2010 (10) TMI 660 - SC - Customs

Exporter registration cancellation under Rule 43 set aside for prejudgment, deficient show-cause process violated natural justice

ORYX FISHERIES PRIVATE LIMITED Versus UNION OF INDIA

SC allowed the appeal and set aside the order cancelling the appellant's exporter registration under Rule 43 of the MPEDA Rules, finding the show-cause ... Cancellation of registration as an Exporter - Defective cargo - Rule 43 of the MPEDA Rules - 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 - Held that:- 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. 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 - 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 - 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 - Appeal is allowed Issues Involved:1. Whether the respondents acted fairly and in compliance with principles of natural justice in canceling the appellant's registration certificate.2. Whether the show cause notice issued by the third respondent was biased and predetermined the appellant's guilt.3. Whether the cancellation order was a non-speaking order and lacked adequate reasons.4. Whether the appellate order could compensate for the lack of reasons in the original order.5. Whether the High Court erred in upholding the findings of the appellate authority.Issue-wise Detailed Analysis:1. Fairness and Compliance with Principles of Natural Justice:The primary issue examined was whether the respondents acted fairly and adhered to the principles of natural justice in canceling the appellant's registration certificate. The Court emphasized that a quasi-judicial authority must act fairly and with an open mind while initiating a show cause proceeding. The show cause notice must provide the person proceeded against a reasonable opportunity to make objections against the proposed charges. The Court found that the respondents did not act fairly, as the show cause notice and subsequent proceedings were biased and predetermined the appellant's guilt.2. Bias and Predetermination in the Show Cause Notice:The Court scrutinized the language of the show cause notice issued by the third respondent. It was found that the notice contained definitive conclusions about the appellant's alleged guilt, which rendered the subsequent proceedings an empty formality. The Court stated that the authority issuing the charge-sheet must not confront the person with definite conclusions of guilt at the stage of the show cause notice. This predetermined bias vitiated the entire proceeding initiated by the show cause notice.3. Non-speaking Cancellation Order:The cancellation order issued by the third respondent was examined and found to be a non-speaking order. It merely reiterated the contents of the show cause notice without addressing the appellant's reply or providing adequate reasons for the cancellation. The Court held that the bias latent in the show cause notice became patent in the cancellation order, making it virtually no order in the eye of law. It was emphasized that a quasi-judicial authority must provide adequate reasons in its order, especially when the order is appealable.4. Adequacy of Reasons in the Appellate Order:The Court addressed whether the appellate order, which contained reasons, could compensate for the lack of reasons in the original order. It was concluded that the absence of reasons in the original order could not be compensated by the appellate order. The Court referred to the principle that there must be no breach of fundamental procedure in the original proceeding, and an appeal cannot serve as an overall substitute for the original proceeding.5. High Court's Error in Upholding Appellate Authority's Findings:The Court found that the High Court failed to consider the issue of bias and lack of fairness in the original proceedings. Consequently, the High Court's order upholding the findings of the appellate authority was quashed. The Court declared the cancellation of the appellant's registration certificate to be invalid and reinstated the certificate, provided it was not vitiated for any other reason. The Court allowed the authorities to proceed afresh from the stage of the show cause notice, strictly in accordance with law and following the fair procedure indicated in the judgment.Conclusion:The appeal was allowed, and the show cause notice, cancellation order, and appellate order were quashed. The Court emphasized the necessity for fairness, open-mindedness, and adequate reasoning in quasi-judicial proceedings to ensure justice is not only done but also appears to be done.