Retrospective Application of TMA Scheme Impermissible Under FTDR Act: Delhi HC Partly allows Chilli Exporters’ Plea [Read Order]

The Delhi High Court, in a recent ruling, has held that retrospective application of the Transport and Marketing Assistance (TMA) Scheme is not permissible under the Foreign Trade (Development and Regulation) Act, 1992 (FTDR).

It was also held that the exporters are entitled to the incentives only for the shipments made after the scheme was formally notified on 09.09.2021 until its foreclosure on 24.03.2022. The court partly allowed the exporters' claim.

The case arose from the petition filed by the Chillies Exporters Association challenging two actions: first, the DGFT’s order dated 19.03.2024 rejecting their representation; and second, the Central Government’s notification dated 25.03.2022 foreclosing the Revised TMA Scheme.

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The Exporters argued that the scheme, introduced on 09.09.2021 with retrospective effect from 01.04.2021, created vested rights for shipments made between April and September 2021. They contended that the subsequent withdrawal deprived them of accrued benefits and violated the doctrine of legitimate expectation.

It was also argued that the Scheme as notified vide notification dated 09.09.2021 is a piece of subordinate legislation which is referable in Section 3 and Section 5 of the FTDR Act and since neither Section 3 nor Section 5 of the FTDR Act permits the Central Government to make any notification regarding foreign trade policy or to make any provision relating to import and export retrospectively, as such the impugned notification dated 25.03.2022, which has rescinded the policy retrospectively, is not sustainable.

The Government defended its action by citing the need to revamp and refocus the scheme for better outcomes. It argued that in complex economic matters, policy decisions must be given latitude, and that exporters could not claim a legitimate expectation for a period when no scheme was in force.

Dependence was placed on Kasinka Trading v. Union of India and Balco Employees’ Union v. Union of India, and the respondents submitted that there can be no estoppel against the Government in matters of economic policy, and that retrospective withdrawal was permissible in public interest.

The Division bench of Chief Justice Devendra Kumar Upadhyaya and Justice Tushar Rao Gedela framed two issues for determination: (i) whether the Central Government has power under Sections 3 and 5 of the FTDR Act to issue notifications with retrospective effect; and (ii) whether any right accrued to chilli exporters for exports effected between 01.04.2021 and 08.09.2021.

On the first issue, the Court depended on the Supreme Court’s ruling in DGFT v. Kanak Exports (2016) 2 SCC 226, which held that delegated legislation can only be prospective unless expressly authorised by statute.

The Bench observed that Section 5 of the FTDR Act permits the Government to “formulate and announce” trade policy but does not confer authority to amend retrospectively. Similarly, orders under Section 3, being subordinate legislation, cannot have a retrospective effect. The Court concluded that the Central Government lacks the power to issue notifications or orders with retrospective application under the FTDR Act.

On the second issue, the Court noted that between 01.04.2021 and 08.09.2021, no scheme was in operation. It was further observed that once it is settled legal position that no notification under Section 5 or an order under Section 3 of the FTDR Act can be issued or made having retrospective effect, applying the notification dated 09.09.2021 before its issuance, i.e. for the period from 01.04.2021 to 08.09.2021, in our opinion, will be absolutely impermissible.

It was also observed that the chilli exporters could not have envisaged that in future, any such notification would be issued on 09.09.2021 and therefore, they would have kept on exporting the chillies during this period, i.e. 01.04.2021 to 08.09.2021, legitimately expecting that the incentive available to the exporters under the TMA Scheme, term of which had already ended on 31.03.2021, would be made available to them in future.

However, the Court held that exporters who effected shipments between 09.09.2021 and 24.03.2022 are entitled to claim incentives under the TMA Scheme, provided they meet other eligibility conditions. The foreclosure notification dated 25.03.2022 was held to operate prospectively only, meaning it cannot cancel benefits for exports already made before that date.

Accordingly, the writ petition was partly allowed. The DGFT’s order dated 19.03.2024 was set aside, and the respondents were directed to process claims of chilli exporters for the eligible period. The Court granted exporters three weeks to submit their claims, which must be considered expeditiously in accordance with the law. No order as to costs was made.

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