No Locus Standi for Rival Businesses to Challenge Penalty Quantum Imposed on Competitor: Chhattisgarh High Court - 2025-08-04

Chhattisgarh High Court Dismisses Rival Millers' Plea, Upholds State's Discretion in Penalty for Forged Guarantees

Bilaspur, Chhattisgarh - The High Court of Chhattisgarh, in a significant ruling, has held that a business entity does not have the legal standing (locus standi) to challenge the quantum of penalty imposed on a competitor, particularly when the State has already initiated appropriate action. Justice Arvind Kumar Verma dismissed a batch of writ petitions filed by rival rice millers who sought stricter punishment against competitors accused of submitting forged bank guarantees.

The Court affirmed the State government's decision to impose a fine of ₹5 lakhs instead of blacklisting the accused mills, noting that the writ court cannot act as an appellate authority to re-appreciate the reasonableness of a penalty imposed by a quasi-judicial body.

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Background of the Dispute

The case involved two groups of rice millers in the Gaurela-Pendra-Marwahi district. The first group, led by M/s Kesharwani Rice Mill, filed petitions alleging that their competitors—including Shyam Industries, Yash Rice Mill, and others—had secured paddy for custom milling by submitting forged bank guarantees worth crores of rupees for the Kharif Marketing Seasons of 2021-22 and 2022-23.

Following an inquiry that confirmed the submission of forged guarantees, the State initially blacklisted the accused firms on December 29, 2022. However, this order was quashed by the High Court in a previous petition (WPC No. 147/2023) on grounds of violating the principles of natural justice, as the firms were not given an opportunity to be heard.

The State was granted liberty to re-initiate proceedings. Subsequently, on March 27, 2023, the State passed a new order. Citing that the accused mills had ultimately delivered the required quantity of rice, resulting in no financial loss to the exchequer, the State decided against blacklisting and instead imposed a fine of ₹5 lakhs for the "irregularity."

Arguments Before the Court

• Petitioners (Kesharwani Group): Represented by Senior Advocate Shri Kishore Bhaduri, this group argued that the State's order was a "mockery of law" and was passed with the ulterior motive of favouring the rival firms. They contended that submitting forged guarantees constituted serious financial misappropriation and that the State authorities had no jurisdiction under Section 7 of the Essential Commodities Act, 1955, to impose such a lenient penalty, a power they claimed was vested only in a court. They demanded the blacklisting of the rival firms.

• Petitioners (Shyam/Yash Group): Represented by Advocate Shri Manoj Paranjape, this group also challenged the ₹5 lakh fine. They argued that the order was passed without providing them adequate opportunity for cross-examination and without supplying a copy of the inquiry report. They maintained their innocence, stating the bank guarantees were cross-verified by officials and that they had caused no loss to the state.

• State's Defence: The State government argued that the order was passed after providing a reasonable opportunity of hearing, in compliance with the High Court's earlier directions. It asserted that the decision to impose a fine was a discretionary power exercised by a quasi-judicial authority and that the petitioner millers (Kesharwani group) were not "aggrieved persons" and thus lacked the locus standi to challenge the order.

High Court's Rationale and Decision

Justice Arvind Kumar Verma, after hearing all parties, delivered a conclusive judgment addressing both sets of petitions.

On the Locus Standi of Rival Millers: The Court found that the dispute was primarily between the State and the mills accused of furnishing forged guarantees. It held that the rival millers (Kesharwani group) were not the "aggrieved" party in a legal sense and therefore had no locus standi to challenge the quantum of punishment. The judgment stated:

"...it is a case between the petitioner and respondent No.1 (Secretary, Department of Food, Civil supplies and Consumer Protection) and agreement has been executed between the parties therefore the petitioners in WPC Nos. 1777/2023... are not the aggrieved and thus, they have no locus standi to file the present writ petitions..."

The Court noted that the State had already initiated criminal proceedings by filing a final report under Sections 420 (Cheating), 467 (Forgery of valuable security), and 34 of the IPC against the accused millers. This, combined with the ₹5 lakh penalty, was deemed sufficient action by the State.

On the Legality of the State's Order: Addressing the challenge from the Shyam/Yash group, the Court found that they had been afforded a proper opportunity of hearing before the impugned order was passed. It dismissed the contention that the principles of natural justice were violated a second time.

Regarding the penalty, the Court observed that while the State had incorrectly cited Section 7 of the Essential Commodities Act (under which only a court can impose punishment), the power to penalize was available under Clause 9 of the Chhattisgarh Rice Custom Milling Order, 2016. This clause provides for penalties as per the agreement and gives discretionary power to blacklist a mill. The Court emphasized its limited role in judicial review:

"This Court cannot interfere with the penalty given by the concerned authority on the ground that it is erroneous if the order impugned is otherwise proper. It is not open to the writ court to re-appreciate reasonableness in the order impugned. This Court is not seated in the appeal of the authority."

Ultimately, the High Court found no error in the State's decision and dismissed all petitions, bringing a close to the contentious dispute between the rival milling groups.