IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Civil Writ Petition No.15428 of 2011 (O&M) Date of decision: 12.10.2011 Bajwa Gram Udyog Samiti (Rice Mills), VPO Ghogra, Tehsil Dasuya, District Hoshiarpur, through its Secretary Devinder Singh Bajwa, and others. ....Petitioners versus Food Corporation of India, Punjab Region, through its General Manager, Sector 31, opposite The Tribune, Chandigarh, and others. ....Respondents CORAM: HON’BLE MR. JUSTICE K. KANNAN ---- Present: Mr. Anil Kshetarpal, Advocate, for the petitioners. Mr. Hari Pal Verma, Advocate, for respondent No.1. Mr. Rakesh Gupta, Advocate, for respondent No.2. Mr. I.S. Sidhu, Advocate, for respondent No.3. Mr. Tarunvir Singh Lehal, Advocate, for respondent No.4. ---- 1. Whether reporters of local papers may be allowed to see the judgment ? No. 2. To be referred to the reporters or not ? Yes. 3. Whether the judgment should be reported in the digest ? Yes. ---- K.Kannan, J. (Oral) 1. The writ petition is at the instance of 4 millers, who have been served with notices by Food Corporation of India (FCI) for immediate replacement of specified quantities of stocks alleged to have been made as below rejection limit (BRL) rice. The counsel Civil Writ Petition No.15428 of 2011 (O&M) - 2 - for the petitioners states that the petitioners 1 and 2 have complied with the notices and, therefore, he does not press for the reliefs sought for in respect of them. 2. It is a conceded case that the supplies were made by petitioners 3 and 4 and quantities were accepted after inspection in the month of June, 2011 as far as the 3rd petitioner is concerned and in the month of April, 2011 as far as the 4th petitioner is concerned. BRL is said to have been detected for the 3rd petitioner on 28.07.2011 and for the 4th petitioner on 27.06.2011. The counsel for the petitioners would contend that the agreement that the millers have entered into with the agencies provides for the delivery of milled rice as per specifications laid down by the Government of India and it also states that after an acceptance note made, check memo and other relevant documents are given, the millers could claim the delivery to have been effected and obtain release order of milling charges for the quantity of rice delivered. The counsel for the petitioners would rely on a procedure laid down in the communication of FCI to the various regional offices about how a checking regarding the quality of rice is to be done. The relevant clause found in the communication is reproduced :- “...........To have a proper check of rice accepted by each TA at the depot, 10% & 5% samples of rice from the stack (duplicate), accepted by each TA at each depot of FCI district will be collected by the representatives of Civil Writ Petition No.15428 of 2011 (O&M) - 3 - Area Manager and General Manager (Region) respectively, within a week's time for test analysis in District and Regional Labs to verify the results of concerned TAs and for taking necessary action as may be deemed necessary. The stacks from which samples have been collected by District/Regional Labs should not be moved till the receipt of analysis results from the respective Labs. District/Regional Office should convey the results to concern centres/depots invariably within a week's time. Ensuring genuinety of the samples so collected shall be the responsibility of squad/representative of General Manager (Region) and Area Manager. Second sample after analysis in the Labs should not be destroyed for a period of 3 months. In the event, if any, sample is found beyond specification, immediate joint analysis be carried out with the concerned TAs and Manager (QC) and disciplinary action may be taken as deemed fit. Timely collection, analysis and communicating of analysis results and joint analysis of samples will be the responsibility of concerned District/Regional Heads.........” 3. The grievance is that an inspection was required to be done in a week's time for test analysis and it could not be done at the whims and fancies of the FCI and the assessment of BRL made on a Civil Writ Petition No.15428 of 2011 (O&M) - 4 - 'super inspection' is impermissible. 4. The counsel for the FCI states at the outset that although the show cause notices have been issued demanding replacements, they are prepared to carry out joint inspection in the presence of the respective petitioners. The counsel would point out to the fact that the respective regional offices are bound to carry out the instructions which are issued by the General Manager, Quality Control of New Delhi office and the communication dated 07.08.2007 states that if any stocks supplied reveal on super inspection done that they fall below the standards, the action must be taken against FCI officers, who had accepted such BRL stocks and the rice millers should be blacklisted by FCI. 5. The counsel for the petitioners contends that any intra office communication relating to the manner of carrying out 'super inspections' and for blacklisting cannot bind the millers for their obligations are governed by the contracts with the State Agencies alone and the moment the stocks are delivered after inspection and acceptance note is given, no further complaint could ever be countenanced at the instance of FCI. The learned counsel would also contend that if there is still a problem which the FCI has about the quality of grains supplied, their duty shall be to inform the State Agencies which may invoke the arbitral clause to seek for an adjudication regarding the quality of stocks. A unilateral decision calling for the miller to replace the stocks on an alleged finding of Civil Writ Petition No.15428 of 2011 (O&M) - 5 - BRL and to stop receiving all further supplies would be grossly unjust. The learned counsel would refer to a decision of this Court in M/s Jai Durga Rice and General Mills Versus The State of Haryana and others in CWP No.268 of 2010, decided on 04.04.2011, where the Bench of this Court has held that in case of disputes relating to quality, the issue could be decided through arbitration. Such a procedure must be adopted by the State Agencies before the petitioner could be called upon to substitute the stocks. 6. While I would agree that the delivery of rice could normally be taken as fully complete when an acceptance notice is issued after inspection, a provision for a super inspection at a random sampling cannot be said to be unjustified, if in the past the FCI had issues of connivance of officials of FCI itself for wrongly issuing acceptance notes even without proper inspection. Even an intra departmental communication by the FCI providing for such an inspection cannot be a matter for challenge for the petitioner, if only a reasonable and transparent procedure is adopted for allaying the fears of a miller that he is not victimized by any reasonable conduct of the FCI. I would read down the communication providing for super inspection to mean that if such inspection reveals that there is an issue of quality then the miller shall be joined in the process of a reanalysis regarding quality. The show cause notice which is impugned, I find is really not a show cause notice but a pre- judgment in so far as it directs the replacement to be made. The text Civil Writ Petition No.15428 of 2011 (O&M) - 6 - of the show cause notice is reproduced below:- “During the course of inspection (rice) by worthy Regional Manager/D.G.M. (QC) from Chandigarh on dated 21.06.2011, infested the rice of Stack No.13A/421 pertains to M/sBajwa Gram Udyog Samiti having Con. No.(208, 216, 1037, 1090, 211) has been found BRL in respect of Broken grains. In this connection, party is advised to replace the stacks with good quality and during this period of non-replacement of stacks, no further stocks will be inspected and dumped.” 7. No offer has been made to the petitioners to submit for joint inspection. There was no opportunity also given for a miller to examine whether the stocks had been properly stored and that no deterioration was possible. This is particularly relevant if we examine that the agreement with the agency clearly stipulates that an inspection would be possible within a period of 7 days after the acceptance notice is issued as per the instruction of FCI. The period of 7 days which the FCI instructions stipulates for a re-inspection or a fresh analysis must be given appropriate meaning so that undue delays are not brought by the FCI to cast an obligation for a miller to supply fresh stocks at any time that FCI fancies to carry out a super inspection and to demand a replacement. 8. The show cause notices directing replacement are required to be quashed for the unreasonableness that stares on the Civil Writ Petition No.15428 of 2011 (O&M) - 7 - face of the said notice, I would accept, however, the plea of the counsel for the FCI for a joint inspection to be made in the presence of the petitioners 3 and 4 and at that time, the millers are also entitled to raise issues regarding storage and any possible ramification, affecting the quality of the grains over which the millers had no control. The joint inspection shall be done on a date specified within two weeks from the date of receipt of copy of this order and delivered for analysis before Central Grain Analytical Laboratory at New Delhi. A decision shall be taken within one week from the date of inspection. The outcome of this inspection and report will govern the rights of the parties for making fresh supplies to the FCI. If it is found that the rejection was justified, the further right of supplies does not arise, for, it will be competent under the contract for the FCI to communicate that the miller could be blacklisted. On the other hand, if the quality is found to be not below the rejection limit, the petitioner shall be entitled to insist on fresh supplies to FCI without any let or hindrance. Any loss that may have entailed by a wrong decision already passed and for the loss of business will be consequential and the matter of adjudication could be resorted by an arbitral process which either party may resort to. Since FCI itself is not a party to the arbitral agreement the arbitration must be understood as an arbitration where a right to demand damages arises against the State agency with whom the millers have contracted. If there is a claim against FCI which is Civil Writ Petition No.15428 of 2011 (O&M) - 8 - possible as a result of the adjudication regarding quality that would be done by independent civil proceedings. 9. At the time of delivery of judgment, the counsel for the petitioners suggested that he should be permitted to make supplies and the FCI shall be directed to receive milled rice for the season 2011-12. He also argued that if pending laboratory test the FCI will show reluctance in receiving the supplies, at least they should be directed to receive it by a specific court order. He would plead that any immediate commitment for issuing pay orders towards milling charges and the stocks could be adjusted against the replacement if ever it were to be found in the laboratory test that the quality of stocks already supplied fell below the rejection limit. 10. The counsel for the FCI on instructions states that they would be prepared to receive the stocks and credit the same for substitution, if it turns out that the stocks were below the rejection limit. The counsel for the State Agencies joins issue to this by pointing out that the stocks belong to them and a substitution of fresh stocks of what they had supplied for milling cannot be done for the stocks already supplied and what could be found to be below the rejection limit. 11. If there is no consensus emerging from the situation, I would rest the issue with a direction that for any outstanding supplies to be made for the previous year 2010-11, the petitioner No.3 could be permitted to supply and the respondents shall receive Civil Writ Petition No.15428 of 2011 (O&M) - 9 - the same subject to issues of quality. The future supply for 2011-12 shall await the reports of the laboratory test and whether the petitioner shall have the right of requiring FCI to accept them or not will be considered at the relevant time after the laboratory test are over. 12. The writ petition is disposed of on the above directions. (K. KANNAN) JUDGE 12.10.2011 sanjeev