P&H HC | Principle of Natural Justice demands petitioner-miller to be associated with stock verification by Food Corporation of India; physical verification set aside

Punjab and Haryana High Court: The question before Jaishree Thakur J., was whether physical verification conducted by Food Corporation of India was arbitrary, incomplete and in violation of principles of natural justice when the agreement of the petitioner was made with Punjab State Co-operative Supply & Marketing Federation Ltd. (MARKFED).

Petitioner-miller had been allotted paddy for custom milling under the policy framed by the Government of Punjab. An agreement was signed between the petitioner and MARKFED. As per the agreement the petitioner was bound to deliver the resultant rice to the Food Corporation of India (FCI) within the prescribed period. However, the period of delivery was extended and the Government of India while allowing the extension imposed a condition that the Food Corporation must ensure that the paddy was physically available on the premises of the miller before accepting the consignment. The Branch Manager of the FCI along with other members visited the mill for physical verification of stock. As per the physical verification done, it was reported that 57713 bags of rice were short in the mill premises.


  • The petitioner vehemently contended that the physical verification was conducted arbitrarily and part of the stock was lying in another unit of the petitioner was not taken into consideration. It was further submitted that Food Corporation of India allowed the delivery of rice only to the extent of 760 MT paddy and did not accept the rice out of the paddy allegedly found short to the tune of 57713 bags whereas, the said paddy was not short, but was lying in the processing unit, godown and transferred to another unit for fortification of the rice.
  • No proper representative was present from the side of the petitioner during the verification which makes it improper. The petitioner requested a fresh verification by writing it to the MARKFED and other respondents.
  • It was submitted that thereafter on, a physical verification was done by the MARKFED through its In-charge, as per which there was no shortfall.
  • Petitioner insisted that agreement was signed only between the petitioner and the MARKFED and MARKFED being satisfied with the petitioner’s storage of paddy, there can be no case for the FCI to intrude into the bilateral and inter-se relationship between the petitioner and the procuring agency.
  • On the contrary FCI submitted that the physical verification conducted on the petitioner’s mill was by the team constituted after following the due procedure including the representative of the MARKFED. It was a special physical verification, as such; the miller was not required to be intimated in advance.
  • It was contended that the petitioner-miller was taking different pleas for non-availability of the stock at the time of physical verification, which being disputed questions of facts, cannot be accepted in the writ jurisdiction.
  • MARKFED submitted that in terms of Clause 16 of the policy, the physical verification was to be done fortnightly and as per Clause 16(v) of the policy, when the physical verification was to be done, the miller/his authorized representative has to be associated and they were to sign the physical verification report. However, MARKFED doubted FCI’s procedure while conducting the verification. Requirements of Clause 16 were not duly followed by FCI.

Decision and Analysis:

The Court analysed the stand of the MARKFED that the physical verification is done by the MARKFED at its level after every fourteen days and in the instant case, the last physical verification was done 3 days before the physical verification done by the FCI and even at that time, the stocks were found intact and there was no shortfall.

It was found that no prior intimation was provided to the petitioner which violated Clause 16 of the agreement. Also, no proper representative was present at the time of verification. It was also found that in the subsequent verification the stock was intact and no discrepancy was found. The Court while applying the principles of natural justice found that at time of verification it was the right of the petitioner to be present.

The Court observed that, “The petitioner has a privity of contract with the procurement agency and is bound by the terms and conditions therein. As per clause 16 of the policy, the physical verification report is to be signed by the miller, which signatures are not available in the instant case when FCI did its own physical verification of stock available at the petitioner’s Mill. Even the rules of natural justice would demand that a person would be associated at the time of doing any stock verification.”

The impugned verification was held unsustainable.[Gurdial Mal  v. Union of India, 2022 SCC OnLine P&H 764, decided on 25-03-2022]


Mr. Sushant Kareer, Advocate for the petitioner.

Mr. Kanisth Ganeriwala, AAG Punjab.

Mr. K.K. Gupta, Advocate for the FCI.

Mr. A.P.S. Mann, Advocate for the MARKFED.

Aastha Sharma, Editorial Assistant has reported this brief.

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