In a relief to cotton exporters,the Bombay High Court on Wednesday stayed a recent Central government circular which directed them to obtain a bank guarantee while registering for exports. The Division Bench of Chief Justice Mohit Shah and Justice Girish Godbole passed the order in response to a petition filed by Anil Ginning and Pressing Factory and several other cotton exporters. The petition challenged a government circular passed on August 4,which said that exporters must obtain a bank guarantee for 2.5 per cent of the total monetary value which they have registered for exports. The bank guarantee would have to be given to the Directorate General of Foreign Trade (DGFT). During the hearing,Chief Justice Shah said,Earlier,when there was a cap on the total exports which could be made,a bank guarantee would have been applicable. But now,there is no such quota,so there is no reason to put such a restriction. Also,if the condition is imposed,it would be discriminatory in favour of exporters who have registered before the governments directives. Arguing for the petitioner,lawyer Cherag Belsara said,The government has no right to impose an additional penalty of this kind on cotton exporters. In any case,the registration certificate (RC) for exports is issued only when a letter of credit from the bank is provided to the authorities. Therefore,this restriction is uncalled for. Belsara also said such a policy will lead to losses to the government in terms of foreign exchange. However,lawyer for the Centre R V Desai told the court,It has been seen that 50-60 per cent of the applicants have not actually made the said exports in spite of getting the registration. In this manner,they will come in the way of genuine exporters. It is for this reason that the 2.5 per cent bank guarantee is necessary and justified. Contrary to what the exporters say,it is not a penalty but a necessary precaution.
