Difference between revisions of "F.C.I vs M/S V.K TRADERS and ORS., ETC.ETC."

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Revision as of 15:02, 1 July 2020

The main issue of this case was whether or not the Respondents, had taken over certain blacklisted rice mills on the lease basis and are also entitled for the allocation of the paddy for custom milling. The appeals submitted before the High Court, was an order which was already passed by the Division Bench of Punjab and Haryana High Court. Here the case was filed by Food Corporation of India (FCI) challenging a Learned Single Judge’s order.


It is the common practice followed by the Government agencies of Punjab to allocate paddy for milling services and after the completion of this process, they would in return supply the rice as per the approved conditions stated by FCI. Same kind of allocation has taken place for the “Kharif Marketing Season” for the year 2004-2005 (KMS). These allocations would happen after the signing of an agreement named as “Bipartite Agreement”. 

A dispute rose which dealt with the quality of the milled rice stock for the above mentioned KMS which led to the CBI investigation. CBI found out that, the milled rice stock to be defective and henceforth a Prosecution was initiated against numerous rice millers. After the prosecution, totally 182 millers were blacklisted for a period of Three year as per Beyond Rejection Limit(BRL) and a period of Five year as per Beyond Prevention of Food Adulteration(BPFA).

It is relevant to note that before imposing the ban on allocation of paddy for custom milling and blacklisting the defaulting rice millers, show cause notices were served and objections duly considered.

. Illustratively, “M/s Sharma Rice Mills, situated at Katcha Firozpur Road, Mukhtsar, was informed vide registered show cause notice dated 04/06.12.2007 that 1814 MT of rice delivered by it, was found as being BRL and BFPA, besides the 588 MT of stock which was yet untested”. This notice also pointed out that the delivered stock was inedible due to which the appellant suffered a huge financial loss. Even after such notice, the rice mill refused to compensate the FCI for the losses caused. After this, the blacklisted rice mills were not allowed to allocate any paddy for the purpose of milling in the year 2011-2012. To escape from this ban period, the mill owners had leased out their mills to the similar partnership firms. Also it should be noted that, all these lease deeds were not registered. . “A reference to one such lease deed of 21.09.2011 shows that the rice mill of M/s Sharma Rice Mills along with land measuring 21 kanal 16 marlas on which it was situated was leased to another firm, M/s BK Traders. The land, building, machinery and plant were leased out for an annual consideration of Rs 2 lakhs. Most of the lessees were only newly constituted entities.” After this, the new leases subsequently wanted to contract with the appellant FCI for allocation of paddy, and they also assured that neither of the leased mills have committed any mistake nor they have been blacklisted. FCI did not entertain such activities and they clearly stated that the new leases have simply “Stepped into the shoes”, of the earlier blacklisted lessors, and lease deeds doesn’t matter to them at all.

JUDGEMENT The Learned Single Bench Judge of HC stated that the new lease firms were to be considered as the separate legal entities. Furthermore, it was observed that the “proprietor of petitioner ¬firm has not been shown to have any connivance with the erstwhile defaulter”. Thus the writ petitions filed by some of these new entities against FCI were considered by the court, and the court passed the judgement stating that “The ban imposed by the FCI on the allocation of the paddy to these new entities was set aside”.

“Shri Gaurab Banerjee, learned senior counsel for FCI contended that the lease deeds relied upon by the new entities were unregistered documents, which had no sanctity in the eyes of law.” After stating this, later it was argued that it is completely not permitted in the eyes of law for permitting the defaulted rice millers through indirect means “in the name of emasculated new lessees”.

CONCLUSION “For the reasons aforestated, these appeals are allowed. The orders passed by the learned Single Judge as well as the Division Bench of the High Court are set aside. The writ petitions filed by the respondent¬lessees are dismissed, however, with liberty to pay dues with penalty/interest of the original rice¬millers and thereafter on production of ‘No Dues Certificate’ seek allocation of paddy for custom milling in accordance with the policy of FCI”.

Bench: Hon'Ble The Justice, B.R. Gavai, Surya Kant CIVIL APPEAL NO. 2070 OF 2020 [Arising out of Special Leave Petition(C)No. 3127 OF 2014]