The Delhi High Court recently declined to interfere with a show cause notice issued against Okiniwa Autotech, an Indian electric vehicle (EV) manufacturing company, by which the Indian government had proposed the blacklisting of the company [Okinawa Autotech International Private Limited v. Union of India].
A Bench of Chief Justice Manmohan and Justice Tushar Rao Gedela, observed that a writ court can interfere with show cause notices only in rare and exceptional cases, such as when the notice is issued without jurisdiction or where there is an abuse of law.
In this case, the Court was not convinced by Okinawa's claim that the show-cause notice was issued with bias or with a 'predetermined mind' to blacklist.
It, therefore, rejected Okinawa's challenge to the September 11 show cause notice issued by the Union Ministry of Heavy Industries and Public Enterprises.
"This Court does not find any reasons to interdict the Show Cause Notice at this stage. In any case, the appellants can raise all its contentions before the authority while filing the reply to the Show Cause Notice, taking all the objections that are possibly available with them," the Court said.
Okinawa was earlier de-registered by the Ministry in October 2023 after the government concluded that the EV company had failed to comply with requirements of the Faster Adoption and Manufacturing of Electric Vehicles in India, Phase II (FAME-II Scheme) and Phased Manufacturing Program Guidelines (PMP Guidelines).
The scheme and guidelines were introduced as part of efforts to promote electric and hybrid vehicles in India. Manufacturers that availed subsidies under this initiative were required to indigenise parts of their vehicle models in accordance with guidelines issued from time to time.
Okinawa Autotech's electric scooter was first to get the FAME-II subsidy incentive in 2019. However, in the wake of allegations that the company flouted guidelines under this scheme, the government initiated proceedings to take back the subsidies earlier granted.
Okinawa eventually challenged its 2023 de-registration before a single judge of the Delhi High Court, which is pending adjudication.
Meanwhile, the Ministry issued a show cause notice against Okinawa, proposing the action of blacklisting the company.
Okinawa challenged the show cause notice. After a single-judge dismissed the said challenge, Okinawa filed an appeal before the High Court's Division Bench.
Senior Advocate Meenakshi Arora led the arguments for Okinawa, which contended that the show cause notice should not have been issued while its challenge to the deregistration was still pending adjudication.
Okinawa pointed out that the show cause notice was predicated on the deregistration order against it and the alleged violation of the FAME-II and scheme and PMP guidelines.
It also contended that since the same authority who ordered the deregistration has issued the show cause notice, there is a naturally an element of bias against Okinawa. The authority may have issued the notice with a predetermined mind while proposing to blacklist Okinawa, the EV company argued.
The Central government denied the allegations of bias. Among other arguments, Additional Solicitor General (ASG) N Venkataraman submitted that Okinawa is not the only company facing action after the genuineness of their subsidy claims were doubted. Proceedings to recover subsidy were initiated against five other companies as well, the ASG argued.
The Court eventually rejected Okinawa's arguments. It observed that there is nothing to restrict the same authority from issuing the show cause notice, and there this aspect would not imply that there is personal bias.
"Moreover, the appellant would be afforded an opportunity to file its reply which would be considered by the Competent Authority in accordance with law," the Court added.
The Court further held that the pendency of Okinawa's plea challenging its de-registration would not be an impediment to the issuance of show cause notice for blacklisting. It proceeded to reject Okinawa's appeal.
"It is made clear that the observations made herein shall not tantamount to any expression on merits of the case. The rights and contentions of the parties are left open," the Court clarified.
Senior Advocate Meenakshi Arora, with Advocates Manish Bishnoi, Anurag Bhatt, Lokesh Pathak, Vaibhav Vijayvargiya and Ankur Gupta appeared for Okinanwa.
ASG N Venkataraman, Central Government Standing Counsel Anurag Ahluwalia, with Advocates Amish Tandon, Anushree Kulkarni, Vaishnavi, Amit Acharya, Kaushal Jeet Kait, Hridyanshi Sharma appeared for the Central Government.
[Read judgment]