Read Time: 07 minutes

Synopsis

The Madras High Court recently observed that the Essential Commodities Act, 1955 is one of the primary reasons of the very existence of India's democracy.

The bench of Acting Chief Justice T Raja and Justice D Bharatha Chakravarthy noted in an order, "...without any exception, all Governments— both Central and State are extremely sensitive and careful when it comes to food and that is why, the people of this Country worship their leaders. In order to achieve this goal of procuring and supplying the essential commodities, the primary tool in the hands of the Government is the Essential Commodities Act".

"The importance of the said Act need not be restated by us. As a matter of fact, the primary difference between India as a colony under the British and India as an independent nation is that irrespective of vagaries of weather, failure of monsoons or floods, the majority of the people, the millions of the masses in this country are not allowed to go hungry. The work done by the Central and the State Corporations in this regard is uncomparable and the amount of essential commodities which are procured, stored and distributed and made available for every human being to consume is unmatchable", added the bench. 

The high court was dealing with a plea filed against the low payments made to the sugarcane farmers by a company named ThiruArooran Sugars Limited.

Allegedly, a total sum of Rs.157.51 crore was due for payment to the farmers by the company for the sugarcane supplied during the year 2013 to 2017. In 2021, the company had gone into liquidation and it was taken over by another company named Kals Distilleries Private Limited.

The petitioner alleged that full payment to the farmers was being evaded by the companies and instead, they were being ordered to take only a fraction of the total sum due.

However, the respondents' argument was that the liquidator had admitted the claim of the farmers only to the tune of Rs.78.48 Crores out of which a major portion had already been paid to them. 

Court took into account the proceedings before the National Company Law Tribunal (NCLT) and observed that the very compromise proceedings under Section 230 of the Companies Act and the manner in which it was dealt with were totally without considering the plight of the farmers and the effect of the provisions and proceedings under the Essential Commodities Act.

Court said that before the Tribunal, no empathetic consideration whatsoever was made while deciding the farmers' representative on board or while deciding the total amount admitted to be due or while deciding the percentage of the amount to be paid.

However, court underscored that since the order passed by the NCLT was not under challenge before it, therefore, it was not appropriate to interfere with the same. 

Further, court observed that still 43% of the admitted claim of Rs.78.48 crore was due for payment whereas Kals Distilleries Pvt Ltd had paid and discharged their liabilities of Rs.45.01 crore.

Accordingly, while stating that it was the state government that had failed to take steps to protect farmers' interests before the NCLT, the court held it liable to make good the loss to the farmers.

In view of the same, court directed the state government to pay the balance sum of Rs.33.46 crore to the farmers within three months from the date of the order. 

Case Title: P.Ayyakannu v The Government of Tamilnadu and Others