Karnataka HC: Two Judge Bench allows Writ to quash the judgment passed by Single Judge Bench

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The writ petition filed by the appellant against the orders and demand notice issued by the Cane Commissioner under the Sugar Cane (Control) Order, 1966, has been dismissed by the single judge. Feeling unsatisfied by the order passed by the learned single Judge in W.P.No.84435/2013 the appellant M/S. The India Sugars & Refineries Ltd., filed intra court Appeal under Section 4 of the Karnataka High Court Act, 1961, praying to set aside the order by allowing this appeal and to allow the writ petition as prayed.

“Sec 4 of Karnataka High Court Act, 1961: Appeals from decisions of a single Judge of the High Court.- An appeal from a judgment, decree, order or sentence passed by a single Judge in the exercise of the original jurisdiction of the High Court under this Act or under any law for the time being in force, shall lie to and be heard by a Bench consisting of two other Judges of the High Court.”

Brief facts of the case

M/S. The India Sugars & Refineries Ltd., / appellant is a company registered under the provisions of the Companies Act, 1956. The appellant had its factory at Chitawadgi, which was stared in the year 1933. The sale of sugar and sugarcane are regulated according to the Sugarcane (Control) Order, 1966, The Central Government every year determines the minimum sugarcane price which is payable to the farmers. No sugarcane grower shall sell sugarcane at less than FRP (Fair remunerative price) which is determined by the sugarcane price determination order.

M/S. The India Sugars & Refineries Ltd., entered into an agreement with The Tungabhadra sugarcane and banana growers Association/respondent on 03.01.2007, to pay Rs.1140/- per metric ton for sugar season 2006-07 and, at the relevant time, the statutory minimum price was Rs.928.50 per metric ton.

The Tungabhadra sugarcane and banana growers Association filed writ petition namely W.P. No.72498-502 of 2012 seeking a direction for making payment of arrears in respect of 2006-07 as per the agreement dated 3rd January 2007. The aforesaid writ petition and connected matters were disposed of with a direction to the Cane Commissioner to consider the representation. Thereafter, the Cane Commissioner conducted an enquiry in which the appellant filed an objection. The Cane Commissioner by an order dated 26.10.2013 passed an order by which, inter alia, it was held that he has the jurisdiction under Clause 3(8) of 1966 Order to adjudicate the dispute. It was further held that the appellant is liable on the basis of the statutory minimum price fixed in the year 2002- 03 and 2003-04 and in view of the agreement with the Association for the year 2006-07. Thereafter, a demand notice dated 30.10.2013 was issued to the appellant. The appellant filed a writ petition namely W.P. No.84436/2013 and 84472-84473 of 2013 in which a challenge was made to the aforesaid orders. The learned single Judge by order dated 25.04.2014 dismissed the writ petitions. Thereafter, the appellant filed a review petition which was dismissed by an order dated 07.08.2014.

The order dated 25.04.2014, as well as the order dated 07.08.2014 passed by the learned single judge, were the subject matter of appeal in W.A. Nos.100807-100809 of 2014. In the aforesaid appeals, an interim order was passed by which the appellant was directed to deposit 50% of the amount ordered, to be deposited with the Cane Commissioner within a period of four weeks. Thereafter, the appellant, on 16.12.2014, filed an application for modification of the interim order. The aforesaid application was considered and the appellant was directed to deposit 25% by the end of December 2014 and the remaining 25% amount by 15th January 2015.

Being aggrieved by the aforesaid order, the appellant challenged the aforesaid order in S.L.P. No.5168-5170 of 2015 which was dismissed by the Supreme Court by order dated 20th February 2015. A Division Bench of High court of Karnataka by judgment dated 30.09.2015, quashed the order passed by the learned single Judge and remitted the matter to the Cane Commissioner for decision afresh in accordance with the law. The Supreme Court in S.L.P. Nos.11248-11250/2016 directed the appellant to comply with the interim order dated 16.12.2014 passed by this Court in these writ appeals. The Supreme Court by an order dated 30.09.2016 disposed of both the special leave petitions filed by the respondents against the judgment dated 30.09.2015 and remitted the matter before the High court of Karnataka without expressing any opinion on the merits of the case and directed the deposit to be transferred to the same Court.

Arguments

“Learned counsel for the appellant has made the submissions as follows:

  1. The Learned Single Judge ought to have appreciated that the impugned order passed by the Cane Commissioner is per se without jurisdiction as lis, under Clause 3(8), can only be adjudicated between the sugarcane growers and the producer, before the Cane Commissioner and a lis between the Association and the producer cannot be subject matter of adjudication by the Cane Commissioner under clause 3(8) of the 1966 Order.
  2. The learned Single Judge ought to have appreciated that the Association had no locus to approach the Cane Commissioner.
  3. That the order has been passed by the Cane Commissioner in violation of the directions of this Court passed in W.P. No.7169 of 2008 dated 29.07.2013 which pertained to sugar season 2003- 04 and W.P. Nos.76567-568/2013 dated 29.07.2013 which pertained to sugar season 2002-03, inasmuch as the Court had directed the matter to be adjudicated by the Cane Commissioner if the dispute raised is within the ambit of Clause 3(8) of 1966 Order. However, the Cane Commissioner without recording any finding in this regard proceeded to deal with the matter on merits. The parties, by virtue of the orders passed by the aforesaid writ petitions, were allowed to lead evidence and they adduced evidence before the Cane Commissioner. However, the Cane Commissioner did not consider the evidence and decided the matter in a cryptic and cavalier manner and the submissions made on behalf of the appellant were not taken into consideration.
  4. The learned Single Judge ought to have appreciated that the order passed by the Cane Commissioner is in violation of the directions issued by this Court inasmuch as it had directed that the Cane Commissioner shall pass a reasoned order by referring the evidence placed before it by both the parties. However, the Cane Commissioner has neither assigned any reasons nor has referred to the evidence which was placed before it.
  5. The learned Single Judge ought to have appreciated that the order passed by the Cane Commissioner is in violation of the principles of natural justice and is arbitrary as the Cane Commissioner has failed to render any finding on crucial aspects of the matter in its replies dated 11.09.2013, 25.09.2013, 05.10.2013, 10.10.2013 and 15.05.2013.
  6. The Cane Commissioner has failed to adjudicate the plea taken by the appellant of the alleged arrears for the year 2002-03 and 2003-04 have been discharged in the years 2004-05 and 2005-06. It has also been urged that all the facts and data was provided by way of individual agreement executed with the farmers for the year 2004-05 and 2005-06 for payment of statutory minimum price and settlement of payments made, the actual payment made and the payment made in excess of the agreed amounts. However, the aforesaid issue has not been addressed by the Cane Commissioner at all and no finding has been recorded.
  7. The Cane Commissioner ought to have appreciated that sugarcane growers had executed individual agreement with the producer namely the appellant for the season 2004-05 and 2005-06 fixing the minimum price and they had, in fact, received an amount in excess of the minimum price in both years i.e. at the rate of Rs.950/- and Rs.1065/- per metric ton. However, the aforesaid aspect of the matter has neither been considered by the Cane Commissioner nor any finding has been recorded on the aforesaid issued.
  8. The Cane Commissioner ought to have appreciated that since the sugarcane growers had obtained a higher price for the year 2002-03 and 2003-04 for sugar season 2010-11 and 2012-13 in pursuance of the agreement dated 12.12.2010 and 21.11.2012 and therefore, had waived their rights under the statute. However, the aforesaid aspect of the matter was not adverted to by the Cane Commissioner.
  9. The Cane Commissioner ought to have appreciated that the cane growers cannot be allowed to approbate and reprobate and were estopped.
  10. The Cane Commissioner ought to have appreciated that none of the farmers had individually filed the claim with the authority and the said claims were being processed by the Association which was not bona fide and the Association was set up only in 2009 with a view to creating a stalemate between the factory and the farmers.
  11. It is also pointed out that the farmers, in fact, had been paid an amount of Rs.28 crores over and above the statutory minimum price and the additional price payable under Clause 5A during the period from 2000-01 to 2011-12. It is also pointed out that the alleged arrears for the year 2006-07 cannot be adjudicated on the basis of an agreement dated 03.01.2007 alone when the aforesaid agreement was novated by a subsequent agreement between the parties on 12.12.2015 and 21.11.2012. The contention that the amounts paid in excess of statutory minimum price are advances under Clause 5A under the agreements with the Association with no liability being found under Clause 5A and the same are adjustable against any payment dues as held by the Supreme Court in State of T.N. Vs. Kothari Sugars & Chemicals Ltd., (1996)7 SCC 752 has not been considered.
  12. The Cane Commissioner ought to have appreciated that all the farmers who had supplied cane in the year 2002-03 and 2003-04 did not make any claim for the alleged short payment of the price for the aforesaid season. It ought to have appreciated that the contention that the alleged arrears for 2006-07 were in fact, the matter which was resolved between the parties namely the appellant and the association by an agreement dated 12.12.2010 and the aforesaid agreement was acted upon by the parties by seeking to dispose of the pending litigation before the High Court. However, the aforesaid aspect of the matter also was not adverted to by the Cane Commissioner.
  13. Lastly, learned counsel for the appellant fairly submitted that he has no objection to adjudication of the claims made by the individual farmers and the appellant shall not take an objection before the Cane Commissioner that the same is barred by limitation.”

Learned Additional Advocate General, counsel for respondents submitted as follows:

That the appellant was afforded an opportunity of hearing and his claim was adjudicated. Thereafter, an order was passed on 26.10.2013. In pursuance of the aforesaid order, demand notice was issued on 30.10.2013. It is further submitted that the Cane Commissioner has the jurisdiction under Clause 3(8) of the 1966 Order. Learned Additional Advocate General has also taken us through the provisions contained in Clause 3(9) as well as Clause 3(12) of the 1966 Order and has supported the order passed by the learned single Judge.

That the appellant is under a legal obligation to pay the cane growers the statutory minimum price or the agreed price whichever is higher and failure to make such payment within fourteen days is a cognizable offence punishable under the provisions of the Essential Commodities Act. It is further submitted that the Cane Commissioner has jurisdiction to decide the dispute as to the same falls within the purview of Clause 3A of the 1966 Order. It is also submitted that the claim of the sugarcane growers cannot be rejected on the ground that it is being prosecuted by respondent NO.2. It is also submitted that the appellant has been declared to be a sick company and is attracted under Section 22 of the Sick Industrial Companies Act, 1985 and is, therefore, under an obligation to make payment to cane growers. It is also urged that the appellant is under a statutory obligation to make payment of either the statutory minimum price or the agreed price under Clause 3(2) of the 1966 Order and there is no legal impediment for the parties to agree to the price higher than the statutory minimum price. In support of the aforesaid submissions, the learned counsel for respondent No.2 has placed reliance on the following decisions: Kedar Nath Motani and Ors. Vs. Prahlad Rai and Ors., AIR 1960 SC 213; A.K.Jain & Ors. Vs. Union of India & Ors., AIR 1970 SC 267; State of Madhya Pradesh Vs. Jaora Sugar Mills Ltd., 1997 AIR SCW 189; U.P. co-operative Cane Unions Federations Vs. West U.P.Sugar Mills Association and Ors. etc. etc., AIR 2004 SC 3697; Arunima Baruah Vs. Union of India (UOI) and Ors, (2007)6 SCC 120; Prestige Lights Ltd. Vs. State Bank of India, (2007)8 SCC 449; Raheja Universal Limited Vs. NRC Limited and Ors, AIR 2012 SC 1440; Anand Agro Chem India Ltd. Vs. Suresh Chandra & Ors. (SC) (Civil Appeal No.897 of 2014, decided on January 24, 2014); KSL & Industries Ltd. Vs. Arihant Threads Ltd (2015)1 SCC 166; M/s. The India Sugars & Refineries Ltd. Vs. Commissioner for Cane Development & Director of Sugar, Karnataka & Ors. (SC) (SLP (C) Nos.5168-5170/2015, decided on 20.02.2015); Sri Nethaji Educational Society and Ors. vs. The State of Karnataka and Ors. (W.P. Nos.234 to 241 of 1992, decided on 02.07.1996); Indian Plywood Manufacturing Company Limited, Dharwad Vs. The Commissioner of Labour in Karnataka, Bangalore and Others 1998(6) Kar.L.J.280; Bangalore Grain Merchants Association Vs. The District Registrar for societies and another, ILR 2001 KAR 766; Manohar and Others Vs. The Commissioner for Cane Development & the Director of Sugar and others (W.P. Nos.39163-68 of 2001, decided on 22nd March 2002); Indian Bank Vs. State of Karnataka and others (W.P. No.46964/2001 and connected matters, decided on 2nd December 2002); Maqsood and Others Vs. The Commissioner for Cane Development & the Director of Sugar and others (W.P. Nos.45849-851/2002 and connected matters, decided on 6th October 2003); Bowring Institute Vs. The District Registrar of Societies (W.P. No.15128 of 2008, decided on 05.12.2008); M/s. India Sugars & Refineries Ltd. Vs. the Secretary to Government, Commerce and Industries Department, Government of Karnataka and others (W.A. No.5139 of 2008, decided on 6th January 2009); M/s India Sugars and Refineries Ltd. Vs. the Secretary to Government, Commerce and Industries Department, Government of Karnataka (W.P. No.31532/2008, decided on 9th September 2009); The Tungabhadra Sugarcane & Banana Growers Association and Others Vs. The Government of Karnataka and Others (W.P. Nos.60262-60264/2011 and connected matters, decided on 15th July 2011); M/s India Sugars and Refineries Ltd. Vs. Union of India and others (W.A. No.31161 of 2013, decided on 11th December 2013); Universal Paper Mills Limited and Ors. Vs. Regional Provident Fund Commissioner and Ors. (Calcutta High Court) (2001) 3 CALLT 186; Bengal Immunity Limited Vs. Mukul Kumar Kar and Ors. (Calcutta High Court) (2004)1 CALLT 130; and Modi Industries Limited Vs. State of Uttar Pradesh and Others, 1993 LLR 689 (All) RELEVANT STATUTORY PROVISIONS”

Court’s Analysis

“The impugned order dated 25.04.2014 passed by the learned single Judge in W.P. No.84435/2013, the order dated 26.10.2013, as well as the demand notice dated 30.10.2013 passed by the Cane Commissioner, is hereby quashed and set aside and the matter is remitted with the following directions:

  1. The amount of Rs.9,86,25,000 along with interest accrued thereon, deposited by the appellant shall stand transferred to the Cane Commissioner forthwith. On receipt of the aforesaid amount, the Cane Commissioner shall keep the same by way of FDR with Nationalized Bank. The aforesaid amount shall be paid to the farmers who have supplied sugarcane to the appellant for the year 2013-14, 2014-2015 and 2015-2016after proper verification and scrutiny, by the Cane Commissioner.
  2. The Cane Commissioner shall adjudicate the claims of the individual farmers for the shortfall in the payment of prices of sugarcane for the sugar season 2002-03, 2003-04 as well as 2006-07 expeditiously.
  3. The Cane Commissioner shall also adjudicate the issue whether it has jurisdiction to entertain the claim on behalf of the Association under the provisions of the Sugarcane (Control) Order, 1966. While deciding the lis between the parties, the Cane Commissioner shall bear in mind the orders dated 29.07.2013 passed in W.P. No.7169 of 2008 and W.P. Nos.76567-568/2013.
  4. The Cane Commissioner shall advert to the evidence adduced by the parties and shall pass a speaking order after analyzing the evidence adduced by the parties.
  5. The Cane Commissioner shall determine the stand taken by the appellant in the replies dated 11.09.2013, 25.09.2013, 05.10.2013, 10.10.2013 and 15.05.2013 and shall adjudicate the claim of the appellant with regard to payment of arrears for the sugar season 2002-03 and 2003-04 and subsequently in the years 2004-05 and 2005-06. The Cane Commissioner shall also ascertain the fact whether the farmers, who have supplied sugarcane to the appellant, have received the amount in excess of the minimum statutory price for the years 2004-05 and 2005-06.
  6. Since the company has already been wound up and the process of adjudication of the claims of the farmers may take some time, we deem it appropriate to protect the interests of the farmers, who have supplied sugarcane to the appellant, in the event of their success before the Cane Commissioner. It is pertinent to mention here that by an order dated 26.10.2013, the Cane Commissioner had directed the appellant to pay a sum of rupees Nine Crores along with interest at the rate of 15% per annum. Therefore, in the fact situation of the case and with a view, to secure the interest of the farmers, in the event of their success before the Cane Commissioner, we deem it appropriate to direct the appellant herein to deposit a sum of rupees Three Crores before the Cane Commissioner within a period of two months from the date of receipt of a certified copy of the order passed today. The aforesaid amount shall be kept by the Cane Commissioner by way of FDR with a Nationalized Bank and shall be subject to the adjudication of the claims of the farmers who have supplied sugarcane to the appellant. Needless to state that in case, the farmers/Association are found entitled to any payment, the aforesaid payment shall be made to them by the Cane Commissioner expeditiously along with statutory interest as admissible under the 1966 Order.
  7. The Cane Commissioner shall also ensure that in the event of the success of the claim of the farmers, who have supplied the sugarcane to the appellant or the Association, the amount due to them is paid in terms of Clause 3(8) of the Sugar Cane (Control) Order, 1966. Needless to state that, if any amount is left after adjudication of the claims of the farmers, who have supplied sugarcane to the appellant, the same shall be refunded to the appellant by the Cane Commissioner.”

With the aforesaid directions, the writ appeals are disposed of.

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