Pawapuri Rice Mills vs Bihar State Food and Civil Supplies Corporation Limited

PAWAPURI RICE MILLS … APPELLANT(S)

Versus

THE BIHAR STATE FOOD AND CIVIL SUPPLIES CORPORATION LTD. & ORS … RESPONDENT(S) WITH

CIVIL APPEAL NO. 1892 OF 2023 WITH CIVIL APPEAL NO. 1902 OF 2023 WITH CIVIL APPEAL NO. 1905 OF 2023 WITH CIVIL APPEAL NO. 1903 OF 2023 WITH CIVIL APPEAL NO. 1904 OF 2023 WITH CIVIL APPEAL NO. 1908 OF 2023 Signature Not Verified WITH Digitally signed by

CIVIL APPEAL NO. 1909 OF 2023 NITIN TALREJA Date: 2024.12.18 12:59:29 IST Reason:

WITH 1 CIVIL APPEAL NO. 1911 OF 2023 WITH CIVIL APPEAL NO. 1910 OF 2023 WITH CIVIL APPEAL NO. 1914 OF 2023 WITH CIVIL APPEAL NO. 1912 OF 2023 WITH CIVIL APPEAL NO. 1913 OF 2023 WITH CIVIL APPEAL NO. 1915 OF 2023 WITH CIVIL APPEAL NO. 1916 OF 2023 WITH CIVIL APPEAL NO. 1917 OF 2023 WITH CIVIL APPEAL NO. 1890 OF 2023 WITH CIVIL APPEAL NO. 1891 OF 2023 WITH CIVIL APPEAL NO. 1895 OF 2023 WITH CIVIL APPEAL NO. 1894 OF 2023 WITH

2 CIVIL APPEAL NO. 1898 OF 2023 WITH CIVIL APPEAL NO. 1896 OF 2023 WITH CIVIL APPEAL NO. 1893 OF 2023 WITH CIVIL APPEAL NO. 1899 OF 2023 WITH CIVIL APPEAL NO. 1897 OF 2023 WITH CIVIL APPEAL NO. 1900 OF 2023 WITH CIVIL APPEAL NO. 1901 OF 2023 WITH CIVIL APPEAL NO. 1906 OF 2023 WITH CIVIL APPEAL NO. 1907 OF 2023

JUDGEMENT

S.V.N. BHATTI, J.

1. Common issues of fact and law arise in the instant batch of

Appeals under the Bihar and Orissa Public Demands Recovery

Act, 1914 (for short, ‘the Act’) and the Bihar and Orissa Public

3 Demands Recovery Rules (for short, ‘the Rules’), hence, these

Appeals are disposed of by this Judgment.

I. BACKGROUND

2. The appellants in Civil Appeal No. 1890 of 2023 and Civil Appeal

No. 1889 of 2023 are rice millers in the State of Bihar. The first

respondent in the Civil Appeals is the State of Bihar, and the

fourth respondent is the Bihar State Food and Civil Supplies

Corporation. For convenience, the appellants are referred to as

‘Rice Millers’ and the contesting respondents as the ‘State’ and

‘Civil Supplies Corporation,’ respectively. The subject matter

of the Appeals relates to the procurement of Custom Milled Rice

(for short, ‘CMR’) for the procurement year 2011-12 in the State

of Bihar. The subject procurement policy departs from the

previous policy of collecting levy rice from the Rice Millers. As is

known from practice and scheme, levy rice is a system requiring

millers to sell a percentage of their rice to the Government at a

particular price. Under the levy rice procurement scheme, the

Rice Millers buy paddy directly from the farmers at the

Minimum Support Price (for short, ‘MSP’) and sell a percentage 4 of rice to the Government at a specified price. The Government

may purchase the rice from the millers or farmers to implement

the Public Distribution System (for short, ‘PDS'). The scheme of

levy rice was replaced with the present procurement policy of

CMR. In this Judgment, we are not examining the reasons or

wisdom for the shift in the State’s policy because the State

knows what a good and correct policy is while administering

and implementing its welfare schemes.

3. In the changed set-up, on 11.11.2011, the Ministry of

Consumer Affairs, Food and Public Distribution, Government of

India, conveyed the fixation of provisional rates of CMR and the

cost of gunny bags of fifty kilograms used in the procurement

scheme. The State, through the Development Commissioner,

issued the memo dated 07.12.2011, setting out the objectives

and major features in the implementation of procurement of

thirty lakh metric tons of paddy from the farmers in the State of

Bihar for the procurement year 2011-12. The Civil Supplies

Corporation has a role to play as the nodal agency of the State

for the procurement of paddy during the year 2011-12. In

5 furtherance of such an arrangement, the Development

Commissioner, Food and Consumer Protection, Government of

Bihar issued the letter dated 07.12.2011 appointing Bihar State

Food Corporation as the nodal agency for procuring paddy and

entrusting the paddy to Rice Millers for CMR. This letter was

sent to all Divisional Commissioners and District Magistrates in

the State. The Rice Millers, as per the scheme, are required to

enter into an agreement with the State and Civil Supplies

Corporation for milling the paddy procured from the farmers. It

is a matter of record that the Rice Millers have entered into an

independent agreement with the Civil Supplies Corporation. The

features of the agreement are that the Rice Millers are required

to deliver 67% of raw rice or 68% of par-boiled rice for hundred

quintals of paddy in advance, and the Civil Supplies

Corporation releases proportionate paddy for CMR by the Rice

Millers. The Rice Millers are under an obligation to supply CMR,

as directed, to the designated depots/warehouses of the Food

Corporation of India (for short, ‘FCI’).

6 3.1. The procurement period is from 15.11.2011 to

30.04.2012. A dispute on the discharge of obligations by the

Rice Millers had arisen with the Civil Supplies Corporation. As

per the contractual obligations, the Rice Millers asserted that

they had milled the rice and were ready to supply CMR to the

FCI. Because of a few issues with the FCI, the CMR agreed to be

delivered by the Rice Millers was neither accepted nor taken

forward. The contesting parties have their own views on the

default of performance of obligations. We need not refer to either

side's case on this behalf to dispose of the appeals. This dispute

over the Rice Millers' non-supply of CMR led to the initiation of

recovery proceedings by the Civil Supplies Corporation under

the Act and the Rules before the Certificate Officer. The District

Collector/District Certificate Officer issued Recovery

Certificates to the Civil Supplies Corporation, and the details

are noted as follows:

Sl No. Civil Appeal No. Petitioner Amount

1. 1889/2023 PAWAPURI RICE Rs.10,15,94,961.94/- MILLS 2. 1892/2023 PAWAN KUMAR Rs.41,99,218/-

7 3. 1902/2023 RAJESH KUMAR Rs.1,63,75,957.87/- MEHTA

4. 1905/2023 AMOD KUMAR Rs.30,02,092.42/- SINGH

5. 1903/2023 MANISH KUMAR Rs.18,53,420.24/-

6. 1904/2023 PRANAV KUMAR Rs.1,86,36,210.21/- SINGH

7. 1908/2023 M/S. UMA RICE Rs.88,44,815/- MILL

8. 1909/2023 M/S. Rs.23,26,795.00/- MUZAFFARPUR MODERN RICE MILL THR. ITS PARTNERS AND ORS.

9. 1911/2023 CHANDRASHEK- Rs.38,44,676.00/-

HAR SAH

10. 1910/2023 RAJ KUMAR RAI Rs.2,91,78,200.00/-

11. 1914/2023 WAKIL PRASAD Rs.45,77,027/-

YADAV

12. 1912/2023 SULEKHA Rs.26,28,780/-

KUMARI

13. 1913/2023 M/S. SHANKAR Rs.53,43,912/-

RICE MILL

14. 1915/2023 ASHOK KUMAR Rs.82,96,336.45/-

15. 1916/2023 ASHOK KUMAR Rs.4,62,78,797/-

16. 1917/2023 M/S NARAYAN Rs.19,99,390/-

RICE MILL

8

17. 1890/2023 SONE VALLEY Rs.4,66,68,330/-

RICE MILL

18. 1891/2023 SACHINDRA Rs.3,56,26,841.01/-

KUMAR RAI

19. 1895/2023 M/S MAA LAXMI Rs.5,21,46,846/-

SILKY RICE MILL

20. 1894/2023 PURSHOTTAM Rs.1,46,30,844.76/-

PRASAD

21. 1898/2023 GANESH Rs.28,23,921.39/-

PRASAD JAISWAL

22. 1896/2023 M/S. AKASH Rs.6,60,41,846.32/-

FEED PVT. LTD.

23. 1893/2023 M/S MAA Rs.2,19,61,092.53/-

JAGDAMBA RICE MILL

24. 1899/2023 M/S PUJA RICE Rs.1,29,54,301.40/-

MILL

25. 1897/2023 M/S GANGOTRI Rs.58,13,662.50/-

RICE MILL

26. 1900/2023 ABINASH Rs.9,91,29,305/-

KUMAR SINGH

27. 1901/2023 RAKESH KUMAR Rs.88,53,551/-

28. 1906/2023 MUNNA PRASAD Rs.85,58,508/-

29. 1907/2023 RAMESH Rs.1,17,06,648/-

BHUSHAN

4. For convenience, Civil Appeal No. 1890 of 2023 – Sone Valley

Rice Mill v. The State of Bihar and others and Civil Appeal

9 No.1889 of 2023 – Pawapuri Rice Mills v. Bihar State Food and

Civil Supplies Corporation Limited and others are treated as lead

cases, and the circumstances noted in these two appeals are

adverted for disposing of the batch of appeals.

A. SONE VALLEY RICE MILLS

5. On 22.12.2011, the Rice Miller and the Civil Supplies

Corporation entered into an agreement for CMR for the

procurement year 2011-12. On 13.02.2012, the Rice Miller

called upon the Civil Supplies Corporation to do the needful for

lifting the CMR to the allotted warehouse/depot of the FCI. It is

averred by the Rice Miller that a follow-up letter was sent to the

District Manager of the Civil Supplies Corporation to discharge

the obligations under the agreement fastened on the Civil

Supplies Corporation. On the respective views held by the

contesting parties, a few letters have been exchanged; however,

reference to the correspondence is unnecessary for the purpose

of this Judgment. Hence, the correspondence is not adverted to.

On 10.05.2013, the District Manager-Kaimur sent a letter in

Form II to the District Certificate Officer-Kaimur requesting 10 initiation of recovery proceedings under the Act. On 11.05.2013,

the District Magistrate-Kaimur issued a Recovery Certificate in

Form I (Certificate of Public Demand) for a sum of Rupees four

crore sixty-one lakh forty-nine thousand one hundred and fifty-

two (Rs. 4,61,49,152/-) in favour of Civil Supplies Corporation.

On 13.05.2013, Form 3 (Certificate of Notice) under section 7 of

the Act in Case No. 36(Y)/2012-13 was communicated to Sone

Valley Rice Mill on the initiation of recovery proceedings under

the Act.

6. C.W.J. No. 13746 of 2013 was filed by Sone Valley Rice Mills in

the High Court of Patna, praying to set aside the Certificate

Proceedings and Notice dated 13.05.2013. It is a matter of

record that, on 29.07.2013, the Rice Miller, in response to the

notice dated 13.05.2013, was permitted to file a reply before the

District Magistrate-Kaimur. On 02.08.2013, the primary

authority decided the representation and issued a warrant of

even date. On 13.09.2013, the District Magistrate-Kaimur

passed an order directing the rice mill owner to deposit sixty per

cent in two equal instalments, and coercive steps were deferred

11 for the present. On 28.10.2013, the District Magistrate held that

the subject recovery of Rupees four crore sixty-one lakh forty-

nine thousand one hundred and fifty-two only

(Rs. 4,61,49,152/-) can be effected under the Act, since the

amount comes under clause 8-A of Schedule I to the Act.

Subsequently, I.A. No. 8778 of 2013 was filed by the Rice Miller,

including a challenge to the Order dated 13.09.2013 in the Writ

Petition.

B. PAWAPURI RICE MILLS

7. The facts of Civil Appeal No. 1889 of 2023 follow a similar

tangent to that of Civil Appeal No. 1890 of 2023. On 17.12.2011,

an agreement was executed between the Rice Miller and the

Civil Supplies Corporation concerning CMR for the procurement

year 2011-12. Subsequently, the Rice Miller sent formal letters

to the District Manager to lift the CMR from the

depot/warehouse to enable further milling. The State Civil

Supplies Corporation, on 16.03.2013, sent a letter requiring the

Rice Miller to deposit the remainder of paddy. Following this, on

07.05.2013, the Certificate Officer initiated certificate 12 proceedings against the Rice Miller in Certificate Case No.

20/13-14 demanding Rupees ten crore fifteen lakh ninety-four

thousand nine hundred and sixty-one, and ninety-four paise

(Rs. 10,15,94,961.94/-).

II. PROCEEDINGS IN THE HIGH COURT OF PATNA

8. On 22.07.2014, the Learned Single Judge in the Rice Millers’

Writ Petition No. 13746/2013 and batch, set aside the recovery

proceedings initiated. However, liberty was given to the Civil

Supplies Corporation to initiate legal proceedings in accordance

with the agreement and recover the amount due from the Rice

Miller. The instant judgement accepted the argument of Rice

Millers (i) that initiation and continuation of the certificate

proceedings under the Act against them is without jurisdiction

and illegal; (ii) the demand is not a public demand within the

scope of section 3(6) of the Act, read with Clause 8-A of the

Schedule; (iii) that the relationship between the miller and the

Civil Supplies Corporation stems from an agreement entered

between the parties concerning the delivery of advanced rice

13 and consequent lifting of paddy; (iv) deliver at the authorised

warehouse/depot; (v) payment of milling charges is an issue;

(vi) clauses 11 and 12 of the agreement provide for forfeiture of

the security deposit made by the Rice Miller for breach of a

condition; (vii) the agreement does not indicate that the paddy

supplied by the Civil Supplies Corporation is the property of the

State and that paddy is made available to the Rice Miller for and

on behalf of the State; (viii) the agreement does not enable the

Civil Supplies Corporation to take recourse to the Act to realise

the alleged demand as public demand; (ix) the Civil Supplies

Corporation is not a subsidiary, and the Civil Supplies

Corporation can sue and be sued independently; (x) the Civil

Supplies Corporation, though a Government Company under

section 617 of the Companies Act, 1956, the said status ipse

dixit does not confer jurisdiction under the Act for realizing the

due as a public demand.

9. Aggrieved by the judgement dated 22.07.2014 in Writ Petition

No. 13746/2013, the Civil Supplies Corporation filed Letters

Patent Appeal No. 1576 of 2014. On 20.05.2016, the LPAs filed

14 by the Civil Supplies Corporation were allowed. Hence, the Civil

Appeals at the instance of the Rice Millers.

9.1. In the impugned judgement, the Division Bench noted

that (i) the State does not procure paddy itself from the farmers

for CMR, but it is procured through agencies to be delivered to

the Rice Millers; (ii) In the final analysis, the failure of the Rice

Millers to deliver rice to the FCI amounts to a breach of the

agreed obligation; (iii) from the averments in the Writ Petition

and Circular dated 07.12.2011, records that the paddy

belonged to the State; (iv) the impugned judgment notes that

the definition of public demand in section 3(6) of the Act read

with clause 8-A of the Schedule to the Act is not exhaustive;

(v) by interpreting the expression in clause 8-A of Schedule I

appended to the Act, it is held that this clause contemplates

outstanding loans and advances to the State, Department, or

Official, by anybody; (vi) clause 15 contemplates any money

payable to a company or statutory body in which the

Government has a majority share; (vii) the paddy is supplied to

the Rice Miller by the Civil Supplies Corporation after

15 purchasing from the funds made available by the State as its

nodal agency, (viii) the Civil Supplies Corporation may not be

the State itself or a Department of the Government or an official

of the Government, but the nature of the transaction would go

to show that the State is acting through the Civil Supplies

Corporation for procurement of paddy and distribution through

PDS system; (ix) the absence of a clause in the agreement

enabling recovery under the Act would not be the determining

circumstance; (x) the definition of public demand in section 3(6)

of the Act read with clause 8-A of Schedule I is satisfied for

initiation of recovery proceedings by the Civil Supplies

Corporation from the Rice Millers on account of default in

delivery of CMR. Hence, the Civil Appeals at the instance of Rice

Millers.

III. SUBMISSIONS

10. We have heard learned Senior Counsel Shri Navneeti Prasad

Singh and Shri Amit Sibal for the Rice Millers and Shri Manish

Kumar, learned Advocate-on-Record for the Civil Supplies

Corporation.

16

11. The Senior Counsel would contend that the recovery initiation

proceedings under the Act for the alleged sums due from the

Rice Millers as public demand, is ex-facie illegal and without

jurisdiction. The Act is applicable upon satisfying a sine qua

non, viz., the demand must be a public demand under section

3(6) read with Schedule I to the Act. Clauses 8 and 15 of

Schedule I to the Act are inapplicable. A plain reading or

interpretation of clause 8-A would demonstrate that the subject

recovery is not covered by the plain meaning of these provisions.

The three expressions in clause 8-A are not attracted to the Civil

Supplies Corporation because it is neither the Government nor

a Department/Official of the Government. Even if the Civil

Supplies Corporation acts as an agent of the Government, the

dues of the Corporation do not become the dues of the

Government and cannot fall within the definition of ‘public

demand’. The paddy is not purchased from the amount made

available by the State Government but from the amount made

available by the FCI.

17 11.1. Alternatively, it is argued that assuming the Government

has advanced money to Civil Supplies Corporation for the

purchase of paddy, the paddy does not automatically become

the property of the Government. The default in delivery of CMR

is a breach of the agreement between the Rice Millers and the

Civil Supplies Corporation. The alleged breach by the Rice

Millers is a cause for consideration by a civil court in a duly

instituted suit for recovery of an amount equivalent to

undelivered CMR. Whether the Rice Millers or the Civil Supplies

Corporation is in default would be the foremost issue for

decision before terming the claim of Civil Supplies Corporation

as a recoverable sum. The initiation of recovery proceedings on

unadjudicated claims for alleged breach of contractual

obligations is illegal. The recovery certificate under the Act was

issued without deciding the existence of a jurisdictional fact.

11.2. It is further contended that the impugned judgement has

not appreciated the circumstances preceding the recovery and

expanded the scope of recoverable sums under clause 8-A of

Schedule I to the Act. The reference to the Full Bench decision

18 in Ram Chandra Singh v. State of Bihar and others1 is

untenable. Therefore, the impugned judgements are liable to be

set aside. The recovery certificates do not conform to the

procedure stipulated by the Act.

12. Shri Manish Kumar, Advocate-on-Record, appearing for the

respondents, argues that the Civil Supplies Corporation is a

Government Company under section 617 of the Companies Act,

1956. The Memorandum and the Articles of Association of the

Civil Supplies Corporation provide that it can act as an agent of

the State, and in the subject procurement of paddy, the Civil

Supplies Corporation acted as the Government’s agent. The

State changed the procurement policy of paddy by keeping it in

line with the policy of the FCI and appointed the Civil Supplies

Corporation as a nodal agency. There is no dispute that the Civil

Supplies Corporation is a nodal agent and has duties and

functions for implementing the procurement policy 2011-12.

Taking the circumstances as presented by the Rice Millers, it

would emerge that the State has formulated a policy for

1 (1986) SCCOnLine Pat 229.

19 procuring paddy, converting it as CMR, supplying CMR to FCI,

and, finally, distributing through PDS to eligible people. The

Civil Supplies Corporation pays farmers the MSP stipulated for

the season and makes over the paddy to the Rice Millers for

CMR. The Rice Millers are required to deliver rice as per the

specification at the designated depots of the FCI. The Civil

Supplies Corporation is a nodal agency, and being the agent of

the State, it is entitled to recover the cost of unsupplied rice

from the Rice Millers through summary recovery under the Act.

The characteristic of ‘public demand’ is decided from the totality

of circumstances in the relationship between the Civil Supplies

Corporation and the Rice Millers. The definition of section 3(6),

read with clause 8-A of Schedule I to the Act, is attracted to the

case on hand. According to him, the case on hand does not

concern the scope of these provisions. The real consideration is

the effect of the totality of circumstances governing, as noted by

both parties, to decide the jurisdictional facts and apply the

plain meaning of clause 8-A of Schedule I to the Act. The LPAs

were allowed by relying on Ram Chandra Singh (supra). The

20 Full Bench of the High Court of Patna, in the said decision, has

considered the scope, meaning, and extent of the definition of

public demand. Replying to the contention of violation of

procedure stipulated by the Act and the Rules, it is argued that

the procedure has been complied with, the objections are

considered, and an order is passed by the primary authority.

The decision under the Act is subject to an appeal or a revision

before the competent authorities. The statutory authorities have

jurisdiction to correct errors of fact. The examination of merits

by the Writ Court on these arguments is unmerited and liable

to be rejected.

13. Having carefully considered the arguments presented by the

parties and the relevant legal provisions, the following issues

arise for our determination:

13.1. Whether the recovery by the Civil Supplies Corporation

qualifies as a ‘public demand’ under the Act and the Rules?

13.2. Whether the Civil Supplies Corporation can initiate

recovery proceedings under the Act against the Rice Millers as

the nodal agency of the State Government?

21 13.3. Whether the procedural safeguards under the Act and

principles of natural justice have been adhered to during

certificate proceedings?

13.4. Whether the Rice Millers can avail alternate statutory

remedies to challenge the recovery certificate?

IV. ANALYSIS

14. The first issue concerns the status of the Civil Supplies

Corporation and whether, as a nodal agency, it qualifies to fall

under the ambit of clause 8-A of Schedule I to the Act. This

determination is crucial, as the recovery mechanism under the

Act is available only to the State, its departments, and officials

for the enforcement of public demands. The crux of the dispute

is the distinction between a statutory body acting in a

governmental capacity i.e., as a nodal agent, and acting purely

with a commercial intent of its own. The answer depends on the

consideration of jurisdictional facts.

15. On 01.07.1914, the Act was gazetted, and one of the objects was

to consolidate and amend the law relating to the recovery of

22 public demands. On the existence of a jurisdictional fact for

invoking the summary procedure, the contesting parties have

relied on section 3(6) of the Act, and clauses 8-A and 15 of

Schedule I to the Act. The provisions read thus:

“Section 3(6) – “Public Demand” means any arrear or money mentioned or referred to in Schedule I and includes an interest which may by law be chargeable thereon up to the date on which a certificate is signed under Part II[.]

Schedule I –

Clause 8-A – Any outstanding loans and advances are payable to the state government or to a department or official of the state government by anybody whatsoever.

Clause 15 – Any money payable to –

(i) State Bank of India constituted under the State Bank of India Act, 1955 (No.23 of 1955); or

(ii) A bank specified in (ii) of the first schedule to the banking companies (Acquisition and Transfer or Undertaking) Act, 1970 (Act V of 1970); or

(iii) a company or a statutory body, including a registered society carrying on financial transactions, owned by or in which Government has a majority of shares or which is managed by an authority appointed under any law for the time being in force; or

(iv) the Bihar State Electricity Board.

in respect of which the person liable to pay the same has agreed, by a written instrument that it shall be recoverable as public demand.”

23

16. Section 3(6), interpreted by the golden rule, presents the

following limbs:

i. Public Demand means any arrear

mentioned or referred to in Schedule I.

ii. Public Demand means money

mentioned or referred to in Schedule I.

iii. Public Demand includes any interest

which may by law be chargeable thereon up

to the date on which a certificate is signed

under part II.

17. Perusal of the definition on the indicated lines, nothing is

determinative on who can and what amount can be recovered

under the Act. The claims, types of causes, and the persons who

can take recourse to summary proceedings are detailed or

defined in Schedule I to the Act. The legislative wisdom is

appreciated by noting that the classes, causes and claims

eligible for summary recovery proceedings are decided by the

clauses in Schedule I to the Act. Schedule I has as many as 15

24 clauses; thereby, through definition and incorporation in

Schedule I, arrears or money to the State government, and also

to a few statutory corporations and banks constituted under an

enactment are given the flair or colour of public demand. Thus,

meriting the initiation of summary recovery under the Act.

18. The above discussion takes us to clause 8-A of Schedule I, and

by applying the golden rule of interpretation, clause 8-A

presents the following facets:

(aa). Any outstanding loan payable to the

state government by anybody whatsoever.

(ab). Any outstanding loan payable to a

department by anybody whatsoever.

(ac). Any outstanding loan payable to an

official of the State Government by anybody

whatsoever.

(ba). Any advances payable to the state

government by anybody whatsoever.

(bb). Any advances payable to a department

by anybody whatsoever.

25 (bc). Any advances payable to an official of the

state government by anybody whatsoever.

19. The occasion to examine the scope of clause 15 arises only after

examination of the scope of section 3(6) and clause 8-A on the

one hand and, on the other hand, applying the circumstances

of the case to these provisions of law. In other words, if the

circumstances of the case are covered by clause 8-A, then

clause 15 and its application need not be examined.

20. As noted earlier, section 3(6) of the Act by itself does not decide

who can be termed as a claimant/creditor before the certificate

officer, i.e., the District Collector. The standing or locus before

the certificate officer is determined by one or the other

exigencies and descriptions of ‘public demand’ enumerated in

Schedule I to the Act. It is contextual to note that Schedule I

defines ‘public demand’ and does not limit the term to the

original concept of recovery of land revenue, tax, and fee from

the defaulters. A few claims otherwise recoverable through the

normal process of law are included and defined as public

demand under the Act. The words that have a bearing in clause

26 8-A are “any loan,” “advance,” “state,” “department,” or the

“official.” The common object of recovery is from anybody

whatsoever. The Rice Millers do not contend that clause 8-A is

inapplicable if the subject Public Demand is payable to the State

Government or Recoverable by the State Government. In other

words, the argument proceeds on the premise that, with regard

to the circumstances of the case, the Civil Supplies Corporation

does not fit into the category of the “state”, “department”, or

“officer of the state”. In our consideration, as part of the

elimination process, it can be noted that the Rice Millers do not

contend that the expression ‘anybody whatsoever’ does not take

within its fold the Rice Millers. However, it is argued that the

claimant and the claim before the certificate officer must come

within one or the other expressions, namely loan/advance,

State, department, or officer of the State. At the first brush, the

contention canvased by the Rice Millers may sound an issue on

the interpretation of clause 8-A. But on close scrutiny of the

provisions, it transpires that the crux of the matter would be

whether the amount being recovered through the summary

27 process under the Act, by the Civil Supplies Corporation is a

Public Demand or not. In other words, the jurisdictional facts

would clinch the issue one way or the other.

21. Before taking up jurisdictional facts, it is apt to refer to Ram

Chandra Singh (supra) wherein the Full Bench considered the

expression ‘public demand.’ Paragraph 9 of the said Judgement

reads thus:

“9. Now, the articles in Sch. I have to be viewed in the context of the fact that the phrase “public demands” is intrinsically one of the widest amplitude. It is against this background that one has to construe the aforequoted definition given in S. 3(6) of the Act. This definition is by direct reference to Sch. I. The said schedule then has its heading as “Public Demands” and at the same time makes express reference to S. 3(6). It is thus manifest that S 3(6) and Sch. I are one integral whole which has to be construed as part and parcel of each other. But what perhaps calls for particular notice in this context is that under the Act the definition and concept of public demand becomes one of the widest amplitude. Even in its ordinary common parlance and dictionary meaning, a public demand is a wide ranging concept. However, this has been further and deliberatelly expanded by the legislature to include within its sweep any arrear or any money which may come to be mentioned or even referred to in Sch. I and include also any interest which may be chargeable thereon. Yet again it deserves highlighting that S. 3(6) of the Act is not merely an inclusive definition but expressly says that the public demand means whatever may be specified in Sch. I. In

28 the result even the broad sweep of public demand is further extended by the statute herein and, in my view, designedly so. In logical essence, this leads to the result that for the purposes of this Act a public demand includes all arrears of revenue or any money due or demand payable which finds place in Sch. I even by reference. It seems patent that the legislature has deliberately not attempted to define public demand or limiting the same. All the arrears of revenue, money or payable demands which the legislature chooses to incorporate in Sch. I become by virtue of the definition under S. 3(6) a public demand of which recovery can be made under the Act. The scheme of the definition under S. 3(6) of the Act and the frame of the articles of the schedule complementary thereto thus become a key to the interpretation of these provisions.”

22. The definition of ‘public demand’ under section 3(6) is broad and

inclusive. It incorporates any arrears mentioned in Schedule I

and allows for recovery of such arrears under the Act.

Clause 8-A further clarifies that any loan or advance payable to

the State Government, its departments, or officials constitutes

a public demand. The provision uses broad language, such as

“any loan” and “anybody whatsoever,” indicating the legislative

intent to create an all-encompassing framework for recovery.

Clause 15 additionally specifies that debts owed to certain

29 banks and statutory bodies also qualify as public demands,

provided that the liability is acknowledged in writing.

23. As held by the Full Bench of the Patna High Court in Ram

Chandra Singh (supra), the term ‘public demand’ is of wide

amplitude and encompasses all arrears or dues explicitly

mentioned or implied in Schedule I. The deliberate legislative

design of section 3(6) and Schedule I reinforces the inclusive

scope of the term.

24. The Full Bench, in reaching such consideration, inter alia

considered:

24.1. Legislative intent – to create a special procedure for the

recovery of public demands, including those that may be strictly

enforceable through ordinary civil procedure.

24.2. Public Interest – the recovery of public demands

expeditiously is essential for the functioning of the State and its

ability to provide public services and utilities.

24.3. Practical Considerations – the Full Bench recognised the

practical difficulties in enforcing certain claims through

30 traditional legal process and the need for a more efficient and

expeditious recovery mechanism.

25. By adopting the above interpretation of the words ‘public

demand,’ the court ensures that the State can effectively recover

undisputed dues owed to it expeditiously, thereby promoting

public interest and efficient governance. We note with approval

the view expressed in Ram Chandra Singh (supra).

26. The word loan is not defined by section 3 of the Act. In a given

case, a loan could be money or in kind. The jurisdictional facts

would decide whether the sum recovered from the Rice Millers

is a loan or not. The Rice Millers have received paddy from the

Civil Supplies Corporation for CMR. In the present case, the

Civil Supplies Corporation, acting under the State

Government’s policy, provided paddy to Rice Millers for custom

milling and subsequent delivery of CMR to FCI depots. The

claim for recovery of the cost of undelivered CMR is claimed as

an arrear owed to a State-recognised nodal agent.

27. A jurisdictional fact implies the existence of a fact that is

necessary to the validity of the proceeding, and without the

31 existence of such fact, the proceeding before the court, Tribunal,

or Authority would be a nullity. In Arun Kumar v. Union of

India,2 it is held that a jurisdictional fact is a fact that must

exist before a court, tribunal or authority that assumes

jurisdiction over a particular matter. It is the fact upon which

an administrative agency’s power through an act is dependent.

The ratio in Ramesh Chandra Sankala v. Vikram Cement3 is

to the same effect.

28. The Learned Single Judge has considered the memorandum or

the agreement between the parties and the existence of a few

clauses enabling recovery of outstanding dues through the

regular civil court as the determining factors on jurisdictional

issues. It is held that the absence of a clause in the agreement

authorising recovery through a proceeding under the Act

denudes the certificate officer’s jurisdiction. The Division

Bench, through the impugned Judgement, has taken note of the

nature of the transaction, the definition of 'public demand’, and

2 (2007) 1 SCC 732 at 758.

3 (2008) 14 SCC 58 at 81.

32 whether the parties, by their acts, can confer jurisdiction on an

authority or a court. In fine, the jurisdictional facts in the

present case can be summed up as:

28.1. The existence of an agreement between the Rice Millers

and the Civil Supplies Corporation for delivery of CMR.

28.2. The failure of the Rice Millers to deliver the agreed

quantity of CMR.

28.3. The classification of the undelivered CMR’s monetary

value as a ‘public demand’ under the Act.

28.4. The undelivered quantity of CMR consists of the

recoverable due from the Rice Millers as a public demand.

29. Upon examination of admitted circumstances and the alleged

default in delivery of CMR, we are unable to subscribe to the

view taken by the Learned Single Judge on the existence of

jurisdictional facts. A cause of action is stated to be a bundle of

facts set out in the plaint. Similarly, jurisdictional facts are

determined by the totality of circumstances in a given case. It is

as simple as not omitting from consideration what is obvious.

Likewise, a relevant circumstance, even if obfuscated, is not

33 omitted from consideration while deciding a jurisdictional fact.

Jurisdictional facts consist of a sequence of events or a bundle

of circumstances. The relevant circumstances are determined

on a case-to-case basis.

30. Let us revert to the circumstances of the case on hand. The

State Government, as part of the changed policy, has dispensed

with the levy rice scheme from the Rice Millers. In place of

purchasing the levy rice, the present policy substitutes availing

the services of Rice Millers for CMR. We are not concerned with

the subtle intricacies in the operation of the policy of CMR.

Broadly, the paddy is purchased from the farmers by the state

government or the Civil Supplies Corporation, and under the

agreement, the paddy is transferred to the Rice Millers for

conversion into CMR. The State is also acting as per the

guidelines issued by the FCI. The whole scheme appears to be

to purchase paddy at MSP, convert paddy into CMR, and deliver

at the depots of FCI for the PDS. It is for this reason that the

Civil Supplies Corporation is recognised as the nodal agency of

the State. The Rice Millers cannot take up a convenient

34 argument by ignoring the role assigned to the Civil Supplies

Corporation as a nodal agency by the State Government.

31. In the subject procurement year, the State Government aimed

to procure thirty lakh metric tons of paddy from the farmers.

The State Food Corporation and Civil Supplies Corporation have

been assigned a few rights and duties to perform in this massive

function as per the scheme. It is difficult to assume that the

Civil Supplies Corporation, with its wherewithal of both

manpower and financial ability, would have acted as an

independent entity. The paddy is purchased either from the

amount given by the state government or paddy received from

primary agricultural societies. The control of the State

Government and District Administration is evident, both from

the circumstances noted in the impugned judgement, a letter

dated 11.11.2011 of the Government of India, a letter dated

09.01.2012 of State Food and Civil Supplies Corporation, and a

letter dated 11.01.2012 of the food and consumer department.

Consequently, all the jurisdictional facts to accept the role of

Civil Supplies Corporation as the nodal agent of the state

35 government have been satisfactorily established in this case.

The agreement between the parties explicitly recognises the

Civil Supplies Corporation’s right to recover dues, and the non-

delivery of CMR is a documented fact. These jurisdictional facts

thus exist, thereby validating the certificate proceedings. In the

present case, the claim for the cost of undelivered CMR aligns

with this definition. Therefore, the claim qualifies as a ‘public

demand’ recoverable under the Act.

32. The learned Single Judge erred in narrowly interpreting the

concept of ‘public demand.’ The court must consider the totality

of circumstances to determine if a particular demand falls

within the ambit of the Act. In this case, the State Government

enabled the Civil Supplies Corporation to enter into an

agreement with the Rice Millers for the procurement, milling,

and distribution of paddy. The objection of Rice Millers is purely

one of convenience and contravenes the conduct and the

admitted contemporaneous circumstances. The non-

compliance by the Rice Millers with the terms of the agreement

36 directly impacted the PDS, a matter of significant public

interest.

33. The Division Bench correctly held that the nature of the

transaction, involving the procurement of public grain and its

distribution, clearly falls within the definition of ‘public

demand.’ The Civil Supplies Corporation, as a nodal agency of

the State Government, was acting on behalf of the State to

ensure the smooth functioning of the PDS.

34. The argument that the absence of a specific clause in the

agreement authorising recovery under the Act, thus negating

the jurisdiction of the certificate officer, is untenable. The Act

itself provides a comprehensive framework for the recovery of

public demands. The nature of the transaction, the public

interest involved, and the role of the Civil Supplies Corporation

as the State’s nodal agency allows for the initiation of recovery

proceedings before the Certificate Officer.

35. We uphold the finding in the impugned judgement that the

initiation of proceedings under the Act by the Civil Supplies

Corporation, i.e., as the nodal agency of the state government.

37 The unaccounted deposit of rice at the depots of FCI certainly

comes within the fold of public demand of the state government

under section 3(6) of the Act. Therefore, the proceedings under

the Act are maintainable before the certificate officer. Further,

we hold that the jurisdictional fact on the initiation of recovery

proceedings under the Act is available and legal. We are in

complete agreement with the view expressed in the Judgement

impugned in the Civil Appeals.

36. The impugned judgement correctly determined that the recovery

proceedings initiated by the Civil Supplies Corporation were

valid and justified. The court has appreciated the facts of the

case and applied the law correctly. The nature of the transaction

between the State Government and the Rice Millers, involving

the procurement, milling, and distribution of public grain,

clearly falls within the ambit of “public demand” as defined in

the Act. The certificate officer’s jurisdiction to initiate recovery

proceedings is thus established.

37. The next limb of the argument is that the continuation and the

concluding of proceedings by the certificate officers are vitiated

38 by procedural irregularities. The arguments on this behalf are

already referred to in the preceding paragraphs. To capture the

arguments in a nutshell, it is noted that the initiation is not in

accordance with the procedure stipulated under the Act, the

procedure prescribed by the Act is not followed, and the

principles of natural justice are violated.

38. The Act is a comprehensive and codified enactment that

provides adequate safeguards for parties facing recovery

actions. Parts II and IV of the Act outline the procedures for

filing, serving, and contesting recovery certificates, as well as

provisions for appeal, revision, and review. Procedural

Safeguards: Part II of the Act outlines the procedure for filing,

serving, and adjudicating certificates. Sections 43 and 44

provide remedies to challenge certificates in civil courts on

specific grounds. The section provides for a time limit of 6

months for availing the remedy to move to the Civil Court.

Sections 60, 62, and 63 deal with appeal, revision, and review

of the orders made under the Act.

39

39. The Division Bench rightly emphasised the availability of these

statutory remedies to the aggrieved persons. The Rice Millers,

by invoking writ jurisdiction, have failed to exhaust statutory

remedies at the first instance.

40. Mr. Manish Kumar has placed before us the photocopies of the

proceedings of the certificate officer, and argued that these

proceedings have been initiated in due compliance with the

provisions of the Act and have been concluded by duly

considering the objections raised by the Rice Millers. In other

words, the argument proceeds that there is no procedural

infirmity in the respective certificates issued in favour of the

Civil Supplies Corporation. Hence, the civil appeals are also

liable to be dismissed by rejecting the contentions on procedural

deviation.

41. We have perused the record and are of the view that the Rice

Millers invoked the writ remedy by raising a jurisdictional fact

against realising the sums as a public demand under the Act.

As a writ court or in an appeal under Article 136, we are not

examining the contentions on alleged procedural deviations.

40 We, however, leave it open to the respective Rice Millers to avail

a statutory remedy as may be available under the Act. For

availing a statutory remedy, we grant thirty days from today to

the Rice Millers.

42. In the event of a Rice Miller availing a statutory remedy as

permitted by this Judgment, the said authority shall entertain

the case without reference to the delay and the period of

limitation in availing a remedy before the said authority. With

the above observation, the civil appeals stand dismissed. No

order as to costs.

...……………………J. [HRISHIKESH ROY]

….……………………J. [S.V.N. BHATTI]

NEW DELHI;

DECEMBER 18, 2024.

41