TMI Blog2007 (5) TMI 602X X X X Extracts X X X X X X X X Extracts X X X X ..... and rice and making the increased price payable at the time of the delivery of the stocks irrespective of the fact that the contracts for lifting the stocks at a lower price had already been entered into with the buyers and the entire sale consideration had also been deposited previous to that date. It is claimed that based on such contracts, the buyers had already entered into further contracts with foreign buyers and not being able to rescind those contracts, they had to incur huge losses. Accordingly, it is contended that the unilateral revision of the price at the time of delivery, is arbitrary and violation of petitioners' rights under Article 14, 19(1)(g) and 21 of the Constitution of India. Background Facts 4. FCI is a statutory corporation established under the Food Corporations Act, 1964 ('FC Act'). It has been entrusted the task of procuring stocks of food grains from farmers in India, storing them for domestic market as well for exports. These activities of FCI are controlled by guidelines issued from time to time by the Ministry of Consumer Affairs, Food and Public Distribution, Department of Food and Public Distribution, Union of India, which is the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ift the stock of rice from inland godown, they may be permitted for identifying the stock and lifting the same after making necessary payment at the District Office/Regional Office concerned. The requisite value be undertaken simultaneously and necessary action taken to satisfy for confirmation of the Bank Guarantee from the banker concerned. (v) In case the stock is loaded into wagon in inland godown destined to a port destination where FCI port godown is situated, the RRs shall be endorsed in favor of the buyer for his holding of the wagons at the destination. However, it shall be the responsibility of the parties for arrangement of further movement to the port etc. 7. A further revised policy was brought out on 18.6.2001 for sale of stock of wheat by the FCI. This policy envisaged sale of wheat at ₹ 4,300 per mt ex port godown of FCI loaded into trucks and stocks were to be lifted till 30.10.2001. It was stated that stocks will be issued on pre-payment on 'as is where is basis' ex FCI godowns located in Port Towns loaded into trucks. On 20.6.2001 FCI introduced a detailed policy for rice which according to which the rates would be determined with referenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the date of the lifting of the stocks. This was followed by another circular dated 11.8.2003 in which it is stated that the price prevailing at the time of lifting will be applicable to all pending release orders/allocations. It was directed that the backlog of release orders had to be first cleared and till such time the road movement of stocks for the purpose of exports of wheat should be immediately stopped. 11. It is stated that the exporters were unable to lift the stocks from the port godowns of FCI for the simple reason that the FCI was unable to transport the stock to these port godowns. This was attributable to the shortage of rail rakes. A reference is made to a Railway circular dated 11.12.2002 according to which the export intend offered by the exporters was to be accompanied by documents verified by the FCI and accompanied by the FCI release order. Submissions of the Petitioners 12. Mr. P. Sureshan and Mr. Mark D'Souza, Advocates appeared on behalf of the petitioners. According to them, the cumulative effect of these circulars was that the buyers were faced with the prospect of having to pay higher prices at the time of delivery of stocks, a situation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nathan . Referring to the decisions of the Hon'ble Supreme Court in State of Orissa v. Mangalam Timber Products Ltd. and Ashoka Smokeless Coal Industries Ltd. v. Union of India , the petitioners claim that the principles of promissory estoppel would also be available to be invoked particularly since the exporters have altered their position by relying on the contract with the FCI and have in turn entered into contracts with the foreign buyers. The petitioners present charts to show the extent of losses likely to have been suffered by the exporters on account of the revision in prices. Submissions of the Respondents 14. The respondents were represented by Mr. Amarendra Sharan, Additional Solicitor General and Ms. Monica Garg, Advocate. On behalf of the respondents it is first contended that the petitioners lack locus standi to file these petitions. In the case of M/s. Vaas Exports, it is pointed out that they were only a certifying agency of M/s. Crossland Marketing (2000) Pte. Limited, the buyer in relation to MMTC. Mr. Sharan pointed out that the buyer in the case of M/s. Vaas Exports was M/s. Crossland Marketing (2000) Pte. Limited, Singapore had itself filed a Writ Pet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tract. Given that the time the price revision is announced in advance and the buyer is given thirty days time to shift the stocks and the stocks could not be held indefinitely in the ex-godowns of FCI it is reasonable to charge the prices as on the date of delivery. 17. The contracts were of a short-term duration and since stocks were to be lifted within a stipulated time, the power of the FCI to revise prices was implicit in the contract itself. It was in the interests of exporters themselves to ensure the timely lifting of the stocks and the FCI was only too eager to give delivery of the stocks given the fact that the stocks were perishable and there was a problem of lack of storage space and mounting demurrage. He refers to Clause 8 of the contract whereby the FCI reserves the right to accept or reject any or all offers and/or withdraw any quantity from the sale without assigning any reasons whatsoever. He submits that in the facts of the present cases there was no occasion to invoke the doctrines of legitimate or promissory estoppel. Issues for determination 18. The issues that arise for consideration in these petitions are: (a) Do the petitioners lack the locus s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... However that it not the situation here. FCI had indeed no privity of contract with Vaas Exports. There is no enforceable right for which Vaas Exports can file the writ petition. The decision in Tashi Delek Gaming Solutions Limited (supra) will not have any application to the facts of the instant case. 22. As regards the other two writ petitions these are associations of which the exporters may be members. While in that capacity the petitioners may legitimately advance the cause of their members, the petitioners must disclose the names of the persons they seek to represent, the exact nature of the transactions and the resultant grievance of each such person. In the absence of such particulars, it would not be possible for the Court to ascertain the nature of the grievance that is sought to be ventilated. To that extent, the respondent FCI is justified in its objections to the maintainability of these petitions by the All India Grain Exporters Association and All India Chamber of Commerce Industries. Issue (a) is, accordingly, answered. However, since the submissions of counsel have been heard at length, the petitions are not being dismissed on the ground of lack of locus stand ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m revising the prices. It is not possible to hold, on a plain reading of the contract, that the price was intended to be fixed for all times to come. 26. If indeed the FCI could revise the price the other question that arises is whether the price revision was irrational or excessive so as to be termed arbitrary. Here, it must be immediately conceded that the Court does not possess the expertise to determine if a particular price is a fair one or not. At best the Court can ask if a reasonable procedure has been followed in fixing the price and if all relevant factors have been accounted for in performing that exercise. The price revision has been undertaken on the recommendation of the High Power Committee. It was not suggested that this expert body lacked the expertise or had acted arbitrarily by ignoring relevant materials in fixing the price. In the circumstances, this Court is unable to come to the conclusion that the revision of prices by the FCI in the instant case was either arbitrary or unreasonable. 27. In the Aluminium Industries Case (supra), the Full Bench of the Madras High Court was dealing with a case of retrospective operation of price revision. Although those ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... egitimate substantive expectation merely permits the Court to find out if the change in policy, which is the cause for defeating the legitimate expectation is irrational or perverse or one which no reasonable person could have made. 30. In Raghunathan's case, the Hon'ble Supreme Court observed (SCC p. 79): the question whether the expectation and the claim is reasonable or legitimate is a question of fact in each case. It was also observed that this question had to be determined not according to the claimant's perception but in larger public interest. 31. Turning to the case on hand, it requires to be noticed first that the contract envisaged delivery at the godown and payment had to be made at that point when delivery would be taken. So the price payable would have to be for stocks ultimately found fit for export and to that extent the exact price to be paid was not certain. Secondly, given the fact that the delivery had to be taken of the stock purchased within a fixed time, it can hardly be expected that the prices would not fluctuate. The phenomenon of price fluctuation in markets is hardly unknown. It ought to be anticipated by the buyers and the sellers. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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