Bank Guarantee Encashment 'Illegal and Unjustified' in Allotment Case: Punjab and Haryana High Court

In a significant legal development, the Punjab and Haryana High Court, under the stewardship of HON'BLE MR. JUSTICE JAGMOHAN BANSAL, has issued a landmark judgment on October 13, 2023. The ruling revolves around the contentious issue of paddy allotment for the Kharif Marketing Season (KMS) 2023-2024 and a protracted dispute between the petitioner, M/S JAGDAMBE RICE AND GENERAL MILLS, and the respondent, STATE OF PUNJAB through MARKFED.

The High Court's decision hinges on the encashment of a bank guarantee of Rs. 41 lakhs by MARKFED, which was declared "illegal and unjustified" by a Division Bench. This encashment had been a contentious point in the longstanding legal battle. Despite the encashment and the dismissal of a suit seeking recovery of Rs. 9,28,507/-, the respondent insisted on a claim of Rs. 1 crore, with the principal amount being Rs. 9,28,507/- and the remainder as interest.

The judgment notably highlights the absence of a crystallized demand against the petitioner, given the dismissal of the civil suit and the first appeal. It emphasizes that the mere pendency of a Regular Second Appeal (RSA) does not create an absolute or vested right. The petitioner had a history of receiving paddy allotments from 1995-1996 to 2022-2023 without any allegations of default. Additionally, the Court had previously ruled that MARKFED had wrongly encashed the bank guarantee of Rs. 41 lakhs.

The Court further criticized the Allotment Committee's lack of independent consideration and its apparent alignment with MARKFED, as it ignored various orders issued by the High Court. The judgment underlines the absence of any specific policy clause invoked by the respondent to justify the denial of paddy allotment.

As a result of these findings, the High Court allowed the petitioner's plea, setting aside the impugned order dated September 19, 2023. The respondents were directed to reconsider the petitioner for the allotment of free paddy for KMS 2023-2024.

This judgment serves as a significant legal precedent, emphasizing the importance of fairness, proper consideration, and adherence to established legal principles in matters of allotment and contractual disputes.

In response to the judgment, Mr. Daman Dhir and Ms. Raman Dhir, advocates for the petitioner, expressed their satisfaction, stating, "This decision reaffirms the principles of justice and fairness in contractual disputes. The High Court's clear and reasoned ruling provides much-needed clarity in such matters."

Date of Decision: 13.10.2023

M/S JAGDAMBE RICE AND GENERAL MILLS   vs  STATE OF PUNJAB AND OTHERS