Telangana High Court
Sri Krupa Enterprises, vs Food Corporation Of India., Regional ... on 10 November, 2022
Author: K. Lakshman
Bench: K. Lakshman
HON'BLE SRI JUSTICE K. LAKSHMAN
WRIT PETITION Nos.25070, 28864 & 28866 OF 2008, 28073 &
28581 OF 2009 & 413, 465, 520, 548, 574, 578, 608, 609, 659, 828,
834, 1086, 1089, 1123, 1130, 1285, 1287, 1297, 1315, 1460, 1462, 1465,
2046, 2889, 2893, 4843, 4928, 13676 & 29272 OF 2010 & 15546 OF
2011 AND 1052 OF 2012
COMMON ORDER:
The lis involved in the present batch of writ petitions is similar. Therefore, they were heard together and are being disposed vide the following common order.
2. Heard Mr. P. Balaji Varma, Mr. R. Sudheer, Mr. S. Naveen Kumar, learned counsel representing Mr. Ch. Ravinder and Mr. Kamatham Govardhan Reddy, learned counsel for respective petitioners, Mr. Meherchand Nori, Mr. Dantu Srinivas, Mr. Yadaiah and Mr. G. Jayaprakash Babu, learned Standing Counsel appearing on behalf of Food Corporation of India and Mr. Gadi Praveen Kumar, learned Deputy Solicitor General of India.
3. The Petitioners are rice millers who supplied their quota of 50% of their procured rice under the A.P. Rice Procurement (Levy Order), 1984 (hereinafter '1984, Levy Order') on the levy price fixed by the Food Corporation of India (hereinafter 'FCI') for the year 2000-01. 2
KL,J W.P. No.25070 of 2008 & batch Subsequently, the Petitioners made a declaration of the remaining rice stock as on 30.09.2001 (which was left after supplying the 50% quota) as procured by them for the year 2000-01.
4. Subsequently, the FCI fixed the procurement price for the crop year 2001-02. In the meanwhile, the Central Government announced the Food for Work Scheme. As part of the said scheme, the FCI procured the remaining stock of rice of the crop year 2000-01 left with the Petitioners (after supply of the mandatory 50% quota). The said remaining rice of the crop year 2000-01 was delivered by the Petitioners from October 2001 to March 2002. For the said excess rice of the crop year 2000-01, FCI paid the Petitioners the price fixed for the crop year 2001-02.
5. An audit was conducted by the Comptroller and Auditor General (hereinafter 'CAG') and it was found that excess payments were made by the FCI. The CAG Report noted that the excess rice procured as part of the Food for Work Scheme from the Petitioners by the FCI was from the crop year 2000-01 and payment was made for the said procurement based on the price fixed for the year 2001-02. The CAG Report stated that price fixed for the crop year 2001-02 cannot be paid for the batches of rice that were milled during 2000-01. Hence, the CAG 3 KL,J W.P. No.25070 of 2008 & batch Report recommended that the excess payment shall be recovered from the Petitioners.
6. Based on the findings of the CAG Reports, the impugned letters were issued to the Petitioners wherein it was stated that the excess payments made for the left-over quantity of rice of the year 2000-01 will be recovered from the Petitioners by deducting the difference between the levy price fixed for the year 2001-02 and levy price fixed for the year 2000-01. The FCI in certain cases, where bills were submitted for payments for the rice supplied in the subsequent years, deducted the amounts that were paid by them to the Petitioners for supply of excess rice during October 2001 to March 2002.
7. Therefore, the question before this Court is whether the levy price fixed for the year 2001-02 will apply to the remaining/excess rice milled during the crop year 2000-01 and supplied during October 2001 to March 2002 by the Petitioners and whether the FCI was justified in recovering the alleged excess payments by issuing the impugned letters based on the CAG Report.
8. Contentions of the Petitioner:
i. The Petitioners contended that the FCI can mandatorily procure only 50% of the total rice milled by the Petitioners on the levy 4 KL,J W.P. No.25070 of 2008 & batch price fixed by them and the Petitioners are free to sell the remaining 50% in the open market.
ii. Rice millers like the Petitioners retain the remaining stock sometimes, in case the market price is not profitable and sell the same later.
iii. The levy price fixed by the Government under the 1984 Levy Order is based on the existing market price for that particular crop year. The levy price fixed for the year 2001-02 was similar to the existing market price.
iv. Therefore, the Petitioners whose rice was procured after the levy price was fixed for the year 2001-02 shall be paid such price, as the same was based on the then existing market rate. Though the remaining rice was of the crop year 2000-01, the FCI shall pay the price fixed for the year 2001-02.
v. The FCI could not have directly deducted the alleged excess payment without issuing a show cause notice. vi. The FCI could not have issued the impugned letters and deducted the alleged excess payment solely by relying on the CAG Report. Reliance was placed on EMTA Coal Ltd. v. Karnataka Power Corporation Ltd.1, Pathan Mohammed Suleman Rehmatkhan 1 . ILR 2016 Kar. 2025 5 KL,J W.P. No.25070 of 2008 & batch v. State of Gujarat2 and Arun Kumar Agarwal v. Union of India3.
vii. The Court in exercise of its powers under Article - 226 of the Constitution of India can interfere in contractual disputes involving public law to set aside arbitrary actions of the State. viii. Reliance was placed on Food Corporation of India v. Seil Ltd.4 and Bakshi Security and Personnel Services Pvt. Ltd. v. Devkishan Computed Pvt. Ltd.5.
9. Contentions of the Respondents (FCI):
i) The levy price of crop 2000-01 will apply to the rice milled during the said period. The levy price of the subsequent crop year 2001-02 will apply only to the rice milled and supplied during the said period. The remaining rice though procured during October 2001 to March 2002 was milled and belonged to the crop year 2000-01. Therefore, the levy price of the year 2000-01 will apply to the procurement of excess/remaining rice as on 30.09.2001 as declared by the Petitioners. 2
. (2014) 4 SCC 156 3 . (2013) 7 SCC 1 4 . (2008) 3 SCC 440 5 . (2016) 8 SCC 446 6 KL,J W.P. No.25070 of 2008 & batch
ii) FCI was justified in recovering the additional/excess payment made by them as the same was based on an audit report from the CAG.
iii) Fixing of levy price is a policy decision and the Court under Article - 226 cannot interfere in such policy decisions. Reliance was placed on State of U.P. v. Uttar Pradesh Rajya Khanij Vikas Nigan Sagharsh Samiti6 and Food Corporation of India v. Bhanu Lodh7.
iv) The matter involves several disputed questions of fact which cannot be decided by this Court under Article 226. Further, the issue is a civil dispute relating to recovery of the alleged payments. Therefore, the Petitioners have to approach the civil court. Reliance was placed on State of U.P. v. Bridge and Roof Co.8.
10. Findings of the Court:
i) It is relevant to note that recovery of the alleged excess payments already made by the FCI has civil consequences which will result in a pecuniary loss to the Petitioners. Therefore, such actions 6 . (2008) 12 SCC 675 7 . (2005) 3 SCC 618 8 . AIR 1996 SC 3515 7 KL,J W.P. No.25070 of 2008 & batch passed by the State or its instrumentalities shall be preceded by compliance of principles of natural justice.
ii) The Supreme Court in S.L. Kapoor v. Jagmohan9 has held that actions having civil consequences shall also follow principles of natural justice. The relevant paragraph is extracted below:
"7. The old distinction between a judicial act and an administrative act has withered away and we have been liberated from the psittacine incantation of "administrative action". Now, from the time of the decision of this Court in State of Orissa v. Dr (Miss) Binapani Dei [AIR 1967 SC 1269 : (1967) 2 SCR 625 : (1967) 2 LLJ 266] "even an administrative order which involves civil consequences . . . must be made consistently with the rules of natural justice".
What are civil consequences? The question was posed and answered by this Court in Mohinder Singh Gill v. Chief Election Commissioner, New Delhi [(1978) 1 SCC 405, 440, 441 : (1978) 2 SCR 272, 308-309] Krishna Iyer, J., speaking for the Constitution Bench said (at pp. 308-09): (SCC p. 440, para 66) "But what is a civil consequence, let us ask ourselves, by passing verbal booby-traps? 'Civil consequences' undoubtedly cover infraction of not merely property or personal rights but of civil liberties, material deprivations and non-pecuniary damages. In its comprehensive connotation, everything that affects a citizen in his civil life inflicts a civil consequence."
9 . (1980) 4 SCC 379 8 KL,J W.P. No.25070 of 2008 & batch The learned Judge then proceeded to quote from Black's Legal Dictionary and to consider the interest of a candidate at a parliamentary election. He finally said: (SCC p. 441, para 66) "The appellant has a right to have the election conducted not according to humour or hubris but according to law and justice. And so natural justice cannot be stumped out on this score. In the region of public law locus standi and person aggrieved, right and interest have a broader import."
iii) Further, dealing with similar cases where alleged excess payments were recovered from the rice millers based on CAG Reports, the Andhra Pradesh High Court vide order dated 28.07.2021 in W.P. No. 14813 of 2021 and order dated 24.08.2021 in W.P. No. 17586 of 2021 has held that such actions of recovery of alleged excess payment has civil consequences and an opportunity of hearing shall be granted to the aggrieved Petitioners therein. The relevant paragraphs of order dated 28.07.2021 in W.P. No. 14813 of 2021 are extracted below:
"6. It is a settled and well established principle of law that when any action has civil consequences, the same must be preceded by a notice to the persons likely to be effected by such action. A perusal of the impugned proceedings discloses in clear and vivid terms that on the basis of the report of CAG, the respondents 2 and 3 have initiated the impugned action and the impugned order does not indicate anything as regards 9 KL,J W.P. No.25070 of 2008 & batch issuance of show cause notices prior to resorting to the impugned action.
7. In the considered opinion of this Court, the said action on the part of respondents is a patent violation of principles of natural justice, and on this ground alone this Writ Petition is liable to be allowed."
iv) In the present case, no show cause notices were issued and no opportunity was afforded to the Petitioners before initiating the recovery of the alleged excess payment. Any action or order passed by any authority without the compliance of natural justice is illegal. In absence of compliance of principles of natural justice, any relief granted to the Respondents will perpetuate illegality which is impermissible.
v) According to this Court, the question whether the levy price fixed for the year 2001-02 will apply to the remaining/excess rice mills during the crop year 2000-01 and supplied during October 2001 to March 2002 by the Petitioners and whether the FCI was justified in recovering the alleged excess payments by issuing the impugned letters based on the CAG Report need not be decided at this stage as no opportunity of hearing was granted to the Petitioners.
11. Conclusion:
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KL,J W.P. No.25070 of 2008 & batch
i) Therefore, the impugned letters/proceedings are set aside.
ii) In view of the aforesaid discussion, it is left open to the respondents to take appropriate steps in accordance with law.
iii) All the writ petitions are accordingly allowed. However, in the circumstances of the cases, there shall be no order as to costs.
As a sequel, the miscellaneous petitions, if any, pending in the writ petitions shall stand closed.
_________________ K. LAKSHMAN, J 10th November, 2022 Mgr