The Managing Director vs. The Chairman

Facts

The petitioner, M/s. Naga Phyto Chem (P) Limited, a company dealing with raw materials for instant tea, was inspected by Tea Board officials on 20.02.2020 and 10.03.2020. Following these inspections, two show cause notices were issued alleging three deviations from the Tea Waste (Control) Order 1959: failure to intimate consignment arrival within 24 hours, manipulation of sales invoices and furnishing incorrect accounts, and purchase invoice details not matching portal information, with a significant quantity of tea waste unaccounted for. The petitioner provided explanations, including apologies for belated intimation and attributing discrepancies to typographical errors and portal issues. The respondents, the Tea Board, issued an order dated 06.07.2020, which the petitioner sought to quash via a writ petition.

Held

The Court held that the respondents clearly violated the principles of natural justice. It was noted that while the invoice number, date, and quantity of tea coincided, the purchaser's name differed between the petitioner's records (Kodanad) and the statement taken from the petitioner (National Bio Fertilizer). The Court found that the respondents ought to have granted the petitioner an opportunity to explain this discrepancy, which they failed to do. Furthermore, the statement and evidence obtained from National Bio Fertilizer, which formed the basis of the respondents' conclusion, were not served upon the petitioner for their objections. The Court also observed that National Bio Fertilizer was selling "Mixed Tea," which is considered adulteration as per paragraph-2(v) of the Tea Marketing Control Order, 2003. The respondents, as the controlling authority for tea, should have taken action against National Bio Fertilizer for selling adulterated tea, especially since they became aware of this activity during the enquiry into the petitioner's case. The Court found it unacceptable that the respondents claimed no control over National Bio Fertilizer simply because it was not a license holder, stating that the respondents ought to have brought such entities dealing with tea or tea waste under their control or taken steps to ensure they obtained licenses. The Court quashed the impugned order dated 06.07.2020 and remitted the matter back to the respondents for a de novo enquiry, directing them to furnish all relied-upon documents concerning transactions with National Bio Fertilizer and to take action against National Bio Fertilizer as well.

Key Issues

1. Whether the impugned order dated 06.07.2020, passed by the second respondent (Executive Director, Tea Board of India), is liable to be quashed for violating principles of natural justice, specifically concerning the reliance on the statement of National Bio Fertilizer without providing it to the petitioner for objections, and for failing to grant the petitioner an opportunity to explain the alleged discrepancy in invoice details? (Mixed question of law and fact, concerning principles of natural justice and evidence appreciation). Petitioner's arguments: The petitioner contended that the respondents violated principles of natural justice by relying on the statement of National Bio Fertilizer without furnishing it to the petitioner and by failing to provide an opportunity to explain the alleged discrepancy in invoice details, which the petitioner claimed was a typographical error. The petitioner also argued that the enquiry was conducted via video conferencing during COVID-19, hindering their ability to effectively present their case. They relied on JKM Graphics Solutions Vs. The Commercial Tax Officer (2017) 99 VST Pg 343 for the proposition that the respondent should have conducted an enquiry on the other end dealer. Respondents' arguments: The respondents argued that the petitioner accepted the first deviation and apologized, thus the order cannot be interfered with. They asserted that the petitioner knowingly manipulated sales invoices and furnished incorrect accounts, citing a discrepancy between an invoice from Kodanad Tea Factory and a statement mentioning National Bio Fertilizer for the same transaction. They also stated that the enquiry via video conferencing was necessitated by COVID-19 conditions and could not be cited as a reason for violating natural justice. The respondents further argued that the petitioner had an alternative remedy of appeal.