(2015) 400 KLW 460
IN THE HIGH COURT OF KERALA AT ERNAKULAM
PRESENT: THE HONOURABLE MR.JUSTICE A.MUHAMED MUSTAQUE
TUESDAY, THE 10TH DAY OF FEBRUARY 2015/21ST MAGHA, 1936
W.P.(C). Nos. 22765 & 29416 of 2014
PETITIONERS
1. MALAPPURAM DISTRICT RATION WHOLESALE DISTRIBUTORS FEDERATION,SUKAPURAM P.O.,EDAPPAL, MALAPURAM DISTRICT - 679 576 REPRESENTED BY ITS PRESIDENT.
2. THIRUR CO-OP RURAL BANK, AWD NO.10,THIRUR P.O - 676 101, REPRESENTED BY ITS SECRETARY.
3. M/S.M.VASUDEVAN,AWD NO.9, PRAKASH MILL,KUTTIPURAM - 679 571.
4. TIRUR FARMERS CO-OPERATIVE CREDIT & MARKETING SOCIETY, AWD NO.4,TALAKADATHUR,TIRUR - 676 103, REPRESENTED BY ITS SECRETARY.
5. K.SAKEER HUSSAIN,AWD NO.4,SUKAPURAM P.O., EDAPPAL,MALAPURAM DISTRICT - 679 576.
6. THE PONNANI CO-OP RURAL SOCIETY LTD, AWD - 15,THRIKKAVU,PONNANI - 679 577, REPRESENED BY ITS SECRETARY.
7. ANDATHODE SERVICE CO-OPERATIVE BAK LTD, AWD- 15,P.O.ARAMANGALAM,PONNANI - 679 587, REPRESETED BY ITS SECRETARY.
BY ADVS.SRI.K.LAKSHMINARAYANAN SMT.SATHYA SHREEPRIYA
RESPONDENTS
1. THE FOOD CORPORATION OF INDIA, BARAKAMBA LANE,HEAD QUARTERS,16-20, NEW DELHI - 1.
2. THE GENERAL MANAGER, FOOD CORPORATION F INDIA,TRIVANDRUM.
3. THE DIRECTOR OF CIVIL SUPPLIES,TRIVANDRUM.
4. DISTRICT COLLECTOR,MALAPPURAM.
5. THE DISTRICT SUPPLY OFFICER,MALAPPURAM.
6. THE GOVERNMET OF KERALA, FOOD AND SUPPLIES OF CONSUMER AFFAIRS DEPARTMENT, TRIVANDRUM,REPRESENTED BY ITS SECRETARY.
7. UNION OF INDIA,MINISTRY OF AGRICULTRUE AND CONSUMER AFFAIRS,FOOD & PUBLIC INSTRUCTIONS, KRISHI BHAVAN,NEW DELHI.
R1-R2 BY ADV. SRI.MATHEW GEORGE VADAKKEL, SC,FCI BY SRI.VARGHESE M.EASO,SC,FOOD CORPORATION OF INDIA R3-R6 BY SENIOR GOVT.PLEADER SRI.M.A.FAYAZ R7 BY SRI.N.NAGARESH,ASSISTANT SOLICITOR GENERAL OF INDIA
J U D G M E N T
These writ petitions are filed by Authorised Wholesale Distributors (for short, "AWDs") of rationed articles in Malappuram District and Kannur District feeling aggrieved by non-payment of additional transportation charges incurred by them consequent upon re-allocation of the depots of the Food Corporation of India (for short, "FCI") for lifting rationed articles in accordance with the terms in their respective agreements.
2. FCI is engaged by the State Government by virtue of the agreement entered in the year 1969. By the above said agreement, the Government has decided to entrust the work of distribution of rationed articles and other commodities through FCI. AWDs are appointed by the State Government under the Kerala Rationing Order for distribution of rationed articles. They are also attached to different sub depots in the area which are located under the FCI. AWDs are to lift the rationed articles from the pre-assigned depots/godowns of FCI.
3. The issue arisen in these cases is owing to the reason that the sub depots to which the petitioners were attached could not supply rationed articles authorised to be lifted by them. They were redirected to be lifted from other alternative godowns/depot belonged to FCI. This resulted in additional transportation expenditure to AWDs.
4. This issue is no longer res integra. This Court by a common judgment in W.P.(C).Nos.1264/2009 and 6449/2009 directed the State Government to pay the additional transportation charges at first instance and obtain reimbursement from the FCI. This judgment was also affirmed by the Division Bench of this Court in W.A.Nos.2426/2009 and 2808/2009. However, the learned counsel for the petitioners would urge that FCI has the liability to reimburse the cost as FCI is bound by the terms of the agreement entered into with the State Government to reimburse such costs.
5. There is no dispute to the fact that the petitioners are entitled for reimbursement of costs for lifting. Statement filed on behalf of the State also would show that FCI is liable to pay the additional transportation charges incurred by the petitioners. The additional charges incurred by the petitioners have to be certified by the supply officer concerned after verification of the distance covered by them.
6. The agreement entered into with the Government by FCI is produced as Ext.P4 in W.P.(C).No.22765/2014. In clause 8 of the agreement, it is agreed by the Corporation as follows:
"The Corporation shall reimburse to Government all additional expenses incurred by Government for making the above said other arrangements."
This arrangement is referred to movement of rationed articles to the retailers attached to the sub depots concerned. Petitioners' case is that though they are not party to the Ext.P4 agreement in W.P.(C). No.22765/2014 nevertheless being a beneficiary they are entitled for enforcement of such terms of the agreement.
7. It is to be noted that in the agreement between the Government and FCI, at various places reference has been made authorising the Corporation to collect expenses from the retail distributors, establishments and other persons authorized by the Government. This agreement clearly shows that even though petitioners are not party to the contract nevertheless agreed between the Government and Corporation that they are the subject of their contract and performance of the agreement is impossible without they being form part of it.
8. It is settled principle of law that strangers cannot sue under a contract. However, there are exceptions to this principle when a trust is created by the contract, the beneficiary can sue under the contract. The enforcement of the contract is not contractual but equitable {See
M.C.Chacko v. State Bank of Travancore [AIR 1970 SC 504]}.
The Hon'ble Supreme Court held in paras.9 and 10 as follows:
"9. The Kottayam Bank was being a party to the deed was not bound by the covenants in the deed, nor could it enforce the covenants. It is settled law that a person not a party to a contract cannot subject to certain well recognised exceptions, enforce the terms of the contract; the recognised exceptions are that beneficiaries under the terms of the contract or where the contract is a part of the family arrangement may enforce the covenant. In
Rankin, C. J. observed:
"Clause (d) of Section 2 of the Contract Act widens the definition of 'consideration' so as to enable a party to a contract to enforce the same in India in certain cases in which the English Law would regard that party as the recipient of a purely voluntary promise and would refuse to him a right of action on the ground of nudum pactum. Not only, however, is there nothing in Section 2 to encourage the idea that contracts can be enforced by a person who is not a party to the contract but this notion is rigidly excluded by the definition of 'promisor' and 'promisee' . Under the English Common Law only a person who is a party to a contract can sue on it and that the law knows nothing of a right gained by a third party arising out of a contract:
It has however been recognised that where a trust is created by a contract, a beneficiary may enforce the rights which the trust so created has given him. The basis of that rule is that though he is not a party to the contract his rights are equitable and not contractual. The Judicial Committee applied that rule to an Indian case
In a later case
the Judicial Committee pointed out that the purchaser' s contract to pay off a mortgage debt could not be enforce by the mortgagee who was not a party to the contract. It must therefore be taken as well settled that except in the case of a beneficiary under a trust created by a contract or in the case of a family arrangement, no right may be enforced by a person who is not a party to the contract.
10. Even if it be granted that there was an intention to create a charge, the Kottayam Bank not being a party to the deed enforce the charge only if it was a beneficiary under the terms of the contract, and it is not claimed that the Bank was a beneficiary under the deed Ex. D-1. The suit against M. C. Chacko must therefore be dismissed."
The beneficiary need not be understood as limited to the beneficiary of a trust alone. This principle clearly indicates that whoever be the beneficiary whether agent or AWD or such other affiliates to whom benefits have been intended by the terms of the agreement would fall within the meaning beneficiary.
9. The Calcutta High Court in
Bhujendra Nath Biswas and others vs. Sushamoyee Basu and another [AIR 1936 Calcutta 67]
and the Punjab-Haryana High Court in Babu Ram Budhu Mal and others. Vs. Dhan Singh Bishan Singh and others [AIR 1957 Punjab 169] have held that strangers to the contract being beneficiary is entitled to enforce contract.
10. The Delhi High Court in
Utair Aviation v. Jagson Airlines Limited and another
(order on I.A.No.8381/2008 in CS(OS).No.203/2009 dated 203/2009) held in para.28 as follows:
"28. A reading of the aforementioned judicial opinion coupled with well recognized exceptions that the privity can be created by virtue of conduct acknowledgment and admission, it becomes clear that any case where one party is made aware about the relationship of the other party with that of a stranger and the said party proceeds to contract out only with other party in question, knowing fully well the participation and role of the said stranger, further, it corresponds with the said third party/stranger, and conduct suggests kind of relationship, then there can be said to be a nexus or a privity which can be said to have been created by virtue of conduct. The said question essentially becomes a question of fact and basing upon the said fact finding, the law has to be necessarily applied as to whether the said person is a complete stranger to a contract or whether the privity can be said to have been created by way of conduct."