KURU AGRI PRODUCTS & ORS. v. UNION OF INDIA & ORS.

3.8. The fraudulent Indian importer who wants to snatch quota of others will fill more quantity in revised contract (more than 30%), sign and stamp it sitting in India and send it to his exporter, who in conspiracy signs, stamps and uploads on online system.

3.9. CBN is fully aware that all the contracts where 20% payment has been sent to Turkey before 20th January, 2022 have been allotted only 30% of quantity applied for. The fraudulent Indian importer is giving information, which is false, misleading or fictitious by submitting hard copy of fraudulently prepared revised contract to make theft of quota of others. CBN instead of taking action against the fraudulent Indian importer has chosen to issue registration certificate for stolen quantity to fraudulent Indian importer.

3.10. The fraud has been done by Indian importer sitting in India under the Jurisdiction of this Hon’ble Court. Petitioners are three applicants. Each have two exporters i.e., ‘Aynira Gida’6 and ‘Urun Tarim’. Each applicant has contact with Aynira for 180 MTs and with Urun Tarim 270 MTs. Aynira has signed revised contract for 30% of quantity applied for so petitioner has no grievance with them. However, Balraj Vinod, a fraudulent Indian importer in collusion with Urun Tarim has stolen the quota allocated to Petitioners. Balraj Vinod in collusion with Urun Tarim has stolen 243MTs allocated to the Petitioners as Balraj Vinod has been given registration for 378 MTS = 135(his quota)+243(Petitioners quota).

3.11. While the contention of Respondent 2 is that the theft has happened in Turkey, so the Indian Courts have no Jurisdiction, the theft of quota of poppy seed allocated to Petitioners has been done by Indian importer sitting in India under the Jurisdiction of this Court. Furthermore, the case of Devki “Aynira” Global Capital Pvt. Ltd. and Ors. v. Union of India and Ors[7]., is not applicable in the present case as the policy therein was for crop year 2019- 2020 where principle of allocation was first-come-first- serve basis, where allocation of quota was in doubt. The facts of this case are thus different. In present case, allocation of poppy seed quota has been done on proportional basis i.e., all the contracts where 20% of contract amount was sent to Turkey by the Indian importer before 20th January, 2022 has been allotted about 30% of the quantity applied for. So, all the contracts of Petitioners have been allocated at 30% of the quantity applied for. As mentioned, 450 MTs is the cap per applicant. So, one applicant at maximum can be given 135 MTs of quota of poppy seed (30%). However, CBN has issued registration to some importer for quantities as large as 431 Metric tonnes by making theft of quota allotted to others. In support of the same, list of some of the importers given registration by CBN for quantities more than 135 Metric tonnes by making theft of quota of others is annexed.

3.12. As per the MoU CBN has been mandated to issue registration in accordance with guidelines mandated by Respondent No.1. False, misleading and fictitious information submitted by fraudulent Indian importer in form of hard copy of revised contract, who wanted to snatch quota of others, should have been denied registration even for legitimate quantity allowed to him. Surprisingly, fraudulent Indian importers has been rewarded for ulterior consideration.

3.13. The Petitioner’s application for early hearing was dismissed and their request for interim direction was not considered constraining them to file 2021(375)ELT3(Del.) LPA 397/2022. The Division bench disposed of the matter vide order dated. 22nd March, 2023 and directed as follows” “It is made clear that if the appellants were to succeed in the matter appropriate quantity will be allocated to the appellant, if otherwise tenable and bearing in mind the plea made in that behalf in line with final decision in the matter. The above directions shall continue to operate during the pendency of writ actions preferred by appellants.”

3.14. Respondent -1 allowed registration of contracts of poppy seed in first week of May’2022 after keeping in reserve the quantity of poppy seed to be kept in reserve as per Division bench’s interim orders in pending LPA (1134MTS) plus the quantity involved in petition filed by Petitioners. It is thus prayed that a direction be issued to CBN to allocate registration for 243 MTS from the quantity reserved (10% of country cap of 17500MTS i.e., 1750MTS has been reserved by CBN and has not been allocated to take care of pending litigation as on 30th April, 2022) as prayed from Aynira with whom the Petitioner has earlier had additional contracts and to further direct the CBN to coordinate with TMO to facilitate imports RESPONDENTS’ CONTENTIONS:

4. With the introduction of the Foreign Trade Policy 2015-2020, the following position emerges regarding the Import of poppy seeds:

4.1. Under Chapter 12 of the existing Foreign Trade Policy 2015-2020, Poppy seeds are freely importable item and as such, do not require any license for the purpose of imports.

4.2. By virtue of poppy seeds being a freely importable item under the existing policy, any advance remittance made in lieu of imports, will not attract the penal provisions of either FEMA Guidelines or any of the Master Directions issued by the RBI.

4.3. It is submitted that Clause 19.3.11 of the FEMA Guidelines specifically states that Authorised dealers should not open letter of credit or allow remittance for import of goods included in the negative list requiring licence for imports. Further, Clause B.[3] of Master Direction No. 17/2016-17 issued by the RBI allows opening of letters of credit and remittance for imports except for goods included in the negative list. Therefore, it is submitted that poppy seeds being freely importable under the existing policy, any advance remittance will not attract Penalties under Section 13 of FEMA.

4.4. The Impugned Guidelines framed by the Respondent for registration of sales contract for import of Poppy seeds from turkey are well-reasoned and non-discriminatory.

4.5. In order to understand the role of Respondent No.2 with respect to disputes raised in the present Petition, it is quintessential to appreciate the policy which governs the import of poppy seeds into India. The Impugned Guidelines and the Public Notice were issued in terms of the MoU dated 23rd May, 2018, executed between the Government of Turkey and Government of India. A perusal of the Guidelines would show the limited role of Respondent No.2 in the import of Poppy Seeds. Respondent No.2 will register the sales contract upon fulfilling the requisite conditions under the Guidelines. Upon provisional registration, Respondent No.2 would verify the advance remittance made by an Indian Importer and update the same in the online system. Lastly, once the registration is granted by the TMO, Respondent No.2 would allow the import of poppy seeds from Turkey. Therefore, it can be safely said that Respondent No.2 has a very limited role in the entire import process and has no authority to give any directions to the Turkish exporters in case of any dispute with the Indian Importer.

4.6. In respect of the MoU, the guidelines and the process of registration of sales contract by the TMO of their exporters, the same is internal matter of Turkish Government being a sovereign Country and Government of India does not have any control over the same. No clause of the MoU provides any consultation or control or even access to the system maintained by the TMO. The action and procedure adopted by the TMO is internal matter of the Turkish Authority and Government of India does not have any control of over the same. The TMO has to act in accordance with the provisions as stipulated in the MoU which categorically provides that TMO should not register contracts in excess of the country cap as fixed by Department of Revenue.

4.7. Furthermore, reliance is placed on Devki Global Capital Pvt. Ltd. and Ors. v. Union of India and Ors,[8] wherein this court upheld the validity of the Impugned Guidelines dated 25th June, 2019 and dismissed the Petition being devoid of any merits.

ANALYSIS AND FINDINGS:

5. The Court has considered the arguments advanced by both parties and examined the documents on record. At the heart of the Petitioners’ grievance lies the allegation that certain exporters in Turkey are engaging in fraudulent practices, allegedly leading to cartelization and monopolization of poppy seed imports. The Petitioners allege that Turkish exporters are selectively lodging contracts on the TMO portal, leading to unfair distribution. Further, according to the Petitioners, the Government of Turkey imposed a cap, limiting each contract to approximately 30% of the initially agreed quantity. They assert that, post-allocation by the Turkish Ministry of Commerce, revised contracts reflecting the 30% allocation are prepared in India, signed, and sent back to Turkish exporters, who then upload them onto the Turkish Grain Board’s (TMO) online system. However, some of the Indian importers, in collusion with Turkish exporters, inflate these revised contracts beyond the stipulated 30%, thereby securing registrations for quantities in excess of the allotted cap.

6. To substantiate these claims, the Petitioners rely on mere assertions of fraudulent practices without providing tangible documentary evidence from the Turkish Ministry of Commerce or the TMO to support the existence of the alleged 30% cap. The Petitioners have not placed on record any official communication or directive from Turkish authorities establishing such a limit. In the absence of substantial evidence, the allegations remain speculative and conjectural. Without corroborative material, the Court cannot entertain assertions of cartelization or monopolistic practices based solely on the Petitioners’ averments.

7. It is further noted that if there is indeed a dispute between the Petitioners and their Turkish exporters concerning the forwarding and registration of contracts with the TMO, such a dispute falls squarely within the domain of a private contractual disagreement. Respondent No. 2 (CBN) does not possess the jurisdiction or authority to intervene in disputes between private Indian importers and their foreign exporters. The Petitioners already have the liberty to seek recourse against these exporters under applicable laws or through direct engagement with the TMO. However, these are matters that lie beyond the purview of the Respondent No. 2, 2021(375)ELT3(Del.) which is neither privy to nor in control of the registration process managed by the TMO in Turkey.

8. In Devki Global Capital, the Court addressed similar grievances regarding the registration of sales contracts for the import of poppy seeds from Turkey. In that case, the Petitioners argued that their sales contracts were not registered by the TMO in Turkey, thereby preventing them from securing the necessary approvals from the Central Bureau of Narcotics (CBN) in India for importation. The key issue before the Court was whether the Indian authorities, particularly the CBN, could intervene in the registration process managed by the Turkish Grain Board (TMO) and whether the guidelines issued were arbitrary or discriminatory.

9. The Court unequivocally held that the registration of sales contracts by the TMO is an internal matter governed by Turkish law and procedure, over which Indian authorities have no control or jurisdiction. It found that the role of Respondent No. 2, the CBN, is strictly limited to registering contracts that have been duly registered by the TMO. The Court accordingly observed that the allocation and registration of contracts are bound by the terms of the MoU between India and Turkey, and any grievances regarding non-registration or alleged manipulation of contracts must be addressed in Turkey through appropriate legal channels. Furthermore, the Court emphasized that, in matters of policy and trade agreements, judicial intervention is warranted only in cases of manifest illegality, mala fide intent, or violation of fundamental rights, none of which were found in that case. This precedent, therefore, directly negates the Petitioners’ plea for judicial intervention in the present matter.

10. Furthermore, the Petitioners’ contentions rest on their assumption that allocation processes employed by the Turkish authorities can be controlled or questioned by Indian authorities including this Court. However, it is essential to recognize that Turkey, being a sovereign nation, administers its own trade policies. The TMO’s actions, including the registration of contracts and allocation of quotas, are governed by Turkish law and cannot be subjected to review by Indian courts. As noted in Devki Global, this Court cannot examine or direct the procedures followed by the TMO, nor can it adjudicate on how the cap or allocation is managed by the Turkish government.

11. The Petitioners’ concern regarding the potential loss of the 20% advance payment made in foreign exchange stems from a private contractual arrangement between the Indian importers and the Turkish exporters. The guidelines framed under the MoU and the foreign trade policy require that advance payments be verified as part of the contract registration process. However, the Respondents have no role in ensuring the success of these private commercial transactions beyond the registration requirements. Once a contract is not found on the TMO’s online system, the Respondents have the right to refuse registration. Therefore, the Petitioners’ grievances regarding their advance payments fall under the realm of private disputes, and the Respondents cannot be expected to act as guarantors of the Petitioners’ financial transactions with foreign exporters. On this issue as well, the Court finds no merit in the contentions advanced by the Petitioners.

12. We must also note that the validity of the Impugned Guidelines was also addressed by the High Court of Bombay in Chailbihari Trading Private Limited and Ors vs Union of India.[9] The Court, while upholding the guidelines, reaffirmed that there exists no fundamental right to import, particularly concerning items such as poppy seeds. This judgment underlines that importation rights are inherently subject to regulatory restrictions, and the onus lies heavily on the petitioner to establish that the impugned policy is prima facie arbitrary or discriminatory. Additionally, the Court in Chailbihari Trading recognized that the guidelines were framed pursuant to the Memorandum of Understanding (MoU) dated 23rd May, 2018, between India and Turkey, and further noted that these guidelines aim to prevent cartelization and artificial inflation of prices by filtering out non-genuine importers. This reasoning directly applies to the present matter, where the Petitioners’ contentions fail to demonstrate how the guidelines, which are designed to ensure fair and regulated trade practices, are arbitrary or discriminatory. The Bombay High Court also acknowledged the broad powers conferred upon the Central Government under Section 9 of the Narcotic Drugs and Psychotropic Substances (NDPS) Act, 1985 and the Department of Revenue to impose quantitative restrictions. This further reinforces the Respondents’ authority to implement the impugned guidelines and regulate the importation of poppy seeds. In light of the findings in Chailbihari Trading, this Court finds that the Petitioners’ challenge to the impugned guidelines is not sustainable. The guidelines not only stem from the MoU, a sovereign act, but also aim to maintain transparency, prevent market manipulation, and ensure compliance with national policies. The Petitioners have not demonstrated any manifest arbitrariness or discrimination inherent in the guidelines. Therefore, the Petitioners’ claims 2020(374) ELT 469 (Bom.) must fail, as the import regulations in question are squarely within the Government’s policy prerogatives

13. Moreover, the Petitioners argue that it is the responsibility of the Indian authorities to ensure that the country cap of 17,500 MT is distributed fairly among all participating importers. While the regulatory framework does ensure fair and transparent allocation within the country cap, the Petitioners overlook the critical fact that this framework operates within the confines of the MoU and the guidelines. The guidelines were designed to facilitate a regulated import mechanism while acknowledging Turkey’s sovereign right to administer its export processes. The Court in Chailbihari Trading upheld the legality of these guidelines, noting that they seek to prevent cartelization and ensure that only bona fide importers participate. Therefore, the Petitioners’ demand for imposing quantitative restrictions on contracts not shown on the TMO portal, based on allegations of collusion and fraud, is untenable. The Court cannot intervene in a foreign sovereign’s internal process, nor can it direct the CBN to disregard established guidelines and MoU provisions.

14. The Petitioners also argue that the Indian authorities have a duty to act against alleged malpractices by Turkish exporters and should not mechanically follow Turkey’s process. However, this contention fails to acknowledge the principle of sovereignty that governs international agreements, such as the MoU between India and Turkey. The guidelines issued by Respondent No. 1, including the 20% payment requirement, were developed in consultation with Turkish authorities to regulate and streamline the import process. The Petitioners’ dissatisfaction with the outcome of their transactions cannot form the basis for judicial intervention in what is essentially a matter of foreign trade policy. As highlighted in Chailbihari Trading, the power to frame such guidelines, including those requiring advance payment, lies with the Government of India under the NDPS Act and the Foreign Trade (Development & Regulation) Act, 1992. The Petitioners’ call for the CBN to proportionately adjust contracts goes beyond its mandate and intrudes upon the Respondents’ administrative discretion.

15. The Court also does not find merit in Petitioners’ contention that Indian authorities can and should demand explanations from Turkish authorities, including the TMO registration process. Such a demand would overstep the boundaries of the MoU, which delineates the responsibilities of the Indian and Turkish governments. The Indian authorities cannot impose their regulations on a foreign sovereign’s internal procedures. The MoU and the guidelines empower the CBN to register contracts based solely on the TMO’s registrations. As noted in Devki Global, the Court cannot compel Indian authorities to investigate or interfere with the TMO’s processes. The guidelines, as they stand, strike a balance between regulating imports and respecting the sovereignty of Turkey.

16. Moreover, we must remember that trade and import policies, particularly those involving international agreements such as the MoU between India and Turkey, are inherently policy decisions that warrant limited judicial interference. The scope of judicial review in such matters is confined to examining whether the policy framework is tainted by arbitrariness, mala fides, or a lack of rationality. The Supreme Court of India has consistently held that while the Courts have the power to review the constitutionality of policy decisions, it does not possess the authority to substitute its own views on economic policies unless there is a manifest violation of constitutional principles or a palpable lack of fairness and reasonableness. In Balco Employees’ Union (Regd.) v. Union of India,10 the Supreme Court held that matters concerning economic policy fall squarely within the domain of the executive, and judicial interference should be exercised with extreme caution. It has also been emphasised that it is neither within the domain of the Courts nor the scope of the judicial review to embark upon an enquiry as to whether a particular public policy is wise or whether better public policy can be evolved. Nor should the Courts be inclined to strike down a policy at the behest of a petitioner merely because it has been urged that a different policy would have been fairer or wiser or more scientific or more logical. Therefore, in the sphere of economic policy or reform, the courts cannot sit in judgment over the wisdom of the executive. It is only in exceptional cases where policy decisions violate any constitutional or statutory provisions or are so patently arbitrary that the courts may interfere. Furthermore, the economic policies involve complex assessments, and as long as the government’s action is neither arbitrary nor discriminatory, the courts would not like to interfere. In the present case, the impugned guidelines and public notices are part of a structured process established under the Foreign Trade Policy and the MoU, designed to ensure a fair and transparent import mechanism. There is no indication of any mala fides or arbitrariness in the implementation of these guidelines which calls for judicial interference.

17. Therefore, the Petitioners’ allegations remain unsubstantiated and also fail to show how the Respondents’ actions violate any statutory or constitutional obligation. Consequently, the petition must fail and is hereby 2001 AIR SCW 5135 dismissed along with pending applications.

SANJEEV NARULA, J SEPTEMBER 25, 2024 d.negi