Full Judgment Text
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PETITIONER:
FOOD CORPORATION OF INDIA AND ORS.
Vs.
RESPONDENT:
JAGANNATH DUTTA AND ORS.
DATE OF JUDGMENT18/03/1993
BENCH:
KULDIP SINGH (J)
BENCH:
KULDIP SINGH (J)
KASLIWAL, N.M. (J)
CITATION:
1993 AIR 1494 1993 SCR (2) 497
1993 SCC Supl. (3) 635 JT 1993 Supl. 85
1993 SCALE (2)84
ACT:
Constitution of India 1950: Articles 14 and 226-Contractual
agreement for clearing, transporting, storing and
distribution of foodgrains-FCI-Terminating agreement-Relief
in writ petition-Whether permissible-Held contractual
agreement terminated pursuant to policy decision.
HEADNOTE:
The Food Corporation of India appellant entered into an
agreement dated August 14, 1967 with the respondent No. 1
entrusting him the work of clearing, transporting, storing
and distribution of foodgrains on behalf of the Corporation
viz. a storage agency by the Corporation. Clause 37 of the
agreement provided that either party was at liberty without
assigning any reason to terminate the agreement on giving
two months prior notice in writing.
The Managing Director of the Corporation in the meeting of
the Zonal Managers, Senior Regional Managers and other
officers held on September 20/21, 19S4 pointed out that the
private storage agencies were responsible for high transit
losses (if the foodgrains in the State of West Bengal, and
directed that the desirability of continuing the system of
storage agents be examined. Immediately a Committee was
formed to go into this question. The Committee reported
against continuing the storage agency system, and the report
was accepted in principle, a final decision to abolish the
storage agency was taken, and a target date for abolition
was fixed for compliance. This decision was contained in
the letter of the Zonal Manager dated 14th March 1985.
The District Manager by his notice dated June 25, 1987
terminated the storage agency agreement with the respondent
with effect from August 31, 1987. The respondent challenged
the validity of the notice by way of a writ petition under
Article 226 of the Constitution before the High Court. The
respondent challenged the termination notice on the grounds
that : (i) clause 37 of the agreement was arbitrary and as
such violative of Article 14 of the Constitution, (ii)
clause 37 was unilateral, against natural
498
justice, unlawful and as such was void under section 24 of
the Indian Contract Act, and (iii) the action of the
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Corporation was arbitrary against public policy and public
interest.
A Division Bench of the High Court did not go into any of
the aforesaid grounds contended by the respondent and
instead examined the correspondence and various office
orders placed before it by the Corporation, and came to the
conclusion that in fact no policy decision was taken by the
FCI before terminating the agreement, and set aside the
notice dated June 25, 1987.
Allowing the appeal of the FCI, this Court,
HELD : 1. The High Court was not justified in quashing
the notice especially when the terms and conditions of the
Contract permitted the termination of the agreement by
either of the parties. [501G]
2. The High Court should not have gone into the
question of contractual obligation in its writ jurisdiction
under Article 226 of the Constitution. [501G]
3. The High Court misread the documents on record and
grossly erred in reaching the conclusion that no policy
decision was taken by the FCI to terminate the storage
agencies in the State of West Bengal. [501H]
In the instant case, there is no manner of doubt that a
policy decision was taken at the level of the Zonal Manager
to abolish the storage agencies and the said decision was
approved by the Head Office of the FCI. The letter dated
March 14, 1985 of the Zonal Manager indicates the plan to be
worked out for abolishing the storage agencies in the West
Bengal Region. [504B-D]
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 977 of 1991.
From the Judgment and Order dated 31.5.89 of the Calcutta
High Court in Appeal No. 662 of 1987.
K.T.S. Tulsi, Additional Solicitor General, Vivek
Gambhir and S.K. Gambhir for the Appellants.
499
R.K. Jain, Ascom Mehrotra, Sunil K Jain, Vijay Hansaria and
Ms. Sangeet Mehrotra for the Respondents.
The Judgment of the Court was delivered by
KULDIP SINGH, J. Food Corporation of India (FCI) entered
into an agreement dated August 14, 1967 with Jagannath Dutta
entrusting him the work of clearing, transporting, storing
and distribution of foodgrains on behalf of the FCI. In
other words he was given a storage agency by the FCI. The
District Manager, FCI by his notice dated June 25, 1987,
terminated the agreement with effect from August 31, 1987.
Jagannath Dutta challenged the validity of the notice by way
of a writ petition under Article 226 of the Constitution of
India before the Calcutta High Court. A Division Bench of
the High Court by its judgment dated May 31, 1989 allowed
the writ petition and set aside the notice dated June 25,
1987. This appeal by way of special leave is against the
judgment of the High Court.
Clause 37 of the agreement dated August 14,
1967 is as under
"Notwithstanding anything herein contained,
either party may be at liberty without
assigning any reason to terminate this
agreement on giving two months’ prior notice
in writing so to terminate this agreement."
The operative part of the notice dated June 25, 1987
terminating the agreement is as under :-
"According to the Article 37 of the
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Agreement.. the Food Corporation of Indian has
the right to terminate the Agreement and
relinquish your Agency with two months prior
Notice without assigning any reason.
The Food Corporation of India has taken the
policy of terminating the storing Agencies
gradually and I have been directed by the Food
Corporation authorities to give effect to that
policy early.
Under the circumstances, 1, Dr. Priti Madhab
Dey, District Manager, Food Corporation of
India, Hoogly... Serve this notice upon you
under the provisions made in para 37 of the
said Article of Agreement terminating your
500
storing Agency at Belmuri with effect from
31st day of August, 1987."
Jagannath Dutta challenged the termination-notice on the
grounds that (i) clause 37 of the agreement was arbitrary
and as such violative of Article 14 of the Constitution,
(ii) clause 37 was unilateral, against natural justice,
unlawful and as such was void under section 24 of the Indian
Contract Act and (iii) the action of the FCI was arbitrary
against public policy and public interest. The High Court
did not go into any of these questions and instead set aside
the impugned notice on the short ground that the FCI had not
taken any policy decision before terminating the agreement.
The High Court examined the correspondence and various
office-orders placed before it by the FCI and came to the
conclusion that in fact no policy decision was taken by the
FCI. The High Court held that the impugned notice having
been issued apparently as a result of a policy decision by
the FCI and there being no such decision on the record the
impugned notice was liable to be quashed. We reproduce the
High Court reasoning hereunder :
"From the foregoing facts, it appears that the
desirability of abolishing the system was
raised by the Managing Director and the entire
correspondence shows that it was an issue
which was pending at the Headquarters’s level
and the decision was expected to be taken at
the level of the Managing Director. The Zonal
Manager (East) or the Zonal Office did not and
could not take any decision in the matter.
The issue always remained pending for decision
at the level of the Managing Director ....
Even assuming that the letter dated 14th
March, 1984 does, contain a policy decision
and the letter dated 30th March/2nd April,
1985 contains the Headquarters’ approval to
the above decision, the said policy decision
as contained in the letter dated 14th March,
1985 is not a valid policy decision. If a
phase-wise or a gradual abolition. of a system
is to take place there must be a plan this
plan must be preconceived. The preconceived
plan must be reasonable and rational with
particular reference to the local conditions.
Implementation of any such policy must
501
depend on an action plan drawn up and
implemented on a rational basis with reference
to the arising situation and circumstances...
For the foregoing reasons we, are of the view
that the case of the F.C.1 to the effect that
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the policy decision was taken in the Zonal
Office and endorsed and/or approved by Chief
Commercial Manager, New Delhi, runs wholly
contrary to the records of the case and
therefore cannot be accepted...
As we have already observed that no policy
decision was finalised by the F.C.I. and they
were proceeding arbitrarily by picking and
choosing for the purpose of terminating the
storing agency. In some cases, terminations
were made not on the ground of policy
decision, but on the ground of
misappropriation. In some cases, as we have
already referred to, the order of termination
was withdrawn or kept in abeyance. Where the
Court has passed ad-interim order staying the
order of termination, no further steps have
been taken by the F.C.I. In one of the cases
we have referred to hereinbefore, would show
that termination was kept in abeyance on a
consideration that the concerned storing agent
would provide the FCI with a godown.
Therefore, the termination of this particular,
agreement by invoking clause 37 has to be
justified by the F.C.I. on the basis of policy
decision and implementation on the policy
uniformly in cases of the storing agents.
Such termination cannot be justified with
reference to other extraneous considerations."
We are of the view that the High Court was not justified in
quashing the impugned notice especially when the terms and
conditions of the contract permitted the termination of the
agreement by either of the parties. The High Court should
not have gone into the question of contractual-obligation in
its writ jurisdiction under Article 226 of the Constitution.
Even otherwise the High Court misread the documents on the
record and grossly erred in reaching the conclusion that no
policy decision was taken by the FCI to terminate the
storage agencies in the State of West Bengal. We may refer
to
502
some of the documents on the record.
The Managing Director, FCI, in a meeting of Zonal Managers,
Senior Regional Managers and other officers held on
September 20/21, 1984 pointed out that the private storage
agencies were responsible for high transit losses of the
foodgrains in the State of West Bengal. He directed that
the desirability of continuing the system of storage agents
be examined. Immediately thereafter the Senior Regional
Manager, West Bengal formed a Committee to go into the
question. The Senior Regional Manager by his letter dated
January 21, 1985 forwarded the report of the Committee to
the higher authorities. The Committee had reported against
continuing the storage agency system. The report of the
Committee was accepted in principle Deputy Zonal Manager in
the office note dated February 23, 1985 examined the
Committee-report and suggested fixation of target date for
abolition of the storing agencies. The Deputy Manager
(Finance) on March 4, 1985 also recommended the abolition of
storing agency by giving additional reasons. A meeting was
held in the chamber of the Zonal Manager in the first week
of March, 1985 which was attended by five senior zonal
officers including the Zonal Manager. In the said meeting
the report of the Committee was accepted and the final
decision to abolish the storage agency was taken. The Zonal
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Manager by his letter dated March 14, 1985 communicated the
decision to the Senior Regional Manager for compliance. The
said letter is reproduced hereunder:
"No. E. 12(1)/81-Stg. Dated
: 14.3.1985
TO
Shri B.K. Mukhopadhyay,
Senior Regional Manager,
Food Corporation of India,
Calcutta.
Sub : Abolition of Storing Agency in West
Bengal Region, FCI.
Sir,
Please refer to the correspondence resting
with your letter No. E/25/(17)/82-Stg. (c)/74
dated 21st January, 1985 regarding abolition
or otherwise of Storing Agency
503
System in West Bengal Region. The matter has
been examined in consultation with the Zonal
Finance and the following decisions have been
taken.
1. Immediate abolition of Storing Agency
depots in the Districts falling under the M.R.
areas where CWC, SWC and owned godowns
including JM(PO) exists.
2. Where there is no existence of SWC, CWC
and owned godowns, FCI should make arrangement
for hiring godowns to replace the storing
agents godowns in phases keeping in view the
distribution in M.R. areas and rake points to
accommodate stocks from Northern India.
3. Storing Agents godowns in S.R. areas of
Calcutta Complex may continue for some time
for maintaining supply’ line, but all our
efforts should be made by SRM, West Bengal for
sending as less stocks as possible to S.A.
godowns in Calcutta Complex. As for example,
in Calcutta (South) with the opening of
Kalighat siding and two feeding depots like
Lake and Behala, Storing Agents need be used
only if absolutely necessary.
You are, therefore, requested to take action
on the line as aforesaid and draw out an
Action Plan and confirm the same to this
Office under intimation to Headquarters.
You are also requested to send us a detailed
list of all the existing Storing Agents
godowns both for M.R. and S.R. areas district-
wise on the line as indicated above in (1),
(2) & (3) as per proforma enclosed.
Approved by Zonal Manager.
Your faithfully
Sd/- V.Ballachandran
Dy. Zonal Manager
For Zonal Manager (East)."
504
Further the letter dated March 30, 1985 by Chief Commercial
Manager ’(in the Head Office) to the Zonal Manager shows
that the decision of the Zonal Manager to abolish the
Storage agency was approved by the Head Office.
The sequence of proceedings narrated by us leaves no manner
of doubt that a policy decision was taken at the level of
the Zonal Manager to abolish the storage agencies and the
said decision was approved by the Head Office of the FCI.
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We are, therefore of the view that the High Court was not
justified in reaching the conclusion that there was no
policy decision by the FCI
The High Court, without noticing any specific instance, made
general observations to the effect that clause 37 of the
contract was not uniformly invoked by the FCI. The High
Court failed to appreciate that the policy decision
contained in the letter dated March 14, 1985 indicates the
plan to be worked out for abolishing the storage agencies.
Although the decision to abolish the storing agencies with
immediate effect was taken but it was stated in para 2
therein that FCI should make arrangement for hiring godowns
to replace the storing agents in phases keeping in view the
distribution of the foodgrains arriving from Northern India.
It was also part of the decision that storing agents godowns
in the Calcutta Complex were to continue for sometime for
maintaining the supply line. It was, therefore, in the
nature of the policy decision that the agreements with the
storage agents were to be revoked in phased manner.
It is not disputed that with effect from September 30, 1985
the West Bengal Government has taken over the public
distribution system in the State of West Bengal. The State
of West Bengal has taken over the godowns from the FCI and
is operating the same. There is thus no scope for operating
the private storage agencies in the State of West Bengal.
We, therefore, allow the appeal, set aside the judgment of
the High Court and dismiss the Writ petition filed by
respondent- Jagannath Dutta with costs. We quantity the
costs as Rs.10,000.
N.V.K. Appeal allowed.
505