IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 08.08.2008
CORAM
THE HONOURABLE Mr. JUSTICE K.VENKATARAMAN
Writ Petition No.15392 of 2008 and
M.P.Nos.1 to 3 of 2008
IMCOLA (Exports) Limited, rep. by
its Head International Trading
Mr.D.Thiruloka Chander. ... Petitioner
Vs.
1.The Pondicherry Co-operative
Sugar Mills Ltd., a Co-operative
Society, registered under the
Co-operative Societies Act,
Lingareddy Palayam, Katteri
Kuppam, Pondicherry-605 502.
2.The Managing Director,
The Pondicherry Co-operative
Sugar Mills Ltd, Lingareddy
Palayam, Katteri Kuppam,
Pondicherry-605 502.
3.The Administrator,
The Pondicherry Co-operative
Sugar Mills Ltd, Lingareddy
Palayam, Katteri Kuppam,
Pondicherry-605 502. ... Respondents
Writ petition has been filed under Article 226 of The Constitution of India to issue a Writ of Mandamus directing the first respondent to fulfil the terms of the sale order made in Ref. PCSM / SS/ MOL / 2007-2008 / 699, dated 3rd March, 2008 by supplying the balance quantity of Molasses amounting to 5411.210 MTs.
For Petitioner : Mr.P.S.Raman, Senior Counsel, for Mrs.Pushpa Menon
For Respondents : Mr.T.Murugesan,
Government Pleader, Pondicherry.
O R D E R
The petitioner has approached this Court by filing the present writ petition to quash the order of respondents 1 and 2 culminating in the cancellation order dated 25.06.2008 and to direct the first respondent to fulfil the terms of the sale order dated 03.03.2008 by supplying the balance quantity of Molasses amounting to 5411.210 MTs to the petitioner by accepting the payment of Rs.92,50,000/-.
2. The short matrix of the matter is set out here under:-
(a) The petitioner company is engaged in the business of exporting Molasses to various countries. The first respondent is a sugar industry and one of the main by products is Molasses. One of the statutory duties of the first respondent is to sell and dispose of the said product by means of open tender cum auction.
(b) On 07.02.2008, the first respondent issued a tender notice for sales of 10,000 MTs of “A” grade Molasses produced during the year 2007-08. The petitioner took part in the tender cum auction and he was selected for the same and a sale order was issued by the first respondent to the petitioner on 03.03.2008, in and by which the first respondent has to sell 10,000 MTs of Molasses at the rate of Rs.2,050/- per MT to the petitioner. The documents specified in the sale order were duly submitted by the petitioner to the first respondent. As per the sale order, the petitioner company has to lift 5000 MTs of Molasses on or before 31.07.2008. No Objection Certificate had been obtained from the competent authority on 07.03.2008. Rs.10,00,000/- had been paid for the total quantity of 10,000 MTs Molasses. On 05.03.2008, the petitioner paid a sum of Rs.1,00,25,000/- by way of Demand Draft to the first respondent towards the cost of 5,000 MTs of Molasses scheduled to be lifted by them on or before 31.03.2008. The first respondent, on the said date, had in possession of only 3,000 MTs of Molasses. The petitioner started to lift the Molasses from 07.03.2008. By 17.04.2008, the petitioner could lift 4588.790 MTs of Molasses. This was due to the insufficient stock of Molasses with the first respondent and on many occasions, the petitioner’s trucks had to leave the Mill premises without being able to lift the Molasses. Thus, the first respondent has been in a position to supply the petitioner only 4,588.790 MTs of Molasses out of 5,000 MTs, which was promised to be given on or before 31.03.2008. The balance of Molasses had not been supplied. When the petitioner was ready and willing to pay the purchase price for the balance quantity of 5,000 Mts of Molasses at the time of tendering the first draft on the advice of the second respondent, the then Managing Director of the first respondent, the petitioner withheld the amount for the balance of 5,000 Mts of Molasses. However, the petitioner paid the balance amount of Rs.92,50,000/- to the first respondent along with a letter dated 10.06.2008. Receipt dated 12.06.2008 had been issued for the payment made. It was also encahsed by the first respondent. The petitioner had addressed numerous letters to the respondents for the supply of the balance Molasses. By then, the price of Molasses went up. In view of the same, the first respondent is evading the supply of balance of Molasses and hence, the petitioner had approached this Court by filing the present writ petition.
3. Counter affidavit had been filed by the second respondent on his behalf and on behalf of respondents 1 and 3 also which sets out the following facts:-
(a) The first respondent is a Co-operative Society registered under the Pondicherry Co-operative societies Act, 1972. The society is fully governed by its own by-laws and service regulations and hence, to describe its activities to be borne out of a statue is not correct. Hence, the allegation that the first respondent society is a State within the meaning of Article 12 of the Constitution of India is absolutely incorrect. The writ petition is, therefore not maintainable and liable to be dismissed in limine.
(b) Since a contractual obligation is sought to be enforced, the writ petition is not maintainable under Article 226 of The Constitution of India.
(c) The petitioner ought to have paid the entire purchase price for the intended purchase of Molasses as per the sale order dated 03.03.2008. Since the petitioner violated the terms and conditions, it is not entitled to any claim and it cannot enforce the contract.
(d) As per the sale order dated 03.03.2008, the petitioner should have paid a sum of Rs.2,05,00,000/- before 13.03.2008 towards the costs of 10,000 MTs of Molasses at Rs.2,050/- per MT. On receipt of the sale order, the petitioner had only made part payment of Rs.1,02,50,000/- by way of demand draft on 05.03.2008, which is a clear violation of the terms and conditions of the sale order dated 03.03.2008. Having received part payment from the petitioner towards the cost of 5,000 MTs of Molasses, the first respondent mill agreed to release the supply of Molasses only to this extent before 31.03.2008. But in violation of the term 6 of the sale order, the petitioner lifted only 4,591.720 Mts.
(e) As on 31.05.2008, the first respondent Mill had its stock of 4,058.727 MTs. of Molasses and therefore, the allegation that the first respondent Mill had only about 3,000 Mts of Molasses is not correct and the same is denied. It is not correct to say that the first respondent was not possessing sufficient stock of Molasses. It had maintained sufficient stock of Molasses for supply to the petitioner in terms of the sale order dated 03.03.2008.
(f) The demand draft paid latter for a sum of Rs.92,50,000/-is a belated one and the amount had been refunded to the petitioner by the second respondent by proceedings dated 26.06.2008. The said demand draft had been returned since the petitioner paid the said amount belatedly.
(g) The payment had not been made as per the terms and conditions of the sale order dated 03.03.2008 and hence, the sale order for the remaining quantity of 5,000 MTs of Molasses was cancelled by the second respondent as per clause 16 of the tender conditions dated 07.02.2008.
Thus, the respondents sought for the dismissal of the writ petition.
4. Mr.P.S.Raman, learned Senior Counsel appearing for the petitioner and Mr.P.Murugesan, learned Government Pleader for Pondicherry appearing for the respondents have made their submissions on the basis of the pleadings set out above.
5. Mr.P.S.Raman, learned Senior Counsel appearing for the petitioner would mainly submit that —
(a) the writ petition is perfectly maintainable before this Court under Article 226 of the Constitution of India.
(b) the first respondent failed to supply the quantity of 5,000 Mts of Molasses due on 31.03.2008 as there was shortfall of supply of 411.210 Mts.
(c) The respondents having accepted the payment from the petitioner, are estopped from raising untenable grounds for non-supply of the balance Molasses.
(d) the respondents’ action is causing huge loss to the petitioner since they would be unable to fulfil the commitment to the overseas buyers and the reputation would be at stake.
(e) The respondents have not given any notice to the petitioner for withholding the balance quantity due under the sale order and this is in violation of principles of natural justice under Article 14, 19 and 21 of The Constitution of India.
6. Per contra, Mr.P.Murugesan, learned Government Pleader, Pondicherry, appearing for the respondents has contended that —
(a) the first respondent is only a society registered under the Pondicherry Co-operative societies Act, 1972 and in view of the Full Bench decision of this Court in Marappan’s case, the writ petition itself is not maintainable before this Court and the same is liable to be dismissed in limine.
(b) since the petitioner is trying to enforce the contractual obligation, the remedy of the petitioner is only to approach the civil Court and not before this Court by filing the writ petition under Article 226 of The Constitution of India.
(c) it is not correct to say that sufficient stocks were not available with the respondents to supply the same to the petitioner. The respondents had sufficient quantity of Molasses and the same could not be supplied in view of the fact that the balance amount had been paid by the petitioner belatedly.
(d) The petitioner having violated the terms and conditions of the sale order, cannot be heard to say that the respondents shall supply Molasses even after the petitioner failed to fulfil the terms and conditions.
7. On the basis of the above pleadings and the submissions made by the learned Senior Counsel appearing for the petitioner and the learned Government Pleader, Pondicherry, appearing for the respondents, now it has to be seen whether the petitioner is entitled for the relief that has been sought for in the writ petition.
8. The undisputed facts are:-
(i) 07.02.2008 sale tender notice was issued by the respondents with condition forms.
(ii) On 22.02.2008 tender forms had been submitted by the petitioner along with Earnest Money Deposit.
(iii) On 03.03.2008 sale order was issued by the respondents in favour of the petitioner.
(iv) On 05.03.2008 demand draft was paid by the petitioner in favour of the respondents towards the cost of 5,000 MTs. of Molasses at the rate of Rs.2,050/- per MT.
(v) On 07.03.2008 No objection Certificate was issued by the Deputy Commissioner of Excise (Government of Pondicherry) for lifting the Molasses.
(vi) On 25.04.2008 Letter from the petitioner to the respondents requesting the short supply of 8.340 MTs along with the balance quantity of 5411.210 MTs.
(vii) On 10.06.2008 Letter from the petitioner requesting the respondents to deliver the Molasses enclosing a demand draft for Rs.92,50,000/-.
(viii) On 12.06.2006 – Receipt had been issued by the respondents towards the payment made by the petitioner.
(ix) On 25.06.2008 – communication by the first respondent to the petitioner enclosing demand draft for Rs.92,50,000/-, rejecting the request to supply balance quantity of Molasses as agreed previously.
9. But, however, the facts in dispute are:-
(i) that the petitioner had not paid the amounts as per the sale order, but, however, paid only for lifting 5,000 MTs. of Molasses and not for the full quantity of 10,000 MTs. of Molasses.
10. Before dealing with the merits of the matter, it has to be seen, whether the writ petition is maintainable on the two grounds raised by the learned Government Pleader, Pondicherry, appearing for the respondents. On the ground of maintainability, the learned Government Pleader, Pondicherry, would submit that (i) since the respondents is a society, writ will not lie and (ii) since the matter in issue is a contractual obligation, the remedy of the petitioner is to approach the civil Court. On those two grounds, the learned Government Pleader, Pondicherry, made elaborate arguments.
11. As far as the first count is concerned, it is contended that since the first respondent is a society registered under the Co-operative Societies Act, as per the Full Bench decision of this Court, writ will not lie. Learned Government Pleader, Pondicherry would further submit that no public authority is involved in the matter in issue and hence, the writ will not lie.
12. Per contra, learned Senior Counsel appearing for the petitioner would submit that the first respondent is a State run Co-operative Sugar Mill under Article 12 of The Constitution of India and hence, it is amenable to writ jurisdiction. Learned Senior Counsel further submits that even though the Government of Pondicherry owns one share, the value of one share is Rs.45,40,75,000/-, whereas the Non-Producer Members even though own 46 shares, the value is only Rs.13,50,000/- and the Purchaser Members even though own shares to the tune of 12,325, the value is Rs.3,70,00,000/- only. Thus, according to the learned Senior Counsel appearing for the petitioner, out of the total share capital of Rs.49,24,25,000/-, the share capital owned by the Government of Pondicherry is Rs.45,40,75,000/-, which works out to about 98.1% of the total share capital. Further, according to the learned Senior Counsel appearing for the petitioner, the term of the committee expired on 31.07.1989 and the first respondent society is being administered by the Administrator appointed by the Government of Pondicherry. Hence, according to the learned Senior Counsel, the writ will lie against the first respondent.
13. I have carefully considered the submissions made by the learned Senior Counsel appearing for the petitioner and the learned Government Pleader, Pondicherry, appearing for the respondents.
14. The question whether a writ will lie against the Co-operative Societies or not came in consideration before the Full Bench of this Court in the year 2001 and thereafter in the year 2006. The original thinking was that writ will not lie against the Co-operative Societies. However, the latter Full Bench of this Court has taken a view that a writ will lie under certain circumstances. The same is reported in (2006) 4 M.L.J. 641 K.Marappan v. Deputy Registrar of Co-operative Societies, Namakkal Cirlce, Namakkal and another. In the said judgment, Their Lordships have elaborately considered several judgments including the case in Ajay Hasia v. Khalid Mujib Sehrewardhi A.I.R. 1981 SC 487, wherein the Hon’ble Apex Court had laid down the circumstance under which a writ will lie. The test laid down in the above said case is extracted here under:-
” (1) One thing is clear that if the entire share capital of the corporation is held by Government, it would go a long way towards indicating that the corporation is an instrumentality or agency of Government.
(2) Where the financial assistance of the State is so much as to meet almost entire expenditure of the corporation, it would afford some indication of the corporation being impregnated with governmental character.
(3) It may also be a relevant factor …. whether the corporation enjoys monopoly status which is State-conferred or State-protected.
(4) Existence of deep and pervasive State control may afford an indication that the corporation is a State agency or instrumentality.
(5) If the functions of the corporation are of public importance and closely related to governmental functions, it would be a relevant factor in classifying the corporation as an instrumentality or agency of Government.
(6) ‘Specifically’, if a department of Government is transferred to a Corporation, it would be a strong factor supportive of this inference of the corporation being an instrumentality or agency of Government”.
The Court observed as follows:
“31.The tests to determine whether a body falls within the definition of ‘State’ in Article 12 laid down in Ramana with the Constitution Bench imparimatur in Ajay Hasia form the keystone of the subsequent jurisprudential superstructure judicially crafted on the subject which is apparent from a chronological consideration of the authorities cited.”
15. The Full Bench of this Court thus after elaborately considering several judgments of this Court as well as the Hon’ble Apex Court, has finally held in para 21, has follows:-
” 21.From the above discussion, the following propositions emerge:
(i) If a particular Co-operative Society can be characterised as a ‘State’ within the meaning of Article 12 of the Constitution (applying the tests evolved by the Supreme Court in that behalf), it would also be ‘an Authority’ within the meaning and for the purpose of Article 226 of the Constitution. In such a situation, an order passed by a Society in violation of the bye-laws can be corrected by way of writ petition.
(ii) Applying the tests in Ajay Hasia Vs. Khalid Mujib Sehrewardi (supra) it is held that a Co-operative Society carrying on Banking business cannot be termed as ‘an instrumentality of the State’ within the meaning of Article 12 of the Constitution.
(iii) Even if a Society cannot be characterised as a ‘State’ within the meaning of Article 12 of the Constitution, a writ would lie against it to enforce a statutory public duty cast upon the Society. In such a case, it is unnecessary to go into the question whether the Society is being treated as a ‘person’ or ‘an authority’ within the meaning of Article 226 of the Constitution and what is material is the nature of the statutory duty placed upon it and the Court will enforce such statutory public duty. Although it is not easy to define what a public function or public duty is, it can reasonably be said that such functions are similar to or closely related to those performable by the State in its sovereign capacity.
(iv) A Society, which is not a ‘State’ would not normally be amenable to the writ jurisdiction under Article 226 of the Constitution, but in certain circumstances, a writ may issue to such private bodies or persons as there may be statutory provisions which need to be complied with by all concerned including Societies. If they violate such statutory provisions, a writ would be issued for compliance of those provisions.
(v) Where a Special Officer is appointed in respect of a Co-operative Society which cannot be characterised as a ‘State’, a writ would lie when the case falls under Clauses (iii) and (iv) above.
(vi) The bye-laws made by a Co-operative Society registered under the Tamil Nadu Co-operative Societies Act, 1983 do not have the force of law. Hence, where a Society cannot be characterised as a ‘State’, the service conditions of its employees governed by its bye-laws cannot be enforced through a writ petition.
(vii) In the absence of special circumstances, the Court will not ordinarily exercise power under Article 226 of the Constitution of India when the Act provides for an alternative remedy.
(viii) The decision in M.Thanikkachalam Vs. Madhuranthagam Agricultural Co-operative Society (supra), is no longer good law, in view of the decision of the seven-Judge Bench of the Supreme Court in Pradeep Kumar Biswas Vs. Indian Institute of Chemical Technology (supra) and the other decisions referred to here before.”
16. While applying the above tests laid down by the Hon’ble Apex court as well as this Court, it emerges that if the financial assistance of the State is so much as to meet almost the entire expenditure of the Corporation, it would afford some indication of the Corporation being impregnated with Governmental character. In the case on hand, as rightly pointed out by the learned Senior Counsel appearing for the petitioner, the share capital of the Government of Pondicherry is Rs.45,40,75,000/-, which is 98.1% of the entire share capital. Further more, now the committee has been dissolved and an Administrator has been appointed for the society. In view of those facts, I am of the considered opinion that the first respondent society could be called as a ” State ” within the meaning of Section 12 of The Constitution of India and the writ would lie against the first respondent.
17. On the second count, it has to be seen whether the petitioner has got any efficacious, effective and alternative remedy, except approaching the writ jurisdiction. In the case on hand, it is the case of the petitioner that respondents 1 to 3 are refusing to release the balance quantity of Molasses as per the sale order dated 03.03.2008. But, on the other hand, it is the case of the respondents that the entire amount has not been paid by the petitioner within the time prescribed and hence supply not made. It has to be seen, whether for the redressel expressed by the petitioner, filing of the suit would be an efficacious, effective and alternative remedy. In my considered opinion it may not. The reason is that the petitioner is engaged in the business of exporting Molasses to various countries and if the petitioner is driven to the civil Court for release of the balance quantity of Molasses, then the petitioner could get the remedy in the civil Court only after a couple of years. In the meantime, as contended by the learned Senior Counsel appearing for the petitioner, the customers in various countries would squeeze the petitioner for fulfillment of the commitments made by the petitioner. Further more, the petitioner, at best, would be entitled for damages and not the specific relief of enforcement of the sale order. Hence, I am of the considered opinion, considering the above relevant factors, that the remedy of the petitioner under the given circumstance would be only to avail the writ jurisdiction and not by way of filing the suit before the Civil Court. Even though, it is a matter of contractual obligation, it cannot be said that totally the petitioner cannot seek the relief inviting the jurisdiction of the Writ Court. Thus, the argument made by the learned Government Pleader, Pondicherry, appearing for the respondents has to be rejected.
18. Then the matter has to be considered on merits and it has to be decided whether the petitioner is entitled for the relief which he has sought for in the writ petition.
19. It is not in dispute that by the sale order dated 03.03.2008, the first respondent had agreed to supply 10,000 MTs. of Molasses. It is also not in dispute that the petitioner had paid the Earnest Money Deposit to the first respondent to the tune of Rs.10,00,000/-. As per the sale order, the petitioner has to lift 5,000 MTs. of Molasses on or before 31.03.2008 and the balance of 5,000 MTs. of Molasses on or before 31.07.2008. The petitioner, in fact paid an amount of Rs.1,00,25,000/- by way of Demand Draft to the first respondent, which is the cost of 5,000 MTs. of Molasses scheduled to be lifted by them by 31.03.2008. It is the case of the petitioner that at the relevant point of time, the first respondent had in its possession only about 3,000 MTs. of Molasses. By 17.04.2008, the petitioner had lifted 4,588.790 MTs. of Molasses and the balance of 5,000 MTs. of Molasses could not be lifted, according to the petitioner, due to insufficient stock of Molasses with the first respondent. Though counter affidavit had been filed disputing the said fact, in para 8 of the counter affidavit, the first respondent has stated that as on 31.05.2008, the first respondent Mill had 4,058.726 MTs. of Molasses. This will clearly indicate that the first respondent did not have enough stock of Molasses to be lifted by the petitioner. Further more, there is only a bald denial for the averment that the first respondent had only about 3,000 MTs. of Molasses at the relevant point of time. Yet another fact that has to be seen is that the petitioner paid the balance amount of Rs.92,50,000/- by way of Demand Draft to the first respondent along with a letter dated 10.06.2008 and the same has been received by the first respondent and a receipt dated 12.06.2008 was issued by the first respondent. The Demand Draft has already been encashed by the first respondent. However, the said amount has been returned to the petitioner after taking Demand Draft by a communication to the petitioner dated 26.06.2008. If really the first respondent was serious about the non-payment of the amount by the petitioner in respect of the lifting of the balance of 5,000 MTs. of Molasses, there is no reason for accepting the payment made by the petitioner and passing on the receipt for the said amount, encashing the Demand Draft and later returning it to the petitioner by taking Demand Draft in favour of the petitioner. These facts will clearly establish that the first respondent was neither in possession of the required quantity for the supply of balance Molasses nor they are serious about the non payment of the total amount for the entire 10,000 MTs. of Molasses on one count. This makes me to believe the statement made by the petitioner that enough stocks were not available with the first respondent for supplying the same to the petitioner and also it makes me to believe that in view of the raise in price, the first respondent is now taking a plea that since the petitioner had not paid the entire amount at one count, the first respondent refused to supply the balance of 5,000 MTs. of Molasses to the petitioner.
11. Considering the above facts and circumstances, I am of the considered opinion, that the plea put forth by the respondents has to be rejected in toto and the petitioner is entitled for the relief, which he has sought for in this writ petition.
12. In fine, the writ petition stands allowed and the first respondent is directed to supply the balance of Molasses to the petitioner as per the sale order dated 03.03.2008. No order as to costs. Consequently, connected petitions are closed.
sbi
To
1.The Pondicherry Co-operative
Sugar Mills Ltd., a Co-operative
Society, registered under the
Co-operative Societies Act,
Lingareddy Palayam, Katteri
Kuppam, Pondicherry-605 502.
2.The Managing Director,
The Pondicherry Co-operative
Sugar Mills Ltd, Lingareddy
Palayam, Katteri Kuppam,
Pondicherry-605 502.
3.The Administrator,
The Pondicherry Co-operative
Sugar Mills Ltd, Lingareddy
Palayam, Katteri Kuppam,
Pondicherry 605 502