Indian Jute Mills Association & ... vs Union Of India & Another
2023 Latest Caselaw 7252 Cal

                     IN THE HIGH COURT AT CALCUTTA
                      Constitutional Writ Jurisdiction
                                Appellate Side



Present:

The Hon'ble Justice Jay Sengupta



                            WPA 27513 of 2022
                  Indian Jute Mills Association & Another
                                    Versus
                         Union of India & Another


For the petitioner             :     Mr. Abhrajit Mitra
                                     Ms. Rajshree Kajaria
                                     Mr. Satadeep Bhattacharyya
                                                            .....Advocates
For the UOI                     :    Mr. Dibashis Basu
                                     Mr. Arun Bandopadhyay
                                                            .....Advocates
Heard lastly on                 :    08.05.2023

Judgment on                     :    18.10.2023

Jay Sengupta, J.:

1.    This is an application under Article 226 of the Constitution of India

praying for directions upon the respondent authorities, especially the

respondent nos. 1 and 2, to make payment for the jute bags manufactured

and inspected in terms of the PCSOs at the rates specified therein

irrespective of when the delivery is taken by the named consignees and upon

the respondent no. 2 to make payment of differential amount to the

numbers of the petitioner no. 1, the loss which has been suffered by the

members due to jute bells being lifted at the price prevailing on the date of

such lifting and not at the rate of which was prevailing at the time of

issuance of PCSOs.

2. Learned senior counsel appearing on behalf of the petitioner

submitted as follows. Raw jute was a controller item. Jute bags made from

raw jute used for packing of food grains were also controlled items. The

present writ petition concerned the power, if any, of the Jute Commissioner

[In short 'JC'] to alter the agreed price specified in the individual Production,

Control and Supply Orders [In short, 'PCSOs']. PCSOs were issued on a

monthly basis by the JC under Regulation 4(i) of the Jute and Jute Textile

Control Order, 2016 [In short 'JTCO, 2016'] for production and supply of

jute bags to the consignees specified in the concerned PCSOs. PCSOs

being bilateral contracts between JC and Jute Mill owners specify the ex-

factory price of the jute bags which was payable by the JC as per Clause 8 of

each PCSO which was also set out hereinbelow: -

"8. Payment Terms: -

(a) 90% payment on proof on inspection and dispatch. Balance 10% will

be released on expiry of 60 days if no quality or other complaints is raised

by the consignee within this period.

(b) In case of dispatch beyond Original/Refixed DP after obtaining DP

extension, 2% payment for every month of delay or part thereof subject to

maximum of 5% will be withheld till regulation of DP.

(c) Paying Authority will be the office of the Jute Commisisoner, Kolkata."

Clause - 8 which stipulates 90% payment by JC to the Jute Mills on proof of

inspection and dispatch had to be read in conjunction with Clauses 7(c) and

(d) which specified the date of inspection and the date of despatch. As would

be evident from Clause 7(a), lifting and transportation of the goods was not

the seller's (jute mill's) obligation. A jute mill had to manufacture the jute

bags and cause the same to be inspected before the specified date Clause 7

(c) by the Inspecting Agency specified in the PCSO Clause-12. As stated

earlier, the lifting and transportation thereafter by the named consignee was

not within the control of the jute mill. It was just that the first 90% payment

was to be received by the jute mill on inspection and despatch [Clause 8(a)].

Thus, as per the contract terms, receipt of 90% payment was dependant not

only on the manufacture and inspection of the jute bags, but also on the

lifting of the jute bags by the named consignees over which the jute mill had

no control. To that extent, the jute mill could not complain even though they

were very often victims of delayed lifting by the consignees, even Clause 8(a)

was binding on the jute mills. The present case concerned the penalization

of jute mills for delayed lifting of jute bags by the named consignee. If there

was a provision to that effect, or there was any breach of the terms of the

contract (PCSO) by the jute mills then it would have been a different matter.

However, none the same, the JC, on a regular basis, by unilateral

amendments to the PCSOs was altering the agreed the price of jute bags i.e.

the PCSO price. Instead of the agreed price mentioned in the PCSOs, by

these unilateral amendments, JC is prescribing a different price the jute

bags, i.e. "lowest of the prices during the period starting from the month of

placement of PCSO, and upto the month of supply, both the months

inclusive." For example, the contractual price of jute bags in PCSO dated

20th September, 2022 was Rs. 6084.61 per 100 bags. As per the PCSOs the

last date of inspection was 30th September, 2022, and last date of dispatch

was 12th October, 2022. Now, if the jute mills have manufactured the jute

bags in time and these were inspected and passed before 30th September,

2022, the jute mills became entitled to receive 90% payment of the

contractual price at Rs. 6084.61 per 100 bags immediately on dispatch, and

the balance 10% on expiry of 60 days thereafter. Now, if the named

consignee, namely, Telengana State Civil Supplies Corporation delayed

lifting of the jute bags beyond the last specified date, i.e. beyond 12th

October, 2022, then and in that case, the contract/PCSO did not stipulate

any alteration of the price. However, as per the unilateral amendment, the

price would be the lower of the price given in the PCSO i.e. Rs. 6084.61 per

100 bags, and the price for the month in which delivery was taken. Say for

example, that delivery was taken in the month of November, 2022 and the

notified price for November, 2022 was Rs. 5903.70, then and in that case,

the jute mills, as per the unilateral amendment by the JC would be receiving

not the contractual price of Rs. 6084.61 per 100 bags, but only Rs. 5903.70.

Thus, for no fault of the jute mill, it would be receiving Rs. 180.91 per 100

bags less. This was apart from the delayed payment, it would be receiving as

per Clause 8(a) of the PCSO, which, of course, being a contractual term, the

jute mills concerned had to accept. There was a chart at page 73 showing

three several instances of jute mills' suffering loss of Rs. 180.91 per 100

bags against the PCSO for the month of September, 2022. Factually, the

case was admitted in the Affidavit-in-Opposition of the respondent, where it

had been admitted that the jute mills are suffering penalty (unilaterally

lowering the price) for the failure of the named consignee to lift the jute bags

in time Para 3(ix) of A/O of the respondent. The respondents had also not

shown any statutory provision empowering the Jute Commissioner to

unilaterally amend the PCSO, and, in fact, JTCO, 2016 did not have any

such provision. The judgments for the proposition that State could not

unilaterally alter the contract terms by way of policy decision or executive

action, were - MANU/GJ/1760/2021 - Cube Construction Engineering

Limited Versus State of Gujrat; (2020) 2 Cal Law Times 383 - Rupa & Co.

Ltd. and Another versus State of West Bengal and Others; (2008) 2 SCC

672 - Delhi Development Authority and Another versus Joint Action

Committee, Allottee of SFS Flats and Others.

3. Learned counsel for the Union of India submitted as follows. The writ

petitioner had deliberately not made the State Procurement Agency (herein

after referred to as SPA) as party to this writ petition. As a matter of act, the

grievances agitated in this instant writ petition was technically against the

said SPA and for which the fall clause of the production control and supply

order has been attracted against the petitioner and therefore, the concerned

SPA were the necessary parties in the writ petition. Paragraph 12, 17, 20, 21

and 30 of the writ petition are the most relevant paragraphs wherein the

writ petitioner had admitted that for the fault on the part of the SPA the fall

clause had been attracted against the writ petitioner. From Annexure 'P/7'

appearing from page 74 to 80 it could be seen that clause number 3

practically described the period of delivery and not in compliance of the

same the clause 8 was attracted against the particular jute mill which

actually referred the fall clause as above. Even more than 70% of the jute

industry was dependent on Government purchase of B-Twill bags, and if

Government support went, then the jute industry would not able to survive

on their own and for that Government had to maintain certain checks and

balances within the system, so that neither any malpractice took place nor

any unscrupulous mills got undue benefit from public exchequer. As a

matter of policy implementation and putting the statute, Jute & Jute

Textiles Control Order, 2016 had come into effect and accordingly the Jute

Commissioner issued Production Control cum Supply Order (in short herein

after referred as PCSO) in consonance with the indents and other

instructions/advice placed by different State Procurement Agencies. The

PCSO issued was a contract, which binded the consignee and the consignor

both into a specific system which if not followed would jeopardies the entire

supply chain mechanism. The order being given to the manufactures

through this PCSO which required to be completed in schedule time,

otherwise any manufacturer might take secured order from Government and

supply to different private purchaser at higher price and this Government

order might never get completed at any point of time. Then the Government

order would become a security key for the manufactured and on the other

hand different State procurement agencies would suffer from shortage of

supply of B-twill bags. The foodgrain supply throughout the nation might

collapse like pack of cards. Therefore, there was a penalty provision imposed

through this PCSO that, in case of delayed supply time, 'fall clause' inbuilt

in PCSO, was applied and lowest rate for the month of supply and issue of

PCSO and other intervening months were paid alleged failure of single

consignee as an accident could not give a cause of action to the writ

petitioner to alter whole Government policy which was being followed for

more than three decades. The Jute and Jute Textile Control Order 2016 was

an outcome of Section 3 of the Essential Commodities Act, 1955 and being

empowered of the aforesaid statutory provision the Jute Commissioner

issued PCSO which bound parties in the contract and therefore unless the

named consignee which was evident from clause 7 of PCSO was impleaded

as party, no effective adjudication could be administered. It was the

Government policy and if the said policy was altered then unscrupulous

traders and manufacturers might take the advantages and might make

illegal profit if there was nothing specified in the PCSO and for which the

inbuilt fall clause had been inserted in clause 8 of the PCSO. From the

affidavit in opposition it was also important that the office of the Jute

Commissioner had taken lawful steps against non-lifting of jute bags by the

transporters engaged by the concerned consignee.

4. I heard the learned counsels for the parties and perused the writ

petition and the written notes of submissions.

5. Following are the facts relevant for adjudication of this lis. Raw jute is

a controlled item. Jute bags made of raw jute and used for packing a

foodgrains are also a controlled items. PCSOs are bilateral contracts

between the Jute Commissioners (JC for short) and the jute mill owners

specifying the ex factory price of jute bags payable by the JC as per Clause 8

of each PCSO. Clause 8 has to be read in conjunction with Clauses 7 (c) and

(d), which specify the date of inspection and the date of dispatch. The lifting

and transportation by the name consignee after an inspection is done is not

within the control of the jute mill. But, 90% payment is to be received by a

jute mill on inspection and dispatch. Therefore, such payment is dependant

not only on the manufacture and inspection of jute bags, but also on the

lifting of jute bags by the name consignees. The JC, on a regular basis, by

unilateral change in the PCSOs is altering agreed price of jute bags. Instead

of the with price mentioned in the PCSOs, the JC is prescribing a different

price for the jute bags that is, "lowest of the prices during the starting from

the manufacture of placement of PCSOs and up to the manufacture of

supply, both the months inclusive." This is causing an undue hardship can

loss to the millers.

6. First, the contention of the respondents that the State Procurement

Agency (SPA, for short) should actually be the necessary parties is not quite

tenable as the price fixation in respect of the PCSOs is being unilaterally

altered by the JC.

7. The respondents further contended that more than 70% of the jute

industry is dependent on Government projects of B-12 bags and if the

government supports goes then the jute industry will not survive on their

own. This is hardly a ground for which the jute mill owner has to bear an

unspecified and unforeseen loss for no fault of its own. A government cannot

act arbitrarily or be seen to act as an exploiter.

8. It is indeed very surprising that instead of ushering in a stipulation

upon the consignees to lift the bags within a particular time of inspection,

the instant unilateral change had to be made by the JC. Such arbitrary and

unreasonable condition cannot be imposed by a statutory functionary on an

agreement or understanding, that too unilaterally.

9. This Court also fails to find any condition in the PCSOs that gives

such right to any of the parties to unilaterally alter the terms agreed to.

10. In view of the above, the term imposed unilaterally by the JC on the

jute millers in respect of the PCSOs that the price to be paid was the lowest

for the period between the date of inspection and the date of delivery is

quashed and set aside for being arbitrary and unjust.

11. However, the JC shall be at liberty to negotiate and/or enter into fresh

terms in respect of the PCSOs to be executed in future.

12. With these observations, the writ petition is disposed of.

13. Urgent photostat certified copies of this judgment may be delivered to

the learned Advocates for the parties, if applied for, upon compliance of all

formalities.

(Jay Sengupta, J.) S.M