(Prayer in W.P.(MD)No.7922/2005: Writ Petition is filed under Article 226 of the Constitution of India praying for the issuance of a Writ of Certiorari, to call for the proceedings of the first respondent in Order No.14/273/2005/E.111/1222, dated 14.06.2005 and quash the same.

Prayer in W.P.(MD)No.8479/2005: Writ Petition is filed under Article 226 of the Constitution of India praying for the issuance of a Writ of Certiorari, to call for the records relating to the proceedings of the first respondent herein in Order No.14/269/2005-Exports III/1322, dated 12.07.2005 (Received on 09.09.2005) and quash the same.)

Common Order

1. These two Writ Petitions arise out of identical issue. In the first Writ Petition in W.P.(MD)No.7922 of 2005, the petitioner is one M/s.Arasan Textile Mills (P) Limited, represented by its Director. In that Writ Petition, the challenge is to an order dated 14.06.2005 issued by the Second Appellate Committee constituted by the Government of India, Ministry of Textiles, in Order No.14/273/2005/E.111/1222, dated 14.06.2005. By the impugned order, the first respondent Appellate Committee rejected the petitioners appeal. In the order, it is stated that the petitioner had already filed W.P.No.2596 of 2005 before this Court and this Court, vide its order dated 30.03.2005, passed an order that until the disposal of the appeal by the Appellate Committee, the bank guarantee of the petitioner should not be forfeited. Thereafter, the present impugned order came to be passed. It is now claimed that the said Writ Petition filed by the petitioner was withdrawn on 10.09.2008, subsequent to the order impugned in this Writ Petition.

2. The Second Appellate Committee took up the petitioners appeal in its meeting held on 14.06.2005. The petitioner was represented by its counsel before the Committee. The contention raised by the petitioner was that the export obligation could not be fulfilled because of the buyer in refusing to honour the contract and open L/c on account of fall in yarn prices and poor market conditions. The Committee was of the view that the circumstances pleaded by the petitioner have no nexus to the grant of the concession extended by the Central Government and these are all normal commercial risks a person faces during business operation. The only exception that to be considered is a clause relating to force-majeure and the Committee was of the view that these conditions do not cover by the force-majeure clause. Aggrieved by the said order, the present Writ Petition came to be filed and it was admitted on 22.08.2005. Pending the Writ Petition, in the application for interim injunction, the petitioner was directed to keep the bank guarantee of Rs.7.50 lakhs alive till the disposal of the Writ Petition and there would be an order of interim injunction.

3. In the second Writ Petition in W.P.(MD)No.8479 of 2005, the petitioner is one Tuticorin Spinning Mills Limited, represented by its Managing Director. In that Writ Petition, the challenge is to an order dated 12.07.2005. By the impugned order, the Second Appellate Committee rejected the plea taken by the petitioner, who also advanced the similar contention and they were also represented by the counsel before the Committee. Aggrieved by the rejection of their request, the present Writ Petition came to be filed, which was admitted on 13.09.2005. Pending the Writ Petition, this Court granted an order of interim injunction to keep alive the bank guarantee, till further orders are passed. It is now stated by the learned counsel for the petitioners that the bank guarantee has been kept alive.

4. On notice from this Court, respondents 1 to 3 have filed their counter-affidavit in each of the Writ Petition. An objection was raised regarding the maintainability of such a Writ Petition in interfering with the imposition of forfeiture clause on the bank guarantee executed by the petitioners, who entered into an agreement and obtained quota for export. The Export Entitlement System, which is otherwise known as "Quota Policies", relates to garments and the policy for the year 2000-2004 imposes conditions and it is consisted of different export categories, which are set out in the policy. Whatever may be the category, the concession was extended by the Central Government on the basis of the application made by the exporters and also on furnishing the earnest money deposit, as per the procedure laid down in the relevant export policy. After accepting the said concession, under the FCFS system, the same conditions relating to EMD have been stipulated and in case of shortfall by not carrying on export obligations within the validity period of entitlements, EMD was liable to be forfeited in terms of the policy. In the present case, admittedly, the petitioners have not fulfilled the conditions for the reasons advanced by them before both the Committees and a show cause notice was issued. Any exporter, aggrieved by an order of forfeiture by QAA, can file an appeal before the Textile Commissioner, who is constituted as the First Appellate Committee. If the exporter is not satisfied with the decision taken by the First Appellate Committee, he may prefer an appeal before the Second Appellate Committee and the Second Appellate Committee also rejected the case of the petitioners.

5. The only question that has to be considered is whether the petitioners have made out any case for interfering in the rejection of the claim made by the petitioners. In this context, it is necessary to refer to a judgment of the Supreme Court in Dwarikesh Sugar Industries Ltd. v. Prem Heavy Engineering Works (P) Ltd. reported in AIR 1997 SC 2477 [LQ/SC/1997/842] , wherein the Supreme Court has held that no Court should give relief in matters involving invocation of bank guarantee by the Government authorities. Apart from the limited judicial review available, the reasons advanced by the petitioners are the usual business reasons, which are found in any trade or more particularly in the trade of Textiles. The Supreme Court in the case of Dwarikesh Sugar Industries Ltd [cited supra], in paragraph Nos.23 and 24, observed as follows:

"23. In the instant case, as has been already noticed there were two types of bank guarantees which were issued. Bank Guarantee No.40/51 for Rs.26,15,000/- was issued to ensure timely performance of the agreement by respondent No.1. The relevant terms of his guarantee firstly makes it clear that the bank has unconditionally and irrevocably undertaken to pay to the appellant, on written demand and without demand, the amount demanded by it. Secondly, Clause II of the said guarantee clarifies that the payment shall be made without demand and on the undertaking that the appellant is to be sold Judge whether the seller has committed any breach. Consequently, the right of the appellant to recover the guaranteed amount is not to be effected or suspended by reason of any dispute which can be raised or pending before the Courts tribunals or arbitrator. Thirdly the guarantor had no right to know the reasons of or to investigate the merits of the demand or to question or to challenge the demand or to know any facts affecting the demand and lastly it was not open to the bank to require the proof of the liability of respondent No.1 to pay the amount before paying the aforesaid guaranteed amount to the appellant.

24. The letter of invocation issued by the appellant demanding the payment of Rs.26,15,000/- was in accordance with the terms of bank guarantee No.40/51 and the bank was, therefore, under an obligation to honour its undertaking and to make the payment. It, however, chose not to fulfil its obligation. If the bank could not in law avoid the payment, as the demand had been made in terms of the bank guarantee, as has been done in the present case, then the Court ought not to have issued an injunction which had the effect of restraining the bank from fulfilling its contractual obligation in terms of the bank guarantee. An injunction of the Court ought not to be an instrument which is used in nullifying the terms of a contract, agreement or undertaking which is lawfully enforceable. In its aforesaid letter dated 24th November, 1995 respondent No.1 had clearly admitted that entire supply had not been made. In view of this also the High Court was not justified in granting an injunction."

6. Apart from laying down the law on the field, the Supreme Court in paragraph No.32 also warned the other Courts from acting contrary to the settled legal position, which reads as follows:

"When a position, in law, is well settled as a result of judicial pronouncement of this Court, it would amount to judicial impropriety to say the least, for the subordinate Courts including the High Courts to ignore the settled decisions and then to pass a judicial order which is clearly contrary to the settled legal position. Such judicial adventurism cannot be permitted and we strongly deprecate the tendency of the subordinate Courts in not applying the settled principles and in passing whimsical orders which necessarily has the effect of granting wrongful and unwarranted relief to one of the parties. It is time that this tendency stops."

7. This Court do not find any illegality in the orders passed by the Second Appellate Committee, confirming the decision taken by the Textile Commissioner to forfeit the EMD and admittedly, the petitioners have bound themselves to satisfy the conditions of export quota given to them and the condition itself stipulates the forfeiture clause and the force-majeure clause do not apply, as correctly held by the Appellate Committee.

8. In the light of the above discussion, there is no case made out to entertain the present Writ Petitions and hence, the same are dismissed. In view of the dismissal of both the Writ Petitions, the contesting respondents are at liberty to invoke the bank guarantee, which is said to have been renewed from time to time. Consequently, the connected miscellaneous are closed. No costs.