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2018 DIGILAW 694 (GUJ)

MESSRS ANITA EXPORTS v. UNION OF INDIA

2018-05-08

AKIL KURESHI, B.N.KARIA

body2018
JUDGMENT : B.N. KARIA, J. 1. By means of filing this writ application under Articles 14, 19, 226, 265 and 300A of the Constitution of India, the petitioners, inter alia, seek the following reliefs : “(A) to issue a writ of certiorari or any other appropriate writ, order or direction, quashing and setting aside the decision of the respondent no. 2 in rejecting the proposal for extension/renewal as recorded at item 78.5 (ii) of the minutes of meeting, held on 3rd July 2017 and the covering letter dated 14th July 2017 communicating the said decision with all consequential benefits and relief ; (B) to issue a writ of mandamus or any other appropriate writ, order or direction to the respondents, their servants and agents, to allow the request made by the petitioners vide letters dated 7th October 2013 and 30th October 2013 requesting extension/renewal of their Letter of Approval and to permit the petitioners to continue their operation for the factory located at the address shown in the cause title of the petition; (C) Pending hearing and final disposal of the present petition, be pleased to stay implementation and execution of the decision of the respondent no. 2 in refusing renewal and extension and be further pleased to direct the respondents, their servants and agents to allow the petitioner to continue their SEZ operations in accordance with the Letter of Approval dated 15th May 1996 with all facilities and benefits available under the SEZ Scheme. (D) An ex parte ad interim relief in terms of prayer 25 (C) above may kindly be granted.” 2. Brief facts of the case are as follows : Petitioner no. 1 is a partnership firm engaged in the business of reprocessing of plastic waste/scrap and also in manufacture of textile products from the used clothing, and whereas, the petitioner no. 2 is one of its partner (hereinafter referred to as, “the petitioner-firm”). The petitioner-firm has its manufacturing unit situated within Kandla Special Economic Zone (“SEZ” for brevity), since 1996. The petitioner-firm was earlier functioning under the name of M/s. Varsha Exports and then M/s. Anshita Exports. The petitioner firm was granted Letter of Approval (“LOA” for brevity) dated 15th May 1996 by the respondent-authorities permitting the petitioner to function within the SEZ for manufacture of plastic bags, etc., out of the plastic waste/scrap. The petitioner-firm was earlier functioning under the name of M/s. Varsha Exports and then M/s. Anshita Exports. The petitioner firm was granted Letter of Approval (“LOA” for brevity) dated 15th May 1996 by the respondent-authorities permitting the petitioner to function within the SEZ for manufacture of plastic bags, etc., out of the plastic waste/scrap. Subsequently, the said LOA was amended from time to time, permitting the petitioner-firm to manufacture reprocessed plastic agglomerates out of the waste and scrap and for recycling/reconditioning of the old and used clothes. The said LOA was subsequently divided into two separate permissions for both the aforesaid nature of works. Thus, upto 2005-2006, the petitioner-firm was extensively involved in both the business of recycling of plastic waste/scrap as well as in the production of textile products from the use clothes. However, by a communication dated 15th December 2005, the petitioner-firm was put to notice that respondent-Ministry would conduct a detailed examination of the Unit and thereafter, functioning of plastic recycling would be allowed for a short term. Thus, subject to inspection of the petitioner-firm’s unit, the respondent issued LOA for shorter periods intermittently between 2005-2006 and 2011-2012. Resultantly, it became difficult for the petitioner-firm to continue business in the normal course. However, on 17th September 2013, a policy regarding functioning of Units engaged in plastic recycling business came to be finalized and published, and as a consequence thereof, Ministry of Commerce & Industry call upon all the Zonal Development Commissioners for listing all the cases relating to extension of LOA of units engaged in the business of plastic reprocessing for consideration in a meeting. To the dismay of the petitioner-firm, its case was not put up for consideration before the Board of Approval, and whereas, case of 19 similarly situated units situated within Kandla SEZ and 9 units situated at other SEZs came to be considered by the Board of Approval for extension. Aggrieved petitioner moved the respondent no. 2 for extension, as was granted to other units. However, though put up for deliberation, the proposal for extension of the petitioners’ Unit was not recommended by the respondent no. 3, and therefore, the respondent no. 2 permitted the respondent no. 3 to withdraw the said proposal. The petitioner, therefore, addressed various letters to the respondent-authorities pointing out the error in withdrawing the proposal for extension, which yielded result in the form of recommendation by respondent no. 3, and therefore, the respondent no. 2 permitted the respondent no. 3 to withdraw the said proposal. The petitioner, therefore, addressed various letters to the respondent-authorities pointing out the error in withdrawing the proposal for extension, which yielded result in the form of recommendation by respondent no. 3 to the respondent no. 2 for renewing the LoA of the petitioner-firm. This was by a communication dated 28th October 2014. Ironically, the case of the petitioner was not put up before the respondent no. 2 for extension for a long time, followed by various reminders for granting extension. Ultimately, on 3rd July 2017, despite the recommendation by the respondent no. 3 for extension of petitioners’ LOA, the respondent no. 2 rejected the same, and hence, this writ petition. 3. Heard learned advocates for the respective sides. 4. Assailing the impugned action of the respondent-authorities of rejecting extension of LoA of the petitioner-firm, learned advocate Shri Paritosh Gupta appearing for the petitioners termed it as a gross disregard to the principles of natural justice, in asmuch as, the order of rejection not only having been passed without assigning any reasons, but no hearing has been granted to the petitioner before passing of the said order. 5. Counsel for the petitioners submitted that the said order clearly suffers from the vice of arbitrariness and non application of mind in asmuch as similarly situated units functioning well within the Kandla SEZ and other SEZs have been granted renewal and extension. 6. Counsel for the petitioner pointed out that the petitioner’s unit has been discriminated against without there being any rationale for the same. Counsel further pointed out that such unreasonable order of rejection would prejudicially affect the employment of workers engaged in the petitioner’s plastic unit. Not only that, counsel for the petitioner added that the huge amount invested by the partners of the petitioner-firm in the form of machinery, factory building, etc., would also go in waste. 7. In light of these facts, counsel for the petitioner-firm urged that the petitioners are legally eligible and entitled to carry on with the business of plastic reprocessing, as has been permitted to other Units. 8. Lastly, counsel for the petitioner-firm urged this Court to quash and set-aside action of the respondent no. 7. In light of these facts, counsel for the petitioner-firm urged that the petitioners are legally eligible and entitled to carry on with the business of plastic reprocessing, as has been permitted to other Units. 8. Lastly, counsel for the petitioner-firm urged this Court to quash and set-aside action of the respondent no. 2 in rejecting the proposal for extension/renewal; as recorded at Item No. 78.5 (ii) of the minutes of meeting held on 3rd July 2017 conveyed under a covering letter dated 14th July 2017 alongwith all consequential benefits. 9. Per contra, learned advocate Shri Nikunt Raval appearing on behalf of the respondents took us through the preliminary contentions raised by the petitioner to demonstrate that the Unit is not entitled to any discretionary relief. 10. Counsel for the respondents pointed out that under the erstwhile Export-Import Policy for manufacturing of all types of plastic bags, LoA granted to the petitioner-firm was amended/broad banded to include recycling activity of worn and used clothing on 27th September 2001, after conversion of the Free Trade Zone (FTZ) into SEZ unit w.e.f 1st November 2000 and therefore, the five-year block period came to be recasted from 1st November 2000 to 31st October 2005 alongwith all other existing Units during the material period of time. In the meantime, SEZ Act 2005 came into force from 10th February 2006 and all provisions related to Foreign Trade Policy as well as provisions of Customs Act, 1962 were made in-operative, and consequently, all the transactions, monitoring and regulation are now governed through the SEZ Act, 2005 and the rules framed thereunder. 11. Counsel for the respondents drew attention of this Court to Rule 18 of the SEZ Rules, 2006 which bars setting up of any new Unit for recycling of plastic waste as well as for recycling of used clothings under Rule 18(4)(a) and 18(4)(c) of the said Rules. Counsel, however, fairly conceded that proviso to the above rules empowers the Board of Approval, which is an inter-ministerial body constituted under Section 8 of the SEZ Act, 2006 to decide extension of the validity of LoA granted earlier to such units. Therefore, intermittently after 31st October 2010, LoA was renewed on piece-meal basis till 30th September 2012, as the concerned Ministry was undertaking an exercise for putting into place a separate policy for regulating the activities of both plastic recycling as well as worn clothing units. Therefore, intermittently after 31st October 2010, LoA was renewed on piece-meal basis till 30th September 2012, as the concerned Ministry was undertaking an exercise for putting into place a separate policy for regulating the activities of both plastic recycling as well as worn clothing units. Accordingly, till its finalization in the year 2013, all such units of SEZs were granted extensions of their LoA in a piece meal basis after 31st November 2013; except that of the petitioner-firm. 12. Counsel for the respondents pointed out that during the five year block period of 2005-2010, the petitioners’ unit was not in operation for majority of the period without any valid explanation, and therefore, in their last seven years of validity period, the Unit was inoperative without any valid reasons and whereas, other such units during the said period continued their operations; even in the renewal period granted in piece meal basis, ranging from one month to twelve months, from time to time. Thus, after finalization of guidelines for regulating the activities of both plastic recycling and used clothing SEZ Units, the request for extension of all such Units came to be considered by BoA in its meeting on 8th November 2013, however, as the request for extension of LoA was moved late by the petitioner-firm, the same could not fall within zone of consideration and subsequently, in a meeting of Board of Approval (“BoA” for short) held on 26th December 2013, the LoA was decided to be withdrawn as the Development Commissioner had not recommended the proposal for an obvious reason that the petitioner’s Unit was inactive for a substantial period during their previous seven years of validity till 2012. 13. Finally, according to the learned counsel for the respondents, the proposal for renewal of LoA of the petitioner’s unit came to be rejected by BoA in its meeting held on 3rd July 2017. Counsel for the respondents added that though there is no specific reason assigned for rejecting the proposal by the BoA, however, it cannot be ruled out that there was not a single transaction which took place during the entire validity period of seven years; as pointed out earlier. 14. Counsel for the respondents added that though there is no specific reason assigned for rejecting the proposal by the BoA, however, it cannot be ruled out that there was not a single transaction which took place during the entire validity period of seven years; as pointed out earlier. 14. Counsel reiterated that there is a clear ban on setting up of any new Unit for recycling of both plastic and used clothing under the SEZ Act, which came into force in the year 2006 and even the import of plastic scrap is under restricted category since 1998. Thus, the existing plastic recycling units of SEZs are in a privileged position to import and recycle plastic waste and scrap, which otherwise is not allowed to any DTA units. And therefore, renewal of validity of such recycling units is not under automatic route, unlike in the case of other SEZ units, wherein under Rule 19 (6) of the SEZ Rules, 2006, the Development Commissioner concerned has been empowered to renew their activity, whereas only in the case of these two categories of existing SEZ units ie., plastic and used clothing units, the power of renewal vests with BoA. 15. Lastly, counsel for the respondents urged that considering the past performance of the petitioner-firm and particularly its inactiveness during the past seven years; especially in relation to sensitive activity of plastic recycling business of imported plastic scrap does not merit re-consideration, in absence of any specific reasons, and therefore, the respondent-authorities have aptly rejected plea for extension of LoA moved by the petitioner-firm, which action does not call for any interference at the hands of this Court in exercise of powers under Article 226 of the Constitution. 16. Having heard learned counsel appearing on behalf of the respective parties and having gone through the documents available on record, it appears that on 12th /14th July 2017, the petitioner was informed by a communication addressed by the respondent no. 3; referring to the letter dated 8th February 2017 as well as e-mail dated 27th April 2017 of the petitioner in respect of renewal of LoA for recycling of plastic waste and scrap, proposal for renewal of LoA for extension of re-cycling of plastic waste and scrap was considered by the BoA in its 78th meeting which was held on 3rd July 2017, stating that after due deliberations, the BoA had rejected the aforesaid proposal. 17. It appears from the record that in similar case of other units engaged in the same line of business at Kandla SEZ and other SEZs, extension/renewal was granted, which was otherwise lying defunct and dormant, as per the say of the petitioner. This aspect requires closer scrutiny by the respondent-authority. It is undisputed that the case of the petitioners was not taken up despite there being a recommendation by the respondent no. 3, the petitioner from time to time addressed various letters and e-mails to the respondents no. 2 & 3 for taking up petitioner’s case for renewal. Despite recommendation by the respondent no. 3 and though according to the petitioner, the case was similar to the case of other SEZ units, its unit was not granted renewal. Surprisingly, the respondent no. 2 during the said meeting held on 3rd July 2017 rejected the proposal of the petitioner without assigning any reasons. 18. Admittedly, the petitioner was granted Letter of Permission (LoP) under the erstwhile Import-Export Policy dated 15th May 1996 for manufacturing of all types of plastic bags-Garbage collection/carry/shopping bags, etc., and subsequently, on a request having been made by the petitioner-unit, the said LoA was also amended/broad banded to include recycling activity of worn and used clothing on 27th September 2001, after conversion of the said Free Trade Zone (FTZ) into SEZ unit with effect from 1st November 2000 and thereafter, their five-year block period was recasted from 1st November 2000 to 31st October 2005. Rule 18 of the SEZ Rules, 2006 empowers the Board of Approval which is an inter-ministerial body constituted under section 8 of the SEZ Act to decide extension of validity of LoA granted to such units. We noticed that LoA in the case of the petitioner was further renewed on 13th September 2006 for a period of five years on certain conditions; including necessary environment clearances from GPCB. The petitioners obtained requisite Consolidated Consent Order from GPCB for their plastic recycling activities, which was renewed vide office letter dated 21st August 2008 upto 31st October 2010. We noticed that LoA in the case of the petitioner was further renewed on 13th September 2006 for a period of five years on certain conditions; including necessary environment clearances from GPCB. The petitioners obtained requisite Consolidated Consent Order from GPCB for their plastic recycling activities, which was renewed vide office letter dated 21st August 2008 upto 31st October 2010. Thereafter, LoA was renewed on piecemeal basis till 30th September 2012, as the exercise for putting in place a separate policy for regulating the activities of both plastic recycling as well as worn clothing units was under finalization in the year 2013 and therefore, all such units of SEZs were granted extension of their LoA in piecemeal manner till 31st November 2013; except the petitioners’ unit for their plastic recycling business. Again a request was made by the petitioners’ Unit for renewal of their LoA for plastic recycling business and the same was forwarded to the ministry on 20th February 2017 for consideration in the BoA meeting. Finally, on 3rd July 2017, request for renewal of their LoA was taken into consideration in a meeting and proposal of the petitioner-Unit for renewal of LoA for extension of recycling of plastic waste and scrap was rejected. 19. Considering the aforesaid facts and circumstances of this case, we are of the view that the petitioner’s case requires reconsideration by the authority particularly to examine the similarity with other existing units which according to the petitioners were granted renewal despite being non operational for extended period. 20. With these observations, this writ petition is hereby partly allowed. The order passed by the respondent no. 2 rejecting the proposal for extension/renewal (as recorded at Item No. 78.5 (ii) of the minutes of meeting held on 3rd July 2017) and the covering letter dated 14th July 2017 is hereby quashed and set-aside. 21. If the petitioners are aggrieved by fresh decision, they shall be at liberty to pursue the remedies available under the law.