This Constitutional petition is directed against the order dated 22.03.2017, passed by Respondent No, 3, whereby the export rebate claim/security deposited by the petitioner regarding 21 consignments of wheat/wheat flour (Atta) exported to Afghanistan was,declined. The petitioner is also seeking direction against Respondent No, 2, to release the subsidy and security deposited as per terms and conditions of the agreements and instructions of State. Bank of Pakistan.
2. Brief facts are that Government of Pakistan allowed the export of wheat/wheat flour by private parties against export rebate of U.S. $ 70 Per Metric Ton (PMT) to be released by State Bank of Pakistan (SBP) to the exporter upon submission of requisite export documents/realization of export proceed. In this regard SBP issued EPD Circular Letter No, 3 of 2015 (Circular No, 3) and Government of Punjab Food. Department also issued notification dated 19.08.2016 (Notification dated 19.08.2016).
In pursuance to said policy, the petitioner entered into various agreements with Respondent No, 3 (detail of which is given in Para 3 of the petition), for the purchase of wheat/wheat flour, for its further export to Afghanistan. The petitioner also deposited Rs, 65,00,000/- as security (Provincial price reduction subsidy) which was to be released after submission of documents prescribed in agreement and notification dated 19.08.2016 to establish actual export of wheat. The grievance of the petitioner is that after the export of 10880 metric tons of wheat/wheat flour to Afghanistan, the respondents are not releasing security deposited by the petitioner. Earlier, the petitioner being aggrieved filed W.P. No, 3224/2017, in which direction was issued to respondents to decide the grievance of the petitioner, however, the matter could not be decided. The petitioner filed Crl.Org.No, 691-W/2017 and thereafter Respondent No, 3, through impugned order dated 22.03.2017, regretted the rebate in 21 cases of the petitioner on the ground that petitioner has failed to provide "SWIFT" message for payment of export proceeds from abroad. Resultantly the security deposited by petitioner was not released by respondents. The petitioner being aggrieved of order dated 22.03.2017, and act of the respondents for not releasing the rebate/security deposited has filed this constitutional petition.
3. Learned counsel for the petitioner argued that petitioner provided all required export documents for export of wheat/wheat flour to Afghanistan along with proof of realization of export proceeds in cash from abroad, therefore, the rebate and security deposited cannot be withheld by the respondents. He submits that there is no requirement in the agreements and notifications of providing "SWIFT" messages for payment from abroad, hence it cannot be the sole ground to regret rebate/security. Further submits that export to Afghanistan, was made against cash convertible currency which is permissible by SBP under the law, hence demand for "SWIFT" messages for payment from abroad through banking channel is unreasonable and arbitrary.
4. Learned Law Officer on the other hand supported the impugned order dated 22.03.2017: He submits that petitioner was required to present "SWIFT" messages for payment from abroad to establish actual export of wheat/flour to Afghanistan. He submits that under Clause 4 of the Contract between the petitioner and Respondent No, 3, the said document could be demanded by respondent department to establish the actual export. Contends that because petitioner failed to produce "SWIFT" messages for payment from abroad through banking channel, hence his rebate was rightly declined.
5. I have heard the learned counsel for the parties and perused the record.
6. There is no dispute between the parties that Federal Government has approved export rebate of US $ 70 PMT against the export of wheat/wheat flour to the exporters upon submission of requisite export documents and realization of export proceeds, This policy is reflected in SBP Circular No, 3 as well as Government of Punjab notification dated 19.08.2016. There is also no dispute that in pursuance to said policy, the petitioner entered into 21 agreements with Respondent No, 3, (detail of which is given in para 3 of the petition) for the purchase of 10880 metric tons of wheat/wheat flour for export purpose. Under the said agreements, the petitioner/exporter was to purchase the wheat from Food Department and export the same within 60 days of its date of lifting from the storage point. The petitioner/exporter under these agreements was also required to submit bank guarantee of Rs, 6500/- per MT or equal cash amount and to apply within 70 days from the date of lifting of wheat/wheat flour for the release of said bank guarantee or amount deposited.
7. It is admitted position between the parties that wheat/wheat flour was lifted by the petitioner for export purpose and he also deposited required amount of security. It is not the case of the respondent department that application for release of security is beyond time or export documents are not provided by the petitioner. However, the sole ground on which the rebate/security deposited was declined through impugned order, is that petitioner has failed to provide "SWIFT" messages for payment frOm abroad. In the circumstances discussed above, the moot legal issue requires determination is whether failure to provide "SWIFT" messages for payment from abroad can be a reasonable ground to deny the rebate and release of amount deposited by the petitioner as security.
8. According to "Investopedia" (One of the leading source of financial contents on the Web), the word "SWIFT" stands for the "society for worldwide interbank Financial Tele Communication" "SWIFT" is a message network that financial institutions use to securely transmit information and instructions through a standardized system of Code. The SWIFT transaction is also illustrated in Investopedia as under:-- "Assume a customer of a Bank of America branch in New York wants to send money to his friend whose bank at the Unicredit Banca branch in Venice. The New Yorker can walk into his Bank of America branch with his friend's account number and UnicaCredit Banca's unique SWIFT code for its. Venice branch. Bank of America will send a payment transfer SWIFT message to the UniCredit Banca branch over the secure SWIFT network. On& Unicredit Banca receives the SWIFT message about the incoming payment, it will clear and credit the money to the Italian friend's account:"
From above definition and illustration, it is evident that "SWIFT" message is only available and applicable in interbank transactions however, where transaction is in cash foreign exchange, the "SWIFT" message will neither be available nor applicable.
9. To examine if production of "SWIFT" message is a mandatory requirement for release of security deposited by petitioner, it is expedient to reproduce relevant clauses of Notification dated 19.08.2016 and terms of Agreements regarding release of Bank guarantee/security deposit.
Clause (g) of the notification dated 19.08.2016, is as under:-- "g) Bank Guarantee of Rs, 6500/- per M.Ton will be released after submission/verification of following documents:--
(i) Copy of bill of lading/manifest whichever is applicable.
(ii) Copy of export commercial invoice.
(iii) Copy of Form-E.
(iv) Copy of L/C for export.
(v) Goods declaration duly verified by the custom authorities.
(vi) Declaration to the effect that no fraud/forgery has been committed in export documents
(vii) Any other documents/evidence which may be required for establishing the actual export of wheat/wheat flour (atta)."
Clause 4 of agreements between petitioner and food department is also re-produced herein below:- "(4) The second party shall apply within seventy (70) days from the date of lifting of wheat for release of Bank Guarantee by submitting the following documents:
(i) Copy of bill of lading/manifest whichever is applicable.
(ii) Copy of export commercial invoice. (ii) Copy of Form-E.
(iv) Copy of L/C for export or cash against documents (CAD) or bank to bank transactions covered under the SBP regime.
(v) Goods declarations duly verified by the Custom Authorities.
(vi) Declaration to the effect that no fraud/forgery has been committed in export/agreement documents.
(vii) Any other document(s)/evidence the first party may require for establishing the actual export of wheat."
10. Plain reading of Clause (g) of notification dated 19.08.2016 and Clause 4 of agreements between petitioner and Food Department shows that petitioner/exporter is required to submit copy of bill of lading or manifest, copy of export commercial invope, copy of Form-E, copy of L/C or cash against documents or bank to bank transaction, goods declaration verified by the customs authorities and declaration to the effect that no fraud committed in export/agreement documents. There is no specific requirement in the notification dated 19,08.2018 or in the agreements for petitioner/exporter to present "SWIFT" message for payment from abroad. The Circular 3 by SHP also does not specially require "SWIFT" message for payment from abroad for release of bank guarantee or security, 11.No doubt under clause 4(vii) of the agreements before release of bank guarantee/security deposited, the respondent department can demand any document or evidence to satisfy itself that actual export of wheat flour took place but such demand must be reasonable and should be of those documents which exist in the transaction. In the present case the claim of the petitioner is that wheat flour was exported to Afghanistan after fulfilling all legal requirements however the export proceeds, were realize in cash foreign exchange instead of banking channel, hence "SWIFT" messages are neither available nor figure in the transaction. The respondent department without even discussing the above plea of the petitioner regretted the rebate without realizing that such cash transaction is permissible under the law where "SWIFT" message is not applicable.
12.In this regard, the SBP issued circular EPD Letter No, 4 of 2013 dated 8.3.2013, where it is directed that in view of peculiar nature of trade with Afghanistan, the authorized dealer will accept the cash convertible currencies brought over their counter by the exporters and convert the same at the prevailing buying rate applicable for normal export proceeds for credit to Pakistan rupee account of the exporters. For convenience, the said Circular is reproduced hereunder:- "EPD Circular Letter No, 04 of 2013 March 08 2013 The Head/Principal Offices of all Authorized Dealers in Foreign Exchange Dear Sirs/Madam.
Export to Afghanistan and through Afghanistan to Central Asian Republics Attention of Authorized Dealers is invited to EPD Circular Letter No, 03 dated March 12, 2002 on the subject containing therewith SRO No, 1371(1)12002 dated March 7, 2002 issued by the Ministry of Commerce, Government of Pakistan.
In this regard, it is clarified that as per FE Regulations, the ,export made against convertible is subject to Form "E" certification by the Authorized Dealers. Accordingly, the export proceeds received as per sales terms are required to be surrendered in the inter-bank market for which the concerned Authorized Dealer will issue Proceeds Realization Certificate (PRC) at the prevailing buying exchange rate and credit the equivalent rupees in the PIER account of the concerned exporter, In view of peculiar nature of trade with Afghanistan, it is emphasized that the Authorized Declers will accept the cash convertible ourrencies brought over their counter by the exporters and convert the same at the prevailing buying rate applicable for normal export proceeds for credit to the PKR account of the exporter.
Further, the banks will ensure that the said proceeds are backed by proper export documents as per prescribed procedure and terms & conditions issued from time to time.
Please bring the above to the notice of all your constituents. "
The said policy regarding exports to Afghanistan is also reflected in Clause 13 of Chapter 12 of SBP Foreign Exchange Manual of 2017.
13.Once petitioner established that it received export proceeds in cash convertible currencies for exports to Afghanistan, under above referred SBP circular, there was no occasion to regret the rebate for not producing "SWIFT" message for payment from abroad. However, the petitioner is bound to provide other required export documents prescribed in notification dated 19.8.2016 and agreements, to show that the export of wheat/wheat flour actually took place to Afghanistan and export proceeds were realized in cash.
14. The demand of SWIFT message by respondents in foreign exchange cash convertible transaction is absolutely illogical and arbitrary. It is settled law that public functionaries vested with power in respect of determination of rights of citizen qua the state resources are required to exercise such power and discretion fairly and properly on judicial principals and keeping in view the relevant considerations having logical nexus with the object of law and not arbitrarily and whimsically. In the instant case, the respondents being public functionaries while dealing with the petitioner and other exporters should have acted justly and fairly in accordance with law and they were bound to stand by their commitments of subsidy. Any unreasonable and illogical ground to deny or withdraw from their commitments will undermine the confidence of exporters and general public. The august Supreme Court in Muhammad Sadiq Vs, Taj Muhammad (PLD 1994 Lah 326), held that discretion conferred on public functionaries should be exercised judiciously and on recognized principles and not arbitrarily or on presumptions or assumptions. The same view was also expressed in Walayat Ali Mir vs. Pakistan International Airlines Corp (PIAC) (1995 PSC 703), Muhammad Nawaz and other vs. Muhammad Sadiq (1995 SCMR 105), MCB vs. Muhammad Umar Malik (PLD 1993 Lah 281), Sharfuddin vs. The Zonal Municipal Committee District South Karachi (1994 MUD 1062), Muhammad Sadiq vs. Tai Muhammad and two others (1994 CLC 369) and Lt. Col. (Retd)
M. Zahoor ul Haque vs. Quarter Master General and others (1994 CLC 2449).
15. The petitioner also makes out a case for discrimination. The appended documents show that earlier in similar situation the respondent food department vide letter dated 18.08.2015 sought clarification from SBP regarding M/s, Thera International (an exporter from Karachi). The SBP clarified the legal position vide its letter dated 19.08.2015, which is reproduced hereunder: "The Deputy Director, Budget & Accounts, Directorate of Food Punjab, Lahore.
Subject: Clarification regarding advance payment in cash being export proceeds against wheat flour.
Dear Sir, Please refer to your Letter No, AB-II (Export)Thara Intel-70/2015 dated 18.8.2015 on the captioned subject. In this context we have to adivse that the SBP instructions allow for exports proceeds realization in cash Foreign Exchange for exports to Afghanistan; any exports so done are quite regular provided other export requirements have been fulfilled.
Regards, (Maqsood Ahmad)
Assistant Director"
The above clarification by SBP is manifest to the effect that SBP allowed for export proceeds realization in cash foreign exchange for exports to Afghanistan. It is not denied that after aforesaid clarification the rebate was allowed to M/s. Thara International, hence, petitioner is also entitled for the same treatment.
16.Further it is not the case of the respondents that petitioner has failed to produce requisite export documents to establish its export of wheat/wheat flour to Afghanistan or petitioner sold wheat/wheat flour locally. The only reason to reject rebate to petitioner is that it has failed to produce "SWIFT" messages for payment, which is otherwise not applicable in present case as already discussed above. Therefore, in the absence of any allegation of fraud in export, the other export documents if produced by or petitioner, will be sufficient to establish that export did take place against cash receipts, which is permissible under the law.
17.In view of above discussion, the impugned order dated 22.03.2017 being illegal and of no legal effect, is set aside. and the respondents are directed to release the rebate/security of the petitioner indeed subject to condition that petitioner has provided other requisite export documents to establish its exports and cash exports process except through "SWIFT" messages.
18.This petition is allowed in above terms.