Full Judgment Text
2011:BHC-OS:13075-DB
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO. 1733 OF 2001
1. Esjay International Pvt. Ltd. )
a Company incorporated under the Indian Companies )
Act, 1956, having its office at 48A, Laxmi Industrial )
Estate, Shankar Rao Naram Path, Lower Parel, )
Mumbai400 013 )
2. Sunil G. Jhangiani, Director, )
residing at Laxmi Niwas, Bhulabhai Desai Road, )
Mumbai400 036 )..Petitioners
vs.
1. Union of India through Ministry of Textiles )
2. The Textile Commissioner having his office at New CGO’s )
Building, 48, New Marine Lines, Mumbai400 020 )
3. Apparel Export Promotion Council, having its registered )
office at 15, NBCC Tower, Bhikaji Cama Place, )
New Delhi110 066, and its Branch office at Bajaj )
th
Bhavan, 12 floor, Nariman Point, Mumbai400 021 ).Respondents
Mr. Zal Andhyarujina with Mr. D. Das, instructed by Mr. Anuj N. Narula for the
petitioners.
Mr. Vinod Joshi for respondent Nos. 1 and 2.
Ms. K.P. Reshma Ravi for respondent No.3.
CORAM : P.B. MAJMUDAR &
R.M. SAVANT, JJ.
DATE: SEPTEMBER 21, 2011.
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ORAL JUDGMENT : (Per R.M. Savant, J. )
The issue that arises for consideration in the above petition is
as to whether the petitioners are entitled to the benefit of clause 9 of
Government Entitlement Policy,19941996 on account of “force
majeure”.
2. The petitioners by way of this petition under Article 226 of the
th
Constitution of India are challenging the orders dated 20 June, 2000,
rd th
23 June, 2000 and 13 October, 1996 passed by the Respondent Nos. 1,
2 and 3 respectively.
3. The factual matrix involved in the above petition can be
conveniently stated thus:
3. The petitioners are exporters and have been recognised by the
Govt. of India as such since the year 1981. The petitioners have their
manufacturing unit at GIDC, Sarigam in the State of Gujarat which they
th
have established some time in the year 1993. By notification dated 4
September, 1993, the Central Government in the Ministry of Textiles
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announced the quota policy framed for the period 19941996. On the
petitioners applying to the Gujarat Electricity Board (“GEB” for short), the
th
petitioners were given motive power connection of 80 HP on 18
th
November, 1994 and thereafter on 16 June, 1995 the petitioners were
given 20 KV power for lighting in the factory and office. The GEB, it
appears, imposed a power cut in respect of the industries at Sarigam for a
duration of four hours a day and 48 hours a week whereby it is the case
of the petitioners that the production at their factory got directly affected
and as such was slowed down considerably. It is the case of the
petitioners that the said power cut remained in force till November,1995
which was certified as such by the Deputy Engineer of the GEB. In terms
of the policy, the petitioners were to fulfil their export obligation as per
the quota allotted to them by September,1995. The petitioners applied
for extension to fulfil their obligations, pursuant to which the petitioners
st
were granted an extension as per the policy upto 31 December, 1995 on
the petitioners giving an undertaking of 30 per cent of value of quota with
th
remainder to be utilised after 30 September,1995. It is the case of the
petitioners that on account of the force majeure condition resulting from
the power cut so imposed by the GEB, the petitioners could manufacture
and ship only 87.01 per cent of the allotment for the said year in respect
of their entitlement in PPE and NQ systems.
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4. In view of the nonfulfilment of the quota obligations by the
petitioners, the petitioners were served with a show cause notice dated
th
10 September, 1996 addressed by the respondent No.3 i.e. Apparel
Export Promotion Council (“AEPC” for short). The show cause notice was
to the effect that the petitioners had not utilised the allotted quantity of
quota and, therefore, the petitioners were liable to forfeiture of bank
guarantee to the extent of an amount of Rs. 16,80,352/. On receipt of
the said show cause notice, the petitioners’ Export Manager represented
against the said show cause notice and, apart from pointing out the
discrepancies in the show cause notice, he ventured to furnish the correct
data of the total export effected in the year 1995. The said show cause
notice, it appears, was adjudicated upon by the AEPC and by an order
rd
dated 3 October,1996, the AEPC called upon the petitioners to pay a sum
of Rs. 11,31,072/ on account of the fact that the petitioners had not
fulfilled the terms and conditions as per the policy which has resulted in
the breach of the undertaking in so far as the fulfilment of the export
obligations were concerned.
rd
5. Being aggrieved by the said order dated 3 October,1996, the
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petitioners filed an appeal before the Respondent No.2 and the main
rd
ground of challenge to the said order dated 3 October, 1996 was that
the petitioners were prevented from utilising and entire quota and/or
achieving 90 per cent utilisation thereof on account of the force majeure
condition of the power cut imposed by the GEB. It appears that
respondent No.2, before whom the appeal was filed, called upon the
petitioners to submit a certificate from the GEB in respect of the alleged
power cut as also called upon the petitioners to submit copies of the
electricity bills for the period June 1995 to December, 1995. The
th
petitioners, in compliance of the said requisition, by their letter dated 9
November, 1998 furnished the details of the power consumed by them in
their factory at Sarigam during the period June, 1995 to December, 1995
th
and also furnished the certificate dated 28 October,1998 issued by the
GEB.
6. The appeal of the petitioners was considered by the
respondent No.2 and after taking into consideration the relevant material
which was produced by the petitioners, the respondent No.2 disposed of
the said appeal by recording a finding that the petitioners had made more
payment towards electricity during the latter part of the year i.e. 1995
compared to the electricity charges paid for the period between June,
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1995 and September, 1995. The respondent No.2, therefore, concluded
that the power cut on which the petitioners sought to rely upon cannot
be said to have affected the production. The respondent No.2, therefore,
rd
by the order dated 23 June, 2000 disposed of the said appeal filed by
the petitioners.
rd
7. Being aggrieved by the said order dated 23 June, 2000
passed by the respondent No.2 herein, the petitioners filed a second
appeal before the Second Appellate Committee constituted by the
respondent No.1. The said Appellate Committee comprised of as many as
four members. The substantial ground of challenge in the appeal filed
before the Second Appellate Committee was that the petitioners have
been wrongly denied the benefit of clause 9 i.e. force majeure on the
premise that the payment of the electricity charges during the period
September,1995 to December, 1995 was higher than the charges paid for
the earlier period. The petitioners challenged the said order on the ground
that the respondent No.2 had erroneously taken into account the
electricity charges paid for lighting provided to the office which supply,
according to the petitioners, was not under any power cut. It was the
specific case of the petitioners that the respondent No.2 had erroneously
taken into account the charges paid without considering the actual unit
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consumption of electricity which clearly indicated that in fact less power
had been utilised by the factory of the petitioners during September, 1995
and December, 1995. The said appeal of the petitioners was disposed of
th
by the Second Appellate Committee by its order dated 20 June, 2001.
The Second Appellate Committee confirmed the findings recorded by the
First Appellate Committee and observed that it had no reason to take a
different view than the view taken by the First Appellate Committee in
respect of the ground of force majeure made out by the petitioners. The
appeal filed by the petitioners was accordingly rejected by the Second
Appellate Committee.
8. After the said order was passed by the Second Appellate
th
Committee, the respondent addressed a communication dated 6 July,
2001 by which they called upon the petitioners to pay an amount of Rs.
11,31,072/ within a period of seven days failing which the petitioners
were threatened with coercive action as could be taken in terms of the
policy. As indicated above, the orders passed by the Respondent Nos. 1, 2
and 3 are the subject matter of challenge in the above petition.
9. On behalf of the respondents, an affidavit in reply, has been
filed by one Ashok Hazra, Assistant Director in the office of the Textile
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Commissioner. The policy as regards exports and the need for fulfilment
of the quota by the exporters has been spelt out in the said affidavit. It has
been averred in paragraph 6 that nonutilisation of the export quota is a
serious matter as it not only affects the earning in foreign exchange but
if the quota remains unutilised, then it has adverse effect and impact in
the future bilateral agreements between the countries. It is the object of
the Ministry that no quota is wasted and, therefore, towards that end a
bank guarantee or a legal undertaking is obtained by the Ministry and for
nonfulfilment of the quota, there is a forfeiture which the exporter has to
suffer. It is averred in paragraph 7 of the said affidavit that the petitioners
had given a Legal Undertaking (LUT) to the AEPC for the entire
revalidated quantity. However, the petitioner Company was not able to
utilise the entire revalidated quota nor the maximum permissible
revalidated quantity i.e. 90 per cent of the revalidated quantity in all the
st
systems till 31 December, 1995. It has further been averred in the said
paragraph that as exporters, the petitioners were fully aware about the
power cut imposed by the GEB since June, 1995 and it is only after
considering the impact of such power cut the petitioners had gone for
st
revalidation of export quota from 1 October,1995. In so far as the order
of the Second Appellate Committee is concerned, it has been averred in
the said paragraph 7 that the Second Appellate Committee had gone
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through the appeal and heard the representatives of the firm as well as
the officers of AEPC i.e. Respondent No.3. Since the case of the petitioners
was the same as before the First Appellate Committee, the Second
Appellate Committee concluded that the grounds made out by the
petitioners were not valid grounds which would amount to force majeure.
10. Heard the learned counsel appearing for the parties.
Submissions on behalf of the petitioners by learned Counsel Shri
Andhyarujina.
11. The principal contention of the learned counsel for the
petitioners Shri Andhyarujia is that once the authorities have not
disputed the applicability of force maejure exemption to a situation of
power cut, the respondents thereafter have arbitrarily in the case of the
petitioners held that the power cut in question which the petitioners were
affected was not a force majeure condition. The learned counsel
submitted that in the absence of the term ‘force majeure’ in the policy, it
was incumbent upon the respondents to uniformly interpret the force
majeure condition under the policy and in support of the said submission
relied upon the judgment of the Apex Court reported in AIR 1961 S.C.
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1285 in the matter of Dhanrajmal Gobindram vs. M/s. Shamji Kalidas and
Co . According to the learned counsel, paragraph 9 of the said report is
material. That the cut imposed by the GEB was a fact and circumstance
beyond the control of the petitioners and, therefore, constituted and
satisfied the force majeure condition. That there was substantial
compliance by the petitioners of their export obligation inasmuch as 87
st
per cent of the quota was utilised by the Petitioners on 31 December,
1995 and, therefore, it was a fit case for the respondents to exercise the
discretion under clause 15 of the policy. That the order passed by the
Second Appellate Committee is a cryptic order and no reasons have been
mentioned for the dismissal of the appeal.
Submissions on behalf of the Respondents
12. That the power cut in question was known to the petitioners in
June, 1995 itself and in spite of the same they had applied for revalidation
of the quota in September, 1995 and, therefore, the petitioners are now
estopped from contending that they were not able to fulfil their
obligations on account of force majeure. That force majeure contemplates
something happening suddenly which is not foreseen and which is beyond
the control of the person. Such is not the case here as the petitioners were
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very well aware of the power cut. That the circumstances were not such
which handicapped the petitioners from fulfilling the export quota
inasmuch as the power cut was in operation throughout the year and,
therefore, the petitioners are disentitled to claim the benefit of clause 9 of
the extant policy. Reliance was placed by the learned counsel for the
th
respondents on an unreported judgment dated 11 November, 2002 of a
learned single Judge of the Delhi High Court in Civil Writ Petition No.
7176 of 2002 wherein it has been held that if things do not turn up as
expected and the labour problem did not get resolved, the same cannot be
equated to a force majeure situation. That the petitioners have been
given the benefit of having fulfilled 90 per cent of the quota by giving a
rebate of Rs. 5 lakhs as the original amount claimed was Rs. 16 lakhs.
Consideration
13. At the outset, it would be apposite to refer to the judgment
cited by the learned counsel for the petitioners in the case of M/s.
Dhanrajmal (supra). Paragraph 17 of the said report is material and is
reproduced hereinunder.
“17. McCardie J. in Lebeaupin v. Crispin, 19202 KB 714
has given an account of what is meant by “force majeure”
with reference to its history. The expression “force
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majeure” is not a mere French version of the Latin
expression “vis major”. It is undoubtedly a term of wider
import. Difficulties have arisen in the past as to what could
legitimately be included in “force majeure”. Judges have
agreed that strikes, breakdown of machinery, which though
normally not included in “force major” are included in
“force majeure”. An analysis of rulings on the subject ijnto
which it is not necessary in this case to go, shows that
where reference is made to “force majeure”, the intention is
to save the performing party from the consequences of
anything over which he has no control. This is the widest
meaning that can be given to “force majeure”, and even if
this be the meaning, it is obvious that the condition about
“force majeure” in the agreement was not vague. The use
of the word “usual” makes all the difference, and the
meaning of the condition may be made certain by evidence
about a force majeure clause, which was in contemplation
of parties”.
A reading of the said judgment, therefore, discloses the perspective from
which the term “force majeure” was looked at by the Apex Court. In the
said case the Apex Court has held that the term “force majeure” is a term
of wider import and that difficulties had arisen in the past as to what
could legitimately be included in force majeure. The Supreme Court has
referred to the fact that the Judges have agreed that strikes, breakdown of
machinery, though normally not included in “vis major” are included in
“force majeure”. The Supreme Court has, therefore concluded that where
reference is to be made to force majeure, the intention is to save the
performing party from the consequences of anything over which he has
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no control. This, according to the Apex court, is the widest meaning that
can be given to the term “force majeure”.
14. The next judgment cited by the learned counsel for the
petitioner is the judgment of the Apex Court reported in AIR 1976 SC
1100 in the matter of M/s. Northern India Iron and Steel Co. vs. The State
of Haryana and another . Though it is not a judgment directly on the issue
of “force majeure”, the said judgment was cited in support of the
contention that the power cut was beyond the control of the petitioners.
Paragraph 9 of the said report is material and is reproduced hereinder.
“9. We are, therefore, of the view that the inability of the
Board to supply electric energy due to power cut or any
other circumstance beyond its control as per the demand of
the consumer according to the contract will be reflected in
and considered as a circumstance beyond the control of the
consumer which prevented it from consuming electricity as
per the contract and to the extent it wanted to consume.
The monthly demand charge for a particular month will
have to be assessed in accordance with subcl (b) of Cl. 4 of
the tariff and therefrom a proportionate reduction will have
to be made as per subcl. (f). We hope, in the light of the
judgment, there will be no difficulty in working out the
figures of the proportionate reduction in any of the cases
and for any period. In case of any difference or dispute as to
the quantum of the demand charge or the proportionate
reduction, parties will be at liberty to pursue their remedy
as may be available to them in accordance with law.”
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15. The respondents have consciously incorporated the condition
of “force majeure” in the export policy so as to give the exporters the
benefit, if a situation so arises that the exporter is not able to fulfil his
obligations for the reasons which are beyond his control. It would be
apposite to refer to the meaning of the term “force majeure” in some of
the legal dictionaries :
“Black’s Law Dictionary:
force majeure. [Law French “ a superior force”] An event
or effect that can be neither anticipated nor controlled.
The term includes both acts of nature (e.g. Floods and
hurricanes) and acts of people (e.g. Riots, strikes, and
wars) – Also termed force majesture; vis major; superior
force . Cf. ACT OF GOD; VIS MAJOR.
rd
Webster’s 3 New International Dictionary:
force majeure: (1) Superior or irresistible force. (2) an
event or effect that cannot reasonably be anticipated or
controlled – Compare ACT OF GOD, INEVITABLE
ACCIDENT, VIS MAJOR”
It is in the said context that we would have to see whether the
petitioners fulfilled the said condition. As held by the Apex Court in M/s.
Dhanrajmal case (supra), and as can be seen from the dictionaries above,
a “force majeure” condition is said to be something which is
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unforeseen, unexpected and which happens suddenly and over which a
person has no control. Things which immediately come to mind is the
sudden failure of the power grid on account of which there is no
electricity or a flash strike by the workmen. Now coming to the facts of
the present case, it is required to be noted that the relevant time in
question i.e. year 1995. A judicial notice would have to be taken of the
fact that the Electricity Boards in some states with a view to conserve
energy and with a view to see to it that there is equitable distribution of
energy between different consumers i.e. Industrial, residential and
commercial adopt the method of power cuts on particular dates which is
popularly known as “staggering supply of electricity”. A prudent business
man, therefore, ought to have taken notice of the said aspect and ought to
have arranged his business accordingly, more so in the case of an exporter
who has to fulfill his export obligation so as to avail of the benefits under
the policy of the Government. In the instant case, the power cut was over
a considerable period i.e. almost for a period of one year i.e. in the year
1995. It is not something which happened suddenly and which crippled
the business of the petitioners for a short period of time. The power cut
was consistently over a long period i.e. almost for a year and, therefore,
the petitioners cannot be heard to say that the power cut happened so
suddenly and without their knowledge so as to impact their export
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obligations. The Second Appellate Committee therefore, was right in
observing that the petitioners could have been made alternate
arrangements like gensets, etc.
It is required to be noted that though the power cut was in
force right from January, 1995 and the petitioners were to fulfil their
export obligations by September, 1995, the petitioners applied for
revalidation of their quota which was revalidated and an extension was
st
granted to the petitioners upto 31 December, 1995. In the said
circumstances, the petitioners ought to have taken appropriate steps so as
to fulfil their export obligations. Having applied for revalidation in the
teeth of the knowledge of the fact that there was a power cut, it is not
open for the petitioners to now claim the benefit of clause 9 relating to
“force majeure”. It is pertinent to note that though as per the
st
revalidation, the obligation was to be fulfilled by 31 December, 1995.
The petitioners did not do so and in fact completed its quota only in
January,1996. In the context of the aforesaid facts, the judgment cited by
the learned counsel for the respondents of a learned single Judge of the
th
Delhi High Court dated 11 November, 2002 in Civil Writ Petition No.
7176 of 2002 is relevant. In the said case, the labour problem commenced
in the year 1995 and the petitioner in the said case had sought
revalidation in October, 1996. However, there was no lock out or
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complete cessation of activities at any time. The petitioners in the said
case being fully aware of the labour problem and the business risk had got
his quota revalidated. The learned single Judge has held that in case the
things did not turn up as expected and the labour problem did not get
resolved, the same cannot be equated to a force majeure situation. The
facts in the said case before the learned single Judge of the Delhi High
Court was, in our view, similar to the facts of the present case inasmuch
as the petitioners were aware of the power cut at the time of the
revalidation of the said quota and in spite of the same, got it revalidated
and had not fulfilled its obligations even in the extended period. We are,
therefore, of the view that the ground of power cut which is sought to be
made out by the petitioners would not constitute a “force majeure” so as
to come within clause 9 of the extant policy.
16. As regards the submission of the learned counsel for the
petitioners Shri Andhyarujina that the order passed by the second
Appellate Committee is a cryptic order and bereft of any reasons and is
therefore, required to be set aside in the context of the said submission, it
wold be relevant to note that before the First Appellate Committee the
petitioners had produced the material in support of their case as regards
force majeure. The subject matter was in the form of the certificate issued
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by the GEB and the consumption of energy by the petitioners during the
relevant period. The First Appellate Committee, based on the said
material and upon hearing the parties, recorded findings of fact in respect
of the aspect of the consumption of energy by the petitioners. The matter
was thereafter carried in appeal by the petitioners to the Second Appellate
Committee. The Second Appellate Committee has confirmed the findings
recorded by the First Appellate Committee by observing that it had no
reason to differ from the said findings. In our view, it was not necessary
for the Second Appellate Committee to go threadbare into the material
produced by the petitioners before the First Appellate Committee since the
Second Appellate Committee came to a conclusion that it agreed with the
findings of the First Appellate Committee. Therefore, we do not find any
substance in the said contention of the learned counsel for the petitioners.
The AEPC as well as the First Appellate Committee having recorded a
finding of fact and the same being confirmed by the Second Appellate
Committee, the same does not warrant any interference.
17. It is also required to be noted that in terms of the policy
guidelines, the respondents have given the benefit of rebate of Rs. 5 lakhs
to the petitioners as originally the amount claimed as and by way of
forfeiture was Rs. 16 lakhs. In that view of the matter, no case for
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interdiction in our writ jurisdiction under Article 226 is made out. The
writ petition is accordingly dismissed.
18. At this stage, the learned counsel for the petitioners applies for
stay of the order. In the facts and circumstances of the case, we stay our
order for a period of eight weeks on the condition that the petitioners
keep the bank guarantee alive which has been furnished pursuant to the
th
interim order passed by this Court on 26 November, 2001 and which is
alive till today for a further period of 12 weeks from date.
P. B. MAJMUDAR, J.
R.M. SAVANT, J.
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
WRIT PETITION NO. 1733 OF 2001
1. Esjay International Pvt. Ltd. )
a Company incorporated under the Indian Companies )
Act, 1956, having its office at 48A, Laxmi Industrial )
Estate, Shankar Rao Naram Path, Lower Parel, )
Mumbai400 013 )
2. Sunil G. Jhangiani, Director, )
residing at Laxmi Niwas, Bhulabhai Desai Road, )
Mumbai400 036 )..Petitioners
vs.
1. Union of India through Ministry of Textiles )
2. The Textile Commissioner having his office at New CGO’s )
Building, 48, New Marine Lines, Mumbai400 020 )
3. Apparel Export Promotion Council, having its registered )
office at 15, NBCC Tower, Bhikaji Cama Place, )
New Delhi110 066, and its Branch office at Bajaj )
th
Bhavan, 12 floor, Nariman Point, Mumbai400 021 ).Respondents
Mr. Zal Andhyarujina with Mr. D. Das, instructed by Mr. Anuj N. Narula for the
petitioners.
Mr. Vinod Joshi for respondent Nos. 1 and 2.
Ms. K.P. Reshma Ravi for respondent No.3.
CORAM : P.B. MAJMUDAR &
R.M. SAVANT, JJ.
DATE: SEPTEMBER 21, 2011.
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ORAL JUDGMENT : (Per R.M. Savant, J. )
The issue that arises for consideration in the above petition is
as to whether the petitioners are entitled to the benefit of clause 9 of
Government Entitlement Policy,19941996 on account of “force
majeure”.
2. The petitioners by way of this petition under Article 226 of the
th
Constitution of India are challenging the orders dated 20 June, 2000,
rd th
23 June, 2000 and 13 October, 1996 passed by the Respondent Nos. 1,
2 and 3 respectively.
3. The factual matrix involved in the above petition can be
conveniently stated thus:
3. The petitioners are exporters and have been recognised by the
Govt. of India as such since the year 1981. The petitioners have their
manufacturing unit at GIDC, Sarigam in the State of Gujarat which they
th
have established some time in the year 1993. By notification dated 4
September, 1993, the Central Government in the Ministry of Textiles
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announced the quota policy framed for the period 19941996. On the
petitioners applying to the Gujarat Electricity Board (“GEB” for short), the
th
petitioners were given motive power connection of 80 HP on 18
th
November, 1994 and thereafter on 16 June, 1995 the petitioners were
given 20 KV power for lighting in the factory and office. The GEB, it
appears, imposed a power cut in respect of the industries at Sarigam for a
duration of four hours a day and 48 hours a week whereby it is the case
of the petitioners that the production at their factory got directly affected
and as such was slowed down considerably. It is the case of the
petitioners that the said power cut remained in force till November,1995
which was certified as such by the Deputy Engineer of the GEB. In terms
of the policy, the petitioners were to fulfil their export obligation as per
the quota allotted to them by September,1995. The petitioners applied
for extension to fulfil their obligations, pursuant to which the petitioners
st
were granted an extension as per the policy upto 31 December, 1995 on
the petitioners giving an undertaking of 30 per cent of value of quota with
th
remainder to be utilised after 30 September,1995. It is the case of the
petitioners that on account of the force majeure condition resulting from
the power cut so imposed by the GEB, the petitioners could manufacture
and ship only 87.01 per cent of the allotment for the said year in respect
of their entitlement in PPE and NQ systems.
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4. In view of the nonfulfilment of the quota obligations by the
petitioners, the petitioners were served with a show cause notice dated
th
10 September, 1996 addressed by the respondent No.3 i.e. Apparel
Export Promotion Council (“AEPC” for short). The show cause notice was
to the effect that the petitioners had not utilised the allotted quantity of
quota and, therefore, the petitioners were liable to forfeiture of bank
guarantee to the extent of an amount of Rs. 16,80,352/. On receipt of
the said show cause notice, the petitioners’ Export Manager represented
against the said show cause notice and, apart from pointing out the
discrepancies in the show cause notice, he ventured to furnish the correct
data of the total export effected in the year 1995. The said show cause
notice, it appears, was adjudicated upon by the AEPC and by an order
rd
dated 3 October,1996, the AEPC called upon the petitioners to pay a sum
of Rs. 11,31,072/ on account of the fact that the petitioners had not
fulfilled the terms and conditions as per the policy which has resulted in
the breach of the undertaking in so far as the fulfilment of the export
obligations were concerned.
rd
5. Being aggrieved by the said order dated 3 October,1996, the
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petitioners filed an appeal before the Respondent No.2 and the main
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ground of challenge to the said order dated 3 October, 1996 was that
the petitioners were prevented from utilising and entire quota and/or
achieving 90 per cent utilisation thereof on account of the force majeure
condition of the power cut imposed by the GEB. It appears that
respondent No.2, before whom the appeal was filed, called upon the
petitioners to submit a certificate from the GEB in respect of the alleged
power cut as also called upon the petitioners to submit copies of the
electricity bills for the period June 1995 to December, 1995. The
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petitioners, in compliance of the said requisition, by their letter dated 9
November, 1998 furnished the details of the power consumed by them in
their factory at Sarigam during the period June, 1995 to December, 1995
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and also furnished the certificate dated 28 October,1998 issued by the
GEB.
6. The appeal of the petitioners was considered by the
respondent No.2 and after taking into consideration the relevant material
which was produced by the petitioners, the respondent No.2 disposed of
the said appeal by recording a finding that the petitioners had made more
payment towards electricity during the latter part of the year i.e. 1995
compared to the electricity charges paid for the period between June,
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1995 and September, 1995. The respondent No.2, therefore, concluded
that the power cut on which the petitioners sought to rely upon cannot
be said to have affected the production. The respondent No.2, therefore,
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by the order dated 23 June, 2000 disposed of the said appeal filed by
the petitioners.
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7. Being aggrieved by the said order dated 23 June, 2000
passed by the respondent No.2 herein, the petitioners filed a second
appeal before the Second Appellate Committee constituted by the
respondent No.1. The said Appellate Committee comprised of as many as
four members. The substantial ground of challenge in the appeal filed
before the Second Appellate Committee was that the petitioners have
been wrongly denied the benefit of clause 9 i.e. force majeure on the
premise that the payment of the electricity charges during the period
September,1995 to December, 1995 was higher than the charges paid for
the earlier period. The petitioners challenged the said order on the ground
that the respondent No.2 had erroneously taken into account the
electricity charges paid for lighting provided to the office which supply,
according to the petitioners, was not under any power cut. It was the
specific case of the petitioners that the respondent No.2 had erroneously
taken into account the charges paid without considering the actual unit
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consumption of electricity which clearly indicated that in fact less power
had been utilised by the factory of the petitioners during September, 1995
and December, 1995. The said appeal of the petitioners was disposed of
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by the Second Appellate Committee by its order dated 20 June, 2001.
The Second Appellate Committee confirmed the findings recorded by the
First Appellate Committee and observed that it had no reason to take a
different view than the view taken by the First Appellate Committee in
respect of the ground of force majeure made out by the petitioners. The
appeal filed by the petitioners was accordingly rejected by the Second
Appellate Committee.
8. After the said order was passed by the Second Appellate
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Committee, the respondent addressed a communication dated 6 July,
2001 by which they called upon the petitioners to pay an amount of Rs.
11,31,072/ within a period of seven days failing which the petitioners
were threatened with coercive action as could be taken in terms of the
policy. As indicated above, the orders passed by the Respondent Nos. 1, 2
and 3 are the subject matter of challenge in the above petition.
9. On behalf of the respondents, an affidavit in reply, has been
filed by one Ashok Hazra, Assistant Director in the office of the Textile
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Commissioner. The policy as regards exports and the need for fulfilment
of the quota by the exporters has been spelt out in the said affidavit. It has
been averred in paragraph 6 that nonutilisation of the export quota is a
serious matter as it not only affects the earning in foreign exchange but
if the quota remains unutilised, then it has adverse effect and impact in
the future bilateral agreements between the countries. It is the object of
the Ministry that no quota is wasted and, therefore, towards that end a
bank guarantee or a legal undertaking is obtained by the Ministry and for
nonfulfilment of the quota, there is a forfeiture which the exporter has to
suffer. It is averred in paragraph 7 of the said affidavit that the petitioners
had given a Legal Undertaking (LUT) to the AEPC for the entire
revalidated quantity. However, the petitioner Company was not able to
utilise the entire revalidated quota nor the maximum permissible
revalidated quantity i.e. 90 per cent of the revalidated quantity in all the
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systems till 31 December, 1995. It has further been averred in the said
paragraph that as exporters, the petitioners were fully aware about the
power cut imposed by the GEB since June, 1995 and it is only after
considering the impact of such power cut the petitioners had gone for
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revalidation of export quota from 1 October,1995. In so far as the order
of the Second Appellate Committee is concerned, it has been averred in
the said paragraph 7 that the Second Appellate Committee had gone
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through the appeal and heard the representatives of the firm as well as
the officers of AEPC i.e. Respondent No.3. Since the case of the petitioners
was the same as before the First Appellate Committee, the Second
Appellate Committee concluded that the grounds made out by the
petitioners were not valid grounds which would amount to force majeure.
10. Heard the learned counsel appearing for the parties.
Submissions on behalf of the petitioners by learned Counsel Shri
Andhyarujina.
11. The principal contention of the learned counsel for the
petitioners Shri Andhyarujia is that once the authorities have not
disputed the applicability of force maejure exemption to a situation of
power cut, the respondents thereafter have arbitrarily in the case of the
petitioners held that the power cut in question which the petitioners were
affected was not a force majeure condition. The learned counsel
submitted that in the absence of the term ‘force majeure’ in the policy, it
was incumbent upon the respondents to uniformly interpret the force
majeure condition under the policy and in support of the said submission
relied upon the judgment of the Apex Court reported in AIR 1961 S.C.
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1285 in the matter of Dhanrajmal Gobindram vs. M/s. Shamji Kalidas and
Co . According to the learned counsel, paragraph 9 of the said report is
material. That the cut imposed by the GEB was a fact and circumstance
beyond the control of the petitioners and, therefore, constituted and
satisfied the force majeure condition. That there was substantial
compliance by the petitioners of their export obligation inasmuch as 87
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per cent of the quota was utilised by the Petitioners on 31 December,
1995 and, therefore, it was a fit case for the respondents to exercise the
discretion under clause 15 of the policy. That the order passed by the
Second Appellate Committee is a cryptic order and no reasons have been
mentioned for the dismissal of the appeal.
Submissions on behalf of the Respondents
12. That the power cut in question was known to the petitioners in
June, 1995 itself and in spite of the same they had applied for revalidation
of the quota in September, 1995 and, therefore, the petitioners are now
estopped from contending that they were not able to fulfil their
obligations on account of force majeure. That force majeure contemplates
something happening suddenly which is not foreseen and which is beyond
the control of the person. Such is not the case here as the petitioners were
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very well aware of the power cut. That the circumstances were not such
which handicapped the petitioners from fulfilling the export quota
inasmuch as the power cut was in operation throughout the year and,
therefore, the petitioners are disentitled to claim the benefit of clause 9 of
the extant policy. Reliance was placed by the learned counsel for the
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respondents on an unreported judgment dated 11 November, 2002 of a
learned single Judge of the Delhi High Court in Civil Writ Petition No.
7176 of 2002 wherein it has been held that if things do not turn up as
expected and the labour problem did not get resolved, the same cannot be
equated to a force majeure situation. That the petitioners have been
given the benefit of having fulfilled 90 per cent of the quota by giving a
rebate of Rs. 5 lakhs as the original amount claimed was Rs. 16 lakhs.
Consideration
13. At the outset, it would be apposite to refer to the judgment
cited by the learned counsel for the petitioners in the case of M/s.
Dhanrajmal (supra). Paragraph 17 of the said report is material and is
reproduced hereinunder.
“17. McCardie J. in Lebeaupin v. Crispin, 19202 KB 714
has given an account of what is meant by “force majeure”
with reference to its history. The expression “force
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majeure” is not a mere French version of the Latin
expression “vis major”. It is undoubtedly a term of wider
import. Difficulties have arisen in the past as to what could
legitimately be included in “force majeure”. Judges have
agreed that strikes, breakdown of machinery, which though
normally not included in “force major” are included in
“force majeure”. An analysis of rulings on the subject ijnto
which it is not necessary in this case to go, shows that
where reference is made to “force majeure”, the intention is
to save the performing party from the consequences of
anything over which he has no control. This is the widest
meaning that can be given to “force majeure”, and even if
this be the meaning, it is obvious that the condition about
“force majeure” in the agreement was not vague. The use
of the word “usual” makes all the difference, and the
meaning of the condition may be made certain by evidence
about a force majeure clause, which was in contemplation
of parties”.
A reading of the said judgment, therefore, discloses the perspective from
which the term “force majeure” was looked at by the Apex Court. In the
said case the Apex Court has held that the term “force majeure” is a term
of wider import and that difficulties had arisen in the past as to what
could legitimately be included in force majeure. The Supreme Court has
referred to the fact that the Judges have agreed that strikes, breakdown of
machinery, though normally not included in “vis major” are included in
“force majeure”. The Supreme Court has, therefore concluded that where
reference is to be made to force majeure, the intention is to save the
performing party from the consequences of anything over which he has
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no control. This, according to the Apex court, is the widest meaning that
can be given to the term “force majeure”.
14. The next judgment cited by the learned counsel for the
petitioner is the judgment of the Apex Court reported in AIR 1976 SC
1100 in the matter of M/s. Northern India Iron and Steel Co. vs. The State
of Haryana and another . Though it is not a judgment directly on the issue
of “force majeure”, the said judgment was cited in support of the
contention that the power cut was beyond the control of the petitioners.
Paragraph 9 of the said report is material and is reproduced hereinder.
“9. We are, therefore, of the view that the inability of the
Board to supply electric energy due to power cut or any
other circumstance beyond its control as per the demand of
the consumer according to the contract will be reflected in
and considered as a circumstance beyond the control of the
consumer which prevented it from consuming electricity as
per the contract and to the extent it wanted to consume.
The monthly demand charge for a particular month will
have to be assessed in accordance with subcl (b) of Cl. 4 of
the tariff and therefrom a proportionate reduction will have
to be made as per subcl. (f). We hope, in the light of the
judgment, there will be no difficulty in working out the
figures of the proportionate reduction in any of the cases
and for any period. In case of any difference or dispute as to
the quantum of the demand charge or the proportionate
reduction, parties will be at liberty to pursue their remedy
as may be available to them in accordance with law.”
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15. The respondents have consciously incorporated the condition
of “force majeure” in the export policy so as to give the exporters the
benefit, if a situation so arises that the exporter is not able to fulfil his
obligations for the reasons which are beyond his control. It would be
apposite to refer to the meaning of the term “force majeure” in some of
the legal dictionaries :
“Black’s Law Dictionary:
force majeure. [Law French “ a superior force”] An event
or effect that can be neither anticipated nor controlled.
The term includes both acts of nature (e.g. Floods and
hurricanes) and acts of people (e.g. Riots, strikes, and
wars) – Also termed force majesture; vis major; superior
force . Cf. ACT OF GOD; VIS MAJOR.
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Webster’s 3 New International Dictionary:
force majeure: (1) Superior or irresistible force. (2) an
event or effect that cannot reasonably be anticipated or
controlled – Compare ACT OF GOD, INEVITABLE
ACCIDENT, VIS MAJOR”
It is in the said context that we would have to see whether the
petitioners fulfilled the said condition. As held by the Apex Court in M/s.
Dhanrajmal case (supra), and as can be seen from the dictionaries above,
a “force majeure” condition is said to be something which is
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unforeseen, unexpected and which happens suddenly and over which a
person has no control. Things which immediately come to mind is the
sudden failure of the power grid on account of which there is no
electricity or a flash strike by the workmen. Now coming to the facts of
the present case, it is required to be noted that the relevant time in
question i.e. year 1995. A judicial notice would have to be taken of the
fact that the Electricity Boards in some states with a view to conserve
energy and with a view to see to it that there is equitable distribution of
energy between different consumers i.e. Industrial, residential and
commercial adopt the method of power cuts on particular dates which is
popularly known as “staggering supply of electricity”. A prudent business
man, therefore, ought to have taken notice of the said aspect and ought to
have arranged his business accordingly, more so in the case of an exporter
who has to fulfill his export obligation so as to avail of the benefits under
the policy of the Government. In the instant case, the power cut was over
a considerable period i.e. almost for a period of one year i.e. in the year
1995. It is not something which happened suddenly and which crippled
the business of the petitioners for a short period of time. The power cut
was consistently over a long period i.e. almost for a year and, therefore,
the petitioners cannot be heard to say that the power cut happened so
suddenly and without their knowledge so as to impact their export
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obligations. The Second Appellate Committee therefore, was right in
observing that the petitioners could have been made alternate
arrangements like gensets, etc.
It is required to be noted that though the power cut was in
force right from January, 1995 and the petitioners were to fulfil their
export obligations by September, 1995, the petitioners applied for
revalidation of their quota which was revalidated and an extension was
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granted to the petitioners upto 31 December, 1995. In the said
circumstances, the petitioners ought to have taken appropriate steps so as
to fulfil their export obligations. Having applied for revalidation in the
teeth of the knowledge of the fact that there was a power cut, it is not
open for the petitioners to now claim the benefit of clause 9 relating to
“force majeure”. It is pertinent to note that though as per the
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revalidation, the obligation was to be fulfilled by 31 December, 1995.
The petitioners did not do so and in fact completed its quota only in
January,1996. In the context of the aforesaid facts, the judgment cited by
the learned counsel for the respondents of a learned single Judge of the
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Delhi High Court dated 11 November, 2002 in Civil Writ Petition No.
7176 of 2002 is relevant. In the said case, the labour problem commenced
in the year 1995 and the petitioner in the said case had sought
revalidation in October, 1996. However, there was no lock out or
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complete cessation of activities at any time. The petitioners in the said
case being fully aware of the labour problem and the business risk had got
his quota revalidated. The learned single Judge has held that in case the
things did not turn up as expected and the labour problem did not get
resolved, the same cannot be equated to a force majeure situation. The
facts in the said case before the learned single Judge of the Delhi High
Court was, in our view, similar to the facts of the present case inasmuch
as the petitioners were aware of the power cut at the time of the
revalidation of the said quota and in spite of the same, got it revalidated
and had not fulfilled its obligations even in the extended period. We are,
therefore, of the view that the ground of power cut which is sought to be
made out by the petitioners would not constitute a “force majeure” so as
to come within clause 9 of the extant policy.
16. As regards the submission of the learned counsel for the
petitioners Shri Andhyarujina that the order passed by the second
Appellate Committee is a cryptic order and bereft of any reasons and is
therefore, required to be set aside in the context of the said submission, it
wold be relevant to note that before the First Appellate Committee the
petitioners had produced the material in support of their case as regards
force majeure. The subject matter was in the form of the certificate issued
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by the GEB and the consumption of energy by the petitioners during the
relevant period. The First Appellate Committee, based on the said
material and upon hearing the parties, recorded findings of fact in respect
of the aspect of the consumption of energy by the petitioners. The matter
was thereafter carried in appeal by the petitioners to the Second Appellate
Committee. The Second Appellate Committee has confirmed the findings
recorded by the First Appellate Committee by observing that it had no
reason to differ from the said findings. In our view, it was not necessary
for the Second Appellate Committee to go threadbare into the material
produced by the petitioners before the First Appellate Committee since the
Second Appellate Committee came to a conclusion that it agreed with the
findings of the First Appellate Committee. Therefore, we do not find any
substance in the said contention of the learned counsel for the petitioners.
The AEPC as well as the First Appellate Committee having recorded a
finding of fact and the same being confirmed by the Second Appellate
Committee, the same does not warrant any interference.
17. It is also required to be noted that in terms of the policy
guidelines, the respondents have given the benefit of rebate of Rs. 5 lakhs
to the petitioners as originally the amount claimed as and by way of
forfeiture was Rs. 16 lakhs. In that view of the matter, no case for
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interdiction in our writ jurisdiction under Article 226 is made out. The
writ petition is accordingly dismissed.
18. At this stage, the learned counsel for the petitioners applies for
stay of the order. In the facts and circumstances of the case, we stay our
order for a period of eight weeks on the condition that the petitioners
keep the bank guarantee alive which has been furnished pursuant to the
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interim order passed by this Court on 26 November, 2001 and which is
alive till today for a further period of 12 weeks from date.
P. B. MAJMUDAR, J.
R.M. SAVANT, J.
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