A. VENKATA SUBBA RAO versus STATE OF ANDHRA PRADESH

Citation: [1965] 2 S.C.R. 577 · Decided: 14-12-1964 · Supreme Court of India · Bench: A.K. SARKAR · Disposal: Dismissed

Cited by 2 judgment(s) · see the full citation network in Lexace

Judgment (excerpt)

B 
c 
A. VENKATA SUBBA RAO 
v. 
STATE OF ANDHRA PRADESH 
(With Connected Appeals) 
December 14, 1964 
[A. K. SARnll, N. RA.JAGOPALA AYYANGAR AND 
R. S. BACHAWAT, JJ.) 
577 
&1ential Supplle• (Temporary Powers) Act (XXIV 
of 1946)-
Procuring ag<nts--Appointed for procuring foodgraiM-lf agents of 
Government-Profit of procuring agent-Increased by action of Govent-
ment in ••ttl(ng pricu--Obligation of procuring agent to 
pay ovu lo 
Government. 
In the years 1947 and 1948 there WS! rice scarcity in certain distridl 
in Madras and Government took action under the Essential Supplies (Tem-
porary Powers) Act, 1946, and passed various Orders for procurement 
and distribution. 
The appellants were appointed procuring agents under 
that system. Their duty was to procure rice from specified areas at pricet 
D 
apecificd by the Government and to deliver it to the Government, or to 
per10ns nominated or to other licensed purch&!ers. 
The procurement 
price was lower than the selling price and the appellants were entitled to 
the difference between the two prices, under a contract entered into bet-
ween the appellants and the Government. Io July and December 1947 
and in November 1948, the Government passed 
orders 
increasing the 
prcies of sale. On the dates on which those orders came into force, the 
appellants had with them stocks of rice procured by them earlier and which 
I: they could aell at the higher sale price. 
Government thought that the 
appellants were not entitled to the increased profit derived on the sale ol 
111ch stocks at the increased sale price, because the enhancement in the 
appellants' profit was entirely due to Government action; and Government 
insisted that the excess awns which they deocribed .., "surcharges" lhould 
be paid over to the Government by the appellants. The Government 
employed three methods for realising the excess amounts. 
They were 
11 
(i) threat of cancellation of the licences, (ii) deduction of the amounts 
from moneya payable by the Government to the appellants and (iii) in 
the case of the incre&!e in November 1948, by requisition of the stock of 
rice lying with the appellants on the day 
immediately preceding 
the 
coming into force of the increased price, at the rate then obtaining, and 
releasing the stocks to the appellants upon their paying the surcharae or 
executing an agreement to pay it. 
G 
II 
Having paid the amounts under protest, the appellants filed suits for 
their recovery. Some of the suits were decreed and others dismissed. On 
appaal to the High Court by the aggrieved parties, the High Court decided 
all the appeals in favour of the State. In appeal to the Supreme Court, 
the appellants contended that the amounts collected by the respondent-
State were in the nature of an unlawful tax imposed by the executive. The 
res~ndeirt sought to support the judgment of the High Court, contending 
that (i) the appellants were agent• of the Government and liable to 
~unt for the profits; (ii) ihe appellants, if not-agents, stood in a fidu-
ciary capacity to the Government with the obligation to account; (iii) 
The Government W8! authorised to issue the direction to pay the sur-
.chargea to ii; (iv) in those cues where the amounts were realised by re-
578 
SUPRBMB 
COURT 
REPORTS 
(1965] 2 S.C.R. 
quisitioning and release, the appellants could not recover because, (a) 
the Government had the power to requisition the stock and direct the sale. 
and (b) by reason of the agreements to pay, the payments were \"Oluntary; 
and (v) some of the suits and claims were barred by limitation. 
HELD (Per Ayyangar and Bachawat, JJ) : (i) The appellants w~re 
not the agents of the Government and were 
therefore, not liable 
to 
account to the Government for the profits which they derived over and 
above those fixed for them by the relevant notifications of the Government. 
[604-EF] 
The purchases were made by the appellants out of their own funda; 
stored at their own cos~ any deterioration, driage or shortfall fell on them, 
and they were the full owners of the paddy procured. The basis' of the 
agreement to sell the rice which was with them, at the controlled price, was 
that they were the full owners of paddy. Sales-tax was payable by them 
on the sales, which would not have been the case if they were merely 
holding the foodgrains as commission agents on behalf of the Government; 
Further, the licence granted to them referred to the foodgrains in their 
possession as their stocks. 

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