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SUPREME COURT OF INDIA
S.A. BOBDE, CJI., B.R. GAVAI, SURYA KANT, JJ.
Food Corporation of India and Another – Appellants
Versus
M/s. V.K. Traders and Others – Respondent
Civil Appeal No. 2070, 2071, 2072, 2073, 2074, 2075, 2076 of 2020 [Arising Out of Special Leave Petition(C)No. 2522, 3125, 3127, 3134, 3273, 3349, 3405 of 2014]
Decided On : 06-03-2020
Registration Act, 1908 – Section 17(1)(d) – Transfer of possessory rights of blacklisted rice mills – Entitlement to allocation of paddy for custom milling – No reliance can be placed upon lease deeds allegedly executed between defaulting rice miller(s) and respondent(s), as they do not satisfy statutory requirements of Section 17(1)(d) of Registration Act, 1908 – Lease-deeds cannot be accepted as evidence of valid transfer of possessory rights – Even in a case where a proprietorship/partnership firm has been in existence for long and took over a mill in default only onward basis, no right to seek allocation of paddy can be claimed by it unless liabilities arising out of previous bilateral agreement are satisfied – High Court erred gravely in setting aside orders through which FCI declined to allocate paddy to new lessees of defaulting rice mills – Orders passed by Single Judge as well as Division Bench of High Court set aside – Writ petitions filed by respondent-lessees dismissed, however, with liberty to pay dues with penalty/interest of original rice millers and thereafter on production of ‘No Dues Certificate’ seek allocation of paddy for custom milling in accordance with policy of FCI. (Paras 12, 13 and 14)
Facts of the Case:
Present appeals have arisen from an order dated 21.10.2013 passed by a Division Bench of the Punjab and Haryana High Court whereby a batch of letters patent appeals filed by the Food Corporation of India (FCI) challenging Single Judge’s order of 15.03.2012 was dismissed. The primary issue before the High Court was whether or not respondents, who had taken over on leasehold basis certain blacklisted rice mills, were entitled to allocation of paddy for custom milling.
Findings of the Court:
Lease-deeds cannot be accepted as evidence of valid transfer of possessory rights. The plea taken by the appellant-FCI, that such documentation was made only to escape the liability fastened on the defaulting rice millers, carries some weight, though it is a pure question of fact. The High Court nevertheless ought to have refrained from opining on the sufficiency of such lease deeds for recognition of a new legal entity, and consequential non-transfer of liability to the lessees.
Result : Appeals allowed.
JUDGMENT :
1. Leave granted.
2. These appeals have arisen from an order dated 21.10.2013 passed by a Division Bench of the Punjab and Haryana High Court whereby a batch of letters-patent appeals filed by the Food Corporation of India (FCI) challenging a learned Single Judge's order of 15.03.2012 was dismissed.
3. The primary issue before the High Court was whether or not the respondents, who had taken over on leasehold basis certain blacklisted rice mills, were entitled to allocation of paddy for custom milling.
Facts:
4. It was common practice in Punjab for different government agencies to allocate paddy for custom milling to hundreds of rice mills, which in turn would supply the rice, post milling as per approved specifications, to the appellant-FCI. Such allocation would take place through terms of a bipartite agreement and the same took place for the Kharif Marketing Season of 2004-05 (hereinafter, "KMS") also.
5. A dispute arose as to the quality of the milled rice stock for the aforementioned KMS, leading to an investigation by the Central Bureau of Investigation (CBI). Finding the quality to be defective, the CBI initiated prosecution against numerous rice millers and additionally recommended blacklisting of a total of 182 millers for a period of three years for 'Beyond Rejection Limit' (BRL) rice and five years for 'Beyond Prevention of Food Adulteration' (BPFA) rice. Such ban was effectuated by the FCI vide a Circular dated 10.10.2012, relevant extracts of which read as follows:
"1. The millers who have supplied rice which was beyond PFA limits, the ban imposed may continue. Final decision on the matter may be taken by the CBI court.
2. As regards the millers who stocks were found BRL by the CBI, the proposal for limiting the ban to a period of three (03) Kharif Marketing Seasons (KMS) w.e.f. the date of imposition of ban, has been accepted.
3. In the case of millers whose stocks were in mixed condition though the same was found beyond PFA and were given benefit of doubt by the CBI, the proposal for limiting the ban to a period of Five (05) Kharif Marketing Seasons (KMS) w.e.f. the date of imposition of ban, has been accepted.
4. The proposals at St. No. 2 and 3 above, would be subject to condition that the defaulting millers deposit the loss suffered by the Corporation along with penal interest. In cases where, FCI has already effected recovery from the concerned State Government & its Agencies, the State Government & its Agencies should recover the said amount from the defaulter miller under intimation to FCI.
5. As there is no specific clause in the Custom Milling Agreement/Levy Order for debarring those rice millers who are found supplying sub-standard rice in CMR/Levy, FCI Headquarters will examine the issue and make specific provisions in this regard in the CMR Agreement as well as advise State Govt. To make such suitable provisions in the Levy Order. Action on this to be initiated at Headquarters.
6. The cases of lease or ownership transfer will be decided on merit of each case by a Committee of Officers consisting of GM(R) Punjab, a representative from Zonal Office (North) and Headquarters after obtaining required verification/report from State Govt. The said committee shall see genuineness of each such transaction, subject to Court decisions, if any regulating such decision.
7. In the matter of pending Court Cases, ED (North)/GM, Punjab may take suitable decision on lifting of the ban imposed on the Millers or otherwise of each case, on merits."
6. It is relevant to note that before imposing the ban on allocation of paddy for custom milling and blacklisting the defaulting rice millers, show cause notices were served and objections duly considered. Illustratively, M/s Sharma Rice Mills, situated at Katcha Firozpur Road, Mukhtsar, was informed vide registered show cause notice dated 04/06.12.2007 that 1814 MT of rice delivered by it, was found as being BRL and BFPA, besides the 588 MT of stock which was yet untested. The n
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