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Andhra Pradesh High Court
Judges : P.CHANDRA REDDY, SRINIVASA CHARI
State of Madras (now A.P.) represented by District - Appellant
Versus
Jayalakshmi Rice Mill Contractors Co - Respondent
Decided On : 03-08-58
FOOD PROCUREMENT - ESSENTIAL SUPPLIES (TEMPORARY POWERS) ACT, 1946 - SECTION 3(2) - FOODGRAINS CONTROL ORDER, 1942 - INTENSIVE PROCUREMENT OF PADDY AND RICE ORDER - RELATIONSHIP BETWEEN GOVERNMENT AND LICENSEES - WHETHER THAT OF PRINCIPAL AND AGENT OR BUYER AND SELLER - WHETHER GOVERNMENT ENTITLED TO RECOVER DIFFERENCE IN PRICE FROM LICENSEES - WHETHER ORDERS PASSED BY GOVERNMENT WERE BEYOND ITS POWERS - WHETHER SUITS MAINTAINABLE IN VIEW OF SECTION 14 OF THE ACT.
Fact of the Case:
The Government of Madras, in exercise of the powers delegated to it under Section 4 of the Essential Supplies (Temporary Powers) Act, 1946, passed various orders to control the production, supply, and distribution of food grains. These orders included the Foodgrains Control Order, 1942, and the Intensive Procurement of Paddy and Rice Order. Under these orders, licenses were granted to mill owners, who were appointed as procuring agents for the Government. The mill owners were required to purchase paddy and rice from producers at specified rates and sell them to the Government or its nominees at prices fixed by the Government. The difference between the purchase price and the sale price was to be paid to the Government. The plaintiffs, who were mill owners and licensees under the said orders, filed suits against the Government claiming the difference in price on the ground that they were entitled to it as they had purchased the paddy and rice with their own funds and had taken the risk of any damage being caused. The Government contended that the mill owners were only entitled to the commission allowed to them for doing the work on behalf of the Government and that the increase in prices was effected with a view to benefit the producers.
Finding of the Court:
The court held that the relationship between the Government and the mill owners was not that of principal and agent, but it was also not that of buyer and seller. It was a case of a person holding a license for doing an act as per the conditions of the license and in accordance with the terms of the agreement entered into by him with the Government. The court further held that the Government was entitled to recover the difference in price from the mill owners as they were appointed licensees under the Food Procurement Order and had to act in accordance with the directions contained in the license. The court also held that the orders passed by the Government were within its powers under Section 3(2) of the Act and that the suits were not maintainable in view of Section 14 of the Act.
Issues: 1. Whether the relationship between the Government and the mill owners was that of principal and agent or buyer and seller? 2. Whether the Government was entitled to recover the difference in price from the mill owners? 3. Whether the orders passed by the Government were beyond its powers? 4. Whether the suits were maintainable in view of Section 14 of the Act?
Ratio Decidendi: 1. The relationship between the Government and the mill owners was not that of principal and agent as the mill owners did not have the discretion to act on their own judgment and were merely carrying out the directions of the Government. 2. The Government was entitled to recover the difference in price from the mill owners as they were appointed licensees under the Food Procurement Order and had to act in accordance with the directions contained in the license. 3. The orders passed by the Government were within its powers under Section 3(2) of the Act as they were necessary to control the production, supply, and distribution of food grains. 4. The suits were not maintainable in view of Section 14 of the Act, which barred the jurisdiction of courts to entertain any suit or proceeding in respect of any order made under the Act.
Final Decision: The appeals filed on behalf of the State were allowed and the appeals filed on behalf of the plaintiffs were dismissed. The suits of all the plaintiffs were dismissed with costs.
( 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
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