Madras High Court
M/S. Greenstar Fertilizers Ltd vs Government Of India
Author: R.Subramanian
Bench: R.Subramanian
W.P.No.25337 of 2017
IN THE HIGH COURT OF JUDICATURE AT MADRAS
Reserved on Delivered on
02.08.2022 23.08.2022
CORAM
THE HONOURABLE MR.JUSTICE R.SUBRAMANIAN
W.P.No.25337 of 2017
M/s. Greenstar Fertilizers Ltd.,
“Spic House”
No.88 Mount Road, Guindy,
Chennai 600 032, Rep by its
Chief Financial Officer Mr.J.Ravishankar ..Petitioner
Vs.
1. Government of India,
Rep. by its Secretary to Government,
Department of fertilizers,
Ministry of Chemicals & Fertilizers,
Shastri Bhavan, New Delhi.
2. The Secretary to Government,
Department of Argiculture,
Government of India,
Shastri Bhavan, New Delhi.
3. The Joint Secretary,
Department of Agriculture and Co-operation,
Government of India, Shastri Bhavan,
New Delhi. ...Respondents
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W.P.No.25337 of 2017
Prayer: Writ Petition filed under Article 226 of the Constitution of India
seeking issuance of Writ of Certiorarified Mandamus, calling for the records
relating to the order dated 28.11.2016 bearing No.15011/14/2014-MPR of
the first respondent herein and quash the same and consequently direct the
respondents to forthwith release the subsidy amount of Rs.107,82,17,592/-
representing Subsidy for the imported DAP through the Vessels M.V.Citrus
Venus and J.S.Comet, and also a sum of Rs.11,29,38,060/- being the interest
recovered together with interest at 12% per annum till the date of payment..
For Petitioner : Mr.AR.L.Sundaresan, Senior Counsel,
for Ms.A.L.Ganthimathi
For Respondents : Mr.R.Rajesh Vivekananthan,
Assistant Solicitor General of India
ORDER
Challenge in this Writ Petition is to the orders of the first respondent dated 28.11.2016 rejecting the request of the petitioner for release of subsidy for imported Di-Ammonium Phosphate that was with held by the Department on account of quality issues.
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2. The petitioner is an Importer and Trader in fertilizer. The petitioner was favoured with a contract for supply of imported fertilizer to various States at a subsidised price. Upon the petitioner distributing the fertilizer at a subsidised price, the loss incurred by the petitioner by sale of fertilizer at a subsidised price would be recouped by the Central Government by grant of subsidy to the petitioner. The petitioner has imported fertilizer during the years 2011 and 2012 through two ships M.V.Citrus Venus and J.S.Comet. The ship M.V.Citrus Venus arrived at the Visakhapatnam Port on 22.08.2011, after unloading the fertilizer, the ship was released on 24.08.2011. The samples of the fertilizer were drawn on 27.08.2011 and the same was tested by the fertilizer Control Order Laboratory at Tadepalligudem.
3. The Laboratory Report issued on 19.09.2011 shows that the fertilizer imported is according to the specifications. However, when the fertilizer was tested at the Regional fertilizer Control Laboratory, Kalyani, Nadia at West Bengal, it was found that the Water Soluble Phosphate content was in excess by .76% and therefore, the Laboratory reported that 3/17 https://www.mhc.tn.gov.in/judis W.P.No.25337 of 2017 the sample is not according to specifications. The very same sample was tested at the fertilizer Control Laboratory, Aurangabad, which certified that the sample was according to specifications. Similarly while the samples tested at Faridabad and Kanpur were found to be in accordance with the specifications the samples tested at Bangalore failed the test.
4. The second vessel J.S.Comet arrived at the Kandla Port on 13.10.2012 and samples were drawn from the imported quantity on 19.10.2012. These samples were tested at Faridabad, Junagadh and Kolkata. While Faridabad reported that Water Soluble content was less, the Lab at Junagadh reported that the sample was according to specifications. However, the Referee Lab at West Bengal reported that Nitrogen level which was required to be above 18% was at 17.3% and the water soluble content which is required to be at 41% was at 42.9.%. Therefore, while the Faridabad Laboratory pointed out that the Nitrogen content was in accordance with the specifications and the water soluble content was less, the Referee Lab at West Bengal found that the water soluble content was according to specifications but the Nitrogen content was less by .7%. 4/17 https://www.mhc.tn.gov.in/judis W.P.No.25337 of 2017
5. However, as per the scheme which provides for payment of subsidy on arrival, 85% of subsidy was released to the petitioner on the self certification made by the petitioner regarding the delivery of the quantity. The remaining 15% was also released to the petitioner on the acknowledgement from the respective States as per the fertilizer Policy. The Policy also provides for deduction along with penal interest on the quantity of the fertilizer which the State Governments have reported to be non- standard. The relevant provision in the fertilizer Policy reads as follows:
“The Department of fertilizers make deductions along with penal interest on the quantity of the fertilizers for which the State Governments have reported to be Non- standard.”
6. As per the above Policy, the entire subsidy was released to the petitioner at various dates upon certification of the quantity and quality by the respective State Governments which had received the fertilizer. However, the Department started recovering the subsidy paid to the petitioner from the subsequent payments that were due to the petitioner. The orders of recovery 5/17 https://www.mhc.tn.gov.in/judis W.P.No.25337 of 2017 were passed on the ground that the fertilizer was reported to be non- standard. The recoveries were made from the subsidy amount due to the petitioner for supplies effected for the subsequent period. It is these orders of recovery that are sought to be challenged in this Writ Petition.
7. The main contention of Mr.AR.L.Sundaresan, learned Senior Counsel appearing for the petitioner is that the Central Government has no Authority or power to test the samples and recoveries could be made only based on a complaint made by the State Governments regarding the quantity or the quality. He would also point out that while the same sample had been certified to be in accordance with the specifications by at least four different Laboratories. The fact that two Laboratories have found that the Water Soluble Phosphate content is not as per the required standards would not mean that the entire stock of the fertilizer was non-standard.
8. Insofar as the second ship J.S.Comet, it is the contention of the learned counsel that while the Report dated 21.11.2012 showed that the Nitrogen content was in accordance with these specifications, the contents of 6/17 https://www.mhc.tn.gov.in/judis W.P.No.25337 of 2017 the Water Soluble Phosphate was at 38.19% as against the requirement of 41%. The test conducted on 23.11.2012 by the Lab at Junagadh had certified the product to be in accordance with specifications. However, the test conducted by the Referee Lab at West Bengal found that the Nitrogen content was less by .7% at 17.3% as against a required minimum of 18%, the water soluble phosphate content was at 42.9% and excess of 1.9% as against a minimum requirement of 41%. Relying upon the above variations, the learned Senior Counsel would contend that the very nature of the product would admit slight variations and therefore, it would not be safe to rely upon tests made at various places to come to the conclusion that the fertilizer is a non-standard fertilizer in the absence of any compliant from the State Governments as required under the fertilizer Policy.
9. The learned Senior Counsel would also draw my attention to the fertilizer Policy which empowers the State Governments to take test and report if the samples are reported to be non-standard. Placing considerable reliance on the fertilizer Policy which provides for recovery action only on the basis of the compliant from the State Governments, the learned Senior 7/17 https://www.mhc.tn.gov.in/judis W.P.No.25337 of 2017 Counsel appearing for the petitioner would submit that the very action of recovery in the absence of any complaint by the State Governments is beyond the powers of the Central Government. The learned Senior Counsel would also invite my attention to the Proforma B submitted by various States which had certified that the fertilizer supplied meets the standard specified. He would also seek to rely upon those Proformas to contend that the fertilizer supplied by the petitioner has met the standards and therefore, the deduction of the subsidy cannot be sustained.
10. Contending contra Mr.R.Rajesh Vivekananthan, learned Assistant Solicitor General of India, would submit that the petitioner itself while certifying the quantity of the fertilizer supplied had under taken that the fertilizers supplied meets the specifications and it meets all the conditions prescribed in the guidelines. He would also point out that the petitioner had specifically accepted that if the quantity is short certified or the quality of the fertilizer is found to be substandard by the concerned State or Union Territory as per Proforma-B then the Company is liable to refund the amount along with penal interest to the department. The learned counsel 8/17 https://www.mhc.tn.gov.in/judis W.P.No.25337 of 2017 would also point out that there has been modification in the procedure for release of subsidy and insofar as P&K fertilizers are concerned while 85% of the subsidy is released on the basis of the receipt of the fertilizers in the Districts, based on the certificate of the statutory Auditor of the Company, the balance 15% will be released subject to the State Government certification of quantity which is to be given within 30 days and the State Certification of quality which is to be be given in 180 days.
11. Clause 6 of the modified procedure issued by the Government of India on 25.10.2012 provides for Certification of Quantity and Clause 7 provides for Certification of Quality by the concerned States. The learned counsel would submit that the Union Government has got the power to analyse the fertilizer and recall the subsidy if it is found that the fertilizer is not according to specifications. He would also rely upon the Reports of various Labs which show that the fertilizer is not accordance with the specifications. According to the learned Counsel, the fact that the States have certified the quality of the fertilizer alone will not absolve the petitioner from the consequences of importing and distributing non-standard fertilizer within 9/17 https://www.mhc.tn.gov.in/judis W.P.No.25337 of 2017 the country. The learned counsel also attempted to rely upon certain letters written by the petitioner accepting that the fertilizer imported by it did not meet the required specifications.
12. I have considered the rival submissions.
13. Adverting to the last submission of Mr.R.Rajesh Vivekananthan, learned Assistant Solicitor General of India, it should be pointed out that mere fact that the petitioner had sought for condonation will not cloth the Central Government with the power to recall the subsidy in the absence of any compliant by the States regarding the quality. Therefore, I am unable to accept the contention of the learned Assistant Solicitor General to the effect that merely because the petitioner had sought for condonation, the petitioner cannot challenge the power of the Central Government to effect recoveries.
14. The main contention of Mr.AR.L.Sunderasan, learned Senior Counsel appearing for the petitioner is that the Central Government has no 10/17 https://www.mhc.tn.gov.in/judis W.P.No.25337 of 2017 power to direct recovery on the ground that the fertilizer imported does not meet the required specifications. He would also point out the varying reports regarding the very same samples, the learned Senior Counsel would submit that if a State points out that the quality of fertilizers supplied to it, does not meet the standards then as per the fertilizer Policy the Central Government can make deductions on the quantity of the fertilizer which has been reported to be non-standard. The very object of this provision, according to the learned Senior Counsel, is to ensure that the subsidy is not deducted for the entire quantity when only a certain quantity of the fertilizer fails the test. He would also point out from the varying reports of different Laboratories that there are likely to be variations due to natural causes considering the nature of the fertilizer imported. Therefore, according to the learned counsel, it will be too dangerous to invest the power in the Central Government to go by one of the Lab Reports to deduct and recover the subsidy paid.
15. The learned Senior Counsel would also point out that in respect of the fertilizer delivered through the Ship J.S.Comet at Kandla Port, 11/17 https://www.mhc.tn.gov.in/judis W.P.No.25337 of 2017 while it was tested on 02.11.2012 at Faridabad, the Nitrogen content was found to be within the standards and the water soluble phosphate content was found to be lesser than the required levels. When the same sample was tested at the Referee Lab at Kolkatta, it was reported that the Nitrogen level was less by .7% and the water soluble content level was above the minimum required at 42.9%. Pointing out this variation, the learned Senior Counsel would submit that the fact that there are likely to be variations is one of the reasons for the Policy which provides that penal action for recovery can be taken only when the State Governments reported the fertilizer to be non- standard in quality.
16. Mr.R.Rajesh Vivekananthan, learned Assistant Solicitor General of India, would however submit that in view of the undertaking given by the petitioner in its letter dated 15.12.2011, the orders of recovery are just and legal. I am unable to read the letter dated 15.12.2011 in the manner suggested by the learned Assistant Solicitor General. Here again the petitioner had categorically stated that if the fertilizer is found to be substandard by the concerned State/Union Territory Governments as per 12/17 https://www.mhc.tn.gov.in/judis W.P.No.25337 of 2017 Proforma-B, the Company would be liable to refund the subsidy received. The Proforma-B issued by all the State Governments have been produced and none of them state that the fertilizer does not meet the required specifications.
17. Though a counter affidavit and an additional counter affidavit have been filed by the Under Secretary to the Government, Ministry of Chemicals and fertilizers, both of them only reiterate the provisions of the Fertilizer Control Order and they do not point out any specific provision which enables the Central Government to independently direct recovery of subsidy on the ground that the fertilizer does not meet the specifications required. The modified procedure for payment of subsidy dated 25.10.2012 also makes it clear that the recovery would depend on the State certification of quality and it prescribes a 180 days window for making such certification.
18. In the absence of any specific power enabling the Central Government to make recoveries from the subsidies paid in the absence of a complaint regarding the quality of the fertilizers supplied by the State, I do 13/17 https://www.mhc.tn.gov.in/judis W.P.No.25337 of 2017 not think that the impugned recovery could be justified. A perusal of the various Lab reports would show that at every point of time there has been difference in the contents of various components of the fertilizer. This would by itself establish that they are bound to be variations in the components as time passes by and the variations which are pointed out are also not very high but less than 2% which is very negligible. I am also informed subsequently the permissible level of water soluble phosphate was reduced to 39% from 41%. It is therefore clear that the Ministry itself was not sure about the required content of water soluble phosphate and ended up in reducing it from 41% to 39%. If the 39% norms is adopted the fertilizer imported by the petitioner is within the acceptable norms. Hence I do not think that recovery of the entire subsidy paid to the petitioner is justified. Even the fertilizer Policy enables the Government to recover the subsidy with reference to the quantity that has been found to be non-standard. Those details of the quantity that are found non-standard are not available in the case on hand. No State Government had made a complaint regarding the quality of the fertilizer and in fact all the State Governments have certified the fertilizer to be of good standard.
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19. In view of the above, I am unable to sustain the recoveries made. The Writ Petition will stand allowed. The order impugned will stand quashed and there will be a direction to the Central Government to release the subsidy amount of Rs.107,82,17,592/- and interest of Rs.11,29,38,060/- within a period of six weeks from the date of receipt of a copy of this order. If the subsidy is not released within a period of six weeks, the amount of subsidy i.e., Rs.107,82,17,592/- will carry interest at 12% per annum from today till date of payment. No costs.
23.08.2022
jv
Index :Yes
Internet :Yes
Speaking order
To:-
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W.P.No.25337 of 2017
1. The Secretary to Government,
Government of India,
Department of fertilizers,
Ministry of Chemicals & Fertilizers,
Shastri Bhavan, New Delhi.
2. The Secretary to Government,
Department of Argiculture,
Government of India,
Shastri Bhavan, New Delhi.
3. The Joint Secretary,
Department of Agriculture and Co-operation,
Government of India, Shastri Bhavan,
New Delhi.
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W.P.No.25337 of 2017
R.SUBRAMANIAN, J.
jv
Pre-delivery order in
W.P.No.25337 of 2017
23.08.2022
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