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8. On 3.12.2001 the Respondent No. 2 issued a circular clarifying that it was the responsibility of the FCI to deliver the stocks of rice or wheat at the port godown and even the demurrage charges would be the responsibility of the FCI. It was stated that "freight" between the depots and port town would be on FCI's account and therefore, there would be no requirement of deposit of the rail freight by the party in advance.

9. It is stated that on the basis of the above circulars, the MMTC and STC entered into contracts with foreign buyers. It is stated by M/s. Vaas Exports that MMTC entered into a sale contract with M/s. Crossland Marketing (2000) Pte. Ltd., Singapore, for bulk quantities of wheat. Clause 7 of that contract mandated that the quantity and quality shall be final and binding on the parties at the load port as certified by M/s. Vaas Exports, the inspection agency appointed by the buyer.

10. It is stated that the above policy circulars did not envisage any escalation in prices. All that was mentioned was that the rates applicable would be those prevalent on the date of remittance. Circular dated 16.12.2002 required the stocks to be lifted within thirty days from the quarter in which the circular was issued. It was stated that if the stocks so not lifted the increased price for the next quarter would be applicable. On 8.4.2003 another circular was issued by the FCI in which it was mentioned that the Ministry had not agreed with the proposal by the FCI that the price revision should not be insisted upon. Accordingly, it was directed by the FCI that stocks lifted beyond 30 days should be released only after recovering the differential amount. This was followed by circulars dated 9.6.2003 and 13.6.2003 in which it was insisted that the release orders would be issued for lifting of stocks at the effective export price that would be applicable on the date of the lifting of the stocks. This was followed by another circular dated 11.8.2003 in which it is stated that "the price prevailing at the time of lifting will be applicable to all pending release orders/allocations." It was directed that the backlog of release orders had to be first cleared and till such time the road movement of stocks for the purpose of exports of wheat should be immediately stopped.

11. It is stated that the exporters were unable to lift the stocks from the port godowns of FCI for the simple reason that the FCI was unable to transport the stock to these port godowns. This was attributable to the shortage of rail rakes. A reference is made to a Railway circular dated 11.12.2002 according to which the export intend offered by the exporters was to be accompanied by documents verified by the FCI and accompanied by the FCI release order.

Submissions of the Petitioners

12. Mr. P. Sureshan and Mr. Mark D'Souza, Advocates appeared on behalf of the petitioners. According to them, the cumulative effect of these circulars was that the buyers were faced with the prospect of having to pay higher prices at the time of delivery of stocks, a situation not anticipated when they entered into the contract with the FCI. This was compounded by the delayed deliveries on account of non-availability of rail rakes. By stipulating that the rate at which payment had to be made would be that prevalent on the date of the lifting of stocks, the buyers had to inevitably incur losses. At the same time they could not have rescinded the contracts they had entered into with foreign buyers except at the risk of running up claims for huge damages. It is contended that terms and conditions of the contract could have been altered only by mutual consent under Section 62 of the Indian Contract Act, 1872 and that the payment of differential/increased amount cannot be treated as a novation of the contract as the same was made under duress. It is contended that the "arbitrary increase in prices should not be allowed to stand on account of payments made by the petitioner in view of the severe economic duress posed by the circumstances and the lack of bargaining power." Accordingly, in these petitions, a declaration is sought that the circulars issued by the FCI between January and August 2003 unilaterally increasing the price are illegal and arbitrary. A challenge is also made to the circulars issued by the Railways to the extent that the liability to pay the freight charges was shifted to the exporters. A mandamus is sought to the respondents to refund the excess amount paid by the exporters.

Issue (b): Can a contractual liability be enforced in writ petitions under Article 226?

23. The petitioners seek a declaration from this Court that the circulars issued by the FCI revising the prices for wheat and rice were impermissible under the terms of the contract and are accordingly arbitrary, unreasonable and in violation of the rights of the exporters under Articles 14, 19(1)(g) and 21 of the Constitution of India. The facts narrated above indicate that what was stipulated in the particular clauses of the contract. The FCI had agreed to supply to the buyers the contracted quantities of rice or wheat as the case may be at certain agreed price at the port godown. The contention by the petitioners on behalf of the exporters is that there was no clause in the contract permitting price escalation. The contention of the FCI on the other hand is that such a clause implicit in the nature of the contract itself.