Case Law Details
Benefit of the ‘Served from India Scheme’ cannot be denied only on the ground that the companies were subsidiaries of foreign companies
Yum Restaurants (I) Pvt. Ltd.&Anr(the Petitioners)are companies incorporated under the erstwhile Companies Act, 1956 and have their registered office situated in India. The Petitioners applied for license (Duty Credit Scrips) in terms of the‘Served from India Scheme’ (SFIS)as framed under the Foreign Trade Policy (FTP) 2004-09 (effective upto August 26,2009) and FTP 2009-14 (effective from August 26,2009) which were duly accepted.
However, later on the Policy Interpretation Committee (PIC) and Director General of Foreign Trade (DGFT) denied the benefit of SFIS, as framed under the FTPto the Petitioners and separate communications were sent to the Petitioners withdrawing/recalling the said benefits on the ground that they were subsidiaries of foreign companies.Hence the objective of SFIS to accelerate growth in export of services from India which creates a powerful and unique served from India brand is not achieved.Being aggrieved, the Petitioners filed Writ Petition before the Hon’ble High Court of Delhi.
The Hon’ble High Court of Delhi allowed the benefit of SFIS to the Petitioners and held the following:
- It cannot be disputed that DGFT is empowered to interpret the FTP but such powers can be exercised only when the plain language of the policy presents an ambiguity. It would not be open for DGFT to introduce new conditions and criteria under the guise of interpreting the policy as that would amount to amending the provision of the FTP;
- The words used in Paragraph 3.12.2 of FTP 2009-14 (Para 3.12.2) are “Indian Service Providers”. There is no scope to read into these wordsthat for service provider to be Indian, its shareholders must also be Indian. As this would amount to introducing an additional eligibility condition, which is extraneous to the eligibility criteria as spelt out in Para 3.12.2;
- The conclusion of DGFT that Indian companies having foreign equity cannot be considered as Indian, militates against well-established canons of the Company Law;
- The Petitioners are companies incorporated under the erstwhile Companies Act, 1956 having registered offices in India and are governed by the provisions of the statute and hence are Indian Companies. Insofar as the domicile of the Petitioners is concerned, no distinction can be drawn between the Petitioners and other companies incorporated under the said Act;
Therefore, the decision of DGFT/PIC denying the benefit of the SFIS to the Petitioners by withdrawing/recalling the said benefits was set aside.