Retrospective Foreclosure of TMA Scheme Struck Down: Key Takeaways from Delhi High Court Ruling

The Delhi High Court in Chillies Exporters Association India Vs DGFT & Anr has delivered an important ruling on the legality of retrospectively withdrawing export incentive schemes notified under the Foreign Trade (Development and Regulation) Act, 1992 (FTDR Act). The judgment deals with the “Revised Transport and Marketing Assistance (TMA) for Specified Agricultural Products” Scheme, its retrospective operation, and its subsequent premature foreclosure by the Central Government.

This decision has serious implications for exporters of agricultural products, particularly chillies, and clarifies the limits on the Central Government’s power to amend or withdraw trade policy measures with retrospective effect.

Background of the Dispute

Origin of the TMA Scheme

The Department of Commerce, Government of India first rolled out the TMA Scheme through:

  • Notification dated 27.02.2019, read with
  • Notification dated 29.03.2019

The objectives of the Scheme were:

  • To provide financial support for the international leg of transportation and marketing of specified agricultural products;
  • To reduce the handicap of higher logistics costs borne by Indian agricultural exports; and
  • To encourage brand-building and recognition of Indian agricultural products overseas.

Under Clause 4 of the notification dated 27.02.2019:

  • The Scheme was to be applicable for a period as may be notified from time to time; and
  • Benefits were explicitly made available for exports effected from 01.03.2019 to 31.03.2020.

Subsequently, notification dated 17.03.2020 extended the TMA Scheme up to 31.03.2021.

Revised TMA and the Critical Gap Period

A revised TMA Scheme was introduced vide notification dated 09.09.2021. This revised Scheme:

  • Extended the earlier TMA Scheme;
  • Declared that it would apply to exports from 01.04.2021 to 31.03.2022.

However, in reality:

  • The original Scheme expired on 31.03.2021.
  • Between 01.04.2021 and 08.09.2021, no TMA Scheme was in force.
  • The notification dated 09.09.2021 sought to retroactively apply the Scheme from 01.04.2021 onwards.

Premature Foreclosure of the Revised TMA Scheme

The Central Government, acting through the Department of Commerce, Ministry of Commerce, then issued notification dated 25.03.2022, by which:

  • The “Revised Transport and Marketing Assistance (TMA) for Specified Agricultural Products” notified on 09.09.2021 was foreclosed; and
  • The notification dated 09.09.2021 was withdrawn.

The stated rationale for this step was:

To revamp, redesign and refocus the Scheme for better outcomes.

As a result, the incentives that would otherwise have been available to chilli exporters under the revised TMA Scheme were abruptly taken away.

Procedural History

  1. The Chillies Exporters Association India filed an initial writ petition (W.P. (C) 15279/2023) before the Delhi High Court, seeking:

    • Directions to the Directorate General of Foreign Trade (DGFT) to allow its members to claim incentives under the notification dated 09.09.2021, notwithstanding the withdrawal notification dated 25.03.2022.

  2. By order dated 28.11.2023, the High Court:

    • Directed that the writ petition be treated as a representation; and
    • Required the competent authority in the DGFT to pass a reasoned order.

  3. In compliance, the DGFT passed an order dated 19.03.2024, rejecting the representation of the petitioner association and holding it to be without merit.

  4. The association then filed the present writ petition under Article 226 of the Constitution of India, challenging:

    • The DGFT order dated 19.03.2024; and
    • The notification dated 25.03.2022 foreclosing the Scheme and withdrawing the notification dated 09.09.2021, as being ultra vires the FTDR Act.

The Delhi High Court examined, in particular, two critical legal questions:

  1. Can the Central Government issue or amend notifications under Section 3 and Section 5 of the FTDR Act with retrospective effect?

  2. Did any right or entitlement accrue to chilli exporters for exports made during the period 01.04.2021 to 08.09.2021 under the TMA Scheme?

An associated question was: if retrospective benefits could not validly exist, could a retrospective withdrawal of those benefits nonetheless be sustained?

Petitioner’s Key Arguments

1. Lack of Power to Issue Retrospective Notifications under FTDR Act

The association contended:

  • The notification dated 09.09.2021, introducing the revised TMA Scheme, and its withdrawal vide notification dated 25.03.2022, are both subordinate legislation traceable to Section 3 and Section 5 of the FTDR Act.
  • Neither Section 3 nor Section 5 empowers the Central Government to:
    • Frame foreign trade policy; or
    • Issue provisions regarding import or export,
      with retrospective effect.

Relying heavily on Director General of Foreign Trade & Anr. v. Kanak Exports & Anr., 2016 (2) SCC 226, the petitioner stressed that: