Importer Cannot Be Put in ‘Denied Entity List’ Without Hearing: Delhi HC Quashes DGFT Communication [Read Order]

In a recent ruling, the Delhi High Court held that an importer or exporter cannot be put in the “Denied Entity List” without giving proper notice and hearing because such action virtually amounts to “civil death” for the business.

Reckitt Benckiser India Private Limited filed an intra-court appeal challenging the order passed by the Single Judge, who had directed the company to avail the statutory remedy under Sections 15 and 16 of the Foreign Trade (Development and Regulation) Act, 1991.

The company had challenged an order dated 27 August 2024 passed by the Deputy Director of Foreign Trade, by which its SEIS scrips issued under the ForeignTrade Policy 2015-2020 were cancelled and a penalty of Rs.10 lakh was imposed for alleged misdeclaration.

The company had also challenged a communication dated 12 September 2024, by which its IEC number/licence was marked in the “Denied Entity List.”

The appellant’s counsel argued that the company would take statutory remedy against the cancellation of SEIS scrips and penalty. However, he argued that the communication putting the company in the “Denied Entity List” was issued in violation of natural justice and Section 8 of the Act.

The appellant argued that without an IEC number, no person can legally import or export goods in India. It was pointed out that the company had been doing import and export business for around 22 years and the impugned communication seriously affected its business rights.

The respondents argued that a show cause notice dated 30 October 2023 had already asked the appellant to explain why action regarding the IEC should not be taken. They also argued that opportunity of hearing was already given.

The Division Bench comprising Chief Justice Devendra Kumar Upadhyaya and Justice Tejas Karia observed that Section 8 of the Act requires issuance of written notice mentioning the grounds for proposed suspension or cancellation of IEC, along with reasonable opportunity to file representation and seek hearing.

The court observed that the communication dated 12 September 2024 only stated that the IEC/licence had been marked in the “Denied Entity List.” It did not mention any reasons, nor did it mention that proper notice or hearing was given.

The court held that the communication dated 12 September 2024 was issued in violation of principles of natural justice and against Section 8 of the Act. It also observed that the Single Judge had not decided the prayer challenging this communication.

The court quashed the communication and liberty was given to the authorities to start fresh proceedings under Section 8 after issuing proper show cause notice, giving reasons and granting opportunity of representation and hearing. The appeal was disposed of and the Single Judge’s order was modified to this extent.

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