IMPORTANT POINT
The court established that the circulars shortening the period of re-validation of licenses were arbitrary and discriminatory, and the appellants were entitled to seek revalidation on the same terms as in the case of fresh licensees.

ORDER :

1. The respondent is engaged in the activity of manufacturing and exporting heat resistant latex rubber threads and has wide ranging exports to several countries. Natural rubber is a major raw material in the manufacture of rubber threads and it was being directly imported. The respondent applied for and was granted advance licenses under the Advance License Scheme for a period of 18 months. This was pursuant to para 4.15 of the Export-Import Policy where under an applicant would be allowed to import inputs free of import duty subject to the fulfillment of the stipulated export obligation as per the policy laid down by the Government.

2. On 20.02.1999, a circular was issued whereby the import of natural rubber under such advance license was no longer permitted and it had to be sourced through State Trading Corporation ('STC'). The respondent approached the STC for supply of rubber against the advance licenses but on 01.05.2001 STC declined its request. On 16.07.2003, the respondent approached the appellants and pointed out that it had completed its export obligations before procuring duty free raw materials.

3. Vide circular dated 10.10.2003, the embargo imposed on the import of natural rubber was lifted and it was stated that fresh advance licenses are issued as per normal EXIM policy. The old licenses can be revalidated up to 31.12.2003.

4. The respondent represented to the appellants that period of validity of licenses, that had been in force but couldn't be utilized because of the restrictions/ban, i.e., 31.12.2003, was far too short. Accordingly, it requested the extension till 31.12.2004. Vide Circular dated 11.12.2003 the outer limit was extended till 31.03.2004.

5. Thereafter, the respondent filed a writ petition in the High Court on the ground that even though it had fulfilled the export obligations, it was denied the benefit of advance licenses. Thus, it sought quashing of circulars dated 10.10.2003 and 11.12.2003 to the extent they prescribed for a shorter period of time. The single Judge Bench of the High Court held that fixing of time period is essentially executive in nature and not within the writ jurisdiction. Aggrieved, the respondent filed an appeal before the Division Bench, which allowed the appeal on grounds of arbitrariness and discrimination between new licensees and old licensees.

6. We have heard the learned counsel for the parties and gone through the impugned judgment.

7. We find that the aforesaid view taken by the High Court is without any blemish and the High Court has given cogent reasons while holding that the circulars in question suffer from bias and arbitrariness and were discriminatory in nature. This aspect of classification is without any rational nexus between the differentia and the object which was sought to be achieved and the differentia is discussed by the High Court from paragraphs 30 to 33. Since we agree with the reasons given therein, the said paragraphs are reproduced below for the sake of brevity:

“30. The second aspect of classification is the existence of a rational nexus between the differentia and the object sought to be achieved. Even if it were assumed – arguendo -that a valid differentiation exists, the respondents, in our view have failed to establish how that has a rational nexus with the object sought to be achieved – by the EXIM policy. As observed earlier, the objective of every such EXIM policy is to optimize exports, and one of the mechanisms adopted is advance import licensing, as an incentive. The respondents have failed to show how that objective is promoted or sub-served better by shortening the period of revalidation in respect of old licenses, and retaining the period mentioned in the Handbook for fresh licenses.

31. The impugned policy also, in our considered view, is also arbitrary and unreasonable. Had the respondents really wanted to protect domestic growers, nothing prevented them from responding appropriately, the order of the Supreme Court expressly k