SC Upholds Gujarat HC’s Refusal To Issue Writ To State Authorities To Aid Recovery Of Dues Of Over 37,000 Farmers From Private Corporation

The Supreme Court bench headed by Chief Justice Dipak Misra on Friday refused to interfere with the Gujarat High Court order of October, 2017, wherein the High Court had ruled that, in exercise of its writ jurisdiction under Article 226, it cannot issue directions to state authorities to aid in the recovery of the outstanding dues of over 37,000 farmers from a private corporation engaged in crop improvement and development of hybrid seeds.

Disposing off the SLP filed by Sabarkantha Lok Adhikar Manch and a Gujarat farmers union, the bench on Friday directed the petitioners to make a Representation to the Agriculture and Cooperation Department of the government of Gujarat within four weeks.

Before the High Court, it was submitted that the aforesaid Company, through the network of 85 organisers and more than 37,000 farmers, undertook the work of production and processing of hybrid cotton seeds. The said Company entered into written agreements with the said 85 organisers, who undertook to identify the good progressive farmers and fertile agricultural lands for production of hybrid cotton seeds. Thus, the said organisers acted as intermediary link between the Company and the farmers for providing requisite assistance to Company and the farmers for production and supply of superior quality hybrid cotton seeds.

In pursuance of the aforesaid agreements, the farmers began production of hybrid cotton seeds. Up to 2011­-12 the company continued to make payment on regular basis. However, the Company committed defaults in making payments after the year 2011-12and as on December 31, 2016, an amount of more than Rs.1 crore, inclusive of interest, stood outstanding.

The relief prayed for before the High Court included inter alia-

(A) to issue a writ of mandamus or any other appropriate writ, order or direction and be pleased to direct the respondent State authorities to take the appropriate steps to ensure the recovery of the outstanding dues of 37347 farmers from the respondent company;

(B) to issue a writ of mandamus or any other appropriate writ, order or direction and be pleased to direct the respondent State authorities to take up the issue with the Finance Department and the Reserve Bank of India to issue the directions and guidelines to the major banks to sanction the loans to the respondent company as a special case only for the purpose of clearing the outstanding dues of the farmers.

It was the case of the petitioners that respondent company has not made payment of the outstanding dues of the petitioners and therefore, appropriate directions be issued for early recovery of the outstanding dues. It was submitted that the State Bank of India and other Banks, which have extended credit facility to respondent Company, are the members of Corporate Debt Restructuring Package, being the secured creditors of the Company. Since the respondent Company has failed to discharge the debts of the aforesaid Banks, the loan accounts of the Company have been restructured under the Corporate Debt Restructuring Package.

The State Bank of India is the lead Bank for enforcing the security interest of all the Banks. Proceedings under the provisions of the SARFAESI Act, 2000 have also been initiated against the respondent Company. The concerned Banks have also taken over possession of some of the properties of respondent Company and they are likely to take over all assets of the Company in due course. It was, therefore, requested that this is the last resort for 37000 and odd farmers for recovery of the dues from the respondent Company and therefore, appropriate directions deserves to be issued to the respondent state authorities.

Dismissing the writ petition, the High Court had observed, “From the averments made in the petition and the submissions canvassed by learned advocate for the petitioners, it transpires that the present petition has been filed for recovery of dues from respondent no.7, which is a private limited company. In our view, when the concerned farmers have entered into agreements with respondent no.7 Company, through the concerned organisers and when it is the case of the concerned farmers that respondent no.7 Company has committed default in making necessary payments, this writ petition under Article 226 of the Constitution is not the remedy. No directions, as prayed for, can be issued against the respondent ­ State authorities. The appropriate remedy available to the petitioners is to initiate appropriate proceedings before the appropriate Court for recovery of the outstanding dues, as Writ is not the remedy”.