M/S Sri Saikrupa Industries, Kaloor Vill Vs. Food Corporation of India, Regional Offi - Court Judgment

THE HONBLE SRI JUSTICE A.V.SESHA SAI W.P.No.17945 of 2010 23-9-2014 M/s Sri Saikrupa Industries, Kaloor village, Nizamabad district, rep. by its Partner C.Ramesh and others...Petitioners Food Corporation of India, Regional Office, 3rd floor, HACA Bhavan, Opp: Public Gardens, Hyderabad, rep. by its General Manager and others... Respondents Counsel for the Petitioner: Sri R.SUDHEER Counsel for Respondents 1 & 2 : Sri B.ANJANEYULU Standing Counsel for F.C.I. Counsel for Respondents 3 & 4 : G.P. for Civil Supplies Gist: : ?. Cases referred:

1. 2007(1) ALD4962.(2000) 6 SCC2933.(2013) 5 SCC470THE HONBLE SRI JUSTICE A.V.SESHA SAI W.P.No.17945 of 2010 ORDER

: This writ petition under Article 226 of the Constitution of India is filed, seeking to declare the action of the Food Corporation of India in recovering the amounts on account of non payment of Minimum Support Price (MSP) for Non FAQ paddy as arbitrary, illegal, ultravires and unconstitutional and violative of the Petitioners' rights guaranteed under Articles 14 and 19 of the Constitution of India and consequently to declare the Common Letter No.Accts/CAG/V-365/Reply/2009-10 issued to the Petitioners as arbitrary, illegal and Ultravires.

2. Heard Sri R.Sudheer, learned counsel for the petitioners and Sri Vedula Venkataramana, learned Senior Counsel for the counsel on record for Food Corporation of India, apart from perusing the material available on record.

3. The pleaded case of the petitioners is as under:

3. 1 Petitioners are the Rice Mills engaged in the business of purchasing paddy from the farmers and milling the same into rice and the said business is regulated by the A.P. Rice Procurement Levy Order, 1984 issued in exercise of the powers conferred under Section 3 of the Essential Commodities Act. Clause 2(j) of the Control Order authorises the Collector or an Officer authorised by him to issue permit to undertake custom milling of paddy. As per Clause 2(k), procurement price means the price specified in Schedule III for different varieties of paddy and for rice as specified in Schedule IV or V as fixed by the State Government with the prior concurrence of the Central Government from time to time. Clause 3 stipulates that every licensed miller shall sell to the Food Corporation of India or State Corporation at the procurement price 75% of the total quantity of (a) each variety of rice confirming to specification owned by him, which is held in stock on the date of commencement of the order; (b) each variety of rice confirming to specification got milled by him everyday out of the stocks of paddy and (c) each variety of rice confirming to specification purchased or otherwise acquired by him for the purpose of sale from persons other than a licensed miller or a licensed dealer. During the year 2005-06 and 2006-07, the Government fixed MSP (Minimum Support Price) for paddy at Rs.580/- and Rs.610/- for common and Grade-A varieties and the Government also announced an incentive bonus of Rs.40/- per quintal and according to which a Miller is bound to pay Rs.620/- and Rs.650/- for common and Grade-A varieties. The said price is applicable to the Fair Average Quality (FAQ) paddy. On the ground that the CAG Auditors pointed out that the Rice millers paid less than the MSP to the farmers, the Area Manager of the Food Corporation of India vide Lr.No.Acct/CAG/V-365/2008-09 dated 6.11.2008 requested the President of the Nizamabad Rice Millers Association to make necessary arrangement to remit the amount by the concerned Rice Millers. The District Collector vide letter dated 9.4.2009 informed the Food Corporation of India that the Millers paid MSP for paddy of FAQ grade and in respect of Non FAQ paddy, the millers purchased below MSP price and the Collector further clarified that the Non FAQ paddy was purchased in terms of the operational guidelines issued by the Government and pursuant thereto, the Food Corporation of India vide its letter dated 9.4.2009 informed the same to the office of the Comptroller and Auditor General of India for dropping all actions. Despite the same the Respondent Corporation addressed letter dated 6.7.2010 to the President of Nizamabad Rice Millers Association informing the adjustment/recovery of the amounts payable to the millers for the period 01-10-2009 to 31-03-2010 towards market fee and ST on gunnies.

4. Pleading in the manner indicated supra and while contending that the above said action which culminated in the impugned letter dated 6.7.2010 is arbitrary, illegal, ultravires and unconstitutional and violative of the Petitioners' rights guaranteed under Articles 14 &19 of the Constitution of India, the present writ petition came to be filed.

5. This Court issued rule nisi on 27-07-2010. A vacate petition vide W.V.M.P.No.3627 of 2011, supported by a counter affidavit has been filed by Respondents 1 and 2. The said counter affidavit is in the direction of denying all the averments in the writ affidavit and in the direction of justifying the impugned action.

6. Contentions of the learned counsel for the petitioners:

6. 1. The impugned action of the Food Corporation of India, which culminated in the Letter dated 6.7.2010 is highly arbitrary, illegal, ultravires and violative of the fundamental rights guaranteed under Articles 14 and 19 of the Constitution of India. 6.2. The Food Corporation of India is not the aggrieved party, as such it is not justified in initiating the impugned action and without there being any complaint from the farmers, the Food Corporation of India ought not to have resorted to the impugned action. 6.3. The Respondent-Corporation is not conferred with any power to initiate the impugned action and as per Clause 14 of the AP Rice Procurement (Levy) Order, 1984, the Enforcement Officer, as defined under Clause 2(d) alone is competent to initiate any action, as such, the action is totally one without jurisdiction and ultravires. 6.4. The unilateral action of the Respondent Corporation without any regard for the Collector's letter dated 9.4.2009 and the earlier letter of the Food Corporation of India dated 9.4.2009 is illegal, arbitrary and violative of Articles 14, 19 and 300 -A of the Constitution of India. 6.5. Having satisfied and taken delivery, it is not open for the Food Corporation of India to dispute the quality and to recover the amounts.

7. Contentions of Sri Vedula Venkataramana, learned Senior Counsel for Food Corporation of India:

7. 1. The present writ petition is not maintainable and the only remedy for the petitioners is a regular Civil Suit and the petitioners herein cannot be permitted to seek the relief of recovery of amounts already recovered by the Food Corporation of India by way of this Writ Petition under Article 226 of the Constitution of India. 7.2. Since the factum of payment of the amounts less than the MSP to the farmers is not denied by the petitioners, they are not entitled for any relief from this Court having violated the said mandatory and statutory requirement and the discretionary and equitable jurisdiction of this Court under Article 226 of Constitution of India is not available to the petitioners. 7.3. The claim of the petitioners is opposed to the provisions of the Indian Contract Act and they are not entitled for unlawful enrichment at the cost of the farmers. 7.4. Only after giving notice and opportunity to the petitioners and as the petitioners did not respond to the same, the Food Corporation of India issued the impugned letter. 7.5. The purchase from the farmers at the rates less than MSP Is prohibited under clause 4-A of the Rice Procurement levy order.

8. In the light of the pleadings, submissions and the contentions, the issues, which this Court is called upon to address are; (1) Whether the present Writ Petition filed under Article 226 of the Constitution of India, assailing the action of recovery of the amounts is maintainable and whether such a relief can be granted in the present Writ Petition?. (2) Whether the petitioners are justified in not furnishing the particulars asked by the Food Corporation of India and whether such a conduct would permit them to seek any relief under discretionary and equitable jurisdiction of this Court?. (3) Having failed to adhere to the statutory obligation of paying Minimum Support Price to the farmers, is it open for the petitioners to justify their action?.

9. The petitioners Rice Mills are engaged in the business of purchasing paddy from the farmers and converting the same into Rice for sale and their business activities are regulated by the Andhra Pradesh Rice Procurement Levy order, 1984 issued by the State Government under the provisions of Section 3 of the Essential Commodities Act. It is an admitted fact that for the years 2005-06 and 2006-07, the Government fixed the Minimum Support Price payable to the farmers @Rs.580/-towards paddy and @ Rs.610/- towards Rice for Common and Grade-A varieties in addition to the incentive bonus of Rs.40/-. Obviously keeping in view the CAG report and the welfare of the farmers, the Food Corporation of India by way of a letter dated 24.4.2010 requested the Rice Millers Association to furnish the details of the quantity of Non FAQ paddy purchased with value from farmers and the additional expenditure incurred towards the processing for conversion into FAQ paddy for ML Rice to Food Corporation of India during 2005-06 and 2006-07 with proof of documents duly certified by the concerned CAG authorities to take further necessary action. In fact, the said letter was preceded by another letter dated 6.11.2008, requesting to remit the amount. It is also amply clear from the material available on record that the petitioners Rice Millers did not furnish any such information as sought in the said letter dated 24.4.2010. It is also pointed out by the learned Senior Counsel, representing Food Corporation of India that the impugned action cannot be found fault with on the ground of jurisdiction as in reality the said action is in pursuance of the directions of the CAG authorities under Articles 148 and 149 of the Constitution of India, read with Section 34 of the Food Corporation of India Act and the said Section 34 and Articles read as under:

34. Accounts and Audit: (1) A Food Corporation shall maintain proper accounts and other relevant records and prepare an annual statement of accounts including the profit and loss account and the balance sheet in such form as may be prescribed. (2) The accounts of a Food Corporation shall be audited by auditors duly qualified to act as auditors of companies under Section 226 of the Companies Act, 1956. (3) The auditors shall be appointed annually by the Food Corporation from among a list of auditors approved by the Central Government on the advice of the Comptroller and Auditor General of India. (4) The auditors shall be supplied with a copy of the annual balance sheet and the profit and loss account of the Food Corporation and it shall be their duty to examine them together with the accounts and vouchers relating thereto and they shall have a list delivered to them of all books kept by the Corporation and shall at all reasonable times have access to the books, accounts and other documents of the Corporation and may require from any officer of the Corporation such information and explanations as the auditors may think necessary for the performance of their duties as auditors. (5) The Comptroller and Auditor General of India shall have power (a) to direct the manner in which the accounts of a Food Corporation shall be audited by the auditors appointed under sub-section (3) and to give such auditors instructions in regard to any matter relating to the performance of their functions as such; (b) to conduct a supplementary or test audit of the accounts of a Food Corporation by such person or persons as he may authorize in this behalf, and for the purpose of such audit, to require information or additional information to be furnished to any person or persons so authorized, on such matters, by such person or persons, and in such form, as the Comptroller and Auditor General may, by general or special order, direct. (6) the auditors shall send a copy of their report together with an audited copy of the accounts; (a) to the Food Corporation concerned. (b) where the accounts relate to a State Food Corporation, also to the Food Corporation of India. (c) to the Central Government; and (d) to the Comptroller and Auditor General of India who shall have the right to comment upon, or supplement the audit report in such manner as he may think fit. (7) Any comments upon, or supplement to, the audit, report, made by the Comptroller and Auditor General of India under clause (d) of sub-section (6) shall be placed by the Food Corporation concerned before the Central Government, and where the accounts relate to a State Food Corporation, also before the Food Corporation of India. Article 148 - Comptroller and Auditor-General of India (1) There shall be a Comptroller and Auditor-General of India who shall be appointed by the President by warrant under his hand and seal and shall only be removed from office in like manner and on the like grounds as a Judge of the Supreme Court. (2) Every person appointed to be the Comptroller and Auditor-General of India shall, before he enters upon his office, make and subscribe before the President, or some person appointed in that behalf by him, an oath or affirmation according to the form set out for the purpose in the Third Schedule. (3) The salary and other conditions of service of the Comptroller and Auditor-General shall be such as may be determined by Parliament by law and, until they are so determined, shall be as specified in the Second Schedule: Provided that neither the salary of a Comptroller and Auditor-General nor his rights in respect of leave of absence, pension or age of retirement shall be varied to his disadvantage after his appointment. (4) The Comptroller and Auditor-General shall not be eligible for further office either under the Government of India or under the Government of any State after he has ceased to hold his office. (5) Subject to the provisions of this Constitution and of any law made by Parliament, the conditions of service of persons serving in the Indian Audit and Accounts Department and the administrative powers of the Comptroller and Auditor-General shall be such as may be prescribed by rules made by the President after consultation with the Comptroller and Auditor-General. (6) The Administrative expenses of the office of the Comptroller and Auditor-General, including all salaries, allowances and pensions payable to or in respect of persons serving in that office, shall be charged upon the Consolidated Fund of India. Article 149 - Duties and powers of the Comptroller and Auditor-General The Comptroller and Auditor-General shall perform such duties and exercise such powers in relation to the". accounts of the Union and of the States and of any other authority or body as may be prescribed by or under any law made by Parliament and, until provision in mat behalf is so made, shall perform such duties and exercise such powers in relation to the accounts of the Union and of the States as were conferred on or exercisable by the Auditor-General of India immediately before the commencement of this Constitution in relation to the accounts of the Dominion of India and of the Provinces respectively.

10. This Court finds sufficient force in the contention of the learned Senior Counsel in the light of the above provisions, as such it cannot be permitted to be contended that the impugned action is without jurisdiction.

11. Another aspect, which strikes at the root of the matter is that the petitioners have neither specifically denied the allegation that they paid the amounts less than MSP to the farmers, nor they furnished the information in response to the letter dated 24.4.2010 sought by the Food Corporation of India in terms of the instructions of the Comptroller and Auditor General of India. According to the respondents, the farmers, who supplied the paddy and rice sustained loss because of the action and attitude of the petitioners in not paying the Minimum Support Price and this Court cannot be asked to play the role of a silent spectator and this Court cannot ignore the same and go into other aspects of the matter. Another vital aspect, which needs mention at this juncture is that there is a statutory obligation on the petitioners to pay Minimum Support Price to the food growers/farmers under Clause 4-A of AP Rice Procurement Levy Order, 1984 and the said statutory mandate cannot be permitted to be escaped nor can be allowed to be frustrated in the name of feeble and unsustainable excuses and explanations.

12. Even assuming that the impugned action is in violation of the principles of natural justice, the claim in the present case is basically a money claim and in order to examine the issue whether the writ petition is maintainable and whether the petitioners need to approach the Civil Court as contended by the learned Senior Counsel, it may be appropriate to refer to the judgments of this Court and the Hon'ble Apex Court.

13. In Canara Bank, Secunderabad v. Power Grid Corporation of India Ltd., New Delhi and others , this Court held that the jurisdiction of this Court under Article 226 of the Constitution cannot be invoked for money claims.

14. In Kerala State Electricity Board and another v. Kurien E.Kalathil and others , the Hon'ble Apex Court at paragraphs 10 and 11 held as under:

10. We find that there is a merit in the first contention of Mr Raval. Learned counsel has rightly questioned the maintainability of the writ petition. The interpretation and implementation of a clause in a contract cannot be the subject-matter of a writ petition. Whether the contract envisages actual payment or not is a question of construction of contract. If a term of a contract is violated, ordinarily the remedy is not the writ petition under Article 226. We are also unable to agree with the observations of the High Court that the contractor was seeking enforcement of a statutory contract. A contract would not become statutory simply because it is for construction of a public utility and it has been awarded by a statutory body. We are also unable to agree with the observation of the High Court that since the obligations imposed by the contract on the contracting parties come within the purview of the Contract Act, that would not make the contract statutory. Clearly, the High Court fell into an error in coming to the conclusion that the contract in question was statutory in nature.

11. A statute may expressly or impliedly confer power on a statutory body to enter into contracts in order to enable it to discharge its functions. Dispute arising out of the terms of such contracts or alleged breaches have to be settled by the ordinary principles of law of contract. The fact that one of the parties to the agreement is a statutory or public body will not by itself affect the principles to be applied. The disputes about the meaning of a covenant in a contract or its enforceability have to be determined according to the usual principles of the Contract Act. Every act of a statutory body need not necessarily involve an exercise of statutory power. Statutory bodies, like private parties, have power to contract or deal with property. Such activities may not raise any issue of public law. In the present case, it has not been shown how the contract is statutory. The contract between the parties is in the realm of private law. It is not a statutory contract. The disputes relating to interpretation of the terms and conditions of such a contract could not have been agitated in a petition under Article 226 of the Constitution of India. That is a matter for adjudication by a civil court or in arbitration if provided for in the contract. Whether any amount is due and if so, how much and refusal of the appellant to pay it is justified or not, are not the matters which could have been agitated and decided in a writ petition. The contractor should have relegated to other remedies.

15. In Rajasthan State Industrial Development and Investment Corporation and another v. Diamond & Gem Development Corporation Limited and another , the Hon'ble Apex Court at paragraphs 19 to 22 held as under: III. Contractual disputes and Writ Jurisdiction 19. There can be no dispute to the settled legal proposition that matters/disputes relating to contract cannot be agitated nor terms of the contract can be enforced through writ jurisdiction under Article 226 of the Constitution. Thus, the writ court cannot be a forum to seek any relief based on terms and conditions incorporated in the agreement by the parties. [Vide Bareilly Development Authority v. Ajai Pal Singh12 and State of U.P. v. Bridge & Roof Co. (India) Ltd.13].

20. In Kerala SEB v. Kurien E. Kalathil14 this Court held that a writ cannot lie to resolve a disputed question of fact, particularly to interpret the disputed terms of a contract observing as under: (SCC pp. 298-99, paras 10-11) 10. The interpretation and implementation of a clause in a contract cannot be the subject-matter of a writ petition. If a term of a contract is violated, ordinarily the remedy is not the writ petition under Article 226. We are also unable to agree with the observations of the High Court that the contractor was seeking enforcement of a statutory contract. .

11. The contract between the parties is in the realm of private law. It is not a statutory contract. The disputes relating to interpretation of the terms and conditions of such a contract could not have been agitated in a petition under Article 226 of the Constitution of India. That is a matter for adjudication by a civil court or in arbitration if provided for in the contract. The contractor should have relegated to other remedies.

21. It is evident from the above that generally the Court should not exercise its writ jurisdiction to enforce the contractual obligation. The primary purpose of a writ of mandamus is to protect and establish rights and to impose a corresponding imperative duty existing in law. It is designed to promote justice (ex debito justitiae). The grant or refusal of the writ is at the discretion of the court. The writ cannot be granted unless it is established that there is an existing legal right of the applicant, or an existing duty of the respondent. Thus, the writ does not lie to create or to establish a legal right, but to enforce one that is already established. While dealing with a writ petition, the court must exercise discretion, taking into consideration a wide variety of circumstances, inter alia, the facts of the case, the exigency that warrants such exercise of discretion, the consequences of grant or refusal of the writ, and the nature and extent of injury that is likely to ensue by such grant or refusal.

22. Hence, discretion must be exercised by the court on grounds of public policy, public interest and public good. The writ is equitable in nature and thus, its issuance is governed by equitable principles. Refusal of relief must be for reasons which would lead to injustice. The prime consideration for the issuance of the said writ is, whether or not substantial justice will be promoted. Furthermore, while granting such a writ, the court must make every effort to ensure from the averments of the writ petition, whether there exist proper pleadings. In order to maintain the writ of mandamus, the first and foremost requirement is that the petition must not be frivolous, and must be filed in good faith. Additionally, the applicant must make a demand which is clear, plain and unambiguous. It must be made to an officer having the requisite authority to perform the act demanded. Furthermore, the authority against whom mandamus is issued, should have rejected the demand earlier. Therefore, a demand and its subsequent refusal, either by words, or by conduct, are necessary to satisfy the court that the opposite party is determined to ignore the demand of the applicant with respect to the enforcement of his legal right. However, a demand may not be necessary when the same is manifest from the facts of the case, that is, when it is an empty formality, or when it is obvious that the opposite party would not consider the demand.

16. In view of the law laid down by this Court and the Hon'ble Apex Court in the above referred judgments, this Court is of the considered view that the present writ petition is not maintainable and as such on this ground also the writ petition is liable to be rejected. In the facts and circumstances of the case, the judgment of this Court referred to in the writ affidavit would not render any assistance to the petitioners.

17. Another important aspect, which has direct bearing on the issue in the present writ petition is non disclosure of the letter dated 24.4.2010 addressed by the Food Corporation of India, wherein the petitioners were asked to submit the information, which admittedly was not responded and for which no proper nor plausible explanation is forthcoming from the petitioners. There is no proper explanation for the said non disclosure. The conduct of the persons approaching the Court is supposed to be highly transparent and the condition precedent is disclosure of all the material realities before the Court. Even assuming that the impugned action is illegal and arbitrary, this Court cannot lose sight of nor this Court can ignore the settled and well established proposition of law that quashing of one illegal action should not result in revival of another illegal action.

18. For the aforesaid reasons, the writ petition is dismissed. However this order will not preclude the petitioners from filing a Civil Suit for redressal of their grievance or furnishing the information sought in the letter of Food Corporation of India dated 24.4.2010 and the consideration of the same and passing of necessary orders thereon by the respondents. As a sequel, the miscellaneous petitions, if any, shall stand closed. There shall be no order as to costs. ______________ A.V.SESHA SAI, J Date:

23. 9.2014