WP/27177/2014 of GMR Hotels and Resorts Ltd., Vs The Union of India on 30 December 2014

ORDER:

The petitioner is 100 % subsidiary holding company of GMRHyderabad International Airport Limited (for short referred to as GHIAL). Petitioner is one of the group companies of GHIAL. In recognition of exportscarried out by the petitioner, competent authority issued ‘Duty Credit scrips’dated 4.7.2013 in all thirteen in number worth Rs.1,25,56,045/-, which can beencashed while importing goods specified in the ‘Served From IndiaScheme’. These scrips are transferable within the group company. Therefore, petitioner requested the Director General of Foreign Trade topermit utilisation of scrips by GHIAL. Petitioner submitted a representationdated 20.12.2013 requesting to grant such permission. In response, by letterdated 12.2.2014, the petitioner was asked to furnish documentary evidenceas per para 9.28 of the Foreign Trade Policy for the years 2009-2014 dulyattested by Registrar of Companies to process the case further. Onapplication, the Registrar of Companies, informed that no such certificate canbe issued. Therefore, a certificate from M/s. Brahmayya & Company,Chartered Accountant of GHIAL was obtained and submitted in lieu ofrequirement of certificate of attestation from the Registrar of Companies. Byproceedings dated 22.7.2014, petitioner was informed that request fortransferability of ‘Duty Credit scrips’ under the ‘Served From India Scheme’ to GHIAL was rejected on the ground that petitioner is not holding more than26 % of the shares in GHIAL, which is a mandatory requirement as perpolicy. Aggrieved thereby, this writ petition is instituted.

2. Heard Sri E. Manohar, learned senior counsel appearing onbehalf of petitioner and Sri B. Narayana Reddy, learned Assistant SolicitorGeneral for respondents.

3. Learned senior counsel contended that GMR Hotels and ResortsLimited-petitioner herein is 100 % holding company of GHIAL and controlsthe affairs of the petitioner company in all respects. It is a group companyand therefore it is permissible for one company to transfer the scrips as perthe Foreign Trade Policy to another in the group company. Learned seniorcounsel further contended that on literal reading of para 3.2.7 read with para 9.28 of Foreign Trade Policy 2009-14 makes it clear that petitioner cantransfer the scrips to GHIAL. When the policy is clear and unambiguous, theDirector General cannot apply his own interpretation to the said term of thepolicy nor the Policy Interpretation Committee can give wholly a differentmeaning to what is contained in para 3.2.7 read with para 9.28 of ForeignTrade Policy. Therefore, any such clarification given by the PolicyInterpretation Committee, is wholly illegal, without jurisdiction andcompetency and rejection of the request of the petitioner on the ground thatpetitioner does not hold minimum 26 % share holding in GHIAL is contrary toForeign Trade Policy.

4. Learned senior counsel further contended that the scheme is abeneficial provision and has to be liberally construed. The scheme is toencourage foreign trade. Thus, facility of utilisation of scrips obtained onaccount of such foreign trade carried out by one company be utilised byanother company is also intend to encourage foreign trade. This encouragesthe group companies to actively involve in foreign trade and earn goodreturns. The interpretation placed by the Policy Interpretation Committee andapplied by the Director General is erroneous and contrary to very spirit of theforeign trade policy. Placing reliance on COMMISSIONER OF CENTRAL

EXCISE, BHOPAL Vs MINWOOL ROCK FIBRES LIMITED[[1]] learnedsenior counsel contended that circulars /clarifications are not binding on theCourt and Court is competent to construe the provision as such withoutregard to a clarification. Learned senior counsel therefore contends thatinterpretation placed by the Policy Interpretation Committee was erroneousand same can be ignored and benefit of provision contained in para 9.28 ofthe policy should be extended to the petitioner to enable the petitioner totransfer the scrip to its holding company.

5. Learned Assistant Solicitor General placing reliance on theaverments in counter affidavit contended that para 9.28 envisages that agroup company must have 26 % or more voting rights in other enterprise towhich the benefit of exports account can be transferred in accordance withForeign Trade Policy. The interpretation placed by the Policy Interpretation Committee is in tune with the provisions contained in para 9.28 of the ForeignTrade Policy. The Director General of Foreign Trade consistently holdingthat a group company which does not have 26 % of the share holding inanother company cannot transfer the scrips issued to it on account of exportscarried out, to that other company.

6. The decisions given by the Policy Interpretation Committee andapplied by the Director General are enclosed to the counter. In cases of M/s.Tata Teleservices Maharastra Limited and M/s.Essar Oil Limited, the facts areidentical and request was rejected by applying the provisions in para 9.28 ofthe Foreign Trade Policy strictly. He therefore submits that decisioncommunicated to the petitioner is valid and is not erroneous nor illegal orarbitrary warranting interference by this Court.

7. With an objective to facilitate imports and to augment export,Foreign Trade (Development and Regulation) Act, 1992 (Act 22 of 1992) wasmade. From time to time Central Government notifies Foreign Trade Policy(FTP). Last such policy was notified in the year 2009 operative for a periodfrom 2009 to 2014. Wherever necessary, changes were effected in themeantime. The policy sets out Government agenda to promote foreigntrade. The Foreign Trade Policy is divided into 10 chapters. Each of thechapter deals with each of the aspects of foreign trade. In this case relevantparas are paragraph 2.3 of Chapter 2, 3.12.7 of Chapter 3 and Para 9.28 ofchapter 9.

8. Chapter 2 deals with general provisions regarding imports andexports. According to para 2.3(a) the decision of DGFT is final and bindingon all matters relating to interpretation of policy. Policy interpretationcommittee (PIC) aids and advices him in this regard.

9. Chapter 3 deals with promotional measures. As part ofpromotional measures, Served from India Scheme (SFIS) was launched. Objective of the scheme is to accelerate growth in export of services to createpowerful and unique “Served From India” brand. Person qualified to avail theSFIS is entitled to Duty Credit sops equivalent to 10 % of free foreignexchange earmarked during the financial year. Duty credit sops can be utilised for import of certain capital goods/for payment of duty on import ofcertain vehicles/ for import of consumables /for payment of excise duty forprocurement from domestic sources in respect of items permitted for importunder SFIS duty credit scrip.

10. Chapter 9 provides for definitions on terms used in the FTP. Para 9.28 defines ‘Group Company’ as under:

“9.28 Group Company : “Group company” means two or moreenterprises which, directly or indirectly, are in a position to:- (a)Exercise twenty six percent, or more of voting rights in otherenterprise; or (b) Appoint more than fifty percent of members ofboard of directors in the other enterprise.

For group companies to claim benefits or have their exportscounted for benefits to be claimed by another member of group, thegroup company should have been in existence at least 2 yearsprior to date of application under any of export promotion schemesnotified in Foreign Trade Policy.”

11. Cumulative reading of objectives of the Act and the FTP, moreparticularly various incentives incorporated in Chapter 3, would show thatCentral Government is giving lot of impetus to encourage exports, moreparticularly in service sector. As part of this impetus, the Duty Credit Scripsare issued as incentive. As per para 3.12.7, normally Duty Credit Scrips arenot transferable but within the group companies, the said scrips can betransferred. While granting relaxation of conditions of non-transferability ofDuty Credit Scrip within group companies, it has not put any furtherrestrictions. Para 9.28 only deals with definition of term ‘Group Company’. O n reading of this definition, it would mean that to qualify to be a groupcompany, an enterprise must have minimum of 26% or more voting rights orin a position to appoint more than 50% of Board of Directors in anothercompany. It does not envisage that the company which earned Duty CreditScrips alone should hold 26 % or more voting rights or has power to appointmore than 50 % of Board of Directors in the other company. On a plainreading, neither the provision in para 3.12.7 nor definition in para 9.28 seeksto restrict transfer of Duty Credit Scrip from a group company to anothercompany based on holding capacity as understood by the Director General of Foreign Trade. Chapter 3 and more particularly para 3.12 deals withincentive scheme for export of services and is a beneficial scheme. Suchbeneficial scheme must receive liberal construction. The petitioner companyavailed the SFIS and earned Duty Credit Scrips. When relevant provisiondoes not impose any restriction on transferability of Duty Credit Scrips byinvoking power of interpretation, Director General of Foreign Tradecannotintroduce something which is not envisaged and impose an additionalrestriction. The Director General of Foreign Trade has only power tointerpret the existing clauses but cannot seek to amend or alter the ForeignTrade Policy terms. The impugned decision amounts to altering the terms of‘Served From India Scheme’ and is in excess of power and jurisdictionvested in him.

Conclusion

For the foregoing reasons, the impugned proceedings dated 22.7.2014is set aside and second respondent is directed to receive served from IndiaDuty Credit scrip No.09100566123 dated 4.7.2013 and transfer the same infavour of GMR Hyderabad International Airport Limited in terms of ForeignTrade Policy 2009-2014, if necessary by extending the period of validity for afurther period of six months from 3.1.2015.

Accordingly the writ petition is allowed. No costs. Having regard tothe same, miscellaneous petitions are closed.

DATE: 30.12.2014TVKNote: L R copy to be marked-- Yes ______________

P NAVEEN RAO,J

Date : 30-12-2014

[1](2012) 3 SCC 518