Andhra Pradesh High Court - Amravati

Andhra Pradesh State Co Operative ... vs Revathi Zinc Products on 13 October, 2023

   IN THE HIGH COURT OF ANDHRA PRADESH: AMARAVATI

HON'BLE MR. JUSTICE DHIRAJ SINGH THAKUR, CHIEF JUSTICE
                                &
        HON'BLE MR. JUSTICE R. RAGHUNANDAN RAO


                        W.A.No.612 of 2023

 Andhra Pradesh State Co-operative Marketing Federation Ltd,
 Rep. by its Managing Director, 5-9-58/B, 7th Floor,
 Parishram Bhavan, Basheerbagh, Hyderabad.

                                                        ...Appellant

                                Versus

 Revathi Zinc Products,
 Rep. by its Managing Director,
 Vytla Ramababu, S/o. Soma Sekhara Rao,
 1st Floor, Lakshminarayana Nagar,
 Ring Road, Anakapalle & fifteen others.

                                                     ...Respondents

Counsel for the appellant : Ms. Y. Mahalakshmi Standing Counsel for AP Co-Operative MARKFED

Counsel for Respondent No.1 : Mr. Chandra Sekhar Ilapakurthi

Counsel for Respondent Nos.2 and 16 : GP for Agriculture

Counsel for Respondent Nos.3 to 15 : -

HCJ & RRR, J

Dt.:13.10.2023

PER DHIRAJ SINGH THAKUR, CJ:

1. The present writ appeal under Clause 15 of the Letters Patent

has been preferred against the judgment and order dated

13.12.2022 passed in W.P.No.12980 of 2012. The writ Court while

allowing the writ petition has directed the Andhra Pradesh State

Co-operative Marketing Federation Limited/appellant herein to pay

an amount of Rs.28,00,000/- to the petitioner for the Zinc Sulphate

it supplied to respondent Nos.3 to 15 in the writ petition.

2. Briefly stated the material facts are as under:

2.1. The petitioner/Revathi Zinc Products, is a company involved

in the manufacture of Zinc Sulphate which is used for agricultural

purposes. During the year 2005, the Andhra Pradesh State Co-

operative Marketing Federation limited invited tenders for the

supply of Zinc Sulphate. The petitioner was found to be a successful

bidder and an agreement dated 23.07.2005, came to be executed

between the two. A supply order was placed by the federation with

the petitioner to supply 155 metric tonnes of Zinc Sulphate to

respondent Nos.3 to 15 in the writ petition.

HCJ & RRR, J

2.2. Needless to say that the agreement executed between the

federation and the petitioner dated 23.07.2005, also contained an

arbitration clause in the following terms:

"18. The Deputy Registrar of Co. operative Societies (Enforcement)

A.P. Markfed (who is Registrar for the purposes under section 61 of

A.P.C.S Act VII of 1964) shall be nominated as the Arbitrator and he

shall decide any such reference at the instance of either party, as if

it is a dispute under Section 61 of the A.P.C.S Act VII of 1964."

2.3. It appears that quality checks were carried out on the

material supplied by the petitioner from different locations. 13 of

the samples so collected, after testing the same were found to be

substandard. The Department of agriculture accordingly, brought

this fact to the notice of the Andhra Pradesh State Marketing

Federation Ltd./appellant herein who immediately instructed the

petitioner to stop further supplies.

2.4. A case under Section 6A of the Essential Commodities Act,

1955 was also filed in this regard. The Joint Collector ordered the

confiscation of the entire quantity and instructed the disposal of

stocks in open auction based on available nutrient content.

Accordingly, the concerned officers disposed the stocks and

deposited the amount released from the open auction to the HCJ & RRR, J

Government account, in regard to 30 metric tonnes of Zinc

Sulphate which was supplied in West Godavari region. A complaint

also came to be preferred against the petitioner under Section

19(1) (a)(b)(c) of Fertiliser (Control) Order, 1985 punishable

under Section 7(1)(a)(i) of the Essential Commodities Act, 1955.

However, the petitioners were acquitted primarily on the ground

that the complainant did not mention the procedure which had

been adopted for collection of samples in the complaint. In that

backdrop, the petitioner claimed that a Mandamus must be issued

to the respondent No.2/appellant herein to pay an amount of

Rs.28,00,000/- to the petitioner for the supply of Zinc Sulphate as

per their supply orders placed with it.

2.5. The writ Court by virtue of judgment and order impugned

allowed the petition primarily on the ground that non-payment of

the amount on account of supplies made, despite the acquittal of the

petitioner was illegal and arbitrary and therefore, directed that

Rs.28,00,000/- be paid to the petitioner on account of the supplies

made.

3. Counsel for the appellant urged that the judgment and order

impugned is not sustainable in law as no amount was due and HCJ & RRR, J

payable on account of the supplies made, as the same was not in

accordance with the supply orders which required Zinc Sulphate of

a particular quality to be supplied and further that the supplies in

fact were made by the petitioner of a substandard Zinc Sulphate.

4. In any case, it was urged that there was an arbitration Clause

18 which the petitioner ought to have invoked as per the terms and

conditions of the agreement dated 23.07.2005, entered into

between the parties and was urged that the writ Court ought not to

have exercised writ jurisdiction in the matter when the petitioner

did have an alternate forum to approach.

5. Counsel for the respondents on the other hand, reiterated the

views expressed by the writ Court in the judgment.

6. We have heard learned counsel for the parties.

7. Admittedly, as per the agreement entered into between the

appellant and the respondents Zinc Sulphate 21% ISI grade was to

be supplied. Supplies were made however, the case of the appellant

is that the supplies made were substandard and not as per the

agreement entered into between the parties.

HCJ & RRR, J

8. Clause 11 of the agreement envisaged that there would be

quality checks conducted periodically by the buyer and the

enforcing department authorities and payment would be made only

after satisfying the quality and quantity as per specification. It

further envisaged that if goods or a material of any one

consignment did not conform to the standard, the supply order

would be terminated summarily and action initiated.

9. Admittedly, there is a dispute between the parties as regards

the supply of the material in regard to its quality. Whereas the

appellant claims that the supplies were substandard, the petitioner

claims that they were not substandard inasmuch as the petitioner

stood acquitted in the criminal case which was filed against it on

that basis.

10. In our opinion, acquittal in a criminal case would not per se

indicate that the Zinc Sulphate supplied by the petitioner was as

per the agreement and the supply order. As stated earlier, the

acquittal was on a technical ground as can be seen from the order

passed by the Court of the II Additional J.F.C. Magistrate,

Rajahmundry. There was therefore, no basis for the writ Court to HCJ & RRR, J

have proceeded to direct the appellant to pay an amount of

Rs.28,00,000/- to the petitioner on account of the supply of Zinc

Sulphate and in the ordinary course ought to have relegated the

petitioner to the remedy of arbitration in terms of the arbitration

Clause 18 contained in the agreement.

11. We would like to refer to the Apex Court judgment in ABL

International Limited vs. Export Credit Guarantee Corporation of

India Ltd1 wherein it was held that the prerogative writ will not

normally be exercised by the Court to the exclusion of other

available remedies unless such action of the State or its

instrumentality is arbitrary and unreasonable so as to violate the

constitutional mandate of Article 14 or for other valid and

legitimate reasons, for which the Court thinks it necessary to

exercise the writ jurisdiction.

12. On the issue of the right to issue prerogative writs to the

exclusion of other available remedies, in State of U.P. vs. Bridge and

Roof Company (India) Ltd.2, the Court held:

"16.....The contract in question contains a clause providing inter a1ia for settlement of disputes by reference to arbitration

2004 3 SCC 553

1996 6 SCC 22 HCJ & RRR, J

[Clause 67 of the Contract]. The Arbitrators can decide both questions of fact as well as questions of law. When the contract itself provides for a mode of settlement of disputes arising from the contract, there is no reason why the parties should not follow and adopt that remedy and invoke the extra-ordinary jurisdiction of the High Court under Article 226....."

13. Following the ratio of the aforementioned judgments, in our

opinion, the writ Court ought to have refused to exercise the writ

jurisdiction and relegated the parties to the remedy of arbitration

which was provided for in the contract entered into between the

parties as a board of settlement of disputes arising from the

contract.

14. For the aforementioned reasons, we find that the judgment

and order impugned passed by the learned Single Judge is

unsustainable in law and is accordingly set aside.

15. In the result, the Writ Appeal is allowed. No costs.

Pending miscellaneous applications, if any, shall stand closed.

DHIRAJ SINGH THAKUR, CJ R. RAGHUNANDAN RAO, J SSN HCJ & RRR, J