http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 13  

PETITIONER: HINDUSTAN VEGETABLE OILS CORPORATION LIMITED

       Vs.

RESPONDENT: PROGRESSIVE INDUSTRIES AND ORS. ETC.

DATE OF JUDGMENT07/09/1995

BENCH: JEEVAN REDDY, B.P. (J) BENCH: JEEVAN REDDY, B.P. (J) MUKHERJEE M.K. (J)

CITATION:  1995 SCC  (6) 174        JT 1995 (6)   458  1995 SCALE  (5)291

ACT:

HEADNOTE:

JUDGMENT:                       J U D G M E N T B.P. JEEVAN REDDY, J.      Leave granted.      These appeals are preferred against the judgment of the Allahabad High  Court allowing  the writ  petitions filed by certain dealers under a common order.      The management of the Ganesh Flour Mills was taken over by  the   Central  Government  under  Section  18AA  of  the Industries Development  and Regulation  Act, 1951  under  an Order  dated  November  3,  1972.  In  the  year  1984,  the Parliament enacted  The Ganesh  Flour Mills  Company Limited (Acquisition  and   Transfer  of  Undertakings)  Act,  1984, providing for  the acquisition  and transfer  of the  right, title and  interest of  certain undertakings  of the  Ganesh Flour Mills  Company Limited.  The Act  came into  force  on January 28,  1984. By  a notification  dated April  23, 1984 issued under  Section 5  of the  Act, the  said undertakings were vested  in the  Hindustan  Vegetable  Oils  Corporation Limited, the appellant herein.      Section 4-B(2)  of the  Uttar  Pradesh  Sales  Tax  Act provides  that  (a)  where  a  dealer  requires  any  goods, referred to  in sub-section  (1), for use in the manufacture by him,  in the  State of  any notified  goods,  or  in  the packing of  such notified goods manufactured or processed by him and  (b) such  notified goods are intended to be sold by him in  the State  or in  the course of inter-State trade or commerce or in the course of export out of India, (c) he may apply to  the assessing  authority, in  such form and manner and within such period as may be prescribed for the grant of a recognition  certificate  in  respect  thereof.  The  sub- section  provides  that  if  the  applicant  satisfies  such requirements  and  conditions  as  may  be  prescribed,  the assessing authority shall grant him in respect of such goods a recognition  certificate in  such form and subject to such conditions as  may be  prescribed. The  Explanation to  sub-

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 13  

section  clarifies   that  "goods   required  for   use   in manufacture" shall mean raw materials, processing materials, machinery, plant, equipment, consumable stores, spare parts, accessories,   components,    sub-assemblies,    fuels    or lubricants.  Clause  (b)  of  the  Explanation  defines  the expression "notified  goods" to  mean such goods as may from time to  time be  notified by  the State  Government in that behalf.      Rule 25-B of the Uttar Pradesh Sales Tax Rules provides that "where  a  dealer  holding  a  recognition  certificate purchases any goods referred to in clause (b) of sub-section (1) of  Section 4-B  for use as raw material for the purpose of manufacture of any notified goods, he shall, if he wishes to avail  of the  concession referred to therein, furnish to the selling  dealer a certificate in Form III-B (hereinafter called a  ’Declaration Form’)".  The rule  provides that any dealer holding  a recognition  certificate  and  wishing  to avail of  the concession  referred to  in Section 4-B(1) (b) shall No. 163 558                               Telex KP 354 To M/s Tracto Auto Industries               PBNo. 32.4 Kalpi Rd 12 P & T, Factory Area                   Kanpur - 208012. Kanpur -- 208 012.                                       Dated : April 10, 1982                                                  26 APR 1982 Dear Sirs,             Sub : Supply  of  New  Empty  Tins  of  18 litre                   capacity                   --------------------------------------      We are  pleased to  place an  order on  you for  12,500 (twelve and  half thousand  only) of  18 litre capacity with newman bung  hole and newman ticklies as per standard size @ Rs. 13.50 per tin against 3 Kha form delivered at our works. The rates are F.O.R. Kanpur. 2. It  has been mutually agreed that payment will be made to you within  seven days of testing of each lot and submission of bills. 3.   This order is effective from April 10, 1982....Supplies should be completed  within 4 weeks. 4........... 5........... 11. You  will submit  separate bill  for each  challa Please mention order No. on challan as well as bill. 12........      Please confirm  your acceptance  of order including the terms and  conditions written above by signing the duplicate copy of  the letter.  Please return signed copy of order for our record. Thanking you,                                           Yours faithfully,                                             sd/-MANAGER."      It is  agreed that  even after  the undertakings of the Ganesh Flour  Mills  vested  in  the  appellant-corporation, purchase orders were issued in identical terms.      In view  of the fact that Ganesh Flour Mills as well as appellant-corporation  were   recognised  dealers   and  had purchased the raw material required by them (for storing the vanaspati in  those tins)  against Declaration Forms in Form III-Kha, the  selling dealers  charged the tax on such sales at the  concessional rate  of one  percent  as  against  the normal rate  of four  percent, as contemplated by clause (b) of Section  4-B(1). It is stated before us that according to the then  obtaining practice,  the Declaration  Forms (Forms III -Kha)  were supplied either at the time of supply of the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 13  

raw material  or at a later point of time. (According to the rules, the  selling dealer  could produce  these Declaration Forms before the assessing authority "upto the date on which he is  required to furnish his accounts for final assessment in respect  of the  year to  which the  claim pertains" vide sub-rule (5) of Rule 25-B.)      Ganesh  Flour   Mills  prior  to  its  vesting  in  the appellant-corporation and  the  appellant-corporation  after the  said   date  of   vesting  were  engaged  not  only  in manufacturing  vanaspati   by  themselves   but  were   also undertaking job  works on  behalf of other parties. Even the vanaspati manufactured  by them was not sold entirely within the State  or in the course of inter-State trade or commerce or in  the course of export out of India, as contemplated by sub-section (2) of Section 4-B. Part of it was sent to other States on  consignment basis  without effecting sale thereof within  the   State  of  Uttar  Pradesh.  According  to  the provisions  of  Section  4-B,  it  may  be  reiterated,  the facility of  recognition certificate  is  confined  only  to cases  where  a  manufacturer  purchases  raw  material  for manufacturing notified  goods (or  for packing such notified goods manufactured  or  processed  by  him)  and  which  are intended to  be sold  within the  State or  in the course of inter-State trade or commerce or in the course of export out of  India.  In  other  words,  the  said  facility  was  not available for  storing (packing)  the vanaspati manufactured on account  of third parties (this is the common case of the parties before  us) or  for storing  the vanaspati which was sent to  other States on consignment basis otherwise than by effecting the  sale within  the State  or in  the course  of inter-State trade or commerce or in the course of export out of India.  It follows  from the  above that  the  recognized dealer (appellant  herein) was not entitled to rely upon his recognition certificate  or to issue Declaration Forms (Form III-Kha)  to   such  selling  dealers  in  respect  of  tins purchased it  but intended  for the above purposes (purposes other than  those mentioned in sub-section (2) of Section 4- B). But what happened in this case is this: the Ganesh Flour Mills while  under Central  Government  management  and  the appellant-corporation, after  the date of vesting aforesaid, have been  purchasing tins  from the respondents undertaking to supply  Declaration Forms  (Form III-Kha)  in that behalf and on the basis of such representation, the selling dealers charged sales  tax at  the concessional  rate of one parcent instead of  the normal four percent. Having so purchased the tins and  having used  part thereof  in connection  with job works and/or  for storing  vanaspati (which  was not sold or exported as  contemplated by  sub-section (2) of Section 4-B but was  sent to  other States  on consignment basis) Ganesh Flour Mills and the appellant found it not possible to issue Declaration  Forms   (Form  III-Kha)   in  respect  of  such purchases. To  be precise  while they  did issue Declaration Forms in  respect of the tins required for storing (packing) the vanaspati manufactured by them which was sold within the State/sold  in   the  course   of   inter-State   trade   or commerce/sold in  the course  of export  out of  India, they could not  and did  not  issue  such  Declaration  Forms  in respect of  tins which  were used  for storing (packing) the remaining quantity  of vanaspati.  The result  was that  the respondents-selling dealers  could not  produce  Declaration Forms (Form  III-Kha) before  the assessing authority in the course of  their assessments. On that account, the assessing authority levied  tax at  the full  rate of four percent and also levied  interest under  the  provisions  of  the  Uttar Pradesh Sales  Tax Act.  The respondents  complain that even

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 13  

penalty proceedings were initiated against them for the said failure. It  is then that they approached the Allahabad High Court by  way of  writ petitions  from which  these  appeals arise. The principal relief sought in the writ petitions was for issuance  of a writ of mandamus directing the appellant- corporation to  furnish to  the writ petitioners Declaration Forms (Form  III-Kha) prescribed  under  the  Uttar  Pradesh Sales  Tax   Rules  in  respect  of  that  quantity  of  tin containers which  were supplied  by the  writ petitioners to the appellant-corporation  on the  strength  of  recognition certificate and  against  the  undertaking  to  furnish  the Declaration Forms  (Form III-Kha).  The claim  of  the  writ petitioners pertained  both to  the period anterior to April 23, 1984  (the date of vesting of the undertakings of Ganesh Flour Mills  in the  appellant-corporation) and also for the period subsequent  to the  said date. The Union of India was also impleaded as a respondent to the writ petitions.      The appellant-corporation  denied any responsibility or liability to  issue the Declaration Forms (Form III-Kha).for the period  prior to  April 23,  1984. They  disclaimed  any responsibility for the said period relying on the provisions of the  Ganesh Flour  Mills Company Limited (Acquisition and Transfer of  Undertaking) Act, 1984 [hereinafter referred to as "Acquisition  Act"]. So  far as the appellant-corporation submitted that  in view  of the fact that the said tins were used for  purposes other than  those specified in Section 4- B(2), they  could not  have issued  Declaration Forms  (Form III-Kha) in  respect of those purchases inasmuch as issuance of such  forms would  have exposed  them to  penalties under sub-section  (6)   of  Section   4-B.They  expressed   their readiness to  pay the  difference of  sales  tax  which  was levied upon  and collected  by the  State from  the  selling dealers (writ  petitioners). They submitted that no writ can be issued to them compelling them to do an act prohibited by law and  which would  expose them  to  penalties  under  the provisions of the Uttar Pradesh Sales Tax Act.      The High  Court has  allowed the  writ petitions on the following findings :      (i) Where the purchasing dealer wishes to avail himself of the  concession referred  to in Section 4-B(1) (b), as in the present  cases, it  is not  competent for the purchasing dealer to  withhold the Declaration Form (Form III-Kha) from the selling dealer. If the purchasing dealer wishes to avail of the  concession provided by Section 4-B, he has no option but to  furnish to  the selling  dealer the Declaration Form (Form III-Kha).      (ii) Where  the purchasing  dealer  represents  to  the selling dealer  that he  wishes to  avail of the  concession admissible to him under Section 4-B and on the basis of such representation  avails   himself  of   such  concession   by accepting the sale and supply from the selling dealer at the concessional rate  of tax, it is not open to such purchasing dealer to  turn round  and refuse  to issue  the Declaration Form (Form  III-Kha) on  the specious  plea that he now does not wish  to avail  of the concession and that he is willing to pay  to the  selling dealer  tax at full rate. The matter cannot be  left to  the whims  and fancies of the purchasing dealer.      (iii) That  by virtue  of the  provisions contained  in Section 22 of the Acquisition Act, the appellant-corporation is liable,  and bound,  to issue the Declaration Forms (Form III-Kha) even  with respect  to the  period prior  to  April 23,1984. Section  6(i)  of  the  Acquisition  Act  does  not relieve the appellant-corporation of the said obligation and liability.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 13  

    (iv) The  writ petitioners  are not  seeking to enforce any  contractual  obligation  by  means  of  the  said  writ petitions but  were only  seeking to  enforce the  statutory obligation  placed   upon  the  appellant-corporation.  Even otherwise,  the  corporation  being  a  ’State’  within  the meaning of  Article 12  is bound  to act  fairly  and  hence amenable to writ jurisdiction.      (v) It  appears from the record placed before the Court that the appellant-corporation has been picking and choosing dealers in  the matter of issuance of Declaration Form (Form III-Kha). To  some they  have issued the forms and to others they have  refused. The  plea of  the corporation  that such forms were  issued to  some dealers  under a  mistake is not acceptable.      (vi)The plea of the appellant-corporation that issuance of such  Declaration Forms (Form III-Kha) would expose it to penalties under  the Utter Pradesh Sales Tax Act is also not acceptable. (The  Court, however  declined  to  express  any opinion on  the question  whether in  fact  the  corporation would  become   liable  for   penalties  if  it  issued  the Declaration Forms (Form III-Kha) as directed by the Court).      The correctness  of the  said  findings  is  called  in question in  these appeals by the appellant-corporation. Sri Rohinton  F.   Nariman,  learned  senior  advocate  for  the appellant-corporation submitted that inasmuch as issuance of Declaration Forms  in Form  III-Kha in respect of tins which were utilised  for purposes  other than  those specified  in Section 4-B(2)  would expose  the corporation  to  penalties under the  provisions of  Uttar Pradesh  Sales Tax  Act,  no mandamus ought  to  have  been  issued  by  the  High  Court compelling   the   appellant-corporation   to   issue   such Declaration Forms.  The proper  course would  have  been  to direct the  corporation the  to pay over to the respondents- dealers (writ  petitioners) the  difference oftax which they were made  to pay  to the State on account of the appellant- corporation’s  failure to furnish the   Declaration Forms to them. The corporation should not, however, be made liable to reimburse the respondents in respect of the interest amount, if any,levied  by the  State upon  the  selling  dealers  on account of  or as  a result  of their failure to produce the Declaration Forms  (Form III-Kha)  in their assessments. The learned counsel  further contended that so far as the period prior  to  April  23,  1984  is  concerned,  the  appellant- corporation can  in no  event be held liable for issuing the said forms.  The provisions of the Acquisition Act are clear and emphatic,  says the  learned counsel. The corporation is not responsible for any of the acts, defaults or liabilities for the  period prior  to the  date of  acquisition. On  the other  hand,   Sri  M.C.Dhingra,  learned  counsel  for  the respondents-writ petitioners  supported  the  reasoning  and conclusions arrived  at by  the High Court. He emphasised in particular the  fact that while in case of some dealers, the appellant-corporation  has  been  issuing  such  Declaration Forms (Form  III-Kha), it  has declined to do so in the case of respondents-writ  petitioners alone.  This,  the  learned counsel  complained,   is  discriminatory   and   that   the appellant-corporation being  a State  cannot be permitted to indulge in such discriminatory treatment.      For a  proper appreciation  of  the  questions  arising herein, it would be appropriate to set out sub-sections (1), (2) and  (6) of Section 4 of the Uttar Pradesh Sales Tax Act along with  sub-rule (1)  of Rule  25-B of the Uttar Pradesh Sales Tax Rules : <SLS>      "4-B.     Special  relief   to   certain

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 13  

    manufacturers.--   (1)   Notwithstanding      anything contained in Sections 3,3-A, 3-      AAAA and 3-D :--      (a)  Where any goods liable to tax under      sub-section  (1)   of  Section  3-D  are      purchased by  a dealer  who is liable to      tax on  the turnover  of first purchases      under  that  sub-section  or  where  any      goods are  purchased by  any  dealer  in      circumstances in  which such  dealer  is      liable  to   purchase  tax   in  respect      thereof under  Section  3-AAAA  and  the      dealer holds  a recognition  certificate      issued under  sub-section (2) in respect      thereof, he  shall be  liable in respect      of  those   goods   to   tax   at   such      concessional  rate,   or  be  wholly  or      partly   exempt    from   tax,   whether      unconditionally  or   subject   to   the      conditions and restrictions specified in      that behalf,  as may  be notified in the      Gazette by  the State Government in that      behalf;      (a-1)       Where   any  declared  goods      liable to  tax under  sub-section (1) of      Section 3-D  are sold  or supplied  by a      dealer,  who   is  the  first  purchaser      thereof,  to  another  dealer,holding  a      valid  recognition   certificate  issued      under   sub-section   (2)   in   respect      thereof, the  dealer who  made the first      purchase  shall   in  respect   of  such      purchase and  subject to such conditions      and restrictions  as may be specified by      notification in  that behalf,  be exempt      from tax  or be  liable to  tax at  such      concessional rate  as may be notified by      the State Government :           (Provisos omitted as unnecessary)      (b)  Where any goods liable to tax under      any other provision of this Act are sold      by a  dealer to  another dealer and such      other dealer  furnishes to  the  selling      dealer in the prescribed form and manner      a certificate  to  the  effect  that  he      holds a  recognition certificate  issued      under   sub-section   (2)   in   respect      thereof, the  selling  dealer  shall  be      liable in  respect of those goods to tax      at such  concessional rate, or by wholly      or  partly   exempt  from  tax,  whether      unconditionally  or   subject   to   the      conditions and restrictions specified in      that behalf,  as may  be notified in the      Gazette by  the State Government in that      behalf.      (2)  Where a  dealer requires any goods,      referred to  in sub-section (1), for use      in the  manufacture by him, in the State      of any  notified goods,or in the packing      of such  notified goods  manufactured or      processed  by  him,  and  such  notified      goods are  intended to be sold by him in      the State  or in  the course  of  inter-      State trade or commerce or in the course

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 13  

    of export  out of India, he may apply to      the assessing authority in such form and      manner and  within such period as may be      prescribed,   for   the   grant   of   a      recognition   certificate   in   respect      thereof; and if the applicant  satisfies      such requirements  and conditions as may      be prescribed,  the assessing  authority      shall grant  to him  in respect  of such      goods a  recognition certificate in such      form, and subject to such conditions, as      may be prescribed.      (6)  Where a  dealer, in  whose favor  a      recognition certificate has been granted      under  sub-section  (2),  purchases  any      goods for  use  in  the  manufacture  or      packing of  any notified  goods  without      payment of  tax or  by paying  tax at  a      concessional  rate  of  less  than  four      percent, and  such  notified  goods  are      sold  or  disposed  of  by  such  dealer      otherwise than  by way  of sale  in  the      State or  in the  course of  inter-state      trade or  commerce or  in the  course of      export out  of India,  such dealer shall      be liable  to pay as penalty such amount      of tax  that  would  have  been  payable      under the provisions of this Act, on the      sale or  purchase of  such goods and not      more than double the amount of such tax,      less  any   amount  which  he  may  have      actually paid  as tax on the purchase of      such goods.      25-B.     Authority      from      which      Declaration Forms  may be obtained: use,      custody and  maintenance of  records  of      such  Forms   and   matters   incidental      thereto-- (1)  Where a  dealer holding a      recognition  certificate  purchases  any      goods referred  to in clause (b) of sub-      section (1)  of Section  4-B for  use as      raw  material   for   the   purpose   of      manufacture of  any notified  goods,  he      shall, if  he wishes  to  avail  of  the      concessional   referred    to   therein,      furnish  to   the   selling   dealer   a      certificate in  Form III-B  (hereinafter      called a ’Declaration Form’)". <SLE>      It would  equally be  appropriate to  set out  at  this stage the relevant provisions of the Acquisition Act:      The preamble to the Act recites that for sustaining and strengthening the  nucleus of  public  owned  or  controlled units required  for ensuring  supply of  wholesome vanaspati and refined  edible oils,  etc. to  the public at reasonable prices and  for giving  effect to the State policy specified in clauses (b) and (c) of Article 39 of the Constitution, it has been  decided to  acquire the undertakings of the Ganesh Flour Mills,  the management  whereof was  taken over by the Central Government under the I.D.R. Act, 1951.      Section 3  provides that "on the appointed day (January 28, 1984),  the Ganesh  Flour Mills and the right, title and interest of  the Company  in relation  to the  Ganesh  Flour Mills, shall,by  virtue of  this Act,  stand transferred to, and shall  vest in,the  Central Government".  Section 4 sets

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 13  

out the  consequences of  such vesting.  Section 5  provides that notwithstanding anything contained in Sections 3 and 4, if the  Central Government  is satisfied  that a  government company is  willing to comply with or has complied with such terms and  conditions as  the government  may think  fit  to impose, the  Ganesh Flour  Mills and  the right,  title  and interest of  the company in relation thereof which is vested in the  Central Government  can be  vested in  turn in  such government  company  under  a  notification  issued  by  the Central Government.  Sub-section (2)  of Section 5 says that where such  further  vesting  takes  place  "the  government company shall,  on or  from the  date of  such  vesting,  be deemed to  have become  the owner of the Ganesh Flour Mills" and all the rights and liabilities of the Central Government in relation  to the  Ganesh Flour  Mills  shall  become  the rights and  liabilities of  such government  company on  and from the date of such vesting. It is in pursuance of Section 5  that  Ganesh  Flour  Mills  was  vested  by  the  Central Government in  the appellant-corporation under and by virtue of the notification dated April 23, 1984.      Section 6  of the  Acquisition Act  is relevant for our purposes and must be extracted in toto: <SLS>      "6.(1)    Every  liability,  other  than      the  liability   specified  under   sub-      section (2),  of the Company in relation      to the  Ganesh Flour Mills in respect of      any period  prior to  the appointed  day      shall be  the liability  of the  Company      and shall  be enforceable against it and      not against  the Central  Government or,      where the  Ganesh Flour  Mills vest in a      Government    company,    against    the      Government company.      (2)  Any liability  in  respect  of  the      amount  advanced,   after  the  date  of      taking over,  to the Company in relation      to the Ganesh Flour Mills, together with      interest  due  thereon  and  the  wages,      salaries  and   other  dues  of  persons      employed in  the Ganesh  Flour Mills  in      respect of  any period after the date of      taking  over  shall,  on  and  from  the      appointed day,  be the  liability of the      Central   Government    and   shall   be      discharged by the Central Government or,      for and on behalf of that Government, by      the  Government   company  as  and  when      repayment of such amount becomes due and      as and  when such  wages,  salaries  and      other dues become due and payable      (3)  For the  removal of  doubts, it  is      hereby declared that --      (a)  save   as    otherwise    expressly      provided in this section or in any other      section of this Act, no liability, other      than the  liability  specified  in  sub-      section (2),  of the Company in relation      to the Ganesh Flour Mills, in respect of      a period  prior  to  the  appointed  day      shall be enforceable against the Central      Government or the Government company, as      the case may be.      (b)  no award,  decree or  order of  any      court, tribunal  or other  authority  in

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 13  

    relation  to  the  Ganesh  Flour  Mills,      passed  after   the  appointed  day,  in      respect of  any matter, claim or dispute      in relation  to any  matter, not being a      matter referred  to in  sub-section (2),      which arose  before that  day  shall  be      enforceable    against    the    Central      Government or the government company, as      the case may be;      (c)  no  liability   incurred   by   the      Company before  the appointed  day,  for      the contravention,  in relation  to  the      Ganesh Flour  Mills, of any provision of      law for  the time  being in force, shall      be  enforceable   against  the   Central      Government or the Government company, as      the case may be." <SLE> In view  of the fact that Section 22 has been relied upon by the High  Court, it would be appropriate to set out the said section as well: <SLS>      "22. Every contract, entered into by the      Company in  relation to the Ganesh Flour      Mills which  has vested  in the  Central      Government  under  section  3,  for  any      service, sale  or supply  and  in  force      immediately before  the  appointed  day,      shall, on  or before  the  expiry  of  a      period of thirty days from the appointed      day, cease  to have  effect  unless such      contract is,  before the  expiry of that      period, ratified,  in  writing,  by  the      Central  Government  or  the  Government      company  may  make  such  alteration  or      modification therein  as  it  may  think      fit.           Provided    that     the    Central      Government  or  the  Government  company      shall not  omit to ratify a contract and      shall  not   make  any   alteration   or      modification in a contract---      (a)  unless it  is satisfied  that  such      contract is  unduly onerous  or has been      entered  into   in  bad   faith  or   is      detrimental  to  the  interests  of  the      Central  government  or  the  Government      company; and      (b)  except after  giving the parties to      the contract a reasonable opportunity of      being heard  and except  after recording      in writing  its reasons  for refusal  to      ratify the  contract or  for making  any      alteration or modification therein." <SLE>      We shall first take up the issue relating to the period subsequent to  April 23,  1984. We  are of  the opinion that having placed  orders for  purchase of  tins undertaking  to supply Declaration Forms in Form III-Kha and having received the supplies on that basis, it is not open to the appellant- corporation to refuse to issue the said Declaration Forms on the plea  that they  have used  the tins  for purposes other than  those  mentioned  in  Section  4-B(2).  The  user  for purposes other  than those mentioned in Section 4-B(2) was a voluntary act  on the part of the corporation. Therefore, it

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 13  

alone should  take the  blame for  it and be responsible for consequences following  therefrom. The corporation ought not to have  made   such a  representation while purchasing that quantity of tins which it did not intend to use for purposes specified  in   Section  4-B(2).   The  High  Court  cannot, therefore, be  held to  be in error in issuing the direction which it did. We, however, wish to provide a modification to the direction  issued by  the High  Court  in  view  of  the provisions of  sub-section (6)  of Section  4-B of the Uttar Pradesh Act and particularly in view of the time-lapse since the  controversy   has  arisen.   In  all   likelihood,  the assessments of  the respondents  under the Uttar Pradesh Act must have been completed long ago and the question of filing the Declaration Forms now, by the respondents, appears to be an impracticable  thing. The  modification is  this: if  the appellant is  not in  a position  to issue  the  Declaration Forms, it  may not  issue them  but in  such a case it shall reimburse the  respondents-selling dealers  in full  for the difference amount  of tax which the respondents were made to pay on  account of  the appellant’s  failure to  furnish the said Declaration  Forms and  also in  respect of interest or the penalties,  if any,  imposed in  that behalf and paid by them. We  cannot appreciate the argument of Sri Nariman that the appellant-corporation  should be  made liable  only  for reimbursing  the  difference  of  tax  amount  but  not  the interest. We  see  no  justification  behind  such  a  plea. Indeed, if  the selling dealers have been made liable to any penalties on  account of  their failure  to produce in their assessments the  Declaration Forms (which ought to have been furnished  by  the  appellant-corporation  to  such  selling dealers) then  the appellant-corporation  shall  equally  be liable to  reimburse the  selling dealers  in that behalf as well.      We may  now take up  the main question urged before us, viz., the liability, if any, of the appellant-corporation to issue Declaration  Forms or to issue Declaration Forms or to reimburse the  selling dealers  (as directed hereinabove) in respect of  the period  prior to  April 23, 1984. This calls for  an  examination  of  the  relevant  provisions  of  the Acquisition Act,  which we have set out hereinabove. Section 5(2),  the   relevant  portion   whereof  has  already  been extracted hereinabove,  says that  with effect from the date of vesting of the Ganesh Flour Mills in the Corporation, the Corporation shall  take over  the rights  and liabilities of the said  government company  (Ganesh Flour Mills, which had become the  government company  on its  statutory vesting in the Central Government on January 28, 1984). Sub-section (1) of Section 6 clearly states that "every liability other than the liabilities  specified  under  sub-section  (2)  of  the company in  relation to the Ganesh Flour Mills in respect of any period prior to the appointed day shall be the liability of the  company and  shall be enforceable against it and not against Central  Government or  where the Ganesh Flour Mills vest  in   a  government  company,  against  the  government company". The  sub-section is clear and emphatic. ["Company" in the  above provision means the Ganesh Flour Mills Company Limited prior  to its  vesting in  the Central  Government - Section 2(c) - and the expression "government company" means the appellant-corporation  -  Section  (i).]  It  is  agreed before us  that the obligation in question is not one of the matters specified  in sub-section  (2) of  Section  6.  Sub- section (3)  makes the  matter further  clear and beyond any doubt. It  declares, in  the interest  of removal of doubts, that "(a)  save as  otherwise  expressly  provided  in  this section or  any other  section of  this Act,  no  liability,

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 13  

other than the liability specified in sub-section (2) of the company in  relation to the Ganesh Flour Mills in respect of a period  prior to  the appointed  day shall  be enforceable against the Central Government or the government company, as the case may be". Clause (b) of sub-section (3) says that no award, decree  or order  of any  Court,  Tribunal  or  other authority in  relation to Ganesh Flour Mills with respect to any matter,  claim or dispute not being a matter referred to in sub-section  (2) and  which  arose  before  the  date  of vesting shall  be enforceable  either  against  the  Central Government or  against the  government company,  as the case may be. Similarly, clause (c) of sub-section (3) states that "no liability  incurred by  the company before the appointed day, for  the contravention, in relation to the Ganesh Flour Mills of  any provision  of law  for the time being in force shall be  enforceable against  the Central Government or the government company,  as the  case  may  be".  ("Company"  is defined in clause (c) of Section 2, as stated above, to mean the Ganesh  Flour Mills  Company Limited,  Delhi, a  company within the  meaning of  Companies Act,  1956 and  having its registered office  at Subzi Mandi, Delhi.) The provisions in Section 6  thus make  it clear  beyond any  doubt  that  any liability of Ganesh Flour Mills prior to the date of vesting in the  Central Government  (January 28,  1984) shall not be enforceable  against   the  Central   Government  and   that similarly no such liability shall be enforceable against the government  company/appellant-corporation.  Sub-section  (3) also puts the matter beyond any doubt.      Now, let  us see whether Section 22 qualifies Section 6 in any  manner or whether it makes the appellant-corporation liable to  issue Declaration  Forms for purchases made prior to April  23, 1984.  The first  thing  be  noticed  is  that Section 22  and Section  6  being  provisions  of  the  same enactment have  to be  construed  harmoniously;  the  effort should be  to give effect to both. Be that as it may, let us see what  does Section  22 say.  It  says  that  a  contract entered into  by Ganesh  Flour Mills  Company Limited,  with respect to  the said  mills, for any service, sale or supply and which  was in force immediately before the appointed day (January 28,  1984) shall on and from the expiry of the said period, ratified in writing by the Central Government or the government company  (appellant-corporation), as the case may be. Even  where the  Central Government  or  the  appellant- corporation ratifies  such contract,  it is  open to them to make such  alterations or  modifications therein as they may think fit.  The proviso  to Section 22 says that the Central Government or  the appellant-corporation  shall not  omit to ratify a  contract and  shall not  make  any  alteration  or modification in  the contract  while ratifying it, unless it is satisfied  that such  contract is  unduly onerous  or has been entered  into in  bad faith  or is  detrimental to  the interests  of  the  Central  Government  or  the  government company.* The  proviso further  says that  before refusal to ratify or  for effecting  alteration or  modification in the contract, the Central Government/appellant-corporation shall give the  parties to  the contract reasonable opportunity of being heard  and shall  record its  reasons for  refusal  to ratify or for effecting alteration/modification, as the case may be.  The High  Court has  understood Section  22 to mean that unless  the existence  of  circumstances  mentioned  in proviso  (a)   are  made   out  in  these  proceedings,  the appellant-corporation would be bound by any contract made by Ganesh Flour  Mills for  supply of  any goods  prior to  its vesting in  the Central  Government. With  respect,  we  are unable to  agree. A  reading of Section 22 shows that unless

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 12 of 13  

ratified in writing within thirty days of the appointed day, no ------------------------------------------------------------ *"Government company"  is defined in clause (i) of Section 2 to mean  "the government  company in  which the Ganesh Flour Mills are  directed to vest under sub-section (1) of Section 5" - in short, the appellant-Corporation. contract entered into by Ganesh Flour Mills prior to January 28, 1984  (appointed day)  shall be binding upon the Central Government/government company. The proviso, no doubt, states that the  Central Government/appellant-corporation shall not omit  to   ratify  a  contract  and  shall  not  effect  any alteration or  modification therein  unless it  is satisfied that such  contract is  unduly onerous  or has  been entered into in  bad faith or is detrimental to their interest which satisfaction has  to be arrived at after hearing the parties to the  contract; the  reasons  for  such  action  are  also required to be recorded in writing. But this only means that if a  particular contract  is refused  to be  ratified or is altered or  modified in  any particular manner, the affected party (i.e.,  party to  such contract)  shall be entitled to question the  same in  accordance with  law.  But  the  writ petitions -  from which  these appeals  arise were  not such proceedings. These  were not  the writ petitions questioning the omission of the Central Government/appellant-corporation to ratify  a particular  contract  or  contracts.  The  writ petitions -  all of  them  -  were  filed  for  a  different purpose, viz.,  for a direction to the appellant-corporation to issue  Declaration Forms  (Form III-Kha)pursuant  to  the supply orders issued by the Ganesh Flour Mills (prior to its vesting under  Section 3  of the  Acquisition Act).* Whereas the  vesting   in  Central  Government  -  as  also  in  the appellant-corporation -  was in  the year  1984, the present writ petitions were filed in 1987 (one writ petition) and in 1990 (the  rest). If  the petitioners wanted to question the non-ratification of  any particular  contract within  thirty days of  the date of vesting, they should have come to Court soon after  the expiry of the said thirty days from the date of vesting.  If they  had done  so,question would  then have arisen whether  Section 22  is attracted to such a contract, whether the  contract which they were seeking to enforce was "a contract  .........for any service, sale or supply and in force immediately  before the appointed day" and so on. Such a writ  petition would also have given an opportunity to the Central Government  and the appellant-corporation to explain and  put   forward  their  reasons  for  not  ratifying  the contract. We  are of  the opinion  that having regard to the pleadings in  the present  writ petitions  and  the  prayers asked for  therein, the  enquiry contemplated  by Section 22 could not  have been  done  or  entertained  in  these  writ petitions. The position, ------------------------------------------------------------ * The  period subsequent to vesting in appellant-corporation was not in dispute as explained above. therefore, is  that  on  account  of  non-ratification,  the contract -  assuming that  it was a contract in force before the appointed  day -  ceased to  have effect  on  expiry  of thirty days  from the  appointed day,  i.e., even before the appellant-corporation came  into the  picture. The remedy of the respondents-writ  petitioners in  relation to the period prior  to   April  23,   1984  is   not  against  appellant- corporation. Any  claim of  theirs in  respect of the period perior to the date of vesting (January 28, 1984) can only be against the  Central Government  which was  in management of the said  company by virtue of the notification issued under

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 13 of 13  

the I.D.R.  Act. In this context, there may be a distinction between Central Government which has become the owner of the Ganesh Flour  Mills by  virtue of  the vesting  provided  by Section 3 of the Acquisition  Act and the Central Government which was in management of the said company by virtue of the notification under  Section 18AA  of the I.D.R. Act. Be that as it  may, we need not pursue this line of thought inasmuch as these appeals are filed only by the appellant-corporation and not  by the  Central Government. Accordingly, we confine ourselves to  the  liability  of  the  appellant-corporation alone.      The appeals  are accordingly  allowed in  part.  It  is declared that  in respect  of the contracts entered into and supplies received  by the  appellant-corporation on or after April  23,  1984,  the  appellant-corporation  shall  either furnish Form  III-Kha or  if  it  cannot  do  so,  it  shall reimburse the  respondents-writ petitioners  in full for the difference amount  of tax which the respondents were made to pay to  the State  on account  of the appellant’s failure to furnish Declaration  Forms to  the respondents,  as also for the  interest  and  penalties,  if  any,  imposed  upon  the respondents in  that behalf. But so far as the orders placed or supplies  made prior  to April 23, 1984 is concerned, the appellant-corporation is  not liable  either to  furnish the Declaration Forms  to the respondents-writ petitioners or to reimburse them in any manner      No costs.