Doing business with India

BL reports

The Supreme Court has ordered the Union Government to allow export of pulses by two firms, which were refused permission to send their consignments on the grounds that a ban had been imposed on such shipments from July 22.

Dismissing an appeal by the Centre against rulings of the Gujarat and Delhi High Courts, a bench comprising Mr Justice S.B. Sinha and Mr Justice Markandey Katju, said any prohibitive order promulgated by statutorily could only have prospective effect.

The bench, however, said the Delhi High Court order declaring a notification issued by the Centre on July 4 as ultra vires, was not sustainable. The July 4 notification permitted export of pulses for which irrevocable letter of credit had been opened before June 22, when the ban was decided to be imposed.

Contracts

The case relates to contracts for export of 415 tonnes of pulses signed by Asian Food Industries and for shipment of 3,000 tonnes of chickpea by Agri Trade India Services Ltd, which won a tender floated by the Trade Corporation of Pakistan.

Asian Food had received orders from the Gulf and executed contracts between April 22 and May 2. It also received 20 per cent of the contract amount totalling $2,94,942 as advance for supplying pulses. As per the contract, it had to ship 107 containers, of which 20 were sent between June 22 and 24. The rest were to be sent from Kandla Port between June 23 and June 26.

However, as the Centre took a decision to ban pulses export on June 22 and issued a notification on June 27. This led to the port authorities refusing to allow the consignments despite being cleared by the Customs authorities.

Permission refused

Subsequently, the Centre came up with a notification on July 4 allowing exports of contracts for which the LC were opened before June 22.

Though Asian Food took up the issue with various authorities, it was refused permission resulting in the firm moving the Gujarat High Court. The High Court in its order said the shipments should be allowed as the Customs authorities had cleared and permitted loading of the goods on the ship. Moreover, the bill of lading had also been filed.

In the other case, Agri Trade signed an irrevocable letter of credit on June 24 and on June 2, it filed invoices with the Customs authorities. But again, Kandla port authorities said they would not allow the shipment in view of the ban. A writ was then filed in the Delhi High Court, which asked the authorities to permit the shipment.

It's not difficult to see why a ban should only come to effect prospectively. Forcing people to break the perfectly legal contracts they entered into won't do any good for a country's reputation. Wonder why it's more difficult for some to see that it's equally bad for a government to force people not to get into some contracts in first place.