IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 16TH DAY OF APRIL 2019 BEFORE THE HON’BLE MR. JUSTICE ALOK ARADHE WRIT PETITION NO.24722 OF 2012 (GM-RES) BETWEEN:
M/S SRINATH ENTERPRISES, #227, 7TH CROSS, A.P.M.C YARD, YESHWANTHPUR, BANGALORE – 22.
REPRESENTED BY ITS PROPRIETOR, B.A.SRINATH, S/O ADINARAYANA GUPTA, AGED ABOUT 44 YEARS, R/O 227, 7TH CROSS, A.P.M.C YARD, YESHWANTHPUR, BANGALORE – 22.
(BY MR.PADMANABHA V.MAHALE, SR. ADV. FOR MR.SATISH M.DODDAMANI, ADV.) AND:
1. THE HIGH LEVEL COMMITTEE, FOOD CORPORATION OF INDIA, BARA KHAMBA LANE, NEW DELHI – 1100 REPRESENTED BY ITS CHAIRMAN.
2. THE CHAIRMAN & MANAGING DIRECTOR, FOOD CORPORATION OF INDIA, BARA KHAMBA LANE, NEW DELHI – 1100.
3. THE GENERAL MANAGER, … PETITIONER FOOD CORPORATION OF INDIA, BARA KHAMBA LANE, NEW DELHI – 1100.
4. THE EXECUTIVE DIRECTOR, FOOD CORPORATION OF INDIA, ZONAL OFFICER, CHENNAI.
5. THE GENERAL MANGER (SALES) FOOD CORPORATION OF INDIA, #10, EAST END MAIN ROAD, 4TH T BLOCK, JAYANGAR, BANGALORE.
6. THE DEPUTY GENERAL MANAGER, FOOD CORPORATION OF INDIA, #10, EAST END MAIN ROAD, 4TH T BLOCK, JAYANGAR, BANGALORE.
7. THE ASSISTANT GENERAL MANAGER, FOOD CORPORATION OF INDIA, #10, EAST END MAIN ROAD, T BLOCK, JAYANGAR, BANGALORE.
8. THE WARE HOUSE MANAGER, SHED NO 62, CENTRAL WARE HOUSING CORPORATION, UNIT NO 4, SURAKSHA GODOWN COMPLEX, MATHOUD, SHIMOGHA DISTRICT, SHIMOGHA.
9. THE WARE HOUSE MANAGER, STATE WARE HOUSING CORPORATION, SHED NO 71, SURAKSHA GODOWN COMPLEX, SAVALANGA ROAD, SHIMOGHA DISTRICT, SHIMOGHA.
… RESPONDENTS (BY MR.SANGAMESH G PATIL, ADV. FOR R9, MR.N.K.RAMESH, ADV. FOR R1-R3 & R5 R4, R6 AND R7 SERVED AND UNREPRESENTED MR.PUTHIGE R.RAMESH, ADV FOR R8) - - -
THIS WRIT PETITION IS FILED UNDER ARTICLES 226 & 227 OF THE CONSTITUTION OF INDIA, PRAYING TO QUASH THE IMPUGNED ORDER DTD.18.4.12 ISSUED BY THE R5 VIDE ANNEX- P AND ETC.
THIS WRIT PETITION COMING ON FOR PRELIMINARY HEARING IN ‘B’ GROUP THIS DAY, THE COURT MADE THE FOLLOWING:-
ORDER Mr.Padmanabha V.Mahale learned Senior counsel for Mr.Satish M. Doddamani, learned counsel for the petitioner.
Mr.Sangamesh G.Patil, learned counsel for respondent No.9.
Mr.N.K.Ramesh, learned counsel for respondent Nos.1 to 3 & 5.
2. The writ petition is admitted for hearing.
With consent of the learned counsel for the parties, the same is heard finally.
3. In this petition under Article 226 of the Constitution of India, the petitioner inter alia seeks a writ of certiorari for quashment of the impugned order dated 18.04.2012 issued by respondent No.5. The petitioner also seeks a writ of mandamus directing the respondents to refund a sum of Rs.81,40,597/-.
4. In order to appreciate petitioners challenge, few background facts need mention, which are stated infra: A tender notification dated 28.09.2010 was issued by the Regional Office of Food Corporation of India, Bangalore for the purposes of Maize, Ragi stock procured in the year 2009-10, which was stored in various godowns in the State of Karnataka. In response to the aforesaid tender notification, the petitioner participated in the tender for lifting the maize stored at various warehouses in Shimoga. The petitioner was declared as the highest bidder for lifting the maize stored in various godowns situated in Shimoga and a communication in this regard was sent on 03.11.2010.
The petitioner deposited a sum of Rs.29,89,62,934/- on different dates. The petitioner was declared as successful bidder for quantity of 365568.70 metric tones. The petitioner after being declared the highest bidder submitted a representation in which it was stated that the time for lifting the maize is insufficient and requested for additional time of 60 days for lifting the maize. It is the case of the petitioner that on account of heavy and incessant rain in Shimoga district, the petitioner could not lift the quantity of the maize. Thereupon the petitioner again submitted a representation dated 21.12.2010 requesting for extension of time by another 15 days. Thereafter on 30.12.2010, the petitioner made another representation and sought for extension of time for another 30 days. However, the aforesaid representations submitted by the petitioner failed to evoke any response. Thereupon the petitioners submitted a representation on 16.04.2011 in which again a prayer was made for grant of time to lift the maize. Petitioner being aggrieved, approached this Court by filing writ petition No.17348/11. The aforesaid writ petition was disposed of by a Bench of this Court with a direction to the Food Corporation of India to ascertain the actual quantity of the stock to which the petitioner was entitled to lift and also consider the default committed by the petitioner in lifting certain commodities with permission of the Corporation and thereafter assessed the amount payable to the petitioner towards value of the stock and pass order within a period of four months from the date of receipt of certified copy of the order passed.
5. When the matter was taken up today, it was further held that since, the action of the respondents in not considering the representation filed by the petitioner seeking extension of time within a reasonable time was not fair and reasonable; the Corporation is required to keep in mind the bar in dealing the consideration of the said request. However, by a telegraph dated 12.03.2012, the time for lifting the stock of Maize was extended for a period of 60 days subject to payment of costs of Rs.13,10,238/- towards storage charges. The petitioner thereafter submitted a representation to adjust a sum of Rs.13,10,238/- towards storage charges and to refund the balance of Rs.81,40,597/- i.e., amount equivalent of the maize supplied after deduction of the storage charges. However, the respondents passed the impugned order dated 18.04.2012 by which a sum of Rs.94,50,835/- was forfeited on account of breach of contract. In the aforesaid factual background, the petitioner has approached this Court.
6. Learned Senior Counsel for the petitioner submitted that the impugned order dated 18.04.2012 forfeiting the amount of Rs.94,50,858/- is illegal, arbitrary and is in violation of Article 14 of the Constitution of India. It is further submitted that the respondents had received the entire sale consideration of the stock, which was allotted to the petitioner. Therefore, the respondents could not be permitted to forfeit the amount, which was payable by the petitioner towards cost of storage of maize allotted to the petitioner. It is also submitted that the impugned order dated 18.04.2012 has been passed in flagrant violation of principles of natural justice inasmuch as neither any notice nor any opportunity of hearing was afforded to the petitioner. It is also submitted that since, the dispute involves the public law allotment, therefore, the action of the respondents were without jurisdiction. It is also urged that the action of the respondents is in violation of Section 55 as well as Section 73 of the Indian Contract Act, 1872. In support of the aforesaid submissions, reliance has been placed on a decision of Supreme Court in ‘ABL INTERNATIONAL LTD. AND ANOTHER VS. EXPORT CREDIT GUARANTEE CORPORATION OF INDIA LTD. AND OTHERS’, (2004) 3 SCC 553 and ‘FOOD CORPORATION OF INDIA AND ANOTHER VS. M/S SEIL LTD. AND OTHERS’, AIR 2008 SC 1101. On the other hand, learned counsel for the respondent submitted that the action taken by the respondents is in accordance with the contract and has submitted that since the petitioner has failed to lift the stock of the maize within the time limit prescribed therein, therefore, the action of forfeiting the amount deposited by the petitioner has been taken in accordance with the terms and conditions of the contract. It is further submitted that under the terms and conditions of the contract, the petitioner has to take recourse to the remedy of civil suit for resolution of the dispute which has arisen between the parties.
7. I have considered the submissions made on both the sides and have perused the record. The relevant extract of the tender reads as under:
(vi) After expiry of sixty (60) days, no further extension will be granted and EMD etc., deposited by the tenderer(s) will be forfeited and the stocks will be sold at risk and cost of the firm without any further notice. However, the Chairman, Managing Director, FCI is authorized to grant extensions in period of lifting maize and levy of penal interest and storage charges upto another 60 days, on merits of the case. In cases where lifting could not be completed on account of reasons assigned directly attributed to the buyer’s failure (such as FCI’s operational constraints etc.,) power for reduction or waiver of storage charges/ penal interest, vest with the higher level committee of FCI. The decision to grant extensions / waiver of penal interest , storage charges/ will be at the sole discretion of FCI / HLC and cannot be claimed as a matter of right.
(viii) In the event of the failure to deposit the cost/ lifting of stocks within the specific time, Food Corporation may dispose off the stocks at the buyer’s risk & cost in the manner deemed fit and shall recover all losses suffered by the Corporation from the Secuirty Deposit and other dues available with the Corporation. In case, the amount falls short of the recoverable amount, the tenderer shall deposit the balance amount on receipt of notice from the Corporation.
8. From conjoint reading of the aforesaid clauses, it is evident that after expiry of 60 days, Earnest Money Deposit etc deposited by the tender shall be forfeited and the stock will be stored at the risk and cost of the firm without any further notice. It is also axiomatic that in the event of the failure of the petitioner to lift the stocks the food corporation may dispose of the stocks at the buyer’s risk and the case engineer deem fit shall recover of the lands offered by the Corporation from the security deposit and other dues available with the Corporation. Admittedly, in the instant case, the petitioner had deposited the entire amount of the cost of maize purchased by him. It is also not in dispute that petitioner as unable to lift the requisite quantity and the petitioner is ready and willing to pay a sum of Rs.13,10,238/- towards the storage charges, which is evident from the communication dated 15.03.2012. A bench of this Court in writ petition filed by the petitioner had disposed of the same with the following direction:
9. Hence, this writ petition is disposed of with a direction to the FCI to ascertain the actual quantity of stock to which the petitioner was entitled to lift and also consider the default committed by the petitioner in lifting certain commodities without the permission o the Corporation and thereafter assess the amount payable to the petitioner towards the value of the stocks and pass an order within a period of four months from the date of receipt of a copy of this order. As it is held that the action of the respondent in not considering the representation filed by the petitioner seeking extension of time within a reasonable period written statement not fair and reasonable, the Corporation is required to keep in mind, the default on its part in delaying the consideration of the said request for extension while computing the value of the stocks.
10. During the course of submission, the respondents have placed a chart, which gives the details of the quantity lifted by them and the quantity which could not be lifted. The details read as under:
Total 16070.31 - 9853.83 6216.48 5044.343 1172.437 - 1172.437 (9450835.04)
11. It is pertinent to mention here that the respondents have filed objections, in para 9 the following stand has been taken:
9. Thereupon, these respondents as per the directions of this Hon’ble Court quantified the loss suffered by the Corporation vis-à-vis the amount payable by the petitioner on account of delay in lifting the stock and the storage loss. Based on the declaration made by the custodian of the stock namely the 8th and 9th respondents an overall short delivery of 1172.437 MT was declared as storage loss. Since the storage loss of 1172.437 MT of Maize is attributable to the lapse on the part of the petitioner for delay in lifting and unauthorized lifting of stock contrary to the tems of the contract, the 2nd respondents passed an order for recovering the losses suffered by the Corporation from out of the available amount as per Cl.H(viii) of the contract which was quantified at rs.94,50,835/- as per the impugned communications.
12. From close scrutiny of the averments made in the objections, it is evident that there is no averment with regard to alleged unauthorized quantity lifted by the petitioner which fact has been vehemently denied by the petitioner. On the other hand, learned counsel for the respondent have asserted that there is a short delivery of 1172.437 of metric tones which as declared as a storage loss. The respondents under the contract had the authority to sell stock of maize, which was not lifted by the petitioner and to recover the price. However, the respondents have failed to do so. The respondents cannot retain the maize, which was already ought to have sold to the petitioner and at the same time recover the cost of the same to the respondent. It is trite law that when a contract is broken, a party who suffers the loss by such breach is entitled to damages from the party who has broken the contract, compensation of any loss or damage caused to him. In the instant case, on account of non lifting of the maize by the petitioner, no loss is shown to have been caused to the petitioner except the storage charges, which the petitioner is ready and willing to pay. Therefore, if the respondents are permitted to retain the amount of maize bought by the petitioner, the same would be in contravention of Section 73 of the Indian Contract Act, 1872, which is not permissible in law.
13. In view of the preceding analysis, the impugned communication dated 18.04.2012 is hereby quashed. The respondents are directed to refund the amount to the petitioner, which has been deposited by him on account of the stock of maize, which has not been lifted by him after deduction of Rs.13,10,238/- towards storage charges within a period of two months from today, failing which, the aforesaid amount shall carry interest at 8% p.a.
With the aforesaid direction, the petition is disposed of.
Sd/- JUDGE SS