Court Rules Notification Shifting Baryte Exports from Free to Restricted Category is Prospective and Valid; Dismisses Challenge to Transitional Protection Clause Requiring Irrevocable Commercial Letter of Credit
In a significant judgment delivered on October 15, 2026, the Madras High Court (Division Bench comprising Chief Justice Sushrut Arvind Dharmadhikari and Justice G. Arul Murugan) upheld the validity of a government notification that reclassified Baryte Grades A and B from the "Free" to the "Restricted" export category under the Foreign Trade Policy (FTP), 2023. The petition filed by Gimpex Private Limited and its director challenged the notification dated April 17, 2026, on grounds of retrospectivity, violation of fundamental rights under Articles 14 and 19(1)(g) of the Constitution, and arbitrariness, besides contesting Para 1.05(b) of the FTP that provides transitional protection only to exporters holding an Irrevocable Commercial Letter of Credit (ICLC).
The Court meticulously examined the petitioners' contentions and the respondents' stand, including the crucial role of national security and strategic interests cited by the government in restricting export of these mineral grades vital for oil, gas, and defence sectors. The Court found that:
1. Notification Not Retrospective; No Vested Rights Affected: The notification applies prospectively to exports made on or after its date of issuance. Mere ownership or storage of stock at the port without completed export formalities such as shipping bills or bills of lading does not confer a vested or indefeasible right to export under the earlier free regime. The Court clarified that the freedom to export is subject to the prevailing policy at the time of export, thereby distinguishing the present case from precedents where retrospectivity was found.
2. No Legitimate Expectation or Promissory Estoppel Against Valid Policy Change: The Court held that classification of Baryte as "Free" export previously was not a promise or guarantee that the policy would remain unchanged. The petitioners' reliance on export tenders by the State-run Andhra Pradesh Mineral Development Corporation Limited (APMDCL) did not amount to assurance by the Union of India to maintain the export policy. The government's sovereign power under the Foreign Trade (Development and Regulation) Act, 1992, permits amendment of policy in the public interest.
3. Reasonableness of Export Restriction Within Constitutional Limits: The Court acknowledged the strategic importance of conserving Baryte reserves and national security considerations raised by the National Security Council Secretariat (NSCS). It ruled that the restriction through a licensing regime, rather than an outright prohibition, was a reasonable and proportionate measure under Article 19(6) of the Constitution. The absence of a separate grace period in the notification was not arbitrary since transitional protection existed under Para 1.05(b) of the FTP.
4. Validity of Transitional Protection Limited to ICLC Holders: The Court upheld Para 1.05(b) of the FTP, which grants transitional protection only to exporters holding an Irrevocable Commercial Letter of Credit issued before the policy change. The Court reasoned that ICLC is a bank-backed, verifiable, and irrevocable commitment, unlike other payment modes such as cash in advance or open account. This classification has an intelligible differentia and rational nexus with the object of protecting irreversible pre-existing export commitments. The hardship faced by exporters trading on other terms does not render the clause unconstitutional.
5. DGFT Must Decide Pending Licence Applications Within Fixed Timeframe: The petitioners' application for a Restricted Export Authorisation filed on April 22, 2026, had remained pending for nearly six months due to an ongoing inter-ministerial policy review. The Court directed the Directorate General of Foreign Trade (DGFT) to decide the application within four weeks after granting a personal hearing and passing a reasoned order. It emphasized that indefinite delay effectively converts restriction into prohibition, which is impermissible. The DGFT was instructed to consider factors like pre-policy procurement, absence of domestic market, shipping delays caused by geopolitical conflicts, economic hardship from mounting port charges, and national security concerns.
The Court, however, declined the petitioners' request to clear shipping bills without a licence, stating that this would violate the valid export restriction.
This judgment reinforces the principle that export policies can be amended prospectively in the public interest, especially for strategic minerals, and establishes the importance of procedural fairness and timely decision-making in licensing under restrictive regimes. Exporters must secure appropriate authorisations and comply with stipulated conditions like ICLC to avail transitional benefits.
Bottom Line:
Foreign Trade Policy - Export of Baryte Grades A and B shifted from Free to Restricted category - Notification held prospective and valid - No vested right to export merely because stock was procured and stored at port before policy change - Para 1.05(b) of FTP, 2023 requiring Irrevocable Commercial Letter of Credit for transitional protection upheld - DGFT cannot keep export licence application pending indefinitely and must decide it within fixed time by reasoned order after hearing.
Statutory provision(s):
Foreign Trade (Development and Regulation) Act, 1992 Sections 3, 5; Foreign Trade Policy, 2023 Para 1.05(b); Constitution of India Articles 14, 19(1)(g), 19(6)
Gimpex Private Limited v. Union of India, (Madras)(DB) : Law Finder Doc Id # 2997450
