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State of Madras (Now Andhra Pradesh) Represented by District Collector West Godavari, Eluru and ors. Vs. Jayalakshmi Rice Mill Contractors Co. and ors. - Court Judgment

LegalCrystal Citation
SubjectContract
CourtAndhra Pradesh High Court
Decided On
Case NumberAppeal Nos. 29, 30, 33, 34, 45, 54, 62, 201, 586, 631, 644, 646 to 650, 700, 701, 703, 704, 747, 764
Judge
Reported inAIR1959AP352
ActsContract Act, 1872 - Sections 69, 70 and 182; Trusts Act, 1882 - Sections 88 and 94; Constitution of India - Article 265; Essential Supplies (Temporary Powers) Act, 1946 - Sections 3, 3(2) and 14; Madras Food Procurement Order, 1946; Evidence Act, 1872 - Sections 115
AppellantState of Madras (Now Andhra Pradesh) Represented by District Collector West Godavari, Eluru and ors.
RespondentJayalakshmi Rice Mill Contractors Co. and ors.
Appellant AdvocateGovernment Pleader and ;M.M. Ramachandra Raju, Adv.
Respondent AdvocateG. Venkatrama Sastri and ;C.V. Kanyaka Prasad, Advs.
Excerpt:
contract - refund of money - sections 69, 70 and 182 of contract act, 1872, sections 88 and 94 of trusts act, 1882, article 265 of constitution of india, sections 3 and 14 of essentials supplies (temporary powers) act, 1946 and madras food procurement order, 1946 - plaintiff got license to procure rice and paddy from producers and to sell them at government fixed prices - licensees entitled to remuneration for services rendered but profit earned had to be accredited to government - millers handed over profits to government - suit filed to reclaim profit from government - contention that millers alone were entitled to profits - court observed granting of license does not make licensees agents of government within meaning of section 182 - government had power to direct licensees as to how.....srinivasachari, j.1. identical questions are involved in these batches of appeals and so they were heard together and are disposed of by a common judgment.2. the claim in all those cases is for the refund of amounts collected by the government from the rice millers in the districts of east godavari. west godavari and krishna, who were licensees under the food procurement order, authorised to procure rice and paddy from, the producers to sell them in the market at prices fixed by the government. the difference between the prices at which they were purchased and the prices at which they were directed to be sold was asked to be made over to the government.the various millers made over the difference in compliance with the order of the government and later on filed suits for the recovery of.....
Judgment:

Srinivasachari, J.

1. Identical questions are involved in these batches of appeals and so they were heard together and are disposed of by a common judgment.

2. The claim in all those cases is for the refund of amounts collected by the Government from the rice millers in the Districts of East Godavari. West Godavari and Krishna, who were licensees under the Food Procurement Order, authorised to procure rice and paddy from, the producers to sell them in the market at prices fixed by the Government. The difference between the prices at which they were purchased and the prices at which they were directed to be sold was asked to be made over to the Government.

The various millers made over the difference in compliance with the order of the Government and later on filed suits for the recovery of those amounts on the ground that they alone were entitled to the difference in the price and the Government was not entitled to recover the same from them.

These transactions relate to a period when immediately after the war, food stuffs had to be controlled for the proper and even distribution of food throughout India. It necessitated the Government to have resort to passing 'Control Orders' thereby restricting and controlling the sale of paddy and rice. The policy of laissez faire received as it were! a set back during this time.

The Indian Legislature passed the Essential Supplies (Temporary Powers) Act, XXIV of 1949 with a view to maintain and increase the supplies of essential commodities and have them distributed equitably at fair prices. Under Section 3 (1) of the Act, the Central Government may, for the implementation of the above object by a notified order, provide for regulating or prohibiting the production and supply of any essential commodity.

Section 3 (2) of the above Act empowered the Government to regulate the production and supply of essential commodities by licences and permits to control the prices thereof. It also empowered the Government to require any person holding stock of an essential commodity to sell the whole or a specified pact of the stock at such prices and to such persons, or class of persons as might be specified in the Order. These powers could be delegated to the Provincial Government under Section 4 of the Act. Accordingly under an order dated 12-11-1946 the powers were delegated to the Madras Government.

3. The first order that was promulgated by the Provincial Government under the powers vested in it under Section 4 of the Act was the Foodgrains Control Order of 1942 which prohibited any person from engaging in any undertaking involving the purchase, sale or storage, for sale any wholesale quantities of any foodgrains except under and in accordance with the licence issued by the Provincial Government or by an Officer authorised by the Government in this behalf.

Under 'this Order a licence was granted and the licensee was expected to carry on the business in accordance with the instructions and directions embodied in the licence. Clause 9 of the licence prescribed that a licensee should comply with any instruction that might be given to him by the Government in regard to the purchase, sale or storage for sale of food grains.

4. The food situation was deteriorating in these areas month by month. The Madras Government had also to take into account the growing discontent among the growers as the producers felt that the procurement prices in these areas were relatively low in the face of the prevailing high prices, and over the scarcity of all essential commodities other than foodgrains. But the Madras Government had to conform to the general price policy of the Central Government and refrain from increasing prices in foodgrains in the Provinces.

It, therefore, decided upon a scheme of bonus to producers in order to give an incentive to the producers to attempt to have greater production by intensive production. The idea was that the food grower ought to he encouraged for greater cultivation and greater production. By this means the Government intended to meet the clamour for increased production.

The Government, therefore, announced in July, 1947, a scheme sanctioning the grant of a bonus at Re. 1 per maund of paddy and Rs. 1-8-0 per maund of rice for all deliveries made from 1-12-1946 to 6-12-1947. This bonus, was ordered to be paid half in cash and half in the shape of bonus coupons which the ryots could exchange for groundnut cakes and fertilisers.

The increase in the price was passed on to the consumer. The new prices were to take effect from 7th Dec. 1947. In order to see that the producers got the increased price, procurement agents were appointed in every procurement area. This had the desired effect in that it gave a stimulus to intensive cultivation and increased production. Similarly the Government decided upon the payment of bonus on all millets during the months of September and October, 1947. This increase was also passed on to the consumer and the amount realised on account of this increase was paid over to the ryots.

5. Likewise, with regard to the procurement of paddy and millets the Government passed orders in exercise of its delegated powers. It passed an order on 15th June, 1946, (G.O. Ms. 467, Food), which directed that any occupier, tenant or lessee or anyone in any other capacity was cultivating land with paddy or who was receiving any portion of such paddy as rent or otherwise, should sell the surplus of such paddy as may be determined by the Collector alter each harvest to the District Collector or an agent appointed by him in this behalf. There was a procedure laid down for determining as to what would be regarded as surplus. This, therefore, prohibited the sale of surplus paddy or rice to any person other than the Collector or his nominee. Later on, in terms of the aforesaid order, an Intensive Procurement of Paddy and Rice Order was also passed. For the duo performance of the duties of procuring agents, certain agreements were taken from them.

Under these agreements the mill owner who was the procuring agent for the Government undertook to sell the stocks of paddy, rice or millets with him only to the persons directed by the Collector and also undertook to sell it at such rates as might he prescribed by the Collector from time to time. He also deposited a certain amount with the District Supply Officer for the due performance of the obligations undertaken by him. Therefore, the arrangement was that he was to purchase them from persons at particular rates in an area and bound to sell them at particular rates to particular persons as directed.

6. It may be mentioned that these licensees were allowed a commission for their labour. It is the case of the Government that the mill owners were only concerned with the commission that was allowed to 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 firstly because the mill owners got back the amount that they paid for the purchase and, therefore, not entitled to the excess amount, and secondly because the increase in prices was effected with a view to benefit the producers.

7. The plaintiffs contend that the stocks of paddy held by them on the date of the promulgation of the order was their exclusive property having been purchased with their own funds and having been stocked at their own risk, the increase in the price of the stock of paddy and rice would accrue to them alone. They further averred that in these transactions the relationship as between themselves and the Government was only that of a buyer and seller.

It was also contended that the order of the Government for the payment to them of the difference in price was beyond the powers exercisable by them under the provisions of Section 3(2) of the Act XXIV of 1946. It amounted to a levy of a surcharge which was not warranted by law. On these pleadings the following issues were raised:--

(1) Whether the stocks held by the plaintiff on the evening of 20-11-1948 (6-12-1947 in the case of O. S. No. 78/1950) are the exclusive property of the Plaintiffs?

(2) Whether the plaintiffs are agents of the Government in respect of the sale of paddy and rice?

(3) Whether the plaintiffs are entitled to the benefit of the increase in the price of the paddy and rice under the notification dated 19-11-1948 (6-12-1947 in the case of O. S. No. 78/1950)?

(4) Whether the order of the Government directing the collection of surcharge comes under the provisions of Section 3 of the Essential Supplies (Temporary Powers) Act, 1946?

(5) Whether the order of the Government directing levy of the surcharge is illegal and ultra vires and contrary to the terms of the licence and the agreement?

(6) Whether under Section 16 of the Essential Supplies (Temporary POWERS) Act, the plaintiffs arc not entitled to call in question the orders passed under the said Act, in a Court of law?

(7) To what relief is the plaintiff entitled?

8. Evidence in the case consisted mainly of documents. Naturally in a case of this kind oral evidence would be of little value. The Subordinate Judge of Eluru first posed the question before him as to whether the relationship between the Government on the one hand and the mill owners on the other was that of a buyer and a seller or that of a principal and agent, and on a consideration of the various documents in the case, he held that the mill owners, the plaintiffs, could not be regarded as the agents of the Government.

The consequence of such a finding was that inasmuch as the stocks of paddy and rice held by these mill owners were their own property, the learned Subordinate Judge came to the conclusion that the) excess received by reason of the increase in the price would go to the millers alone as they were the owners of the Rice and paddy.

Coming to that conclusion he held that the plaintiffs in the suits before him, were entitled to a decree for the amount claimed by them together with interest at 6 per cent per annum till realisation. In the alternative, on the footing that the sales by the mill owners were to be regarded as sales in compliance with an order of the Government, the learned Judge held that these orders issued by the Government could not be sustained because they were not notified orders.

9. With regard to the suits filed in the Sub-Court, East Godavari, also the learned Judge held that the relationship between the plaintiffs and the Government was that of a buyer and seller and as such the Government was not entitled to the difference between the purchase price and the sale price. As regards the question as to whether the Government had the power under Section 3(2) of Act 24 of 1946 to control the prices etc., he held that there was no provision in the aforesaid section enabling the Government to claim the difference in prices whenever the price was increased by the Government.

He also held that the order of the Government directing the collection of the surcharge (difference between the purchase price and the sale price) was not warranted under Section 3 of the Act. He held that this amounted to a levy of a surcharge and therefore was illegal and ultra vires. As a result of this finding the Subordinate Judge held that the amounts claimed by the plaintiffs from the Government were due to them. He, therefore, decreed the suits with costs and interest at 6 per cent.

While this was the view taken by the Subordinate Judge of West Godavari and the Subordinate Judge of East Godavari, the Subordinate Judge of Krishna at Masulipatam took a different view, According to him the directions issued by the Government under the licence granted to the food procurement agents viz., the plaintiffs, were within the competence of the Government and that, therefore, the orders were legal and valid in law.

He further held that if under the terms of the licence the procurement agent had merely to carry out the directions of the Government, the amount received by the sale of the paddy at a higher price should go to the Government for disbursement as they like and not to the licensee. In the result he dismissed the suits. We have therefore before u; appeals on behalf of the State against the decreeing of the suit, and appeals by the parties against the dismissal.

10. According to the plaintiffs the relationship between themselves and the Government was only that of a seller and buyer and not that of principal and agent as alleged by the Government and inasmuch as the relationship was not that of an agent, the difference in the price accrued to them, because they paid the price of the food stuffs, they stocked them in their godowns and took the risk of any damage being caused.

Under those circumstances the excess price, oven if it was got by reason of the Government increasing the price was only available to them and not to the Government. On behalf of the State it was very strongly urged by the learned Government Pleader that the position of these procurement agents could not be anything else other than that of an agent. For this purpose the learned Government Pleader relied upon the terms of the agreement executed by the procurement agents.

A form of such agreement is to be found in Ex. 13-1 in appeal No. 29/53. The heading reads as an agreement executed by procurement agent. The learned Government Pleader argued that the various undertakings mentioned in the said agreement such as to purchased paddy, rice etc., at the rates prescribed by the Commissioner of Civil Supplies or any officer authorised by him, the undertaking to store paddy and to be responsible for its safe custody and the further undertaking to sell the paddy and rice stored thus, only to the Collector or his nominee at the prices fixed by the Government, clearly indicated that the plaintiffs were only filling the role of an agent so far as the Government was concerned, It was also urged that the fact that the plaintiffs paid the purchase) price thereof initially did not matter.

11. It has to be observed that the relationship of an agency is a contractual relationship. As the clauses of the agreement 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 mixed question of law and fact. The function of an agent is to enter into contract relations with third persons for and on behalf of his principal. An agent does some act suggested more 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 to (he direction and control of the Government. There was no scope for the exercise of any discre:ion on the part of the plaintiffs.

12. Agent has been defined in the Indian Contract Act, as a person employed to do any act for another or to represent another in dealings with third persons. the first portion of the definition would appear to lend support to the view that in this case' also inasmuch, as the plaintiffs, the licensees, were employed to procure paddy and rice from the producers for the Government and sell them, they could be said to satisfy the requirement of an 'agent' under Section 182 of the Contract Act and could be styled agents.

But it has to be observed that the other factors which generally are to be found to constitute 'agency' are absent here. The agent, for example, acts on his own judgment, of course, within the limits of his authority. In the case of the licensees, the plaintiffs, there is no scope for the; exercise of their discretion or their judgment. The plaintiffs merely acted as they are directed to do.

They did not represent the Government in their dealings with the producers. They were merely constituted the medium for the purchase and sale of paddy and they were paid remuneration for their services. The fact that they were paid commission for their work would not by itself be enough to constitute the relationship of agency vide Balthazar and Son v. E. M. Abowath (A Firm) AIR 1919 P.C. 166. Taking into consideration the various circumstances governing the regulation of business as between the Government and the procurement agents, it could not be said that in the strict definition of the word, the relationship of principal and agent could be said to have been established, for all the ingredients necessary to constitute an agency ' are hot to be found herein.

The Supreme Court had occasion to point out the difference between an agent as defined in Section 182, Indian Contract Act and a servant in the case of Lakshminarayan Ramgopal v. Hyderabad Government, : [1954]25ITR449(SC) . Their Lordships observed :

'A principal has the right to direct what work the agent has to do, but a master has the further right to direct how the work is to be done.'

Here the Government has the power to give directions to the licensees as to how and to whom the grain should be sold. This may be said to be more analogous to that of a master rather than of a principal.

13. While therefore v/e hold that the relationship between the Government and the plaintiffs cannot be said to be that of a buyer and seller, we are of the opinion that there is no relationship of principal and agent either. It is a case of a person holding a licence for doing an act as per the conditions of the licence and in accordance with the terms of the agreement entered into by him with the Government.

14. It was next argued that if there was no relationship of principal and agent established, the Government could not recover the difference in price realised, consequent upon the enhancement of the price. The contention was that the stocks of paddy were paid for by the plaintiffs and, if by the Bale of such paddy any profit was made, such profit should enure for the benefit of the, plaintiffs alone. This argument, it must he said, is founded upon an entirely erroneous basis.

It may he pointed out that the sale of the stock of paddy or rice at a higher price was not a free and voluntary sale in the open market by the plaintiffs. The prices were not increased at the instance of the plaintiffs. They were enabled to sell at a higher price because of the order of Government In the absence of any such order by the Government they could not have sold the goods at a higher price to enable them to earn a profit. It can never be regarded as a profit which accrued to them by reason of a rise in the market price of the commodities.

It is futile to contend that they became entitled to the difference in the price, in the face of the express condition to sell at a higher price and make it over. It explicitly says : 'Sell it at a particular higher price and pass on the difference to the Government.' The appointment of the plaintiffs as licensees under the Food Procurement Order has to be considered in the light of the policy of the Government underlying the appointment of procurement agents.

The memorandum issued by the Government explaining their policy in relation to the price of food grains, clearly indicates that in view of the growing discontent among the producers of food grains that the procurement prices fixed were relatively low, having regard to the prevailing high prices of commodities other than food grains, the Government decided upon granting a bonus to every producer as a set off against the disparity between the prices at which he is paid for his food grains and the prevailing high prices of other commodities. Vide Ex. B-14, p. 24 in Documents in A.S. 956/1953.

Decidedly the increase in price was made to effectuate this policy. No part of it was to go to the Miller. The fact that there were persistent and repeated representations from the producers saying that a substantial increase in the procurement price was necessary, would be evident from G. O. No. 1310 dated 6-12-19-17 Vide Ex. B-12 (P. 78 in A.S. No. 29 of 1953).

The Government wanted to balance the equities between the producer and the consumer. This was done in the interests of National economy. Under these circumstances, it could not be urged that the increase in the price was intended for the benefit of the millers. The millers had no place in this. Their commission was left untouched.

15. The Subordinate Judge, West Godavary, fell into a grave error in confusing the position of a dealer under the Grain Purchase Order and that of a licensee under the Food Procurement Order. In so doing he relied upon a wrong document as the agreement governing the liability of the plaintiffs, lie relied upon Ex. A-2 in the case while he should have referred to Ex. B-l.

Relying upon an irrelevant document the Subordinate Judge argues that the form of agreement does not empower the Grain Purchasing Officer to issue a direction claiming the difference in price whenever the prices were increased by the Government. The argument and the reasoning of the learned Judge is absolutely fallacious. The learned Judge has relied upon certain decisions, in order to come to the conclusion that the plaintiffs could not be regarded as agents of the Government.

These decisions are entirely irrelevant and do not touch the point. Suffice it to refer to one of the cases relied upon by the lower Court i.e., Hope Prudhomme and Co. v. Hamel and Horley AIR 1925 PC 161. There the question related to the fact as to whether a particular person could be regarded as an agent. Their Lordships observed that in many trades particularly in the motor car trade the so called agent is merely a 'favoured and favouring buyer' who undertakes to do his best to find a market for the manufacturer's stock, who is given some special advantage. This case bears no analogy to the case now under consideration before us. Likewise is the case of Venkatasubbayya v. Satyanarayana Murty, 1940-1 Mad LJ 465 : (AIR 1940 Mad 489).

There the learned Judge, Patanjali Sastri, J. relying upon a passage in Bowstead On Agency explained the position that where a person buys goods on behalf of another the property in the goods does not pass to the latter until the price for the goods has been paid bv the latter. It therefore follows that the relationship of the plaintiffs qua the Government could never be likened to that of a buyer and seller.

If the relationship inter se between the Government and the plaintiffs is not that of principal and agent nor could it be regarded as that of a buyer and seller, the question arises as to whether the Government is not entitled to recover the difference in price from the plaintiffs, the millers. The plaintiffs in this case, as has been observed, are appointed to act for the Government and under a licence granted to them to carry out the directions contained in the licence.

If such is the position, then a fiduciary relationship would be deemed to have been established. They owe to the Government a duty as fully fiduciary as the duty of a servant to his master or of an agent to his principal although strictly speaking the relationship is not that of an agent or servant, and if there is a fiduciary relationship the profits and advantages gained would go for the benefit of the Government because of their having been appointed licensees under, the Food Procurement Order. We are fortified in this view of ours by a decision of the House of Lords in Reading v. Attorney General, 1951 AC 507.

That was a case where a sergeant in the Army on active service abroad consented on several occasions to accompany civilian lorries transporting illicit spirits to specified destinations. He wore a military uniform to avoid inspection by the Police and for his services he received 20,000. The military authorities took possession of the amount, tried him by Court Martial finding him to be in possession of large sums of money and convicted him. After his release from prison, he tried to recover the amount.

Viscount Jowitt the Lord Chancellor and Lord Porter held that as it was the official position held by the soldier, that enabled him to earn the money by its use, it gave the Crown, his master the right to the money as money had and received even though it was earned by a criminal act and even though the Crown suffered no loss. The law Lords further held that the Crown was entitled to the money on another ground also viz., the fiduciary relationship that existed between the soldier and the Crown.

16. The right to recover money from a person who stands in a fiduciary relationship and which money has been received for and on behalf of another person, has been regarded as an equitable right.

17. In this connection we may also advert to a decision of the Madras High Court in Municipal Council Dindigul v. Bombay Company Ltd. ILR 52 Mad. 207 : (AIR 1929 Mad 409). One of the questions raised in that case was whether the respondent company who paid the company's tax to the appellant, the Municipal Council, under protest could recover the amount. Therein Courts Trotter C. J., observed that in the Courts in British India, an action for money had and received may he treated, as an action founded on equity binding on the conscience of the recipient of the money which is shown not to be his. The remedy being an equitable one is enforceable. The learned Chief Justice further observed :

'There is no necessity to find an actual contract or to impute the function of a contract, in asmuch as every Court can treat the question as one not merely of contract but of trust fund where necessary.'

Lord Haldane in John v. Dodwell and Co. 1918 AC 563 : (AIR 3918 PC 241) ruled that law and equity have been administered by the same Courts as aspects of a single system in Ceylon, and therefore an action analogous to that for money had and receiveed was maintainable in all cases. Coutts Trotter C. J., in the aforementioned case ILR 52 Mad 207 : (AIR 1929 Mad 409) thought that those observations of Lord Haldane not merely applied to Ceylon but to British India as well and, therefore, so far as British India was concerned, there was no divergence between equitable and legal remedies.

18. The question could be looked at from another point of view. Are the plaintiffs entitled to retain the difference in the price to which they could not be said to have become entitled, having regard to the terms of the licence under which they acted. They have benefited themselves unjustly. This unjust benefit is spoken of as 'unjust enrichment'. Dealing with cases of this kind Lord Wright in Firbosa Spolka Akoyjna v. Fairbairn Lawson Combe Barbour Ltd. 1942-2 All ER 122 stated as follows :

'It is clear that any civilised system of law is bound to provide remedies for cases of what has been called unjust enrichment or unjust benefit derived from another which it is against conscience that he should keep.'

The principle underlying this is to quote the words of Lord Mansfield in Moses v. Macferlau, 1760-2 Burr. 1005 'the gist of this kind of action is that the defendant upon the circumstances of the case is obliged by the ties of natural justice end equity to refund the money.' This principle has been very tersely put by Lord Atkin in United Australia Ltd. v. Barclays Bank Ltd., 1940-4 All ER 20 at p. 27:

'The man has my money which I have not delivered to him with any real intention of passing to him the property. I sue him because he has the actual property taken.....These fantastic resemblances of contracts invented in order to meet requirements of the law as to forms of action which have not disappeared should not in these days be allowed to affect actual rights.'

19. The learned counsel appearing for the plaintiffs, the procuring agents invited our attention to a decision of the House of Lords in Attorney General v. Wilts United Dairies Ltd. (1922) 127 LT 822 and argued that the instant case was exactly similar to the above case where the Ministry of Food was held to be not entitled to collect the fee from the company who had been granted licence to purchase milk and were asked to pay the Food Controller 2d. for each gallon purchased under the licence. That case is clearly distinguishable front the case before us. In the English case the payment of 2d. for every gallon was a condition for granting tha licence for Lord Atkin's judgment makes it clear. Lord Atkin observed as follows :

'The question of law that arises is whether the food controller, had any legal authority for requiring the defendants to agree to pay the sums in question as a condition of the licence required.'

There is no such thing in our case. The amount sought to be realised from the plaintiffs is not by way of a fee, levy or charge but only the difference in the price recovered by them on account of the enhancement of the price. The question in the English case clearly was whether the levy of 2d. was authorised by statute. The Law Lords held that there was no sanction of Parliament for this levy and so could not be imposed. That clearly held that it was a tax that was being imposed. That case can have no relevancy whatsoever.

20. Learned counsel called in aid a decision of the Madras High Court in Tata Iron and Steel Co. v. State of Madras, 1955-1 Mad LJ 346 and urged that there was no obligation to pay to the Government an amount that he collected unlawfully. That case can never apply to the facts of this case. While construing Section 3 together with Section 8(b) of the Madras General Sales-tax Act the learned Judges held that what was expected of a Registered dealer under the Sales-tax Act was to collect the tax that is leviable lawfully on the purchases, and to make over the tax thus collected to the Government. The Act envisaged the collection of a tax as enjoined by the Act and not any other amount, and this amount the dealer is expected to make over to the Government and not any amount that he might have recovered illegally. In the instant case there is no levy of a tax and much less an illegal tax. So that case can have no bearing.

21. A rather unsuccessful attempt was made to say that the amount sought to be realised was a levy or tax because the Government itself called it as 'surcharge'. It was argued that consciously the Government was trying to realise the amount as a levy on the price of food-stuffs. This argument must be rejected straightway. The nomenclature cannot be conclusive about the character of a particular demand. There was no imposition of a 'levy' or 'tax'.

That the licence that was granted to them was on condition that they made over the difference in price, would be evident from G.O. No. 1048, Food Department, dated 19-11-1948, Ex. B-19 (P. 116) in A.S. 29/53. It says : 'If the stock-holders do not agree in writing to pay the difference in price duo to increase in price sanctioned by the Government the stocks in question should be seized and sold to other merchants'. This would make it abundantly clear that it was well understood by the licensees that they had to make over the difference.

The fact that they released the stocks and sold meant that the procurement agents agreed to pay the difference in price. The Court could very well presume their consent because, otherwise the stocks would not have been released by them, Having considered this aspect of the case we will now consider as to whether the Government is not entitled to recover the amounts having regard to the terms of the licence granted by it. It was argued by the learned counsel for the plaintiffs that the food procurement order and the several notifications issued thereafter in that regard were beyond the scope and power of the Government under the Essential Supplies (Temporary Powers) Act.

It must be stated straightway that the order impugned clearly falls under Section 3(2) of the Act. Section 3(1) of the Act gives the Central Government the power to promulgate orders for securing, maintaining, increasing the supplies of any essential commodity or to regulate and prohibit the production, supply and distribution thereof. While this is, the power vested in the Government under sub-section (1) of Section 3 of the Act. sub-section (2) gives wider powers for it reads as under :

'Without prejudice to the generality of the powers conferred by sub-section (1) an order made thereunder may provide

(c) for controlling the prices at which any essential commodity may be bought or sold

(d) for regulating the licences, permits or otherwise the storage, transport, distribution, disposal, acquisition, use or consumption.

(e) ......

(f) for requiring any person holding stock of an essential commodity to sell the whole or A specified part of the stock at such prices and to such persons or class of persons or in such circumstances as may be specified in the order.'

Clause (f) extracted above clearly gives the power to the Government to direct the stock-holders of rice and paddy to sell them to persons designated by the Government. Therefore, there could be said to be no want of authority. A direction in the manner mentioned in the licence could also be said to fall within the ambit of the power vested in the Government. The Supreme Court in the case of Santosh Kumar v. The State : 1951CriLJ757 dealing with the scope of the powers, under Section 3(1) and (2) of the Act ruled that the power to provide for regulating or prohibiting production, distribution and supply, conferred on an executive body may well include the power to regulate, prohibit by issuing directions to a particular producer or dealer or by requiring any specific act to be done or forborne in regard to production etc. It authorises the making of ad hoc or special orders with respect to any particular person or thing. In short 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.

22. The power enabling the making of orders, requiring that the goods be sold to specitied persons and for that purpose issuing a licence is not objectionable at all. The direction in the licence to sell and pay (he difference must be regarded as tailing within the scope of the power. Vide Khetsidas v. Pratapmull Rameshwar, AIR 1946 Cal 197.

23. A question of estoppel by conduct would also arise in so far as the plaintiffs are concerned. The plaintiffs were allowed to procure the paddy and rice from the producers and growers on the strength of the licence granted to them and it is by virtue of the licence that they secured the stocks and subsequently sold them, as per directions of the Government. They agreed to purchase and sell, in other words to deal in food grains subject to the conditions and terms imposed upon them in their licences and in the agreements executed by them.

They cannot go behind the averment in the plaint saying that under a contract with the Government they were bound to sell paddy or rice to local grain purchasing officer or to such other person directed by the said officer. The plaintiffs were purchasing and selling paddy and rice in accordance with the said agreement. They became entitled to their fixed commission on the quantity of the stock bought and sold. Having got a benefit under an order on the footing that it was a valid order is it open to them to say that that portion of the order asking them to make over the difference in price is invalid and could not be sustained. They cannot.

This is based on the doctrine of 'approbate and reporbate. To quote the words of Scrutton Lord Justice,

'A person cannot say at one time that a transaction is valid and thereby obtain some advantage to which he could only be entitled on the footing that it is valid and then turn round and say it is void for the purpose of securing some other advantage. That is to approbate and reprobate the transaction.'

Verschures Creameries Ltd. v. Hull and Netherlands Steam Ship Co., 1921-2 KB 608 at p. 612.

24. The plaintiffs have failed to show how the increase in prices consequent on the orders enhancing the prices was one which accrued to the benefit of the plaintiffs alone. Issue No. 3 which is as follows : 'whether the plaintiffs are entitled to the benefit of the increase in the price of paddy and rice under the Notification dated 19-11-1948' throws the onus on the plaintiffs which, in our opinion, the plaintiffs have not discharged.

25. It was raised in the written statement and argued before us on behalf of the State that if the order was one under Section 3(2) read with Section 4 of the Act, and the granting of the licences was in pursuance thereof, such an order could not be called in question in any Court and Section 14 of the Act operated as a bar to the filing of a suit. In the view that we have taken, that the impugned I order was in exercise of the power conferred by the Act we feel that Section 14 would come into operation and the suits filed must be held to be not maintainable. As the whole case was argued and the arguments did not confine to the preliminary point of the maintainability of the suit, a finding on this issue is not quite necessary.

26. We cannot lose sight of the fact that some of the plaintiffs in appeal Suits Nos. 344, 351, 354, 644. 646, 649, 650, 766 and 767 in the suits filed before the Subordinate Judge, Krishna, are person whe agreed in writing to pay the difference in prices. This fact was brought to our notice by the learned Government Pleader and this is borne out by the relevant exhibits in the case. The learned counsel appearing for those plaintiffs could not controvert the fact. Their appeals will necessarily have to be dismissed.

27. After giving the matters raised before us cur careful considerations, we are of the opinion that the appeals filed on behalf of the State should be allowed and the appeals filed on behalf of the plaintiffs in the various suits (Krishna Group) should be dismissed.

28. The result would be that the suits of allthe plaintiffs would be dismissed. As regards costswe direct that so far as those plaintiffs in the suitsfiled in the Sub-Court, Krishna, are concerned whoagreed to pay the difference, they be made liableto pay the full advocate's fee in the lower Court andin this Court while those plaintiffs in the sub-CourtKrishna who did not give their consent to payingthe difference are concerned, they would be liableto pay 3/4 of the advocate's fee payable In thisCourt and in the Court below. The plaintiffs in thesuits in the various Courts in the Districts of Eastand West Godavari will pay the costs of the Government here and in the Court below. This judgmentwill govern all the appeals.


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