermanent basis. When such investment, expansion of the facilities for manufacturing and deployment of manpower is based on a licence extended at a time for a period of five years, its abrupt curtailment without there being any change in policy or any public interest involved in doing so, would be hit by the principle of promissory estoppel. In the present case, the only excuse offered for curtailment of the period is that though the policy had already changed years back, in the year 2004, the same was not implemented with any rigour . When two extensions were granted to the petitioner, even after the change in the policy, such reason put forth by the respondents would hold no validity.

The Petition is allowed to the limited extent of striking down the order of the authority dated 8th October 2013 and by further providing that the LoP in case of the present petitioners shall continue to be valid till 23rd October 2015 ie ., the full period of its validity and upto such period, the respondents shall not prevent the petitioners from carrying out its above mentioned activities.

(See 2014-TIOL-574-HC-AHM-EXIM)