Recovery of Public Demands: Supreme Court Judgment on the Application of Bihar and Orissa Public Demands Recovery Act

The case of Pawapuri Rice Mills vs. Bihar State Food and Civil Supplies Corporation Ltd. & Ors. involves a dispute over the recovery of sums due under the Bihar and Orissa Public Demands Recovery Act, 1914. The appellants, Pawapuri Rice Mills and several other rice millers, contested the recovery proceedings initiated by the Bihar State Food and Civil Supplies Corporation for the procurement of Custom Milled Rice (CMR) under a new procurement policy. The primary issue raised was whether the recovery could be classified as a public demand under the provisions of the Act.

Background of the Case

The appellants in the case are rice millers in the state of Bihar. The dispute arises from the procurement of CMR during the procurement year 2011-12, under the changed procurement policy implemented by the State. The State had moved from the traditional levy rice system, where rice millers were obligated to sell a certain percentage of rice to the government at a fixed price, to the new CMR procurement policy. As part of this policy, the Civil Supplies Corporation was tasked with procuring paddy from farmers and appointing rice millers to mill the paddy into CMR. The rice millers were then expected to deliver the milled rice to the Food Corporation of India (FCI) for distribution through the Public Distribution System (PDS).

The dispute began when the rice millers, including the appellants, failed to deliver the agreed quantities of CMR to the FCI as per the procurement agreement. The Civil Supplies Corporation initiated recovery proceedings under the Bihar and Orissa Public Demands Recovery Act, seeking to recover substantial amounts from the rice millers for the undelivered CMR.

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Arguments of the Petitioner (Rice Millers)

The appellants argued the following points:

• The recovery proceedings initiated by the Civil Supplies Corporation were illegal and without jurisdiction under the Bihar and Orissa Public Demands Recovery Act.
• The rice millers entered into a contractual relationship with the Civil Supplies Corporation and the dispute over the undelivered rice should be resolved through civil court proceedings, not recovery proceedings under the Act.
• The provisions of the Act do not apply to the recovery of sums between private entities, especially in the case of a government agency acting as a nodal agency for procurement.
• The amounts sought to be recovered do not qualify as public demands under the Act, as the Civil Supplies Corporation is not a government department, but a company under the Companies Act.

Arguments of the Respondent (Civil Supplies Corporation)

The respondent’s counsel argued the following points:

• The Civil Supplies Corporation, although a government company, was acting as an agent of the State Government in procuring paddy and distributing rice, which qualifies the demand as a public demand under the Act.
• The recovery proceedings initiated under the Act were in accordance with the provisions, and the Civil Supplies Corporation is authorized to initiate recovery of public demands arising from its contractual obligations.
• The rice millers’ failure to deliver the agreed quantity of CMR constitutes a breach of the agreement, and the amount due for the undelivered rice qualifies as a public demand recoverable under the Act.
• The rice millers had ample opportunity to challenge the demand in the prescribed forums and could have raised objections, but they chose to invoke writ jurisdiction, which is inappropriate in this case.

Supreme Court’s Analysis

The Supreme Court analyzed the case in light of the Bihar and Orissa Public Demands Recovery Act, 1914, and the specific provisions of the procurement agreement. The Court considered the following key points:

• The Court reiterated that under the Act, a ‘public demand’ is defined broadly to include any arrears or money owed to the government or its departments, as well as certain statutory bodies acting on behalf of the government.
• The Court highlighted that the Civil Supplies Corporation, while a company under the Companies Act, acted as the nodal agency of the State Government for the procurement of paddy and the distribution of CMR. This made the amounts due from the rice millers qualify as a public demand.
• The Court discussed the distinction between private contractual disputes and claims that can be classified as public demands under the Act, noting that the relationship between the State, the Civil Supplies Corporation, and the rice millers was governed by public welfare concerns and the procurement policy.
• The Court further noted that the jurisdiction of the certificate officer to initiate recovery proceedings was well-established and that the rice millers had failed to exhaust the statutory remedies available to them before challenging the proceedings in court.

Final Judgment

The Supreme Court ruled in favor of the respondent, the Civil Supplies Corporation, and upheld the recovery proceedings under the Bihar and Orissa Public Demands Recovery Act. The Court held that:

• The amounts due from the rice millers for undelivered CMR constituted a public demand as defined under the Act, and the Civil Supplies Corporation, as the nodal agency of the State Government, was entitled to recover the sums due.
• The recovery proceedings initiated by the Civil Supplies Corporation were legal and within the jurisdiction of the certificate officer under the Act.
• The rice millers had the opportunity to challenge the demand through the prescribed statutory remedies but failed to do so in a timely manner. Therefore, the proceedings initiated by the Civil Supplies Corporation were valid and enforceable.

The judgment reinforces the principle that public welfare schemes, such as the procurement of paddy and the distribution of rice through the Public Distribution System, require efficient recovery mechanisms and that statutory bodies acting on behalf of the State have the authority to recover public demands. The decision also emphasizes the importance of following the prescribed statutory remedies before resorting to writ petitions in cases involving public demands.

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Petitioner Name: Pawapuri Rice Mills.
Respondent Name: Bihar State Food and Civil Supplies Corporation Ltd..
Judgment By: Justice S.V.N. Bhatti, Justice Hrishikesh Roy.
Place Of Incident: Bihar.
Judgment Date: 17-12-2024.

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