REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. OF 2010

(Arising out of Special Leave Petition (C) No.27615/08)

ORYX Fisheries Private Limited ...Appellant(s)

- Versus -

Union of India and others ...Respondent(s)

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

1

of pealed and undeveined (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 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

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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

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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.

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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

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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.

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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.

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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

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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.

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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 28

th

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.

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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

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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.

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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 5

th

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.

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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.

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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

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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

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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

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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.

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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:

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“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 8

th

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.

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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).

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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

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