IMPORTANT POINT
The court established that state instrumentalities must demonstrate fair play in their actions and cannot arbitrarily withhold payments based on erroneous assumptions of responsibility.

JUDGMENT :

Shree Chandrashekhar, A.C.J.

The National Federation of Farmers Procurement, Processing and Retailing Cooperation of India Limited (in short, “NACOF”) has filed this Letters Patent Appeal to challenge the writ Court’s order dated 1st March 2023 passed in WP(C) No. 1339 of 2021.

2. Before the writ Court, the NACOF laid a challenge to the order dated 24th November 2020 passed by the Managing Director of the Jharkhand State Food Corporation (in short, “JSFC”) on the ground that the responsibility for not depositing the Customed Milled Rice (in short, “CMR”) with the Food Corporation of India to the tune of 57892.81 quintals cannot be shifted on it. The FCI simply shrugged off the responsibility of making payment to NACOF on the ground that only towards the CMR quantity received by it the payment shall be released. Besides referring to the communications by the parties, the FCI took the following stand in its counter-affidavit filed before the writ Court:

“37. That in the foregoing facts and circumstances, the decision for disbursement of the outstanding dues claimed by M/s. NACOF has to be taken by the State of Jharkhand. The answering Respondents are bound by the decision of the Government of Jharkhand as M/s. NACOF was an agency appointed by the Government of Jharkhand for procurement work as stated hereinabove.

38. That the answering Respondent has not delayed payment to M/s. NACOF and any payment that has been withheld is due to non-production of essential documents relating to procurement. In these facts and circumstances, the answering Respondent is not liable and the non-payment, if any, is due to clear prohibition and want of documents and clarification of the process to be worked out by the Jharkhand State Food Corporation.”

3. The JSFC also denied its liability to make payment to the NACOF for the shortfall quantity of 57892.81 quintals, taking the following stand in its supplementary counter-affidavit dated 24th November 2022:

“11. That reply to the statement made at paragraph-7 of the writ application as follows:

a. That in reply to the statements made at paragraph-7 (a &b) it is stated that in KMS 2016-17, NACOF has been nominated as agency for procurement of paddy in Santhal Pargana Division and North Chotanagpur Division by the Food, Public Distribution and Consumer Affairs Department by Resolution No.-3846 dated 27.09.2016 and Resolution No.-4458 dated 02.11.2016. Further it is submitted that NACOF was blacklisted due to delay in the payment made to the farmers upon the paddy which has been procured.

b. That in reply to the paragraph-7 (c) it is submitted that NACOF receives administrative fee from the Food Corporation of India for paddy procurement and procurement plan was to be monitored and arranged by NACOF only.

c. That in reply to the paragraph-7 (d) it is stated and submitted that the plan is to be monitored by the committee constituted at the state, district and block levels.

d. That in reply to the paragraph- 7 (e) it is stated that it is the responsibility of NACOF to carry out the work of procurement of paddy and deposit CMR as per clause- 07 of the revised agreement with NACOF.

e. That the statement made at paragraph-7 (f) is matter of record and hence no comments required.

f. That the statement made at paragraph-7 (g) is matters of record and hence no comments required.

g. That in reply to the statement made at paragraph-7 (h) it is submitted that as per clause-7 of the revised agreement with NACOF, it is the responsibility of NACOF to undertake the work of procurement of paddy and deposit of CMR.

h. That the statement made at paragraph-7 (i) is matters of record and hence no comments required.

i. That the statement made at paragraph-7 (j) is matters of record and hence no comments required.

j. That in reply to the statement made at paragraph-7 (k) it is submitted that the farmers whose payment was not made by NACOF, those farmers were paid by the district under the supervision of NACOF.

k. That the stateme