PETITIONER:
M/S. BEJGAM VEERANNA VENKATA NARASIMLOO ETC.
Vs.
RESPONDENT:
STATE OF ANDHRA PRADESH & ORS.
DATE OF JUDGMENT: 25/11/1997
BENCH:
S.P. BHARUCHA, SUHAS C. SEN
ACT
HEADNOTE
JUDGMENT
THE 25TH DAY OF NOVEMBER, 1997 Present:
Hon’ble Mr. Justice S.P. Bharucha
Hon’ble Mr. Justice Suhas C.Sen A.Subba Rao, B.Parthasarthy, Advs. for the appellants G.I.Gopalkrishna, Y.P.Rao, K Ramkumar and T.V.S.N.Chari, Advs. for the Respondents.
JUDGMENT The following Judgment of the Court was delivered: (WITH C.A.NO 8296 of 1997 arising out of S.L.P.No. 568 of 1982) SEN, J.
Section 3 of the Essential Commodities Act, 1955 confers upon the Central Government power, inter alia, to regulate production, supply and distribution of essential commodities for securing their equitable distribution and availability at fair prices. The power given to the Central Government by sub-section (1) of Section 3 is in very broad terms. Sub-section (2) specifically provides that an order can be made by the Central Government, inter alia, "for controlling the price at which any essential commodity may be bought or sold". Clause (f) of sub-section (2) of Section 3 has also empowered the Central Government to require any person holding in stock, or engaged in the production, or in business of buying or selling, of any essential commodity, to sell the whole or a specified part of the quantity held in stock or produced or received by him to officer or agent of such Government or to a Corporation owned or controlled by such Government as may be specified in the order. Sub-section (3A) of Section 3 provides that where any person sells any essential commodity in compliance with an order made with reference to clause (f) of subsection (2), there shall be paid to the seller as the price therefore- (a) Where the price can consistently with the controlled price of the food stuffs, if any fixed under this section, be agreed upon, the agreed price: (b) where no such agreement can be reached, the price calculated with reference to the controlled price, if any; (c) where neither clause (a) nor clause (b)- applies, the price calculated with reference to the average market rate prevailing in the locality during the period of three months immediately preceding the date of the notification.
Sub-section (3b) of Section 3
provides:-
"Where any person is required, by
an order made with reference to
clause (f) of sub-section (2) to
sell to the Central Government or
to a Stat Government or to an
office or agent of such Government
or to a corporation owned or
controlled by such Government, any
grade or variety of foodgrains,
edible oilseeds or edible oils in
relation to which no notification
has been issued under sub-section
(3A), or such notification having
been issued, has ceased to be in
force, there shall be paid to the
person concerned, notwithstanding
anything to the contrary contained
in sub-section (3), an amount equal
to procurement price of such
foodgrains, edible oil seeds or
edible oils, as the case may be
specified by the State Government,
with the previous approval of the
Central Government having regard
to-
(a) the controlled price, if any,
fixed under this section or by or
under any other law for the time
being in force for such grade or
variety of foodgrains, edible oil
seeds or edible oils;
(b) the general crop prospects;
(c) the need for making such grade
or variety of foodgrains, edible
oilseeds or edible oils available
at reasonable prices to the
consumers, particularly the
vulnerable section of consumers;
and
(d) the recommendations, if any, of
the Agricultural Prices Commissions
with regard to the price of the
concerned grade or variety of
foodgrains, edible oil seeds or
edible oils."
There is no dispute that ’rice’ is an ’essential commodity’ under the Essential Commodities Act. Andhra Pradesh Rice (Procurement Ex-Mill Prices) Order, 1974 and Andhra Pradesh Rice (Procurement Ex-Mill Prices) Order, 1975 were promulgated requiring persons carrying on business in foodgrains, paddy, rice, rice milling, etc. to supply rice to Food Corporation of India (FCI) at procurement prices fixed by Orders issued by the Andhra Pradesh Government from time to time. The rice millers were entitled to be paid what is called the "notified price". which has been defined to mean the price fixed under the Andhra Pradesh Rice (Procurement Ex-Mill Prices) Order, 1975.
The appellants, who are rice millers, supplied the FCI rice milled from Khariff and Rabi crops for the crop year 1975-76 and also 1976-77 under the aforesaid Orders. The FCI paid them price fixed by Andhra Pradesh Rice (Procurement Ex-mill Prices) Order, 1975.
The present dispute arises out of an Order issued by the Government of Andhra Pradesh on 8th October, 1975, which is as under:
"NOTIFICATION"
In exercise of the power conferred
by Clause (c) of Sub-section (2) of
Section 3 of the Essential
Commodities Act, 1995 (General Act
10 of 1995) read with the order of
the Government of India, Ministry
of Agriculture (Department of
Food), New Delhi, G.S.R. 316 (E)
dated the 20th June, 1972 and all
other powers hereunto enabling and
with the prior concurrence of the
Government of India, the Governor
of Andhra Pradesh hereby rescinds
with immediate effect, the Andhra
Pradesh Rice (Procurement Ex-Mill
Prices) Order, 1974 issue in G.O.
MS. No. 1001, Food and Agriculture
(CS.V) Department, dated the 6th
November, 1974 and published at
pages 1-13 of the rules Supplement
to Part II Extra-ordinary of the
Andhra Pradesh Gazette, No. 38
dated the 7th November, 1974.
Provided that such recession shall
not affect:
(a) the previous operation of the
said Order of any thing duly done
or supported thereunder; or
(b) any right, privilege,
obligation or liability acquired,
accrued or incurred under the said
Order; or
(c) any penalty, forfeiture or
punishment incurred in respect of
any offences committed against the
said Order;
(d) any investigation, legal
proceeding or remedy in respect of
any such right, privilege,
obligation, liability, penalty,
forfeiture or punishment as
aforesaid, and any such
investigation, legal proceeding or
remedy may be instituted, continued
or enforced and any such penalty,
forfeiture or any such penalty,
forfeiture or punishment may be
imposed as if the said Order has
not been rescinded.
xxx xxx xxx
11. In exercise of the powers
conferred by Clause (c) of Sub-
section (2) of Section 3 of
Essential Commodities Act, 1995
(Central Act 10 of 1995) read with
the Order of the Government of
India, Ministry of Agriculture
(Department of Food), New Delhi
G.S.R. No. 316 (E), dated 20th
June, 1972 and of all other powers
hereunto enabling and with the
prior concurrence of the Government
of India, the Governor of Andhra
Pradesh hereby makes the following
order, namely-
1. Short title, extent, application
and commencement
(1) This Order may be called the
Andhra Pradesh Rice (Procurement
Ex-Mill Prices) Order, 1975.
(2) It extends to the whole of the
State of Andhra Pradesh.
(3) It shall apply only to the rice
milled or hand-pounded from paddy
of Khariff 1975-76 or subsequent
crop.
(4) It shall be deemed to have come
into force on the 1st October,
1975."
There is no dispute that even after 7.9.76, FCI continued to procure rice and pay the appellants the price fixed by the 1975 Levy Order. The case of the appellants is that there is no reason not to pay at the old rates till promulgation of a new Order in accordance with law fixing new rates. The case of the State is that the price notified in the 1975 Order will have no application to the supplies of rice made on or after 7.9.76. It has been emphasised that in clause (3) of the Order, it has been specifically made clear that the Order shall be operative "only to the rice milled or hand-pounded from paddy of Khariff 1975-76 or subsequent crop". This can only mean that the order will not be operative beyond the crop year 1975-76.
As against this, the contention on behalf of the appellants is that the Order came into force on 1st October, 1975. It was made operative not only for the Khariff crop of 1975-76 but also for the "subsequent crop". "Subsequent crop" need not be confined only to the crop raised in 1975- 76. The procurement price provided in the Order must continue till a new Order is promulgated laying down the levy price. Otherwise, there will be a vacuum. The rice millers will have to supply rice compulsorily to FCI without knowing what is the procurement price. The intention behind the Order clearly was to continue the procurement price fixed by the Order to all subsequent crops until a fresh Order was issued.
Assuming that the contention of the State Government is correct what will be the price payable for the crop year 1976-77 commencing on and from 7.9.1976?. A fresh order of procurement was published in the official Gazette only on 24.2.1997. Under the provisions of Section 3 of the Essential Commodities Act, any person who sells any essential commodity in compliance of an order passed with reference to clause (f) of Sub-section 2 of Section 3 will have to be paid - (a) an agreed price which is consistent with the controlled price, if any, fixed under Section 3 or (b) in the absence of any agreement, the price, if any, or when neither (a) or (b) applies, the price, if any, or when neither (a) or (b) applies, the price calculated with reference to the average prevalent market price of the locality during the period of three months immediately preceding the day of the notification.
In this case, on and from 7.9.76, the rice millers sold and the FCI bought rice at the procurement price fixed for the crop year 1975-76. This was because of an Order issued on 2.11.1976 by which the procurement price of rice in force for the year 1975-76 was made payable for the crop year 1976-77. The relevant portion of the Order is as under:
"MEMO NO. 2611/SCI(2)/76-2, DATED
2.11.1976
Sub: Civil Supplies-prices and
procurement policy for Khariff
cereals for 1976-77 season-
Regarding.
Ref: 1. From the Government of
India, Ministry of Agriculture and
Irrigation (Department of Food) New
Delhi, Telex Message No.167 (28)
76-PY.I, dated 30.9.1976.
2. From the Government of India,
Ministry of Agriculture and
Irrigation (Department of Food) New
Delhi Lr. No. 167/28/76 PY.I dated
30.9.1976.
The Government of India in their
reference cited, copies of which
are communicated herewith to all
District Collectors, Chief
Rationing Officer, Hyderabad,
Director, Vigilance Cell (CS) and
Board of Revenue (CS), have
declared the procurement policy for
Khariff cereals 1976-77. They are
informed that the producers levy
slabs prescribed for the crop year
1976-77 in the Schedule to the
Andhra Pradesh, Paddy Procurement
(Levy) Order, 1972 as amended last
in G.O.Ms. No.844, F&A (CS.I) dated
24.9.1975 shall continue to apply
for the crop year 1976-77 also.
2. The procurement price of paddy
and specification for the crop year
1976-77 shall be the same as were
fixed for the crop year 1975-76 and
notified in G.O.Ms.No. 1002 Food &
Agrl. (CS.V) dated 6.11.1974 in the
schedules under the Andhra Pradesh
Paddy (Procurement Prices) Order,
1974. The Procurement Prices of
rice for crop year 1976-77 shall be
the same as notified in the
Schedules to the A.P.Rice
(Procurement Ex-Mill Prices) Order,
1975.
With regard to the Mill Levy, it
has been decided to 50% levy
uniformly for millers and dealers
and necessary amendment to the
relevant Schedule to the Andhra
Pradesh Rice (Procurement Levy) and
Restriction on Sale Order, 1967
will be issued shortly in
consultation with the Government of
India, Pending issue of the
amendment, the District Collectors
are instructed to take action to
collect levy from millers and
dealers not exceeding the
percentage mentioned above for the
crop year 1976-77."
Even after expiry of the crop year 1975-76, in terms of the aforesaid order, the appellant millers supplied rice to the FCI and were paid at the rate prescribed in the Order/Memorandum dated 24.9.1975. Not only the procurement price but also the quantum of levy of rice was determined by this Order/Memorandum.
On 24.2.1977, the Food and Agriculture Department of Andhra Pradesh Government, issued a Gazette Notification to the following effect:-
"In exercise of the power conferred
by Clause (c) of sub-section (2) of
Section 3 of the Essential
Commodities Act, 1955 (Central Act
10 of 1995) read with the order of
the Government of India, Ministry
of Agriculture (Department of
Food), New Delhi in G.S.R.No.
316(e) dated the 20th June, 1972
and with the prior concurrence of
the Government of India, the
Governor of Andhra Pradesh hereby
makes the following amendments to
the Andhra Pradesh Rice
(Procurement Ex-Mill Prices) Order,
1975 issued in G.O. Ms. No. 901,
Food and Agrl. at page 8 of the
Rules supplement of Part I Extra-
ordinary of the Andhra Pradesh
Gazette No.53 dated the 9th October
1975 as subsequently amended.
2. The amendment hereby made shall
be deemed to have come into force
on 7th September, 1976.
AMENDMENTS
i) In Schedule I to the said order
in Col. (2) for the figures 149.00,
136.00, 125.00 and 121.00 against
varieties or rice super fine and
coarse the figure 146.00, 133.00
and 118.00 shall respectively be
substituted."
As a result of this notification, procurement price for various varieties of rice fixed in the 1975 Order was brought down purportedly with retrospective effect from 7.9.1976. This created an anomalous situation because in the period between 7.9.1976 and 24.2.1977 rice was actually procured according to the slab laid down in the Andhra Pradesh Paddy Procurement (Levy) Order, 1972 as amended by the order dated 24.9.75 for which price was paid according to the rates laid down in that order on the basis of the Memorandum issued on 2.11.76.
The Andhra Pradesh Government claimed that payment for the levy of rice on and from 7.9.76 had been made at an excessive rate. The proper rate would be the rate as fixed in the order dated 24.2.77. Therefore, the excess payment made by the assessee will have to be recovered from the rice millers. It has been argued on behalf of Andhra Pradesh Government that the Memorandum dated 2.11.76 was of no legal effect because it was not notified in the Official Gazette. Therefore, anything done on the basis of the Memorandum was of no legal effect. If price was paid in terms of that Memorandum it was by mistake of law and the Government had a right to recover the excess amount paid. it was further argued that Levy Order of 1975 had spend its force at the end of the crop year 1975-76. Therefore, procurement price on the basis of that order could not in any event be paid in the crop year 1976-77.
We are of the view that the contentions made on behalf of the Andhra Pradesh Government are untenable in law. It has not been explained how and in what circumstances the order/memorandum dated 2.11.76 extending the life of the 1975-76 procurement order came to be issued. the issuance of the memorandum is not denied. It is also not denied that rice was procured in terms of this order. Rice millers had to deliver the rice according to the quantum or slab fixed by the 1975-76 order on the strength of the Memorandum dated 2.11.76. FCI also acted upon this Memorandum and paid the millers at the rates laid down in the order dated 24.9.75. It is not open to the Andhra Pradesh Government now to say that this Memorandum is of no legal effect because it was not notified in the Official Gazette and was not addressed to any of the rice millers but was merely an interdepartmental communication. the Memorandum categorically stated "pending issue of the amendment, the District Collectors are instructed to take action to collect levy from millers and dealers not exceeding the percentage mentioned above for the crop year 1976-77". District Collectors acted on the basis of this Memorandum. The millers were compelled to sell rice to FCI. in the background of all these facts, it is not open to the State Government to contend that the Memorandum was not notified and therefore, no right or obligation flowed from that Memorandum. If the Memorandum was required to be notified, the Government cannot take advantage of its failure to notify it. Having acted on the basis of the Unnotified Memorandum and having collected rice compulsorily from the millers on the strength of this Memorandum and also having paid the millers at the rate fixed by the Memorandum, the Government cannot be heard to say that the Memorandum is of no legal effect and the payment was made under mistake of law.
In our view, it will be inequitable to permit the Government to take the plea of irregularity of its own Order after procuring rice on the basis of that order. There is also another aspect of this case. Sub-section (3A) of Section 3 provides that where any person sells any essential commodity in compliance with an order made with reference to clause (f) of sub-section (2), "there shall be paid to the seller......the price therefor......". The language of the Section is mandatory. The price for the rice procured will have to be paid. In the absence of any agreed price or controlled price, the price calculated with reference to the average market rate prevailing in the locality during the last three months will have to be paid to the seller. Even if the contention of the State Government is upheld and the Memorandum is held to be void and of no legal effect, the State Government has a statutory duty to pay for the rice procured by it at the market rate calculated in the manner laid down by the statute.
The next question is whether the State Government can fix the procurement price of the rice purchased by it retrospectively. The High Court’s view was that the State Government cannot do it. But the High Court has tried to salvage the case for the State Government by holding that the notification dated 24.2.1977 was not really retrospective even though clause (2) of the notification states that "the amendment hereby made shall be deemed to have come into force on 7th September, 1976". The High Court stated the question before it and its answer in the following words:
"Thus, the whole question in this
case boils provisions of the E.C.
Act, In this case, it must be
admitted that there is no provision
in the E.C.Act authorising the
making subordinate legislation with
retrospective effect. It follows,
therefore, that Ex.B-4 would be
invalid if it is truly a
retrospective subordinate piece of
legislation. This raises the
question whether Ex.B-4 dated
24.2.77 fixing prices with effect
from 7.9.76 can be truly called a
retrospective law. We are of the
clear opinion that it is not."
The High Court was of the view that merely because a subordinate legislation was given effect to from an anterior date, it cannot be treated as a piece of retrospective subordinate legislation. It was held that a subordinate legislation can be said to be retrospective only when it took away or impaired any vested right acquired under existing laws or created new obligations or imposed a new duty or attached a new disability in respect to transactions or considerations already past. Reliance was placed upon Craies on Statute Law, 6th Edition p.386. it was held that by notification dated 24.2.1977, the Government did not reduce in any way the price legally payable to the appellants because there was no such price in existence nor did it alter in any way the legal rights of the appellants with regard to their sales for the second year.
We are unable to follow how the High court could come to the conclusion that the vested right of the appellants had not been disturbed in any way by the subordinate legislation. Rice has been sold under a procurement order and a right to be paid in terms of that order had accrued to the seller as soon as sale of rice was effected. As a matter of fact, the FCI did pay the appellants the price for the rice purchased. If a portion of the price paid by the FCI is taken away, the appellants will be prejudicially affected. They not only had acquired a vested right to be paid but actually received payment for the rice sold. If the rice was delivered without any valid procurement order, the sellers were entitled to be paid at the market rate in terms of section 70 of the Contract Act. The retrospective subordinate legislation has tried to take away a portion of the money the appellants had lawfully obtained.
We are of the view that the decision of the High Court is clearly erroneous. The recoveries which are now sought to be made from the appellants are clearly unlawful and unjust. The appeals are allowed. The judgment under appeal is set aside. There will be no order as to costs.
C.A.No. of 1997
(Arising out of S.L.P. (C) No.568/1982)
Leave granted.
In view of our above decision in C.A.Nos. 3196-3200 of 1981, this appeal is also allowed with no order as to costs.