While sustaining Irrevocable Commercial Letter of Credit (ICLC) based transitional protection, the Madras High Court has held that an open-ended policy review cannot freeze licence applications and turn an export restriction into a prohibition in practice. The Court clarified that Notification No.12/2026-27 dated April 17, 2026, applies prospectively, and purchasing and warehousing goods under the earlier ‘Free’ regime did not entitle Gimpex to export contrary to the changed policy.
The Court accepted conservation of Baryte reserves and national security as legitimate public-interest objectives, and asserted that licensing was a less restrictive alternative to an outright ban, but hardship to exporters did not invalidate the notification. Emphasising that bank-backed, independently verifiable commitments provided a rational basis for transitional protection, Gimpex’s lack of an ICLC made it ineligible. The Court also rejected the suggestion that exporters must anticipate policy changes and alter their commercial arrangements beforehand.
Briefly, Gimpex Private Limited challenged the notification dated 17 April 2026 that moved Grade A and Grade B Baryte from the “Free” to the “Restricted” export category, requiring DGFT authorisation. It also challenged Para 1.05(b) of the Foreign Trade Policy, 2023, which limits transitional protection for future exports to commitments backed by a pre-existing Irrevocable Commercial Letter of Credit (ICLC).
Gimpex had purchased Baryte from APMDCL exclusively for export and held stock valued at about Rs. 225 crores at Chennai Port. According to the petitioners, shipments had stopped because of the US–Iran conflict and disruption through the Strait of Hormuz. Its application dated 22 April 2026 for export authorisation remained pending.
The Division Bench comprising the Chief Justice Sushrut Arvind Dharmadhikari and Justice G. Arul Murugan observed that the notification applied prospectively to exports made from 17 April 2026. Purchasing goods and storing them at a port did not create a vested right to export under the earlier policy, particularly when the required statutory procedures and final regulatory clearances had not been completed. The Court also found no promise by the Union or DGFT that Baryte exports would remain unrestricted, and APMDCL’s export tenders could not amount to such an assurance.
The Court accepted conservation of strategic mineral reserves and national security as a rational basis for the restriction. It noted that the notification imposed licensing, not an outright export ban, and already provided transitional arrangements. The ICLC requirement was upheld because it provided independently verifiable, bank-backed evidence of an irrevocable commitment. However, the Court rejected the Government’s suggestion that Gimpex ought to have anticipated the policy change and obtained an ICLC, as its ineligibility arose from not holding the required instrument, not from any fault in failing to foresee the restriction.
The High Court also held that a prospective export restriction does not become retrospective merely because it affects stock purchased under an earlier policy. Mere procurement or warehousing does not confer an indefeasible right to export contrary to the policy applicable on the export date. The Court upheld the ICLC-based transitional classification as rational and the licensing restriction as a reasonable public-interest measure. At the same time, DGFT cannot indefinitely freeze applications pending a policy review, as doing so would turn a restriction into a prohibition in practice.
