Delhi High Court Quashes DGFT Communication Adding Importer to Denied Entity List: Natural Justice and Section 8 Compliance Mandatory

Background and Overview

The Delhi High Court, in the matter of Reckitt Benckiser India Private Limited Vs Union of India & Ors., delivered a significant ruling concerning the powers of the Directorate General of Foreign Trade (DGFT) to place importers and exporters on the "Denied Entity List." The Division Bench held that such an action, when taken without adhering to the procedural safeguards embedded in Section 8 of the Foreign Trade (Development and Regulation) Act, 1991, is legally unsustainable and must be set aside.

This judgment carries far-reaching implications for entities engaged in import-export trade, reinforcing that statutory authorities cannot curtail trade rights through executive communications that bypass the principles of natural justice.

Genesis of the Dispute

The matter originated from a writ petition filed before a Single Judge of the Delhi High Court. The core grievance related to two distinct actions taken by the DGFT authorities:

  1. An order dated 27.08.2024 passed by the Deputy Director of Foreign Trade, which cancelled Service Exports from India Scheme (SEIS) scrips issued to the assessee under the Free Trade Policy 2015-2020 and simultaneously imposed a monetary penalty of ₹10,00,000/- on the ground that the scrips had been obtained through misdeclaration.

  2. A communication dated 12.09.2024, through which the assessee was informed that its Importer-Exporter Code (IEC) — bearing number 0288022912 / Licence Number 0511013855 — had been marked against the "Denied Entity List."

The Single Judge, by the impugned order dated 28.03.2026, disposed of the writ petition by directing the assessee to avail the statutory appellate remedy under Section 15(1)(b) of the Foreign Trade (Development and Regulation) Act, 1991 — without independently adjudicating on the challenge to the communication dated 12.09.2024.

Aggrieved by this non-adjudication, the assessee filed the present intra-court appeal before the Division Bench.

Concessions and Contested Issues Before the Division Bench

When the matter came up before the Division Bench, the Senior Counsel for the assessee made a measured concession. He acknowledged that the challenge to the order cancelling the SEIS scrips and imposing penalty could appropriately be channelled through the statutory remedy available under Section 15 and Section 16 of the Foreign Trade (Development and Regulation) Act, 1991.

However, the assessee specifically carved out the challenge to the communication dated 12.09.2024 from this concession. The Senior Counsel argued that this particular communication:

  • Was issued entirely without any notice to the assessee
  • Denied the assessee any opportunity to be heard or make a representation
  • Flagrantly violated Section 8 of the Act, which mandates specific procedural requirements before an IEC can be suspended or cancelled
  • Effectively rendered the assessee commercially paralysed, given that no import or export activity is legally permissible without a valid IEC

The assessee further relied upon the Supreme Court's ruling in Whirlpool Corporation v. Registrar of Trade Marks, Mumbai & Ors., (1998) 8 SCC 1, which carved out exceptions to the general rule of exhausting statutory remedies before invoking Article 226 of the Constitution of India. One such recognised exception is where the impugned action has been taken in breach of natural justice principles — which was precisely the situation in the present case.

DGFT's Defence: The Show Cause Notice Argument

The respondents, represented by learned counsel, attempted to justify the communication dated 12.09.2024 by pointing to a Show Cause Notice dated 30.10.2023 (SCN), which had been annexed on record. Specifically, they drew the Court's attention to: