Madras High Court
P.Ayyakannu vs The Government Of Tamilnadu on 21 April, 2023
WP No.34030 of 2022
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED: 21.04.2023
CORAM
THE HON'BLE MR.T.RAJA, ACTING CHIEF JUSTICE
AND
THE HON'BLE MR.JUSTICE D.BHARATHA CHAKRAVARTHY
WP No.34030 of 2022
and WMP No.33489 of 2022
P.Ayyakannu ... Petitioner
vs
1. The Government of Tamilnadu,
Rep by its Secretary,
Agriculture Department,
St.George Fort, Chennai.
2. The Commissioner of Sugar,
Government of Tamil Nadu,
690, Anna Salai, Chennai.
3. The District Collector,
Cuddalore.
4. Mr.Ramakrishnan Sadhasivan
Liquidator of M/s Thiru.Arooran Sugars Limited,
28, Menod Street, Purasavakkam,
Chennai-7.
5. The Kals Distillers Private Limtied,
T.Nagar, Chennai ... Respondents
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WP No.34030 of 2022
Prayer: Writ Petition under Article 226 of the Constitution of India
praying for a Writ of Mandamus directing the respondents to pay the
sugar cane arrears payable to the farmers those who supplied sugar
cane to the Arooran Sugar Limited and also to discharge the loan
fraudulently borrowed by the Arooran Sugar Limited in the name of
farmers from the banks.
For the Petitioner : Mr.S.Muthukrishnan
For the Respondents : Mr.S.Silambanan
Addl.Advocate General
Assisted by Mr.P.Muthukumar,
State Government Pleader,
For RR1 to 3
: Mr.P.H.Aravind Pandiyan
Senior Counsel
Assisted by Mr.B.Dhanaraj
For R-4
: Mr.P.S.Raman
Senior Counsel
Assisted by Mr.T.K.Baskar
for R-5
*****
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WP No.34030 of 2022
ORDER
(Order of the Court was made by the Hon'ble Acting Chief Justice
and
D.Bharatha Chakravarthy,J.)
A. Prelude :
"cGJz;L thH;thnu thH;thh;kw; bwy;yhk;
bjhGJz;L gpd;bry; gth;/" (Thirukkural -1303)
This is a converse case where the small and marginal sugarcane
farmers, who supplied sugarcane as per the mandate of the State to
the fourth respondent company, namely, ThiruArooran Sugars Limited,
during the years 2013 to 2017, are made to be praying with folded
hands, not demanding any favour, but for the price due of the
sugarcane supplied by them.
B. The PIL & Its Maintainability :
2. This public interest litigation is filed by one P.Ayyakannu, the
State President of an agriculturists' association. Objections to the
maintainability of the public interest litigation have been raised by both
the Liquidator of Thiru Arooran Sugars Limited and also the new entity,
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which is going to run the said sugar mill, namely, The Kals Distilleries
Private Limited, the fourth and fifth respondents herein. Their
preliminary objection is that when the affected farmers themselves
have taken part in the Committee of Creditors meeting and other
proceedings before the National Company Law Tribunal (NCLT),
Chennai and had accepted for 57% of the Fair and Remunerative Price
(FRP), contrary to their will the public interest litigation is
unnecessarily filed by the writ petitioner. In response thereof, when
this Court raised the said query to the petitioner and directed him to
get affidavits from the affected farmers, the petitioner has filed
statements duly signed by large number of farmers along with their
Membership number, Village and the balance amount due to them.
2.1. Secondly, we had also gone through the order of the NCLT
in this regard, which we are going to deal with in the later part of the
judgment. It is seen that out of 14,000 farmers who were directed to
vote, when all of them assembled, there was agitation on behalf of
these farmers leading to some of them tearing and throwing away
ballot papers and no voting took place. Thereafter, it was decided on
behalf of the Committee not to assemble farmers, but to separately
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deal with them. Even with such an attempt, they were able to get
ballots only from about 1086 farmers, which is not even 10% and only
by taking into account the total amount due and the volume of debt of
the fourth respondent company, namely, ThiruArooran Sugars Limited,
their objections were steamrolled and the order of the NCLT was
passed accepting the compromise proposal. Therefore, we are unable
to accept the submission on behalf of the respondents 4 and 5 as if all
the farmers have participated and accepted the verdict of the NCLT
and the public interest litigation cannot be entertained. On the other
hand, we find that the affected farmers are small and marginal farmers
languishing in debt after supplying sugarcane and without the
wherewithal to individually take legal recourse themselves and
therefore, there is overwhelming public interest to entertain this public
interest litigation.
C. Facts in Brief :
3. The brief facts which can be culled out from the pleadings
before this Court on behalf of the petitioner as well as the respondents
are as follows:
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3.1. Thiru Arooran Sugars Limited had two units situated at
Thirumandangudi, Thanjavur District and A.Chittoor, Cuddalore
District. Both the units had been allotted the mandatory areas,
thereby statutorily forcing the farmers of their territorial limits to
supply their sugarcane only to the said sugar mill units by virtue of
grant of command area under Order 6 of the Sugarcane (Control)
Order, 1966. Both the units had stopped crushing operation from the
year 2018-2019 and they had not paid the price of the sugarcane
supplied, to the farmers from the year 2013 to 2017.
3.2. It is seen that in respect of the unit at Thirumandangudi,
Thanjavur District, the total sum due was Rs.99.62 crore and in
respect of A-Chittoor unit at Cuddalore District, the total sum due was
Rs.57.89 crore, in all totalling to Rs.157.51 crore. The following table
provides the further details of the sum due:
Details of Claim submitted by District Collectors
Thanjavur and Cuddalore
Rs. In Cr.
Sugar Mills FRP Interest SAP Total
ThiruArooranThirumandangudi 35.19 26.32 38.11 99.62
ThiruArooranA.Chittoor 11.21 3.39 43.29 57.89
Total 46.40 29.71 81.40 157.51
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3.3. In view of the default, the respective District Collectors,
namely, the District Collector, Thanjavur and the District Collector,
Cuddalore, initiated proceedings under Order 3 of the Sugarcane
(Control) Order and started recovering amounts from the said
defaulting company. It is stated that a sum of Rs.4.45 crore was
recovered by initiating proceedings under the Revenue Recovery Act,
1890, by the District Collector, Thanjavur District and the same was
disbursed to 749 sugarcane growers. Similarly, the District Collector,
Cuddalore District, had recovered a sum of Rs.12.72 crore and
distributed the same to 3574 growers.
3.4. While things stood thus, an application bearing
IBA/243/2019 was filed by State Bank of India, one of the financial
creditors of the fourth respondent company before the NCLT, Chennai,
under Section 7 of the Insolvency and Bankruptcy Code, 2016 (in short
'IBC') for initiation of Corporate Insolvency Resolution Process (CIRP)
against the fourth respondent company on the ground of its inability to
repay the debts. The said application was admitted on 07.06.2019 and
by declaring a moratorium under Section 14 of the IBC, the Tribunal
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appointed one R.Ragavendran, as the Interim Resolution Professional
of the said company. The Interim Resolution Professional had caused a
publication in Form-A dated 10.06.2019 intimating about the CIRP of
the fourth respondent company, thereby calling for claims from the
creditors and fixed the last date of submission of claims on or before
21.06.2019. After receipt of the claims and their verification, a
Committee of Creditors (CoC) was constituted by the then Interim
Resolution Professional on 06.07.2019 and during the first meeting of
CoC on 06.07.2019, the said Interim Resolution Professional was
appointed as the Resolution Professional. Even though the total sum
due in respect of the farmers is Rs.157.51 crore, it is stated that the
Resolution Professional had admitted the farmers' claim only for a sum
of Rs.65,90,42,831/- under the head "Operational Creditors".
3.5. Even with such truncated claims, no resolution plan was
approved by the CoC as per Section 30 of the IBC and in its meeting
held on 27.11.2020, it was resolved to liquidate the fourth respondent
company under Section 33 of the IBC. Accordingly, an application
bearing IA/1186/IB/2020 was filed by the then Resolution Professional
before the NCLT and by order dated 08.04.2021, NCLT ordered
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liquidation of the company and appointed the fourth respondent as the
Liquidator of the company. Thereafter, the fourth respondent again
published Form-B on 12.04.2021, inviting claims from the creditors
and fixed the last date for submission of the claims on or before
08.05.2021. On behalf of the farmers, both the District Collectors of
Cuddalore and Thanjavur submitted claims in Form-C on 06.05.2021
and 07.05.2021 for the above said respective sums mentioned in the
tabular column, in all totalling to Rs.157.51 crore. The Liquidator, by its
letter dated 29.06.2021, however, again admitted the claim only to the
tune of Rs.21,06,66,356/- and Rs.57,41,54,911/- under the head
"Operational Creditors", in all totalling to Rs.78,48,21,267/-.
3.6. Thereafter, on 14.07.2021, the Liquidator published an
Expression of Interest calling for a scheme under Section 230 of the
Companies Act, 2013 and as per Regulation 2B of Insolvency and
Bankruptcy Board of India (Liquidation Process) Regulations, 2016, on
14.07.2021 and fixed the last date as 13.08.2021. The Stakeholders
Consultation Committee, in its meeting held on 08.10.2021 discussed
the compromise/arrangement submitted by the fifth respondent
namely, The Kals Distilleries Private Limited and accordingly, the
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Liquidator filed Company Application bearing CA(CAA)/ 113/2021
before the NCLT to convene the meeting of the stakeholders/ creditors
of the fourth respondent company. Thereafter, the Tribunal, by its
order dated 24.12.2021, allowed the said application and thereafter,
another application for appointment of authorised representatives for
the various classes of creditors was also allowed. One Mrs.Renuka Devi
Rangaswamy, an Insolvency Professional, who had absolutely no
connection whatsoever with the farmers, was appointed to be the
representative of the farmers before the Committee. Thereafter, ballot
voting was attempted to be conducted and approximately, 14,000
ballot papers were printed containing the name of the farmers and
their RYOT number. However, during the voting, the farmers were
agitated by the fact that only an amount representing 57% of the total
amount admitted by the Liquidator in all totalling to Rs.45.01 crore
alone was proposed to be settled to them while their total due was
Rs.157.51 crore and therefore, they agitated and took away all the
ballot papers and dumped them in water. Thereafter, the said
Professional did not want the farmers to unite and decided to organise
separate mobile camps village-wise so that farmers can be approached
separately to cast their votes and even in the said attempt, they were
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able to get the ballot votes of only 1086 farmers whose value was only
Rs.19.50 crore and treated the rest of the farmers as abstained and
submitted a report as if 100% votes were cast in favour of the
resolution.
3.7. In the said background, as against the total debt of the said
ThiruArooran Sugars Limited to its secured, unsecured, operational
creditors, employees, shareholders, etc., in all amounting to
Rs.1583.53 crore, the proposal of the fifth respondent company to
bring in a total sum of Rs.145.21 crore in respect of the two units was
accepted by the Committee and the scheme of compromise is
approved by the order dated 02.05.2022 of the NCLT in
CP(CAA)30(CHE)/ 2022 and thus resulted in the fourth respondent
company not having the corporate death, but there was also no revival
as both the units being taken over by the fifth respondent company,
namely, Kals Distilleries Private Limited and the net result is that no
creditor whomsoever can proceed further against the company or its
directors or guarantors and they have to rest content with the sum
further divided by the Liquidator of the total sum of Rs.145.21 crore
brought in by the fifth respondent company.
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3.8. It is submitted that as per the said scheme of compromise,
57.36% due to the farmers being a sum of Rs.45.0146 crore have
already been deposited with the Collectors and out of the deposited
amount, already a major portion amounting to Rs.37.88 crore was
already disbursed to the farmers and only a further sum of Rs.7.13
crore is remaining as balance. As far as the balance amount is
concerned, it is the farmers who are not accepting the said sum and
demanding that the entire sum should be paid to them and not 57% of
the Fair and Remunerative Price alone.
D. The Earlier Interim Order :
4. It is at this stage that when this writ petition came up for
hearing, we passed an interim order on 15.03.2023 pointing out the
powers of the District Collector under Order 3 of the Sugarcane
(Control) Order whereby in case of default of payment of the price of
the sugarcane within 14 days from the date of delivery of the
sugarcane, the amount due as well as the statutory interest of 15%
per annum is to be collected by the Collector of the District from the
defaulting company as arrears of land revenue and since the steps
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which are taken by the respondents and the representation before the
NCLT were absolutely without reference to the said powers, we passed
an interim direction to take all steps to get the money reimbursed as
arrears of land revenue and to ensure that the farmers are paid the
price of the sugarcane as expeditiously and to file a status report.
Immediately thereupon, applications were filed to recall the said order
by the fourth and fifth respondents stating that even though they were
on record, they were not served with notices as on date of the said
order and the relevant orders by the NCLT were not placed on record
and in the said context, without further insisting upon the interim
order, we proceeded to hear this public interest litigation on merits
finally after permitting all the parties to complete the pleadings.
E. The Submissions :
5. We heard Mr.S.Muthukrishnan, learned counsel appearing for
the petitioner, Mr.S.Silambanan, learned Additional Advocate General
assisted by Mr.P.Muthukumar, learned State Government Pleader for
respondents 1 to 3, Mr.P.H.Aravind Pandian, learned senior counsel
appearing for the Liquidator/fourth respondent and Mr.P.S.Raman,
learned senior counsel appearing for the fifth respondent.
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5.1. Learned counsel for the petitioner would submit that the
entire dues of the farmers amounting to Rs.157.51 crore have to be
settled with further statutory interest thereon. They have been
agitating and several of them also, since died, are unable to bear the
burden of debt. The companies successfully by filing applications on
the file of NCLT have evaded payment to the farmers. The farmers are
not asking for any benefit or subsidy, but the price for the sugarcane
supplied by them. When the sugarcane has been crushed and the
sugar has been sold and the proceeds have been exploited by the
companies, now refusing to pay them the amount and ordering to take
only a fraction of the total sum due amounts to gross injustice and
violative of not only Article 19, but also Article 21 of the Constitution of
India in the facts and circumstances of the instant case. The official
respondents are duty bound to protect the interest of the farmers as
per Order 3 of the Sugarcane (Control) Order, as it is they who have
passed orders entrusting the command area to the company which
committed the default. Therefore, he would say that the writ petition
be allowed and the entire amount be paid to the farmers.
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5.2. Mr.S.Silambanan, learned Additional Advocate General
appearing on behalf of the District Collectors, would submit that they
have started taking action, but, however, in view of the applications
filed before the NCLT, even though steps were taken to represent the
farmers before the NCLT, they could only obtain and disburse the
amount as ordered by the NCLT. If the farmers accept, the remaining
Rs.7.13 crores also will be disbursed swiftly.
5.3. Mr.P.H.Aravind Pandian, learned senior counsel appearing
on behalf of the liquidator, would submit that but for the order of
compromise passed under Section 230 of the Companies Act, 2013,
had the company been liquidated, the distribution of assets have to
take place only as per Section 53 of the IBC, in which, firstly the
Insolvency Resolution costs and liquidation costs have to be paid and
thereafter, workmen's due for the last 24 months period should be
given preference and then, the secured creditors should be given
preference and thereafter, the other wages of the workmen due and
the farmers would only come thereafter and therefore, if the two units
of the mill were sold by public auction, the farmers could not have
realised even a single paise and very graciously, they were granted
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57% of the admissible claims which itself was taking into account the
farmers' conditions. The learned senior counsel would submit that the
provisions of Order 3 of the Sugarcane (Control) Order cannot override
the order of the NCLT in view of Section 238 of the IBC. The provisions
of IBC will override even if there is any inconsistency with the other
laws in force. The learned senior counsel would rely upon the
judgment of the Hon'ble Supreme Court of India in Duncans
Industries Ltd. vs. A.J.Agrochem, reported in 2020 (2) CTC 842,
more specifically relying upon paragraph 7.4 to contend that the
Hon'ble Supreme Court of India has held that the IBC being the later
enactment will prevail over earlier enactment containing similar
clauses. He would submit that that was a case which was similar in
nature relating to the Resolution Process of a tea manufacturing
company and in spite of the provisions under the Tea Act, 1953, to
consult the Central Government before winding up of the company, the
Hon'ble Supreme Court of India held that in view of Section 238 of the
IBC, such consultation was unnecessary and held that the provisions of
the IBC will prevail over. The learned senior counsel also relied upon
the judgment of the Hon'ble Supreme Court of India reported in
(2001) 3 SCC 71 in Solidaire India Limited -Vs- Fairgrowth
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Financial Services Ltd for the proposition that when two enactments
contain the non obstante clause, the later enactment would prevail.
5.4. Mr.P.S.Raman, learned senior counsel appearing on behalf
of the fifth respondent, would submit that pursuant to the Expression
of Interest, after considering the value of the two units of ThiruArooran
Sugars Limited, the fifth respondent company had, in total, offered a
sum of Rs.145.21 crore. The fifth respondent's offer is clear and
categorically conditional upon the said sum being taken as full
consideration of the value of the two units of ThiruArooran Sugars
Limited to be vested in the fifth respondent. Hereafter, it is the fifth
respondent being a third party entity which is going to operate the two
units of the Mill. When the scheme framed under the Companies Act is
in respect of earlier company, namely, ThiruArooran Sugars Limited, no
claim whatsoever, in any event, can be claimed against the fifth
respondent company over and above what is ordered to be paid by the
NCLT. As a matter of fact, without even waiting for the timeline, the
fifth respondent has paid the said amount in advance. Therefore, no
further sum whatsoever can be directed to be paid by the fifth
respondent.
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5.5. Mr.P.S.Raman, learned senior counsel, would submit that the
fifth respondent company had nothing against the farmers. As a
matter of fact, they will be again supplying sugarcane to the fifth
respondent company as they would come under its jurisdictional area.
If by any means, they get their 100% due either from the State or
from the previous company, the fifth respondent has no objection
whatsoever. If the State is at fault in not taking steps to recover the
entire sum due as per Order 3 of the Sugarcane (Control) Order, then
the liability cannot be mulcted at the fifth respondent company after
the order of the NCLT. Therefore, he would submit that no further
steps can now be taken under Order 3 of the Sugarcane (Control)
Order or any distraint proceedings can be caused in respect of the
units at Thirumandangudi, Thanjavur and A.Chittoor, Cuddalore or
against any other asset belonging to the fifth respondent company.
F. Discussion & Findings :
6. We have heard the rival submissions on either side and
perused the material records of the case.
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6.1. Firstly, we have to understand the plight of the farmers.
Sugarcane itself is a distant attraction/greener pasture on the other
side of the river to any small and marginal farmer. The average small
and marginal farmers, finding themselves to face certain difficulties
and unable to bear the vagaries of the monsoon, availability of water
and market fluctuation in respect of the paddy and other regular crops,
switched over to sugarcane. Sugarcane is relatively long term crop as
harvest would be taking place after ten to twelve months and a repeat
for two more crops in all totalling for about 3 years. It involves higher
investment. Firstly, the farmer has to tillage the field to greater depth,
followed by harrowing, levelling and laying out the field so as to suit
the planting of the sugarcane, which takes considerable costs.
Secondly, the seedlings have to be purchased, with high costs. Before
planting applying manure and fertilizers is essential. After planting, not
only meticulously the field has to be watered, initially twice or thrice
the weeds have to be removed. Not to mention about the price
pesticides and other further fertilisers. As the sugarcane grows, after
the removal of unnecessary leaves/water shoots, once again the
correction of the field has to take place. This apart, the menace of wild
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boar/other animals which feed of sugarcane cause considerable
amount of damage to the crops. Not to mention about fire accidents
caused by not only the negligent alcoholics/beediwalas throwing the
matchstick into the sugarcane fields, but also by the mischief mongers.
Thereafter, when the crop is ripe to be cultivated, the cutting order
should be received on time. The labour for cutting the sugarcane now
costs huge and if the season of cutting is dry without rains, the same
would gravely affect the total weight of the sugarcane and if it rains,
there will be slush on the path resulting in the lorries/trucks not
coming near the field and the farmers have to spend a huge amount in
transporting the sugarcane from the fields to the main road by
employing labour. After all these, the spillage and theft on the way to
the mill is also borne by the farmers. Not to mention about weighment.
Many a time, the farmers wonder the same amount of stacking in the
loading vehicle shows difference in weights ranging as high as one to
two tons. After all this, there is a delay in getting the price of the
sugarcane. Taking into account all these, it is roughly estimated that
the cost and expenses involved to an ordinary farmer, is more than
80% of the Fair and Remunerative Price which is fixed by the Central
Government which is like the minimum wage and it is not the fair
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market price. Thereafter, the State Governments are authorised and
they take into account the actual market value considering the actual
expenses involved, the price of the sugarcane, etc., and they fix the
State Advised Price (SAP). If only the State Advised Price is paid, the
ordinary small and marginal farmers can survive.
6.2. Section 3 of the Essential Commodities Act, 1955 enables
the Central Government that if it is of opinion that it is necessary or
expedient so to do for maintaining or increasing supplies of any
essential commodity or for securing their equitable distribution and
availability at fair prices, or for securing any essential commodity for
the defence of India or the efficient conduct of military operations, it
may, by order, provide for regulating or prohibiting the production,
supply and distribution thereof and trade and commerce therein. In
exercise of its powers, the Central Government has made the
Sugarcane (Control) Order, 1966. Order 6 reads as follows :
“6. Power to regulate distribution and movement of
sugarcane.—(1) The Central Government may, by order notified in the
Official Gazette.—
(a) reserve any area where sugarcane is grown (hereinafter in this
clause referred to as ‘reserved area’) for a factory having regard to the
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crushing capacity of the factory, the availability of sugarcane in the
reserved area and the need for production of sugar, with a view to
enabling the factory to purchase the quantity of sugarcane required by it;
(b) determine the quantity of sugarcane which a factory will
require for crushing during any year;
(c) fix, with respect to any specified sugarcane grower or
sugarcane growers generally in a reserved area, the quantity or
percentage of sugarcane grown by such grower or growers, as the case
may be, which each such grower by himself, or, if he is a member of a
co-operative society of sugarcane growers operating in the reserved area,
through such society, shall supply to the factory concerned;
(d) direct a sugarcane grower or a sugarcane growers’ co-
operative society, supplying sugarcane to a factory, and the factory
concerned to enter into an agreement to supply or purchase, as the case
may be, the quantity of sugarcane fixed under paragraph (c);
(e) direct that no 2 [x x x x x] khandsari sugar or sugar shall be
manufactured from sugarcane except under and in accordance with the
conditions specified in the licence issued in this behalf;
(f) prohibit or restrict or otherwise regulate the export of
sugarcane from any area (including a reserved area) except under and in
accordance with a permit issued in this behalf.
(2) Every sugarcane grower, sugarcane growers’ co-operative society and
factory, to whom or to which an order made under paragraph (c) of sub-
clause (1) applies, shall be bound to supply or purchase, as the case may
be, that quantity of sugarcane covered by the agreement entered into
under the paragraph and any willful failure on the part of the sugarcane
grower, sugarcane growers’ cooperative society or the factory to do so,
shall constitute a breach of the provisions of this Order:
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Provided that where the default committed by any sugarcane growers’co-
operative society is due to any failure on the part of any sugarcane
grower, being a member of such society, such society shall not be bound
to make supplies of sugarcane to the factory to the extent of such
default.”
Thus, the authorities are vested with the powers to grant a command
area to a sugar mill. But however, the said exercise of power is also
coupled with duty to fix the price and in default of payment within
fourteen days, the entire amount along with statutory interest has to
be recovered as arrears of land revenue. It is useful to extract Order 3,
which reads as follows :
“3. Minimum price of sugarcane payable by producer of
sugar.— (1) The Central Government may, after consultation with
such authorities, bodies or associations as it may deem fit, by
notification in the Official Gazette, from time to time, fix the minimum
price of sugarcane to be paid by producers of sugar or their agents
for the sugarcane purchased by them having regard to —
(a) the cost of production of sugarcane;
(b) the return to the grower from alternative crops and the general
trend of prices of agricultural commodities;
(c) the availability of sugar to the consumer at a fair price;
(d) the price at which sugar produced from sugarcane is sold by
producers of sugar; and
(e) the recovery of sugar from sugarcane:
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Provided that the Central Government or with the approval of the
Central Government, the State Government, may, in such
circumstances and subject to such conditions as specified in Clause 3-
A, allow a suitable rebate in the price so fixed.
Explanation.—
(1) Different prices may be fixed for different areas or different
qualities or varieties of sugarcane.
(2) When a sugar factory produces ethanol directly from sugarcane
juice or B-Heavy molasses, the recovery rate in case of such sugar
factory shall be determined by considering every 600 litres of ethanol
so produced as equivalent to 1 tonne of production of sugar;
(3) Production of ethanol directly from sugarcane juice shall be
allowed in case of sugar factories only.
(2) No person shall sell or agree to sell sugarcane to a producer of
sugar or his agent, and no such producer or agent shall purchase or
agree to purchase sugarcane, at a price lower than that fixed under
sub-clause (1).
(3) Where a producer of sugar purchases any sugarcane from a
grower of sugarcane or from a sugarcane growers’ co-operative
society, the producer shall, unless there is an agreement in writing to
the contrary between the parties, pay within fourteen days from the
date of delivery of the sugarcane to the seller or tender to him the
price of the cane sold at the rate agreed to between the producer and
the sugarcane grower or the sugarcane growers’ co-operative society
or that fixed under sub-clause (1), as the case may be, either at the
gate of the factory or at the cane collection centre or transfer or
deposit the necessary amount in the Bank account of the seller or the
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co-operative society, as the case may be.]
(3-A) Where a producer of sugar or his agent fails to make payment
for the sugarcane purchased within 14 days of the date of delivery, he
shall pay interest on the amount due at the rate of 15 per cent per
annum for the period of such delay beyond 14 days. Where payment
of interest on delayed payment is made to a cane growers’ society,
the society shall pass on the interest to the cane growers concerned
after deducting administrative charges, if any, permitted by the rules
of the said society.
(4) Where sugarcane is purchased through an agent, the producer or
the agent shall pay or tender payment of such price within the period
and in the manner aforesaid and if neither of them has so paid or
tendered payment, each of them shall be deemed to have
contravened the provisions of this clause.
(5) At the time of payment at the gate of the factory or at the cane
collection centre, receipts, if any, given by the purchaser, shall be
surrendered by the cane grower or co-operative society.
(6) Where payment has been made by transfer or deposit of the
amount to the Bank account of the seller or the co-operative society,
as the case may be, the receipt given by the purchaser, if any, to the
grower or the co-operative society if not returned to the purchaser,
shall become invalid.
(7) In case, the price of the sugarcane remains unpaid on the last day
of the sugar year in which cane supply was made to the factory on
account of the suppliers of cane not coming forward with their claims
therefor 4 [x x x x x], it shall be deposited by the producer of sugar
with the Collector of the district in which the factory is situated, within
three months of the close of the sugar year. The Collector shall pay,
out of the amount so deposited, all claims considered payable by him
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and preferred before him within three years of the close of the sugar
year in which the cane was supplied to the factory. The amount still
remaining undisbursed with the Collector, after meeting the claims
from the suppliers, shall be credited by him to the Consolidated Fund
of the State, immediately after the expiry of the time limit of 3 years
within which claims therefor could be preferred by the suppliers. The
State Government shall, as far as possible utilise such amounts for
development of sugarcane in the State.
(8) Where any producer of sugar or his agent has defaulted in
furnishing information under Clause 9 of this Order or has defaulted
in paying the whole or any part of the price of sugarcane to a grower
of sugarcane or a sugarcane growers co-operative society within
fourteen days from the date of delivery of sugarcane, or where there
is an agreement in writing between the parties for payment of price
within a specified time and any producer or his agent has defaulted in
making payment within the agreed time specified therein, the Central
Government or an officer authorised by the Central Government in
this behalf or the State Government or an officer authorised by the
State Government in this behalf may either on the basis of
information made available by the producer of sugar or his agent or
on the basis of claims, if any, made to it or him regarding non-
payment of prices or arrears thereof by the concerned grower of
sugarcane or the sugarcane growers co-operative society as the case
may be, or on the basis of such enquiry that it or he deems fit, shall
forward to the Collector of the district in which the factory is located,
a certificate specifying the amount of price of sugarcane and interest
due thereon from the producer of sugar or his agent for its recovery
as arrears of the land revenue.
(9) The Collector on receipt of such certificate, shall proceed to
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recover from such producer of sugar or his agent the amount
specified therein as if it were arrears of land revenue.
(10) After effecting the recovery, the Collector shall intimate to the
concerned growers of the sugarcane or the concerned sugarcane
growers co-operative societies through a public notice to submit their
claims in such a manner as he considers appropriate within thirty
days: Provided that the Collector may, for the reasons to be recorded
in writing allow the submission of claims after the period so specified
if he is satisfied that there was sufficient cause for not submitting
such claim earlier.
(11) If the amount recovered is less than the amount specified in the
certificate under sub-clause (8), the Collector shall distribute the
amount so recovered among the concerned growers of the sugarcane
or the concerned sugarcane growers co-operatives in proportion to
the ratio determined by the Collector on the basis of the sugarcane
supplied by the concerned growers of sugarcane or the sugarcane
growers’ co-operative society as the case may be.
(12) If the amount recovered and distributed under sub-clause (11) is
less than the amount specified in the certificate under sub-clause (8),
the Collector shall proceed to recover the remaining amount, as if it
were arrears of land revenue till the full amount is recovered and
distributed to satisfy the remaining claims.
(13) If the amount is given to the concerned sugarcane growers co-
operative societies, it shall distribute the amount through
cheque/draft/or any other recognised banking instrument on any
Scheduled Bank to the concerned sugarcane growers within ten days
of the receipt of the amount from the Collector.
(14) If the concerned sugarcane grower or the concerned sugarcane
growers co-operative society do not come forward to claim or collect
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the amount so recovered by the Collector within three years from the
date of the public notice referred to in sub-clause (10), the unclaimed
amount shall be deposited by the Collector in the Consolidated Fund
of the State. “
(emphasis supplied)
Thus, it can be seen that the power to issue a command to the
sugarcane grower is coupled with the duty to fix the minimum price
and to recover the dues if any as arrears of land revenue. It can be
seen in the instant case that when dues are not being paid on time
right from the year 2013, after passing orders commanding the
farmers to supply only to ThiruArooran Sugars Limited in exercising
powers under Order 6 of the Sugarcane (Control) Order, the mandate
and the procedure prescribed under Order 3 of the Sugarcane
(Control) Order is not at all followed. Therefore, there has been clear
failure on the part of the State authorities in realising the price after
issuing a statutory mandate to the farmers.
6.3. Now for proceeding further, the proceedings of the NCLT is
sought to be put against the farmers. We have carefully gone through
the entire records before the NCLT and considered the submissions
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made by both the learned senior counsels in that regard. We find the
following aspects :
i) Firstly, the law relating to recording of
compromise during liquidation under IBC is
no longer res integra and the Hon'ble
Supreme Court of India has already
considered the issue in detail in Arun
Kumar Jagatramka vs Jindal Steel and
Power Limited, reported in (2021) 7 SCC
474 and laid down as follows :
(a) The IBC is a well thought out and
well crafted Code and the question of
compromise under Section 230 of
Companies Act, itself is brought in by
way of Judicial Intervention, which
should be kept to barest minimum
(Paragraph 94);
(b) The compromise should result in
reivival of the company and such revival
is in public interest(Paragraph 64);
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(c) The compromise shall conform to
commercial Morality (Paragraph 64).
In the instant case, thought the fourth
respondent is saved from a corporate
death, the compromise does not result in
its revival as they only escape from the
scene and the liability to pay a huge debt
of 1500 crores and all their
directors/guarantors is are liberated from
their liability. Thus, the compromise
neither conforms to commercial morality
nor is in any public interest. As a matter
of fact, the only purpose pleaded by the
liquidator is that they can side step and
violate Section 53 of IBC. Thus, it smells
foul of the law laid down by the Hon'ble
Supreme Court of India in every aspect.
ii) Secondly, we find the very compromise
proceedings under Section 230 of the Companies
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Act and the manner in which it is dealt with is
totally without considering the plight of the
farmers and the effect of the provisions and
proceedings under the Essential Commodities Act,
1955. The Tribunal as well as the stakeholders
have totally disregarded the provisions of the
Essential Commodities Act. The importance of the
said Act need not be restated by us. As a matter
of fact, the primary difference between the India
as a colony under British and India as an
independent nation is that irrespective of vagaries
of weather, failure of monsoon or floods, majority
of the people, the millions of the masses in this
Country are not allowed to go hungry. The work
done by the Central and the State Corporations in
this regard is uncomparable and the amount of
essential commodities which are procured, stored
and distributed and made available for every
human-being to consume is unmatchable. As a
matter of fact, without any exception, all
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Governments both Central and State are
extremely sensitive and careful when it comes to
food and that is why, the people of this Country
worship their leaders. In order to achieve this
goal of procuring and supplying the essential
commodities, the primary tool in the hands of the
Government is the Essential Commodities Act. It
can be said that the Essential Commodities Act is
one of the primary reasons of the very existence
of our democracy. The legislature had created
special rights, obligations and special machinery
for enforcing the special rights and obligations
under the Essential Commodities Act, 1955 and
therefore, when it comes for payment of price of
the essential commodities, the Essential
Commodities Act is the special legislation and
therefore, following the basic and time-tested
principle generaliaspecialibus non derogant, that
is, even in case of any repugnancy or
inconsistency, only the Special Act will prevail
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over the General Act will apply. In any event
there is no repugnancy as both the legislations
can be harmoniously read. Under the IBC, the
amount has to be distributed in case of liquidation
as per Section 53 of the IBC. If one goes through
the waterfall mechanism adopted in Section 53,
right from workmen, secured creditors, financial
and other unsecured creditors or other persons, it
can be seen that every one of them had dealt
with the company under liquidation on their own
whereas the sugarcane farmer was statutorily
mandated to supply sugarcane by an order
passed by the District Collector under Order 6 of
the Sugarcane (Control) Order. Therefore, this
situation of a statutorily mandated farmer is not
at all dealt with under Section 53 of the IBC and
it is quite impossible that when a legislation is
enacted, the framers can provide answer for
every situation that may arise. Therefore, it can
be said that there is any inconsistency as far as
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the present case and the judgment of the Hon'ble
Supreme Court of India in Duncans Industries
(supra) is in respect of Tea Act, that too dealing
with similar provisions of winding up, while the
same is not under the Essential Commodities Act,
which totally presents a different picture and
necessity as stated supra. It is essential to note
that Section 6 of the Essential Commodities Act,
1995, states as follows :
“6. Effect of orders inconsistent with other
enactments.-Any order made under section 3
shall have effect notwithstanding anything
inconsistent therewith contained in any
enactment other than this Act or any
instrument having effect by virtue of any
enactment other than this Act. “
The NCLT has not even adverted to the above
provision and considered the matter, while
ordering the compromise.
iii) Finally, even under Section 230 of the Companies
Act, the compromise can be made applicable to
particular class of creditors. In this case, since
none of the farmers voted at the first meeting and
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all of them have opposed to the scheme and the
same was not at all considered. As a matter of
fact, after all the farmers 100% opposed the
scheme, they were separately contacted and even
then, only 1086 farmers submitted their ballots
agreeing for 57%. In any event, the same is
taken as if the 100% farmers being present and
voted and the scheme was stated to be approved.
Absolutely, no empathetic consideration
whatsoever is made while deciding their
representative on board or while deciding the
total amount admitted to be due or while deciding
the percentage of the amount to be paid.
6.4. We have made the above observations and findings from
the view of the Constitutional Court, exercising its powers under Article
226 of the Constitution, in which we traverse beyond a particular
legislation and can visualise the interplay between more than one
legislations, while the NCLT in this case seems to have lost itself in the
maze while ordering the compromise.
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6.5. Thus, it can be seen that the arguments relating to the
proceedings of the NCLT are prima facie unsustainable. But, however,
since the order has not been directly challenged before this Court, as it
has to be assailed in the manner known to law by filing appeal to the
appropriate forum, we refrain from setting aside or interfering with the
same. Further, the fifth respondent company has also paid the
compromise amount and is being disbursed and distributed by the
Liquidator and therefore, as of now, the position is that as per the
compromise scheme as sanctioned by the NCLT, the fifth respondent
company is not liable to pay more than the amount of Rs.145.21 crore
which it has already paid.
6.6. Be that as it may, the scheme framed by the NCLT as well
as the transfer of assets and ownership of assets are in respect of the
lands in which the two units are situate along with the plant and
machinery of the mill. The same does not directly or indirectly deal
with the command area which has to be made by the State under
Order 6 of the Sugarcane (Control) Order. Therefore, in spite of its
advantage of being protected by the scheme, again the fifth
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respondent has to go before the State authorities, namely, the District
Collector, Thanjavur as well as the District Collector, Cuddalore, for
grant of command area under Order 6 and the very same farmers who
are represented in this public interest litigation will be mandated to
supply their sugarcane, which makes this case different from any other
third party/clean slate auction purchase.
6.7. The Fair and Remunerative price is the barest minimum
price which is fixed by the Central Government and even as per the
fair and minimum price, a total sum of Rs.78.48 crore is now
admittedly due by the parties. Therefore, we hold that when the State,
after choosing to exercise the power under Order 6 of the Sugarcane
(Control) Order had failed to take steps under Order 3 within the time
and had not chosen either to implead themselves as a party before the
NCLT nor having chosen to agitate the order of sanction of compromise
by the NCLT before the appropriate appellate authority, are only to
blame themselves and therefore, are liable to make good the loss to
the farmers. For the above, the farmers cannot be put to loss and
therefore, they are entitled for payment of at least the minimum price
being the Fair and Remunerative Price, if not the State Advised Price
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with further interest. Therefore, we hold that respondents 1 to 3 are
liable to pay the balance sum of Rs.33.46 crore being the 43% of the
admitted claim of Rs.78.48 crore. In view of the peculiar facts and
circumstances of this case, we refrain from ordering further interest or
the payment of the State Advised Price. It is also brought to our notice
by the status report filed by the State authorities that further meeting
with the fifth respondent has been conducted and in the outcome of
the meeting, recommendations are made to make 100% Fair and
Remunerative Price for the farmers. We make it very clear that the
order of sanction of compromise by the NCLT can relate and hold good
only in respect of the assets including the plant and machinery and the
land in respect of the two units which is now conveyed to the fifth
respondent company. The same does not actually deal with the rights
and obligations of the State to pass orders providing a command area
to the fifth respondent company neither it would be the ambit of the
Companies Act or the IBC. Therefore, it would be very much open for
the State authorities to negotiate with the fifth respondent company
while further extending/renewing the command area in respect of
realising the balance sum which is now mandated by this order to pay
to the farmers.
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G. The Result:
7. In the result, the writ petition is disposed of on the following
terms:
(i) The respondents 1 to 3 shall pay to the concerned
farmers the balance sum of Rs.33.46 crore being
the balance amount of the admitted amount of
Fair and Remunerative Price of Rs.78.48 crore,
within three months from the date of receipt of a
copy of this order;
(ii) In view of the order of the NCLT dated
02.05.2022 approving the scheme in respect of
the fourth respondent company ordering payment
of 57% of the admitted claim of Rs.78.48 crore,
no further distraint proceedings or proceedings
under Order 3 of the Sugarcane (Control) Order
shall be made under the fifth respondent
company, as they have paid and discharged their
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liabilities of Rs.45.01 crore;
(iii) Within one week from the date of receipt of the
copy of this order, the balance sum of Rs.7.13
crore lying with the District Collector, Thanjavur
and the District Collector, Cuddalore, shall be
disbursed to the eligible farmers in accordance
with the scheme framed by the NCLT and the
receipt of the said sum shall be without prejudice
to the rights of the farmers to receive the balance
sum from the State as ordered above; and
(iv)It would be however open for the State and its
authorities either to avail the remedies available
to it under law against the order of the NCLT
dated 02.05.2022 and recover the amount due
from the fourth respondent company or to
negotiate with the fifth respondent company to
realise the above said sum of Rs.33.46 crore paid
by it to the farmers while considering the matter
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of allotment of command area to the fifth
respondent.
(v) There will be no order as to costs. Consequently,
WMP No.33489 of 2022 is closed.
(T.R., ACJ.) (D.B.C., J.)
21.04.2023
Index : Yes/No
Neutral Citation : Yes/No
sra
To
1. The Secretary,
Government of Tamil Nadu,
Agriculture Department,
St.George Fort,
Chennai.
2. The Commissioner of Sugar
Government of Tamil Nadu,
690, Anna Salai,
Chennai.
3. The District Collector,
Cuddalore.
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T.RAJA, ACJ,
and
D.BHARATHA CHAKRAVARTHY, J.
(sra)
WP No.34030 of 2022
21.04.2023
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