Kerala Rice Miller's Association Kalady v State of Kerala and Kerala Civil Supplies Corporation Ltd and others

## **IN THE HIGH COURT OF KERALA AT ERNAKULAM** ## **PRESENT** ## **THE HONOURABLE SMT. JUSTICE P.V.ASHA** **TUESDAY, THE 03RD DAY OF NOVEMBER 2020 / 12TH KARTHIKA, 1942** **WP(C).No.15897 OF 2019(J)** ## **PETITIONER:** **KERALA RICE MILLER'S ASSOCIATION KALADY, ERNAKULAM DT, KERALA-683 574, REPRESENTED BY ITS SHRI VARKEY PETER** **BY ADVS. SRI.E.K.NANDAKUMAR (SR.) SRI.M.GOPIKRISHNAN NAMBIAR SRI.K.JOHN MATHAI SRI.JOSON MANAVALAN SRI.KURYAN THOMAS SRI.PAULOSE C. ABRAHAM SRI.JAI MOHAN** ## **RESPONDENTS:** **1 STATE OF KERALA REPRESENTED BY THE SECRETARY, DEPARTMENT OF FOOD AND CIVIL SUPPLIES, SECRETARIAT, THIRUVANTHAPURAM-695 001, KERALA 2 KERALA CIVL SUPPLIES CORPORATION LTD(SUPPLY CO) MAVELI BHAVAN, GANDHINAGAR, KOCHI-682 020, REPRESENTED BY ITS CHAIRMAN AND MANAGING DIRECTOR 3 ADDITIONAL GENERAL MANAGER (MARKETING), KERALA CIVIL SUPPLIES CORPORATION LTD. (SUPPLY CO), MAVELI BHAVAN, GANDHINAGAR, KOCHI-682 020 ADDL *K.E.AGRO PRODUCTS PRIVATE LIMITED R4 REPRESENTED BY ITS MANAGING DIRECTOR THOMAS MATHEW, AGED 67, S/O.VARKEY THOMAS, MOONUKANDATHIL (H), ARPUKKARA P.O., KOTTAYAM ADDL *GEEYEM AGRO MILLS, R5 REPRESENTED BY ITS MANAGING PARTNER THOMAS MATHEW, AGED 67, S/O.VARKEY THOMAS, MOONUKANDATHIL (H), ARPUKKARA P.O., KOTTAYAM** **WP(C).No.15897 OF 2019(J)** 2 **(ADDITIONAL R4 AND R5 IS SOUGHT TO BE IMPLEADED AS PER ORDER DATED 03.11.2020 IN I.A.NO.6 OF 2020)** **BY SMT.MOLLY JACOB,SC, SUPPLYCO BY ADV. K.R.VINOD** ## **OTHER PRESENT:** **SMT.PRINCY XAVIER, GP** **THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 21-10-2020, THE COURT ON 03-11-2020 DELIVERED THE FOLLOWING:** **WP(C).No.15897 OF 2019(J)** 3 ## **P.V.ASHA J.** ## **-----------------------------------W.P.(C).No.15897 of 2019** **-------------------------------------** Dated this the 3[rd] day of November, 2020 **==> picture [124 x 10] intentionally omitted <==** Petitioner is an association of Mill owners who have executed agreements with the Civil Supplies Corporation (the 2[nd] respondent) for processing of paddy procured by the 2[nd] respondent and delivering rice out of the same, in tune with the agreements executed by them. Their grievance is over the denial of processing and other charges by the 2[nd] respondent before and after the flood of August 2018. 2. The 2[nd] respondent is the agency of the Govt. of Kerala for implementation of Decentralized Paddy Procurement, processing and marketing scheme of the Govt. of India. The members of petitioner association, who are owners of rice mills have entered into separate agreements like Ext.P2 for the year 2017-18 and Ext.P4 agreement for the year 2018- **WP(C).No.15897 OF 2019(J)** 4 19 for receiving, transporting, storing, processing and milling of paddy and delivery of rice for the 2[nd] respondent. The 2[nd] respondent has authorised these millers to receive paddy from the farmers as per the allotment made by it; they have to store, parboil and mill the same, then process the rice by cleaning, dehusking, polishing and pack the same in large sacks in accordance with the grading given by the quality controller under the 2[nd] respondent after assuring its quality and bags of such Custom Milled Rice (CMR) are thereafter delivered to the public distribution system in the State based on release Orders issued by the 2[nd] respondent, as part of Paddy Procurement, Processing and Distribution Scheme implemented by it. The unprecedented and devastating flood which occurred in August, 2018 caused very serious damage to the paddy as well as rice which were stocked in the mills of the members of petitioner association. According to the petitioner, **WP(C).No.15897 OF 2019(J)** 5 the entire stock with them, of paddy as well as CMR, is insured by the 2[nd] respondent on payment of premium by the Millers in accordance with the terms of agreement. The loss caused by the millers in natural calamities like flood is to be compensated by the 2[nd] respondent, who keeps the insurance policy with them and receives the compensation from the insurance company. But even after the 2[nd] respondent received the insurance claim, it did not take any steps to compensate the millers despite their repeated representations for the same explaining their plight consequent to the flood and pointing out that they are not able to operate their mills due to nonpayment of even the amount due to them towards the stock before the flood. It is stated that they had approached the 2[nd] respondent as well as the Government requesting for immediate release of payment. The petitioner states that the 2[nd] respondent has received compensation from the insurance company **WP(C).No.15897 OF 2019(J)** 6 and they are denying payment even when they are very well aware of the huge loss caused to the stock of paddy and rice in their mills inundated in the flood. According to them it is arbitrary and unjust on the part of the 2[nd] respondent to deny any payment to them, even after the receipt of the insurance claim, at least towards the processing and other charges for the stock which was available before the flood. It is stated that payment is due to each of its members towards processing charges for CMR lifted before the August, 2018 flood at the rate of Rs.214 per quintal of paddy. Similarly they are entitled to processing charges for the flood affected CMR/raw paddy at the rate of Rs.193/- per quintal of paddy which comes to a total of Rs.15,34,74,579/-, as they have explained in the table in paragraph 15 of the writ petition. It is also their case that the 2[nd] respondent did not take any steps to lift the stock despite their repeated requests and it was only on **WP(C).No.15897 OF 2019(J)** 7 such requests that they finally invited tenders for the salvaged paddy and CMR and the damaged paddy and rice were lifted as per the release orders for the successful bidders. The Corporation has received the payment for the damaged stock also based on the tenders issued. Petitioners claim payment on the basis of the provisions contained in clause 5 of Ext.P2 agreement under which the 2[nd] respondent has insured the stock from natural perils like flood from out of the premium paid by them. They also rely on clause 42/44 of the agreement Ext.P2/P4 for the processing charges. 3. Clause 4 to 6, 41 and 42 of the agreement, ## which are relevant, read as follows : 4. That the Paddy belonging to the first party should be stored in the Godowns of the mill (included in schedule I) and or the additional storage in or near the mill which were notified to the First Party/ Supplyco and the Second Party/ miller shall be exclusively responsible for the proper storage, preservation and safe custody of the stock without any deterioration in quality and quantity. Any loss to the stock due to Fire/ Flood/ theft, shrinkage, dryage or any reasons on storage shall be borne by the Miller in full and to prevent such losses the second party/ miller shall **WP(C).No.15897 OF 2019(J)** 8 process the paddy to rice as soon as they are procured from the farmers and deliver to the PDS- Public Distribution System on proper release orders. 5. The First Party/ Supplyco shall insure the stock of paddy with the Second Party/ miller for full value to cover natural perils like fire, flood etc. and loss of goods due to theft. The amount incurred for payment of premium for insurance shall be borne by the miller and will be deducted from the payment due to the miller, all payments from the Insurance Company will come to the first party, since the stock insured is belonging and owned by the first party/Supplyco. 6. That the allotment of paddy to the Second Party/ miller shall be made by the First Party/ Supplyco in accordance with the area wise availability of paddy and requirement of rice. The Second Party/ Miller shall not have any claim or guarantee for allotment (a) of a minimum quantity (b) of a particular variety (c) of a particular area or (d) throughout the period of contract. - 41 That the claims of the Second Party/ miller for milling charges as agreed shall be paid after scrutiny of the copy of the Release Orders in which the receiving agency acknowledges receipt of the rice both in quantity and quality. 42. That the miller will be paid the charges for receiving paddy, providing good gunny bags to farmers free, transporting, storing, quality assurance, parboiling, milling, packing and markings including cost of gunnies for rice delivery with loading charges as per Government rules and regulations. 4. Clause 32 to 34 and 46 are also relevant which read as follows: - 32 That the second party/ miller will deliver the CMR approved by the officials of the first party/Supplyco, against the release orders issued by Supplyco, without delay, for which the loading charges of CMR have to be paid by the second - party/miller. The quality of CMR will be checked at PDS godowns as well. **WP(C).No.15897 OF 2019(J)** 9 - 33 That the second party/ miller shall deliver the rice processed out of the paddy entrusted and procured from the farmers registered with the first party/ principal in accordance with the processing capacity offered on monthly production targets of rice as required by Supplyco. Compliance of this provision will be presumed by the resultant rice from the paddy procured from the farmers on behalf of the first party that if 100 Qtls of paddy are received at the mill in a day 68 Quintals of rice from the same paddy should be added to the stack of CMR and the facts should be recorded in the stock details. - 34 That the Second party / miller shall deliver, out of the paddy so obtained, Parboiled rice at the rate of out turn of 68% conversion fixed by the Government of India. The weight of paddy as recorded in the PRS at the time of receipt by the second party/ contractor shall be reckoned for the purpose of determining the rate of out-turns. For any short out-turn, not made good in kind, the value of rice shall be recovered as per rates fixed by the First party/ principal. Second party/ miller is allowed to retain/sell the byeproducts such as bran, broken grains and husk. - (...) 46. That only after fully delivering the rice converted from the paddy /procured of one crop season of a year by the second party, the mill will be allotted paddy from the farmers in the harvest of the next season within a year. After completing the milling and delivery of one season a certificate to the effect in the following proforma will be sent by the second party to the first party.” 5. The 2[nd] respondent has filed a statement, additional statement and finally a counter affidavit. 2[nd] respondent has raised a preliminary objection as to maintainability of the writ petition stating that the petitioner is seeking reliefs alleging violation of the terms and conditions in an agreement executed **WP(C).No.15897 OF 2019(J)** 10 by its members with the 2[nd] respondent, which is purely contractual. Apart from that the contention is that the mill owners do not have any right to claim any payment out of the insurance claim; it was their responsibility to keep the stock without any damage. The mill owners did not return rice in accordance with the out turn ratio under which they are bound to return 68 quintals of CMR towards 100 quintals of paddy. Only if rice is delivered in that ratio the Government of India would make payment to the 2[nd] respondent. According to the provisions in clause 41 read with 42 of Ext.P2 agreement as well as clause 43 read with 44 of Ext.P4 agreement, the millers are entitled to the charges only after release of the CMR in the prescribed ratio. Eventhough processing charge is fixed @ 214 per quintal, the net amount payable to them is calculated after recovering the liabilities, as per the terms of agreement. 2[nd] respondent has paid the price of the paddy while procuring the same from **WP(C).No.15897 OF 2019(J)** 11 the farmers; the amount spent by it for the procurement would be reimbursed to it by the Government of India under the decentralized paddy procurement scheme only if the prescribed quantity of rice is delivered to the public distribution system. The 2[nd] respondent is only an agency of the Government in the said system; the 2[nd] respondent states that the millers did not do anything to shift the stock to any safe place though instructions were issued to them in Ext.R1(a), as instructed by the insurance officers; insurance company did not honour the loss caused to the entire stock of paddy or rice, damaged in the flood; it took the stock only upto 2 layers above the water level on the wall, though the bags on the top layers were also damaged. Insurance Company released a sum of Rs.46,39,987/- towards settlement of the claim for damages in 2018 flood. A sum of Rs.23,89,44,075/- was received towards the sale proceeds of salvaged paddy and rice. Thus as against **WP(C).No.15897 OF 2019(J)** **==> picture [13 x 7] intentionally omitted <==** the loss to the tune of 140 crores sustained in the flood, the 2[nd] respondent received only a sum of Rs.70,35,84,062/- which is adjusted towards the flood liability of the rice millers and it is not sufficient to compensate the loss sustained in the flood; the 2[nd] respondent has already paid the farmers from whom paddy was procured. It is stated that further enhancement is sought from the insurance company. According to the 2[nd] respondent, huge amount is due from each of the mill owners towards the short supply of rice in accordance with the OTR and payment if any towards the processing and other charges can be made only after adjusting the liability of the millers. It is stated that orders similar to Ext.R2(b) are issued to all the millers, in which the amount is due from the Millers and it is for the millers to make payment to the 2[nd] respondent. However it is stated that a decision is awaited from Government regarding release of claim related to **WP(C).No.15897 OF 2019(J)** 13 processing charges of CMR. 6. Heard Sri. E.K. Nandakumar, learned Senior Counsel appearing for the petitioner and Smt. Molly Jacob, appearing for the 2[nd] respondent. 7. According to Sri. Nandakumar, when there is no disputed question of facts the objection as to maintainability is only to be repelled. It is pointed out that the 2[nd] respondent cannot have any dispute over the damage caused to the stock of paddy as well as CMR in the 2018 flood. The stock is insured from natural calamities and the 2[nd] respondent has received the insurance claim. The petitioner is only seeking for the processing charges. 8. On the other hand Smt. Molly Jacob, the learned Standing Counsel, relying on the judgments of the Apex Court in **Kerala State Electricity Board and another v Kurien E Kalathil and others** [(2000) 6 SCC 293], P **impry chinchwad Municipal Corporation and others v M/s Gayatri Construction company and another** **WP(C).No.15897 OF 2019(J)** **==> picture [13 x 7] intentionally omitted <==** [(2008) 8 SCC 172: 2008 KHC 4821], etc, argued that writ petition is not maintainable for enforcement of commercial contracts, even if it is with a public sector undertaking. It was argued that in order to grant any relief to the petitioner this Court would have to interpret the provisions in the terms of a contract which is not permissible. 9. As rightly contented by Smt. Molly Jacob, this Court is not supposed to interpret or enforce the terms and conditions of commercial contracts, under Article 226 of the Constitution of India. 10. However the 2[nd] respondent has in paragraph 5 of the additional statement filed on 18.07.2019, stated as follows : “The Chairman and Managing Director of the Corporation as per letter No.Est.to.29815/15 dated 24.11.18 and 30.11.18 has approached the Secretary Food and Civil Supplies Department regarding the financial crisis that has cropped up on account of the damage of rice and paddy in the flood and requested to provide financial aid to tide over the situation from the relief fund of Central Government. Another letter Est.to.29815/15 dated 22.03.2019 was was sent to the Secretary on coming to know about that Insurance Company is limiting the claim based on the report of Surveyor to the stock actually **WP(C).No.15897 OF 2019(J)** 15 immersed in the water. xxx” ## 11. Further in paragraph 7 of the counter affidavit it is stated as follows: “A decision from the Government of Kerala is awaited regarding release of claim amount related to processing charges of CMR lifted (column A).” 12. In the counter affidavit the 2[nd] respondent also admits that substantial loss was caused in the flood of 2018. Therefore, the fact that huge loss was sustained to the stock kept in the mills is admitted. The disputed question is over the payment. Government or the Supplyco cannot shut their eyes over the loss caused in the unprecedented and devastating flood of 2018 across the State. Whether it was possible for anybody to shift the articles in such a situation and whether those affected by the flood should be denied their claims require serious consideration at the end of the 1[st] and 2[nd] respondents taking note of the reality. Petitioners have explained their plight on account of the non-payment of the processing charges. **WP(C).No.15897 OF 2019(J)** 16 Now more than 26 months passed since the flood. Therefore, an emergent decision is required in the matter. The Writ Petition is therefore disposed of directing the first respondent to take a decision on the request made in the letters of 2[nd] respondent in letter No.Est.to.29815/15 dated 24.11.18, 30.11.18 and letter No.Est.to.29815/15 dated 22.03.2019, after affording an opportunity of hearing to the petitioner within a period of 'one month' from the date of receipt of a copy of the judgment. It is made clear that 1[st] respondent is free to conduct the hearing through electronic mode. Sd/- **P.V.ASHA, JUDGE** AS **WP(C).No.15897 OF 2019(J)** 17 ## **APPENDIX** ## **PETITIONER'S EXHIBITS:** - **EXHIBIT P1 LIST OF MEMBERS OF THE PETITIONER ASSOCIATION** - **EXHIBIT P1 A LIST OF MEMBERS /RICE MILLS WHICH HAVE EXECUTED THE AGREEMENT WITH 2ND RESPONDENT SUPPLY CO IN 2017-2018 CROP SEASON** - **EXHIBIT P1 B LIST OF 24 RICE MILLS BELONGING TO THE MEMBERS OF THE PETITIONER ASSOCIATION WHICH HAVE SEPARATE AGREEMENTS WITH 2ND RESPONDENT AND WHICH WERE GRAVELY AFFECTED BY THE FLOODS IN AUGUST 2018** - **EXHIBIT P2 TRUE COPY OF THE AGREEMENT EXECUTED BETWEEN THE 2ND RESPONDENT AND M/S. SN RICE MILL,ONE OF THE MEMBERS OF THE PETITIONER ASSOCIATION, DATED 10.10.2017** - **EXHIBIT P2 A TRUE COPY OF THE EXTRACT OF THE RELEVANT CLAIM BILL SHOWING PAYMENT OF INSURANCE PREMIUM BY ONE OF THE MEMBERS OF THE PETITIONER ASSOCIATION DATED 9.7.2018** - **EXHIBIT P3 TRUE COPY OF THE REPRESENTATION SUBMITTED BY THE PETITIONER ASSOCIATION DATED 10.01.2019 TO THE 2ND RESPONDENT** - **EXHIBIT P4 TRUE COPY OF THE AGREEMENT DATED 28.09.2018 EXECUTED BETWEEN THE 2ND RESPONDENT AND M/S. KKR AGRO MILLS PVT LTD., A MEMBER OF THE PETITIONER ASSOCIATION** - **EXHIBIT P5 TRUE COPY OF THE REPRESENTATION DATED 27.05.2019 MADE BY THE PETITIONER** **WP(C).No.15897 OF 2019(J)** 18 ## **ASSOCIATION** **EXHIBIT P6 TRUE COPY OF THE LETTER DATED 19/06/2019 BEARING NO. EST.2.23745/16(2) ISSUED BY THE 2ND RESPONDENT TO THE MEMBERS OF THE PETITIONERS ASSOCIATION.** - **EXHIBIT P6(A) TRUE COPY OF THE LETTER DATED 27/06/2019 BEARING NO. EST.2.23745/16 ISSUED BY THE 2ND RESPONDENT TO THE MEMBERS OF THE PETITIONERS ASSOCIATION.** - **EXHIBIT P6(B) TRUE COPY OF THE LETTER DATED 29/06/2019 BEARING NO. EST.2.23745/16 ISSUED BY THE 2ND RESPONDENT TO THE MEMBERS OF THE PETITIONERS ASSOCIATION.** - **EXHIBIT P7 TRUE COPY OF THE LETTER DATED 02/07/2019 ISSUED BY THE PETITIONER ASSOCIATION TO THE 2ND RESPONDENT. (I.A.NO.1 OF 2019)** - **EXHIBIT P7 TRUE COPY OF THE LETTER DATED 10/01/2020 ISSUED TO THE SECRETARY/PRESIDENT OF THE PETITIONER ASSOCIATION BEARING NO. EST. 7.1016/19 BY THE 2ND RESPONDENT SUPPLYCO. (I.A.NO.1/2020)** - **EXHIBIT P8 A TRUE COPY OF THE STATEMENT REGARDING PADDY PROCURED AND DELIVERED AND ACTUAL SHORTAGE DUE TO FLOODS FOR THE YEAR 2017-2018 PREPARED ON THE BASIS OF THE DATA AVAILABLE ON 2ND RESPONDENT'S PORTAL. (I.A.NO.4/2019)** **EXHIBIT P8 TRUE COPY OF THE LETTER DATED 15/01/2020 ISSUED BY THE PETITIONER TO THE 2ND RESPONDENT SUPPLYCO. (I.A.NO.1/2020)** **WP(C).No.15897 OF 2019(J)** 19 - **EXHIBIT P9** - **TRUE COPY OF THE NOTICE DATED 24/01/2020 BEARING NO.EST.7/1016/19(6) ISSUED BY THE 2ND RESPONDENT SUPPLYCO TO DIAMOND FOOD PRODUCTS.** - **EXHIBIT P10** - **TRUE COPY OF THE LETTER DATED 01/02/2020 ISSUED BY DIAMOND FOOD PRODUCTS TO THE 2ND RESPONDENT SUPPLYCO.** - **EXHIBIT P11 TRUE COPY OF THE REQUEST MADE BY SRI. A K TOMY DATED 16/12/2019 TO THE 2ND RESPONDENT SUPPLYCO.** - **EXHIBIT P12.** - **TRUE COPY OF THE LETTER DATED 22/01/2020 ISSUED BY SUPPLYCO IN RESPONSE TO THE REQUEST UNDER THE RTI ACT MADE BY SRI. TOMY.** - **EXHIBIT P13** - **TRUE COPY OF THE LETTER DATED 17/02/2020 ISSUED BY THE 2ND RESPONDENT SUPPLYCO TO KKR AGRO MILLS BEARING NO.EST.7/1016/19(15).** ## **RESPONDENTS' EXHIBITS:** - **EXHIBIT R2(a):** - **TRUE COPY OF THE CIRCULAR NO.EST.2.29815/15 DATED 20/08/2018 ISSUED BY MANAGER (PP) ISSUED TO MILL OWNERS.** - **EXHIBIT R2(b): TRUE COPY OF THE ORDER PASSED BY CHAIRMAN & MANAGING DIRECTOR ON 17/02/2020 TO THE CONTRACTED MILL SHOWING THE LIABILITY AMOUNT AND THE AMOUNTS DUE TO THE MILER, DIAMOND FOOD PRODUCTS.** - **ANNEXURE R2(A) TRUE COPY OF THE PERFORMANCE REPORT FROM PADDY PORTAL FOR PROCESSING COMPLETED SEASON 2017-2018.** - **ANNEXURE R2(B)** - **TRUE COPY OF THE STATEMENT SHOWING THE TOTAL AMOUNT DUE TO SUPPLYCO FROM MILL OWNERS AFTER ADJUSTING THE SECURITY DEPOSIT GIVEN BY THE MILLERS TO** **WP(C).No.15897 OF 2019(J)** 20 ## **SUPPLYCO.** **ANNEXURE R2(C)** **TRUE COPY OF THE PERFORMANCE REPORT OF 24 MILLERS AT THE END OF SEASON 20172018.**