Case Note & Summary
The Supreme Court allowed appeals by the Food Corporation of India (FCI) against a Punjab and Haryana High Court order that had directed allocation of paddy to lessees of blacklisted rice mills. The dispute arose from the Kharif Marketing Season 2004-05, where CBI investigation found defective rice quality, leading to blacklisting of 182 millers for 3-5 years. The FCI imposed a ban via Circular dated 10.10.2012. Subsequently, the defaulting millers leased their mills to new entities through unregistered lease deeds, which the FCI treated as sham transactions to circumvent the ban. The lessees filed writ petitions, and the High Court allowed them, holding that the new entities were separate and not liable for the lessors' defaults. The Supreme Court reversed, holding that the unregistered lease deeds did not satisfy Section 17(1)(d) of the Registration Act, 1908, and could not be relied upon. The Court further held that even if a firm took over a mill-in-default, no right to allocation exists unless the liabilities from the previous agreement are satisfied. The appeals were allowed, the High Court orders set aside, and the writ petitions dismissed with liberty to the lessees to pay dues and obtain a 'No Dues Certificate' for future allocation.
Headnote
A) Registration Act - Lease Deed Validity - Section 17(1)(d) Registration Act, 1908 - Unregistered lease deeds exceeding one year cannot be accepted as evidence of valid transfer of possessory rights - Court held that no reliance can be placed on such lease deeds as they do not satisfy statutory requirements (Para 12). B) Contract Law - Liability of Lessee - Custom Milling Agreement - Lessees stepping into shoes of defaulting millers cannot claim allocation of paddy unless liabilities of previous bilateral agreement are satisfied - Court held that even if a firm took over a mill-in-default, no right to allocation exists until dues are cleared (Para 13). C) Administrative Law - Blacklisting - Circumvention of Ban - Sham Transactions - Lease deeds executed to escape liability for substandard rice supply - Court held that what is impermissible for defaulting millers cannot be permitted through indirect means via new lessees (Paras 10, 12).
Issue of Consideration
Whether lessees who took over blacklisted rice mills on leasehold basis are entitled to allocation of paddy for custom milling despite the lessors' default and ban.
Final Decision
Appeals allowed. Orders of learned Single Judge and Division Bench of High Court set aside. Writ petitions of respondent-lessees dismissed with liberty to pay dues with penalty/interest of original rice millers and seek allocation on production of 'No Dues Certificate'.
Law Points
- Registration Act
- 1908
- Section 17(1)(d)
- Lease deed validity
- Blacklisting
- Custom milling
- Allocation of paddy
- Liability of lessee
