Case: M/S. National Seeds Corpn. Ltd Vs. M.Madhusudhan Reddy

2. Appellant - M/s. National Seeds Corporation Ltd. (NSCL) is a Government of India company. Its main functions are to arrange for production of quality seeds of different varieties in the farms of registered growers and supply the same to the farmers. The respondents own lands in different districts of Andhra Pradesh and are engaged in agriculture/seed production. They filed complaints with the allegation that they had suffered loss due to failure of the crops/less yield because the seeds sold/supplied by the appellant were defective. District Consumer Disputes Redressal Forums, Kurnool, Mehboob Nagar, Guntur, Khamman and Kakinada allowed the complaints and awarded compensation to the respondents. The appeals and the revisions filed by the appellant were dismissed by the Andhra Pradesh State Consumer Disputes Redressal Commission (for short, `the State Commission) and the National Consumer Disputes Redressal Commission respectively5.1 Respondents M. Madhusudan Reddy and K. Rambhupal Reddy claim to have purchased 46 kg. of KBSH-1 Sunflower seeds from Area Manager of the appellant at Kurnool. They undertook cultivation by adopting the recognized modes of preparing the field and irrigation and also used the prescribed fertilizer but there was germination only in 60% seeds and the height of the plants was uneven. The germination in the remaining 40% plants was slow. Not only this, flowering did not take place simultaneously. At the request of the respondents, Area Manager of the appellant inspected their field on 19.11.1999. He is said to have agreed that there was less germination and the growth of the plants was uneven, but declined to give any assurance for payment of compensation5.2 Dissatisfied with the response of the Area Manager, the respondents filed a complaint under Section 12 of the Consumer Act and prayed for award of compensation of Rs.1,79,505/- towards the cost of seeds, fertilizer and pesticides and value of the lost crop with interest at the rate of 12 per cent per annum by alleging that they did not get the expected yield because the seeds sold by the appellant were defective5.3 In the reply filed on behalf of the appellant, it was pleaded that the seeds were purchased by respondent no. 1 alone and there was no evidence of joint cultivation by the respondents. The appellant denied that the seeds were defective and pleaded that respondent No. 1 did not get the expected yield because sufficient quantity of seeds had not been used for cultivation and there were no rain during the relevant period. It was also claimed that there was no complaint from any other farmer, who had purchased the same variety of seeds5.4 By an order dated 1.12.1999 passed in IA No.141 of 1999, District Forum, Kurnool appointed Shri D. C. Rama Rao, retired Assistant Director of Agriculture as Commissioner and directed him to submit a report after inspecting the field of the respondents. The Commissioner conducted the inspection and submitted report dated 1.12.1999, the relevant portions of which are extracted below –The sunflower crop is raised under rainfed conditions. The soil is black and suitable for the Sunflower Crop. The cultivation aspects as observed is very satisfactory. The field is clean and free. The variety is said to be KBSJI the crop may be of 80 days above. Flowering is seen but it is not uniform. About 55% of the plants have flowers. About 25% of the plants have the head natured and about 10% of the plants are in the bud stage, while rest of the plants do not have flowers and there is no possibility for these plants to get flower, as they are only 3 feet height and the crop period to give flowers is overThe following are the variation, I have noticedNo.Observed %Height of theFlowers StageRemarks1.45%6 feetFlowering and grain setting is in progress and (Convex flat heads)Only two to three rows of flowers in head is setting seed2.10%4 feetFlowering and the seed setting is started.No possibility for further growth3.20%6 feetHead dropping since seed setting is over.No growth is possible4.5%4 feetHead dropping since seed setting is over.-do-5.10%4 to 6 feetIn bud stageGrowth can not be expected further6.10%3 to 4 feetNo flowering is seen.Growth also isstuntedPresence of leaf heairyness is seen in all the items except item (3) above to a certain extent i.e., 3 to 4 %In all the cases I have noticed difference in Head shape i.e, a few or convex a few a flat and a few are concaveIn all the cases I have seen the heads are not uniform in size. Twenty five percent of heads which are dropping because of full maturity are bigger in size while many are of medium sizeI have noticed 0.1% of flowers with multiple headsThere are gaps which are may be due to faulty seed or may be due to non germination of the seedIn the heads which are flat and concave are having three rows of seed setting while in the convex heads the filling or setting of seed is satisfactoryI have also seen two different plots of sunflower grown adjacent to the plot in question and are exhibiting uniformity of the plant, in height, size and opening of flower etcetra. This is an indication of a standard seedSimilar uniformity is lacking in the plot in question. In all the three plots, there prevailed uniform physical and climatelogical factors. Hence the wide variation in all the aspects as explained in the earlier paras gives a scope this seed is not standard up to the markParticularly Hybrid seed be having with such a wide variation is not idealFrom this I estimate the yield may be around 150 to 200 kgs/Ac as against the 600 to 700 kgs/Ac expected from the variety.5.5 The appellant filed objections against the Commissioners report and claimed that the assessment made by him was not based on any scientific method and the comparison with the adjacent field without having regard to the nature of soil, water facility etc. was unacceptable. The appellant also contested the Commissioners observation regarding satisfactory nature of cultivation by asserting that as per Vyavasaya Panchangam of Acharya N. G. Ranga Agriculture University, Hyderabad, 10 to 12 kgs. seeds were required for one hectare but respondent No.1 had used substantially less quantity of seeds for his holding of 21.10 acres5.6 The respondents filed their affidavits along with copies of Invoice bill H.No.000691 dated 11.6.1999, No.3 Adangal, letter dated 6.11.1999 given to the appellant, bill dated 29.6.1999 showing the purchase of fertilizers from Chaitanya Chemicals & Fertilizers, Kurnool and the photographs showing the unevenness in the plants. On behalf of the appellant, an affidavit was filed along with copies of the documents mentioned therein5.7 The District Forum rejected the appellants objection to the Commissioners report and held that the complainants (the respondents herein) have succeeded in proving that the seeds sold to them were defective resulting in loss of crop. Accordingly, the complaint of the respondents was allowed and the appellant was directed to pay Rs.1,00,000/- towards loss of crop and Rs.10,000/- towards the cost of fertilizer, pesticides, labour etc. with a stipulation that if the amount is not paid within one month, the appellant shall be liable to pay interest @ 9% per annum5.8 The State Commission dismissed the appeal and held that Commissioners report was rightly accepted by the District Forum because the appellant had not produced any evidence to controvert the findings contained therein that the respondent had taken proper steps for cultivation but did not get the expected yield due to faulty seeds5.9 The National Commission rejected the appellants plea that the only remedy available to the respondents was to file a complaint under the Seeds Act, which is a special legislations the Consumer Act, by observing that there is no provision in that Act for compensating a farmer whose crop may be adversely affected due to use of defective seeds sold by the appellant. The argument that the District Forum could not have decided the complaint without complying with the mandate of Section 13(1)(c) of the Consumer Act was negatived by the National Commission and it was held that the report of the Commissioner, who was an expert in agriculture, was rightly relied upon by the District Forum for coming to the conclusion that the crop had failed due to the use of defective seedsCivil Appeal No.3499 of 20006.1 Respondent P. V. Krishna Reddy is a grower having land in Khanpur village of Manopad Mandal of Mahabubnagar District of Andhra Pradesh. He was one of the persons selected by the appellant in March 2000 for growing `bitter gourd seeds. The appellant entered into an agreement with the respondent and assured him that by producing seeds on its behalf he will get minimum net profit of Rs.38,000/- per acre within a span of three months. In furtherance of the terms of agreement, the appellant supplied 5 kgs. of `bitter gourd foundation seeds to the respondent by charging Rs.1,852.50 towards cost of the seeds, inspection fee etc. The appellant also appointed a supervisor and the respondent sowed seeds under his supervision by spending a sum of Rs.22,470/- towards labour charges, fertilizers and pesticides. In September, 2000, officials of the appellant visited the field of the respondent and others, who had entered into similar agreements, and rejected the seeds grown by them on the pretext that the same were not fit for certification6.2 On receipt of the inspection report prepared by the officials of the appellant, the respondent contacted the Horticulture Officer, who also inspected the field and submitted a report with the conclusion that the crop had failed because the seeds were defective. The respondent then filed a complaint under the Consumer Act and prayed for issue of a direction to the appellant to pay compensation of Rs.1,38,322/- with interest at the rate of 18% per annum and compensation of Rs.1,00,000/- by alleging that he had suffered loss because the foundation seeds supplied by the appellant were defective6.3 In the reply filed on behalf of the appellant, the following objections were taken to the maintainability of the complaint:(i) that in view of the arbitration clause contained in the agreement, the only remedy available to the respondent was to apply for arbitration and the District Forum did not have the jurisdiction to entertain the complaint(ii) that the respondent had entered into an agreement for commercial production of the seeds and, as such, he cannot be treated as a `consumer within the meaning of Section 2(d) of the Consumer ActOn merits, it was pleaded that Shri M. V. Narsimha Rao, Seed Officer of NSC Kurnool had advised the respondent and other growers to remove off-types and diseased plants, which were liable to be rejected but the growers ignored his advice. It was then averred that during their visit on 8.9.2000, Shri M. V. Narsimha Rao, Shri M. V. Sudhakar and Area Manager, NSCL, Kurnool found 7% off-types seeds which were more than the prescribed standards and, therefore, their crops were rejected. The report of the Horticulture Officer was contested on the premise that the respondent did not get the seeds tested in any government laboratory6.4 District Forum, Mahabubnagar overruled the objections of the appellant by observing that the respondent had purchased the seeds for earning livelihood by self- employment and not for any commercial purpose and that availability of remedy by way of arbitration does not operate as a bar to the entertaining of a complaint filed under the Consumer Act. The District Forum also referred to the appellants plea that issue relating to quality of the seeds can be determined only by getting the samples tested in a laboratory and rejected the same by making the following observations:The complainant purchased 5 kgs of bitter gourd seeds under Ex.A-1 and sowed the seeds in an extent of 3 acres in his land. He sowed the entire seeds purchased by him. At the time of sowing, he might not have known that he had to keep back some seeds out of the seeds purchased by him as sample in the event of his approaching Forum if the seed crop was ultimately rejected by NSC. As all the seeds were sowed, he could not have taken out any seeds from the soil and produce them before the District Forum for following the procedure contemplated under Section 13(1) of C.P. Act. In those circumstances, the sample of seeds could not be sent to the appropriate Laboratory for analysis as contemplated under Section 13 of C.P. Act by the District Forum6.5. The District Forum also opined that the appellant had failed to substantiate its assertion that the respondent had not removed off types and diseased plants despite the advice given by the Seed Officer by observing that no evidence had been produced in that regard. The District Forum finally concluded that the foundation seeds supplied to the respondent were faulty and the appellant was liable to compensate him6.6 The State Commission dismissed the appeal filed by the appellant and confirmed the order passed by the District Forum. The National Commission considered the objections raised by the appellant to the maintainability of the complaint, referred to the judgments of this Court in Fair Air Engineers (P) Ltd. v. N.K. Modi (1996) 6 SCC 385 , State of Karnataka v. Vishwabharathi House Building Coop. Society (2003) 2 SCC 412 , CCI Chambers Housing Cooperative Society Ltd. v. Development Credit Bank Ltd. (2003) 7 SCC 233 and Indochem Electronic v. Additional Collector of Customs (2006) 3 SCC 721 and held that the complaint filed by the respondent was maintainable because the jurisdiction of the consumer forums is in addition to other remedies which may be available to him. The National Commission further held that the respondent is covered by the definition of `consumer contained in Section 2(d) of the Consumer Act because he did not purchase the seeds for any commercial purpose. The appellants plea that the District Forum could not have awarded compensation to the respondents without complying with Section 13(1)(c) of the Consumer Act was negatived by the National Commission by observing that after having used all the seeds for sowing the respondent was not in a position to provide sample for testing and the report of the Horticulture Officer was sufficient for proving that the foundation seeds supplied by the appellant were defectiveCivil Appeal No.4519 of 20097.1 The respondent is an agricultural labourer. He used to take the lands of other farmers on lease and cultivate the same for his livelihood. He purchased tomato seeds from the appellant in the name of the landowners. When the respondent noticed that there was no yield from the plants, he approached the appellants Manager at Vijayawada and requested him to inspect the field and assess the damages, but the latter did not respond. He then filed a complaint for award of compensation of Rs.60,000/- with interest at the rate of 12% per annum by alleging that he had suffered loss because the seeds sold by the appellant were defective7.2 The appellant controverted the claim of the respondent and pleaded that the complaint was liable to be dismissed because the District Forum was not competent to decide the issue relating to the quality of seeds. It was also pleaded that the crop had failed because while sowing the seeds the respondent did not take necessary precaution7.3 By an order dated 27.12.1995, District Forum, Khammam appointed Shri A. Jeevan Babu, Advocate as Commissioner to inspect the field of the respondent and estimate the loss, if any, sustained by him. The Advocate Commissioner requested the Principal, Agriculture College, Aswaraopet and Mandal Revenue Officer, Yerrupalem to depute an expert and an Administrative Officer of Peddagopavaram and Yerrupalem to assist him. The Principal deputed Shri P. Sesha Reddy, Associate Professor and the M.R.O. deputed two executive officers to assist the Advocate Commissioner. Notice of the date of inspection was given to the appellant but no one appeared on its behalf on the appointed day. After conducting inspection with the assistance of Shri P. Sesha Reddy and other officers, the Advocate Commissioner submitted report dated 31.1.1996, the relevant portions of which are extracted below:The field and the tomato fruits were examined by me and the Agriculture Officer and all the persons. The petitioner was also present, who told that he purchased the tomato seeds from the opposite party/respondent as usual and transplanted the same in the month of Sep. 1995 and also manured and applied pesticides as previous. The plants were sown at a distance of 3 feets from each plant. The tomato trees were grown upto 3 to 5 feets height, but no progress in the tomato fruits. The tomato fruits are small just like small bolls. There is no saleable value in the market for the said tomato fruits. The Agrl. Associate Professor Sri P . Seshi Reddy has collected the earth in the field and also trees along with the tomato fruits for testing purpose. On enquiry the petitioner told regarding the mode of cultivation that he adopted in sowing Naru applying manure and pesticides. The petitioner complainant told that he was purchasing the tomato seeds from National Seeds Corporation Ltd., Vijayawada since more than 5 years and he sustained heavy loss this year due to non- production of the tomato yield since he supply of with inferior quality of tomato seeds. I conducted Panchanama at the field to that effect on 4.1.1996Number of villagers gathered and they also opined that the petitioner complainant has sustained heavy loss this year. He has shown empty tomato seeds packet, which is available with him. Sri P. Sesha Reddy, Associate Professor, Agrl. College, Aswaraopet has sent a report which is being submitted herewith. He opined that the seed `Pusa Early Dwarf supplied by, NSC, Vijayawada to the farmers of Yerrupalem and Pedergopalem villages may not be true type and crop failure to yield true type may be due to defective seed. I returned back to Khammam on 4-1-1996 at 9-30 p.m. by passengers train7.4 The District Forum considered the material produced before it including the Commissioners report, allowed the complaint of the respondent and directed the appellant to pay him Rs.36,200/-. The State Commission and the National Commission approved the conclusion recorded by the District Forum that the respondent had suffered loss because the seeds sold by the appellant were defective. The National Commission dealt with the appellants plea that the District Forum had not complied with Section 13(1)(c) and that there was violation of the Andhra Pradesh Seeds (Control) Order, 1983 and held:It is well settled by now that under Section 13 of the Consumer Protection Act, 1986 (hereinafter referred to as `the Act for short), the burden to prove the deficiency, if any, on the part of the respondent, is on the complainant. Section 13(1)(c) provides that where a complainant alleges a defect in the goods which cannot be determined without proper analysis or test of the goods, the District Forum shall obtain a sample of the goods from the complainant, seal it and authenticate it in the manner prescribed and refer the sample so sealed to the appropriate laboratory along with a direction to make an analysis/test, whichever may be necessary. In other words, there has to be some expert opinion to prove the fact. In the present case, Dr. P. Sesha Reddy had inspected only 9 fields, the details of which have been given by him in his Report and which have been referred to in the earlier paragraph. He did not inspect the fields of other respondents. His Report is relevant insofar as the respondents in Revision Petitions Nos. 131, 135, 136, 137, 140, 142, 143 and 150 of 2003 are concerned. Insofar as respondents in the other 12 Revision Petitions, i.e., Revision Petition Nos. 132, 133, 134,138, 139, 141, 144, 145, 146, 147, 148 and 149 of 2003 are concerned, they have failed to produce any expert opinion to show that the seeds did not germinate in their fields because the seeds supplied were defective.

Court's reasoning:
16. An analysis of the above reproduced provisions shows that for achieving the object of regulating the quality of certain seeds to be sold for the purposes of agriculture including horticulture, the legislature has made provisions for specifying the minimum limits of germination and purity of notified kind or variety of seeds and the affixation of mark or label to indicate that such seed conforms to those limits, for restricting sale, etc., of any notified kind or variety of seed unless the same is identifiable as to its kind or variety and conforms to the minimum limits of germination and purity; grant of certificate by the certification agency to certain category of person; revocation of the certificate; appointment of Seed Analysts and Seed Inspectors with power to the latter to take sample of any seed of any notified kind or variety from any person selling such seed or a producer of seeds and send the same for analysis by the State Seed Laboratory or the Central Seed Laboratory. The Seed Inspector can launch prosecution for violation of any provision of the Seeds Act or any Rule made thereunder. If a person is found guilty then he can be punished with imprisonment upto a maximum period of six months or he can be visited with a penalty of fine upto Rs.1,000/- or with both. If an offence is committed by a company, then every person who, at the time of commission of offence was incharge of and was responsible to the company of the conduct of its business can be punished. Rule 13 of the Rules casts a duty on very person selling, keeping for sale, offering to sell, bartering or otherwise supplying any seed of notified kind or variety to keep complete record of each lot of seeds sold for a period of three years. He is also required to keep sample of the seed, which can be tested for determining the puritythe Seeds Act is a special legislation enacted for ensuring that there is no compromise with the quality of seeds sold to the farmers and others and provisions have been made for imposition of substantive punishment on a person found guilty of violating the provisions relating the quality of the seeds, the legislature has not put in place any adjudicatory mechanism for compensating the farmers/growers of seeds and other similarly situated persons who may suffer loss of crop or who may get insufficient yield due to use of defective seeds sold/supplied by the appellant or any other authorised person. No one can dispute that the agriculturists and horticulturists are the largest consumers of seeds. They suffer loss of crop due to various reasons, one of which is the use of defective/sub- standard seeds. The Seeds Act is totally silent on the issue of payment of compensation for the loss of crop on account of use of defective seeds supplied by the appellant and others who may obtain certificate under Section 9 of the Seeds Act. A farmer who may suffer loss of crop due to defective seeds can approach the Seed Inspector and make a request for prosecution of the person from whom he purchased the seeds. If found guilty, such person can be imprisoned, but this cannot redeem the loss suffered by the farmer23. It can thus be said that in the context of farmers/growers and other consumer of seeds, the Seeds Act is a special legislation insofar as the provisions contained therein ensure that those engaged in agriculture and horticulture get quality seeds and any person who violates the provisions of the Act and/or the Rules is brought before the law and punished. However, there is no provision in that Act and the Rules framed thereunder for compensating the farmers etc. who may suffer adversely due to loss of crop or deficient yield on account of defective seeds supplied by a person authorised to sell the seeds. That apart, there is nothing in the Seeds Act and the Rules which may give an indication that the provisions of the Consumer Act are not available to the farmers who are otherwise covered by the wide definition of `consumer under Section 2(d) of the Consumer Act. As a matter of fact, any attempt to exclude the farmers from the ambit of the Consumer Act by implication will make that Act vulnerable to an attack of unconstitutionality on the ground of discrimination and there is no reason why the provisions of the Consumer Act should be so interpreted26. Since the farmers/growers purchased seeds by paying a price to the appellant, they would certainly fall within the ambit of Section 2(d)(i) of the Consumer Act and there is no reason to deny them the remedies which are available to other consumers of goods and services33. What needs to be emphasized is that the appellant had selected a set of farmers in the area for growing seeds on its behalf. After entering into agreements with the selected farmers, the appellant supplied foundation seeds to them for a price, with an assurance that within few months they will be able to earn profit. The seeds sown under the supervision of the expert deputed by the appellant. The entire crop was to be purchased by the appellant. The agreements entered into between the appellant and the growers clearly postulated supply of the foundation seeds by the appellant with an assurance that the crop will be purchased by it. It is neither the pleaded case of the appellant nor any evidence was produced before any of the Consumer Forums that the growers had the freedom to sell the seeds in the open market or to any person other than the appellant. Therefore, it is not possible to take the view that the growers had purchased the seeds for resale or for any commercial purpose and they are excluded from the definition of the term `consumer. As a matter of fact, the evidence brought on record shows that the growers had agreed to produce seeds on behalf of the appellant for the purpose of earning their livelihood by using their skills and labourA reading of the plain language of that section shows that the District Forum can call upon the complainant to provide a sample of goods if it is satisfied that the defect in the goods cannot be determined without proper analysis or test. After the sample is obtained, the same is required to be sent to an appropriate laboratory for analysis or test for the purpose of finding out whether the goods suffer from any defect as alleged in the complaint or from any other defect. In some of these cases, the District Forums had appointed agricultural experts as Court Commissioners and directed them to inspect the fields of the respondents and submit report about the status of the crops. In one or two cases the Court appointed Advocate Commissioner with liberty to him to avail the services of agricultural experts for ascertaining the true status of the crops. The reports of the agricultural experts produced before the District Forum unmistakably revealed that the crops had failed because of defective seeds/foundation seeds. After examining the reports the District Forums felt satisfied that the seeds were defective and this is the reason why the complainants were not called upon to provide samples of the seeds for getting the same analysed/tested in an appropriate laboratory. In our view, the procedure adopted by the District Forum was in no way contrary to Section 13(1)(c) of the Consumer Act and the appellant cannot seek annulment of well-reasoned orders passed by three Consumer Forums on the specious ground that the procedure prescribed under Section 13(1)(c) of the Consumer Act had not been followed36. It may also be mentioned that there was abject failure on the appellants part to assist the District Forum by providing samples of the varieties of seeds sold to the respondents. Rule 13(3) casts a duty on every person selling, keeping for sale, offering to sell, bartering or otherwise supplying any seed of notified kind or variety to keep over a period of three years a complete record of each lot of seeds sold except that any seed sample may be discarded one year after the entire lot represented by such sample has been disposed of. The sample of seed kept as part of the complete record has got to be of similar size and if required to be tested, the same shall be tested for determining the purity. The appellant is a large supplier of seeds to the farmers/growers and growers. Therefore, it was expected to keep the samples of the varieties of seeds sold/supplied to the respondents. Such samples could have been easily made available to the District Forums for being sent to an appropriate laboratory for the purpose of analysis or test. Why the appellant did not adopt that course has not been explained. Not only this, the officers of the appellant, who inspected the fields of the respondents could have collected the samples and got them tested in a designated laboratory for ascertaining the purity of the seeds and/or the extent of germination, etc. Why this was not done has also not been explained by the appellant. These omissions lend support to the plea of the respondents that the seeds sold/supplied by the appellant were defective39. The reasons assigned by the National Commission in the aforementioned three cases are similar to the reasons assigned by the State Commission which were approved by this Court in Maharashtra Hybrid Seeds Company Ltd. v. Alavalapati Chandra Reddy (supra) and in our view the proposition laid down in those cases represent the correct legal position