Fisheries Private
Limited Vs Union of India And Others
J U D G M E N T
GANGULY, J.
1.
Leave
granted.
2.
The
appellant, a Private Limited Company engaged in the production, procurement and
processing and export of sea-foods, and other related products, agreed to
supply MT of pealed and un-deveined (PUD) shrimps to one Cascade Marine Foods
LLC (hereinafter referred to as, "Cascade"}, a company incorporated
under the relevant laws of UAE at Sharjah. The Purchase Contract dated26.09.2006,
was signed by Pristine Food Inc., a local agent of Cascade, and as per the details
of the contract, the PUD Shrimps were to be Block frozen-with mandatory labels
on both individual block and master carton and the destination was Sharjah, UAE.
By a subsequent amendment dated 19.10.2006 to the purchase contract, the PUD
quantity was increased to a total of 24 MT without changing other terms of the purchase
contract. Prior to the dispatch of the consignment, inspection was carried out by
Sakson Fisheries Consultants, local agents of Cascade, on18.10.2006, whereby
it was found that there was no bad odour. Rather there was a fairly fresh smell
and the quality of the consignment was found to be satisfactory.
3.
On
25.10.2006, the consignment was dispatched from Mumbai, which arrived at Sharjah
Port on 02.11.2006 via Delivery Order, dated 06.11.2006. The Director of Customs,
Sharjah, was requested to authorize the release of the PUD Shrimps to Cascade. Following
this, on 07.11.2006 Sharjah Customs, vide its Customs Declaration Form, stated
that the consignment was not to be released before Health Inspection. It appears
from the facts that the customs and health authorities of UAE, had inspected
the PUD Shrimps' quality and quantity and they were satisfied that it was fit for
human consumption. The health authorities resealed the consignment and
numbered it as MSLA 18 J 550015, as against the original seal no. YME 166813.
It appears from the Store Receipt voucher No. 9232 dated 12.11.2006 of Cascade,
the buyer, that they had taken possession of the consignment. After a lapse of
more than 10 days, Cascade alleged that the PUD Shrimp was of very poor quality
as it transpired from their analysis report dated 21.11.06.
4.
As
per the minutes of the meeting held on 17.12.2006 in the office of Cascade at Sharjah
which was attended by Mr. S.D. Puranik and Mr. P.R. Sakthivel, respectively
Managing Director and Director Marketing of the appellant and Mr. Vijay Paranjape,
Group QA Manager Al-Kabeer and Ajit Pillai, General Manager, Cascade Marine
Foods LLC, the appellant agreed to compensate Cascade to the extent of the value
of the defective goods and the minutes of the meeting were signed by all the
aforementioned individuals.
5.
It
has been mentioned in the note attached to the letter dated 03.09.2007 sent by Cascade
to the Secretary, Ministry of Commerce, Government of India that Cascade was
asked by the appellant on 21.12.2006 to issue necessary samples to Mr.
Celestine of M/s Starfish Trading FZE and several samples were handed over to
him. The fact that the samples were handed over to M/s Starfish Trading FZE has
been disputed because the appellant's stand before this Court was that Cascade
failed to hand-over the necessary samples to the said M/s Starfish Trading
FZE.
6.
The
appellant called upon Cascade to hand over the consignment to one Freshly
Frozen Foods LLC and as a result of that 1081 cartons of goods were delivered
to the cold store designated by Freshly Frozen Foods on14.04.2007 vide Cascade
Store Issue Voucher0390. Freshly Frozen Foods could retrieve only 25 kgs from 4
MT of product they had thawed out and they had directed Cascade to take back the
material. When the Municipality Audit found out that the validity of PUD shrimp
packages had expired they compulsorily destroyed the entire consignment of
shrimps and the destruction cost was debited to Cascade. As a result, Cascade
by its facsimile transmission dated13.08.2007 informed the appellant that they
rejected the entire consignment and they enclosed a Debit Note No.CMF/DN/108/07
for US$ 86,104.00 which represented the material cost and destruction charges and
requested the appellant to settle the same at the earliest
7.
On
3.09.2007 Cascade by its letter addressed to Chairman, Marine Products Export Development
Authority (for short, MPEDA), made a quality complaint on the shipment effected
by the appellant for a value of US$ 83000 and a claim of total loss arising
from intentional cheating by way of delivery of decomposed shrimp, unfit for
human consumption.
8.
The
Deputy Director, MPEDA, the third respondent by its letter dated 12.09.2007 forwarded
the quality complaint made by Cascade and sought clarification from the appellant
regarding the same. To that the appellant vide its letter dated 18.09.2007 stated
that the consignment that they had sent was of standard quality and also pointed
out that they were very doubtful whether the sample shown to the appellant's officers
during their visit to Cascade's factory and the analysis report dated 21.11.2006
pertained to the consignment sent by them.
9.
In
addition to this, Cascade, through its advocates, served a legal notice on the
appellant on 23.09.2007 asking it to pay US$ 83104 plus destruction costs
within 7 days of receipt of the notice and on failing to do so, appropriate legal
proceedings would be filed in India and UAE to recover the said amount. The
appellant, through its Advocate, replied on 17.10.2007 denying that the entire consignment
of shrimps exported by the appellant had deteriorated in quality. In furtherance
they also denied any liability to compensate Cascade for the value of the goods
along with storage charges, distribution costs of USD 83104 plus destruction
costs as alleged.
10.
The
third respondent vide its letter dated 25.10.2007, addressed to the appellant, directed
it to settle the dispute with Cascade urgently by 10.11.2007, which was duly
replied to by the appellant in the negative by its letter dated 11.11.2007. After
a series of correspondence between the appellant and the third respondent, finally
the third respondent decided on 20.11.2007 to convene a joint meeting on 5.12.2007
between the appellant and Cascade to find out an amicable settlement of the issue
in the presence of the officers of MPEDA. The appellant in order to amicably settle
the dispute offered Cascade 25% of the value of the goods exported, by way of deferred
payment against adjustments, from future supplies, in the presence of officers
of MPEDA, Cochin
11.
However,
Cascade refused to accept the same. Then the third respondent issued a show
cause notice dated 23.01.2008. As per the show cause notice the MPEDA called
upon the appellant to show cause why their certificate of registration should
not be cancelled.
12.
The
appellant replied to the show cause notice vide its letter dated 4.2.2008 seeking
to refute the allegations levied upon it and further stated that MPEDA would not
be justified in canceling its certificate of registration on the above- mentioned
grounds.
13.
Third
respondent without giving any reason and without giving the appellant any personal
hearing held, vide its order dated 19.3.2008, that the registration. certificate
of the appellant stood cancelled.
14.
Being
aggrieved by the said order, the appellant appealed before the second respondent
under Rule 44 of the Marine Products Export Development Authority Rules, 1972 (hereinafter
referred to as, "the MPEDA Rules"). The appellate body fixed a
personal hearing on 28.04.2008. The appellant vide letter dated 26.05.2008 addressed
to the appellate body stated that despite several attempts made by the appellant
to resolve the dispute with Cascade as advised by the MPEDA, the attempts proved
futile and once again requested appellate body to adjudicate the dispute on
merits as well as to revoke the order of cancellation.
15.
The
second respondent vide its letter dated 20.06.2008 informed the appellant that
no more personal hearing was required and directed them to send any further
evidence of proof of settlement with Cascade, if any. On 19-08-2008, the second
respondent passed an order holding, inter alia, that: "......The appellant
in a very unethical way, had reneged on the promises made earlier. It is also
clear that the appellant company has made every attempt to disown its responsibility
for supplying poor quality seafood to M/s. Cascade Marine Foods LLC, Sharjah. Even
during the personal hearing before the undersigned on the 28th April, the appellant
was given ample time to settle the matter. Time was also given beyond the deadline
fixed. However, the appellant seems to have taken a decision not to settle the
complaint. The appellant's contention that they were pressured to sign the
documents is quite illogical and unjustifiable because if they had any
difference of opinion they could have recorded then and there. Hence there is
ample evidence that this is definitely a case of cheating of M/s. Orxy Fisheries
by shipping substandard material to M/s. Cascade Marine that brought heavy loss
to one of the leading buyers in UAE. Such erring and unrepentant exporters if they
continue to export seafood from India could easily damage the reputation of
India among buyers abroad. In view of the facts and circumstances as mentioned
above, this appellate authority finds no lapse on the part of the Deputy Director
in canceling the registration of the appellant as an exporter. I, therefore
disallow the appeal and uphold the order of cancellation issued by the Deputy
Director, RO, Mumbai."
16.
Being
aggrieved, by the order dated 19.03.2008 and 19.08.2008, the appellant preferred
a Writ Petition No.2251 of 2008, before the High Court of Bombay. The High Court
found no error of law on the face of record, and upheld the findings of the appellate
authority and dismissed the writ petition by an order dated 16.10.2008.
17.
Assailing
the High Court's order, this Court was moved on a Special Leave Petition whereupon
this Court on 28.11.2008 issued notice and continued the stay granted by the
High Court on 16.10.2008.
18.
In
the backdrop of these facts the first question which falls for consideration of
this Court is whether the respondents in cancelling the registration
certificate of the appellant acted fairly and in compliance with principles of
natural justice and also whether the respondents acted with an open mind.
19.
It
is obvious that in passing the impugned order of cancellation, the respondents
were acting in a quasi-judicial capacity and also they were acting in exercise
of their statutory powers. Indisputably, the third respondent while purporting
to cancel the registration certificate was acting in exercise of his power
under Rule 43 of the MPEDA Rules.
20.
The
show cause notice dated 23.01.2008 was issued by the third respondent in
exercise of this power.
21.
For
a proper appreciation of the points involved, the show cause notice is set out in
etenso: "Sub: SHOW CAUSE NOTICE Your attention is invited to our HQ's letter
No. IV/53/06-MS/HO dated 25.10.2007 and subsequent joint meeting with the buyer
held at our Head office on 5th September, 2007 on the trade complaint received
from M/s Cascade Marine Foods LLC, Sharjah. At the meeting it was convincingly proved
that the cargo shipped by you to the above mentioned buyer was defective and
you have not so far settled the complaint. Therefore, in exercise of the powers
vested in me vide Office Order Part-II No.184012005 dated 25.11.2005 read with
Rule 43 of the MPEDA Rules, I hereby call upon you to show cause why the Certificate
of Registration as an Exporter granted to you should not be cancelled for reasons
given below:
i.
It
has been proved beyond doubt that you have sent substandard material to M/s Cascade
Marine Foods, LLC, Sharjah.
ii.
You
have dishonoured your written agreement with M/s Cascade Marine Foods, LLC,
Sharjah to settle the complaint made by the buyer as you had agreed to
compensate to the extent of the value of defective cargo sent by you and have
now evaded from the responsibility.
iii.
This
irresponsible action have brought irreparable damage to India's trade relation
with UAE. Your reply should reach the undersigned within 10 days from the date of
receipt of this letter failing which it will be presumed that you have no explanation
to offer and we will proceed with action for cancellation of your registration
certificate without further notice to you. If ultimately a decision is reached to
deregister you under the provisions of the MPEDA Rules, it will automatically
entail de-registration under Registration Exporters' policy also."
22.
Relying
on the underlined portions in the show cause notice, learned counsel for the appellant
urged that even at the stage of the show cause notice the third respondent has
completely made up his mind and reached definite conclusion about the alleged
guilt of the appellant. This has rendered the subsequent proceedings an empty
ritual and an idle formality.
23.
This
Court finds that there is a lot of substance in the aforesaid contention.
24.
It
is well settled that a quasi-judicial authority, while acting in exercise of
its statutory power must act fairly and must act with an open mind while
initiating a show cause proceeding. A show cause proceeding is meant to give the
person proceeded against a reasonable opportunity of making his objection against
the proposed charges indicated in the notice.
25.
Expressions
like "a reasonable opportunity of making objection" or "a reasonable
opportunity of defence" have come up for consideration before this Court in
the context of several statutes.
26.
A
Constitution Bench of this Court in Khem Chand v. Union of India and others, reported
in AIR 1958 SC 300, of course in the context of service jurisprudence, reiterated
certain principles which are applicable in the present case also.
27.
Chief
Justice S.R. Das speaking for the unanimous Constitution Bench in Khem Chand (supra)
held that the concept of `reasonable opportunity' includes various safeguards
and one of them, in the words of the learned Chief Justice, is: "(a) An
opportunity to deny his guilt and establish his innocence, which he can only do
if he is told what the charges leveled against him are and the allegations on which
such charges are based;"
28.
It
is no doubt true that at the stage of show cause, the person proceeded against must
be told the charges against him so that he can take his defence and prove his innocence.
It is obvious that at that stage the authority issuing the charge- sheet,
cannot, instead of telling him the charges, confront him with definite conclusions
of his alleged guilt. If that is done, as has been done in this instant case, the
entire proceeding initiated by the show cause notice gets vitiated by unfairness
and bias and the subsequent proceeding become an idle ceremony.
29.
Justice
is rooted in confidence and justice is the goal of a quasi-judicial proceeding also.
If the functioning of a quasi- judicial authority has to inspire confidence in
the minds of those subjected to its jurisdiction, such authority must act
with utmost fairness. Its fairness is obviously to be manifested by the
language in which charges are couched and conveyed to the person proceeded
against. In the instant case from the underlined portion of the show cause
notice it is clear that the third respondent has demonstrated a totally close mind
at the stage of show cause notice itself. Such a close mind is inconsistent with
the scheme of Rule 43 which is set out below. The aforesaid rule has been
framed in exercise of the power conferred under Section 33 of The Marine Products
Export Development Authority Act, 1972 and as such that Rule is statutory in nature.
30.
Rule
43 of the MPEDA Rules provides as follows: "43. Cancellation of
registration Where the Secretary or other officer is satisfied that any person
has obtained a certificate of registration by furnishing incorrect information
or that he has contravened any of the provisions of this rule or of the
conditions mentioned in the certificate of registration, or any person who has
been registered as an exporter fails during the period of twelve consecutive
months to export any of the marine products in respect of which he is registered,
or if the secretary or other officer is satisfied that such person has become
disqualified to continue as an exporter, the Secretary or such officer may,
after giving the person who holds a certificate a reasonable opportunity of making
his objections, by order, cancel the registration and communicate to him a copy
of such order."
31.
It
is of course true that the show cause notice cannot be read hyper-technically
and it is well settled that it is to be read reasonably. But one thing is clear
that while reading a show-cause notice the person who is subject to it must
get an impression that he will get an effective opportunity to rebut the allegations
contained in the show cause notice and prove his innocence. If on a reasonable
reading of a show-cause notice a person of ordinary prudence gets the feeling
that his reply to the show cause notice will be an empty ceremony and he will
merely knock his head against the impenetrable wall of prejudged opinion,
such a show cause notice does not commence a fair procedure especially when
it is issued in a quasi- judicial proceeding under a statutory regulation which
promises to give the person proceeded against a reasonable opportunity of
defence.
32.
Therefore,
while issuing a show-cause notice, the authorities must take care to manifestly
keep an open mind as they are to act fairly in adjudging the guilt or otherwise
of the person proceeded against and specially when he has the power to take a
punitive step against the person after giving him a show cause notice.
33.
The
principle that justice must not only be done but it must eminently appear to be
done as well is equally applicable to quasi judicial proceeding if such a proceeding
has to inspire confidence in the mind of those who are subject to it.
34.
A
somewhat similar observation was made by this Court in the case of Kumaon
Mandal Vikas Nigam Limited v. Girja Shankar Pant & others, (2001) 1 SCC
182. In that case, this court was dealing with a show cause notice cum charge-sheet
issued to an employee. While dealing with the same, this Court in paragraph 25
(page 198 of the report) by referring to the language in the show cause notice
observed as follows: "25. Upon consideration of the language in the
show-cause notice-cum-charge-sheet, it has been very strongly contended that it
is clear that the Officer concerned has a mindset even at the stage of framing
of charges and we also do find some justification in such a submission since the
chain is otherwise complete."
35.
After
paragraph 25, this Court discussed in detail the emerging law of bias in different
jurisdictions and ultimately held in paragraph 35 (page 201 of the report), the
true test of bias is:
"35. The test,
therefore, is as to whether a mere apprehension of bias or there being a real
danger of bias and it is on this score that the surrounding circumstances must and
ought to be collated and necessary conclusion drawn there from -- in the event however
the conclusion is otherwise inescapable that there is existing a real danger of
bias, the administrative action cannot be sustained:"
36.
Going
by the aforesaid test any man of ordinary prudence would come to a conclusion that
in the instant case the alleged guilt of the appellant has been prejudged at
the stage of show cause notice itself.
37.
The
appellant gave a reply to the show cause notice but in the order of the third respondent
by which registration certificate of the appellant was cancelled, no reference
was made to the reply of the appellant, except saying that it is not satisfactory.
The cancellation order is totally a non-speaking one. The relevant portion of
the cancellation order is set out:-"Sub: Registration as an Exporter of
Marine Products under MPEDA Rules 1972.Please refer to the Show Cause NoticeNo.10/3/MS/2006/MS/3634
dated 23.01.2008acknowledged by you on 28/01/2008directing you to show cause
why the certificate of registration as an exporterNo.MAI/ME/119/06 dated
03/03/2006 granted to you as Merchant Exporter should not be cancelled for the
following reasons:-1. It has been proved beyond doubt that you have sent
sub-standard material to M/s. Cascade Marine Foods, L.L.C., Sharjah.2. You have
dishonoured your written agreement with M/s. Cascade Marine Foods, L.L.C,
Sharjah to settle the complaint made by the buyer as you had agreed to
compensate to the extent of the value of the defective cargo sent by you and
have now evaded from the responsibility.3. This irresponsible action has
brought irreparable damage to India's trade relation with UAE. Your reply dated
04/02/2008 to the Show Cause Notice is not satisfactory because the quality
complaint raised by M/s. Cascade Marine Foods, L.L.C, Sharjah have not been resolved
amicably. Therefore, in exercise of the power conferred on me vide Rule 43 of
the MPEDA Rules, read with office order Part II No.1840/2005 dated 25/11/2006, I
hereby cancel the Registration Certificate No.MAI/ME/119/06 dated 03/03/2006 issued
to you. The original Certificate of Registration issued should be returned to
this office for cancellation immediately. In case you are aggrieved by this order
of cancellation, you may prefer an appeal to the Chairman within 30 days of the
date of receipt of this order vide Rule 44 of the MPEDA Rules.
38.
Therefore,
the bias of the third respondent which was latent in the show cause notice became
patent in the order of cancellation of the registration certificate. The cancellation
order quotes the show cause notice and is a non-speaking one and is virtually
no order in the eye of law. Since the same order is an appealable one it is incumbent
on the third respondent to give adequate reasons.
39.
On
the question whether the entire proceeding for cancellation of registration initiated
by the show cause notice and culminating in the order of cancellation is vitiated
by bias we can appropriately refer to the succinct formulation of the principle
by Lord Reid in Ridge v. Baldwin and others (1964 A.C. 40). The Learned Law Lord,
while dealing with several concepts, which are not susceptible of exact definition,
held that by fair procedure one would mean that what a reasonable man would regard
as fair in the particular circumstances (see page 65 of the Report). If we
follow the aforesaid test, we are bound to hold that the procedure of cancellation
registration in this case was not a fair one.
40.
On
the requirement of disclosing reasons by a quasi- judicial authority in support
of its order, this Court has recently delivered a judgment in the case of
Kranti Associates Pvt. Ltd. & Anr. v. Sh. Masood Ahmed Khan & Others on
8th September 2010.
41.
In
M/s Kranti Associates (supra), this Court after considering various judgments formulated
certain principles in para 51 of the judgment which are set out below a. In
India the judicial trend has always been to record reasons, even in
administrative decisions, if such decisions affect anyone prejudicially. b. A
quasi-judicial authority must record reasons in support of its conclusions. c.
Insistence on recording of reasons is meant to serve the wider principle of
justice that justice must not only be done it must also appear to be done as
well. d. Recording of reasons also operates as a valid restraint on any
possible arbitrary exercise of judicial and quasi-judicial or even
administrative power. e. Reasons reassure that discretion has been exercised
by the decision maker on relevant grounds and by disregarding extraneous considerations.
f. Reasons have virtually become as indispensable a component of a decision making
process as observing principles of natural justice by judicial, quasi-judicial
and even by administrative bodies. g. Reasons facilitate the process of
judicial review by superior Courts. h. The ongoing judicial trend in all
countries committed to rule of law and constitutional governance is in favour of
reasoned decisions based on relevant facts. This is virtually the life blood of
judicial decision making justifying the principle that reason is the soul of
justice. i. Judicial or even quasi-judicial opinions these days can be as
different as the judges and authorities who deliver them. All these decisions serve
one common purpose which is to demonstrate by reason that the relevant factors have
been objectively considered. This is important for sustaining the litigants'
faith in the justice delivery system. j. Insistence on reason is a requirement
for both judicial accountability and transparency’s. If a Judge or a
quasi-judicial authority is not candid enough about his/her decision making
process then it is impossible to know whether the person deciding is faithful
to the doctrine of precedent or to principles of instrumentalism. l. Reasons in
support of decisions must be cogent, clear and succinct. A pretence of reasons
or `rubber-stamp reasons' is not to be equated with a valid decision making process.
m. It cannot be doubted that transparency is the sine qua non of restraint on
abuse of judicial powers. Transparency in decision making not only makes the
judges and decision makers less prone to errors but also makes them subject to broader
scrutiny. (See David Shapiro in Defence of Judicial Candor (1987) 100 Harward
Law Review 731-737 n. Since the requirement to record reasons emanates from the
broad doctrine of fairness in decision making, the said requirement is now
virtually a component of human rights and was considered part of Strasbourg
Jurisprudence. See (1994) 19 EHRR 553, at 562 para 29 and Anya vs. University
of Oxford, 2001 EWCA Civ 405, wherein the Court referred to Article 6 of European
Convention of Human Rights which requires, "adequate and intelligent
reasons must be given for judicial decisions". o. In all common law
jurisdictions judgments play a vital role in setting up precedents for the
future. Therefore, for development of law, requirement of giving reasons for the
decision is of the essence and is virtually a part of "Due Process".
42.
In
the instant case the appellate order contains reasons. However, absence of reasons
in the original order cannot be compensated by disclosure of reason in the appellate
order.
43.
In
Institute of Chartered Accountants of India v. L.K. Ratna and others,(1986) 4 SCC
537, it has been held: "......after the blow suffered by the initial decision,
it is difficult to contemplate complete restitution through an appellate decision.
Such a case is unlike an action for money or recovery of property, where the
execution of the trial decree may be stayed pending appeal, or a successful appeal
may result in refund of the money or restitution of the property, with appropriate
compensation by way of interest or mesne profits for the period of deprivation.
And, therefore, it seems to us, there is manifest need to ensure that there is
no breach of fundamental procedure in the original proceeding, and to avoid treating
an appeal as an overall substitute for the original proceeding." (See para
18, pages 553-554 of the report)
44.
For
the reasons aforesaid, this Court quashes the show cause notice as also the order
dated 19.03.2008 passed by the third respondent. In view of that, the appellate
order has no legs to stand and accordingly is quashed.
45.
We
are constrained to observe that unfortunately this aspect of the matter was not
considered by the High Court. We cannot, therefore, approve the order of the High
Court and the same is accordingly quashed. The cancellation of the registration
certificate of the appellant is set aside and we declare the registration to be
valid if it is not vitiated for any other reason.
46.
We,
however, make it clear that if the authorities are so inclined, they can proceed
from the stage of show cause notice afresh but strictly in accordance with law and
following the fair procedure indicated in this judgment.
47.
The
appeal is allowed. Parties are left to bear their own costs.
.......................J.
(G.S. SINGHVI)
.......................J.
(ASOK KUMAR GANGULY)
New
Delhi
October
29, 2010
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