THE HON'BLE SRI JUSTICE D.V.S.S.SOMAYAJULU
I.A.NO.01 OF 2021
IN
WRIT PETITION NO.9279 of 2021
ORDER:
The writ petition is filed under 226 of Constitution of India for the following relief.
"..to issue an appropriate writ, order or direction particularly one in the nature of writ of Mandamus declaring the G.O.Ms.No.19 Animal Husbandry, Dairy Development & Fisheries (Dy.Vig) Department, dated 27.4.2021 of the 1 st respondent as illegal, arbitrary without authority of law, contrary to the provisions of the Companies Act, 2013, against the Rules of Law and unconstitutional and consequently set aside the said G.O.Ms.No.19 Animal Husbandry, Dairy Development & Fisheries (Dy.Vig) Department, dated 27.4.2021 of the 1 respondent and to st pass such other order or orders..."
This Interlocutory Application is filed to stay the operation of the said G.O.Ms.No.19, dated 27.4.2021.
This Court has heard Sri B. Adinarayana Rao, learned Senior Counsel appearing for the petitioners, and the learned Advocate General. Even though this is an interlocutory application still in view of the detailed arguments advanced, this Court is also compelled to reproduce the same in some detail.
Learned senior counsel points out that the impugned G.O. that has been issued on 27.4.2021 seeks to set aside an earlier G.O. that was issued on 17.7.1978 i.e after 43 years.
Learned senior counsel initially draws the attention of this Court to the G.O.Ms.No.515, Forests and Rural Development (Corporation) Department, dated 17.7.1978 and its contents. Prior to that, he points out that the State Government has decided to establish a Feeder Balancing Dairy at Sangam Jagarlamudi, Guntur District. According to the learned senior 2 counsel, the milk producers of Guntur District contributed money to purchase the land in Vadlamudi adjoining Sangam Jagarlamudi village. The details of purchase are mentioned in Table-A of the affidavit. One Sale-deed bearing No.1446/1973 is also filed as an illustrative example. This document as per the Learned Senior Counsel shows that the financial contribution for the purchase was made by the milk producers. Learned senior counsel also draws the attention of this Court to the Table-B, which is mentioned in the writ petition, in which he states that the land acquired by the Andhra Pradesh Dairy Development Corporation (for short 'APDDC') is mentioned. He also draws the attention of this Court to the fact under the A.P. Cooperative Societies Act, 1964, the Guntur District Milk Producers Cooperative Union (hereinafter called as 1964 Cooperative Society) started functioning. In the year 1978, by G.O.Ms.No.675, Dairy Development and Fisheries Department, dated 27.08.1977, Vadlamudi Dairy was directed to be transferred to the said Society. Since then, according to the learned senior counsel, the Feeder Dairy at Vadlamudi popularly called as Sangam Dairy was transferred to the 1964 Society. On settlements of accounts, it was found that the State Government invested a sum of Rs.81,00,000/-(Rupees Eighty One Lakhs only), which was according to the learned counsel was directed to be treated as 'share capital'. This valuation was done by the State only as per the learned senior counsel According to the learned senior counsel, with effect from 1978 and by virtue of G.O.Ms.515, the assets became the assets of the Sangam Dairy. Learned senior counsel also draws the attention of this Court to the repayment of 3 the amount and the challans, by which the money invested by the State was repaid to the State Government .He also points out that the audited accounts also reveal that the State Government became the shareholder alone. Later in 1995, when the Mutually Aided Co-operative Societies Act, 1995 came into force, the 1964 Society was converted into MACS Society. The NDDB (National Dairy Development Board) also advised the 1964 Society to get converted into an MACS Society. Accordingly, the learned senior counsel submits that the Society submitted its application in December, 1996 and ultimately the 1964 Society converted into an MACS Society on 01.2.1997. Later, the learned senior counsel submits that the General Body has passed a Resolution in September, 2011 to convert the 1995 MACS Society into a producer company. Learned senior counsel submits that after following legal procedure and after securing all the necessary statutory approvals etc., the petitioners' company was formed as a company with the name of Sangam Milk Producers Company Limited on 18.6.2013. Learned senior counsel also draws the attention of this Court to legal hurdles faced by the petitioners' company and the result of the legal challenge, as decided by the Hon'ble Supreme Court of India in Andhra Pradesh Dairy Development Corporation Federation Vs. B. Narasimha Reddy and others1. Learned senior counsel submits that the Hon'ble Supreme Court of India recognized the conversion from 1964 Act to 1995 Act and also that the judgment in paragraph 53 recognizes the fact that after the conversion under the 1995 Act, 1 (2011) 9 Supreme Court Cases 286 4 with the permission of the Government 1964 Society cannot be treated as aided Societies or Societies holding the assets of the Government or of the Federation. Relying upon this judgment and the judgment of the learned Single Judge reported in APDDC Staff and Workers Union and others Vs. Government of A.P. and others2, he points out that the conversion from the 1964 Act to 1995 Act was recognized and the learned senior counsel argues that the petitioners' company has come into existence after following the due process of law. He therefore argues that the assets of the petitioners' company cannot be treated as the assets of the Government and that the State cannot unilaterally take over the operations and /or the assets of the petitioners' company. Learned senior counsel argued that the petitioners' company is duly formed under law and that the State cannot treat itself as the "owner" of the assets of the company.
He draws the attention of this Court to the impugned G.O.Ms.No.19, dated 27.4.2021 and argues that under the guise of a vigilance enquiry and by a mere administrative order the entire action has been taken and the Sub-Collector, Tenali cannot be appointed to supervise the management of the operations. It is also his contention that the second reason mentioned in the impugned G.O is incorrect and there are no depletion of assets as sought to be made out. He submits that the assets of the company were already mortgaged to NDDB and the mortgage was only extended. Therefore, the learned senior counsel argues that the entire action taken by the State is mala fide and is for 2 1999 (6) ALD 357 5 extraneous political reasons. He urges that there is no public interest involved at all.
Learned Advocate General on the other hand argues that taking over of the assets is necessitated as the State still remains the owner of the assets, more particularly, the Feeder Balancing Unit at Sangam Jagarlamudi. Learned Advocate General points out that G.O.Ms.No.515, dated 17.7.1978 merely transfers the operation and management of the unit. According to him, the ownership has not been transferred. He points out that the Chairman of the Milk producers Union adopted a Resolution to set up a Trust in memory of its Ex-chairman i.e., in the name of Sri Dhulipalla Veeraiah Chowdary Memorial Trust and the Board of Directors passed a Resolution to transfer Ac.10.00 of this land in favour of the Trust. According to the learned Advocate General the land belongs to the Government and the transfer to the proposed Trust is contrary to law. He also argues that this transfer is subject matter of the investigation in Criminal Case FIR No.2 of 2021. Learned Advocate General argues that further execution of the gift deeds in April, 2020 in favour of the Trust is contrary to law. The Certificate obtained by the Union in February, 2011 according to the learned Advocate General is given by an officer who is also arrayed as accused in the criminal case. Learned Advocate General submits that the said document is prepared to suit the interest of the Chairman and Managing Director. He also argues that the conversion of the MACS into a producer company is also suspicious and that the provisions of law are not complied with. He draws the attention of this Court to 6 paragraphs No.13 to 21 of the counter affidavit and argued that the entire sequence of events are suspect beginning with the conversion from 1964 Cooperative Society to MACS under 1995 Act and later the conversion into producer company. He also points out that the Anti Corruption Bureau of the State has also registered a crime, which is detailed in paragraph 22 of the counter affidavit against the Managing Director and others, which is pending investigation. He draws the attention of this Court to an order passed by the learned Single Judge of this Court in I.A.No.1 of 2021 in Criminal Petition No.2675 of 2021. Relying upon Paragraph 13 of the Judgment, the learned Advocate General argues that the single Judge observed that there is no provision of law by which there would be automatic vesting of property once the 1964 Cooperative Society becomes an MACS. Lastly, he argues that as per the General Clauses Act etc., the power to withdraw a GO is inherent in the State. He argues that there is no need for separate legal provision to enable the Government to withdraw the sanction/grants under G.O.Ms.No.515, Forests and Rural Development (Corporation) Department, dated 17.7.1978.
In rejoinder, Sri B. Adinarayana Rao, learned senior counsel points out that from 1978 the petitioners' company has been functioning by utilizing the assets and by an executive order control of the petitioners' company has been taken over. While relying upon the contents of G.O.Ms.No.515, dated 17.7.1978 and G.O.Ms.No.19, dated 27.4.2021 the learned senior counsel argues that neither of these two GOS are issued under any law nor can the power be traced to any statute. He argues 7 that these are mere executive instructions. He submits that there is no depletion of assets as made out in the G.O .He also argues that by use of force and under the guise of ACB case the Management has been taken over by the respondents. Lastly, he again submits that there is absolutely no public interest involved in this case.
This Court, after hearing the learned counsels, notices that there are certain issues which need to be gone into deeper and decided. It is apparent from the reading of the sale deed, copy of which has been filed, the contribution to the purchase of the property has been made by the two individuals, who are mentioned in the sale-deed. In Table-A of the writ affidavit in paragraph No.5 the details of the purchase of the land said to be with the contribution/payment by the milk producers union are given. This group of people who are Milk Producers are organized themselves into the Guntur District Milk Producers Co-operative Union under the A.P. Cooperative Societies Act, 1964.(1964 Society).
By G.O.Ms.No.515, dated 17.7.1978, the Feeder Balancing Dairy at Jagarlamudi was handed over to the 1964 Society /Milk Producers Union. Thereafter, as the State Government funds were involved, clarifications were sought and it was decided that the payments made by the Government would be treated as 'share capital' of the Government.
As pointed out by the learned senior counsel, the contribution for purchase of the land by Milk Producers is also reflected in the annual accounts of the 1964 Dairy, which is audited.
After the MACS Act came into force the need to convert/register the Union under the new Act was discussed with the statutory authority and NDDB. This proposal was hanging in the air. Ultimately, NDDB directed 8 the 1964 union to return the Rs.81,00,000 (Rupees Eighty One lakhs only) to the State. The same was done under the challan dated 11.12.1996 etc. On 01.2.1997, the 1964 Union was registered as an MACS under the 1995 Act. Thereafter, the MACS is converted into a producer company. This is evidenced by the Certificate of Incorporation issued by the Registrar of Companies. In the intermediate period the disputes were decided by the Hon'ble Supreme Court of India and also the A.P. High Court. In 1999 (6) ALD 357 (APDDC Staff and Workers Union and others Vs. Government of A.P. and others), the learned Single Judge noticed the conversion/migration from 1964 Cooperative Society to 1995 Act.. Even in 2011 (9) Supreme Court Cases 286 (Andhra Pradesh Dairy Development Corporation Federation Vs. B. Narasimha Reddy and others), the Hon'ble Supreme Court of India noticed the conversion /migration from 1964 Act to 1995 Act. The effect of these two judgments and the arguments of the learned Advocate General are matters that have to be considered at a greater depth and in a final hearing. Apart from this, this Court also notices that the investigation by the ACB is at a nascent stage. No Court of competent jurisdiction has come to the conclusion that the issues raised by the ACB are correct or that the accused are guilty. Since the matters are pending investigation this Court is not expressing further opinions.
The other contention urged by the learned Advocate General is that only the management is transferred by G.O.Ms.No.515, dated 17.7.1978 and that there is no automatic transfer of assets. The learned Single Judge in the course of Criminal petition also prima facie held that there is no automatic transfer. This Court is not entering into this area also at 9 present. This needs to be probed further. But for the purpose of present application, it is to be noticed that from 1978 onwards, the Management of certain assets were given to the Milk Producers Union registered under 1964 Act. Management of the assets includes putting the society in possession of the assets. It is needless to say that this Court is dealing with a Dairy, which is established for the purpose of processing and selling milk and milk products. For this purpose, the 1964 Society has been in possession of the property. According to the petitioners, the 1964 Society migrated and became MACS under the 1995 Act and later a producer company. Admittedly, the petitioners were still in possession. In the prima facie opinion of this court once they are in settled possession even if the Government has a claim over the property they cannot summarily and by an Executive order take over the possession. This is contrary to the settled law on the subject. The argument of the learned Advocate General about the conversion being contrary to law, is a matter that is not yet finally decided.
The other major argument is about the depletion of the assets. As per the learned Advocate General the interest of the Government is only to protect the assets of the Union in Public Interest and to avoid further depletion. Ac.10.00 of land, which is supposedly transferred to the Trust is the bone of contention. It is argued that the G.O.Ms.No.515, dated 17.7.1978 imposed the condition that the Union shall not encumber or alienate the property, and it is argued that the transfer to the TRUST is contrary to the condition and the law. The final answer to this would depend on the various issues to be decided in this writ and in a way will also depend on the criminal investigation. No firm /conclusive opinion can thus be expressed now on this issue. It is also argued that contrary to the interim orders in WPMP.No.26060/2013 in WP.No.21278/2013 10 the extension of equitable mortgage took place. This is another facet of this argument of depletion. Whether an equitable mortgage amounts to alienation or transfer of an asset is also a matter that is required to be looked into greater depth. The documents filed by the State with their counter affidavit show that the "existing mortgage" was extended by the producer company in February, 2020. As stated earlier this is an issue which requires further investigation/elucidation.
Lastly, this Court is the prima facie opinion that G.O.Ms.No.515, dated 17.7.1978 is in the nature of administrative/executive instruction, and it does not refer to any statutory provision as its source of power . Whether in such a case, the State can rely upon Section 15 of the State General Clauses Act or Sec 21 of the Central General Clauses Act is also a moot point. In the absence of any statutory power this court is of the prima facie opinion that the State by an executive order/administrative order cannot take over possession summarily even if the argument that only the management of the assets is handed over is accepted. The period of time that elapsed is also an important point and what is given/conferred in 1978 is reversed in 2021.
In the opinion of this Court, these are all matters which require to be decided in the writ petition. Prima facie, this Court is of the opinion as the petitioner has made out an arguable case Balance of convenience is also in their favor and they have been in this business by managing the Diary along with possession since decades. Greater harm will be caused to them by this action. The petitioner is therefore entitled to a relief. However, what is stated by the State cannot also be totally overlooked and as highlighted by the Learned Advocate General, the endeavour of the State is only to protect the assets and to prevent their depletion. The 11 Counter affidavit however states in para 38 that the management is continued to be vested in and is being exercised by the Board of Directors. The impugned GO also talks of the day to day activities continuing with the existing staff and employees and of the need to ensure uninterrupted supply of the essential services.
Therefore, this Court is of the opinion that interests of justice would be met if the following order is passed.
1. There shall be an interim suspension of G.O.Ms.No.19 Animal Husbandry, Dairy Development & Fisheries (Dy.Vig) Department, dated 27.4.2021
2. The 1st petitioner shall be entitled to continue in the management and control of the petitioners' union
3. However, the posting of an IAS officer would lead to administrative difficulties particularly as the petitioner is a process industry requiring special expertise. Therefore, this Court directs that the administration and management shall continue to be exercised by the Directors of the company and the Sub Collector Tenali shall not be present in the premises or take part in the operations /administration .
4. Regular day to day activities, the payment of salaries, payments of statutory dues and contractual obligations etc., shall be carried out as before by the 1st petitioner only.
5. However, the Board shall not except with the permission of this Court create any further charge, encumbrance etc., on the properties. All future transactions by which the movable and immovable assets of the petitioners are sought to be alienated, mortgaged, transfered etc., should be with the prior permission of the court.
6. The normal business activities of the 1st petitioner - buying , processing and selling of milk and milk products shall be continued by the 1st petitioner without any hindrance . In view of the fact that I.A.No.1 of 2021 is allowed and G.O.Ms.No.19 Animal Husbandry, Dairy Development & Fisheries (Dy.Vig) Department, dated 27.4.2021, is suspended with certain directions no further orders are immediately called for in I.A.No.2 of 2021 .
12The opinions expressed in this order are prima facie opinions for the disposal of this application only .
With the above observation, this interlocutory application is allowed.
________________________________ JUSTICE D.V.S.S.SOMAYAJULU Date: 07.05.2021 GR