Sujatha Janagama vs The State Of Telangana
2024 Latest Caselaw 3333 Tel

Telangana High Court

Sujatha Janagama vs The State Of Telangana on 28 August, 2024

Author: K. Lakshman

Bench: K. Lakshman

              HON'BLE SRI JUSTICE K. LAKSHMAN

WRIT PETITION Nos.1974, 17872, 18688, 28007 & 45916 OF 2022,
         11484 OF 2023, 18867 AND 20288 OF 2024

COMMON ORDER:

Heard Mr. J. Prabhakar, learned Senior Counsel representing Ms.

Kanumuri Kalyani, learned counsel for the petitioners, Mr. S. Rahul

Reddy, learned Special Government Pleader and Mr. Pasham Mohith,

learned counsel representing Ms. Hamsini Mohith, learned counsel for

respondent No.12 in W.P. Nos.20288 and 18867 of 2024.

2. W.P. No.1974 of 2022 is filed declaring G.O.Ms.No.22, dated

06.12.2021 in not extending the time for supply of custom milling in six

(06) installments, as illegal, and for a consequential direction to the

respondents to receive the CMR paddy in six (06) installments from the

petitioner firms.

3. W.P. Nos.17872, 18688, 28007 and 45916 of 2022 are filed by

the respective petitioners challenging issuance of Demand Prior to

Attachment of Land proceedings, dated 29.03.2022, 26.03.2022,

25.06.2022 and 14.12.2022, issued by the respective Tahsildars in Form

No.4 (U/S - 25 of the Telangana Revenue Recovery Act, 1864).

4. W.P. No.11484 of 2023 is filed by the petitioner challenging

issuance of Notice of Attachment proceedings, dated 06.04.2023 issued

KL,J W.P. No.1974 of 2022 & batch

by the Tahsildar, Mulugu Mandal and District in Form No.5 (under

Section - 27 of the Telangana Revenue Recovery Act, 1864).

5. W.P. No.18867 of 2024 is filed by petitioner Nos.8 and 9 in

W.P. No.1974 of 2022 challenging the action of respondents in sealing

their rice mill in premises No.9-385, 9-386 in Survey No.1257/A,

1257/AA and 1257/E, situated at Jeevanth Rao Palli Road, Mulugu

Town and District and also seizure of 27,614 bags of paddy and 4420

quintals of rice and also the notice dated 14.03.2024 issued by

respondent No.5 and the notice dated 20.07.2024 issued by the Collector

(CS), Mulugu.

6. W.P. No.20288 of 2024 is filed by the very same petitioner

Nos.8 and 9 along with petitioner in W.P. No.45916 of 2022 challenging

the issuance of notice of attachment proceedings, dated 25.07.2023

issued by the Tahsildar, Mulugu Mandal and District in Form No.5

(under Section - 27 of the Telangana Revenue Recovery Act, 1864) and

also Notification dated 25.07.2024 published in Mulugu District,

extraordinarily, Government of Telangana in Form No.5, Notice of

assumption in Form No.6, dated 25.07.2024 issued by respondent No.2

and the notice issued by the Dist. Manager, TGSCL, Mulugu on

26.07.2024.

KL,J W.P. No.1974 of 2022 & batch

7. Thus, the challenge is with regard to the initiation of

proceedings under the Telangana Revenue Recovery Act, 1864 (for short

'R.R. Act') and the allegation of the petitioners is that the respondents

issued impugned notices without following the procedure laid down

under the R.R. Act. Therefore, there is no need to delve into the facts of

the case in detail.

8. However, the gist of the contentions in the aforesaid writ

petitions is necessary and the same are mentioned below:

i) W.P. No.1974 of 202:

(a) The Telangana State Civil Supplies Corporation Limited

(TSCSCL) delivered 64.16 LMTS of paddy during the Rabi

Season 2019-20, which is more than milling capacity of the

petitioner mills.

(b) In the absence of any obstacles, the TSCSCL extended time vide

G.O.Ms.No.13, dated 25.07.2019 to clear their dues from 2013-19.

(c) But, due to COVID in March, 2021, imposition of Lock Down

leading to shortage of labour and transportation and huge rains,

which were beyond the control of the petitioners, they could not

process custom milling. Without considering the same, the

KL,J W.P. No.1974 of 2022 & batch

respondents issued G.O.Ms.No.22, dated 06.12.2021 stating that

they are not extending time for supply of custom milling.

ii) W.P. Nos.17872, 18688, 28007 & 45916 of 2022:

a) Owing to COVID in March, 2021, imposition of Lock Down

leading to shortage of labour and transportation and huge rains,

which were beyond the control of the petitioners, they could

not process custom milling. Without considering the same, the

respondents issued G.O.Ms.No.22, dated 06.12.2021 informing

that they are not extending time for supply of custom milling.

b) The petitioners made representation to the TSCSCL for

extension of time. Without considering the same, the

respondents are trying to seize the rice mills of the petitioners.

Pursuant to the same, the respondents issued demand prior to

attachment of land in Form No.4 (U/S - 25 of the R.R. Act) to

pay the amount, failing which, properties will be attached,

which is illegal.

iii) W.P. No.11484 of 2023 & 20288 of 2024

The petitioners made representation to the TSCSCL for

extension of time. Without considering the same, the

respondents are trying to seize the rice mills of the petitioners.

KL,J W.P. No.1974 of 2022 & batch

Pursuant to the same, the respondents issued notice attachment

in Form No.5 (under Section - 27 of the R.R. Act) to pay the

amount, failing which, properties will be attached, which is

illegal.

iv) W.P. No.18867 of 2024:

a) Respondent Nos.7 to 10 and 12 seized the stock and locked the

entire premises of the petitioners.

b) On the complaint made by the Manager of the TSCSCL, a case in

Crime No.147 of 2022 was registered by P.S. Mulugu for the

offences under Sections - 403, 406, 417 and 420 of IPC and

Section - 7 of P.C. Act. After completion of investigation, final

report was filed and the same was taken on file as C.C. No.46 of

2023.

c) As per the directions of the Joint Collector, consequent to the

seizure of rice mill on 03.05.2024, respondent No.11 disconnected

the electricity supply to the mill. In fact, there were no arrears due

as on the date of seizure of mill

d) In the locked premises, there are some leakages on account of

rainy season. The water is sweeping onto the stock. In the said

circumstances, there would be huge loss to the stock.

KL,J W.P. No.1974 of 2022 & batch

9. The Additional District Collector has filed counter in W.P.

No.18867 of 2024 contending as follows:

i) M/s. Sri Sai Sahasra Rice Tech, Mulugu, a partnership firm,

was constituted in the year 2017 and subsequently

reconstituted several times. The same was lastly constituted

with few partners retiring having only two partners

continuing i.e., Mr. J. Seetharama Rao and Ms. J. Vinodha

(inducted on 26.08.2018) through a registered deed of

Retirement-cum-Reconstitution of Partnership dated

07.12.2020 vide registered document No.4 of 2021 on

25.01.2021.

ii) Managing Partner of M/s. Sai Sahasra Rice Tech, Mulugu,

Mr. Janagama Seetha Rama Rao, entered into an agreement

for custom milling with District Manager, TSCSCL,

Mulugu, for milling of paddy.

iii) Thereafter, paddy was supplied and custom milled rice was

partly returned to Civil Supplies Corporation/FCI.

iv) A total quantity of 1,30,412.80 quintals of paddy under

Rabi 2019-20 was allotted to the said rice Mill under an

agreement dated 20.12.2019. As against the allotted paddy,

KL,J W.P. No.1974 of 2022 & batch

custom milled rice that should have been delivered back

was 88,721.50 quintals. But, the petitioner delivered back

only 60,375.30 quintals of custom milled rice, and balance

to be delivered is 28,346.20 quintals of rice, which is not

delivered.

v) Proceedings were directed to be initiated under R.R. Act for

recovery of loss of paddy and a letter dated 18.11.2021 was

addressed to the Tahsildar. Under apprehension of

initiating proceedings under R.R. Act by respondent No.9,

Mr. J. Seetha Rama Rao filed a writ petition vide W.P.

No.32912 of 2021 on 07.12.2021, and the same was

disposed of on 13.12.2021 directing him to pass orders on

explanations submitted by Mr. J. Seetha Rama Rao.

vi) The District Manager issued further notice to Mr. J. Seetha

Rama Rao on 07.01.2022 to deliver pending quantity of

custom milling rice along with 25% penalty making a total

of 35,499.93 quintals of rice. As nothing was forthcoming,

again on 15.06.2022, the Additional Collector (Revenue)

has issued proceedings authorizing the Tahsildar, Mulugu to

KL,J W.P. No.1974 of 2022 & batch

recover an amount of Rs.12,31,02,336/ to the TSCSCL

under R.R. Act.

vii) A letter dated 25.05.2022 was addressed by the District

Manager, TSCSCL to the Tahsildar to initiate proceedings

under R.R. Act for the said amount.

viii) Thereafter, a notice of demand prior to attachment of land

was issued in Form No.4 by the Tahsildar on 25.06.2022.

Challenging the same, W.P. No.28007 of 2022 is filed.

ix) Consequent to Form No.4 notice, dated 14.12.2022, a

distraint order in Form No.1 was issued by the Tahsildar,

Mulugu to pay the said amount within a period of fifteen

(15) days, failing which they should proceed with recovery

of arrears by attachment and sale of land and building that

of movable (including stock goods) and immovable

properties.

x) Mrs. J. Sujatha, claiming partner of M/s. Sai Sahasra Rice

Tech, filed W.P. No.45916 of 2022 challenging the distraint

notice dated 14.12.2022 without reference to previous writ

petitions filed by Mr. J. Seetha Rama Rao. Pursuant to the

liberty granted by this Court in W.P. No.45916 of 2022 for

KL,J W.P. No.1974 of 2022 & batch

recovery of said amount, the Tahsildar had issued notice of

attachment in Form No.5 to Mr. J. Seetha Rama Rao and

Mr. J. Mahender Rao. As against the same, Mr. J.

Mahendar Rao, filed W.P. No.11484 of 2023.

xi) Pursuant to the reports submitted to respondent No.2 vide

letters dated 08.05.2024 and 10.07.2024, respondent No.2

accorded permission on 19.07.2024 to dispose of the seized

stock and adjust the same against the CMR dues.

10. Mr. J. Prabhakar, learned Senior Counsel appearing for the

petitioners, Mr. S. Rahul Reddy, learned Special Government Pleader

and Mr. Pasham Mohith, learned counsel representing Ms. Hamsini

Mohith, learned counsel for respondent No.12 in W.P. Nos.20288 and

18867 of 2024 made their submissions extensively.

11. Most of the petitioners in the aforesaid writ petitions

challenged the main destraint order, demand prior to attachment in Form

No.4 and notice of attachment in Form No.5 on the following grounds:

i. Amounts sought to be recovered by the respondents are disputed

and they have not crystallized. Therefore, initiation of proceedings

under the R.R. Act without determination of the amount is illegal

and violation of the principle laid down by the Hon'ble Supreme

KL,J W.P. No.1974 of 2022 & batch

Court in State of Karnataka v. Shree Rameshwara Rice Mills 1;

Shriram Engineering Constructions Company Limited v.

Kerala State Industrial Development2; and Taherunnisa

Begum v. District Collector, Cuddapah District3.

ii. Proceedings under the R.R. Act cannot be resorted when there

exists an arbitration clause between the parties. Reliance was

placed on the principle laid down in Sanjay Kumar v. The

Managing Director, BSFCSC4 and Arvind Kumar v. State of

Bihar5.

iii. Property of third parties, who are not revenue defaulters, cannot be

attached. Reliance was placed on Taherunnisa Begum3.

iv. There is violation of procedure contemplated under the R.R. Act.

v. Destraint order in Form No.1 is defective since details of movable

and immovable properties to be attached were not mentioned.

vi. The Government is due and liable to pay huge amount towards

milling charges and transport charges. Reliance was placed on the

principle laid down by the Apex Court in S.K. Bhargava v. The

. (1987) 2 SCC 160

. 2007 SCC OnLine Ker. 196

. 2007 SCC OnLine AP 527

. 2020 SCC OnLine Pat.924

. 2014 SCC OnLine Pat. 1495

KL,J W.P. No.1974 of 2022 & batch

Collector, Chandigarh6, Shree Rameshwara Rice Mills1;

Shriram Engineering Construction Company Limited 2.

12. Whereas, Mr. S. Rahul Reddy, learned Special Government

Pleader contended that the petitioners having entered into an agreement

for supply of custom milling with TSCSCL, they have not supplied

entire custom milled rice. Therefore, they are due and liable to pay

amount, for which the TSCSCL issued notices to the petitioner mills, and

on calling for explanation only, impugned destraint order, demand prior

to attachment of land and notice of attachment were issued. Criminal

cases were also initiated against them. There is shortfall of rice to the

huge quantity. Shareholders and Directors are also responsible for the

same. Therefore, the respondents have issued the said notices by

following the procedure laid down under the R.R. Act. There is no error

in it.

ANALYSIS AND FINDING OF THE COURT:

13. In the light of the aforesaid rival submissions, it is relevant to

note that the Telangana Government has announced its Paddy

Procurement Policy in the year 2015. As per the said Policy and the

Government Orders (GOs) issued by the State Government, Rice Millers

. (1998) 5 SCC 170

KL,J W.P. No.1974 of 2022 & batch

have to purchase paddy from farmers at a Minimum Support Price

(MSP) predetermined by the State Government and has to deliver 75%

of the rice milled as levy to the Food Corporation of India (FCI), and the

TSCSCL at a predetermined price. The rice millers were entitled to sell

and move the remaining 25% levy free rice within and outside the State

and also export the rice as per the then prevailing orders of the State

Government from time to time. It was called Levy System which was

abolished by the Central Government in 2015 and was duly followed by

the State Governments.

14. The newly formed State of Telangana traded the levy system

for the custom milling system in order to provide more support to the

farmers. The FCI was replaced by the TSCSCL. Under the said custom

milling system, the State directly purchases paddy from the farmers

through different procurement centers at Village or Mandal levels and

distributes the paddy to rice millers for custom milling. The rice millers

mill the paddy and supply to the State and receive predetermined custom

milling charges.

15. Vide G.O.Ms.No.18, CA, F&CS (CS.I-CCS), dated

30.10.2015, the Government of Telangana has issued Telangana Rice

(Custom Milling) Order, 2015 (for short 'Order, 2015'), which makes it

KL,J W.P. No.1974 of 2022 & batch

mandatory for all rice millers to whom paddy is delivered by the

TSCSCL or its Agencies to do custom milling of paddy and deliver rice

on such terms and conditions stipulated from time to time by the State

Government. The new policy coupled with increase in MSP of paddy,

policy support in the form of farmers' input incentives and

improvements in irrigation led to drastic increase in the production of

paddy across the State of Telangana. Thereafter, petitioner Nos.9 and 10

firms entered into custom milling agreement with TSCSCL for each

milling season on the specific terms and conditions mentioned therein.

SCHEME OF R.R. ACT:

16. It is apposite to note the Scheme of the Telangana Revenue

Recovery Act, 1864. The R.R. Act was brought in for the purpose of

consolidating the Law for the Recovery of Arrears of Revenue in the

State of Telangana.

i) Section - 4 of the R.R. Act deals with arrears of revenue, and it

says when the whole or portion of a kist shall not be so paid, the amount

of the kist or of its unpaid portion shall be deemed to be an arrear of

revenue.

ii) Section- 5 of the R.R. Act deals with arrears of revenue how

recovered, and it says that whenever revenue may be in arrear, it shall be

KL,J W.P. No.1974 of 2022 & batch

lawful for the Collector, or other officer empowered by the Collector in

that behalf, to proceed to recover the arrear, together with interest and

costs of process, by the sale of the defaulter's movable and immovable

property, or by execution against the person of the defaulter in manner

hereinafter provided.

iii) Section - 7 deals with interest on arrears, and it says that

arrears of revenue shall bear interest at the rate of 6 per cent per annum.

iv) Section - 8 deals with rules for seizure and sale of movable

property, and it says that in the seizure and sale of movable property for

arrears of revenue, the following rules shall be observed:- First.- The

Collector, or other officer empowered by the Collector in that behalf,

shall furnish to the person employed to distraint the property of a

defaulter, a demand in writing and signed with his name, specifying the

name of the defaulter, the amount of the arrear for which the distress

may be issued, and the date on which the arrear fell due. The person

employed to distraint shall produce the writing which, if the arrear

together with the batta due to him, under Section - 53, be not at once

paid, shall be his authority for making the distress, and on the day on

which the property may be distrained, shall deliver a copy of such

writing to the defaulter, endorsing thereon a list or inventory of the

KL,J W.P. No.1974 of 2022 & batch

property distrained, and the name of the place where it may be lodged or

kept. Second.- The writing shall further set forth that the distrained

property will be immediately brought to public sale unless the amount,

with interest, batta, and all the expenses of the distress, be previously

discharged. Third.- When a defaulter may be absent, a copy of the

writing, with the endorsement, shall be fixed or left at his usual place of

residence, or on the premises where the property may have been

distrained, before the expiration of the third day, calculating from the

day of the distress.

v) Section - 9 deals with procedure when defaulter neglects to pay

after notice and it says that when the amount due shall not have been

paid pursuant to the terms of the demand, and no arrangement for

securing the same shall have been entered into to the satisfaction of the

Collector or other officer empowered by the Collector in that behalf, the

distrainer shall transmit an inventory of the property distrained to the

nearest public officer empowered to sell distrained property, under Act

VII of 18391, in order that it may be publicly sold for the discharge of

the arrear due, with interest, batta, and cost of distraint.

vi) Section - 22 deals with proclamation of time of sale and of

property to be sold and it says that the public officer, empowered under

KL,J W.P. No.1974 of 2022 & batch

Act VII of 18391 to sell distrained property, shall cause to be affixed to

the outer door of the defaulter's house, or on the premises where the

property may have been distrained, a list of the property to be sold, with

a notice specifying the place where, and the day and hour at which the

distrained property will be sold and shall cause proclamation of the

intended sale to be made by beat of drum in the village to which the

lands on which the arrear has accrued may belong, and in such place or

places as the Collector, or other officer empowered by the Collector in

that behalf, may consider necessary to give due publicity to the sale. No

sale shall take place until after the expiration of a period of fifteen days

from the date on which the notice may be so affixed.

vii) Section - 23 deals with sale how conducted and it says that at

the appointed time, the property shall be put up in one or more lots, as

the said officer may consider advisable, and shall be disposed of to the

highest bidder. Where the property may sell for more than the amount of

the arrear, the over plus after deducting expenses of process and interest,

shall be paid to the defaulter.

viii) Section - 25 deals with demand to be served prior to

attachment of land, and it says that before a Collector, or other officer

empowered by the Collector in that behalf, proceeds to attach the land of

KL,J W.P. No.1974 of 2022 & batch

the defaulter, or buildings thereon, he shall cause a written demand to be

served upon the defaulter, specifying the amount due, the estate or land

in respect of which it is claimed, the name of the party in arrear, the batta

due to the person who shall serve the demand, and the time allowed for

payment, which shall be fixed with reference to the distance from the

land on which the arrear is due to the place at which the money is to be

paid. Such demand shall be served by delivering a copy to the defaulter,

or to some adult male member of his family at his usual place of abode,

or to his authorized agent, or by affixing a copy thereof on some

conspicuous part of his last known residence, or on some conspicuous

part of the land about to be attached.

ix) Section - 26 deals with procedure when defaulter neglects to

pay, and it says that when the amount due shall not have been paid

pursuant to the terms of the demand, and no arrangement for securing the

same shall have been entered into to the satisfaction of the Collector or

other officer empowered by the Collector in that behalf, he shall proceed

to recover the arrear by the attachment and sale of the defaulter's land in

the following manner.

x) Section - 27 deals with mode of attachment, and it says that the

attachment shall be effected by affixing a notice thereof to some

KL,J W.P. No.1974 of 2022 & batch

conspicuous part of the land. The notice shall set forth that unless the

arrear, with interest and expenses, be paid within the date therein

mentioned, the land will be brought to sale in due course of law. The

attachment shall be notified by public proclamation on the land, and by

publication of the notice in the District Gazette.

xi) Section - 36 deals with procedure in sale of immovable

property, and it says that in the sale of immovable property under this

Act the following rules shall be observed:- First.- The sale shall be by

public auction to the highest bidder. The time and place of sale shall be

fixed by the Collector of the district in which the property is situated, or

other officer empowered by the Collector in that behalf. The time may be

either previous to or after the expiration of the fasli year. Second.-

Previous to the sale the Collector, or other officer empowered by the

Collector in that behalf, shall issue a notice thereof in English and in the

language of the district, specifying the name of the defaulter; the position

and extent of land and of his buildings thereon; the amount of revenue

assessed on the land, or upon its different sections; the proportion of the

public revenue due during the remainder of the current fasli; and the

time, place, and conditions of sale. This notice shall be fixed up one

month at least before the sale in the Collector's office and in the Taluk

KL,J W.P. No.1974 of 2022 & batch

Cutcherry, in the nearest police station-house, and on some conspicuous

part of the land. Third.-A sum of money equal to fifteen per cent of the

price of the land shall be deposited by the purchaser in the hands of the

Collector, or other officer empowered by the Collector in that behalf, at

the time of the purchase, and where the remainder of the purchase-

money may not be paid within thirty days, the money so deposited shall

be liable to forfeiture. Fourth.-Where the purchaser may refuse or omit

to deposit the said sum of money, or to complete the payment of the

remaining purchase-money, the property shall be resold at the expense

and hazard of such purchaser, and the amount of all loss or expense

which may attend such refusal or omission shall be recoverable from

such purchaser in the same manner as arrears of public revenue. Where

the lands may, on the second sale, sell for a higher price than at the first

sale, the difference or increase shall be the property of him on whose

account the said first sale was made. Fifth.- All persons bidding at a

sale may be required to state whether they are bidding on their own

behalf or as agents, and, in the latter case, to deposit a written authority

signed by their principals. If such requisition be not complied with, their

bids may be rejected.

KL,J W.P. No.1974 of 2022 & batch

xii) Section - 37-A deals with application to set aside sale of

immovable property on deposit. Section - 38 deals with application to

set aside sale. Section - 39 deals with proclamation of sale. Section - 40

deals with delivery of possession. Section - 44 deals with sale of land

for arrears. Section - 48 deals with power of arrest in case of willful or

fraudulent non-payment of arrears-period of imprisonment etc. Section -

57-A deals with revision.

17. Distraint order issued under Section - 8 of the R.R. Act in

Form No.1 as per Appendix - II (Standing Order No.41, Paragraph 25) is

relevant and the same is extracted as under:

KL,J W.P. No.1974 of 2022 & batch

18. Like-wise, demand prior to attachment of land issued under

Section - 25 of the R.R. Act in Form No.4 is also relevant and the same

is extracted below.

KL,J W.P. No.1974 of 2022 & batch

19. Similarly, notice of attachment issued under Section - 27 of

the R.R. Act in Form No.5 is also relevant and the same is extracted

below:

20. The aforesaid Forms would reveal that the respondents shall

mention all the details in Form No.1 - distraint order. Perusal of the said

distraint order issued under Section - 8 of the R.R. Act in Form No.1

dated 25.06.2022 in respect of the petitioners in W.P. No.18867 of 2024

would reveal that the same lacks all the requisite details. It is a defective

notice. Therefore, subsequent proceedings are also liable to be set aside.

KL,J W.P. No.1974 of 2022 & batch

21. In Shree Rameshwara Rice Mills1, the Apex Court

categorically held that without determination of amount, any initiation of

recovery of arrears under R.R. Act is impermissible. Paragraph Nos.7

and 8 are relevant and the same are extracted as under:

"7. On a consideration of the matter we find ourselves unable to accept the contentions of Mr Iyenger. The terms of clause 12 do not afford scope for a liberal construction being made regarding the powers of the Deputy Commissioner to adjudicate upon a disputed question of breach as well as to assess the damages arising from the breach. The crucial words in clause 12 are "and for any breach of conditions set forth hereinbefore, the first party shall be liable to pay damages to the second party as may be assessed by the second party". On a plain reading of the words it is clear that the right of the second party to assess damages would arise only if the breach of conditions is admitted or if no issue is made of it. If is was the intention of the parties that the officer acting on behalf of the State was also entitled to adjudicate upon a dispute regarding the breach of conditions the wording of clause 12 would have been entirely different. It cannot also be argued that a right to adjudicate upon an issue relating to a breach of conditions of the contract would flow from or is inhered in the right conferred to assess the damages arising from a breach of conditions. The power to

KL,J W.P. No.1974 of 2022 & batch

assess damages, as pointed out by the Full Bench, is a subsidiary and consequential power and not the primary power. Even assuming for argument's sake that the terms of clause 12 afford scope for being construed as empowering the officer of the State to decide upon the question of breach as well as assess the quantum of damages, we do not think that adjudication by the officer regarding the breach of the contract can be sustained under law because a party to the agreement cannot be an arbiter in his own cause. Interests of justice and equity require that where a party to a contract disputes the committing of any breach of conditions the adjudication should be by an independent person or body and not by the officer party to the contract. The position will, however, be different where there is no dispute or there is consensus between the contracting parties regarding the breach of conditions. In such a case the officer of the State, even though a party to the contract will be well within his rights in assessing the damages occasioned by the breach in view of the specific terms of clause 12.

8. We are, therefore, in agreement with the view of the Full Bench that the powers of the State under an agreement entered into by it with a private person providing for assessment of damages for breach of conditions and recovery of the damages will stand confined only to those cases where the breach of conditions is admitted or it is not disputed."

KL,J W.P. No.1974 of 2022 & batch

i) The said principle was also laid down by a Division Bench of

Kerala High Court in Shriram Engineering Constructions Company

Limited2 and further held that when breach is not admitted, before

determining the amount by suit or arbitration by independent authority,

revenue recovery cannot be initiated for recovering disputed damages.

ii) In Taherunnisa Begum3, the combined High Court of Andhra

Pradesh at Hyderabad held that where there are disputes between alleged

debtor and Government with regard to certain liability, before initiating

recovery proceedings under Section - 52, there is no obligation cast upon

the State Government to hold a proper enquiry, furnish full particulars to

person sought to be fastened with the liability, consider his

representations and first determine liability or otherwise for the sums

said to be due.

iii) In the light of the aforesaid legal principle, coming to the facts

of the present case, according to the respondents, the petitioners have not

delivered the entire custom milled rice. They have also mentioned the

due amount i.e., Rs.12,31,02,336/- in the distraint order dated

25.06.2022 of respondent No.9 in W.P. No.18867 of 2024. Whereas,

according to the petitioners, due to Covid and imposition of lockdown

and heavy rains, there was shortage of labour and transportation and,

KL,J W.P. No.1974 of 2022 & batch

therefore, they could not supply the entire custom milled rice to the

respondents. They have also submitted written representation for

extension, but the same was not considered. In earlier occasions when

there were no hurdles, the Government had extended time for supply of

the same. But, on account of the Covid and other reasons, instead of

extending the time, Government has issued G.O.Ms.No.22, dated

06.12.2021 to recover pending dues from rice millers of Rabi 2019-20

without extending time for supply of balance custom milled rice.

Therefore, the issuance of said G.O.Ms.No.22 and the consequential

proceedings for recovery of amount by issuing distraint order in Form

No.1, demand prior to attachment of land in Form No.4, notice of

attachment in Form No.5 and, therefore, seizure of stock and sealing the

rice mill etc. are illegal and the same are liable to be set aside.

Admittedly, the balance non-supply of custom milled rice was not

determined by the respondents. Therefore, without determining the said

amount, initiation of proceedings under the R.R. Act for recovery of

arrears is contrary to the procedure laid down under the R.R. Act and the

principle laid down in the aforesaid judgments.

iv) Mr. S. Rahul Reddy, learned Special Government Pleader

referring to the proceedings dated 18.11.2021, 07.01.2022, 15.06.2022

KL,J W.P. No.1974 of 2022 & batch

and 25.05.2022, would contend that the respondent authorities have

already determined the amount. Perusal of the same would reveal that

before issuance of the proceedings and determining the amount, no

opportunity was given to the petitioners by serving the notice and

seeking for explanation. Therefore, the same cannot be treated as

determination in terms of the procedure laid down under the R.R. Act

and the principle laid down in the aforesaid decisions. Thus, it cannot be

treated as determination.

v) The respondents have to first determine the said amount and

thereafter, they have to initiate procedure laid down under the R.R. Act.

Moreover, it is the specific case of the petitioners that there was no

default at all on their fault and the circumstances that occurred were

beyond their control. The said aspects have to be considered by the

respondents, conduct inquiry, then they have to initiate procedure laid

down under the R.R. Act for recovery of arrears. Even after

determination also, they have to follow the aforesaid procedure under the

R.R. Act for recovery of arrears of revenue. They cannot deviate from

the procedure and issue notices under the guise of recovery of arrears of

revenue.

KL,J W.P. No.1974 of 2022 & batch

22. It is also the contention of the petitioners that there exists an

arbitration clause in the aforesaid agreement. Therefore, the proceedings

under the R.R. Act cannot be resorted. There is no dispute that Clause

No.12.4 of the said agreement deals with 'arbitration' and it says that

both the parties have agreed that in the event of any dispute with regard

to the said agreement, the same shall be referred to an Arbitrator. The

Arbitrator shall be appointed by Commissioner, Civil Supplies,

Government of Telangana.

i) In Sanjay Kumar4, the Patna High Court held that Arbitration

Act being a Central Act would prevail over Recovery Act, which is

enacted by the State. Paragraph Nos.51, 52 and 56 are relevant and the

same are extracted as under:

"51. What requires consideration next is as to whether the petitioners' right under the Arbitration Act stands foreclosed in the light of proceedings initiated under the Recovery Act or not?

52. The answer is simple both on facts and law.

53. Under Clause 15 and 16 of the agreement, parties themselves chose to be governed by both the statutes, without ousting proceedings under the other. The language of the agreement is amply clear. The agreement itself stipulated two different situations.

54. Even in law, there cannot be any conflict or restriction. The Arbitration Act stands enacted under

KL,J W.P. No.1974 of 2022 & batch

Part IV, Chapter I, Entry 13 of List 3 of the Schedule VII of the Constitution. By virtue of Article 234, the said statute would prevail over the Recovery Act which stands enacted by the State under its Legislative power flowing from List II of Schedule VII of the Constitution. The Arbitration Act Patna High Court REQ. CASE No. 146 of 2019 dt.03-07- 2020 is a central, and subsequent legislation would prevail over the said State Legislation.

55. xxxx

56. Matter needs to be examined from yet another angle. And that as to whether there is any conflict between the two statutes at all or not. A careful reading of both the Statutes only leads to an inescapable conclusion of not being so. More so considering the ambit and scope of both the legislations. The Arbitration Act provides a mechanism for adjudication of disputes, which can be by way of a claim and counterclaim inter se the parties to the agreement. Whereas the Recovery Act provides for a mechanism for determination of public debt and recovery thereof, by way of a particular procedure. It is not as though with the issuance of a mere notice, all amounts are deemed to be recoverable as public debt. What requires consideration is whether the debt can be classified as a public demand or not. There is no mechanism for Patna High Court REQ. CASE No. 146 of 2019 dt.03-07-2020 the adjudicatory process of the

KL,J W.P. No.1974 of 2022 & batch

disputes or claims of a private party under the Recovery Act. The proceedings under the Recovery Act are summary in nature, based on admitted, certain or unsustainable objections rather than the lengthy process of adjudication of a dispute, be it monetary or otherwise."

23. In the light of the above principle, in the case on hand,

according to the respondent authorities, the petitioners have not supplied

the entire custom milled rice and that they have supplied partly and there

is balance to be delivered. Whereas, according to the petitioners, there is

no default on their behalf and it was on account of unavoidable

circumstances which were beyond their control. The respondents have

dumped paddy stocks more than the agreed capacity. Thus, there are

disputes between the petitioners and the respondents on the said aspects.

24. The petitioner in W.P. No.11484 of 2023 is claiming that he is

neither a partner nor owner of M/s. Sai Sahasra Rice Tech, Nekonda

Road, Narsampet, Warangal. Therefore, issuance of notice of

attachment, dated 06.04.2023 in Form No.5 is illegal. The said aspects

were not considered by the respondents while issuing distraint order,

demand prior to attachment of land and notice of attachment in Form

Nos.1, 4 and 5 of the R.R. Act.

KL,J W.P. No.1974 of 2022 & batch

i) In S.K. Bhargava6, the Apex Court while exercising the

provisions of the Haryana Public Moneys (Recovery of Dues) Act, 1979

held that even though Section 3 does not expressly provide for an

opportunity being given to the alleged defaulter to explain as to whether

any amount is due or not but in view of the nature of the said provision,

the principles of natural justice must be read into it. The requirement of

determination of the sum due by the Managing Director must be

regarded as providing for the Managing Director hearing the alleged

defaulter before coming to the conclusion as to what is the sum due. The

very use of the word "determine" and "sum due" implies that there may

be a lis between the parties and they have to be heard before a final

conclusion is arrived at by the Managing Director. It is not a mere claim

of the TSCSCL which is forwarded to the Collector for realisation, but it

is the "sum due" as determined by the Managing Director which alone is

recoverable. The determination cannot be done without notice to the

alleged defaulter.

ii) It is also the specific contention of the petitioners that the

properties of third parties, who are not revenue defaulters cannot be

attached. They have placed reliance on the principle laid down in

KL,J W.P. No.1974 of 2022 & batch

Taherunnisa Begum3. In the said decision, paragraph Nos.18, 19 and

26 are relevant and the same are extracted hereunder:

"18. In B. Kameswaramma v. Tahsildar, Tenali, 1975 (2) APLJ 26, Justice O. Chinnappa Reddy (as he then was) held that it is not open to the Tahsildar to attach property, which did not stand in the defaulters name.

19. This Court in Kalimili Radhakrishnaiah v. The Govt. of Andhra Pradesh, AIR 1979 AP 255 held that Section 5 of the Act empowers the Collector or any other officer empowered by him in that behalf to proceed against property belonging to a defaulter alone. It was also held that even assuming for a moment that if a person was in the position of a trustee and the state of a beneficiary, it would still not render the sale valid if it is not made in accordance with the requirement of the Act and that the person to whom loan was advanced for sinking the well alone but not a third party can be regarded as the defaulter for the purpose of the Act. This Court further held as follows:

"Section 5 of the Act itself gives an indication of the meaning of "defaulter" though this term has not been defined in the Act as it provided for steps to be taken for the recovery of arrears of revenue by proceeding against movable or immovable properties of the defaulters. Almost every one of the relevant sections in the Act refers to defaulter alone and not to the persons other than the defaulter. If it is proposed to

KL,J W.P. No.1974 of 2022 & batch

recover the amount from the plaintiff on the ground that he has taken over all the liabilities of the family, the proper remedy, if any, would be to file a civil suit against him but in no event property admittedly belonging to him could be validly attached and sold under the Act for realization of arrears due from Sankaraiah who alone is the defaulter in this case."

26. Admittedly, the petitioners are not the revenue defaulters. Therefore, their properties cannot be a subject-matter of adjudication or sale, without determining their liability to pay the said amount or that the said properties were purchased by the revenue defaulter in their name benami. In the absence of the same, the impugned order, dated 17- 11-1999, passed by the Collector, Kadapa and the Gazette Notification, dated 17-8-2000, attaching the properties of the petitioners, cannot be sustainable and the same are accordingly quashed. However, this order shall not preclude the respondents to proceed in the manner authorized under the Act or any other law, if they are so advised."

25. It is relevant to note that Clause - 2 (b) of the Telangana Rice

(Custom Milling) Order, 2015, vide G.O.Ms.No.18, dated 30.10.2015

deals with 'custom milling', and it says that milling of paddy, not

belonging to the miller into rice in his rice mill on payment of mill

charges in cash or in kind as prescribed by the Government of

KL,J W.P. No.1974 of 2022 & batch

India/State Government. Clause - 8 (1) (e) (i) and (ii) envisages that any

stock of rice or paddy in respect of which or part of which he has reason

to believe, a contravention of any of the provisions of this Order has

been, or is being, or is about to be committed; and that any package,

covering or receptacle in which such stock of rice or paddy or is found,

can be seized and removed with such aid or assistance as may be

necessary.

26. Clause - 5 of the Agreement with Rice Milers for Custom

Milling of Paddy KMS-2019-20 (Kharif & Rabi) deals with 'scope of

work', and it says that the miller shall be supplied paddy in accordance

with his/its milling capacity by the District administration as per the

clauses of operational guidelines prescribed in Paddy Procurement

Policy of KMS 2019-20 by the Telangana State Government for custom

milling of paddy procured by the TSCSCL. But, according to the

petitioners, the respondents have dumped the stock of paddy more than

the capacity of petitioner mills.

i) Clause - 8 of the said Agreement deals with 'in the event of

default', and it says that in the event of failure on the part of the miller to

deliver CMR within stipulated period, the TSCSCL reserves the right to

initiate the actions against the millers viz., i) the balance paddy available

KL,J W.P. No.1974 of 2022 & batch

in the premises of the miller shall be shifted by the Corporation to other

mill or mills for custom milling at the costs of miller; ii) the Corporation

reserves the right to invoke the provisions of R.R. Act, if the defaulted

paddy is not available in the premises of the miller, to collect the cost of

short quantity of equivalent rice for the defaulted paddy @ 125% of rates

of CMR fixed by the government of India along with interest @ 12%

p.a., on the actual payable amount, and any other expenditure incurred

on that part, from the due date (i.e., 31st March 2020 for Kharif 2019-20

and 30th September 2020 for Rabi 2019-20) till the actual payment,

besides initiating criminal action against the miller as per the Act,

disqualifying and debarring the mill from participating in future paddy

procurement and custom milling operations under provisions of law.

Waiving of the penalty is not appealable.

ii) Clause - 9 of the said Agreement deals with 'Joint Custody',

and it says that paddy received by the Miller from the respective PPC's

shall be under the joint custody of the Corporation i.e., TSCSCL and

Miller. On behalf of the Corporation, the Deputy Tahsildar (CS) of

respective area or any other official nominated by the Collector (CS)

shall be the joint custodian. Placing reliance on the same, learned

counsel for the petitioners would contend that there is no default on the

KL,J W.P. No.1974 of 2022 & batch

part of petitioners and the delay for non-supply of balance custom milled

rice is only on account of circumstances which were beyond their control

for which the TSCSCL should have extended time, but they did not do

so.

27. It is also relevant to note that according to the petitioners,

TSCSCL and other respondents did not pay milling charges and

transport charges to them and statements showing the details are also

filed. Therefore, the respondents have to consider the said aspects.

However, this Court cannot consider the said aspect in the present writ

petitions where challenge is with regard to initiation of proceedings

under the R.R. Act. If the respondents did not pay milling charges and

transport charges, liberty is granted to the petitioners to take steps in

accordance with law.

28. It is also apt to note that in Shiv Shankar Dal Mills Ltd., v.

State of Haryana7, the Apex Court held that where public bodies under

colour of public laws recover people's money, later discovered to be

erroneous levies, the dharma of the situation admits of no equivocation.

A Division Bench of this Court also had an occasion to deal with the said

. AIR 1980 SC 1037

KL,J W.P. No.1974 of 2022 & batch

issue as to whether Board Standing Orders are statutory in nature or non-

statutory in K. Anjaiah v. Asst. Commissioner of Proh. & Excise 8.

29. It is relevant to note that in the agreements, there is no clause

that the Mills whether partnership firm or Limited Company has to

inform the TSCSCL with regard to change of constitution, if any.

Therefore, TSCSCL shall be careful while drafting the agreements and

has to specifically fix responsibility on the millers whether it is a

Company or Partnership Firm to necessarily inform the change of

constitution of either partnership firm or Company.

CONCLUSION:

30. In the light of the aforesaid discussion, the respondents did

not follow the aforesaid procedure laid down under the R.R. Act while

issuing destraint order in Form No.1 under Section - 8 of the R.R. Act;

demand prior to attachment of land in Form No.4 under Section - 25 of

the R.R. Act and Notice of attachment in Form No.5 under Section - 27

of the R.R. Act. Therefore, they are liable to be set aside and

accordingly the same are set aside. However, this order will not

preclude the respondent authorities in initiating proceedings afresh by

. W.A. Nos.711 & 911 of 2008, decided on 26.05.2022

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strictly following the procedure laid down under the R.R. Act and also

the principle laid down in the aforesaid judgments.

31. As far as W.P. No.1974 of 2022 is concerned, as discussed

above, the said writ petition is filed seeking to declare G.O.Ms.No.22,

dated 06.12.2021 in not extending the time for supply of custom milling

in six (06) installments as illegal and for a consequential direction to the

respondent authorities to receive CMR paddy in six (06) installments

from the petitioner firms. The petitioners failed to make out any case to

declare the same as illegal. However, liberty is granted to the petitioners

in the said writ petition to submit a representation to the authorities

concerned with a request to extend time for supply of custom milling in

six (06) installments and also to receive the CMR paddy in six (06)

installments from them, and it is for the said authorities to consider the

same.

32. Accordingly, Writ Petition Nos.17872, 18688, 28007 &

45916 of 2022, 11484 of 2023, 18867 and 20288 of 2024 are allowed,

while W.P. No.1974 of 2022 is disposed of.

33. The respondents in W.P. No.18867 of 2024 are directed to

unseal the petitioners' rice mill in premises bearing No.9-385 and 9-386

in Survey Nos.1257/A, 1257/AA and 1257/E, situated at Jeevanth

KL,J W.P. No.1974 of 2022 & batch

Raopalli Road, Mulugu Town and District forthwith. But, in the

circumstances of the case, there shall be no order as to costs.

As a sequel thereto, miscellaneous petitions, if any, pending in the

writ petitions shall stand closed.

_________________ K. LAKSHMAN, J 28th August, 2024 Note: Furnish C.C. of order forthwith.

(B/O.) Mgr