JS BANK LIMITED, KARACHI vs PROVINCE OF PUNJAB through Secretary Food, Lahore Rr

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JS BANK LIMITED, KARACHI VS PROVINCE OF PUNJAB through Secretary Food, Lahore Rr. 9(3), 12(3), 14(1) & 14(10)---Punjab Sugar Factories Control Act (XXII of 1950), Ss. 6(2), 6(3), 6(4), 11(4), 13, 14 & Preamble---Sale of Goods Act (III of 1930), Ss. 19 & 53(2)---Dispute between cane growers and sugar mills over payment of price of sugar cane provided to the mills---Unjust enrichment---Remedial constructive trust---Scope---Cane Commissioner allowed the sugar mills to start crushing for fresh season but upon their undertaking and offer for sale of refined sugar stocks to pay the cane growers---Petitioner-banks filed Constitutional petitions before the High Court challenging the action of the Cane Commissioner whereby the refined sugar as per their contention, was pledged with the banks against the "Running Finance" facility extended to the Sugar Mills, and therefore the banks had a first charge being secured creditors upon the refined sugar---Constitutional petitions filed by the banks were dismissed, and Intra-Court Appeal filed there against were also dismissed ---[Per Amin-ud-Din Khan, J; (Minority view): For purchase of cane sugar cane growers and sugar factories entered into a mandatory agreement under R. 9(3) of the Punjab Sugar Factories Control Rules, 1950 ('the Rules')---Grower was bound to supply the sugar cane to the Occupier (sugar mills) and entitled to receive the price within two weeks---Grower supplied cane to the occupier in view of such statutory assurance---Cane Commissioner acted as a statutory fiduciary for both the parties; he was the key person who ensured required amount of cane supply to the Occupier (sugar mills) and payment for the cane to the grower---If the occupier (sugar mills) purchased sugar cane from the grower under the statutory assurance and converted it for its own use without paying to the grower (without any legal justification), it would amount to unjust enrichment with the occupier and the same could not be allowed---In such like situations, the courts may apply the doctrine of "remedial constructive trust"---After the passing of legal title of sugar cane to the Occupier, the equitable title shall remain with the grower till the payment was made and the buyer/occupier of the mills could not pass on (to the bank) better title than his own---Court would be justified in imposing constructive trust upon the converted goods/sugar cane in the possession of the Occupier in favour of the grower---Since, the title of refined sugar to the extent of unpaid amount remained with the growers, there arose no occasion for the lien of the creditor banks to the "pledged stock"---Valid pledge could only be created against the goods owned by the occupier and not the third party---Creditor banks and the growers were strangers to each other and their respective rights were not dependent upon each other---[Per Mushir Alam, J (Majority view): Transaction regulated through Punjab Sugar Factories Control Act, 1950 ('the 1950 Act') was not a compulsory acquisition of property but, a valid agreement for the sale of goods; it was an enforceable contract under law; it did not lack free consent of the parties, and did not completely exclude mutual assent---Interest of the cane growers was not that of an unsecured creditor but, of a party carrying a Statutory First Charge granting them preference over all other creditors, unsecured or secured alike, of the sugar mills---Statutory First Charge clinched onto the goods and withstood any changes that may occur to the goods---Cane growers also had a statutory first charge through the operation of S. 53(2) of the Sale of Goods Act, 1930 ('the 1930 Act') that granted them preferential treatment over secured creditors of the sugar mill to recover the purchase price of unpaid goods---Furthermore the interest accrued under R. 14(10) of the Punjab Sugar Factories Rules, 1950 due to the delayed and defaulted payment of the sugar mills would also form part of the liability that carried a Statutory First Charge under S. 6(3) of the 1950 Act and shall be paid to the cane grower---Reference in S. 11(4) of the 1950 Act to the liability being collected as 'arrears of land revenue' was to enable the Cane Commissioner, access to an existing mechanism to protect the rights of the cane growers---Action not initiated by the Cane Commissioner, after the statutory period to collect the payment for the sugarcane had lapsed would result in the scrutiny of the court, as well as, warrant departmental proceedings against the Cane Commissioner, himself for abdicating to perform statutory duties casted upon him under the law---Supreme Court directed that the Cane Commissioner shall calculate the liability, including interest to be calculated from the date the sugar cane was delivered, owed by the sugar mills and to ensure all necessary legal means to fulfill the outstanding debts of the cane growers, and that the Deputy Registrar (Judicial) of the High Court shall release the collected amount to the cane commissioner for the disbursement to the sugar cane growers---Petitions for leave to appeal were dismissed and leave was refused.

JS BANK LIMITED, KARACHI vs PROVINCE OF PUNJAB through Secretary Food, Lahore Rr — 2021 SCMR 1617 SUPREME-COURT

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