Case: Hindustan Vegetable Oils Corpn. Ltd Vs. Progressive Industries

us see whether Section 22 qualifies Section 6 in any manner or whether it makes the appellant-Corporation liable to issue Declaration Forms for purchases made prior to 23-4-1984. The first thing to be noticed is that Section 22 and Section 6 being provisions of the same enactment have to be construed harmoniously; the effort should be to give effect to both. Be that as it may, let us see what does Section 22 say. It says that a contract entered into by the Ganesh Flour Mills Company Limited, with respect to the said mills, for any service, sale or supply and which was in force immediately before the appointed day (28-1-1984) shall on and from the expiry of a period of thirty days from the appointed day cease to have effect unless such contract is, before the expiry of the said period, ratified in writing by the Central Government or the government company (appellant-Corporation), as the case may be. Even where the Central Government or the appellant-Corporation ratifies such contract, it is open to them to make such alterations or modifications therein as they may think fit. The proviso to Section 22 says that the Central Government or the appellant-Corporation shall not omit to ratify a contract and shall not make any alteration or modification in the contract while ratifying it, unless it is satisfied that such contract is unduly onerous or has been entered into in bad faith or is detrimental to the interests of the Central Government or the government company. The proviso further says that before refusing to ratify or before effecting any alteration or modification in the contract, the Central Government/appellant-Corporation shall give the parties to the contract reasonable opportunity of being heard and shall record its reasons for refusal to ratify or for effecting alteration/modification, as the case may be. The High Court has understood Section 22 to mean that unless the existence of circumstances mentioned in proviso (a) are made out in these proceedings, the appellant-Corporation would be bound by any contract made by the Ganesh Flour Mills for supply of any goods prior to its vesting in the Central Government. With respect, we are unable to agree. A reading of Section 22 shows that unless ratified in writing within thirty days of the appointed day, no contract entered into by the Ganesh Flour Mills prior to 28-1-1984 (appointed day) shall be binding upon the Central Government/government company. The proviso, no doubt, states that the Central Government/appellant-Corporation shall not omit to ratify a contract and shall not effect any alteration or modification therein unless it is satisfied that such contract is unduly onerous or has been entered into in bad faith or is detrimental to their interest which satisfaction has to be arrived at after hearing the parties to the contract; the reasons for such action are also required to be recorded in writing. But this only means that if a particular contract is refused to be ratified or is altered or modified in any particular manner, the affected party (i.e. party to such contract) shall be entitled to question the same in accordance with law. But the writ petitions - from which these appeals arise were not such proceedings. These were not the writ petitions questioning the omission of the Central Government/appellant-Corporation to ratify a particular contract or contracts. The writ petitions - all of them - were filed for a different purpose, viz., for a direction to the appellant-Corporation to issue Declaration Forms (Form III-Kha) pursuant to the supply orders issued by the Ganesh Flour Mills (prior to its vesting under Section 3 of the Acquisition Act). Whereas the vesting in Central Government - as also in the appellant-Corporation - was in the year 1984, the present writ petitions were filed in 1987 (one writ petition) and in 1990 (the rest). If the petitioners wanted to question the non-ratification of any particular contract within thirty days of the date of vesting, they should have come to Court soon after the expiry of the said thirty days from the date of vesting. If they had done so, question would then have arisen whether Section 22 is attracted to such a contract, whether the contract which they were seeking to enforce was "a contract ... for any service, sale or supply and in force immediately before the appointed day" and so on. Such a writ petition would also have given an opportunity to the Central Government and the appellant-Corporation to explain and put forward their reasons for not ratifying the contract. We are of the opinion that having regard to the pleadings in the present writ petitions and the prayers asked for therein, the enquiry contemplated by Section 22 could not have been done or entertained in these writ petitions. The position, therefore, is that on account of non-ratification, the contract - assuming that it was a contract in force before the appointed day - ceased to have effect on expiry of thirty days from the appointed day, i.e., even before the appellant-Corporation came into the picture. The remedy of the respondents-writ petitioners in relation to the period prior to 23-4-1984 is not against appellant-Corporation. Any claim of theirs in respect of the period prior to the date of vesting (28-1-1984) can only be against the Central Government which was in management of the said company by virtue of the notification issued under the IDR Act. In this context, there may be a distinction between Central Government which has become the owner of the Ganesh Flour Mills by virtue of the vesting provided by Section 3 of the Acquisition Act and the Central Government which was in management of the said company by virtue of the notification under Section 18-AA of the IDR Act. Be that as it may, we need not pursue this line of thought inasmuch as these appeals are filed only by the appellant-Corporation and not by the Central Government. Accordingly, we confine ourselves to the liability of the appellant-Corporation alone

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]We are of the opinion that having placed orders for purchase of tins undertaking to supply Declaration Forms in Form III-Kha and having received the supplies on that basis, it is not open to the appellant-Corporation to refuse to issue the said Declaration Forms on the plea that they have used the tins for purposes other than those mentioned in Section 4-B(2). The user for purposes other than those mentioned in Section 4-B(2) was a voluntary act on the part of the Corporation. Therefore, it alone should take the blame for it and be responsible for consequences flowing therefrom. The Corporation ought not to have made such a representation while purchasing that quantity of tins which it did not intend to use for purposes specified in Section 4-B(2). The High Court cannot, therefore, be held to be in error in issuing the direction which it did. We, however, wish to provide a modification to the direction issued by the High Court in view of the provisions of sub-section (6) of Section 4-B of the Uttar Pradesh Act and particularly in view of the time-lapse since the controversy has arisen. In all likelihood, the assessments of the respondents under the Uttar Pradesh Act must have been completed long ago and the question of filing the Declaration Forms now, by the respondents, appears to be an impracticable thing. The modification is this : If the appellant is not in a position to issue the Declaration Forms, it may not issue them but in such a case it shall reimburse the respondents-selling dealers in full for the difference of amount of tax which the respondents were made to pay on account of the appellants failure to furnish the said Declaration Forms and also in respect of interest or the penalties, if any, imposed in that behalf and paid by them. We cannot appreciate the argument of Shri Nariman that the appellant-Corporation should be made liable only for reimbursing the difference of tax amount but not the interest. We see no justification behind such a plea. Indeed, if the selling dealers have been made liable to any penalties on account of their failure to produce in their assessments the Declaration Forms (which ought to have been furnished by the appellant-Corporation to such selling dealers) then the appellant-Corporation shall equally be liable to reimburse the selling dealers in that behalf asfirst thing to be noticed is that Section 22 and Section 6 being provisions of the same enactment have to be construed harmoniously; the effort should be to give effect to both. Be that as it may, let us see what does Section 22 say. It says that a contract entered into by the Ganesh Flour Mills Company Limited, with respect to the said mills, for any service, sale or supply and which was in force immediately before the appointed day (28-1-1984) shall on and from the expiry of a period of thirty days from the appointed day cease to have effect unless such contract is, before the expiry of the said period, ratified in writing by the Central Government or the government company (appellant-Corporation), as the case may be. Even where the Central Government or the appellant-Corporation ratifies such contract, it is open to them to make such alterations or modifications therein as they may think fit. The proviso to Section 22 says that the Central Government or the appellant-Corporation shall not omit to ratify a contract and shall not make any alteration or modification in the contract while ratifying it, unless it is satisfied that such contract is unduly onerous or has been entered into in bad faith or is detrimental to the interests of the Central Government or the government company. The proviso further says that before refusing to ratify or before effecting any alteration or modification in the contract, the Central Government/appellant-Corporation shall give the parties to the contract reasonable opportunity of being heard and shall record its reasons for refusal to ratify or for effecting alteration/modification, as the case may be. The High Court has understood Section 22 to mean that unless the existence of circumstances mentioned in proviso (a) are made out in these proceedings, the appellant-Corporation would be bound by any contract made by the Ganesh Flour Mills for supply of any goods prior to its vesting in the Central Government. With respect, we are unable to agree. A reading of Section 22 shows that unless ratified in writing within thirty days of the appointed day, no contract entered into by the Ganesh Flour Mills prior to 28-1-1984 (appointed day) shall be binding upon the Central Government/government company. The proviso, no doubt, states that the Central Government/appellant-Corporation shall not omit to ratify a contract and shall not effect any alteration or modification therein unless it is satisfied that such contract is unduly onerous or has been entered into in bad faith or is detrimental to their interest which satisfaction has to be arrived at after hearing the parties to the contract; the reasons for such action are also required to be recorded in writing. But this only means that if a particular contract is refused to be ratified or is altered or modified in any particular manner, the affected party (i.e. party to such contract) shall be entitled to question the same in accordance with law. But the writ petitions - from which these appeals arise were not such proceedings. These were not the writ petitions questioning the omission of the Central Government/appellant-Corporation to ratify a particular contract or contracts. The writ petitions - all of them - were filed for a different purpose, viz., for a direction to the appellant-Corporation to issue Declaration Forms (Form III-Kha) pursuant to the supply orders issued by the Ganesh Flour Mills (prior to its vesting under Section 3 of the Acquisition Act). Whereas the vesting in Central Government - as also in the appellant-Corporation - was in the year 1984, the present writ petitions were filed in 1987 (one writ petition) and in 1990 (the rest). If the petitioners wanted to question the non-ratification of any particular contract within thirty days of the date of vesting, they should have come to Court soon after the expiry of the said thirty days from the date of vesting. If they had done so, question would then have arisen whether Section 22 is attracted to such a contract, whether the contract which they were seeking to enforce was "a contract ... for any service, sale or supply and in force immediately before the appointed day" and so on. Such a writ petition would also have given an opportunity to the Central Government and the appellant-Corporation to explain and put forward their reasons for not ratifying the contract. We are of the opinion that having regard to the pleadings in the present writ petitions and the prayers asked for therein, the enquiry contemplated by Section 22 could not have been done or entertained in these writ petitions. The position, therefore, is that on account of non-ratification, the contract - assuming that it was a contract in force before the appointed day - ceased to have effect on expiry of thirty days from the appointed day, i.e., even before the appellant-Corporation came into the picture. The remedy of the respondents-writ petitioners in relation to the period prior to 23-4-1984 is not against appellant-Corporation. Any claim of theirs in respect of the period prior to the date of vesting (28-1-1984) can only be against the Central Government which was in management of the said company by virtue of the notification issued under the IDR Act. In this context, there may be a distinction between Central Government which has become the owner of the Ganesh Flour Mills by virtue of the vesting provided by Section 3 of the Acquisition Act and the Central Government which was in management of the said company by virtue of the notification under Section 18-AA of the IDR Act. Be that as it may, we need not pursue this line of thought inasmuch as these appeals are filed only by the appellant-Corporation and not by the Central Government. Accordingly, we confine ourselves to the liability of the appellant-Corporation alone