JUDGMENT A.N. Varma, J. - The petitioners are rice Millers. They are engaged in the business of de-husking paddy and converting it into rice. Under the provision of U.P. Rice and Paddy (Levy, Regulation of Trade and Control Movement) Order 1970 as amended by the Levy Order, of 1978, the petitioner like the other rice millers is required to sell to the State Government 60% of the rice produced by it .and the state Government in its turn pays to the rice millers the price laid down in the Levy Order. 2. The petitioners are challenging the legality of an order dated 7-3-1983 passed by the Senior Marketing Inspector, Sahanpur whereby the petitioners were asked to deposit a suns of Rs. 39,440.50 P. within seven days of that order claimed as the value of gunny bags supplied to the petitioners by the Government. The order further contains a threat that if the petitioners did not deposit the aforesaid amount, the same shall be adjusted against the amounts due to the petitioners as price of levy rice supplied by the petitioners to the Government. 3. The relevant facts are that for the years 1979-80 and 1980-81 the State Government entered into an agreement with the petitioner through the Commissioner of Food & Civil Supplies, Lucknow under which it was agreed that the State Government would supply to the petitioner paddy in gunny bags for de-husking and conversion into rice. The agreement contained a stipulation that the gunny bags of paddy would be taken hack by the state Government through the Senior Marketing Inspector. After the petitioner had hulled the paddy and converted it into rice the same was supplied to the Government as levy rice packed in the old gunny bags in which the Government had supplied paddy to the petitioner. The petitioner states that the process of hulling takes some time and as a consequence the gunny bags are exposed normal wear and tear and other hazards on account of weather, moisture and lifting of bags at various stages. The petitioner further states that it was ready and willing at all material times to return the unused bags to the Government and offered the same to the Chief Marketing Inspector and other Officers of the Government but the gunny bags were allowed to remain lying with the millers. The petitioner further states that it was ready and willing at all material times to return the unused bags to the Government and offered the same to the Chief Marketing Inspector and other Officers of the Government but the gunny bags were allowed to remain lying with the millers. These facts were also brought to the notice of the Commissioner of Food and Civil Supplies who passed an order dated 20th of December, 1980 to the effect that the empty bags lying with the `fillers by taken back after necessary verifications of the marks on the bags. He further ordered that the unserviceable gunny bags he also taken back. To the same effect another order was passed on 23rd December, 1980. Despite these orders, the gunny bags were not taken back from the millers. 4. It appears that the Commissioner of Food & Civil Supplies reviewed his earlier orders and passed a fresh order on 20th November 1981 in which it was stated that if the rice millers returned the gunny bags which were serviceable the same may be accepted by the Chief Marketing Inspector without making any deductions. However, those gunny bags which have become worn out and unserviceable might he left with the millers and in lieu thereof a sum of Rs. 4.50 per bag he recovered from them. 5. Following the aforesaid order dated 20th November 1981 the Chief Marketing Inspector has passed the impugned order dated 7-3-1983 to the effect mentioned above. 6. Two contentions have been raised by the learned counsel for the petitioner in support of this petition : 1. the demand for payment of Rs. 39,440.50 p. is wholly arbitrary and unauthorised in law and, 2. alternatively, even if the Government could claim the aforesaid amount as the value of gunny bags, the same could not legally be deducted from the price payable to the petitioner undera the U.P. Rice & Paddy (Levy) Order. 7. Having heard learned counsel for the parties we are clearly of the view that both these contentions are well founded. 8. In regard to the first contention, the indisputable position seems to be that the impugned demand is not founded upon any previously determined liability of the petitioner to compensate the Government for any alleged deterioration which the gunny bags supplied by the Government may have suffered while they were in possession of the petitioner. 8. In regard to the first contention, the indisputable position seems to be that the impugned demand is not founded upon any previously determined liability of the petitioner to compensate the Government for any alleged deterioration which the gunny bags supplied by the Government may have suffered while they were in possession of the petitioner. The agreement does not provide for payment of any ascertained amount in the event either of the failure of the petitioner to return the bags or to compensate the Government for any loss which may be caused to it in consequence of any act or omission on the part of the petitioners in regard to the gunny bags. Even clause (4) of the agreement, to which our attention was invited by the learned Standing Counsel, merely provides that the petitioner shall return in good condition all the property of the State Government remaining with him and on the Regional Food Controller presenting a `no demand certificate' the State Government shall refund the security deposit to the miller after deducting all the amounts recoverable from the miller. It does not in our opinion entitle the Government to make it demand for payment straightway from the petitioner on the Government's determining unilaterally an amount which the Government may choose to consider as representing the loss for damage in respect of any of its property. The clause is confined only to the Government's right to adjust any amount which may be legally recovered and presently due from the miller against its security deposit. 9. The claim of the Government is, in our opinion, pure and simple one for compensation in respect of the damage to sunny bags which it considers has resulted from some alleged acts or omission of the petitioner. It is clearly in the nature of a claim for unliquidated damages. There is, in our opinion, in these circumstances no right in the Government either under the agreement or under the Levy Order straightway to proceed to recover such unliquidated damages from- the petitioner without the same having been previously determined through mutual agreement, arbitration or a civil suit. 10. The view that we are taking is fully fortified by a pronouncement of the Supreme Court in the case of Union of India v. Raman Iron Foundry, AIR 1974 SC 1265 . 10. The view that we are taking is fully fortified by a pronouncement of the Supreme Court in the case of Union of India v. Raman Iron Foundry, AIR 1974 SC 1265 . The true legal import and nature of a claim for un-liquidated damages was considered at some length by their Lordships in this case. His Lordship Bhagwati J. speaking for the court observed thus (at p. 1273) : "Now the law is well settled that a claim for un-liquidated damages does not give rise to a debt until the liability is adjudicated and damages assessed by a decree or order of a Court or other adjudicatory authority. When there is a breach of contract, the party who commits the breach does not eo instanti incur any pecuniary obligation, nor does the party complaining of the breach become entitled to a debt due from the other party. The only right which the party aggrieved by the breach of the contract has in the right to sue for damages." 11. After examining several decisions both of the English Courts and of various High Courts in India, his Lordship summed up the law thus : "A claim for damages for breach of contract is, therefore, not a claim for a sum presently due and payable......" 12. Further, from the affidavits filed by the parties, it is clear that there was a dispute between the parties as regards who was responsible for the gunny bags having become unserviceable. The claim of the petitioner is that it was ready and willing of all material times to return the gunny bags to the Government but the Government itself failed to take back the same even after orders to that effect had been passed by the Commissioner, Food and Civil Supplies. The petitioners' stand is that if the gunny bags have become unserviceable the same was not on account of any act or omission of the petitioners but entirely on account of, the normal wear and tear to which the gunny bags were exposed because of the failure of the Government to take back the same within a reasonable time. On the contrary, the assertion of the respondents in the counter-affidavit is that the gunny bags were damaged on account of the failure of the petitioners' to take care of the same. On the contrary, the assertion of the respondents in the counter-affidavit is that the gunny bags were damaged on account of the failure of the petitioners' to take care of the same. Whether the petitioners are right or the respondents, the fact remains that there case clearly a dispute between the parties regards the claim of the Government to recover any amount from the petitioners on account of the gunny bags having become unserviceable. Now under clause (11) of the agreement itself, there is a provision for arbitration. It provides that every dispute, difference or question touching or arising out of this agreement or the subject matter thereof shall be referred to the sole arbitration of a person nominated by the Secretary to the Uttar Pradesh Government. Food and Civil Supplies Department whose decision thereon shall be final and binding on the parties. Admittedly, the dispute was not referred for arbitration. Instead the Government chose to determine the quantum of damages itself and thereafter demand the same on pain of the amount being adjusted against the price payable to the petitioners on account of levy rice. This was clearly arbitrary and without any sanction of law. 13. If the Government has any right to recover from the petitioners, the value or price of the gunny bags which it supplied to the petitioners and which in the opinion of the Government has become worn out and unserviceable on account of any wrongful act or omission on the part of the petitioners, the remedy of the Government lies in referring the dispute for arbitration or to file a civil suit. But in our considered view the Government could not legally claim the amount straightway and threaten to recover the same by adjusting it against the lawful dues of the millers under the Levy Order. The first contention raised on behalf of the petitioners is, therefore, accepted. 14. The first contention having been accepted the impugned order is liable to be quashed on that ground alone. However, the second submission also appears to be not without any merit, and is indeed supported by a decision of this court in the case of R.K. Industries Kashipur v. State of U.P. reported in 1979 All LJ 574. 14. The first contention having been accepted the impugned order is liable to be quashed on that ground alone. However, the second submission also appears to be not without any merit, and is indeed supported by a decision of this court in the case of R.K. Industries Kashipur v. State of U.P. reported in 1979 All LJ 574. In this case the State Government had claimed to deduct certain amount from the price payable to the rice miller under the U.P. Rice and Paddy (Levy) Order on the ground that at the time of the despatch of rice subsequently from the godowns of the millers the weight of the rice and percentage of moisture in it were less than the actual weight and actual percentage of moisture. The Division Bench repelled this claim of the Government and held that even if the Government had some cause for making a demand for the loss the Government had no authority or right to make any deductions from the statutory price of rice which the Government was obliged to pay under the Levy order to the miller. 15. The same view has been reiterated by this court in a very recent case reported in AIR 1983 All 234 in the case of Mirza Javed Murtza v. U.P. Financial Corporation in which a Division Bench of this court relying upon various decisions of the Supreme Court and other courts held that no pecuniary liability arises in respect of a claim for damages till the same has been determined by a court. 16. We are in full agreement with the statement of law contained in the aforesaid decisions of this court. That being so, it must follow that the demand raised by the Government under the impugned order is without any sanction of law. The threat contained in the impugned order that in the event of the failure of the petitioners to deposit the amount demanded thereunder the same shall be deducted from the price payable to the petitioner under the Levy Order is also. for the same reason, entirely unjustified and unsustainable in law. 17. In the result the petition succeeds and is allowed. The impugned order dated 7-3-1983 (Annexure-6 to the writ petition) is quashed . The petitioners are entitled to their costs the respondents.