Oryx Fisheries Pvt.Ltd vs Union Of India & Ors

referred to as, "Cascade"}, a company

incorporated under the relevant laws of UAE

at Sharjah. The Purchase Contract dated

26.09.2006, 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, on

18.10.2006, whereby it was found that there

was no bad odour. Rather there was a

2 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

3 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

4 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

5 cartons of goods were delivered to the cold

store designated by Freshly Frozen Foods on

14.04.2007 vide Cascade Store Issue Voucher

0390. 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 dated

13.08.2007 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.

6

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

7 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.

8

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.

9

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

10 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.

11

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.

12 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

13 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.

14

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:

1. It has been proved beyond doubt that you have sent substandard material to M/s Cascade Marine Foods, LLC, Sharjah.

2. 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.

15 3. 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. 16

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,

17 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

18 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

19 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 20 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

21 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.

22

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:

23

"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 therefrom -- 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 24 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 Notice No.10/3/MS/2006/MS/3634 dated 23.01.2008 acknowledged by you on 28/01/2008 directing you to show cause why the certificate of registration as an exporter No.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 25 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

26 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

27 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.

28 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.

k. 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 incrementalism.

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).

29 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 30 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

31 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

32