FOOD CORPORATION OF INDIA AND ORS. versus JAGANNATH DUTTA AND ORS.

Citation: [1993] 2 S.C.R. 497 · Decided: 18-03-1993 · Supreme Court of India · Bench: KULDIP SINGH · Disposal: Appeal(s) allowed

Judgment (excerpt)

FOOD CORPORATION OF INDIA AND ORS. 
v. 
JAGANNATH DUTTA AND ORS. 
MARCH 18, 1993 
[KULDIP SINGH AND N.M. KASLIWAL, JJ.] 
Constitution of India 1950: Articles 14 and 226-Contractual agreement 
for clearing, transporting, storing and distribution of foodgrains-FCJ-Ter-
minating agreement-Relief in writ petition-Whether pem1issib/e--He/d con-
A 
B 
tractual agreement tenninated pursuant to policy decision. 
C 
The Food Corporation of India - appellant entered into an agree-
ment dated August 14, 1967 with the respondent No. 1 entrusting him the 
work of clearing, transporting, storing and distribution of foodgrains on 
behalf of the Corporation viz. a storage agency by the Corporation. Clause 
37 of the agreement provided that either party was at liberty without D 
assigning any reason to terminate the agreement on giving two months 
prior notice in m-iting. 
The Managing Director of the Corporation in the meeting of the 
Zonal Managers, Senior Regional Managers and other officers held on 
September 20/21, 1984 pointed ol!t that the private storage agencies were 
responsible for high transit losses of the foodgrains in the State of West 
Bengal, and directed that the desirability of continuing the system of 
storage agents be examined. Immediately a Committee was formed to go 
E 
into this question. The Committee reported against continuing the storage 
agency system, and the report was accepted in principle, a final decision 
F 
to abolish the storage agency was taken, and a target date for abolition 
was fixed for compliance. This decision was contained in the letter of the 
Zonal Manager dated 14th March 1985. 
The District Manager by his notice dated June 25, 1987 terminated G 
the storage agency agreement with the respondent with effect from August 
31, 1987. The respondent challenged the validity of the notice by way of a 
writ petition under Article 226 of the Constitution before the High Court. 
The respondent challenged the termination notice on the grounds that : 
(i) clause 37 of the agreement was arbitrary and as such violative of 
Article 14 of the Const~tution, (ii) clause 37 was unilateral, against natural H 
497 
._J 
498 
SUPREME COURT REPORTS 
[1993] 2 S.C.R. 
A justice, unlawful and as such was void under section 24 of the Indian 
Contract Act, and (iii) the action of the Corporation was arbitrary against 
public policy and public interest. 
B 
A Division Bench of the High Court did not go into any of the 
aroresaid grounds contended by the respondent and instead examined the 
correspondence and various office orders placed before it by the Corpora-
tion, and came to the conclusion that in fact no policy decision was taken 
by the FCI before terminating the agreement, and set aside the notice 
dated June 25, 1987. 
C 
Allowing the appeal of the FCI, this Court, 
HELD : 1. The High Court was not justified in quashing the notice 
especially when the terms and conditions of the Contract permitted the 
termination of the agreement by either of the parties. [501G] 
D 
2. The High Court should n0t have gone into the question of con· 
. tractual obligation in its writ jurisdiction under Article 226 of the Con-
stitution. [501G] 
3. The High Court misread the documents on record and grossly 
E erred in reaching the conclusion that no policy decision was taken by the 
;>. 
FCI to terminate the storage agencies in the State of West Bengal. [501H] 
In the instant case, there is no manner of doubt that a policy 
decision was taken at the level of the Zonal Manager to abolish the storage 
agencies and the said decision was approved by the Head Ollke of the 
F 
FCI. The letter dated March 14, 1985 of the Zonal Manager indicates the 
plan to be worked ont for abolishing the storage agencies in the West 
;;· 
Bengal Region. [504B-D] 
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 977 of 
G 1991. 
From the Judgment and Order dated 31.5.89 of the Calcutta High 
Court in Appeal No. 662 of 1987. 
K.T.S. Tutsi, Additional Solicitor General, Vivek Gambhir and S.K. 
H Gambhir for the Appellants. 
F.C.I. v. JAGAN NATH DUTTA [KULDIP SINGH, J.] 
499 
R.K. Jain, Ascom Mehrotra, Sunil K Jain, Vijay Hansaria and Ms. A 
Sangeet Mehrotra for the Respondents. 
The Judgment of the Court was delivered by 
I 
KULDIP SINGH, J. Food Corporation of India (FCI) entered into 
an agreement dated August 14, 1967 with Jagarinath Dutta entrusting him 
the work of clearing, transporting, storing and distribution of foodgrains 
on behalf of the 

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