The Andhra Pradesh High Court has directed the Directorate General Of Foreign Trade (DGFT) not to obstruct non-basmati white rice exports in fulfilment of contractual obligations with foreign buyers if it possesses letters of credit prior to 20/07/2023.
The court noted that the petitioners /exporters had acted upon the existing Foreign Trade Policy-2023, entered into agreement / contracts with foreign buyers, pursuant to which the Letters of Credit were issued in their favour and therefore justified in raising the contention based on doctrine of legitimate expectation.
Facts
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 / agreements. The foreign buyers have issued irrevocable Letters of Credit in favour of the petitioners, who in turn and to fulfil 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/contracts.
On 20.07.2023, the DGFT issued Notification prohibiting export of Non-Basmati White Rice (semi milled or wholly milled rice, whether or not polished or glazed: other) with immediate effect.
The exporters contended that by virtue of the impugned Notification dated 20.07.2023, temporary export of Non-Basmati White Rice is permitted only if anyone of the conditions mentioned in Para No.2 of the said Notification are satisfied, but export of the Rice is not permitted in respect of the consignments pursuant to the contracts / agreements entered and irrevocable Letters of Credit issued in favour of the exporters, prior to the date of the Notification. Neither in the Notification nor in the subsequent Trade Notice No.23 of 2023 dated 18.08.2023, reasons as to why the export of Non-Basmati White Rice is prohibited have been assigned.
The exporters contended that most of the petitioners have stored substantial quantities of Non-Basmati Indian White Rice in different warehouses at different locations, he contends that as they were not permitted to export the agreed quantities of rice as per the contracts/agreements and Letters of Credit which are much prior to the impugned Notification dated 20.07.2023, the petitioners will have to contest International Arbitration proceedings that may be initiated by the Foreign Buyers by incurring huge expenditure and suffer adverse awards with heavy damages. That apart, the learned counsel submits that the petitioners will also have to face the legal consequences for failure to comply with the obligations in respect of the purchase orders placed on the local suppliers.
The department contended that the contractual obligations between the petitioners and their foreign buyers are adequately protected and the apprehensions of the petitioners with regard to damages / compensation / penal consequences-etc., are not well founded.
Conclusion
The court held that the Writ Petitions are disposed of holding that the impugned Notification shall have prospective effect only, in so far as the Writ petitioners are concerned, and the same shall not impede the petitioners’ exports of Non-Basmati White Rice in fulfilment of their contractual obligations with the foreign buyers, provided the Letters of Credit are issued in their favour prior to 20.07.2023.
Case Details
Case name: Sree Murali Mohana Boiled And Raw Rice Mill Private Limited V/S Union of India
Citation: Writ Petition No: 33148 Of 2023
Court: Andhra Pradesh High Court
Decision Date: 11/07/2024
Coram: Justice Ninala Jayasury
