Letters Patent Appeal No.380 OF 2002. **** Against the judgment and order dated 13th December, 2001 passed by the learned Single Judge in CWJC No. 8876 of 2000. **** Harinagar Sugar Mills Ltd., Mumbai through its Manager S.N. Poddar & Anr. ------------------- Appellants Versus The Union of India & Ors -------------------- Respondents. **** For the appellants:- M/s Y.V. Giri, Sr. Advocate, D.P. Verma, R.K. Agarwal, Jyoti Saran and D. Chapgar, Advocate. For the Union of India:- Mr. Sarvadeo Singh, C.G.C. For the F.C.I.:- Mr Prabhakar Tekriwal, Advocate. ***** P R E S E N T THE HON'BLE MR. JUSTICE BARIN GHOSH AND THE HON'BLE MR. JUSTICE C.M.PRASAD Barin Ghosh and C.M. Prasad, JJ.- Heard learned counsel for the parties. If there is a contract for sale, three elements are essential, namely, parties, property and price. The purchaser must agree to purchase from the seller and, at the same time, the seller must agree to sell to the purchaser. The property agreed to be sold should be ascertained by both the seller and the purchaser. The price to be paid and received should also be ascertained and agreed by the both. In the absence of any of these elements, the contract for sale will fail. - 2 - Essential Commodities Act is not a deterrent for production or manufacture of essential commodities. The same however, is a deterrent in the matter of choosing the buyer of essential commodities. Producers or manufacturers of essential commodities have no market. They are bound to sell essential commodities to the buyer to be nominated by the Central Government. Inasmuch as, producers or manufacturers of essential commodities have no market, there is no known method of fixing the price of essential commodities. The Act, therefore, requires the Central Government to determine the price of essential commodities. The legislature while making the Act has laid down the principles upon which price of essential commodities is required to be fixed. The question is whether sale of essential commodities to a buyer to be chosen by the Central Government and at a price to be determined by the Central Government is or is not sale. A Constitution Bench of the Hon’ble Supreme Court comprising seven Hon’ble Judges in the case of M/s Vishnu Agencies (Pvt.) Ltd. Vs. Commercial Tax Officer & Ors., reported in AIR 1978 Supreme Court 449, has held that even a statutory sale may have some modicum of consensuality so as to remain a sale in the eye of law and consequently would be leviable to sale tax. Therefore, sale of essential commodities is selling of such - 3 - commodities within the meaning of the provisions of law dealing with sale of goods would be the logical conclusion. A Full Bench of this Court in the case of Vishnu Sugar Mills Ltd. Vs. The Food Corporation of India & Anr., reported in 1986 P.L.J.R. 1045, has held so. In the instant case, the appellant is a manufacturer of sugar, an essential commodity. A part of the sugar manufactured by the appellant can be sold by the appellant in the open market and accordingly, in relation to that part of sugar manufactured by it, the appellant can choose its buyer and can fix the price of sugar to be sold to such chosen buyer, which price is normally fixed on the basis of the price prevalent in the market depending upon supply and demand. The remaining part of sugar manufactured by the appellant cannot be sold by the appellant to any one, except to the nominee of the Central Government and at a price to be determined by the Central Government. Such sugar is known as ‘levy sugar’. As the appellant is obliged to sell levy sugar to the nominee of the Central Government at the price fixed by the Central Government, the other sugar mills manufacturing sugar in this country have similar obligation in relation to that part of sugar manufactured by them, which is levy sugar. The condition prevalent in the country for manufacture of sugar varies from place - 4 - to place. In order to fix price of levy sugar, in the background of such variable conditions, the Central Government fixes price of levy sugar on zone wise basis. Such fixation is, however, notified by one composite Notification. The Central Government is required to fix the price of levy sugar once in a sugar year, normally starting from the month of July and stretching up to the month of August of the next year. However, there is no hard and fast rule that the Central Government can only once fix the price of levy sugar for a particular sugar year. As has been admitted before us and as it appears from the judgment of the Hon’ble Supreme Court rendered in the case of Shri Malaprabha Cooperative Sugar Factory Ltd. Vs. Union of India & Anr., reported in (1994) 1 SCC 648, for the sugar year 1975-76, the Central Government fixed price of levy sugar thrice by Notifications dated 29th of November, 1975, 9th of February, 1976 and 3rd of August, 1976. Even for the year, 1977- 78 the price of levy sugar was fixed twice by Notifications dated 22nd of December, 1977 and 1st of March, 1978. A look at these Notifications would make it amply clear that the subsequent notification does not supersede the previous Notification. Though the sugar year commences from the month of July of a particular year, as such the sugar year 1975 - 1976 started from August, 1975, but the price of levy sugar for the year 1975-76 was fixed - 5 - for the first time on 29th of November, 1975. By reason of fixation of price by Notification dated 29th of November, 1975, any sale of levy sugar for the sugar year 1975-76 had to be concluded at the price fixed by the Notification dated 29th of November, 1975, but only up to 8th of February, 1976. The sale of levy sugar for the sugar year 1975-76 concluded on or after 9th of February, 1976 but before 3rd of August, 1976 could only be concluded at the price fixed by the Notification dated 9th of February, 1976. But sale of levy sugar during the sugar year, 1975-76 concluded on or after 3rd of August, 1976 had to be concluded at the price fixed by the Notification dated 3rd of August, 1976. The said system had been and still is in vogue. After the Notification dated 28th November, 1974 was issued fixing the price of levy sugar for the sugar year 1974-75, a new pricing policy was introduced. On the basis of the said new pricing policy, the price of levy sugar for the sugar year 1975-76, 1976-77 & 1977-78, with which we are concerned here, had been fixed. Shri Malaprabha Cooperative Sugar Factory Ltd. and 30 other sugar manufacturers approached Courts challenging fixation of the price of sugar under the said new pricing policy. Ultimately the matters went before the Hon’ble Supreme Court and the Hon’ble Supreme Court by its judgment and order rendered in Shri Malaprabha Coop. Sugar Factory Ltd. (supra) held that the notifications fixing price (except the one dated 28th November, - 6 - 1974) cannot be upheld and the reason for leaving out the Notification dated 28th November, 1974 was that the same came to be issued before the new pricing policy was introduced. The Hon’ble Supreme Court then directed the Union of India to amend the Notifications taking into account the liability of manufacturers under Clause 5-A of the Sugarcane (Control) Order, 1966 as regards cane price and to refix the price of levy sugar after taking into consideration the factors mentioned in Section 3 (3-C) of the Act. After having had issued the said direction, the Hon’ble Supreme Court observed that normally it would have quashed the Notifications, but quashing of the Notifications would lead to nebulous situation during the interregnum till refixation of price, and, accordingly, they were obliged to give direction for amending the Notifications. While issuing the said direction, the Hon’ble Supreme Court, as noted by their Lordships in paragraph 110 of the reported judgment, took note of the passage occurring at page 294 of Judicial Remedies in Public Law by Clive Lewis, which suggested, amongst others, that quashing of decisions may impose heavy administrative burdens on the administration, divert resources towards reopening of decisions and lead to increased and unbudgeted expenditure. In terms of the said decision of the Hon’ble Supreme Court, on 22nd February, 1995, the Central Government issued Notifications relating to the sugar years in question. In the said - 7 - Notifications, the price of levy sugar applicable to manufacturers situate in North Bihar zone had been reduced from the price of levy sugar as had been fixed by the earlier Notifications pertaining to the said sugar years. The Food Corporation of India, being the nominee of the Central Government, received levy sugar for the sugar years in question from the appellant. It paid the price payable on account of such levy sugar as was fixed by the Notifications issued by the Central Government during the relevant sugar years. No sooner the Central Government published the Notifications dated 22nd February, 1995 pertaining to the relevant sugar years, the Food Corporation of India felt that it has made excess payment to the appellant in relation to supplies effected by it during the relevant sugar years, almost 20 years back. Proceeding on such understanding the Food Corporation of India purported to recover the excess payment alleged to have been made by it from the current bills of the appellant in relation to sale of levy sugar by the appellant to the Food Corporation of India for the sugar year 1995- 96. This action on the part of the Food Corporation of India led to presentation of a writ petition by the appellant in this Court, which was registered as CWJC No. 9010/1996. The said writ petition was taken up for hearing on 21st October, 1997 when a learned Single Judge of this Court in His Lordship’s order recorded the principal contentions of the appellant, as had been put forward in - 8 - the said writ petition, and then recorded the submissions of the learned counsel appearing on behalf of the Union of India. After having had recorded the submission of the learned counsel for the Union of India that the Union of India is coming out with a fresh Notification within a period of two months, the learned Single Judge, while directed the Union of India to issue such a notification, also directed the Food Corporation of India to recalculate the amount of the price within a period of two weeks and thereupon to pay to the appellant, if any amount is found due by the Food Corporation of India to the appellant. The said state of affair clearly demonstrates that the questions raised in the said writ petition by the appellant had not been gone in by the Writ Court. On the other hand submission made by the Union of India impressed the learned Single Judge that in view of the fresh notification, which is due within a period of two months from the date of the order of the learned Single Judge, there is a possibility for the appellant of obtaining some payment from Food Corporation of India, when the Food Corporation of India in the meantime on the basis of the 1995 Notifications had already adjusted a part of the amount due to the appellant on account of supplies effected during the sugar year 1995-96 towards alleged over payment. The learned Judge thus concluded the matter. The Union of India in 1999 published yet another set of - 9 - notifications relating to the concerned sugar years, but thereby did not reduce the price of levy sugar from what it had indicated in the Notifications published in 1995 for the relevant sugar years for North Bihar zone and the appellant was thus constrained to come to this Court once again by filing a yet another writ petition registered as CWJC No. 8876 of 2000. Before filing the said writ petition, a petition to review the order dated 21st October, 1997 passed in the earlier writ petition was filed which was disposed of by granting liberty to the appellant to file a fresh writ petition agitating all points. By the judgment and order under appeal the second writ petition has been dismissed by a learned Judge of this Court principally on the ground that in the judgment of the Hon’ble Supreme Court in Shri Malaprabha Coop. Sugar Factory Ltd. (supra), the Hon’ble Supreme Court directed the Central Government to replace the notifications pertaining to the relevant sugar years and that having been replaced and there being no contention that the price fixed by the replacement notifications is contrary to law, there is hardly any scope of going into the questions raised in the writ petition. Being aggrieved thereby the appellant is before us. It is the principal contention of the respondents that the second writ petition (CWJC No. 8876/2000) was barred by res judicata and, accordingly, the writ petition on that ground alone should have - 10 - been dismissed. The fact, however, remains that the learned Judge, who passed the judgment and order under appeal was not pursuaded to accept such contention. However, a meaningful reading of the order passed in the first writ petition would amply demonstrate that the appellant had ventilated his grievance which had been repeated in the second writ petition. The Court while dealing with the first writ petition believed the submission of the Union of India that the notification to be published by the Central Government within two months may reduce the price and, accordingly, the appellant may get back what the appellant is seeking to get back. If such an order can stand as res judicata that would tantamount to give premium to unjust and improper submission made to Court for the purpose of derailing the issues. A look at the order of the Hon’ble Supreme Court rendered in the case of Shri Malaprabha Sugar Cooperative Ltd. (supra) would amply make it clear that the Hon’ble Supreme Court did not direct replacement of any of the notifications published for fixing price of levy sugar for the relevant years. The Hon’ble Supreme Court in no uncertain terms held that the notifications in question are not sustainable. Despite that, the Hon’ble Supreme Court did not strike down any of the notifications but, at the same time, directed to amend the same. The Hon’ble Supreme Court did not strike down the notifications being conscious of the fact that the same may tantamount to - 11 - reopening of matters which have been concluded finally. The Central Government while issuing the notifications of 1995 and 1999 made the same effective from the date of their publication. The notifications nowhere say that they supersede or replace all other notifications issued prior to the said notifications pertaining to the relevant sugar years. The question is in such event, how the 1995 and 1999 Notifications would be applied in relation to sale of levy sugar which stood concluded much prior to the date of publication of the said Notifications? As aforesaid, sale is effected when there is identification of the buyer and the seller, ascertainment of the product to be sold and purchased and the price as agreed upon between the seller and the buyer. In the absence of any of these elements, as aforesaid, sale cannot be effected. Having regard to the fact that the sale in the instant case is a forced sale, while the product was identified, the seller and the purchaser were also identified, but the matter pertaining to price had not been agreed upon by those, who had approached the Hon’ble Supreme Court. Sale by those, who still disputed the price remained inconclusive. Sale by others stood concluded upon acceptance of the buyer, identification of the product and the price to be paid therefor. Keeping the same in mind, the Hon’ble Supreme Court consciously did not quash the notifications fixing the sale price. And at the same time it did not direct replacement - 12 - of the notifications fixing the sale price. It only permitted an amendment to be effected. All those efforts were made with a view not to upset things which stood concluded in law otherwise. The Central Government, being alive of the said situation and the diction of the Hon’ble Supreme Court, did not give retrospective effect to the 1995 and 1999 Notifications. It made those notifications prospective and thereby allowed the transactions of sale of levy sugar for the relevant sugar years to be concluded by those parties, who disputed fixation of price of levy sugar fixed by the notifications published during the relevant years. There being no contention by any one that the appellant or any sugar mill established in the zone known as North Bihar zone questioned fixation of price of levy sugar for the relevant years, in law, sale of levy sugar by the appellant and purchase thereof by the Food Corporation of India at the price fixed by the Central Government by the Notifications issued during the relevant years stood concluded and could not be reopened either at the instance of the appellant, i.e. the seller or at the instance of the Food Corporation of India, i.e. the buyer. The conclusion, therefore, would be that the Food Corporation of India was under a misimpression that by reason of the Notifications published in 1995 or 1999, the price of sugar sold by the appellant to it during the relevant years stood altered and, accordingly, the Food Corporation of India is entitled to claim from - 13 - the appellant refund of price paid by it to the appellant in respect of sale of levy sugar during the relevant years. Price of goods sold and delivered, in the instant case, was paid by legal tender, which was not goods and, accordingly, there was no scope of exercising lien thereon. Furthermore, a buyer in law has no lien on goods of a seller, being the subject matter of a separate sale transaction. It is true that a buyer is entitled to put forward a claim of set off but not in respect of a debt which is not legally recoverable, being barred by limitation, and, in the instant case, grossly. Appropriation can be made even against a barred debt, but when money is tendered without specifying towards which debt the tender has been made. In the instant case there was no tender. In the circumstances the conclusion would be that without any authority of law but on the basis of utter misconception, the Food Corporation of India wrongfully and illegally refused to pay price of levy sugar due and payable by it to the appellant for sale affected by the appellant to the Food Corporation of India during the sugar year 1995-96. The question is whether a Writ Court would assist the appellant in such a matter or it is required for the appellant to take recourse to the general law of filing a civil suit and thereupon to pursue the same. In a recent judgment rendered by the Hon’ble Supreme Court in the case of Food Corporation of India & Anr. v. Seil - 14 - Ltd. & Ors., reported in (2008) 3 SCC 440, a similar question came to be decided by the Hon’ble Supreme Court. The Hon’ble Supreme Court held that a claim to set off in respect of alleged defective supplies effected long time back is, ex facie, an error on the face of records, and, therefore, the Writ Court is competent to grant appropriate relief. In the instant case, money due has been withheld without any legal right. Soon after the money otherwise admittedly due to the appellant was withheld by the Food Corporation of India, the appellant approached this Court by filing CWJC No. 9010/1996 but, as aforesaid, the said writ petition was disposed of on the basis of an impression given by the Central Government that the fresh notification may yield refund to the appellant and thereupon made the appellant to wait until the 1999 Notification was published and immediately thereafter the appellant approached this Court by filing the second writ petition in the year 2000 and before that seeking review of the order passed on the earlier Writ Petition. For the reasons, as above, while we allow the appeal and set aside the judgment and order under appeal, we also allow the writ petition by declaring that withholding of any part of the otherwise admitted dues and claims of the appellant on account of supply of levy sugar to the Food Corporation of India during the sugar year 1995-96 on the ground that price of levy sugar sold and delivered by the appellant to Food Corporation of India during the - 15 - sugar years 1975-76, 1976-77 and 1977-78 stood altered by the Notifications of 1995 or of 1999 is illegal. The Food Corporation of India is obliged to pay the same to the appellant without any demur forthwith and, at the same time, is obliged to compensate the appellant for the loss incurred by it for wrongfully withholding of the said amount, which can only be a quantified in the form of interest, which having regard to the facts and circumstances of case, we fix at 10% per annum. We hope and expect that the Food Corporation of India shall discharge its obligations as above within a reasonable time and, according to us, such reasonable time in no circumstances can stretch beyond three months from today. No one seeks a certificate under Article 132(1) of the Constitution of India. ( Barin Ghosh, J. ) ( Chandra Mohan Prasad, J. ) Patna High Court. The 30th July, 2008. NAFR DK/DKS.