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CASE NO.: Appeal (civil)  370 of 2008

PETITIONER: Food Corporation of India & Anr

RESPONDENT: M/s. SEIL Ltd. & Ors

DATE OF JUDGMENT: 11/01/2008

BENCH: S.B. Sinha & J.M. Panchal

JUDGMENT: J U D G M E N T

CIVIL APPEAL NOS.  370              OF 2008 (Arising out of SLP (C) No.5599 of 2006) With  CIVIL APPEAL NOS.           372 and 371                 OF 2008 (Arising out of SLP (C) No.7316 and 7666 of 2006)

S.B. Sinha, J.         Leave granted. 1.      Parliament of India enacted Essential Commodities Act, 1955 (The  Act).  In terms of Section 3(2)(f) thereof, the Central Government is  empowered to direct any manufacturer of sugar to sell the said commodity to  the Central Government or a State Government or to a body owned or  controlled by them for the purpose of making it available to the public at a  fair price.  It is commonly known as ’levy sugar’.  Price of such levy sugar is  fixed by the Central Government in exercise of its power under Section  3(3C) of the Act on yearly basis.  ’Sugar year’ commences from the month  October of the year.  Price of levy sugar although is required to be notified at  that time, admittedly, there exists a practice to notify the previous year’s  price as a levy sugar on an adhoc basis price in October and final price  therefor is notified later on.   2.      Pursuant to or in furtherance of a notification issued by the Central  Government under the Act and the directions issued by the competent  authority from time to time, levy sugar was supplied by the respondents to  the agencies of Central Government as also the appellant.   3.      Respondents herein received allotment letters for supply of sugar both  to FCI as also UPPCF.  Claims were lodged for the price of levy sugar both  with the FCI as also the Directorate of Sugar, Ministry of Food.  The Central  Government sanctioned the claim of the respondent in respect of the sugar  supplied to UPPCF.  It made similar claim in respect of the sugar supplied to  the appellant.  Appellant, however, demanded for a no dues certificate.  It  raised other objections including weight and quality of the sugar in relation  to the supplies made to the Central Government. Respondents contended that  no complaint having been made by the Central Government in this  connection, the action of the appellant was totally unjustified.         We may, however, notice that withholding of payment was, inter alia,  made by the appellant for the alleged shortages in supply of sugar during the  period 1983 to 1995.   4.      Respondents filed writ applications before the High Court of Delhi.  A  learned Single Judge of the said Court classified the cases into two  categories; (1) supplies made to the State Government, the Central  Government; and their other agencies in respect whereof the appellant only  had the authority to make payment, and (2) supplies made to the appellant.   5.      So far as the supplies made to the Central Government and other  agencies are concerned, it was held that a direction for making the payment  should be made but in respect of the supplies made to the appellant; any  resolution setting the controversy was held to be impermissible in a writ

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proceeding therefor and the respondents were relegated to the remedy of a  civil suit for recovery of respect of the amount claimed by them.   6.      A review petition was filed by the respondents pointing out that no  direction has been made in regard to payment of interest and by a judgment  and order dated 29th April, 2005 interest was directed to be paid. 7.      Appeals preferred thereagainst by the appellant herein have been  dismissed by a Division Bench of the High Court by reason of the impugned  judgment.   8.      Mr. Amarendra Sharan, learned Additional Solicitor General of India  appearing on behalf of the appellant submitted : 1.      Transactions between the parties being contractual in nature, no  writ petition was maintainable.  2.      Respondents, having alleged breach of contract on the part of the  appellant, the writ petition should not have been entertained.   3.      Several disputed questions of fact including the quality and  quantity of sugar having been raised, the High Court committed a  serious error in determining the said question in a writ proceeding.   4.      In any event, direction to pay interest in the review proceeding was  wholly impermissible in law. Mr. Sudhir Chandra Agarwal, learned senior counsel appearing for the  respondents, on the other hand, contended : 1.      Supply of sugar having been made in terms of a statutory order,  the writ petition was maintainable.   2.      Food Corporation of India could not have withheld payment in  respect whereof there was no dispute.   3.      Lawful payment cannot be withheld on the purported plea of  non-supply of entire quantity of sugar in the earlier years.   8.      Admittedly, supplies were made to FCI and UPPCF in terms of the  allotment orders received by the respondents.  The Central Government  verified the bills in terms of the circular letters issued by it from time to  time.  The claim in terms of the said circulars was to be submitted to the  Directorate of Sugar directly.  Appellant was merely to pay the difference in  the prices of sugar for the years in question keeping in view the price  notification dated 22.10.1993 and 17.1.1994.  Bills were forwarded to the  Food Corporation of India by the concerned authority for making payment.           Appellant, in its counter affidavit before the High Court, inter alia,  averred that as in respect of supply of sugar in earlier years, certain claims  had been made by it, payment was rightly withheld, stating: "Since the shortages mentioned in the preceding  paras were detailed in the seal intact wagons,  therefore, the petitioners were fully  respondible/liable for compensating the losses  caused to the Respondents on this account.   However, there happened some delay in working  out compiling the accurate shortages at our level  and as such factual position could not be intimated  to the petitioners in time.  The shortages relates for  the period from 1983 to 1995 i.e. 12 years."

9.      We have noticed that the mode in which supplies were to be made  have been laid down in the circular letters issued by the Central  Government.  The responsibility of the mill owner was to supply at the rail  head.  The fact that transportations of the commodity were made only by rail  is not in dispute.  If any shortage was found during transit, in terms of the  policy decision of the Central Government, claims were to be raised by the  appellant with the Railway Authorities.   10.     When supply of sugar was made in terms of a statutory order as also  on the directions issued by the Central Government and in the cases there  did not exist any factual dispute, we do not see any reason as to why the writ  petitions would not be maintainable.           It is now no longer res integra that contractual disputes involving  public law element are amenable to writ jurisdiction.  In these cases, the  Central Government not only scrutinized the bills but also verified the  claims of the respondents.  A direction was issued to make payment.   Appellant, which is a ’State’ within the meaning of Article 12 of the

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Constitution of India, withheld payment without any legal justification.   11.     The High Court referred to several letters issued by the Central  Government to arrive at the conclusion that where sugar had been lifted by a  third party without any complaint, protest or demur of shortages, there was  no reason as to why payment therefor could not be made.  12.     Appellant could not have withheld payment on the basis of the  purported shortages in supply of sugar under the contracts made by the  respondents many many years back, save and except under the terms of  binding contract.   13.     We have noticed hereinbefore that the High Court had divided the  cases in two categories.  In regard to the supplies made by the respondents to  the Central Government and/or its agencies wherewith appellants had no  concern, it could not have denied payment on the pretext of shortage or  quality of the sugar supplied, particularly, when the recipient did not raise  such a question. 14.     The Central Government, issued a letter dated 17th November, 1972  on which reliance has been placed by the appellant itself before the High  Court; clause (vii) whereof reads as under :  "On receipt of dispatch instructions, the District  Manager at dispatching and will arrange full  payment including excise duty to the mills for road  movement.  As regards, movement by rail full  payment may be made in two installments; first  being @ Rs.15/- per quintal.  After making initial  payment inspection of the stocks should be arranged  and mills should be asked and perused to place  indents for wagons immediately.  Balance amount  will be paid to the Mills as soon as wagons are  placed.  To save time lag, cheques/demand drafts  should be kept ready and handed over the mills as  soon as wagons are made available, as the mills may  hesitate loading wagons unless full payment is made  particularly when the cosignees will be FCI and  ownership of the Cargo will be changed as soon as  stocks are loaded.  Excise duty will also be paid  along with the final payment for stocks RRs will be  freight to pay and in favour of FCI as consignee.   Payment shall be made through cheques and in case  of any objection from the mill regarding acceptance  of the cheques, payments may be made either by  demand draft or cheques certified as good for  payment. Funds shall be arranged by the District  Managers directly from the Head Office as is being  done in the case of food grain purchase. Posting of additional staff at the mill point is under  consideration and after decision is taken follow up  action should be taken by the Regional Managers.   The staff at the mill would be responsible to  undertake inspection of quality, check weighment,  indent of wagons and look to other general  arrangements about transport and dispatch\005.  These  transport charges will be incorporated by the mills in  the bills and will be paid by FCI.  Wagons will be  booked against clear RRs in the name of receiving  District Managers and would be sent to the letter  promptly. Stocks by rail shall move against clear RRs and it  shall therefore be the responsibility of the receiving  District Managers to account for the weight of sugar  properly.  In case of any shortage/damages of sugar  in transit, the claims for the same should be lodged  promptly with the railways, in accordance with the  standing instructions on the subject."

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15.     Jurisdiction of the High Court to entertain a writ application involving  contractual matter was considered by a Bench of this Court in ABL  International Ltd. & Anr. v. Export Credit Guarantee Corporation of India  Ltd. & Ors. [(2004) 3 SCC553] wherein upon referring to a large number of  decisions, it was held : "23. It is clear from the above observations of this  Court, once the State or an instrumentality of the  State is a party of the contract, it has an obligation  in law to act fairly, justly and reasonably which is  the requirement of Article 14 of the Constitution of  India.  Therefore, if by the impugned repudiation  of the claim of the appellants the first respondent  as an instrumentality of the State has acted in  contravention of the abovesaid requirement of  Article 14, then we have no hesitation in holding  that a writ court can issue suitable directions to set  right the arbitrary actions of the first respondent."

16.     Reliance placed by Mr. Sharan on M/s. Burmah Construction  Company v. The State of Orissa & Ors. [AIR 1962 SC 1320] is not apposite.   Claim made therein was a pure money claim.  It was in that situation  observed that the High Court normally does not entertain a petition under  Article 226 of the Constitution to enforce a civil liability arising out of a  breach of contract to pay an amount of money due to the claimant. 17.     Article 14 of the Constitution of India has received a liberal  interpretation over the years.  Its scope has also been expanded by creative  interpretation of the court.  The law has developed in this field to a great  extent.  In this case, no disputed question of fact is involved.           The High Court, in an appropriate case, may grant such relief to which  the writ petitioner would be entitled to in law as well as in equity.         We do not, thus, find any substance in the contention of Mr. Sharan  that while exercising its review jurisdiction, no interest on the principal sum  could have been directed to be granted by the High Court.  A writ court  exercises its power of Review under Article 226 of the Constitution of India  itself.  While exercising the said jurisdiction, it not only acts as a court of  law but also as a court of equity.  A clear error or omission on the part of the  court to consider a justifiable claim on its part would be subject to review;  amongst others on the principle of actus curiae neminem gravabit (An act of  the courts shall prejudice none).  We appreciate the manner in which the  learned Judge accepted his mistake and granted relief to the respondents.   18.     We, however, although agree with the opinion of the Division Bench  of the High Court on the legal principle in regard to payment of interest, as  has been enunciated by it, having regard to the fact that the respondents did  not prefer any appeal, are of the opinion that increase in the rate of interest,  as has been directed by the Division Bench, cannot be upheld.   19.     We, therefore, in modification of the order passed by the Division  Bench, direct that the appellant would pay the amount in question with  interest as awarded by the learned Single Judge of the High Court.   20.     Subject to above, the appeals are dismissed. Respondents are also  entitled to costs quantified at Rs.1,00,000/- (Rupees one lakh only) in each  case.