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Gunupati Alluraiah Vs. State of Andhra Pradesh Represented by the District Collector, Nellore - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtAndhra Pradesh High Court
Decided On
Case NumberSecond Appeal Nos. 607, 608, 609, 819 and 885 of 1958
Judge
Reported inAIR1963AP394
ActsEssential Supplies (Temporary Powers) Act, 1946 - Sections 3, 14(1) and 16(2); Madras Foodgrains (Procurement) Order, 1947; Madras Foodgrains (Intensive Procurement) (Amendment) Order, 1950; Indian Contract Act - Sections 222
AppellantGunupati Alluraiah
RespondentState of Andhra Pradesh Represented by the District Collector, Nellore
Appellant AdvocateM. Krishna Rao, Adv.
Respondent AdvocateN.V.B. Sankara Rao, Second Government Pleader
DispositionAppeals allowed
Excerpt:
civil - indemnity - sections 3, 14 (1) and 16 (2) of essential supplies (temporary powers) act, 1946, madras foodgrains (procurement) order 1947 and madras foodgrains (intensive procurement) order, 1950 - plaintiff appointed as wholesale dealer for sale of rice under madras order, 1947 - executed agreement with government pursuant to order - claimed from government certain incidental expenses incurred by him and indemnity in respect of shortage of re-delivery - filed suit on refusal of government - suit not barred by section 16 (2) as plaintiff's claim was only for indemnity and not for damages - plaintiff and government are agent and principal - indemnity to be given by government - held, government duty bound to indemnify plaintiff and interest is also to be given. - - 4 it was.....venkatesam, j.1. these five second appeals arise out of suits filed by dealers in food grains of nellore district, hereinafter called the dealers, against the state of andhra represented by the district collector, nellore, for recovery of certain amounts due to them. these five suits and two others were disposed of by a common judgment by the district/munsif of kanigiri, who decreed all the suits. the appeals against his decision preferred by the state of andhra were also disposed of by a single judgment of the subordinate judge of kavali, who reversed the decision of the that court, and dismissed the suits. these second appeals are preferred by the dealers against that judgment.2. the facts briefly are as follows:the appellants-plaintiffs were appointed as wholesalers for kanigiri taluq.....
Judgment:

Venkatesam, J.

1. These five second appeals arise out of suits filed by dealers in food grains of Nellore District, hereinafter called the dealers, against the State of Andhra represented by the District Collector, Nellore, for recovery of certain amounts due to them. These five suits and two others were disposed of by a common judgment by the District/Munsif of Kanigiri, who decreed all the suits. The appeals against his decision preferred by the State of Andhra were also disposed of by a single judgment of the Subordinate Judge of Kavali, who reversed the decision of the that Court, and dismissed the suits. These second appeals are preferred by the dealers against that judgment.

2. The facts briefly are as follows:

The appellants-plaintiffs were appointed as wholesalers for Kanigiri Taluq under the scheme of State Trading in Food Grains, adopted by the State of Madras in exercise of the powers conferred on it under the Essential Supplies (Temporary Powers) Act (XXIV of 1946), hereinafter called 'the Act', in order to make up the shortage of food grains experienced at that time and to ensure proper distribution of the available stocks. In September, 1952, the District Collector, Nellore, allotted to the plaintiffs and some others each 218 bags of Visakhapatnam rice to be delivered at Singarayakonda Railway Station after collection of the price including administrative surcharge and subsidiary surcharge and the Railway freight. The Tahsildar of Kandukur took delivery of the food grains at Singarayakonda Railway Station and handed over the same to the plaintiffs as per their quota. Having discovered that what was delivered by the Tahsildar was boiled rice, for which there was no demand in the locality, the plaintiffs made representation to the Collector, Nellore, who directed the pontiffs to return the stocks remaining with them to the Tehsildar, Kandukur at Singarayakonda Railway Station for export to Madras, which was accordingly done by the plaintiffs.

The plaintiffs' case is that in receiving the quota of food grains allotted to them and in returning the stocks they acted throughout as agents of the Government, and, on account of the relationship of principal and agent between them, they are entitled to claim the expenseswhich they incurred in receiving the food grains and if, also returning the same, including reasonable interest on their out-lay in that connection. The plaintiffs have sued for the balance of the sums spent by them with interest and the loss incurred on account of shortage, after deducting the payments made to them by the Government.

3. The suits were resisted by the Government, contending that the transactions in question were in the nature of an outright sales that there was no relationship of principal and agent between them and dealers, and that as the ownership in the goods passed to the plaintiffs together with attendant risk, the plaintiffs have to bear the losses or shortage, and that they are not entitled to recover the sums claimed. The Government made ex gratia payments to the dealers towards handling charges, and they are not liable to pay the suit amounts by way of damages or otherwise.

4. The common issue (Issue No. 3) raised in all the suits was, whether the plaintiffs had a cause of action against the Government. The trial Court found that the relationship between the parties was one of agency, but not seller and buyer, and that under Section 222 of the Indian Contact Act, the principal is bound to indemnify the agent against the consequences of all lawful acts done by him. On the other issue (Issue No. 2) viz., whether the agreements relied on by the defendant is true and binding on the plaintiff, and, if so, what are its terms, and whether the amount due to the plaintiff from the defendant in accordance with agreement was fully paid, it was found that the agreements were true, but that they did not bind the plaintiffs who executed them, and that the agreements with the dealers did not contain details as to how or on what basis they had to be paid in respect of the incidental charges incurred by them, and that the payments, if any, made by the Government to the plaintiffs were not made on the basis or in pursuance of the agreements.

On issue No. 4 it was found that the orders of the Collector and the Board of Revenue in rejecting a portion of the plaintiff's claim was not done under proper delegation, and that they cannot be considered to have been made in good faith, and that Section 16(2) of the Act is no bar to the entertainment of the plaintiff's claims in a Civil Court. On the first issue relating to the truth of the suit claim, the learned District Munsif had gone into the evidence in detail with regard to each of the items claimed, and granted decrees in each suit as per the tabular statement appended to his judgment.

5. On appeal by the State, the learned Subordinate Judge found that the plaintiffs' claim for damages and losses incurred by them and incidental charges is not maintainable against the Government, and that the Civil Court had no jurisdiction to entertain the suits. He also found that in any case, the plaintiffs are not entitled to claim interest, relying on the decisions in B.N. Rly. Co. Ltd. v. Ruttanji Ramji, AIR 1938 PC 67 and Nanchappa Koundan v. V.I. Mannadiar, AIR 1930 Mad 727. The Subordinate Judge held that the agreements relied on by the defendants are true and binding on the plaintiffs, and in the light of those findings, dismissed all the suits.

6. It is the correctness of this decision that is challenged before me in these second appeals.

7. Sri M. Krishna Rao, the learned counsel for the appellants in all these cases raised the following contentions :

(1) That the relationship between the Government and the dealers Is not that of seller and buyer, but of aprincipal and an agent, and as such, the sums claimed, which are in the nature of indemnity, could be recovered from the Government;

(2) That the jurisdiction of the Civil Court is not taken away by the provisions of the Act, and that the suits are maintainable;

(3) That the agreements are true, but that Clause 8 in Ex. B-15, which is the same in all other cases, cannot be considered to be an undertaking on the part of the dealer; and oven assuming it to be so, it did not prevent the dealers from claiming the suit amounts by way of indemnity;

(4) That the dealers are entitled to interest on the sums found due to them, as the relationship being one of principal and agent, interest could be awarded even according to the decisions cited by the Subordinate Judge; and

(5) That the lower appellate Court erred in disposing of the suits on the preliminary issues, which, according to his submission, are erroneous, and that it may be directed to dispose of the appeals on other issues, in particular with regard to the maintainability of the various heads of claims made in each of the suits.

8. In considering the question whether the civil Court has jurisdiction to decide the suit claim, it is as well that the relevant provisions of the Act are noted.

9. The Act was passed with a view to provide the continuance of powers to control the production, supply, distribution, and trade and commerce in the essential commodities, and to secure their equitable distribution at fair prices. Under Section 4 of the Act, the Central Government was empowered to delegate the power to make orders under Sec, 3 of the Act to the State Government, which was accordingly done. The State Government passed orders like the Madras Food Grains Procurement Order, 1947, and the Madras Food Grains (intensive Procurement Order, 1948, restricting and controlling the sale and distribution of rice and other food stuffs.

Section 2(a) of the Act defined an 'essential commodity' to mean certain classes of commodities, and included under sub-head (i) food stuffs. Under Section 3(1) the Central Government may, for maintaining supplies of any essential commodity or securing their equitable distribution and availability at fair prices, provide for regulating or prohibiting the production, supply and distribution of any essential commodity. Section 3(2) has empowered the Stats Government to issue order under Sub-Section (1) of Section 3 for regulating by licence, permits, or otherwise, the storage, transport, distribution, disposal or consumption of any essential commodity. By Section 6 It is provided that any order made under Section 3 shall have effect notwithstanding anything inconsistent therewith contained in any enactment other than this Act, or any instrument having effect by virtue of any enactment other than this Act.

10. Section 14(1) lays down that:

'(1) No order made in exercise of any power conferred by or under this Act shall be called in question in any Court.'

11. Section 16 enacts thus:

'(1) No suit, prosecution or other legal proceeding shall lie against any person for anything which is in good faith done or intended to be done in pursuance of any order made under Section 3.

2. No suit or other legal proceeding shall lie against the Government for any damage caused or likelyto be caused by anything which is in good faith done or intended to be done in pursuance of any order made under Section 3.'

12. Pursuant to the powers conferred under this Act, and the orders issued thereunder, the Collector ofNellore issued proceedings, Ex. B-69 dated 14-9-1952, appointing the plaintiffs as whole-salers for 1952 in Kanigiri. By that order every wholesaler was requiredto make a security deposit of Rs. 1,000/- and alsoexecute an agreement.

13. The plaintiffs in all these suits executed the agreements, similar to Ex. B-15 exhibited in O. S. No. 287 of 1955. It is described as an agreement executed by an authorised wholesale procuring agent prescribed in B.P. fit. No. 1204/50 dated 22-8-1950 as subsequently amended by the Board by its order dated 16-12-1950. It states that the particular dealer was appointed a dealer for the purchase, storage and distribution of the food grains under the provisions of the Madras Food Grains Procurement Order, 1947/Madras Food Grains (Intensive Procurement) Order, 1950, and that he shall abide by all the provisions prescribed by or under this order, and any directions issued thereunder, and contains a number of Clauses, which I shall advert to later.

14. The contention on behalf of the Government is that Section 16(2) of the Act is an absolute bar to the entertainment of any claim on behalf of the dealers, while, on the other hand, the appellants, contend that Section 16(2) has not taken away altogether the jurisdiction of the civil Courts, that Sub-section (1) provides protection against individuals for any action for anything done by them in good faith in pursuance of any order made under Section 3, while Sub-section (2) imposes a restriction on the right of suit against the Government for any damage caused or likely to be caused by anything which is in good faith done in pursuance of an order made under Section 3.

The appellants say that they are not questioning the order passed under Section 3, nor claiming any damage suffered by them for any act done in pursuance of such an order. On the other hand, they stand by the agreements, like Ex. B-15, executed pursuant to the orders appointing them as wholesalers, which was done under the powers conferred by the Act and the Control Orders. They aver that the relationship created between the Government and themselves is one of principal and agent which carries with it the obligation on the part of the principal to indemnify the agent for all lawful expenses incurred by him, and it is the amounts spent by them in the course of their activity as agents that they wish to recover by way of indemnify against the Government. It is not correct to describe their claims as damages for an act done pursuant to the order.

15. The exact legal relationship created by the agreements may now be considered. In State of Madras (now Andhra Pradesh) v. Jayalakshmi Rice Mill Contractors Co. : AIR1959AP352 a Bench of this Court had to consider a similar question. There, the suits were laid for refund of amounts collected by the Government from the rice millers who were licensees under the Food Procurement Order authorised to procure rice and paddy from the producers, and to sell them in the market at the prices fixed by the Government. The difference between the prices at which they were procured and the prices at which they were directed to be sold was asked to be paid to the Government. Havingdone so, the millers later on filed the suits for their recovery on the ground that the Government was not entitled to those amounts. The effect of the orders and the agreement was stated by the Court thus:

'The Food Grains Control Order, 1947, prohibited any person from engaging in any undertaking involving the purchase, sale, or storage for sale of any of the wholesale quantities of foodgrains, except under and in accordance with a licence issued by the Provincial Government, or an officer authorised by the Government In that behalf. In order to increase the production, the Madras Government decided upon a scheme of bonus to producers, so that there may be an incentive for the food-growers for greater cultivation and production.

Likewise, with regard to the procurement of paddy and the millets, the Government passed orders on 15-6-1946 in exercise of their delegated powers, requiring all occupiers, tenants, lessees, or any one in any other capacity who was cultivating land with paddy or receiving a portion of rent as paddy, to sell the surplus of paddy as would be 'determined by the Collector of the District, or to an agent appointed by him in this behalf. Thus, the sale of surplus paddy or rice to any one other than the Collector or his nominee was prohibited. In terms of that order, the Intensive Procurement of Paddy and Rice Order was also passed. For the due performance of the duties of the procuring agents, certain agreements were taken from them. Under those agreements, the mill-owners were appointed as procuring agents. The arrangement was that procuring agent was to purchase from the persons at particular rates in an area and to sell them at particular rates to particular persons as directed. The licencess were allowed a commission tor their labour, and the Government contended that the licensees were only concerned with the commission that was allowed the them for doing this work on behalf of the Government, and any amount received by reason of the increase in the prices could only go to the Government, because the mill-owners got back the amount they paid for the purchase and also because the increase in price was affected with a view to benefit the producers, but not the licensees.'

16. The contention of the millers in those cases was that the stocks of paddy held by them on the date of the promulgation of the order was their exclusive property purchased with their own funds, stocked at their own risk, and that increase in price would, therefore accrue to them. The relationship evidenced by the transaction was only of a buyer and a seller, and that the clause In the agreement requiring the payment to the Government of the difference in price was beyond the powers exercisable by the Government under the provisions of Section 3 (2) of the Act, as it amounted to a levy of surcharge not warranted by law.

Dealing with the question whether the relationship created was of principal and agent the learned Judges observed at page 49 thus:

'It has to be observed that the relationship of agency is a contractual relationship. As the clauses of the agreement (Ex. B-1) would Indicate, the procurement agent is directed to do an act for another and receive a commission for such act. The mere fact that a person is employed to do an act for another does not make the former an agent of the latter. Further, the fact that the agreement speaks of a procurement agent Is not conclusive evidence of the relationship of principal and agent, for the name 'which the parties may choose to give to a transaction cannot be the sole criterion. The question of agency is always a mixedquestion of law and fact. The function of an agent is to enter into contractual relations with third persons for and on behalf of his principal. An agent does some act suggested mote or less by his discretion and judgment which has the effect of establishing a contractual relationship between his principal and third parties. In this case It would appear that the plaintiffs were employed and were subjected la the direction and control of the Government, There was no scope for the exercise of any discretion on the part of the plaintiffs.' (The words (Ex. B-1) ere mine).

Having regard to the various circumstances governing the regulation of business between the Government and procurement agents, the learned Judges hold that the relationship was not that of a buyer and a seller, and, as they are expected only to carry out the directions of the Government, they did not represent the Government in their dealings with producers, that they merely constituted the medium for the purchase and sale of paddy, and that they were paid remuneration for their services, and that the relationship could not be said to be that of a principal and an agent in the strict sense, but that it was more analogous to that of a master and servant. The argument on behalf of the millers that the amount sought to be recovered by them was described by the Government itself as 'surcharge' and, therefore, that it was a levy or a tax on the price of food stuffs, was rejected on the ground that the nomenclature was not conclusive about the character of a particular demand, and that there was no imposition of a 'levy' or 'tax' and that, inasmuch as the licence was issued on condition that they made over the difference in price, the millers were bound to do so.

It was also held that the Food Procurement Order and the several notifications issued thereafter in that regard were within the scope and power of the State Government under the Act, and that the order impugned fell within Section 3 (2) of the Act, and that there is a residuary power vested in the Government to pass any order in order to carry out the purposes of Section 3 (1) of the Act. The millers were also held to be bound by their agreements, and, as they became entitled to their commission under those agreements, and having got that benefit on the footing that it was valid order, it was not open to them to turn round and say, that, with regard to the liability to make over the difference, the order is invalid. Their Lordships invoked the doctrine of approbate and reprobate laid down in Verschures Creameries, Ltd. v. Hull and Netherlands Steamship Co. Ltd., (1921) 2 KB 608 at p. 612 and the plaintiffs were held estopped by conduct.

17. A detailed reference has been made to this case as it is a decision of a Bench of this Court binding upon me, and the facts are also similar,

18. A perusal may now be made of the several terms of the agreement, Ex. B-15. It describes the dealer as authorised wholesale procuring agent under the Madras Food Grains Procuring Order, 1947--Madras Food Grains (Intensive Procuring) Order, 1950, and he agreed to abide to by all the provisions under the said order, and the directions that may be issued thereunder. He undertook to purchase all the notified food-grains available for purchase in the area 'at the rates prescribed by the Government' to store the notified food-grains purchased by him in proper godowns and be responsible for their safe custody; to sell the stocks of notified food-grains to persons to whom he is directed to sell 'at such rates as may be prescribed'; to remit to the Government the savings effected by the payment of reduced rates to producers or stocks seized under clause 9 of the Madras Food Grains (Intensive Procurement) Order,1950; to remit to the Government money accruing on account of the difference between the old prices and the new enhanced prices on food-grains wherever the increase in price is ordered by the Government; any amount felling due to the Government from the procuring agent during the period and in actual working of the agreement shall be recoverable under Section 52 of the Madras Revenue Recovery Act as arrears of land revenue; to remit to the Government the amount of administrative surcharge including the whole-sale issue price of the foodgrains sold by him, and in default to pay interest at six per cent thereon; and, to deposit with the Collector, Nellore, Rs. 1,000/- or less against the fulfilment of the undertaking which was liable to be forfeited for any breach by him or his agent in failing to comply with or securing the compliance with the aforesaid provisions and directions and duties prescribed from time to time under the procurement order. Clause 8 of the agreement is extracted in full and it is as follows:

'(8). I also understand that the Government do not hold themselves responsible for any loss that might arise in the disposal of stocks on any account.'

19. I looked into Ex. B-1 referred to in the decision : AIR1959AP352 , and I find that the clauses in that agreement are substantially the same as clauses 1 to 3 and 9 of Ex. B-15 in the instant case, except that, in that case the dealer purchased from the producers and delivered the stock of food-stuffs to the Government, while in the instant case, the dealer purchased from the Government and delivered it to the persons nominated by the Government at the price stipulated by them. Otherwise, the course of dealing and the incidents of Irons-action are the same. The said ruling is clear proof that the agreements entered into between the Government and the dealers under Control Orders may be anomalous bearing the characteristics of several wellknown legal relationships, and that the correct determination of the jural relationship depends not upon the nomenclature or words used here and there, but on a consideration of all the terms of the agreement and the substance of the transaction; and, applying these principles, it was held that the relationship was not that of buyer and seller, but only that of master and servant, and 1 am bound by that decision. I accordingly hold that the transactions did not bring about the relationship of buyer and seller, between the dealers and the Government.

20. The rate at which rice was to be purchased is specified and the rate at which it was to be sold was specified, and the difference between the two was obviously the commission which the dealer earns in ths transaction. The fact that the dealer holds himself responsible for the safety of the food stuff that he should sell only at the prices specified by the Government and to the persons nominated, and to account for the difference in prices realised by him, all indicate that the relationship on the other hand is that of principal and agent, or of master and servant, which is analogous to it.

21. Having come to that conclusion, I shall now consider whether the plaintiffs are entitled to claim the suit amounts. The appellants rely on Section 222 of the Indian Contract Act, which is as follows:

'The employer of an agent is bound to indemnify him against the consequences of all lawful acts done by such agent in the exercise of the authority conferred upon him.'

The plaintiff's case is that they were appointed as agents by the Government for the sale of rice, In Kanigiri Taluk,that the residents of that area do not require boiled rice but they were all supplied only boiled rice. They, therefore, complained to the concerned authorities, who directed the return of the stocks. It is alleged by the appellants that they are claiming only the incidental expenses by way of transport charges, handling charges, re-bagging charges, standardizing charges, interest on the capital invested from time to time for receiving the rice allotted and for re-delivery of the same to the Government at Singarayakonda Railway Station, and full indemnification of the shortage in quantity of rice-re-delivery, as they are bound to be indemnified by the Government, as their principal. On the other hand, the learned Government Pleader contended that the various sums claimed represent damages caused pursuant to the order under Section 3 of the Act, which cannot be claimed under Section 16 (2) of the Act. I shall advert to the scope of Section 16 (2) later. But, for the present, I would consider the distinction between the amount claimed by way of indemnity and by way of damages, as it has a bearing also on the question of jurisdiction.

22. In the case of Krishna Swamy Aiyar v. Raghaviah Chetty, 53 Mad LJ 679 : (AIR 1928 Mad 43), Venkatasubba Rao, J., considered this question. In that case, the plaintiff sued the first defendant on the toot of a mortgage executed by him, and the latter (first defendant) applied under Order 5-A of the Madras Original Side Rules by way of third-party procedure against the second defendant, who was already a party to the suit, on the ground that the second defendant was entrusted with a sum of money by a third person with which he was directed to redeem the mortgage on the property. The question therefore arose for consideration, whether the first defendant was entitled to be indemnified against the second defendant in respect of that amount.

The second defendant contended that the Claim of the first defendant was a 'cestui que' trust, who was entitled to the right of indemnity against the trustee, the second defendant. The observations of the learned Judge are very instructive:

'Now, in the case of contracts, right to indemnity must be carefully distinguished from right to damages. A right to indemnity is given by the original contract, whereas a right to damages arises in consequence of the breach of the contract. These two rights are confounded and one reason for the confusion is, that when a contract is broken, indemnity is often found to coincide with the measure of damages. In those cases, whether the right is called right to indemnity or right to damages practically the same result follows, and it is forgotten that these two words express two fundamentally different legal ideas.' The cases in which a right of indemnity was held to exist in English Law were summarised as follows:

(A) It may be created by express contract i.e., where it is given in terms by the contract between the parties;

(B) it may arise by implied contract i.e., by an inference to he drawn from the facts though the parties had not expressed themselves to that effect, and it is stated as an instance, if A requests B to do a thing for him and B, by reason of doing that act, is subjected to some liability, then from A's request to do the act, law implies a contract by him to indemnify B for the loss.

23. In these two cases where the contract is expressor implied, the learned Judge observed that the measureof damages may be the same as the right to Indemnity,and made the observations extracted above. In addition tothose two cases, the learned Judge also mentioned, thefollowing:

'(C) Where the position of the parties is such thateither in law or in equity there is an obligation on the oneparty to indemnify the other;

(D) there is a state of circumstances to which the law attaches a legal or equitable duty to indemnify. The learned Judge observed that cases C and D are generally treated as falling under 'implied contract'; and

(E) a right to indemnity may be given by a statute.'

24. In the instant ease, it is clear that the plaintiffs were employed by the Government to render the services, referred to in the respective agreements, and carry out the other directions issued by the Government. The obligation of the Government in these circumstances falls, to my mind, under the heads B, C and D referred to in the above case. A Bench of the Madras High Court in Kuppan Cheltiar v. Ramaswami Chettiar, AIR 1916 Mad 472 : ILR 1947 Mad 58 also laid down that it is a general principle of law, that when an act is done by one person at the request of another, which act is not in itself manifestly tortious to the knowledge of the person doing it, and such act turns out to be injurious to the rights of a third party, the person doing it is entitled to an indemnity from him who requested that it should be done. For this reliance was placed on the decision of the Privy Council in Eastern Shipping Co. v. Quail Beng Kee, 1924 AC 177 and also the following passage in Chitty's 'Contracts', 19th Edition, page 823 i

'In many cases the law implies a promise to indemnify. If the circumstances are such that the law imposes on any person a legal or equitable duty to indemnify, it will imply a promise on his part to do that which under the circumstances he ought to do.'

25. The legislature in our country has recognised this principle so far as principals and agents are concerned, and enacted Section 222 of the Contract Act referred to above. I am, therefore, of the opinion, that, viewed either as the relationship of principal and agent or master and servant, the Government is under a duty to indemnify the dealers, in this view, I must say that the suit claims cannot be described as claims for damages against the Government, but only a claim to indemnity.

26. I shall now consider the question, whether the jurisdiction of Civil Court is taken away by reason of Section 16 (2) of the Act. The right of the legislature to take away the Jurisdiction of Civil Courts, has been considered in a number of cases, and I shall content myself by referring to a few authoritative pronouncements on the question.

27. In the well-known case of Secretary of State v. Mask and Co., AIR 1940 PC 105 : ILR 1940 Mad 599, Lord Thankerton observed :

'It is settled law that the exclusion of the jurisdiction of the Civil Courts is not to be readily inferred, but that such exclusion must either be explicitly expressed or clearly implied. It is as to well-settled that even if jurisdiction is so excluded, the Civil Courts have jurisdiction to examine into cases where the provisions of the Act have not been complied with, or the statutory tribunal has not acted in conformity with the fundamental principles of judicial procedure.'

A Full Bench of the Madras High Court in Secretary of State v. Allu Jagannadham, AIR 1941 Mad 53C : ILR 1941 Mad 850, following the above case laid down that, to exclude the jurisdiction of the Civil Courts, the exclusion must be explicitly expressed or clearly implied, and where the liability is statutory as opposed io liability under the common law, the party must adopt the remedy given to him by the statute.

28. The Federal Court in Hori Ram Singh v. Emperor, AIR 1939 F C 43, observed thus:

'But when a citizen seeks a civil remedy against a public servant, the Legislature must be presumed 10 have been very cautious in depriving the aggrieved citizens of redress in a Court of Law and any restrictions on such a remedy imposed in the interest of the public servant should not be lightly extended so as unduly to restrict the remedy of the citizen.'

Though the observation is made with regard to the remedy against a public officer, the principle applies even with regard to a remedy against the Government.

29. In Kamaraja Pandia Naicker v. Secretary of State,69 Mad LJ 695 : (AIR 1936 Mad 269), Varadachariar, J.,observed at page 700 thus:

'The ordinary rule is that where a person's liberty or property is interfered with, under colour of statutory powers he has a cause of action which the Civil Courts are bound to entertain unless a bar to such entertainment has beenenacted expressly or at least by necessary implication. Where there is no question of a common law right and an infringement thereof, the position may be different, for in such cases, the ordinary Courts had 'prima facie' no jurisdiction, therefore there is no question of any ouster of their jurisdiction.'

30. A Bench of the Madras High Court reviewed the law on the subject in Province of Madras v. Satya Narayanamurthy, : AIR1952Mad273 . That was a case involving the interpretation of Section 18 of the Madras General Sales Tax Act, before Section 18-A was addded. That Act provided an appeal and also a revision to the Board of Revenue against an order of assessment. Section 18 laid down that no suit shall be instituted againstthe State Government and no suit, prosecution or other proceeding shall be instituted against any officer or servant of the State Government in respect of any act done or purporting to be done under the said Act, unless the suit, prosecutionor other proceeding is instituted within six months from the date of the act complained of.

On a consideration of all the rulings, the learned Judgesobserver):

'The principle therefore is that where a statute specifically excludes the jurisdiction of a Civil Court, or by necessary intendment such exclusion implied, then ordinary Courts cannot have any tight to entertain the suits. But there is another class of cases where the statute recognises that a suit can be filed but puts a restriction upon the filing ofsuch suits or prescribes a period of limitation for the filing of a suit of that nature, or, as a necessary prerequisite to the filing of a suit requires the sanction of an authority. In such matters the Court's jurisdiction is not excluded . . . .. When Section 18 of the Act providesthat no suit shall be instituted against the State unless me same is done within six months from the date of the Act complained of, it necessarily implied-that there is no prohibitionagainst the filing of a suit. The section is couched in the negative form; but if it is paraphrased and expressed in a positive form, the result comes to this that a suit can be instituted against the State Government for an act done or purporting to be done under the Act if the same is done within six months from the date of the act complained against. In our opinion this section comes within the category explained by Varadachariar, J. in 69 Mad L J 695 : (AIR 1936 Mad 269), and the suits are therefore maintainable.'

31. This Court had occasion to consider the same question in Santhanna v. State, 1957-2 Andh W R 260 :

(AIR 1958 Andh Pra 670) and the decision just cited was followed. It was held that the fact that there is under the Taxing statute a right of appeal or revision against the assessment is not by itself sufficient to take away the right of the assessee to have a recourse to a Court of law, having regard to the fact that Civil Courts have jurisdiction to entertain such suits, and also the fact that Sec-lion 18 of the Act was not applicable to such suits, and that the jurisdiction of the Civil Courts is not taken away to entertain suits challenging the legality of an assessment order under the Act. The learned Judges interpreted the words: 'Suits in respect of any act done or purporting to be done under this Act' employed in Section 18 of the Madras General Sates Tax Act as suits for compensation or damages and for coming to that conclusion, reliance was placed on the decision of the Full Bench of the Madras High Court in Panchayat Board, Tiruvottiyuf v. Western India Matches Co., ILR (1939) Mad 566 : 1939-1 Mad LJ 588 : (AIR 1939 Mad 421), which interpreted similar words used in Section 225 of the Local Boards Act.

This observation lends support to the conclusion that the suit or other legal proceedings which are barred under Section 15(2) of the Act are suits and proceedings relating only to compensation and damages against the Government pursuant to the orders made under Section 3, but not to indemnity arising under the agreement entered into pursuant to that order. The decision in 1957-2 Andh WR 260 : (AIR 1958 Andh Pra 670) was followed by another Bench of this Court in Basappa v. Provincial Government of Madras, (now Andhra Pradesh), : AIR1959AP192 and the principle is reiterated that Section 18 of the Sales Tax Act applies only to suits for damages and compensation and cannot be extended to cases for refund of taxes paid to, the Government.

32. Bearing these principles in mind, I shall now examine the language of Section 16 (2) of the Act. It bars 'suits or legal proceedings against the Government for any damage caused ..... in pursuance of an ordermade under Section 3'. As already stated, the sums of money now claimed are claimed by way of indemnity, but not by way of damages. The plaintiffs in these suits are not complaining of any damage or loss sustained by them by reason of anything done under Section 3. Pursuant to the order under Section 3 agreements were entered into creating a legal relationship with certain incidental legal consequences. One of them being a right to indemnity, and a suit to enforce such a right is not taken away from the cognizance of Civil Court by Section 16 (2).

This view of mine Is fortified by the decision in Barada Kanta Das V. State of Assam, AIR 1956 Assam 23. In that case, a Bench of the Assam High Court held that for claiming immunity under Section 16(2), it has got to be shown that the State issued an order or orders under Section 3 of the Act, and where the liability which the plaintiff is seeking to enforce arises from the fact that action was taken in pursuance of such order of the Government, the liability which the plaintiff seeks to enforce is entirely contractual, and Section 16 (2) does not bar the suit. I follow the principle laid down in that case. In view of the cases cited above, the Jurisdiction of the Civil Court, even where restricted by statute, must be specifically excluded or clearly implied, and is not to be readily inferred where the rights of the citizen in respect of his property are affected. It cannot be said that in this case the suit for recovery of indemnity is expressly barred, or has to be clearly implied under the circumstances.

The same conclusion would also follow if we apply the test whether the Act has provided any machinery for adjudication of such claims of the dealers. No such provision has been brought to my notice. The section only bars the claim for damages arising from orders under Section 3 of the Act. In fact, Section 14(1) says that no order made in exercise of any power conferred by or under this Act shall be called in question in any Court. The legislative intendment seems to be that the validity of such an order cannot be called in question in any Civil Court, not can damages alleged to have been suffered by reason of anything done under such an order be claimed. But where the validity of the order is not at all impugned, but, on the other hand, the parties stand by that order and the agreement executed pursuant to it, and their claim is only : for indemnity, those sections cannot be read as constituting a bar. I therefore hold that Section 16 (2) has not taken away the jurisdiction of the Civil Courts to entertain the suit claims.

33. The learned Government Pleader contended that the agreement used the word 'purchase' and therefore the dealers must be deemed to be out-right purchasers. But,as already stated, I cannot accept this contention. He also relies upon Clause (6) of the agreement and says that a provision has been made for recovery of the money due under the agreement. I cannot agree because it only provides for recovery of the amount due to the Government from the procuring agent as arrears of land revenue under Section 52 of the Madras Revenue Recovery Act, but does not constitute a remedy available to the dealer. It is then contended on behalf of the Government that clause (8) of the agreement extracted above operates as a bar to this suit. In the first place, the language does not clearly say that it is an undertaking as in the case of other clauses. Even assuming that it is an undertaking, it says that the Government do not hold themselves responsible for any loss that might arise in the disposal of stocks on the dealers account. The language cannot be understood to apply to a situation like the present one where the claim is for indemnity.

34. The District Munsif held that under Section 16 (2), the suit may not lie against the Government for damages, but as the claim of the plaintiffs against the Government was one for indemnification, it is no bar. The Subordinate Judge, however, differed from that conclusion on the ground that according to him the relationship between the parties is not of principal and agent, but of seller and buyer, which, as already stated, is unsustainable. The reasoning of the Subordinate Judge for not following the decision in AIR 1955 Assam 23, referred to supra is ' equally unsustainable.

He was at pains to demonstrate that the orders of the District Collector in this case were ,made in good faith-- an aspect, which in the view I have taken, is really unnecessary. Instructions Nos. 96 to 100 and 119 as also 138 and 191 of the Civil Supplies Accounts Manual relied on by the Subordinate Judge have hardly any bearing on the determination on the question in issue. They are admittedly instructions issued by the Board of Revenue to afford necessary help and guidance to the officers entrusted with financial administration of the schemes, and to co-ordinate the accounts procedure followed in the various offices comprising Civil Supplies Department, regarding the maintenance of cash and stock accounts and in regard to rendering of accounts and returns to the Board periodically by the Collector and the District Supply Officers, as would be evident from the Introduction to that publication. I, therefore findmyself unable to agree with the conclusion of the learned Subordinate Judge that the jurisdiction of the Civil Courts is ousted under Section 16 (2) of the Act in respect of these suits I am also of the opinion that clause 8 of Ex. B-15 cannot be pressed into service by the Government.

35. I find from Ex. A-7 that the Government were willing to pay only lorry charges incurred in connection with the re-delivery of the unwanted boiled rice at Singarayakonda Railway Station, and that the amount of expenses incurred for re-packing the bags etc., would not be paid, and that if the stock is not returned within two days, the dealer had to sell the boiled rice himself. This communication makes it clear that the Government recognised the justness of the claim for the charges incurred in returning the rice, but there is no understandable reason why it should be confined only to the lorry charges. The fact that if the goods were not returned within two days, the dealer had to sell the stocks, would not justify an inference that the delivery even in the first instance constituted an out-right sale. On the other hand, it indicates that the Government were willing to take back the undisposed of stock, but, if not returned within the time specified, the dealer had to dispose it of himself. This letter also does not establish that the transaction amounted to sale nor negatives the right of the plaintiffs to claim indemnity.

36. There remains the question as to the amounts for which decrees ought to be passed in these cases. The learned Subordinate Judge in the view that he took that the suits are not maintainable, dismissed them. But, since I have come to a contrary conclusion, the appeals will have to be remanded for a decision on the other issues. In particular, the Subordinate Judge will consider the validity of the claim in each suit under the various heads; and allow only those which can be claimed by way of indemnity, but not the rest.

So far as the claim for interest is concerned, they will be entitled to the same. The lower Appellate Court has not rightly understood the principle laid down in AIR 1938 PC 67 and AIR 1930 Mad 727. In both those cases, it was held that the interest could be awarded by Courts in all cases where according to the English practice a Court of Equity would have exercised its jurisdiction to award interest. I have already found that the relationship between the parties is one of principal and agent. Even otherwise, it is a fiduciary relationship as held in : AIR1959AP352 . The Subordinate Judge shall, therefore, award interest on the rate of six per cent from the date on which the amounts became due.

37. In the result, I set aside the decrees in all these appeals and remand them to the Court of the Subordinate judge, Kavali for disposal on other issues in the light of the above findings and observations. The costs in these second appeals shall abide the result in the lower Appellate Court. The court-fee paid shall be refunded. No leave.


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