Introduction
Foreign trade notifications routinely straddle the line between policy flexibility and legal certainty. Exporters plan shipments, price contracts and calculate margins around the incentive schemes announced by the Directorate General of Foreign Trade (DGFT), and any retrospective tinkering with those schemes whether to grant a benefit or to take one away has an outsized effect on their commercial expectations. In Chillies Exporters Association India v. Directorate General of Foreign Trade, in W.P. (C) No. 9643 of 2024, decided on 10.12.2025, a Division Bench of the Hon’ble Delhi High Court examined this tension in the context of the Transport and Marketing Assistance (TMA) Scheme for agricultural exports.
The judgment, revisits the well-settled principle that delegated legislation under the Foreign Trade (Development and Regulation) Act, 1992 cannot operate retrospectively and, notably, applies that principle even-handedly, denying retrospective effect not only to a notification that withdrew a benefit but also to one that purported to confer it.
Background
The TMA Scheme was designed to offset the higher cost of transporting agricultural exports to overseas markets and to build brand recognition for Indian agricultural produce in specified overseas markets. It was first notified on 27.02.2019, read with notification dated 29.03.2019, covering exports effected between 01.03.2019 and 31.03.2020. A subsequent notification dated 17.03.2020 extended the Scheme for a further period of one year, up to 31.03.2021.
What followed was a gap. No TMA Scheme was in force between 01.04.2021 and 08.09.2021. On 09.09.2021, the DGFT notified a revised TMA Scheme, but instead of applying it only from the date of notification, the department made it applicable retrospectively covering exports effected from 01.04.2021 all the way to 31.03.2022, thereby purporting to bridge the gap that had existed since the earlier Scheme lapsed.
That revised Scheme did not run its full course either. On 25.03.2022, the DGFT issued a fresh notification foreclosing the Scheme notified on 09.09.2021, citing the need to revamp, redesign and refocus the Scheme for better outcomes. In effect, the incentive that chilli exporters believed themselves entitled to for the period 01.04.2021 to 08.09.2021 was denied.
Facts of the Matter
Aggrieved chilli exporters, through their association, first approached the Hon’ble Delhi High Court in an earlier writ petition, W.P. (C) 15279/2023, seeking a direction permitting them to claim incentives under the 09.09.2021 notification. By an order dated 28.11.2023, a Coordinate Bench disposed of that petition, directing that it be treated as a representation to be decided by the competent authority within the DGFT through a reasoned order.
Pursuant to that direction, the DGFT passed an order dated 19.03.2024 rejecting the exporters’ representation in its entirety, holding it devoid of merit. It was this rejection order along with the underlying notification dated 25.03.2022 that the petitioner association challenged in the present writ petition.
The petitioner sought a declaration that the notification dated 25.03.2022 was ultra vires, and consequential relief permitting its members to claim TMA incentives for exports effected during the period between 01.04.2021 and 08.09.2021, when the earlier Scheme had already lapsed but the revised Scheme’s retrospective coverage was meant to apply.
Issues
- Whether the Central Government or the DGFT possesses the power, under Sections 3 or 5 of the FTDR Act, 1992, to issue a notification with retrospective effect whether to confer a benefit or to withdraw one?
- Whether any right had accrued or vested in the chilli exporters in respect of exports effected between 01.04.2021 and 08.09.2021, a period during which no TMA Scheme was, in fact, operative?
Arguments of the Parties
The petitioner association’s case rested substantially on the Supreme Court’s decision in Director General of Foreign Trade v. Kanak Exports, (2016) 2 SCC 226 = 2015 (326) E.L.T. 26 (S.C.). Relying on that authority, it was argued that Sections 3 and 5 of the FTDR Act do not empower the Central Government to make any notification or order with retrospective effect; that rights had already accrued to exporters for the period 01.04.2021 to 31.03.2022 by virtue of the 09.09.2021 notification, and that these rights could not be extinguished by the subsequent notification dated 25.03.2022; that exporters had altered their position in reliance on the representation contained in the 09.09.2021 notification; and that the foreclosure notification was manifestly arbitrary.
The DGFT, resisting the petition, argued that no legitimate expectation could arise for the period 01.04.2021 to 08.09.2021 because no Scheme existed during that window in the first place; that the 25.03.2022 notification was a bona fide policy decision to redesign the Scheme; that courts exercising judicial review over economic policy ought to extend considerable latitude to the executive and not sit in appeal over the wisdom of a policy; that no estoppel lies against the Government in the exercise of its sovereign, legislative or executive functions; and that the Central Government was, in any event, empowered to issue retrospective notifications where the public interest so demanded. For these propositions, the DGFT relied on Balco Employees’ Union v. Union of India, Ugar Sugar Works Ltd. v. Delhi Administration, and Kasinka Trading v. Union of India.
Court’s Analysis
The Hon’ble Court anchored its reasoning in paragraph 113 of Kanak Exports, where the Supreme Court had held in unambiguous terms that delegated or subordinate legislation can only operate prospectively unless the enabling statute specifically vests the rule-making authority with the power to act retrospectively. Section 5 of the FTDR Act, which empowers the Central Government to formulate and announce the export-import policy and to amend it, contains no such enabling language. The power to amend a policy, the Court reiterated, is not the same as the power to amend it with retrospective effect a distinction the Supreme Court itself had drawn while approving the Bombay High Court’s reasoning in the very same case. The Division Bench extended this logic to orders issued under Section 3 of the FTDR Act as well, holding that such orders, being equally in the nature of subordinate legislation, are similarly incapable of retrospective operation.
Having settled the retrospectivity question in principle, the Hon’ble Court turned to what is arguably the more interesting part of the judgment: applying that principle to the facts at hand. The 25.03.2022 notification, in foreclosing the Scheme, undeniably purported to take away benefits that exporters believed had accrued to them and to that extent, the petitioner’s challenge was well-founded. The Hon’ble Court reasoned that if the Government lacks the power to issue a retrospective notification, that disability applies with equal force to the 09.09.2021 notification itself, insofar as it purported to reach back and cover exports already made between 01.04.2021 and 08.09.2021 a period during which, on the Government’s own admission, no TMA Scheme existed at all.
The Hon’ble Court observed that exporters shipping chillies during that six-month gap could not have legitimately expected, at the time of export, that a scheme notified months later would retrospectively extend a benefit to them. The Scheme that had earlier covered exports up to 31.03.2021 had already lapsed; nothing in force between 01.04.2021 and 08.09.2021 could have generated a reasonable expectation of incentive. Accordingly, no right could be said to have vested in the exporters for that specific window, regardless of the language used in the subsequent notification.
On the doctrine of legitimate expectation, while acknowledging the exposition in Sivanandan C.T. that public authorities must act consistently, transparently and predictably, and that a denial of legitimate expectation which is arbitrary can attract judicial scrutiny under Article 14, the Bench found the doctrine of no assistance to the petitioner, precisely because no promise or established practice existed during the interregnum period to found an expectation in the first place. As for the respondents’ reliance on the latitude accorded to economic policy-making under Balco Employees’ Union and Ugar Sugar Works, the Court accepted that principle in the abstract but held that it could not answer the narrower and more fundamental question of statutory competence namely, whether the enabling provisions permitted retrospective operation at all.
Decision
The Hon’ble Delhi High Court held that the Central Government has no power under Sections 3 or 5 of the FTDR Act to issue any order or notification with retrospective effect. Applying that finding symmetrically, the Court ruled that the notification dated 09.09.2021 could operate only prospectively that is, from the date of its own issuance and not for the period preceding it. Correspondingly, the foreclosure notification dated 25.03.2022 was held to have no application to claims for exports effected between 01.04.2021 and 08.09.2021, since no rights had accrued for that period in any event.
The net result: exporters who shipped chillies between 09.09.2021 and 24.03.2022 the window during which the revised TMA Scheme was validly and prospectively in force before being foreclosed remain entitled to claim the incentive, subject to otherwise satisfying eligibility conditions. The DGFT was directed to process such claims, to be lodged within three weeks of the judgment. No relief was granted for exports made during the earlier gap period of 01.04.2021 to 08.09.2021. The writ petition was thus partly allowed, with no order as to costs.
AMLEGALS Remarks
Chillies Exporters Association India v. Directorate General of Foreign Trade reinforces, through fresh facts, a principle that Indian courts have applied with increasing consistency: delegated legislation under the FTDR Act, being subordinate in character, is confined to prospective operation unless the parent statute says otherwise. The Delhi High Court’s contribution lies in applying that principle without favouring either side reflexively the Government could not use retrospectivity to take away a benefit, and equally could not use it to manufacture one. Exporters affected by the six-month policy gap between April and September 2021 did not obtain relief for that period, but those who exported during the Scheme’s valid prospective window stood vindicated. The judgment offers a clear template for future disputes involving retrospective foreign trade notifications, whichever direction the retrospectivity runs.