- (1.) The writ petition involves an adjudication of whether there had been entrustment of stocks of paddy by the respondent-Punjab State Civil Supplies Corporation Limited (PUNSUP), arrayed as the 4th respondent, to the petitioner-M/s Lakshmi Energy -& Foods Limited, a rice Milling Company to make it liable for a claim by PUNSUP, for its decision to mill the stocks alleged to have been entrusted at the risk and cost of the petitioner. Respondents 1 to 3 are the State functionaries connected with the Department of Food, Civil Supplies & Consumer Affairs, Punjab and the 5th respondent is the District Manager, PUNSUP, Fatehgarh Sahib. The dispute by the petitioner was that there was no such entrustment to make it liable. Though the issue seems factual, they are grounded on documents and, therefore, the initial plea by the respondent that the case would not merit consideration in a writ petition, I would find to be not justified under the peculiar facts and circumstances. There is also objection that an arbitral process has started subsequent to the institution of the petition and, therefore, the adjudication must cease before this Court. This point will also be considered in the course of the judgment. II. Essential terms of milling policy in so far as relevant to issue of allotment. (a) Two modes of entrustment-with and without cash security
(2.) The petitioner is said to be a Company which has a large milling capacity of 165 MT at its Rice Mill at Khamanon. The paddy is allotted through four procurement agencies, namely, PUNSUP, MARKFED, Punjab Warehousing Corporation and Punjab Agro. Through a common order of allocation dated 15.10.2009, the petitioner was allotted to all the four procurement agencies equally distributed to total allotment attributable to 2.5 tonne each. There are two modes of allotment of milling policy released by the State, namely, (i) without cash security, and (ii) non-cash security. The allotment is made on the basis of the capacity of the Rice mill and the maximum paddy that could be allotted without cash security irrespective of the capacity of the Rice mill is 8400 MT. The petitioner which had the capacity of 175 MT was, therefore, entitled to be allotted a maximum of 8400 MT through procurement agencies without cash security being taken. The milling policy released by the Government of Punjab, Department of Food, Civil Supplies & Consumer Affairs, Punjab, also makes possible allotment of additional supplies but this would be subject to furnishing of cash security to be taken in the prescribed format. There are norms attached to the cash security also that it should be equivalent to 5% of the total value of the stocks allotted and that the same shall be paid through demand draft drawn in favour of the Department of Food and Supplies. (b) Manner of allotment and its basis-always founded on contract.
(3.) Since the issue in this case relates to an assessment of whether the stocks that had been allotted to the petitioner had not been milled as contracted to be done, it becomes essential to reproduce the relevant terms in the milling policy about the manner of allotment, the method of securing allotted stocks to be milled, the mechanism for enforcement of the claims of the State or its agency for unmilled supply of stocks. Para 2 contains a reference to the fact that paddy to be custom-milled shall always be on contractual basis. The relevant cause as for as it is applicable to this case is as follows:- ...No rice miller will undertake the work of custom milling of any agency under any circumstance unless or until duly allotted for the purpose. In case any miller refuses custom milling work, he will not be allowed to do levy work.... The allotted stocks shall be stored in specified places and the manner of allotment of mandis and storage is spelt out in clause 3 and the same reads as follows: The purchase centres/mandis shall be linked with the nearest milling centre/storage centre keeping in view the availability of milling capacity at the milling/storage center(s) at which paddy is proposed to be stored/got milled. All the procuring agencies will make necessary arrangements of linking the proposed purchase centres/mandis with the storage points/milling centres in such a way so as to incur bare minimum expenditure on transportation..... There are also instructions to the effect that no additional security amount shall be got deposited from the miller of a paddy allotted under the 'Cash Security' head. In respect of the paddy that is allotted and shifted to the miller, the nomenclature of such custody is referred to as a joint custody. The idea is that the exclusive storage within the precincts of the miller shall still be understood as held jointly with the agency that supplies it to enable the agency to shift them out if the miller has not milled the quantity that is contracted and when there is a need to have it milled outside, there is no scope for any obstruction on the part of the miller. Clause 5 relating to the storage of paddy stocks would bring out this fact that the Paddy procured by the agencies shall be, by and large, stored in the premises of the allotted mills in joint custody as per details given in the subsequent paragraphs on the basis of allotment policy. Bare minimum paddy should be stored in own custody and that too under exceptional circumstances only with the prior approval of the head of the procuring agency concerned. The paddy to be stored in own custody will be stored in own custody will be stored within 8 kilometres of the rice mills allotted to the procuring agencies. Such paddy stocks are to be got milled from the mills allotted to the agencies at the earliest possible so that agencies do not incur avoidable financial expenditure. The responsibility for quality and quantity for the paddy stored in own custody will be of the staff of concerned agency. The paddy stored in the premises of rice mills will be under joint custody of the rice millers and the staff of the concerned agency for which responsibility for quantity and quality will be of the concerned rice millers and the staff of the agencies. The miller will ensure the storage of the paddy stocks of the agencies separately from that of his own purchased paddy stocks by erecting a physical barrier such as a boundary wall or a proper and durable fencing. The responsibility for the allotment of rice mill that is made to the District Level Committee comprising of all the district heads and any violation or discrepancy in allotment of capacity fixation is required to be brought to the attention of the Director, Food & Supplies, Punjab, for necessary action (clause 6) to ensure that there is equitable and fair distribution of allotments of the paddy procured by the State agencies. I have already referred to also the norms for allotment for storage of paddy and the allotment of additional paddy under the cash security in the rice mills during KMS 2009-10. The data which is relevant and applicable to this case alone is reproduced:- JUDGEMENT_179_LAWS(P&H)10_20111.htm (c) Proof of allotment and liability to furnish security To ensure that the norms are properly followed, there is also a mechanism about securing the proof of allotment and the concomitant liability of furnishing security. The relevant clauses are:- (e) The cash security would be in the shape of demand draft drawn in favour of Managing Director, Pungrain only payable at Chandigarh, even if the paddy relates to any procuring agency. The demand draft would be deposited in the Office of Director, Food and Supplies, Punjab, Sector 17, Chandigarh, and not with any other agency at the district/local level. (h) The miller would lift the paddy against cash guarantee within seven days from the issuance of release order for the additional paddy, failing which the next eligible rice miller would be considered for allotment of additional paddy. An allotment and storage cannot be merely on oral basis but the State agencies would enter into contracts in writing with the respective millers indicating the entitlement for allotment and the quantity actually allotted and secure proof through appropriate release orders. The requirement of entering into an agreement is brought through yet another clause which is also reproduced: j. the allotted rice mils will enter into an agreement with the concerned agency by 01.10.2009 and complete all other formalities in this regard, failing which the allotment shall be liable to be cancelled. Signatory to the agreement must be authorised by the owners/partners/Directors through a legally executed GPA in his favour. However, the overall responsibility would still rest with the owner rice miller. In any case no paddy will be stored with the miller till he executes the agreement and signs the necessary documents. A set of documents will be sent by the concerned DFSC/District Manager to his Head Office. The power of attorney to run a rice mill can be given only to the shareholder or partner of a rice mill and not to any third person who is in no way connected with the rice mill. This clause is crucial, for, it is this document which establishes the actual allotment to a miller. Admittedly, an agreement had been entered into with the 4th respondent-PUNSUP for allotment of 2100 MT, being the maximum that a miller could be allotted with no cash credit, the same being 1/4th of the total entitlement of the petitioner against PUNSUP. This is reflected in the memorandum issued by the District Controller, Food & Civil Supplies Department, Fatehgarh Sahib (Annexure P-2) assigning to the petitioner an allotment of PUNSUP 2.5 tonnes. The agreement which the petitioner has entered into with the 4th respondent on 02.03.2010 also brings out the follows: JUDGEMENT_179_LAWS(P&H)10_20112.htm There was an additional allotment of paddy to the petitioner within the limit prescribed under the norms for which cash credit was necessary and it is brought through the communication of the Director, Food Civil Supplies and Consumer Affairs, Punjab (Annexure P-4). It is clear through records that the petitioner had made a deposit of nearly Rs.8 crores for the additional allotments entrusted by the Government. (d) Periodical monitoring of stock positions and control through district level meetings.;