IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) MONDAY, THE TWELFTH DAY OF SEPTEMBER TWO THOUSAND AND ELEVEN :PRESENT: THE HON'BLE SRI JUSTICE NOOTY RAMAMOHANA RAO WRIT PETITION NO.25370 of 2011 Between: Vippula Govindu and another ..... PETITIONERS AND Food Corporation of India, rep. by its Branch Manager, Tadepalligudem, W.G. District and others ..... RESPONDENTS The Court made the following: ORDER: This writ petition has been instituted by the petitioners namely Vippula Govindu and Penmarti Kiran Prabhakar seeking a writ of mandamus to declare the action of the respondents in conducting auction of the paddy of 38,240 Kgs., and 44,680 Kgs., respectively belonging to the petitioners as illegal and consequently direct the respondents to redeliver the said quantity of paddy. The writ petitioners assert that they are small farmers and they are cultivating the lands of their own as well as those lands, which have been taken on tenancy basis. They submit that they have sold the paddy to the third respondent herein namely M/s.Teja Traders, who have only promised to pay for the paddy supplied by the petitioners but failed to do so, this far. It is stated that 38,240 Kgs., and 44,680 Kgs., of paddy respectively has been supplied by the petitioners to the third respondent. The value of which works out to Rs.3,70,500/- and Rs.4,40,550/- respectively, which amounts have not been paid for by the third respondent. The third respondent has only protracted the matter of payment of value of the paddy received by him. However, on 20-08-2011 the second respondent-Tadepalligudem branch of State Bank of Hyderabad, has notified for auction of the paddy in question and hence, they approached this Court by this writ petition. It is further asserted that the writ petitioners have nothing to do with the third respondent’s commercial activities nor does the writ petitioners have anything to say on the relationship between the second respondent banker and the third respondent. Pursuant to the notice issued, the second respondent banker has filed a detailed counter-affidavit in the matter. It is pointed out that the third respondent is a borrower and that certain paddy was stocked in a godown which was taken on lease by the bank and that was sought to be put to auction, inasmuch as the paddy if it loses colour and also get infected with fungus and other such material, its value will completely get depreciated. It is pointed out that the third respondent having availed cash credit limits has hypothecated the property namely the stocks of the paddy to the second respondent banker. Since the third respondent has committed certain default and went to the extent of playing fraud on the second respondent banker, the second respondent banker has invoked its right on the stock of paddy which has been pledged to it and therefore, the writ petitioners cannot object the second respondent banker from proceeding with the proposed sale by public auction of the said paddy. It is also further pointed out that as to whether the writ petitioners have actually supplied the paddy or the third respondent has paid for its value or not are questions, which are not capable of being adjudicated in this writ petition and such questions can be adjudicated only in a properly constituted civil suit. Heard Sri N.V. Ramanujam, learned counsel for the petitioners and Sri A. Krishnam Raju, learned counsel for the second respondent banker. The third respondent has not chosen to contest this case. Learned counsel for the petitioners would submit that in terms of Section 46 of the Sale of Goods Act, 1930 an unpaid seller has a lien on the goods and has a right of resale as set out by the said Act. Since the petitioners have not received the price of the goods supplied by them they are entitled to exercise their right as unpaid sellers with regard to the paddy in question. Per contra, Sri A. Krishnam Raju, learned counsel for the banker would submit that when once the goods have been pledged, by the third respondent; the rights of the unpaid sellers cannot have an overriding effect on such goods. Further it is contended by the learned counsel for the bank that the petitioners have to first of all establish, as a fact, that they have supplied the paddy in question and the quantity in question to the third respondent and that the third respondent had failed to pay for the said paddy supplied by them and only then, the question of the petitioners herein being treated as unpaid sellers would arise but not until then. Equally, the learned counsel for the petitioners would submit, that the second respondent bank also has got to establish that the goods in question have been pledged in favour of the second respondent bank by the third respondent and only then it can have a predominant right to deal with the said goods. I see considerable force in the submissions made on both sides. If the petitioners are small and marginal farmers who happened to supply paddy to the third respondent with the hope that they will be able to receive the sale price in a short time and if the third respondent had failed to pay for the said paddy stock received from the petitioners, they may legitimately be entitled to exercise their rights as unpaid sellers. At the same time, if the stocks in question have been already pledged in favour of the second respondent banker by the third respondent and if the third respondent has already committed default in living up to his obligations towards the said banker, the right of the banker over such pledged goods can be an over riding right. Both these sets of factual situations, can be established only after lot of evidence is gathered on either side. Such an exercise cannot be carried out in exercise of jurisdiction, under Article 226 of the Constitution of India normally. It is, therefore, appropriate that both the petitioners herein and the second respondent banker shall be relegated to a civil suit. It would appropriate for the civil Court, upon a proper adjudication, to determine the rights of the respective parties. However, the paddy which is now under the custody of the second respondent banker and which is proposed to be sold by public auction is a commodity which is perishable one or which is likely to lose much of its value for variety of reasons including delay in its sale. If the paddy gets de-coloured or catches fungus or any other such infectious material, it will not fetch proper value. In either case, the petitioner or even banker, who ever is legitimately entitled to the ultimate benefit of the said paddy, will be a loser. Therefore, with a view to strike a balance between both these competing claimants, I consider it appropriate to direct the second respondent banker to proceed further with the proposed public auction of the paddy. It is open to the writ petitioners to participate in the said auction by themselves or by securing any prospective bidders. The sale proceeds of paddy to the extent of 38,240 Kgs., and 44,680 Kgs., respectively be not appropriated by the second respondent banker or adjusted against the outstanding loan amount of the third respondent, till such time an adjudication as suggested supra takes place. The money may however be confined to an interest yielding measure so that the claims of both parties can be adequately mitigated with such a measure. This writ petition is accordingly disposed of allowing the second respondent banker to proceed with the public auction of the paddy. But however, subject to the second respondent banker not adjusting or appropriating the sale value of 38,240 Kgs., and 44,680 Kgs., of paddy respectively but await the result of adjudication of the respective claims. There shall be no order as to costs. ________________________________ NOOTY RAMAMOHANA RAO, J September 12, 2011 PN HON'BLE SRI JUSTICE NOOTY RAMAMOHANA RAO WRIT PETITION No.25370 of 2011 September 12, 2011 PN