'We Swear By Rice': Kerala High Court Directs Supplyco To Clear Paddy Farmers' Dues In A Month, Criticises It For Shifting Liability

Justice Devan Ramachandran directed Supplyco to obtain a bank loan for making payments to the farmers based on a tripartite agreement between the bank, Supplyco and the Government.

“The petitioners cannot be put to any further prejudice, solely because the ‘Supplyco’ has not been able to garner resources to comply with their contractual commitments; nor can anything be attributed to them if the financing Bank causes any delay in grant of loan to the ‘Supplyco’ under the tripartite agreement between two of them and the Government. The shifting of any such responsibility onto the shoulders of the farmers is uncharitable and, in any case, wholly impermissible.”

The Court was hearing a batch of writ petitions filed by aggrieved farmers who sold their paddy to the State Government through Supplyco but have not received any payment in return.

Earlier, interim orders were passed by the Court to ensure that the farmers were paid by the respondents. The directions of the Court were not complied with and payment amounts were still due to many farmers.

The counsel for the petitioners submitted that full amounts were not disbursed to them under the Paddy Procurement Scheme and now they were being asked to go to banks and sign loan applications and documents. The petitioners prayed that Supplyco be directed to make full payments without delay.

The counsel for the respondents submitted before the Court that if payments were up to the amount of fifty thousand rupees, then they would be paid immediately and payments exceeding that amount would be made after Supplyco obtains a bank loan based on the tripartite agreement between the Bank, Supplyco and Government.

The Court found that payments up to the amount of Rs. 50,000 were disbursed and amounts exceeding the same were yet to be disbursed.

Justice Ramachandran emphasised that it is Supplyco's contractual obligation to pay the full Procurement Consideration and ensure that all eligible farmers, including the petitioners, are paid promptly.

“There can be little doubt, as is fully admitted, that it is the contractual obligation of the ‘Supplyco’ to pay fully under the Paddy Procurement Scheme; and hence it is their liability to ensure that every petitioner, as also other farmers, are paid their full Procurement Consideration at the earliest, especially when the agreed time frame fixed for such purpose has concededly expired.”

However, it noted that the delay was due to certain administrative difficulties faced by the Bank under the tripartite agreement. The Court observed that amounts were sanctioned, and payments would be made to the farmers if they approached the Banks and executed certain receipts.

The bench found that the petitioners misunderstood that they were asked to sign loan applications, instead they only had to go to the banks to execute certain receipts under the tripartite loan agreement.

The Court noted that as per the Procurement Scheme, payments ought to have been made to the farmers within sixty days of procurement of the paddy. During the hearing, the Court said, 

“We swear by rice, these are the people who give you rice and we don’t pay them.”

The Court found that the farmers apprehend that they will be made to sign loan applications and documents if they approach the bank directly and that they will be burdened with loan obligations later. It observed, based on the assurance given by the Counsel for Supplyco, that the farmers were being asked to approach the bank directly only to obtain due amounts on the execution of proper receipts.

The Court was assured that receipts would be accounted only against the loan account of Supplyco. However, it further noted that Supplyco had the liability to ensure that payments were effected to the farmers and now they cannot burden the farmers to go to the Bank and seek that the amounts be released to them.

Based on the above observations, the Court directed the payments to be disbursed to the farmers within a period of one month. It also noted that farmers can approach the banks directly and receive money through direct credit to their account by executing a receipt as opined by Supplyco.

However, the Court noted that if farmers were unable to approach the banks or find it difficult, then Supplyco should ensure that they also receive payments.

The Court directed the registry to place the matter before it on October 30 to ensure that the order has been complied with. It also directed Supplyco to file an Action Taken Report before the Court.

The petitioners were represented by Advocates Millu Dandapani, Legith T Kottakkal, P.R.Banerji, Binoy Vasudevan, Sreejith Sreenath, S.Ranjit, Gokul Das V.V.H., T.K.Sandeep, Veena Harikumar and Swetha R.

Citation: 2023 LiveLaw (Ker) 518

Case title: K Sivanandhan V State of Kerala and other matters

Case number: WP(C) NO. 23267 OF 2023, WP(C) NO. 24835 OF 2023, WP(C) NO. 25152 OF 2023, WP(C) NO. 25410 OF 2023, WP(C) NO. 25575 OF 2023

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