IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Regular Second Appeal No. 1423 of 1990 Date of Decision : January 25, 2010 The Punjab State Cooperative Supply and Marketing Federation Limited and another ....Appellants Versus M/s Shri Hargobind Rice and General Mills, Cantt. Road, Faridkot .....Respondent CORAM : HON'BLE MR. JUSTICE T.P.S. MANN Present : Mr. Rajesh Garg, Advocate Mr. P.S.Brar, Advocate T.P.S. MANN, J. Suit filed by the plaintiff-respondent for recovery of Rs.37,252.52 Ps, was decreed with no order as to costs by Sub Judge Ist Class, Faridkot, on 12.10.1988, which judgment and decree was upheld by the Additional District Judge, Faridkot on 16.2.1990 while dismissing the appeal filed by the defendants. They are now before this Court by way of a second appeal. According to the plaintiff-firm, it was running the business of rice shelling at Faridkot. The defendants-Markfed purchased paddy from the various markets in the year 1981-82 and supplied the same to the shellers for shelling @ Rs.4/- per quintal. 67% yield of PR 106 and 69% yield of IR 8 was to be supplied to the defendants after shelling. R.S.A. No. 1423 of 1990 -2- At the time of supply of the paddy it was settled that the defendants would give benefit of 2% driage to the shellers. The defendants supplied 5692 quintals 38 kgs of IR 8 paddy and 1553 quintals 6 kgs of PR 106 paddy to the plaintiff for shelling. In the meantime, a dispute arose amongst the shellers of the area on the one hand and the defendants, on the other, regarding percentage of driage, on account of the fact that the paddy supplied was found mixed with husk, sand and dust. When the matter was brought to the notice of the District Manager, Markfed, he promised to compensate the shellers including the plaintiff. The question of benefit of additional driage was under consideration but the plaintiff was pressurised to supply rice. However, it was promised that whatever benefit would be given to other shellers would also be given to the plaintiff. The plaintiff supplied rice to the defendants. The other shellers, namely, Dhillon Rice and Mills, M/s Avtar Singh and Sons and M/s Friends Rice Mills did not supply rice prior to settlement of additional driage. The defendants examined the matter and decided to give benefit of 3% more driage in addition to the driage already given. As such 5% driage was allowed on the paddy issued to the shellers of the area but this benefit was not given to the plaintiff-firm. The Senior District Manager of the Markfed had also recommended that the plaintiff- firm be given benefit of 5% driage on the pattern of other shellers. Reminder was also issued to the Head Office but the defendants did not compensate the plaintiff. It was pleaded that the total amount recoverable from the R.S.A. No. 1423 of 1990 -3- defendants was Rs.37,252.52 Ps which included Rs.30,137.26 Ps on account of benefit of 3% additional driage, Rs.2,000/- on account of labour charges for unloading of paddy paid by the plaintiff-firm although required to be paid by the defendants and Rs.5117.26 Ps deducted by the defendants as local charges without any reason from the plaintiff-firm. While opposing the suit, the defendants pleaded that the suit was time barred. It was also pleaded that the plaintiff-firm supplied rice to the defendants as per the contract. It was denied that there was any promise to give benefit of additional driage to the plaintiff-firm as it was not entitled to such a benefit under any law. As per the policy and contract the local charges were to be borne by the shellers, as such the deduction was proper. The plaintiff submitted a bill for labour charges but the same was not traceable and in case its copy was submitted by the plaintiff-firm, it could be considered on merits. It was also pleaded that release of security showed that no amount was due from the defendants. After hearing learned counsel for the parties and going through the evidence brought on the record, learned trial Court held that there was no justification for withholding the benefit of 3% additional driage from the plaintiff-firm as such a benefit was given to other shellers. The equity required the defendants not to withhold its benefit from the plaintiff-firm. The plaintiff-firm was also held entitled R.S.A. No. 1423 of 1990 -4- to Rs.2,000/- on account of labour charges and Rs.5117-26 Ps on account of local charges. As mentioned above, the findings arrived at by the learned trial Court were upheld by the lower appellate Court as it dismissed the first appeal filed by the defendants. The present appeal was admitted on 16.7.1990 and notice regarding stay was issued. Ad-interim execution of the decree was suspended in view of the statement made by learned counsel for the appellants at the bar that his clients had already furnished a bank guarantee before the first appellate Court and they undertook to renew the same. On 10.8.1990 after the appearance of the plaintiff-respondent, this Court directed that the decretal amount be deposited in a fixed deposit with the State Bank of India initially for a period of three years and if by then the appeal was not disposed of, the said deposit be renewed for another term of three years. Learned counsel for the defendants-appellants has submitted that the paddy was supplied to the plaintiff-firm for shelling and after shelling, to return the same to the defendants in accordance with the instructions contained in circular issued by the Director, Food and Supplies Department for the year 1981-82. According to one of its terms the miller was to be given benefit of 2% driage while returning the rice after shelling the paddy. The plaintiff performed the process of shelling and returned the rice in accordance with the terms and conditions mentioned in the circular by availing the benefit of 2% R.S.A. No. 1423 of 1990 -5- driage. After completely performing the contract, the plaintiff moved an application on 28.6.1982 for the refund of the security amount of Rs.25,000/-. The security amount was released after deducting an amount of Rs.4908.40 Ps. At no point of time, the plaintiff made any grievance about the difficulty in the shelling process or likelihood of less procurement by virtue of dust etc, in the paddy, therefore, there was no question of allowing more driage than what was contemplated under the agreement arrived at between the parties. The learned Courts below erred in law in holding that non payment of additional 3% driage amounted to discrimination by the defendants-appellants. The parties were governed by the conditions contained in the agreement. The plaintiff had performed his part in accordance with the terms and conditions, therefore, he was not entitled to any deviation in the terms of the agreement after successful completion only for the reason that there was some deviation in the agreement relating to other shellers/millers of the same area, who had been given benefit of 3% additional driage. Therefore, the findings arrived at by the learned Courts below deserve to be reversed and the suit filed by the plaintiff-respondent to be dismissed. On the other hand, learned counsel for the plaintiff- respondent has submitted that most of the shellers/millers of the area had been given the benefit of 3% additional driage on account of the fact that the paddy supplied was found mixed with husk, sand and dust. A similar request for benefit of additional driage was also made on R.S.A. No. 1423 of 1990 -6- behalf of the plaintiff-firm and the said request was forwarded to the Head Office after the Senior District Manager recommended the same. Despite the said recommendation, the plaintiff-firm had not been given the benefit of 3% additional driage although similarly situated shellers/millers had been granted this benefit. The act of the defendants in not extending the benefit of 3% additional driage was, thus, discriminatory. After hearing learned counsel for the parties, I find that a substantial question of law as to whether the civil Court can alter the terms and conditions of the agreement between the parties, arises for determination. On 7.10.1981 the Director, Food and Supplies-cum-Joint Secretary to Government, Punjab, issued instructions Ex.D2 to all the District Food and Supplies Controller in the State of Punjab in respect of custom-milling of paddy purchased by State agencies during the crop year 1981-82. These instructions are as under:- “The matter of storage and custom-milling of paddy purchased by the State agencies viz. State Food & Supplies Department, PUNSUP and MARKFED and deliveries of resultant rice to Food Corporation of India in Central Pool has been considered and it has been decided to draw the following procedure in this regard. Instructions contained herein be followed strictly. R.S.A. No. 1423 of 1990 -7- (1) Delivery of paddy. (i)Paddy purchased by Government agencies will be distributed for purpose of custom-milling amongst various rice millers in advance. (ii)Paddy shall be moved from the mandis directly to the mill premises or at a place near to the mill to whom it has been allocated for custom-milling. (iii)The rice millers shall not be asked to start milling of paddy of Government agencies immediately and in any case not before 1.12.1981. (iv)Till the milling of paddy begins it shall be in the joint custody of the concerned procuring agency and the miller. The responsibility for the weight and maintenance of the health of stocks held in joint custody shall be that of the miller. (v)Paddy shall be issued to rice millers for custom-milling in lots after entering into agreement (form already supplied to you). The next lot of paddy would be given against proper security for milling only when the resultant rice of the previous lot of paddy has been delivered. (vi)A driage allowance of 2% shall be allowed to millers on paddy given to them”. Pursuant to the aforementioned instructions, the plaintiff- firm submitted its request Ex.D1 to the District Manager, Markfed, Faridkot stating therein that it was ready to undertake milling as per the terms and conditions of DFC. This request was accepted. As a result, R.S.A. No. 1423 of 1990 -8- the plaintiff-firm agreed to driage allowance of 2%. Pursuant thereto, requisite paddy was supplied by the defendants to the plaintiff and after its shelling/milling the rice was returned to the defendants. On or about the same time some other rice millers of the area were able to obtain benefit of 3% additional driage on the ground that the paddy supplied was found mixed with husk, sand and dust. The plaintiff-firm also felt encouraged to come up with a similar request that it be also granted additional driage of 3% as was done in the case of other rice millers/shellers. Its request was entertained by District Manager, Markfed, Faridkot, who recommended to the Head Office to give same benefit to the plaintiff-firm as had been given to M/s Dhillon Rice Mills and others. However, its request Ex.P5 was never accepted or assented to by the Head Office. It remained a recommendation simpliciter and, therefore, no right flowed under the same in favour of the plaintiff-firm. In the absence of the request of the plaintiff for additional driage not being granted, it was entitled to only 2% driage as per the terms and conditions as contained in the circular dated 7.10.1981. Once the plaintiff-firm was not granted the benefit of additional driage of 3% by the Head Office of the defendants, the civil Court was not competent to grant such a benefit on the ground that it had been granted to other similarly situated shellers/millers of the area. It is not in dispute that the other shellers/millers of the area had been duly granted benefit of 3% of the additional driage whereas it had not R.S.A. No. 1423 of 1990 -9- been done in the case of the plaintiff-firm. The case of the plaintiff-firm could not have been equated with that of the other shellers/millers of the area. In any case, the civil Court was not competent to grant the said benefit as it amounted to altering the terms of the agreement, which had been arrived at between the parties especially in relation to the benefit of driage to the extent of 2% only. In Kerala State Electricity Board and another V Kurien E. Kalathil, AIR 2000 SC 2573, it was held that the interpretation or implementation of a clause in a contract could not be the subject matter of a writ petition. The disputes about the meaning of a covenant in a contract have to be determined according to the usual principles of the Contract Act. The contract between the parties was in the realm of private law and, therefore, the disputes relating to interpretation of the terms and conditions of such a contract could not have been agitated and decided in a writ petition. The relevant observations are reproduced here-in-below:- “A statute may expressly or impliedly confer power on a statutory body to enter into contracts in order to enable it to discharge its functions. Dispute arising out of the terms of such contracts or alleged breaches have to be settled by the ordinary principles of law of contract. The fact that one of the parties to the agreement is a statutory or public body will not by itself affect the principles to be applied. The disputes about the meaning of a covenant in a contract or its enforceability have to be determined according to the usual principles of the Contract Act. Every act of a statutory body need R.S.A. No. 1423 of 1990 -10- not necessarily involve an exercise of statutory power. Statutory bodies, like private parties, have power to contract or deal with property. Such activities may not raise any issue of public law. In the present case, it has not been shown how the contract is statutory. The contract between the parties is in the realm of private law. It is not a statutory contract. The disputes relating to interpretation of the terms and conditions of such a contract could not have been agitated in a petition under Article 226 of the Constitution of India. Whether any amount is due and if so, how much and refusal of the appellant to pay it is justified or not, are not matters which could have been agitated and decided in a writ petition. The contractor should have been relegated to other remedies”. In Assistant Excise Commissioner and others V Issac Peter and others,(1994) 4 SCC 104 the Hon’ble Supreme Court held that the contract between the parties was governed by statutory provisions and, therefore, the terms and conditions of the contract were binding upon both the parties. Neither of them could depart from them. It was not open to any officer of the Government to either modify the amount or alter the said terms and conditions, not even to the Minister for Excise. In law nobody could be relieved of the obligations undertaken by him under the contract, profit and loss being normal incidents of a business. Even the doctrine of unjust enrichment could not be invoked. The rules of promissory estoppel and estoppel by conduct could not be invoked to alter or amend specific terms of R.S.A. No. 1423 of 1990 -11- contract. The doctrine of fairness and reasonableness could also not be read into the contract to which the State was a party on the ground that the State could not act unreasonably or unfairly even while acting under a contract involving State power. The relevant observations are reproduced here-in-below:- “The contract between the parties is governed by statutory provisions, i.e., provisions of the Act, the rules, the conditions of licence and the counterpart agreement. They constitute the terms and conditions of the contract. They are binding both upon the Government and the licensee. Neither of them can depart from them. It is not open to any officer of the Government to either modify, amend or alter the said terms and conditions, not even to the Minister for Excise. It is, therefore, not really necessary for our purpose to examine what precisely was the statement made by the Minister for Excise on March 19, 1981 or by the auctioning authorities at the time of auction. Even according to the licensee, the Minister merely stated that steps will be taken in the coming days to supply requisite quantities. ... ... ... It is enough to note that they were not competent to hold out any such promise nor any such promise can clothe the licensees with any legally enforceable rights. xx xx xx xx xx xx Maybe these are cases where the licensees took a calculated risk. Maybe they were not wise in offering their bids. But in law there is no basis upon which they can be relieved of the obligations undertaken by them R.S.A. No. 1423 of 1990 -12- under the contract. ... ... ... It is a business for him- profit and loss being normal incidents of a business. There is no room for invoking the doctrine of unjust enrichment in such a situation. The said doctrine has never been invoked in such business transactions. The remedy provided by Article 226, or for that matter, suits, cannot be restored to wriggle out of the contractual obligations entered into by the licensees. xx xx xx xx xx xx Learned counsel for the respondents sought to invoke the rule of promissory estoppel and estoppel by conduct. The attempt is a weak one for the said rules cannot be invoked to alter or amend specific terms of contract nor can they avail against statutory provisions. Here, all the terms and conditions of contract, being contained in the statutory rules, prevail. Learned counsel for the respondents also sought to rely upon the rule of legitimate expectation which the licensees entertained in view of the practice during previous years. Firstly, the rule cannot be invoked to modify or vary the express terms of contract, more so when they are statutory in nature. xx xx xx xx xx xx Learned counsel for respondents then submitted that doctrine of fairness and reasonableness must be read into contracts to which State is a party. It is submitted that the State cannot act unreasonably or unfairly even while R.S.A. No. 1423 of 1990 -13- acting under a contract involving State power. Now, let us see, what is the purpose for which this argument is addressed and what is the implication? The purpose, as we can see, is that though the contract says that supply of additional quota is discretionary, it must be read as obligatory -- at least to the extent of previous year's supplies -- by applying the said doctrine. It is submitted that if this is not done, the licensees would suffer monetarily. The other purpose is to say that if the State is not able to so supply, it would be unreasonable on its part to demand the full amount due to it under the contract. In short, the duty to act fairly is sought to be imported into the contract to modify and alter its terms and to create an obligation upon the State which is not there in the contract. We must confess, we are not aware of any such doctrine of fairness or reasonableness. Nor could the learned counsel bring to our notice any decision laying down such a proposition. Doctrine of fairness or the duty to act fairly and reasonably is a doctrine developed in the administrative law field to ensure the rule of law and to prevent failure of justice where the action is administrative in nature. Just as principles of natural justice ensure fair decision where the function is quasi-judicial, the doctrine of fairness is evolved to ensure fair action where the function is administrative. But it can certainly not be invoked to amend, alter or vary the express terms of the contract between the parties. ... ... ... We are, therefore, of the opinion that in case of contracts freely entered into with the State, like the present ones, there is no room for invoking the doctrine of fairness and reasonableness R.S.A. No. 1423 of 1990 -14- against one party to the contract (State), for the purpose of altering or adding to the terms and conditions of the contract, merely because it happens to be the State. In such cases, the mutual rights and liabilities of the parties are governed by the terms of the contracts (which may be statutory in some cases) and the laws relating to contracts. It must be remembered that these contracts are entered into pursuant to public auction, floating of tenders or by negotiation. There is no compulsion on anyone to enter into these contracts. It is voluntary on both sides. There can be no question of the State power being involved in such contracts. It bears repetition to say that the State does not guarantee profit to the licensees in such contracts. There is no warranty against incurring losses. It is a business for the licensees. Whether they make profit or incur loss is no concern of the State. In law, it is entitled to its money under the contract. It is not as if the licensees are going to pay more to the State in case they make substantial profits. ... ... ...” In Puravankara Projects Ltd. V Hotel Venus International and others (2007) 10 SCC 33 the Hon’ble Supreme Court reiterated that duty to act fairly which was sought to be imported into a contract to modify and/or alter its terms and/or to create an obligation upon the State Government, which was not there in the contract, was not covered by any doctrine of fairness or reasonableness. The doctrine of fairness was evolved to ensure fair action when the function was administrative but it could not be invoked to amend, alter or vary the R.S.A. No. 1423 of 1990 -15- express terms of the contract between the parties. In view of the above, the Courts below were not competent to alter the agreement so as to grant benefit of 3% additional driage to the plaintiff-firm by awarding an amount of Rs.30,137.26 Ps to the firm. However, at the same time, it is held that the learned Courts below rightly held the plaintiff-firm entitled to the amount of Rs.2,000/- on account of labour charges regarding unloading of paddy and Rs.5117.26 Ps as local charges, which had been wrongly deducted by the defendants. Resultantly, the appeal is partly allowed by modifying the judgments and decrees passed by the learned Courts below to the extent that the plaintiff-respondent was not entitled to an amount of Rs.30,137.26 Ps from the defendants on account of benefit of additional of 3% driage. The suit in that respect is, accordingly, dismissed. However, the relief granted by the learned Courts below to the plaintiff for being entitled to Rs.2,000/- on account of labour charges regarding unloading of paddy and Rs.5117.26 Ps, which had been wrongly deducted by the defendants as local charges, is upheld. There would, however, be no order as to costs. ( T.P.S. MANN ) January 25, 2010 JUDGE ajay-1 To be referred to the Reporter : YES