Magnum Aviation (Uk) Ltd. vs Pawan Hans Helicopters Ltd. & Ors.
2013 Latest Caselaw 4211 Del

*              IN THE HIGH COURT OF DELHI AT NEW DELHI

%                             Judgment reserved on   : 12.09.2013
                              Judgment pronounced on : 17.09.2013
+      W.P.(C) 4201/2010
       MAGNUM AVIATION (UK) LTD.                      ..... Petitioner

                        Through: Mr Ashim Vachher, Mr Pawash
                        Piyush, Advs

                        versus

       PAWAN HANS HELICOPTERS LTD. & ORS.

                                                       ..... Respondent

                        Through: Mr Lalit Bhasin, Ms Ratna D.
                        Dhingra and Ms Bhavna Dhami, Advs.

       CORAM:
       HON'BLE MR. JUSTICE V.K. JAIN

V.K. JAIN, J.

The respondent-Pawan Hans Helicopter Limited (PHHL) placed an

order with the petitioner company - M/s Magnum Aviation (UK) Ltd.

(hereinafter referred to as the UK Company) for import of two "RMI

Board for Civil Aircraft - Avionics". The goods were to be shipped CIF

and the petitioner was responsible to deliver the same to PHHL. The

petitioner company procured the goods from M/s South East Aerospace

of Australia. However, the said company, instead of shipping to PHHL,

shipped them to M/s Magnum Aviation Private Limited (hereinafter

referred to as Indian Company). Since the petitioner was responsible to

ensure delivery of the goods to PHHL, it requested the Indian Company

to arrange for the clearance of the consignment for onward delivery to

PHHL. One Santosh Kumar of the Indian Company was entrusted with

the job of getting the consignment cleared from customs. It would be

pertinent to note here that PHHL was entitled to claim exemption from

the custom duty in respect of the above referred goods. Mr. Santosh

Kumar in order to get the goods cleared from customs without payment

of customs duty, forged an undertaking purported to be executed by Shri

Ramesh Chand of PHHL and submitted the same to the Customs

Department. He not only got a forged rubber stamp of PHHL prepared

from the market without any authorization in this regard, but also forged

the signatures of Mr. Ramesh Chand on the said documents. He also

forged signatures of an PHHL official on the declaration form under Rule

10 of Customs Violation Rules and a declaration form showing the name

of PHHL as importer of the goods. In his statement recorded under

Section 108 of the Customs Act, Mr. Ramesh Chand stated that the

aforesaid act was conducted by him out of his own negligence and

ignorance without any instructions from the company he was working

with. Vide order dated 6.11.2009, the Additional Commissioner of

Customs imposed duty of Rs.1,16,615/- on the Indian Company besides

penalty of Rs.1.15 lac under Section 112 of Customs Act. He also

imposed, penalty of Rs.20,000/- each on Mr. Santosh Kumar and PHHL.

2. Vide order dated 9.3.2010, the Deputy General Manager of PHHL

directed de-registration of the petitioner company from the list of

suppliers of PHHL and banned it from doing business dealings in future

with PHHL. Aggrieved from the said order, the petitioner preferred a

W.P(C) No.2042/2010. Vide order dated 26.3.2010, this Court recorded

the statement of the counsel for PHHL stating that the show-cause notice

would be issued to the petitioner along with the documents relied upon by

them. The counsel for the PHHL stated that if such a notice was received,

the petitioner will file a reply thereto within ten days. The writ petition

was disposed of in terms of the said statement with further directions to

PHHL to fix a date for hearing the petitioner and then pass a final order

on the show cause notice. The petitioner was granted liberty to seek

appropriate remedies as available to it in law, if aggrieved with the said

decision.

3. Vide show cause notice dated 1.4.2010, issued by Deputy General

Manager (Material), PHHL required the petitioner UK Company to show

cause as to why it should not be de-registered from the list of suppliers

and why its registration be not withdrawn. The petitioner responded to the

show cause notice vide reply dated 15.4.2010. Vide order dated 7.6.2010

passed by the Chairman and Managing Director of PHHL, the petitioner -

UK Company was de-registered from the list of registered

vendors/suppliers, for a period of five years. Being aggrieved from the

said decision, the petitioner filed this writ petition seeking quashing of the

aforesaid order dated 7.6.2010 and restoration of its registration.

4. When this writ petition came up for hearing on 17.8.2010, the

Court was informed that the Appellate Authority in this matter would be

the Board of Directors. The Court, therefore, directed that the petitioner

shall file a proper appeal before the said Appellate Authority and a

decision taken by the Board after giving personal hearing to the petitioner

would be communicated to it within one week of the said decision being

taken.

5. Vide order dated 8.11.2010, the Board of Directors of PHHL

dismissed the appeal filed by the petitioner. The writ petition was then

amended so as to challenge the said order as well.

6. Impugned orders were assailed by the learned counsel for the

petitioner on the following grounds; (i) the show cause notice was issued

by the Deputy General Manager, who in view of the guidelines dated

30.7.2009 on "Banning Business Dealings", was not competent to issue

such notice (ii) the petitioner has been deprived of the right of second

appeal to the Board since its first appeal itself was heard by the Board in

view of the impugned order dated 7.6.2010 having been passed by the

CMD of PHHL (iii) there was no misconduct on the part of the petitioner

company and, therefore, the banning was not justified and (iv) the period

of banning is highly excessive.

7. As regards the first contention, Mr. Lalit Bhasin, the learned

counsel for PHHL submitted that the guidelines on "Banning Business

Dealings" came into force much later after transaction with the petitioner-

UK Company and they are applicable only to the persons who enter into

Integrity Pact with PHHL and also agreed to be bound by the said

guidelines. The learned counsel for the petitioner did not dispute that the

aforesaid guidelines came into force after order had been placed by

PHHL and the goods had been cleared by the Customs. Admittedly, the

petitioner-UK Company did not enter into an Integrity Pact with PHHL.

Since the guidelines came into force at a much later stage, there could be

no question of the petitioner agreeing to abide by the said guidelines. I,

therefore, find merit in the contention of Mr. Bhasin that the aforesaid

guidelines were not required to be applied while issuing the show cause

notice and passing the impugned orders dated 7.6.2010 and 8.11.2010.

8. Moreover, on a perusal of the aforesaid guidelines, I find no merit

in the contention that the Deputy General Manager of PHHL was not

competent to issue show cause notice to the petitioner- UK Company.

The only requirement of the guidelines is that the proposal to initiate

banning should be approved by the Competent Authority. This is not the

requirement of the guidelines that the show cause notice itself should be

signed by the Competent Authority. Under the guidelines, the Competent

Authority would be Executive Director/ General Manager (Engineering)

and CMD, PHHL shall be the Appellate Authority whereas the Board of

Directors of PHHL would be the Second Appellate Authority, for

banning throughout entire PHHL. A perusal of the reply to the counter

affidavit would show that the show cause notice dated 1.4.2010 as well as

additional show cause notice dated 26.4.2010 to the petitioner company

were issued only after the same were approved by the respondent no.2,

who is none other than the CMD of the PHHL. If Executive Director/ GM

who holds position inferior to that of CMD, could approve issue of show

cause notice, the CMD being the higher authority could certainly approve

initiation of banning proceedings and/or issue of show cause notice to the

petitioner-UK Company. The banning order also came to be passed by

the CMD of PHHL and being a authority higher than the Executive

Director/ General Manager, he was competent to pass such order. It is

true that on account of the banning order having been passed by CMD,

the petitioner was deprived of filing a second appeal but, that to my mind,

would not be material, considering the order passed by this Court on

17.8.2010, which expressly directed appeal to the Board of Directors,

thereby leaving no scope for a second appeal. In any case, as noted

earlier, the banning guidelines were not at all applicable in the case of the

petitioner, the same having come into force at a much later date and on

having been agreed to by the petitioner. In any case, the appeal of the

petitioner having been considered by the Board, which is the second

appellate authority, under the guidelines, no prejudice to the petitioner

was caused due to denial of one appeal. I, therefore, find no merit in the

first two contentions raised by the learned counsel for the petitioner.

9. As regards the third contention, it is petitioner's own case that it

had requested the Indian Company to take steps for clearance of the

consignment with the Customs. The Indian Company, therefore, was

acting as an agent of the petitioner-UK Company in the matter of

clearance of the consignment from the Customs Department. Admittedly,

Mr. Santosh Kumar who forged the stamp of PHHL and signatures of its

official was an employee of the Indian Company, which was acting as an

agent of the petitioner - UK Company in the matter of release of the

consignment. Therefore, for all intents and purposes, Mr. Santosh Kumar

was acting as an agent/ representative of the petitioner - UK Company

while pursuing the matter with the Customs Department. It is true that

there is no evidence of the petitioner-UK Company having instructed or

permitted Mr. Santosh Kumar to forge the stamp of PHHL and the

signatures of its officers, but that would hardly be material since being

principal, the petitioner - UK Company cannot escape to suffer the

liability for the illegal act of its agents, though it may not be criminally

liable for the offences committed by him. The Customs Department

imposed a penalty of Rs.20,000/- on PHHL without there being any lapse

on the part of the said company solely on account of misconduct

committed by Mr. Santosh Kumar who at the relevant time was acting as

an agent of the petitioner - UK Company in the matter of clearance of the

consignment. The penalty certainly brought a bad name to the PHHL.

10. During the course of arguments, the learned counsel for the

respondent drew my attention to a letter dated 12.6.2003 written by Mr.

Inder Kumar Bisnoi, Managing Director of the petitioner- UK Company

to PHHL, whereby S-241, Panchsheel Park, New Delhi was stated to be

the India office of the petitioner company. He also drew my attention to

another communication dated 12.6.2003 from the petitioner- UK

Company stating therein that the Magnum Aviation (India) also got F-

Category approval from DGCA. In yet another communication of even

date, the petitioner - UK Company gave address of Magnum Aviation as

its representative office in India. In his statement under Section 108 of the

Customs Act, Mr. Santosh Kumar described the petitioner company as

their parent company. He also stated that since they had no knowledge of

this shipment, he had made inquiries in his office from their parent

company in UK, which was the shipper in the case. Thus, the stand taken

by Mr. Santosh Kumar was that the petitioner - UK Company is the

parent company of the Indian company. In fact, in a letter sent to PHHL

on the letterhead of the petitioner - UK Company, Mr. Santosh Kumar

described him as Manager (Shipping) of the petitioner company. There

could be no reason for Mr. Santosh Kumar to falsely claim to be the

Manager with the petitioner - UK Company in this letter dated 4.11.2008

which was sent much before this consignment got stuck with Customs

Department. This letter in fact clearly shows that Mr. Santosh Kumar was

an employee of the petitioner company though he simultaneously would

be an employee of the Indian Company.

11. A perusal of letter dated 12.6.2003 sent to PHHL would also show

that one Director of the petitioner company was also a Director of Indian

Company. Mr. Inder Kumar Bisnoi, Managing Director of the petitioner

company was a Director of the Indian Company, though he claims to

have been appointed with effect from 7.4.2008. The declaration in this

regard was filed only on 1.7.2010 which indicates that the said

resignation could be antedated by him. The commonalty of the Director is

to be viewed in the light of the statement of Mr. Santosh Kumar claiming

the petitioner - UK Company to be a foreign company of the Indian

Company and the UK Company giving address of the Indian Company as

its India office address. This finds further corroboration from the fact that

Mr. Santosh Kumar was working not only with Indian company but also

with UK Company and even the logos appearing on the letterhead of the

petitioner - UK company and the Indian Company was same.

12. As held by the Apex Court in Patel Engineering Ltd. versus UOI

[(2012) 11 SCC 257], the State which has the right to enter into contract

with any person also has a right to decline to enter into a contractual

relationship with a person for a legitimate purpose. On course, the State

even in such matters must necessarily act fair, reasonable and without

being actuated by malafide. However, the Court will not interfere with

the decision not to enter into a contractual relationship with a person

unless it finds that the decision taken in this regard was wholly arbitrary,

perverse or illegal. When an order of blacklisting/ banning a person for a

limited period is passed after giving a show cause notice and opportunity

of hearing to the person concerned, the Court would not be justified in

substituting its own decision over the decision of the State except in cases

mentioned above. In the facts and circumstances of the case, as discussed

hereinabove, the order passed by the CMD and upheld by the Board of

Directors of PHHL cannot be said to be illegal, arbitrary or perverse in

nature so as to call for interference by the Court.

13. As regards the period of ban, the learned counsel for the petitioner

submitted that the said order has already been in force for more than three

years, which cannot be said to be inadequate, considering the nature of

allegations. In this regard, he drew my attention to the letter dated

29.10.2008 sent by the M/s South East Aerospace of Australia to the

Assistant Commissioner of Customs admitting the mistake on its part by

shipping goods to a wrong address instead of shipping it to PHHL. He

also submitted that the requisite stamp duty and penalty has already been

paid by the petitioner company.

During the pendency of this writ petition, the Court permitted the

petitioner to make a representation to the Board of Directors of PHHL to

reduce the period of banning from five years to a lesser period. In terms

of the liberty granted by this Court, the matter was considered by the

Board of Directors which, however, decided not to reduce the period of

banning. As noted earlier, in such matters, the Court cannot substitute its

own view for the view of the Competent Authority unless the said view is

shown to be wholly arbitrary, unreasonable or perverse. In the facts and

circumstances of the case, particularly considering the extent Mr. Santosh

Kumar had gone for the purpose of getting the consignment cleared, the

view taken by the CMD of PHHL, which has been confirmed by the then

Board of Directors cannot be said to be unreasonable or arbitrary so as to

call for an interference by the Court. Moreoever, considering that Shri

Santosh Kumar had personal interest in the matter and therefore no

incentive to go to the extent of forging stamp of PHHL and signatures of

its officials, there is a reasonable probability of the senior management of

the petitioner having given nod to what Mr. Santosh Kumar did, to get the

consignment released. I, therefore, find no good ground to reduce the

period for which the petitioner company has been banned from dealing

with PHHL.

14. I also feel that the petitioner has not disclosed the true state of

affairs to the Court since it took the stand that it has no linkage with the

Indian Company whereas the true state of affairs as reflected in the

statement made by Mr. Santosh Kumar and various documents sent by

the petitioner company to PHHL reflect otherwise and clearly indicate a

close connection between the two companies. This is yet another reason, I

do not find it appropriate to interfere with the decision taken by the

respondent.

For the reasons stated hereinabove, I find no force in this petition

and the same is hereby dismissed. There shall be no orders as to costs.

V.K.JAIN, J SEPTEMBER 17, 2013/rd