The Spices Board after personal hearings in the matter and clinching evidences, cancelled the licences of Mumbai-based Gautam Exports, Patons Exports and SG Spice and Seed Trading Corporation, all cross-held by the directors.
The licences had been under suspension since 2003, when the issue was detected. Following the cancellation of licences in August 2005, the firms had appealed to the Union commerce secretary, who invited them and the board for a personal hearing. Incidentally, the Spices Board regulations had been amended, bringing food safety norms under its purview and giving it the final authority to decide matters of cancellation.
The sudan-issue surged in mid-2003, with a series of rapid alerts from the European Union (EU). The first of the rapid alerts came on May 9, 2003, and it was found that the consignment of Gautam Exports contained the prohibited colourant. The board later detected that Gautam Exports and allied concern Patons Exports had sourced the material from another Mumbai-based chilli processor and shipped out the material to Europe. The licences of the two firms and the processor were immediately suspended. Later, the licence of associated firm SG Spice and Seed was also suspended.
The commerce ministry directed the board to cancel the licence and directed the Director-General of Foreign Trade (DGFT) to cancel the import-export code of the exporters. However, a sudden U-turn was made and in an attempt to give a discreet burial to the issue, the DGFT, through an order, directed the board to drop the proceedings against one of the exporters on June 23, 2004.
The board contested this, but both its appeal and review plea were rejected on technical grounds. Taking into consideration the magnitude of the issue which had resulted in recall of over 600 food products contaminated by the use of chilli powder exported by Gautam, the board had introduced mandatory pre-shipment testing of export consignments.
There was also the fear that the EU would impose a ban on import of spices from India. On a PIL before the Kerala High Court on the issue of adulteration which could also affect the domestic consumer, the court had on June 28, 2005 said that as the licences were suspended, the exporters could not ship out material and there was little threat to the market abroad.