The Union of India (UOI) vs Bipra Charan Panigrahi and Another

R.N. Misra, J.—Defendant No. 1 in R suit for recovery of money has appealed against the confirming judgment and decree of the learned Subordinate Judge of Berhampur.

Plaintiff was a licensed dealer under the Orissa Rice Procurement (Levy) Order, 1961 and was required to procure paddy and supply the same to the Union of India under the joint scheme of the State Government and the Central Government. During the relevant period, the Union Government had opened an office at Khurda Road and had appointed the Assistant Director of Food (Defendant No. 2) as its Purchase Officer. Plaintiff supplied rice from Berhampur rail way station between 13-2-1965 and 21-4-1965 and received payments therefore excepting the sales tax payable under the Central Sales Tax Act of 1956. When Plaintiff was not paid the sales-tax, at his instance the Purchasing Officer, i. e., the Assistant Director of Food on behalf of the President of India furnished undertakings to Plaintiff to reimburse him in case Plaintiff was made liable to pay tax under the Central Sales Tax Act in respect of these supplies. Plaintiff was assessed to sales-tax and was called upon to repay the same. He deposited the tax on 11.3.1966 and claimed reimbursement in terms of the undertakings. Defendants having failed to pay the same, the suit was instituted on 15.3.1969.

Defendants entered contest by filing separate written statements but raising similar pleas. It was claimed that the Assistant Director of Food at Khurda Road was not the Purchasing Officer and had no authority to bind the Union Government. In the absence of an appropriate contract satisfying the requirements of Article 299 (1) of the Constitution, no liability binding the Union Government could be created. The transactions in question between Plaintiff and Defendants did not constitute sale and, therefore, liability under the Central Sales Tax Act was not attracted. The suit was claimed to be barred by limitation.

All the issues were decided in favour of the Plaintiff and accordingly the suit was decreed. In the lower appellate Court, Defendants'' appeal was dismissed and the decree has been upheld. This second appeal has been carried against the concurrent decision of the learned Appellate Judge.

In this Court, Mr. Das for Defendant No. 1 Appellant raises two contentions:

(i) The undertakings for reimbursement under Exts. 1 and 2 given by the second Defendant do not bind the Union of India in the absence of compliance of Article 299(1) of the Constitution and

(ii) The claim is barred by limitation.

Exts. 1 and 2 are in similar terms though quantities in respect of which the undertaking has been given differ. The undertaking is in the following terms:

This is to certify that M/s. Bipro Charan Panigrahi, Berhampur, have booked the following consignment, on behalf of the President of India, in pursuance of THE ORISSA RICE PROCUREMENT (LEVY) ORDER 1964-Order No. G.S.R. 1738 Dated 1-12-1965 of the Ministry of Food and Agriculture (Deptt. of Food). If the party is made liable to pay any purchase or Sales Tax in accordance with the provision of law in force or likely to come into force at future date. The President of India hereby undertake to reimburse the amount of tax to the party.

Defendant No. 2 has signed at the foot of the undertaking by describing himself as Assistant Director (Food) for and on behalf of the President of India. The learned Appellate Judge dealing with this question has stated:

It is not disputed that during the period of 1964-65 the Joint and Deputy Directors were posted at Cuttack and one Assistant Director Mr. Khosla was posted at Khurda Road for the purpose of paddy procurement. It is further not disputed that the Plaintiff being one of the licensing purchasing agents under the State of Orissa was directed to make purchases on behalf of the Union of India and accordingly he made the supplies and received the price. The Union of India has submitted such an argument before this Court relying upon a notification issued by the Ministry of Law, New Delhi, on the First December, 1958. It will be profitable to mention the said notification in detail for the purpose of appreciation of the argument advanced by the parties. The notification runs like this:

G.S.R. 1161: In exercise of the powers conferred by Clause (1) of Article 299 of the Constitution and in supersession of the notification of the Govt. of India in the Ministry of Law, No. S.R. Order 3442, dated the 2nd November, 1955, the President hereby directs that the under-mentioned contracts and assurances of property made in the exercise of the executive power of the Union may be executed on his behalf as follows:

In toe case of the Ministry of Food and Agriculture VII-B - in the case of the Department of Food: 1(a) All contracts and instruments relating to purchase, supply and conveyance or carriage of materials, stores, machinery and foodgrains:

(b) ...

(c) ...

By the Director General of Food, Deputy Director General of Food; Deputy Secretary; Under Secretary, Regional Directors (Food); Directors, Joint Directors; Deputy Directors; The Chief Director of Purchase; The Director of Purchase, Joint Director of Purchase; Deputy Director of Purchase or Assistant Directors of Purchase....''

Relying upon this notification, it is contended by the learned Counsel for the Defendants who are the Appellants here that the President of India only authorised the Joint Directors and Deputy Directors to have any sort of contract with any person in regard to supply of food. But from the Orissa Rice Procurement (Levy) Order 1964, it appears that in Section 2(c) ''Purchase Officer'' means the Joint Director of Government of India, Orissa and includes the Deputy Director (Food) or any other officer appointed by the Central Government to exercise the powers of the Purchase Officer under the said Order. Under Clause (d) the ''licensed dealer'' means ''the person holding a valid licence'' under an order issued by the State Government under the Essential Commodities Act, 1955, for the licensing of food grains dealers and for the time being in force and under Clause (e) ''licensed miller'' means the owner or other person in charge of rice mill holding a valid licence under the Rice Milling Industry (Regulation) Act, 1958. As pH these definitions the fact remains undisputed that the Plaintiff was treated as a licensed dealer for the purpose of supply of rice. His supply, therefore, has been accepted by the Assistant Director of Purchases at Khurda Road.

That the Assistant Director of Food was designated as the Assistant Director of Purchases is not disputed. That he was the man on the spot dealing with the matter is also not disputed. Mr. Das no more disputes the position that supplies effected for price under the scheme would constitute sales in view of a series of decisions of the Supreme Court and of this Court. At the time when supplies were effected, the Union of India as purchaser was obliged to pay sales-tax. That had been deferred because the position was not very certain then and Plaintiff had in lieu of the tax accepted the undertakings. Taking an overall picture of the matter, I do not think, the Courts below have gone wrong in holding that the Assistant Director concerned was not entitled to give the undertaking. In fact, no additional liability has been created for the Union of India except that what should have been paid contemporaneously with the transactions has been undertaken to be paid if liability of the Plaintiff accrues. I would accordingly negative the contention advanced on behalf of the Appellant and hold that the undertaking bound the Union of India because apart from anything else it derived a benefit of postponing the liability to pay sales-tax to a future date. Defendant No. 1 is estopped from taking the stand that the undertaking did not bind it. In fact, if the undertaking had not been given, Plaintiff would have insisted upon payment of sales-tax contemporaneously and he changed his position relying upon the undertaking given by no other person than the person who was representing the Union of India at the spot for the dealings between the parties. The first contention of Mr. Das must accordingly fail.

The terms of the undertaking have already been extracted. Cause of action for the Plaintiff would arise when Plaintiff pays sales-tax because the undertaking is for reimbursement. A is said to reimburse B when on account of A, B has spent some money and on claim being raised by B, A pays the amount. Cause of action for reimbursement thus arises only when Plaintiff has paid the tax on account of the Defendants. It is conceded that the suit is within limitation from either the date of assessment or the date of payment of the tax. But relying on a Single Judge decision of this Court in Union of India v. Messrs Pravat Rice Mill and Ors. F.A. No. 100 of 1971-D/16-10-1974, disposed of on 16th October, 1974, Mr. Das contends that the suit must be held to be barred by limitation.

As it appears the suit of the aforesaid first appeal was of similar type as that of the present suit. Rice had been supplied between 10-1-1965 and 31-3-1965. The suit was Instituted in the year 1969. The trial Court stated that in view of the period of limitation of three years, the suit would be out of time, but taking the dates of payment of sales-tax into account, the decree was given. Before the learned Single Judge reliance was placed on a Bench decision in the case of Commissioner of income tax, Bihar and Orissa, Patna v. Bijoy Kumar Das ILR 1971 Cutt 1351, in support of the contention that sales-tax is a part of the price of the goods sold, undoubtedly it is. That has however, nothing to do with a suit of this type where the claim for reimbursement arises when payment has been made by the Plaintiff for the Defendant and Defendant commits breach of the undertaking in not reimbursing the Plaintiff. The question that bad been considered in the -reported decision by the Division Bench was not one which has any material bearing on the question of limitation in a suit of this type. The pleading in regard to accrual of cause of action in the unreported decision is not before me and I am, therefore, not in a position to appreciate as to under what circumstances, limitation was found to run from the date of the transaction. In the plaint before me, in paragraph 8, it has been clearly stated that the cause of action arose on 11-3-1966 when the sales-tax dues were paid into the State Bank of India at Berhampur. As I find, the undertaking under Exts. 1 and 2 also indicated that to be the basis for the cause of action. "Therefore, Defendants'' lability to reimburse arose when Plaintiff met the liability on behalf of the Defendants.

The suit has been filed within three years from that date and accordingly I am not in a position to accept the contention of ''Mr. Das that the suit is out of time.

The second appeal is devoid of merit and it is unfortunate that the Union of India has thought it appropriate to carry this litigation involving a small claim of Rs. 625 68 only to this Court. The second appeal is accordingly dismissed with costs. Even though Respondents have not appeared and ordinarily costs would not be granted on that account, I think it is an appropriate case where costs should also be assessed. Hearing fee is assessed at rupees one hundred.