Sri Saibaba Industries (Regd.) v. State of Karnataka

‘the plaintiff and ‘the defendant Nos. 1, 2,3,4,6 and 7, respectively.

3. Brief facts of the case leading to the filing of this Appeal may be stated as under: Appellant/plaintiff filed a suit in 0 5 No.119/1995

21.10. 1995 for recovery of Rs.32,18,034/- together with interest at the rate of 18% per annum from the date of suit till realisation. It is contended that plaintiff is a Partnership Firm carrying on business in Rice Mill: during the relevant period, it was paying sales tax to the State and he is having large number of customers in and around Raichur District and has also got its business at 4 Maharashtra, Tamilnadu and Kerala States and is maintaining its accounts to which no objection was raised from anybody: at the relevant time defendants 3, 4, 6 and 7 who are Government servants lodged a false complaint which came to be registered in Crime No. 130/1992 under the Karnataka Essential Commodities Licensing Order, 1996, (in short, the Essential Commodities Licensing Order’) against the plaintiff and simultaneously they also reported the matter u/s.6(A) to the Deputy Commissioner and on

14.8.1992 seized 1000 bags of rice (500 quintals), 3152 bags of paddy and 61 bags of broken rice valued at Rs.l4,32,200/-; plaintiff made an application to the Deputy Commissioner, Food, Raichur. for release of the stock: on 20.8.1992, plaintiff made an application to the Deputy Commissioner, Raichur, for recounting of the entire stock; on 25.8.1992, another application was filed before the Deputy Commissioner, Food, Raichur, to order for re inspection and recounting of the goods and also to consider the documents in respect of the stock and business transaction and to release the goods immediately: the Tahsildar, Raichur, issued a public notice regarding auction of the seized commodities and on the same day, the Deputy Commissioner passed an order on 5

25.81992 for sale of the goods: plaintiff filed a Writ Petition in No.26008/1992 against the order of the Deputy Commissioner and this Court by an order on 2.9.1992, stayed the auction and directed to release the goods in favour of the plaintiff subject to furnishing Bank Guarantee to the extent of the goods alleged to be in excess of stock: on 19.10.1992, plaintiff filed an application for release of the seized goods as per the order passed in Writ Petition No.26008/1992; in view of the fact that Police filed B’ report on

30.10.1992, plaintiff made an application to the Deputy Commissioner (Food), Raichur stating that the seizure made was illegal and un-warranted; due to seizure of goods and taking custody of the Rice Mill itself, plaintiff suffered losses and also filed a suit for recovery of 32, 18,034/-.

4. Defendant No.2/Deputy Commissioner, Raichur, filed a written statement contending that the authorities conducted physical verification of the stock and found difference of 3 quintals of rice, 19 quintals of broken rice and 216 bags of paddy and registered a case in Crime No.130/1992 of the Market Yard Police Station, Raichur. and initiated proceedings in accordance with Section 6(A) of the Essential Commodities Act, 1955 (in short, 6 Act’). And taking into account that the seized commodities were deteriorating day by day and on account of rainy season, it may result in natural decay and thereby market value would get reduced an order came to he passed on 25.8.1992 to dispose of the entire seized goods through public auction; it was contended that there was no malafide intention on the part of the defendants. It was further contended that the goods seized from the premises of the plaintiff were in huge quantity and it was not possible for the authorities to make alternative arrangement to keep the stock and as such the authorities kept the stock in the mill itself and sealed the premises: a police watch and ward was kept during the period from 11.8. 1992 till the date of release on 13.11. 1992; as per the order of the High Court, the Mill was opened and stock was released on 13.11.1992 by accepting the Bank Guarantee as ordered in WP No.26008/1992. It was pleaded that the authorities have discharged their duties in accordance with law and there is no good ground for awarding damages and prayed for dismissal of the suit.

5. In view of the pleadings on record, trial Court framed as many as 7 issues and one additional issue which reads as under: 7 (1) Whether the plaintiff proves that, it has suffered loss as mentioned in para- 10 because of tortious act of defendants 2 to 8, as contended? (2) Whether the plaintiff proves that, it has suffered loss in a sum of Rs.25,26, 119/- as alleged in para- 10 of the plaint and same is liable to be paid by the defendants? (3) Whether the defendants establish that, their acts of seizure etc, as alleged are in accordance with law and there is no vicarious liability as contended? (4) Whether the plaintiff is entitled to interest if any on the sum of Rs.25,26, 119/- as claimed? (5) Whether the plaintiff is entitled to the relief sought for? (6) Whether the plaintiff is entitled to pendente lite and future interest at the rate of Rs. 18% per annum? (7) What order/decree? Addl.Issue: (1) Whether the defendants prove that the suit as brought is not maintainable under law?

6. In order to prove the contentions raised in the plaint the partner of the plaintiff firm got himself examined as P.W1 and got marked Exs.Pl to P20. On behalf of the defendants, Assistant Director of Food and Civil Supplies was examined as D .W 1 and got marked Exs.D1 to D9. 8

7. The Trial Court after hearing the arguments and on perusal of evidence both oral and documentary, answered issue Nos. 1. 2, 4. 5 and 6 in the negative and issue No.3 in the affirmative and consequently dismissed the suit, which is now questioned in the present Appeal.

8. Heard Sri S.M. Chandrashekar, learned counsel appearing for plaintiff and Sri Shivakumar Tengali, Addi. Govt. Advocate for respondents 1, 2 and 4 and Sri Bhavani Shankar Rao, learned advocate appearing for R3.

9. Learned Counsel appearing for the appellant/plaintiff submits that authorities should have entertained a reasonable belief of contravention of the provisions the Essential Commodities Act, 1955 and Control orders made thereunder. However, without reasonable satisfaction with regard to alleged contravention, they raided the Rice Mill of the plaintiff, seized the stock and also closed the Factory for a period of 92 days, thereby resulting in financial loss which is required to be made good by the defendants. He further submits that the authorities erred in seizing the entire stock instead of seizing alleged excess and also 9 erred in sealing the Factory. He further contends that trial court ought to have answered issue No.3 at the first instance. He would contend that under the provisions of the EC order 1981, a dealer can complete the accounts for each day before commencement of business on the next working day and not earlier to it. Hence, he contends no violation can be alleged if an inspection is conducted during mid day stating that registers did not disclose the entries on the days’ transaction. He would further contend that in spite of contending there being unreasonable delay in the release of goods and the defendants with a malicious intention had detained the goods, defendants were unable to disprove this fact, but on the other hand, admitted the same in their written statement about the delay. but attributed the same to administrative reasons which is erroneous and as such liable to be set aside. He would further contend that even if the act of search and seizure were to be held to be within the jurisdiction of defendants, it is apparent that the delay was deliberate and with malicious intention and as such, the suit ought to have been decreed. He would contend that defendant for not having denied that plaintiff had suffered any loss, the issue No.1 ought to have been answered in the affirmative and plaintiff 10 cannot be expected to prove anything further. He would elaborate his submission and contend that when defendants have contended in their written statement that plaintiff might have suffered financial loss was itself sufficient to answer issue No.2 in the affirmative. He would submit that the trial court erred in not considering the documentary evidence produced by the plaintiff while answering the issued framed by it and thereby it has resulted in erroneous judgment being passed and suit being dismissed. On these grounds, he prays for appeal being allowed and suit being decreed for 15,OO,OOO with future interest the date of filing of the appeal. In support of his submission, he has relied upon the following decisions: (i) (ii) (iii) (jr) AIR 1979 SC 711 (K L SUBHAYYA Vs. STATE OF KARNATAKA) 198 1(2) KAR.L. J 47 (VENKATESWARA TRADERS Vs. STATE OF KARNATAKA & OHERS) AIR (AHMED YAR JUNG Vs. SC 787 1974 COLLECTOR, LAND ACQUISITION, HYDERABAD) AIR 1963 SC 1547 (FIRM SETH RADHA KISHAN (DECEASED) REPRESENTED BY HARI KISHAN AND OTHER ADMINISTRATOR MUNICIPAL Vs. COMMIYFEE LUDHIANA) 11 (v) AIR 1970 SC 1298 (THE STATE OF WEST BENGAL Vs. THE INDIAN IRON AND STEEL CO. LTD.) (vi) AIR 1991 CAL 120 (BIMAL SAHOO, SECRETARY, BASUDEBPUR GIRLS’ HIGH SCHOOL AND OTHERS Vs. GOURI RANI PAHARI AND OThERS) (vii) AIR 1969 TRIPURA 1 (UNION TERRITORY OF TRIPURA AND ANOTHER Vs. MADHUSUDAN GUHA) (viii) AIR 1971 RAJASTHAN 167 (MANGALJI CHOTELAL AND ANOThER Vs. STATE OF RAJASTHAN) (ix) AIR 1942 BOM 300 (SHIVRAO SHESGIRI KALBAG Vs. SECRETARY OF STATE) (x) AIR 1962 M P 348 (STATE OF MADHYA PRADESH Vs. CH. JAWAHIRLAL BATAI SAO AND OTHERS) (xi) AIR 1967 SC 109 (JAHURI SAH AND OTHERS Vs. DWARIKA PRASAD JHUNJHUNWALA AND OTHERS)

10. Per contra. learned High Court Government Advocate submits that there was excess stock of broken rice and paddy and huge stock was recounted and authorities found excess stock of 216 bags of paddy. He further submits that authorities have discharged their obligations in accordance with law and the orders were passed as per the provisions of the Act and there was no malafide intention to seize the stock and the Factory. He submits that huge stock was seized from the plaintiff/Factory and there U was no other alternative accommodation to keep the stock and as such seized stock was kept in the Factory and Police were deputed to guard the stock. Merely because Police filed the B’ report, cannot be said that the officials had no reasonable cause for conducting raid on the Factory of the plaintiff arid seizing the stock. He further submits that the plaintiff has not proved the actual loss, if any. by producing books of accounts and the trial Court has rightly appreciated the evidence on record and dismissed the suit and there is no merit in the Appeal.

11. Having heard the learned advocates appearing for the parties and on perusal of the judgment and decree passed by the trial court as also the evidence both oral and documentary tendered by the parties before the trial court, the following points would arise for our consideration: (1) Whether the court below was justified in dismissing the suit filed by the plaintiff for recovery of damages? (2) What order?

12. For the purpose of convenience, we proceed to consider both the points together for consideration. 13

13. It is pertinent to state that plaintiff is a partnership firm carrying on business in Rice Mill. On 1 L8. 1992, the Food Cell Authorities, Gulbarga inspected the plaintiffs Rice Mill and found the plaintiff had stocked essential commodities. The authorities conducted physical stock verification and found the difference of stock as mentioned below: SLNo. Name essential commodities Rice Broken Rice Paddy 1 2 3 the Stock as per Physical I ledger difference 503 gtl. 80 gtl 2936 bags 500 gtl. 500 gtl. 3152 bags

3.00 gtl. 19.00 gtl. 216 bags. Seized goods were released on 13.11.1992.

14. Plaintiff has claimed that defendants with a malicious intention entered the Rice Mill of the plaintiff during mid-day and verified the stocks and found that there was difference in stock and as such, not only seized the excess stock, but the entire stock and also the Mill which is highly improper and as a result of plaintiffs Mill could not be run for 92 days and resulted in financial loss. Hence, the plaintiff has claimed damages. At this juncture, 14 would be necessary to state that as per paragraph- 10 of the plaint. the plaintiff has claimed compensation as under: (1) Loss of business and working of Mill (2) Loss due to damage to the goods and machinaries in the mill seized due to improper maintenance (3) Release certificate preventing utilisation of them (4) Interest on value of seized goods valued at26%p.a. (5) Bank Guarantee loss (6) Legal expenses (7) Stay at Bangalore (8) Misc. Expenses as STD Local phone calls, trunk calls and petrol (9) Reprocessing of rice (10) Sorting cost of Paddy (11) Loss of reputation and good will (12) Mental agony Total - - - - - - - - - - - - - Rs.4,05,360-00 Rs.6.4 1,884-00 Rs.3,32, 150-00 Rs.1,10,577-00 Rs. 2,580-00 Rs. 2,900-00 Rs. 4,700-00 Rs. 12,500-00 Rs 4,024-00 Rs. 9,444-00 Rs.7,00,000-00 Rs.3,00,000-00 Rs.25,26. 119-00 15

15. In the instant case, the authorities have exercised their power to enter, inspect, search and seize the essential commodity by virtue of the power conferred by the Karnataka Essential Commodities Licensing Order under Order No.14, if the authority has reason to believe that there is/or has been any contravention of the provisions” of the order, they have power to enter, search and seize. The said Order No.14 has been extracted to by the learned trial judge at paragraph 8(xv) of the judgment and as such, it is not repeated. In fact, the witness examined on behalf of the plaintiff admits in the cross examination dated 14.10.2003 (paragraph-2) that defendant 6 & 7 had right to initiate action for violation of the provisions of the Control Order. The contention of the plaintiff is with a malafide intention the defendants conducted the search and without entertaining reasonable ground, could not have conducted the search and in support of said submission he has relied upon the judgment in: (1) AIR 1979 SC 711 and (2)1981 (2) KU 47, supra. wherein it has been held that u/s.6(A) of the Act, the authority has to show that it had power to raid and seize the goods. In order to examine whether the act of the defendant is illegal or otherwise, we have to see the Essential 16 Commodities Control Order. As per Order No.14, if “reasonable belief’ is entertained by the authorities who conduct the search, it would meet the requirement of the law. In the case of Damodar Rice Industries by its Managing partner Vs. State of Kamataka reported in ILR 2004 KAR 1021, it has been held that under the Act and the Order, the Deputy Commissioner has power confiscate the entire stock of articles. The words “reasonable belief’ used in the Control Order No.14. cannot be used in a restricted sense. The doubt entertained by the authority about ‘reasonable belief’ of excess stock being available is sufficient to conduct the search. Hence, it cannot be construed or held that the search has been conducted with sinister motive. Admittedly, in the instant case at the time search, they noticed difference in stock and in this background of “reasonable belief’ seizure has been done and nothing much can be attributed for entertaining such a “reasonable belief’ which is without any malice. Learned trial judge has succinctly discussed these aspects in paragraph 8(xviii) to (xxvi). Admittedly, plaintiff has sought for damages under various heads as mentioned above. It is for the plaintiff to establish by cogent and positive evidence as to how the plaintiff 17 has suffered these losses and mere plea without amplification of the same and proving the same, the plaintiff is not entitled for the relief. There is no dispute that for the tortious liability of the government in respect of the acts done by its officials, government would be liable to pay the compensation on the ground of vicarious liability (vide AIR 1974 SC 787). But, in our finding recorded holding that acts of the officials namely the defendants was not with malafide intention, there is no merit in the suit. In short, the acts of defendants do not amount to an illegal act, and therefore question of tortious liability does not arise. Even otherwise, the plaintiffs have not produced any positive material to establish that on account of closure of the Mill, they have suffered any loss much less the loss claimed in the plaint or in this appeal except the self serving testimony of the plaintiff. In that view of the matter also, the trial court was fully justified in answering issue No.1,2, 4 to 6 and additional issue No.1 in the negative. The decisions cited by the learned counsel for the appellant are of no avail to the case of the appellant. We do not find any infirmity in the judgment and decree passed by the trial court and accordingly. the point No.1 formulated herein above is answered in the 18 affirmative by holding the trial court was correct dismissing the suit.

16. In view of the discussions made herein above, we pass the following: ORDER (1) Appeal fails and same is hereby dismissed. (2) Judgment and decree passed in OS No.119/1994 by the Addi. Civil Judge (Sr. Dn.), Raichur dated 14.10.2004 is hereby affirmed. (3) No order as to costs. Sd/ JUDGE JUDGE Bjs/PL