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Karnataka Roller Flour Mills Vs. Director of Food and Civil Supplies - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtKarnataka High Court
Decided On
Case NumberW.P. Nos. 8906 to 8929 of 1983
Judge
Reported inILR1986KAR1505
ActsWheat Roller Flour Mills Licensing & Control Order, 1957
AppellantKarnataka Roller Flour Mills
RespondentDirector of Food and Civil Supplies
Appellant AdvocateK. Srinivasan, Adv.
Respondent AdvocateM.R. Achar, Government Adv. for Respondent-1 and ;Shylendrakumar, Adv. for Respondent-3
DispositionPetition dismissed
Excerpt:
.....supplied to millers continues until sale by them -- millers and dealers not owners of stock of wheat held by them -- dealers' margin to be constant -- to equalise difference in profit margin created by new rates, direction to recover difference of amount, amounts only to maintain same profit margin as under old rates -- correlation being maintained between wheat price and price of wheat products application of new rates to stocks held by millers not unreasonable.;challenging the order directing payment of difference of amount between rates of wheat and wheat products before 15-4-1983 and those come into effect on and from 15-4-1983 contended that: new rates are not to be applied to stocks held as on 14-4-83, the recovery is unauthorised, millers or dealers on receiving supply became..........roller flour mills. wholesale nomineesand fair price depots in respect of stocks of both wheat and wheatproducts held by them on the morning of 15-4-1983 including whose intransit(-) necessary undertaking that they would pay the differencialcost by 15-4-1983 may be obtained in duplicate (.)3.1) pursuant to the aforesaid telex message, the state government has issued the aforesaid order bearing no. dfs. 199 dfm/82-83 dated 27 4-1983. according sanction to the costing sheet of wheat products shown in the annexures i and ii appended to the order and further stating that the revised rates shall be effective from 15-4-1983. the revised rates have already been reproduced above. thereafter another order dated 23-4-1983 was issued by the regional manager for the food corporation of india,.....
Judgment:
ORDER

K.A. Swami, J.

1. In these Petitions under Article 226 of the Constitution, the petitioners have sought for issue of a writ in the nature of mandamus directing the respondents to forbear from requiring the petitioners to remit the difference of the cost of wheat and its products held by them as stock in transit as at the close of 14-4-1983 pursuant to the Official Memorandum dated 9-8-1982 and the telex message dated 12-4-1983 and the communication dated 23-4-1983 produced as Annexures B, C and F respectively.

2. The petitioners are the owners of the Roller Flour Mills. They have been granted licences, under the provisions of Wheat Roller Flour Mills (Licensing and Control) Order, 1957 (hereinafter referred to as the Licensing Order, 1957). The Central Government supplies the wheat to them on a fixed rate. They are required to extract wheat products through their mills and sell the wheat products at the rates specified by the Central Government. It is done in exercise of the power under Clause 10 of the Licensing Order, 1957 read with Condition No. V of the licence issued in Form No. II. Upto 14-4-1983, certain rates were fixed for wheat and wheat products. With effect from 15-4-1983 the rates of wheat and wheat products have been revised. The revised rates are as follows :

'From : The Director of Food & Civil Supplies in Karnataka, Bangalore.

To : All the Deputy Commissioners of the Districts except Mandva and Bangalore.-------------------------------------------------------------------No. DFS. 199 DFM/82-83 dt. 27th April 1983-------------------------------------------------------------------

Please refer this office Telex dated 12-4-1983 and expedite the stock position of wheat and wheat products as on close of 14-4-1983 at wholesale points, retail points, R.F. Mills and stock in transit. Sale of Wheat maida and soji supplies to public distribution on system may be effected with the following prices. Time for lifting of wheat products of March 1983 is extended upto 10-5-83.

CostingSheet of Wheat with effect from 15-4-1983.1. Cost of wheat

Rs. 172.00

2. Sales Tax @ 4%

Rs. 6.88

3. Price payable to F.C.I.

Rs. 178.88

4. Admn. Charges payable toP.D. Account

Rs. 8.12

5. Wholesale margin

Rs. 4.00

6. Wholesale price

Rs. 191.00

7. Retail margin

Rs. 6.00

8. Retail price

Rs. 197.00

CostingSheet of Maida and Soji

Maida

Soji

1. Ex. mill price

Rs. 287.00

292.00

2. Administrative charges

Rs. 5.00

5.00

3.Ex-godown price

Rs. 292.00

297.00

4. Wholesale Margin

Rs. 5.00

5.00

5. Wholesale Price

Rs. 297.00

302.00

6. Retail Margin

Rs. 8.00

8.00

7. Retail Price

Rs. 305.09

310.00

As the revised rates were to be effective from 15-4-1983 and on the commencement of 15-4-1983 the millers and the dealers had with them the wheat supplied at the old rate and also the wheat products extracted from such wheat, the Central Government issued a telex message dated 12th April 1983, bearing No. DPS 199/1982-83 (Annexure-C), which reads thus :

TELEX MESSAGE

FROM : THE DIRECTOR OF FOOD & CIVIL SUPPLIES : BANGALORE

TO : ALL THE DEPUTY COMMISSIONERS EXCEPT BANGALORE AND MANDYA DISTRICTS.-------------------------------------------------------------------NO. DFS 199 DFM/1982-83 DATED 12TH APRIL 1983-------------------------------------------------------------------THE COST OF WHEAT SUPPLIED TO ROLLER FLOUR MILLS AND PUBLIC DISTRIBUTIONSYSTEM HAVE BEEN REVISED RESPECTIVELY FROM Rs. 185 TO 208/- AND Rs. 160/-TO 172/- PER QUINTAL WITH EFFECT FROM 15-4-1983 (.) PLEASE VERIFY THESTOCKS OF WHEAT AND WHEAT PROUCTS HELD WITH THE ROLLER FLOUR MILLERSWHOLESALE NOMINEES, FAIR PRICE DEPOTS AS ON CLOSE OF 14-4-1983 (.)RECOVER THE DIFFERENTIAL COST FROM ROLLER FLOUR MILLS. WHOLESALE NOMINEESAND FAIR PRICE DEPOTS IN RESPECT OF STOCKS OF BOTH WHEAT AND WHEATPRODUCTS HELD BY THEM ON THE MORNING OF 15-4-1983 INCLUDING WHOSE INTRANSIT(-) NECESSARY UNDERTAKING THAT THEY WOULD PAY THE DIFFERENCIALCOST BY 15-4-1983 MAY BE OBTAINED IN DUPLICATE (.)

3.1) Pursuant to the aforesaid telex message, the State Government has issued the aforesaid order bearing No. DFS. 199 DFM/82-83 dated 27 4-1983. according sanction to the costing sheet of wheat products shown in the Annexures I and II appended to the order and further stating that the revised rates shall be effective from 15-4-1983. The revised rates have already been reproduced above. Thereafter another order dated 23-4-1983 was issued by the Regional Manager for the Food Corporation of India, stating that the wheat and wheat products held by the millers in pipeline on the close of 14-4-1983 also attracted the enhanced rate. The difference between the enhanced rate and the old rate was also payable by all the millers to the Government of India, through the respective State Governments. All the member mills were also informed accordingly.

3.2) It is pursuant to this, the millers are being compelled to pay the difference of the amount between the rates of wheat and wheat products prevailing just before the commencement of 15-4-1983 and those which have come into effect from 15-4-1983.

4.1) It is contended by Sri K. Srinivasan, Learned Counsel for the petitioners that it is not open to Respondents 1 and 3 to apply the new rates which have been made effective from 15-4-1983 to the stock of wheat and wheat products held by the millers or dealers on the close of the 14th of April, 1983, that even if there is a power in the third respondent, there is no order as such issued by the third respondent applying the new rates to the stock of wheat and wheat products held by the millers on the commencement of the 15th of April, 1983, therefore, it is submitted that the recovery of the difference of the amount is unauthorised. It is also further contended that once the wheat is delivered to the miller or dealer on receiving the value thereof according to the rate prevailing on the date of delivery, the wheat so delivered becomes the property of the deliverer and to such property the third respondent is not entitled to apply the new rates and collect the difference of the amount.

4.2) On the contrary, it is contended on behalf of Respondent No. 2 by Sri M. R. Achar, Learned Government Advocate and Sri Shylendra Kumar, Learned Counsel for Respondent No. 3 that there is a correlation between the rates of wheat supplied by the third respondent and rates of wheat products extracted from such wheat ; that there is a power vested in the third respondent under Clause 10 of the Licensing Order. 1957 read with Condition No. V of the licence ; that in substance the telex message fixes the rates for the stocks of wheat and wheat products held on the commencement of 15-4-1983; that as the wheat and wheat products with effect from 15-4-1983 have to be sold at the new rates, the difference of the amount is required to be recovered and as such the action taken in this regard is valid in law.

5. Having regard to the aforesaid contentions, the points that arise for consideration are as follows :

(1) Whether the third Respondent has power to fix the rates for wheat and wheat products held by the millers and dealers on the beginning of 15-4-1983 in other words at the close of the 14th of April 1983.

(2) Whether the telex message dated 12th April, 1983. bearing No DPS. 199. DFM/1982-83, produced as Annexure-C amounts to fixing new rates, which are made effective from 15-4-1983, and if so whether it amounts to fixing the rates for the stock of wheat and wheat products held by the millers and dealers on the opening of 15-4-1983 or at the close of 14th April 1983.

Point No. 1 :

6.1) Sri. K. Srinivasan, Learned Counsel for the Petitioners, fairly, has not disputed before me that the Central Government under Clause 10 of the Licensing Order. 1957 read with Condition No. V of the Licence has power to fix new rates for the wheat and wheat products. Clause 10 of the Licensing Order. 1957 reads thus :

'10. Powers of Licensing Authority and specified authority to issue directions to Licensee :-

(1) The Licensing Authority or as the case may be, 'the specified authority' may issue directions to licensees in regard to --

(a) the source from which and the manner in which wheat shall be obtained for the purpose of manufacture of wheat products;

(b) the production or manufacture of different kinds of wheat products and also the size of the packing, the method of packing and the like;

(c) the disposal of wheat products.

Provided that no direction under item (a) shall be issued by the specified authority without obtaining the prior concurrence of the Central Government.

(2) Every licensee shall be bound to carry out the directions of licensing authority or as the case may be, the specified authority under Sub-clause (1)'.

6.2) According to the third respondent ha is the licensing authority. The first respondent is the specified authority. Clauses 10 (1)(a), (b) and (c) empowered the licensing authority and the specified authority to issue directions to the licensees regarding the source from which and the manner in which wheat shall be obtained for the purpose of manufacture of wheat products, and also regarding the production or manufacture of different kinds of wheat products and also the size of the packing, the method of packing and the like, and also regarding the mode of disposal of wheat products. Clause 10(2) thereof specifically provides that every licensee is bound to carry out the directions of the licensing authority or as the case may be, the specified authority under Sub-clause (1) thereof. Condition No. V of the Licence specifically provides that the licensee shall abide by any directions issued by the licensing authority or the specified authority, as the case may be, in regard to the purchase of wheat, extraction of maida, soji and rawa and also in regard to the distribution or disposal of wheat products. Therefore, rightly, Sri Srinivasan has not disputed the power of the licensing authority and the specified authority to determine the rates for the wheat and wheat products.

6.3) The question that still remains to be considered is as to whether this power extends to the stock of wheat which was delivered to the millers earlier to 15-4-1983 and the wheat products in the possession of the millers and dealers extracted from such wheat at the close of 14th April, 1983. A reading of Clause 10 of the Licensing Order, 1957 with Condition No. V of the Licence, makes it clear that power to determine the rates for the wheat supplied to the millers and the wheat products extracted therefrom extends even to the stock held by them at the close of the 14th April, 1983. The control of the licensing authority and the species authority on the wheat supplied to the millers does not come to an end after it is supplied to them. It continues until the wheat products extracted from such wheat are sold to the several agencies as notified, and at the rates specified by the Central Government. This power is not affected even if it is held that the millers or the dealers had become the owners of the stock of wheat held by them at the close of 14-4-1983. It is not possible to hold that the millers and dealers had become the owners in the full sense of the expression, of the stock of wheat held by them at the close of 14-4-1983 because as per the provisions of Clause 10 of the Licensing Order, 1957 and Condition No. V of the Licence, they are not free to sell the wheat and its products as owners according to their choice. Anyhow, it does not make much difference in the instant case, because the power to regulate and fix price for the stock of wheat held at the close of 14-4-1983 is not affected as it continues till the wheat products are sold. Thus, until the wheat products are sold by the millers and dealers at the specified rates, the power under Clause 10 of the Licensing Order, 1957 and Condition No. V of the Licence is exercisable by the licensing authority and the specified authority. That being so, the licensing authority and the specified authority were justified in applying the new rates, effective from 15-4 1981, to the stock of wheat and wheat products held by the millers at the close of 14th April, 1983. Point No. (1) is accordingly held in the affirmative.

7.1) POINT NO. 2 :- The contention of Sri Srinivasan is that the telex message dated 12th April, 1983 does not amount to an order determining the rate for the wheat and wheat products held by the millers and dealers on the opening of the 15th April, 1983. The entire telex message is already reproduced above. No doubt, the said telex message, in so many words, does not state that the new rates, which are to be effective from 15-4-1983 are also the rates applicable to the stocks of wheat and wheat products held on the opening of 15-4-1983 by the Roller Flour Millers or dealers. It only states that the difference in the old rates for the wheat and wheat products and the new rates relating to the stocks of wheat and wheat products held by the millers and dealers on the commencement of 15th April, 1983 be recovered.

7.2) At this stage, it is pertinent to notice that while fixing the rates for wheat and wheat products the millers' margin and dealers' margin is provided. Both in respect of the wheat and wheat products, there is a correlation between the price of the wheat and also the price of wheat products. The rates that were prevalent prior to 15-4-1983, it is not disputed, also provided for such margin for wholesale dealers and retail dealers. The millers fall within the category of wholesale dealers. Thus, if a correlation between the rates of wheat and wheat products is maintained it has also to be maintained when the new rates are made applicable from a stated date and time. If the new rates are not made applicable in respect of the stocks held on the commencement of 15-4-1983 there will not be any correlation between the rates of wheat and the rates of wheat products, inasmuch as the wheat would have been sold at a lesser rate or at the rate that was prevalent before the commencement of 15 4-1983, which was admittedly less than the one made effective from 15 4 1983 and whereas the products of such wheat will have higher rates as the same are to be sold from 15-4-1983 as per the new rates. It is necessary to equalise the difference created by reason of the new rates, in order to maintain the correlation that has to exist between the rates of wheat and wheat products. It is to maintain this, in exercise of the power under Clause 10 of the Licensing Order, 1957 and Condition No. V of the Licence, the aforesaid telex message is issued. The sum and substance of the total effect of the said order is that the wholesale dealers' and retail dealers' margin that is made available should be fixed constantly and there should not be any variation between the wholesale margin regarding the wheat and the wholesale margin regarding the wheat products, so also the retail margin regarding the wheat and retail margin regarding the wheat products. The recovery of the difference of the amount between the two rates in substance amounts to applying or fixing the new rates, to the stocks held on the opening of 15-4-1983. Otherwise, the question of recovering the difference of the amount does not arise. It is on applying the new rates to the wheat and wheat products held at the close of 14-4-1983 the difference in the amount arises. Hence, the telex order in effect applies to or fixes the new rates to the stock of wheat and wheat products held at the close of 14-4-1983. Such a power as it is already pointed out, exists in the licensing authority and the specified authority. That being so, it is not possible to hold that merely because the order Annexure-C states that the difference of the amount to be recovered, it does not amount to fixing and applying the new rates to the stock of wheat and wheat products held by the millers or dealers on the commencement of 15-4-1983.

7.3) Sri Srinivasan, Learned Counsel for the petitioners, has placed strong reliance on a decision of the Supreme Court, in Venkata Subba Rao v. State of Andhra Prudish, : [1965]2SCR577 and also a Division Bench decision of the High Court of Patna in Bokaro Rolley Flour Mills Pvt. Ltd v. Union of India, : AIR1984Pat331 . No doubt, both the decisions arose more or less under the identical circumstances. The decision of the Patna High Court relates to the very order in question and it has followed the aforesaid decision of the Supreme Court and has held that it is not open to the licensing authority or the specified authority to claim difference of the amount in respect of the stock of wheat and wheat products held on the commencement of 15-4-1983 on the ground that the new rates are applicable with effect from 15-4-1983. It is pertinent to notice that the decision of the Supreme Court has proceeded on a certain basis and as per the case pleaded by the Government of Madras. The facts of the case of the Supreme Court are as follows :

The Government of Madras for the purpose of procuring and sale of rice issued orders from time to time in the years 1947 and 1948 fixing the rates for procurement and also rates for sale. At a certain stage, it so happened that the rates for sale came to be increased. AS a result thereof, the procurement agencies who had purchased the rice at the old procurement rate became entitled to a larger profit. The Government were of the view that the procurement agencies were not entitled to the larger profits. Therefore, they tried to recover the difference of the larger profit either by surcharging them or by requisitioning the stocks held by them and again selling the same stock to them on a higher rate. It is very pertinent to notice that there was no defence put forth by the State Government in the said case that it was entitled to do so under the relevant provisions of the order to fix a new rate or apply the new rate in respect of the stocks held by the procurement agencies and in substance the action of the State Government amounted to it. On the contrary, the defence that was advanced was that the procurement agencies were the agents of the State Government and therefore they were not entitled to the larger profit. On consideration of the terms of the agreement and the various other factors, the Supreme Court came to the conclusion that there was no relationship of the principal and the agent, therefore, the State Government was not entitled to recover the larger profit to which the procurement agencies were entitled to on the sale of the rice procured by them at a lesser rate. On the aforesaid basis, the Supreme Court also came to the conclusion that the surcharge under such circumstances amounted to tax which could be done only by way of legislation. Accordingly, it was held that even the surcharge was also not valid. Of course, in the dissenting Judgment, SARKAR, J., held that the Government had the power to fix new rates in respect of the stocks held by the procurement agencies by requisitioning the stocks at the lesser rate and supplying it on the higher rate so as to equalize the difference created by reason of the new rates. But, the majority Judgment though in so many words did not state that the Government had no such power, in effect, it amounted to holding that the Government had no power as it was held that since the procurement agencies were considered by the State Government as their agents and as such, there was no question of requisitioning the stock from the agents because the stock held by the agents was the stock of the Government itself : therefore, there was no question of requisitioning its own stocks. Thus, the case was decided on the basis of the plea raised by the State Government that the procurement agencies were the agents of the State Government. The same defence was put forth before the High Court of Patna also. Tharefore, it is clear that no doubt me Judgment of the Supreme Court deals with similar circumstances, and no doubt the Judgment of Patna High Court also deals with the very order in question, but the grounds on which both the decisions are rendered are quite different from the grounds urged in these petitions and as such, the ultimate conclusion reached in those decisions cannot be of any help to decide the contentions raised in these Petitions. Hence, I am of the view that it is not possible to hold that the Judgment of the Supreme Court covers the contentions raised by the respondents. In the view I take, I find it difficult to agree with the view expressed by the High Court of Patna.

7.4) I may also refer to the other contentions urged by Sri Shylendra Kumar, Learned Counsel for the third Respondent. Section 6 of the Essential Commodities Act (hereinafter referred to as the Act) is as follows :

'Any


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