1. Court’s decision
The Delhi High Court has partially allowed a writ petition filed by a national association of chilli exporters challenging the foreclosure of the Transport and Marketing Assistance (TMA) Scheme through a notification dated 25.03.2022. The Court held that the Union Government lacks statutory power under Sections 3 and 5 of the Foreign Trade (Development and Regulation) Act, 1992 to issue notifications with retrospective effect. Consequently, the revised TMA Scheme notified on 09.09.2021 must operate only prospectively from 09.09.2021 onward. The Court directed authorities to process incentive claims for exports carried out between 09.09.2021 and 24.03.2022 (the day before foreclosure) and rejected all claims for the retrospective period 01.04.2021–08.09.2021. The petition thus succeeded only in part.
2. Facts
The TMA Scheme, introduced in 2019 to support agricultural exporters by offsetting high international transport costs, originally applied for exports from 01.03.2019 to 31.03.2020 and was extended to 31.03.2021. After a gap of more than five months, a revised TMA Scheme was notified on 09.09.2021 for exports from 01.04.2021 to 31.03.2022. This revived the scheme retrospectively from April 2021. However, on 25.03.2022, the Government foreclosed the scheme, citing administrative reasons to revamp and redesign it. The petitioner association had earlier approached the High Court, where their petition was treated as a representation. The DGFT rejected their representation on 19.03.2024. The present writ petition challenged both the foreclosure notification and the rejection order.
3. Issues
The Court addressed the following key questions:
- Whether the Central Government under Sections 3 and 5 of the FTDR Act can issue notifications or orders with retrospective effect.
- Whether chilli exporters acquired any vested right to claim TMA incentives for exports carried out between 01.04.2021 and 08.09.2021.
- Whether the withdrawal notification dated 25.03.2022 was invalid for retrospectively extinguishing accrued benefits.
- Whether the DGFT’s rejection order was arbitrary or contrary to law.
- Whether the doctrine of legitimate expectation justified protection of exporters’ claims for the retrospective period.
4. Petitioner’s arguments
The petitioner argued that the notification dated 25.03.2022 unlawfully operated retrospectively because it terminated the revised TMA Scheme for an already-covered period. They invoked Section 3 and Section 5 of the FTDR Act to contend that the Government possesses no authority to issue retrospective policy amendments. Relying heavily on Kanak Exports, they asserted that vested rights accrued to exporters during the period 01.04.2021–31.03.2022. They also relied on judgments such as Asian Food Industries, Mallik Tanning, and Indian Flexible Intermediate Bulk Container Association, all of which held that foreign trade notifications cannot retrospectively take away export incentives. The petitioners invoked legitimate expectation, arguing that exporters altered business arrangements assuming incentive entitlement for the entire FY 2021–22. They also cited Sivanandan C.T. to argue that state action must be predictable, transparent, and non-arbitrary.
5. Respondent’s arguments
The Government defended the foreclosure notification as a policy decision aimed at reorganising export incentives for better outcomes. It argued that economic policy decisions deserve judicial deference, citing Balco Employees’ Union and Ugar Sugar Works. The Union also invoked Kasinka Trading to assert that there is no estoppel against exercise of sovereign functions. Most critically, the respondents contended that no incentive could have accrued to exporters between 01.04.2021 and 08.09.2021 because the scheme itself did not exist during that period. They argued that retrospective operation of the 09.09.2021 notification was itself invalid under the very case law the petitioners relied upon. If retrospective benefit cannot be conferred through delegated legislation, the petitioners cannot demand retrospective enforcement of the same notification. Legitimate expectation, they argued, cannot operate for a period when no scheme was in force.
6. Analysis of the law
The Court conducted an extensive analysis of Sections 3 and 5 of the FTDR Act and reiterated the Kanak Exports principle: delegated legislation cannot be retrospective unless expressly authorised. There is no such authorisation in Sections 3 or 5. The 2010–2025 jurisprudence consistently holds that export-related subordinate legislation must operate prospectively unless otherwise empowered. The Court also clarified the relationship between policy changes, accrued rights, and legitimate expectation, noting that these doctrines cannot create rights where none existed. Since no scheme existed between 01.04.2021 and 08.09.2021, exporters could not legitimately expect incentives for that period. The Court accepted that although governments enjoy wide economic-policy freedom, they cannot circumvent statutory limits on retrospective rulemaking.
7. Precedent analysis
The Court relied extensively on Director General of Foreign Trade v. Kanak Exports (2016), quoting paragraph 113 at length to reaffirm that Section 5 confers no power to enact retrospective foreign trade policy amendments. It also acknowledged the reasoning in Indian Flexible Intermediate Bulk Container Association (Delhi HC, 2023), which followed Kanak Exports faithfully. Judgments in Asian Food Industries and Mallik Tanning reinforced that FTDR-based notifications are prospective by default. While petitioners cited Sivanandan C.T. on legitimate expectation, the Court held that this doctrine cannot overcome the statutory bar against retrospective policy implementation. The respondents’ reliance on Balco, Ugar Sugar Works, and Kasinka Trading was accepted only partially: economic policy deserves deference, but only within statutory limits.
8. Court’s reasoning
The Court held that the revised TMA Scheme notified on 09.09.2021 could not operate retrospectively because Section 5 does not empower such operation. Consequently, exporters cannot claim incentives for the period prior to 09.09.2021. The Court emphasised that exporters could not have anticipated resurrection of a lapsed scheme and therefore no legitimate expectation accrued. However, for exports made between 09.09.2021 and 24.03.2022, the TMA Scheme was fully operative. For this period, the Court protected exporters’ rights and directed the DGFT to process incentives. The foreclosure notification dated 25.03.2022 was upheld but limited prospectively.
9. Conclusion
The Court concluded that while the Government has broad authority to amend or rescind export incentive schemes, it cannot enact retrospective policy changes under the FTDR Act. Therefore, the notification withdrawing the revised TMA Scheme does not affect exporters’ entitlement for the period 09.09.2021–24.03.2022. Conversely, exporters have no claim for the period before 09.09.2021 because the retrospective operation of the Scheme itself was legally impermissible. The writ petition was thus partly allowed with clear directions to process eligible claims.
10. Implications
This judgment clarifies a crucial point in Indian foreign trade law: neither the Central Government nor the DGFT may retrospectively modify or rescind incentive schemes unless expressly permitted by statute. It also provides exporters a workable timeline: claims will be honoured only for exports after 09.09.2021. The ruling strengthens legal certainty in export incentive schemes, curtails retrospective policy volatility, and reinforces the principle that legitimate expectation cannot override statutory constraints. Its impact extends to all future incentive-based schemes, ensuring that exporters can plan more accurately and reducing ambiguity in the administration of trade support programmes.
CASE LAW REFERENCES
1. Director General of Foreign Trade v. Kanak Exports (2016) 2 SCC 226
Holding: Section 5 of FTDR Act does not permit retrospective notifications; delegated legislation must be prospective.
Application: Court held both the 09.09.2021 and 25.03.2022 notifications must operate prospectively.
2. Indian Flexible Intermediate Bulk Container Association v. DGFT (2023)
Holding: Neither Central Government nor DGFT can retrospectively modify foreign trade policy.
Application: Reinforced the prospective-only rule used to deny pre-09.09.2021 claims.
3. Union of India v. Asian Food Industries (2006) 13 SCC 542
Holding: Policy prohibitions under Sections 3 and 5 must operate prospectively.
Application: Used to invalidate retrospective readings of export incentives.
4. Kasinka Trading v. Union of India (1995) 1 SCC 274
Holding: No estoppel against sovereign policy changes.
Application: Accepted only partially; cannot override Section 5’s prospective limitation.
5. Sivanandan C.T. v. High Court of Kerala (2024) 3 SCC 799
Holding: Legitimate expectation grounded in fairness and predictability.
Application: Doctrine cannot apply where no incentive scheme existed at the relevant time.
SEO-FRIENDLY FAQs
1. From which dates are chilli exporters eligible for TMA incentives?
Exporters are eligible only for exports made between 09.09.2021 and 24.03.2022, the period when the revised TMA Scheme was valid prospectively.
2. Can the Government issue retrospective notifications under the FTDR Act?
No. The Court held that Sections 3 and 5 do not empower the Central Government to issue retrospective trade policy amendments.
3. Did chilli exporters have a legitimate expectation for incentives for April–August 2021?
No. Since no scheme was in force during that time, no legitimate expectation or accrued right existed.
