Research › Search › Judgment

Andhra High Court · body

2020 DIGILAW 505 (AP)

Vijaya Lakshmi Traders v. State Of Andhra Pradesh

2020-08-06

U.DURGA PRASAD RAO

body2020
JUDGMENT U. Durga Prasad Rao, J. - The petitioner implores for writ of Mandamus declaring the action of 4th respondent in issuing letter in Ref.P/58/2019 dated 06.02.2020 instructing the 8th respondent/bank to encash the bank guarantees No.38921049336 for Rs.50,00,000/- and No.38921045988 for Rs.40,00,000/- (Rs.90,00,000/- in total) furnished by the petitioner and arrange Demand Draft (DD) for the said amount in the name of 6th respondent towards reimbursement of the cost of Custom Milled Rice (for short "CMR") paddy as illegal, arbitrary and against the conditions envisaged in the agreement dated 14.11.2019 entered into by the petitioner and the 2nd respondent and for a consequential order restraining the respondents from encashing the two bank guarantees and further directing them to continue the agreement till its finality. 2. The petitioner's case is that he is the sole proprietor of Vijaya Lakshmi Traders, Chelluru, Rayavaram Mandal, East Godavari District and deals with purchase/sale of notified agricultural produce livestock etc. The 2nd respondent entered into an agreement with the petitioner on 14.11.2019 for custom milling of paddy and transportation of custom milled rice (CMR) to FCI/APSCSCL godowns for the year 2019-2020 for the District of East Godavari. As per the terms of the agreement the petitioner has given bank guarantees No.38921049336 dated 14.11.2019 for Rs.50,00,000/- and No.38921045988 dated 14.11.2019 for Rs.40,00,000/- through the 8th respondent bank in favour of 6th respondent. The petitioner in terms of agreement has been procuring paddy and milling in his rice mill for supplying to FCI/APSCSCL. Recently, the petitioner supplied CMR to the 2nd respondent vide acknowledgments dated 21.01.2020 and 25.01.2020. The said delivery of rice was delayed at godown due to shortage of labour for unloading of the CMR. (a) While so, on 21.01.2020, the 7th respondent along with his staff visited the petitioner's rice mill and seized the stock available in the petitioner's rice mill under the cover of mediators report dated 21.01.2020. The allegations against the petitioner as per the mediator's report are that the 7th respondent got weighed the stock available in the petitioner's rice mill and came to conclusion that there was a deficit of 77.076 metric tons paddy worth of Rs.13,98,930/-. It was mentioned in the mediator's report as if the petitioner allegedly confessed before the officials that he imported the low cost rice through Chattisgarh from Sivam Traders, Machavaram and the same was being packed as CMR rice. It was mentioned in the mediator's report as if the petitioner allegedly confessed before the officials that he imported the low cost rice through Chattisgarh from Sivam Traders, Machavaram and the same was being packed as CMR rice. The 7th respondent and his officials noted the details of the available rice as follows. (1) CMR Paddy available in the Godowns 593.985 Metric tons (2) Rice packed in CMR bags available in Mill 63.12 Metric tons (3) Rice intend to pack as CMR Rice (213 x 50 kg) = 106.05 Quintals (4) White Mica Bags (empty) 340 After weighing the same, they came to conclusion that there was a deficit of 77.076 metric tons of paddy. In fact, the petitioner never made any confession as noted in the mediator's report. (b) Basing on the report submitted by 7th respondent, the 4th respondent initiated proceedings under Section 6-A of EC Act against the petitioner and also issued show cause notice vide proceedings No.V3/CS/RCPM/49/2020 dated 06.01.2020. Further, vide proceedings dated 07.02.2020, the 4th respondent inter alia ordered that 106.50 quintals of rice received from Chattisgarh State and rice stock of 250 quintals available in the lorry bearing No. AP 35 X 7588 shall be allotted to the 6th respondent, who in turn shall conduct a public auction and recover the shortage of CMR from the sale proceeds. (c) The petitioner is ready to face the case instituted under Section 6-A of Essential Commodities Act, 1955 (for short, "EC Act") as he never intended to project the rice imported by him from Chattisgarh as CMR as alleged in the mediator's report. He has substantial evidence to prove that there was no deficit of CMR stock for the stock was already sent for delivery to 2nd respondent and it was delayed and ultimately acknowledgments were issued on 21.01.2020 and 25.01.2020. If those acknowledgments are taken into consideration, there will not be any deficit of stock as alleged in the mediator's report. The petitioner is thus contesting the Sec.6-A proceedings and he has every chance of succeeding in the said matter. (d) While so, pending Sec.6-A proceedings, the 4th respondent issued the impugned letter in Ref.No.P/58/2019 dated 06.02.2020 to the 8th respondent instructing him to encash the bank guarantees and arrange DD in the name of 6th respondent towards reimbursement of the cost of the deficit CMR paddy. (d) While so, pending Sec.6-A proceedings, the 4th respondent issued the impugned letter in Ref.No.P/58/2019 dated 06.02.2020 to the 8th respondent instructing him to encash the bank guarantees and arrange DD in the name of 6th respondent towards reimbursement of the cost of the deficit CMR paddy. Before issuing such letter, no notice was issued to the petitioner calling for his explanation as to why the bank guarantees should not be invoked. The said letter is unsustainable under law as the main proceedings under Sec.6-A are still pending and even if Sec.6-A proceedings ultimately ended against the petitioner, the value of 106 quintals of rice seized from the petitioner will be sufficient to make up the deficit CMR found during the inspection. Hence, the writ petition challenging the invoking of bank guarantees pending Sec.6-A proceedings. 3. On 11.02.2020, when the matter was taken up for hearing, learned Government Pleader for Civil Supplies took notice on behalf of respondent Nos.1, 3, 4, 5 and 7, Sri Hema Chandra, learned Standing Counsel took notice on behalf of respondent Nos.2 and 6 and sought time for getting instructions. It is to be noted that while posting the matter to 17.02.2020, this court passed the following order. "Post on 17.02.2020 at the end of the Motion List. Till then, the respondent No.6 shall not invoke the bank guarantee furnished by the petitioner vide Bank Guarantee No.38921049336 for Rs.50,00,000/- and Bank Guarantee No.38921045988 for Rs.40,00,000/- (Rs.90,00,000/- in total) issued by respondent No.8, if already not invoked." 4. The said interim order was passed in I.A.No.1 of 2020 filed by the petitioner. While so, on the next day i.e., on 12.02.2020, I.A.No.2 of 2020 came to be filed by the petitioner by moving an urgent motion. The petitioner's grievance in the said petition is that immediately after passing of the interim order on 11.02.2020, the petitioner's counsel informed to 6th and 8th respondents about the said order and also to the Standing Counsel of 2nd and 6th respondents over phone. Besides, he also sent a letter through what's app around 5.30 or 5.45 P.M. Added to it, immediately after receipt of the order copy, the same was sent to the Standing Counsel for 2nd and 6th respondents through what's app and also to 8th respondent through g-mail. Besides, he also sent a letter through what's app around 5.30 or 5.45 P.M. Added to it, immediately after receipt of the order copy, the same was sent to the Standing Counsel for 2nd and 6th respondents through what's app and also to 8th respondent through g-mail. Thus, in spite of having knowledge about the passing of the interim order on 11.02.2020, the 6th respondent managed 8th respondent to invoke the bank guarantees and he obtained DDs/Banker's cheque in his favour between 7/7.30 P.M on 11.02.2020 vide DD No.478442309 for Rs.50,00,000/- and DD No.478442310 for Rs.40,00,000/-. As soon as the aforesaid DDs were issued by 8th respondent in favour of 6th respondent, the petitioner received a message to his mobile phone about debiting of Rs.40,00,000/- from his account and also an amount of Rs.6236/- towards TDS. The said message was received at 6.12 P.M. The petitioner thus claims that in spite of petitioner's counsel intimating about the interim order to 6th and 8th respondents, however, they encashed the bank guarantees and obtained two DDs. He thus, prayed in I.A.No.02 of 2020 to pass an interim order directing 6th respondent not to encash the two DDs payable at SBI, Kakinada Main Branch, Kakinada pending the writ petition. This court directed the 6th and 8th respondents to file their sworn affidavits with regard to the allegations levelled in I.A.No.02 of 2020 and they obliged. 5. The 6th respondent while admitting that the petitioner has furnished two bank guarantees for Rs.50,00,000/- and Rs.40,00,000/- respectively through the 8th respondent bank, submitted that the 4th respondent addressed the impugned letter on 06.02.2020 itself to the bank to encash the bank guarantees and issue DDs infavour of 6th respondent and accordingly the Branch Manager of 8th respondent issued two DDs infavour of 6th respondent on 11.02.2020. As 08.02.2020 and 09.02.2020 happened to be Public Holidays, the encashment process was done on 10.02.2020. Due to some technical problem, the two DDs were issued to 6th respondent at 7.20 PM on 11.02.2020. After receiving the DDs from 8th respondent, they were handed over to District Supply Officer, Kakinada and they have been deposited in Current Account No.10598897059 of the 6th respondent on 12.02.2020 at 11.00 AM i.e., prior to the receipt of the order dated 12.02.2020 in I.A.No.02 of 2020. After receiving the DDs from 8th respondent, they were handed over to District Supply Officer, Kakinada and they have been deposited in Current Account No.10598897059 of the 6th respondent on 12.02.2020 at 11.00 AM i.e., prior to the receipt of the order dated 12.02.2020 in I.A.No.02 of 2020. The 6th respondent further stated in his affidavit that the main intention of invoking bank guarantees and depositing the DDs in the bank was only to safeguard the government money but not to forfeit the total amount of bank guarantees to the government account. Further action will be taken pursuant to the orders in Sec.6-A proceedings. The 8th respondent also filed his affidavit in similar lines. 6. The petitioner filed rejoinder refuting the contents in the two affidavits. It is pleaded that the 6th and 8th respondent have deliberately flouted the interim order dated 11.02.2020. 7. Heard learned counsel for petitioner, Sri K. Jyothi Prasad and learned Government Pleader for Civil Supplies representing respondent Nos.1, 3, 4, 5 and 7 and Sri Hema Chandra, learned Standing Counsel representing respondent Nos.2 and 6. 8. The main plank of argument of learned counsel for petitioner is that Sec.6-A case itself is not legally maintainable for, there was no deficit of CMR as alleged by the inspecting officials and whatever deficit they found, was due to the fact that he sent CMR to 2nd respondent on 21.01.2020 and 25.01.2020. Since there was delay in unloading the CMR at the godown of the 2nd respondent, the petitioner could not get the acknowledgments in time. Therefore, the petitioner made his appearance before the 4th respondent and he has been contesting the Sec.6-A case. Learned counsel further argued that while Sec.6-A case is still pending, the 4th respondent has unjustly addressed the impugned letter dated 06.02.2020 to 8th respondent to encash the bank guarantee and issue DDs for Rs.90,00,000/- to the 6th respondent. He would contend that the invocation of the bank guarantees will arise only when the guilt of the petitioner is established in Sec.6-A proceedings but not before. Being aggrieved by the said letter dated 06.02.2020, the petitioner filed the instant writ petition and this court passed interim order on 11.02.2020 directing the 8th respondent not to invoke the bank guarantee if already not invoked. Being aggrieved by the said letter dated 06.02.2020, the petitioner filed the instant writ petition and this court passed interim order on 11.02.2020 directing the 8th respondent not to invoke the bank guarantee if already not invoked. Learned counsel vehemently argued that in spite of his communicating this order to 6th and 8th respondents and all other concerned, still they clandestinely encashed the bank guarantees and obtained two DDs at about 7.30 PM on 11.02.2020. He thus argued to direct the respondents to redeposit the amount of Rs.90,00,000/- in the petitioner's account. 9. In oppugnition, learned Government Pleader as well as learned Standing Counsel argued that the impugned letter was addressed by the 4th respondent way back on 06.02.2020 itself and as the bank was closed due to Public Holidays on 08.02.2020 and 09.02.2020, the encashment procedure was completed on 10.02.2020 and DDs were prepared on 11.02.2020. Due to some technical issue, the DDs were handed over to 6th respondent at about 7.20 PM on 11.02.2020. The information relating to interim order dated 11.02.2020 was received by them only thereafter and hence there were no malafides on their part. It is further argued that the intention in invoking the bank guarantees and depositing the amount in the account of 6th respondent was only to safeguard the interest of the government and the said amount will be appropriated as per the order in the Sec.6-A proceedings and the directions contained therein. 10. The point for consideration is whether there are merits in the writ petition to allow? 11. POINT: It is to be noted that as against the initiation of Sec.6-A proceedings, the petitioner earlier filed W.P.No.4170 of 2020 and this court disposed of the said writ petition on 26.02.2020 with the following direction. " 7. Therefore, considering reasonability in the submission of learned counsel for the petitioner, this writ petition is disposed of giving liberty to the petitioner to approach the 4th respondent and submit his explanation to substantiate his stand, in which case, the 4th respondent shall consider his explanation and after affording a personal hearing to the petitioner, pass an appropriate order in accordance with governing law and Rules expeditiously. Till such exercise is completed, the impugned order in V3/CS/RCPM/49/2020, dated 07.02.2020 passed by the 4th respondent in so far as directing that the rice stock of 106.50 quintals received from Chattisgarh State shall be allotted to 6th respondent and permitting him to conduct public auction and recover the shortage value of CMR from the sale proceeds is stayed. No costs." 12. Be that it may, the instant writ petition is filed challenging the letter of 4th respondent to 8th respondent instructing him to encash the bank guarantees and issue DDs for Rs.90,00,000/- in favour of 6th respondent towards the deficit CMR paddy. Thus on a conspectus of the facts, it is clear that the veracity of the contentions in both the writ petitions depend upon the outcome of Sec.6-A case. Briefly saying, whether the petitioner has mischievously sold away a part of CMR paddy and tried to substitute the deficit CMR with the low quality of rice which he obtained from Chattisgarh or not is to be decided by the 4th respondent after scrutinizing the relevant evidence. Similarly, the petitioner's contention that he supplied CMR to 2nd respondent on 21.01.2020 and 25.01.2020 and that was why apparently deficit was occurred has to be established by the petitioner before the 4th respondent. Therefore, running the risk of repetition, it must be said that everything depends upon the outcome of Sec.6-A case. It is informed by counsel for petitioner that Sec.6-A proceedings are still pending before the 4th respondent and the case is not finalized due to the COVID Pandemic. In that view of the matter, in the considered view of this court, the interest of both parties can be safeguarded if suitable directions are given to the 4th respondent. 13. Accordingly, this writ petition is disposed of directing the 4th respondent to consider the explanation of the petitioner and after affording a personal hearing to him, pass an appropriate order in Sec.6-A case in accordance with the governing law and rules expeditiously but not later than three (03) months from the date of receipt of a copy of this order. In case, the petitioner succeeds in the Sec.6-A case, the 4th respondent shall direct 6th respondent to refund an amount of Rs.90,00,000/- to the petitioner with appropriate rate of interest from the date of encashment of the bank guarantees till the date of refund. In case, the petitioner succeeds in the Sec.6-A case, the 4th respondent shall direct 6th respondent to refund an amount of Rs.90,00,000/- to the petitioner with appropriate rate of interest from the date of encashment of the bank guarantees till the date of refund. Till the orders are passed by the 4th respondent in Sec.6-A case, the 6th respondent in whose account Rs.90,00,000/- is deposited shall keep the amount intact. No costs. As a sequel, interlocutory applications, if any pending, shall stand closed.