Telangana High Court

Rice Millers Association, vs The Union Of India, on 10 August, 2022

Bench: Ujjal Bhuyan, C.V. Bhaskar Reddy

        THE HON'BLE THE CHIEF JUSTICE UJJAL BHUYAN
                                       AND
        THE HON'BLE SRI JUSTICE C.V.BHASKAR REDDY


              WRIT APPEAL No.1858 of 2017

JUDGMENT:     (Per the Hon'ble the Chief Justice Ujjal Bhuyan)



      Heard Mr. V.S.R.Murthy, learned counsel for the

appellant; Mr. B.Mukherjee, learned counsel representing

Mr.   Namavarapu           Rajeshwar             Rao,       learned       Assistant

Solicitor General of India appearing for respondent No.1 -

Union of India; and Ms. G.Jyothi Kiran, learned

Government Pleader for Consumer Affairs, Food and Civil

Supplies Department i.e., respondent No.2. None has

appeared for respondent No.3.

2. This intra-court appeal has been preferred against

the order dated 01.06.2017 passed by the learned Single

Judge dismissing W.P.No.26344 of 2011 filed by the

appellant as the writ petitioner.

3. Appellant before us is the Rice Millers Association. It

is basically aggrieved by different procurement prices fixed

by the respondents for custom milled rice and levy rice.

Respondent No.1 by order dated 14.12.2010 had fixed the

prices of levy rice procured out of paddy purchased during

kharif marketing season 2010-11 insofar the then

composite State of Andhra Pradesh was concerned in the

following manner:

         Variety             Raw Rice                    Par-boiled
         Common                  1679.70                 1670.60
         Grade 'A'               1727.10                 1717.40

4. Likewise, respondent No.1 had fixed the cost of one

quintal of rice of the above two categories for the aforesaid

season as under:

     Raw rice (Common)            -        Rs. 1855.96

     Raw rice (Grade A)           -        Rs. 1906.94

     Par-boiled rice (Common) -            Rs. 1830.27

     Par-boiled rice (Grade A)    -        Rs. 1880.07

5. Prayer made in the writ petition was for a direction to

revise the procurement price of levy rice.

6. Justification for such demand made by the appellant

was summed up in paragraph 9 of the writ affidavit, which

is extracted as under:

"9. It is submitted, respondents are not empowered or not authorised for fixing different procurement prices for Custom Milled Rice and Levy Rice under law. It is settled law, respondents 1 & 2 have to fix the reasonable price while exercising repository statutory powers under Section 3, 3-B of Essential Commodities Act. In view of the above, the respondents 1 & 2 have to fix the charges/costs of actual working incidentals for Levy Rice at least on par with Custom Milled Rice as under:

a) Mandi Labour Charges It is submitted, Mandi labour charges are fixed at Rs.6.98 paise for Levy Rice. In fact, the labour expenses involves at various stages beginning from purchase of paddy to delivery of rice to the FCI. In fact Rs.6.98 per quintal does not meet minimum labour charges and fixing of labour charges is not based on actuals. For the same purpose, in case of Custom Milled Rice (CMR), the Mandi labour charges are fixed @ Rs.11.93. Therefore, there is a difference of Rs.4.95 per quintal being paid for Miller Levy Rice.

b) Cost of Gunny Bags Cost of 2 new 50 kg gunny bags is fixed for levy rice @ Rs.64.76 to miller Levy Rice. The

Procurement Policy under para-2 prescribes that the levy rice has to be delivered to FCI in 50 kg gunny bags only. In fact, the millers are purchasing 2 nos. of 50 kg gunny bags at higher rate keeping in view of the strength required for maintaining the quality and for proper delivery from mill to FCI godown. If the gunny bags are of low quality it will not facilitate proper transport to the FCI and there will be damage and loss of rice. The FCI also rejects the same if the gunny bags are of poor quality. Therefore, two gunny bags of 50 Kg are purchased by millers by paying more than Rs.80/- in the market. It is pertinent to mention that even the State Civil Supplies Corporation is purchasing each gunny bag @ Rs.40.16. The same is evident from the letter furnished by the Vice Chairman and Managing Director, vide Lr.No.Mktg.

M2/52(G)/2010-11, dated 16.08.2011. Respondent No.1 fixed rate of Rs.78.16 for two new gunny bags for Custom Milled Rice.

Therefore, the difference amount being paid is Rs.13.40 between the Levy Rice and Custom Milled Rice.

Gunny bags depreciation For the Milled Levy Rice, no amount has been fixed for gunny bags depreciation; whereas for Custom Milled Rice Rs.31.26 has been fixed. Similar amount is required to be fixed for Milled Levy Rice also.

c) Driage In respect of transfer or purchase of paddy, milling and storage, there is an element of 'driage'. Due to said driage, certainly there will be variation of stock. Therefore, on account of driage, some charges have to be fixed as part of purchase price, but the Respondent-1 has not fixed any amount on account of driage in respect of Milled Levy Rice. Whereas, in respect of Custom Milled Rice, the driage has been fixed @ 1% of MSP i.e., Rs.10/- per quintal for common variety and Rs.10.30 for Grade-A variety.

d) Interest The duration of period for purchase of paddy, conversion and milling into rice etc., is about two months and involves capital expenditure. For this purpose, the miller has to necessarily borrow money from the financial institutions, as investment for the purpose, thus incurs interest. However, Respondent-I has not fixed any interest charges for the Levy Rice of the millers; whereas the interest charges for 2 months @ Rs.10.30% per annum on MSP and other statutory charges, have been provided, i.e., Rs.19.09 per quintal of Common variety and Rs.19.65 per quintal of Grade-I variety. Similar interest is paid for parboiled rice also. Therefore, the interest is required to be paid to the Milled Levy Rice also.

e) Transportation Charges The transportation charges incurred by the miller in transporting the levy rice from miller to FCI godown in Annexure P-I in para-2 it was stated, the forwarding and transportation charges for delivery of rice from mills to FCI godown up to 8 Kilometers included in the levy rice. But, however to that affect it was not reflected or included in the cost sheet as part of procurement price communicated by the 1st respondent."

7. Respondent No.1 contested the proceeding by filing

counter affidavit. Paragraph 3 of the counter affidavit

reads as under:

"3. In reply to the averments made in para 8 to 12 of the petitioner's affidavit, it is submitted that the costing of Custom Milled Rice (CMR) and levy rice is done on the basis of different parameters as the charges allowed for CMR are provisional and are finalized on the basis of actual expenditure incurred by the State Agencies procuring CMR as reflected in their audited accounts. In case of levy rice, cost once fixed is final and millers do not have to submit their accounts for examination.

a. For mandi labour charges, in case of CMR these charges are fixed in each State separately on the basis of expenditure incurred by the States in the past years. In the case of levy rice, mandi labour

charges are fixed equally for all the States to maintain uniformity.

b. The prices of gunny bags allowed for levy rice are the lowest among the prices of gunny bag allowed for CMR/rates claimed by the State Government/Rates of gunny bags available in Kolkata open market during the lean period. Gunny depreciation is not reimbursed to the millers because as per the principles uniformly followed for all the States for fixation of levy price, the millers should be reimbursed only the cost of gunny bags in which rice is supplied for the Central Pool.

c. Driage allowance is not given for levy rice since it is assumed that the levy mill owner would purchase only that quantity of paddy which he could store in secure place and hence there would be no question of driage.

d. Regarding interest charges, one month interest charges for capital employed by the millers are already taken into account in the costing of milling charges. Stage agencies have to avail loan from Consortium of Banks and pay interest charges which are reimbursed to them.

e. No transport charges from the mandi to the mill premises are allowed for the levy rice as transportation charges for transportation of paddy for 0-8 kms are already included in the milling charges. For delivery of rice,

transportation charges beyond 8 kms, if any, are reimbursed by the FCI.

Therefore, it is not correct to compare the levy prices of rice with that of Custom Milled Rice (CMR) since Government agencies which procure CMR have to incur several costs which are not incurred by the millers."

8. Learned Single Judge considered the rival pleadings

as well as the submissions made. Thereafter, learned

Single Judge came to the conclusion that it was

impermissible to compare the prices of levy rice and

custom milled rice, holding the classification to be valid.

Finding no merit in the writ petition, the same was

dismissed.

9. Hence the appeal.

10. Learned counsel for the appellant has strenuously

argued the justification for seeking a higher procurement

price for custom milled rice and has once again taken us to

the writ affidavit filed in this regard. He submits that the

classification resorted to by the respondents to deny higher

price to the appellant for procurement of custom milled rice

is not at all justifiable having regard to the basic object

leading to enactment of the Essential Commodities Act

1955. In support of his contention, learned counsel has

relied upon a recent decision of the Supreme Court in

Manish Kumar v. Union of India1, more particularly to

paragraph 212 thereof to contend that there cannot be a

valid classification depending upon the purpose for which

the procurement is made. The pricing of essential

commodities would have to be made on the basis of the

relevant factors which have been pointed out by the

appellant. The same having not been done, the

classification is invalid. Learned Single Judge overlooked

this aspect of the matter and dismissed the writ petition of

the appellant. He submits that prayer of the appellant for

seeking higher procurement price for custom milled rice is

fully justified in the facts and circumstances of the case.

He further submits that even assuming but not admitting

that the classification is valid, it would lead to an

unreasonable burden on the rice millers which would be

(2021) 5 SCC 1

violative of the equality clause under Article 14 of the

Constitution of India.

11. Per contra, both Mr. B.Mukherjee and Ms. G.Jyothi

Kiran, learned counsel representing the contesting

respondents have supported the order passed by the

learned Single Judge. They have supported the fixation of

price made by the Union of India and submits that no

interference is called for.

12. We have heard learned counsel for the parties and

considered the materials on record.

13. Insofar decision of the Supreme Court in Manish

Kumar's case (supra) is concerned, the same was rendered

in the context of challenge to constitutionality of Sections

3, 4 and 10 of the Insolvency and Bankruptcy Code

(Amendment) Act, 2020. Be that as it may, from an

analysis of the relevant portion of the aforesaid decision,

what is conveyed thereunder is that classification cannot

be made on the basis of the public purpose for fixing

quantum of compensation for which land is acquired.

Explaining further, Supreme Court observed that there

cannot be different principles of compensation for lands

acquired for a hospital or a school or a Government

building, all three objects being for public purpose and

insofar the owner is concerned, it would not matter to him

whether the land was acquired for one public purpose or

the other.

14. We fail to understand as to how the above decision

can be applied to the facts and circumstances of the case.

15. In the communication dated 14.12.2010 and the

annexure thereto, Government of India in the Ministry of

Consumer Affairs, Food & Public Distribution (Department

of Food & Public Distribution), has given justification for

fixation of the price mentioned therein and the difference in

the pricing. Similar is the position insofar the

communication dated 29.10.2010 is concerned.

16. On the above consideration of the matter, learned

Single Judge held as follows:

"8. It is to be first noted that the present issue with regard to difference and variation of prices of Custom Milled Rice and Levy Rice relates to the Khariff market season 2010-11. At the hearing, it is stated that the Levy Rice system is now not in vogue. It is also submitted on behalf of the respondents that the present issue relating to the year 2010-11 has become stale, and requires no adjudication. It is further submitted that the Levy Rice and Custom Milled Rice prices were fixed every year, for each year, that is, in previous and later years also, only after detailed examination of various factors including incidental costs that may be incurred by the rice millers and as per the norms formulated by the Ministry of Consumer Affairs/1st respondent for fixation of price of Levy Rice and that such norms are generally formulated in an objective manner and that no issue as was raised in the present writ petition was raised by the rice millers in any other year and that the prices that were and are being fixed under the policy vary from year to year depending upon various factors of that year and norms formulated for each year. It is clear from the pleadings of the parties and the submissions made before this Court that the costing of the Custom Milled Rice and Levy Rice was being done on the basis of different parameters and it is not in dispute that the charges allowed for Custom Milled Rice are provisional and are finalized on the basis of actual expenditure incurred by the State Agencies in procuring the same and as per the facts & figures reflected in their audited accounts; and, whereas the costing of Levy Rice is not provisional and its price once fixed is final. From the submissions, it emerges that Mandi Labour charges are

fixed in each State separately for Custom Milled Rice on the basis of expenditure incurred by the States in the previous years and that Mandi charges insofar as Levy Rice are fixed equally and uniformly for all the States and that prices of Gunny Bags, which are allowed for Levy Rice are the lowest prices of the Bags in Kolkata open market during the lean period and that depreciation is also not reimbursable in view of the uniform policy being followed by all the States and that the rice millers are being reimbursed only the cost of gunny bags in which rice is being supplied for the central pool. Further, on careful examination of the matter, this Court is satisfied that the respondents assigned valid reasons for not giving driage allowance and also for not making a provision for interest charges and transport charges. In fact, the respondents stated that the said interest charges and transport charges are already taken into account in the costing of milling charges. It is also undisputed that for delivery of rice, transportation charges beyond 8 KMs are being reimbursed by the FCI. Thus, from the facts borne out by the record, it is manifest that the respondents sufficiently supported their action in fixing different prices for Custom Milled Rice and Levy Rice. The impugned action of the respondents in classification of the two kinds of Custom Milled Rice and Levy Rice for fixation of different prices, when examined, keeping in view the above factors, on the touch stone of the principle as to whether or not the classification is reasonable and is having an intelligible differentia and a rational basis germane to the purpose, it is manifest that the said classification is reasonable and is having

intelligible differentia and is also based on a rationale, which is equitable, valid and sustainable. In the facts and circumstances of the case and for all the reasons stated supra, it is impermissible to compare the prices of Levy Rice and Custom Milled Rice. On the above analysis, this Court finds that there is no merit in the writ petition and that the writ petition is liable to be dismissed."

17. We agree with the conclusion reached by the learned

Single Judge. Respondents have given sufficient

justification for fixing different prices for custom milled rice

and levy rice. It is well settled that while the Court can

examine as to whether an impugned decision is backed by

reasons, sufficiency or otherwise of reasons is not

justiciable. The differentiation in procurement prices was

on account of various factors which have been explained by

the respondents. For a writ Court to examine such pricing

or pricing methodology would be venturing into an area

over which it may not have much expertise.

18. That being the position, we do not find any error or