As per case facts, a rice mill, the petitioner, engaged in custom milling of paddy under an agreement with the State. A physical verification revealed a significant shortage of allocated ...
CWP-4767-2026 (O&M) -1-
IN THE HIGH COURT OF PUNJAB AND HARYANA AT
CHANDIGARH
310 CWP-4767-2026 (O&M)
Date of decision: 27.05.2026
M/s United Foods, through its partner
Naseeb Singh
....Petitioner
Vs.
State of Haryana and others
....Respondents
CORAM : HON’BLE MR. JUSTICE HARSH BUNGER
Present: Mr. Sanjeev Sharma, Sr. Advocate assisted by
Mr. Vikramvir Sharda, Advocate
for the petitioner.
Mr. Abhimanyu Antil, DAG, Haryana.
*****
HARSH BUNGER J.
1 Petition herein is, inter alia, seeking a writ in the nature of
Certiorari, for setting aside the office letter dated 09.12.2025 (Annexure
P-23) and also order dated 09.02.2026 (Annexure P-25), both issued by
office of Director General, Department of Food, Civil Supplies and
Consumer Affairs, Haryana.
2. Briefly, the petitioner is registered partnership firm, which
operates a rice mill, situated at District Karnal, Haryana. Petitioner firm is
engaged in work of custom milling of paddy since 2017. It is stated that the
Government of India adopts a policy of custom milling of paddy whereunder
the State Government and its procurement agencies purchase paddy from the
open market at Minimum Support Price (MSP) fixed by the Government of
CWP-4767-2026 (O&M) -2-
India and the said paddy is allotted to the rice millers for its milling/shelling
as per custom milling policy framed by the State Government.
3. It is averred that after the milling, the resultant rice is delivered
to the Food Corporation of India (FCI), in the central pool by the rice millers
in the account of the concerned State Agency and the cost of rice and another
charges are claimed by the concerned State Agency from the Food
Corporation of India (FCI) as fixed by the Government of India.
3.1 It is stated that the petitioner had been entering into agreement
for the last many years with the State of Haryana, through District Food and
Supplies Controller and/or such other authority for custom milling of paddy
in accordance with the terms and conditions of the agreement. It is claimed
that the work of the petitioner has been satisfactory as he has been supplying
rice within the timeline agreed upon and there has been no complaint of any
embezzlement and/or misappropriation against the petitioner.
4. Government of Haryana had issued Policy/instructions on
16/18.09.2025 (Annexure P-1) for Paddy Procurement and its Milling during
Kharif Marketing Season (KMS) 2025-26. Accordingly, petitioner-firm is
stated to have entered into an agreement dated 10.10.2025 (Annexure P-2)
with the District Food and Supplies Controller, for paddy milling for the
Kharif Marketing Season 2025-26; whereupon, the petitioner was allotted
3772 Mt. of paddy for milling into rice.
4.1 As per the agreement, the petitioner is required to mill the
paddy supplied to it and deliver the rice to FCI directly, as per prescribed
CWP-4767-2026 (O&M) -3-
quality specifications and as per the delivery schedule upto June 2026
(subject to milling period decided by the Government of India).
4.2 It is stated that a miller is required to carry out the milling
operation only on that paddy, in respect of which the release order has been
issued by the District Food and Supplies Controller and/or any other
competent authority. It is further stated that in order to secure the interest of
the Department, the petitioner has submitted security in form of Fixed
Deposit Receipt (FDR) in favour of District Food and Supplies Controller
(DFSC), Karnal and also submitted a cheque of Rs.50,00,000/- in favour of
DFSC, Karnal. In addition to the aforesaid cheque and FDR, the petitioner is
also stated to have submitted 2/3rd party sureties of reputed commission
agents/rice millers, who have also handed over two cheques of
Rs.50,00,000/- (each) in favour of DFSC, in order to secure the interest of
the department, in the paddy allocated to the petitioner.
4.3 Concededly, the department allocated 3772 Mt. paddy to the
petitioner for milling; out of which the petitioner claims to have milled
approximately 610 Mt. paddy and the resultant 409 Mt. rice was stored in
the premises of the petitioner, for delivery to Food Corporation of India as
per the delivery schedule. It is stated that balance 3162 Mt. of paddy was
available in the premises of the petitioner in terms of agreement dated
10.10.2025 (Annexure P-2); however, on 16.11.2025, certain officials of the
Food and Supplies Department, Haryana, conducted a physical verification
(P.V.) of the stock available in the premises of the petitioner, whereupon, it
was found that out of 3772 Mt. of paddy allocated to the petitioner, only
CWP-4767-2026 (O&M) -4-
2767 Mt. paddy was found available in the premises of the petitioner,
therefore, there was a shortage of 1005 Mt. paddy. In this regard, report of
physical verification at 16.11.2025 is attached as Annexure P-3.
Simultaneously, the Food and Supplies Department, also got a case FIR
No.367 of 2025 registered against the partners of the petitioner-firm at
Police Station Butana, under Section 316(2) and 318(4) of the Bharatiya
Nyaya Sanhita, 2023 (for short “BNS, 2023”), for allegedly
misappropriating the allocated paddy.
4.4 It appears that the partner(s) of the petitioner firm sought
anticipatory bail, which was rejected by the Sessions Court, Karnal vide
order dated 27.11.2025 (Annexure P-4), as well as by this Court vide order
dated 04.12.2025 (Annexure P-5).
4.5 On the other hand, petitioner firm is stated to have filed a civil
suit bearing C.S. No. 3079 of 2025 seeking mandatory injunction for
directing the department to receive the milled rice (already milled by the
petitioner) and to further grant permission to the petitioner to mill the
remaining stock of paddy, which is lying in the premises of the petitioner
firm. Simultaneously, the department filed an application under Sections 5
and 8 of the Arbitration and Conciliation Act, 1996, (in short the “1996 Act”)
in view of the arbitration clause contained in the agreement dated
10.10.2025 (Annexure P-2); which was allowed by the learned Civil Judge
(Junior Division), Karnal vide order dated 28.11.2025 (Annexure P-8),
wherein it was observed that the parties are at liberty to approach the
Arbitrator and get the dispute adjudicated through arbitration proceedings.
CWP-4767-2026 (O&M) -5-
4.6 It transpires that the District Food and Supplies Controller,
Karnal, vide order dated 05.12.2025 (Annexure P-9), called upon the
petitioner to deposit an amount of Rs.2,47,24,676/- towards shortage of 1005
Mt. of paddy. The petitioner is stated to have deposited the aforesaid amount
with the District Food and Supplies Controller, Karnal, on 05.12.2025
against receipt (Annexure P-11). Simultaneously, the petitioner issued a
letter dated 05.12.2025 (Annexure P-10) requesting the Department to grant
provisioning of CMR on the balance paddy.
4.7 It appears that the District Food and Supplies Controller,
Karnal, issued a letter dated 11.12.2025 (Annexure P-14), instructing the
officials to prepare a list of rice mills nearest to the petitioner’s rice mill, so
that the proposal for transfer of paddy stored at the rice mill of the
petitioner-firm to another mill, (which is nearest to the petitioner-firm), can
be prepared and sent to Government.
4.8 On the same date i.e. 11.12.2025, the petitioner submitted a
letter (Annexure P-15) to the office of Director General, Department of
Food, Civil Supplies and Consumer Affairs, Haryana, requesting that the
petitioner-firm be allowed to deliver the milling carts to the FCI, since the
paddy had already dried up and transferring into another mill would result in
significant financial loss. A similar request was submitted by the petitioner
vide letter dated 15.12.2025 (Annexure P-16) and letter dated 16.12.2025
(Annexure P-17).
5 It transpires that in the interregnum, vide communication dated
09.12.2025 (Annexure P-23), the office of Director General, Department of
CWP-4767-2026 (O&M) -6-
Food, Civil Supplies and Consumer Affairs, Haryana informed the District
Food and Supplies Controller, Karnal that the request made by the petitioner
firm for milling of balance paddy has been examined and not found suitable
for further custom milling rice (CMR) and it has been decided to shift the
paddy to the nearest rice mill and the cost is to be recovered from the
petitioner-firm.
5.1 In the aforementioned circumstances, the petitioner approached
this Court by filing a writ petition bearing CWP No.3320 of 2026, which
came to be disposed of vide order dated 06.02.2026 (Annexure P-24), the
relevant extract thereof reads as under:-
“xxx xxx xxx
In such circumstances, at this stage with respect to question of
permitting the petitioner to process paddy lying in its premises,
it would not be appropriate to relegate the petitioner to proceed
for arbitration. There is no reasoned order by respondents to
shift paddy lying in the petitioner's premises to another mill.
The petitioner was never heard by respondents. The State
counsel has not pointed out any clause of the policy or
agreement adverting to situation in hand.
8. In the backdrop, this Court finds it appropriate to direct
the Director General, Food Civil Supplies & Consumers Affairs
Department to pass a speaking order within 7 days from today
after granting opportunity of hearing to the petitioner. To avoid
confusion and mis-communication, the petitioner is hereby
directed to appear before the Director on 09.02.2026 at 11:00
AM and thereafter as directed by said officer. Till the passing of
fresh order by the Director, the respondent would not attempt to
shift paddy lying in the premises of the petitioner.
9. Disposed of in the above terms.”
CWP-4767-2026 (O&M) -7-
6 Thereafter, the Director General, Department of Food, Civil
Supplies and Consumer Affairs, Haryana, passed the impugned order dated
09.02.2026 (Annexure P-25), whereby the communication dated 09.12.2025
(Annexure P-23) for shifting of paddy from the premises of petitioner firm
was maintained and the petitioner-firm has been further ‘blacklisted’. The
relevant extract of order dated 09.02.2026 (Annexure P-25), reads thereof:-
“After careful perusal of the agreement dated 10.10.2025
executed between the DFSC Karnal and M/s United Foods
Village Shekhpura Indri, wherein all the terms and conditions
are reduced into writing, it has been observed that the miller
was allotted 3772 MT paddy for milling during KMS 2025-26.
As per clause No. 4 (vi) of the agreement, the paddy was stored
in the mill of the miller and was in his custody wherein the said
clause conspicuously imposes a sole responsibility of the miller
in case of any shortage or damage to the paddy.
As per clause No. 22(v) of the milling policy, the paddy
stored in the premises of the rice mill will be under the joint
supervisory custody of the rice mill and State procuring agency.
The responsibility for quantity and quality will be of the
concerned rice millers. The concerned custodian staff of
agencies and Inspector/Sub-Inspector Food, Civil Supplies and
Consumer Affairs Department will supervise. Accordingly, on
dated 16.11.2025, the undersigned alongwith the inspection
team of DFSC Karnal conducted a physical verification of the
stock available in the presence of miller and found the shortage
of 1005 MT paddy causing a whopping financial loss to the
tune of Rs. 2,47,24,676/- to the department. An FIR No. 367
dated 16.11.2025 was lodged in the Police Station Butana
district Karnal under section 3(5), 316(2) & 318(4) of BNS,
2023 as per the clause No. 13 (i) of the Agreement. Though the
CWP-4767-2026 (O&M) -8-
firm has deposited to Rs. 2.47 crore towards the shortfall of
paddy. However, the firm and the department both are bound
by KMS 2025-26 Milling Policy as well as agreement dated
10.10.2025 as observed by the Hon'ble High Court in its order
dated 06.02.2026.
As the clause 13 (iv) empowers the undersigned to
transfer the paddy stocks in case of failure of the rice miller to
deliver the CMR of KMS 2025 as per stipulated scheduled and
further empowers the undersigned to blacklist the firm. In
compliance of the aforesaid clause of the agreement, the
undersigned vide order dated 09.12.2025 decided to shift the
remaining 2767 MT paddy to another rice mill from the
premises of the miller. However, the said order of shifting the
paddy from the firm to another rice miller was challenged by
the firm in the Hon'ble Punjab and Haryana High Court in
CWP No. 3320 of 2026 which was disposed of by the Hon'ble
Court vide order dated 06.02.2026 directing the undersigned to
pass a speaking order within seven days from today after
granting opportunity to the firm. In compliance to the above
said direction, the defaulting firm was called for personal
hearing before the undersigned on 09.02.2026 at 11.00AM to
present his case
After careful consideration of the arguments advanced by
the miller, I am of the considered opinion that the miller has
failed to give any cogent and reasonable justification for not
shifting of paddy from his premises to the another rice miller
and to blacklist his firm which is in consonance with the well
defined terms and condition of the agreement and policy of
KMS 2025-26. As the department of Food Civil Supplies &
Consumer Affairs Department caters to the nutritional needs of
the under privileged and BPL families through its targeted
Public Distribution Systems which adds to the gravity of the
CWP-4767-2026 (O&M) -9-
offence of criminal breach of trust committed by the defaulting
firm. Therefore, in compliance of the direction dated
06.02.2026 of the Hon'ble Punjab and Haryana High Court, I,
Anshaj Singh, Director General Food, Civil Supplies &
Consumer Affairs Department Haryana, being a competent
authority to pass speaking order uphold the order dated
09.12.2025 of shifting of paddy from the premises of the
defaulting firm and blacklist the firm.
"I hereby order accordingly."”
7. In the aforementioned circumstances, present writ petition has
been filed before this Court, for seeking relief(s), as noticed hereinabove.
8. Learned Senior counsel appearing for the petitioner has
primarily raised two submission(s); firstly, that the direction issued vide
impugned letter/order dated 09.12.2025 (Annexure P-23) regarding shifting
of the paddy from the premises of the petitioner to another mill is without
any basis as there is no provision under the Custom Milling Policy
(Annexure P-1) and/or agreement (Annexure P-2) executed between the
parties, authorizing the Department to direct shifting of paddy. Secondly,
that the direction issued vide impugned letter dated 09.02.2026
(Annexure P-25) for blacklisting the petitioner-firm and that too without
affording opportunity of hearing to the petitioner on the aspect of
blacklisting and/or specifying the period for which the petitioner-firm has
been blacklisted, is arbitrary and illegal, therefore liable to be set aside.
9. On the other hand, learned State counsel has opposed the
contention raised on behalf of the petitioner by submitting that since 1005
Mt. paddy has gone missing from the premises of the petitioner-firm and the
CWP-4767-2026 (O&M) -10-
petitioner-firm has been trying to replace the paddy with inferior quality
procured from Uttrakhand, and even the anticipatory bail filed by the
partners of the petitioner-firm has been declined by Sessions Court, Karnal
vide order dated 27.11.2025 (Annexure P-4), as well as by this Court vide
order dated 04.12.2025 (Annexure P-5); therefore, in the attending
circumstances and also in the light of the provisions contained in Policy
(Annexure P-1) as well as agreement (Annexure P-2); no interference is
required in the impugned letter/order dated 09.12.2025 (Annexure P-23)
and/or the impugned order dated 09.02.2026 (Annexure P-25). Accordingly,
prayer for dismissal of the writ petition has been made.
10. I have heard the learned counsel for the respective parties and
perused the paperbook with their able assistance.
11. Before dealing with the submissions raised on behalf of
petitioner, it would be apposite to refer to a few relevant provisions
contained in Policy (Annexure P-1) as well as the agreement (Annexure
P-2). Clause 22 of Policy (Annexure P-1) of the State in respect of Kharif
Marketing Season (KMS) 2025-26, specifies regarding custom milling of
paddy, which reads as under:-
“22. Policy regarding Custom Milling of Paddy
In order to ensure smooth operations of custom milling of
Paddy procured by the State Procurement Agencies
during KMS 2025-26, the following instructions shall be
followed in letter and spirit by the State Procurement
Agencies:-
Storage of Paddy
i)Paddy procured by the Agencies will be stored in the
premises of the allotted Rice Mills as per details given
in subsequent paragraphs. The transportation of paddy
CWP-4767-2026 (O&M) -11-
from mandi/purchase center to mill, will be done by the
transporter/miller. Hence the paddy will be delivered to
the Millers in the mills itself, and he will be responsible
for its quality and quantity till the rice is delivered to
FCI in Central Pool.
ii) The CCTV camera shall be installed at the gates of the
Rice Mill and the rice millers shall retain soft copy of
footage for all the period mentioned in the agreement.
iii) The miller must make a declaration that he is doing CMR
work only, for other work he has to make separate stock
registers and updation of these two stocks registers has to
be submitted to concerned agency after every 15 days.
The rice miller will also maintain a stock register of the
paddy allotted to him duly certified by the
DFSC/DFSO/AFSO/IFS/SIFS. The stock entered in the
stock register by the rice millers will be verified by the
DFSCs/DMs of the procurement agency by constituting a
committee of atleast three officers/officials not below the
rank of Inspector, immediately after total allotment to the
miller and before commencement of milling operation
and the same shall be communicated to Headquarter.
iv) In extreme emergencies and with prior written approval
of the Director Food, Civil Supplies & Consumer Affairs
Haryana, the agencies may store Paddy in their own
godowns. In such cases, the services of appointed
Labour, Cartage and Transport Contractors will be
required.
v) The Paddy stored in the premises of the rice mill will be
under the joint supervisory custody of the rice mill and
State procuring agency. The responsibility for quantity
and quality will be of the concerned rice millers. The
concerned custodian staff of Agencies and Inspector/Sub-
Inspector Food, Civil Supplies & Consumer Affairs
Department will supervise. The rice millers will plan the
daily CMR milling as per the stack number and entries in
the register with I-form number to ensure priority milling
and this plan has to be submitted to concerned agency for
next 15 days. All the supervisory officers of the
Procurement Agencies and Food Department i.e.
DFSC/DFSO/AFSO/IFS/SIFS and Manager/District
Manager of the concerned agency will be held
accountable for any irregularities if they are found not
CWP-4767-2026 (O&M) -12-
following the instructions and guidelines for supervisory
controls and mandatory inspections. The miller will
ensure the storage of the paddy stocks of the
Agencies/department separately from his own stock by
erecting a physical barrier such as a boundary wall or a
proper and durable fencing by producing site plan duly
approved by the architect.
vi) The Paddy shall be delivered in the mills by the Agency
to the miller through delivery challan duly signed by the
authorized representative of the Agency. The miller on
receipt of such delivery challan shall have a right to
examine the paddy so delivered. The acceptance of
paddy by the miller is testimony to the fact that paddy is
as per specifications fixed by the Government. The
miller shall record on a separate register the paddy
received through each delivery challan every day.
vii) Once the paddy has been accepted through the delivery
challan by the Miller, he or his representative shall put
his signatures on the Delivery Challan. The paddy so
received by the miller shall be considered to be correct
in terms of quantity and quality and no disputes shall
be entertained after such acceptance with regard to the
quality and quantity of the paddy received by the miller.
viii) No Delivery Challan accepted by the miller shall be
recognized by the Agency unless it has been duly issued
and signed by authorized representative of the State
procuring agencies.
ix) Each miller will prepare a pictorial chart/sketch in
triplicate depicting the positioning of the stacks with
stack no., I-form number & number of bags in each stack.
He will retain a copy of the above at his mill premises,
second with the Inspector/ In-charge of agency and third
copy will be kept in the District Office of the Procurement
Agency for priority milling on fortnightly basis.
x) It shall be responsibility of the millers to ensure that the
stock of paddy/CMR within the mill premises is always
available in countable condition for accurate physical
verification.
xi) The Signature on cheque book will be got verified by the
miller from his banker and a certificate must be issued by
the miller/second party that the guarantor to the
agreement is not his family member.
CWP-4767-2026 (O&M) -13-
xii) In order to prevent the unscrupulous rice millers from
making advance purchase of rice and to deter them
from using bogus bills to show it as genuine purchase
from the farmers, an undertaking from the rice millers
be taken regarding the existing stock of paddy and rice
in their mills and same should be kept separately. For
this 100% verification of the premises of mills is to be
carried out by the DCs through a committee constitúted
for this purpose and videography of entire inspection
should be undertaken.
xiii)No paddy for CMR is to be given to those rice mills who
could not show the genuine bills of their stock already
lying in their mills at the time of inspection before
allotment of paddy.
xiv) The detailed report of the release order (RO) for delivery
of paddy to mills should be maintained.
xv) A Co-ordination committee including District Marketing
Enforcement (DMEO) Mandi Secretary, DM/FCI and
heads of all State Procurement Agencies under the
chairmanship of DC should ensure proper monitoring of
procurement operations.
xvi) The full address of the guarantor with pin code and
e- mail id will be taken and the property pledged by the
guarantor should be unencumbered.”
(Emphasis Supplied)
11.1. Further clause 27 of the Policy (Annexure P-1), provides for
allocation of the paddy for custom milling of rice, whereunder sub-clause
(xvi) provides as under:-
“xvi) In case the miller lifts Paddy without release order &
unauthorizedly converts it into rice, theft or
misappropriation it shall tantamount to defalcation and
Agency will take criminal action against the miller. The
miller will be liable to pay the interest @ CCL rate of
interest on the value of Paddy for the duration of
defalcation. In addition, the miller along with his mill
premises will be blacklisted.”
CWP-4767-2026 (O&M) -14-
11.2 Further clause 28 of the Policy (Annexure P-1), provides for
execution of agreement between the millers and the concerned procurement
agencies, which reads as under:-
“28.Execution of Agreements
i. Millers doing custom milling of Paddy shall execute an
agreement with the concerned Procurement Agencies
immediately in the prescribed proforma and complete all
other formalities in this regard, failing which the
allotment of Paddy shall be cancelled.
ii. Signatures on the agreement must be authorized by the
partners/Directors through a legally executed General
Power of Attorney. They will have to adhere to various
terms and conditions incorporated in the agreement.
iii. No Paddy will be given to any miller without executing
proper agreement.
iv. All the columns of the Agreement should be properly
filled and each should be signed by both the parties.
v. It will be the joint responsibility of the Sub-inspector,
Inspector, AFSO, DFSO and DFSC to ensure that the
agreement is executed with the Rice Mill totally in
concurrence with the Policy and all relevant documents,
security, Bank Guarantee (where ever applicable) in each
& every case.
vi. The agreement should be complete in all respect and
duly signed by all the executers and submitted to head
office.”
11.3 Still further, clause 31 of the Policy (Annexure P-1), deals with
the delivery of rice and sub-clause (iv) to (vii) and (xii), read as under:-
“(iv) The Concerned DFSC/DMs shall maintain truck-wise
paddy issue entries and monitor them for receipt of
proportionate CMR as per schedule.
(v) In the event of failure to deliver CMR, within stipulated
period, the miller, as a penal provision, shall be liable to
pay interest @ CCL.
(vi) In the event of failure of the due delivery of CMR by the
rice miller against the paddy issued, the miller shall be
liable to pay the cost of short quantity of rice @ 110% of
rates of CMR fixed by the Govt. Of India along with
CWP-4767-2026 (O&M) -15-
Compound interest @ 12% p.a. on the actual payable
amount from 1" July 2026 till the date of actual
payment. However, the waiving off the penalty is not
appealable.
(vii) Rate of interest will be levied in the form of holding
charges for delayed period on the delivery of CMR from
the date it becomes due till the date of realization
towards the left over quantity/stocks. District Milling
Committee will ensure that the Holding Charges should
be deducted in uniform pattern by all agencies.
xxx xxx xxx
(xii) In view of the clause no. 31(iv), if rice miller fails to
deliver the CMR of KMS 2025-26 of the Agency as per
the stipulated schedule and the Agency has to shift the
Paddy stocks, it would be done at the risk and cost of
the miller concerned giving him 7 days notice for this
purpose. This paddy will be shifted after approval of the
Director, Food, Civil Supplies & Consumer Affairs
Department/Managing Directors of the concerned
agency under intimation to FCI. The miller and his mill
premises shall also be blacklisted.”
11.4 That apart clause 35 of the Policy (Annexure P-1), provides for
arbitration in the following terms:-
“35 All disputes relating to interest, penalty, holding charges,
milling charges including interpretations pertaining to
the policy of custom milling of Paddy between the millers
and the agencies shall be resolved through arbitration by
an Arbitrator to be appointed by the Head of the
concerned Procurement Agency on the request of any of
the party in the agreement. There shall be no objection to
any such appointment to the miller/DM/DFSC
concerned. The cases of fraud, theft, embezzlement or
misappropriation etc. are not covered under this clause
and in such cases legal proceedings as deemed fit will be
initiated against the defaulting rice millers.”
12. In furtherance and compliance to the aforesaid Policy
(Annexure P-1), the petitioner-firm has already executed an agreement dated
CWP-4767-2026 (O&M) -16-
10.10.2025 (Annexure P-2) with the District Food and Supplies Controller,
whereunder clauses 4, 5, 7, 12 and 13, reads as under:-
“4. (i) On receipt of the paddy through delivery challan, the
Miller/Second Party shall cause the challan to be signed
by him or his representative.
(ii) The Miller/Second Party shall record on a separate
register the paddy received through each Delivery
Challan every day.
(iii) One of the authorized partner/representative of the
Miller/Second Party on a weekly basis (each Monday)
shall inform the First Party about the total quantity of
paddy received by him in the following format :-
Sr. No. Date Challan No. Qty. of Paddy. Total of the week
1 2 3 4 5
(iv) Once the paddy has been accepted through the Delivery
Challan by the Miller/Second Party, he or his
representative shall put his signatures on the delivery
challan. The paddy so received by the Miller/Second
Party shall be considered to be correct in terms of
quantity and quality and no disputes shall be
entertained after such acceptance with regard to the
quality and quantity of the paddy received by the
Miller/Second Party.
(v) No delivery challan accepted by the Miller/Second Party
shall be recognised by the First Party/Agency unless it
has been duly signed and issued by authorised
representative of the 1
st
party.
(vi) The paddy stored in the mill of the Miller/Second Party
shall remain in his custody and he will be responsible
for any shortage or damage to paddy/rice stock. Paddy
procured by the Agencies will be stored in the premises of
the allotted Rice Mills as per details given in subsequent
paragraphs. The transportation of paddy from
mandi/purchase center to mill will be done by the
Transport Contractor Govt. agencies. Hence the paddy
will be delivered to the Millers in the mill itself, and he
will be responsible for its quality and quantity till the
rice is delivered to FCI in central pool.
CWP-4767-2026 (O&M) -17-
(vii) The Miller/Second Party, however, undertakes to mill
approximately ________ MT of paddy purchased during
Kharif Marketing Season 2025-26. The exact quantity of
paddy shall be calculated as per actual delivery accepted
by the Miller/Second Party. The details of actual delivery
statement signed by both parties will be part of this
agreement.
(viii) Provided further that the First Party does not guarantee
any definite volume of work relating to shelling of paddy
at any time or throughout the period of contract. The
mere mention of any item of work in this contract shall
not by itself confer a right on the Miller/Second Party to
demand that the work relating to shelling of paddy at a
particular centre/mandi should necessarily or exclusively
be entrusted to him. The First Party shall have the
exclusive right to support one or more millers for any
particular centre/mandi and to distribute the work
between such millers in any manner that the First
Party/Agency may decide and no claim shall lie against
the First Party/Agency for such withdrawal/distribution
of work.
(ix) The miller/second party agrees to install CCTV cameras
at the gates of the Rice Mill and the rice millers will
retain soft copy of footage for all the period mentioned in
the agreement.
(x) The miller/second party will also maintain a stock
register of the paddy allotted to him duly certified by the
DIFSC/DMs of procurement agency. The stock entered
in the stock register by the rice millers will be verified
by the DFSCs/DMs of procurement agency by
constituting a committee of at least three
officer/officials not below the rank of Inspector,
immediately after total allotment to the miller and
before commencement of milling operation.
(xi) Property/Land record like Fard/Jamabandi of the miller
and guarantors should be taken at the time of the
agreement with the mill.
(xii) In case of partnership firm, the partnership deed should
have been registered in Haryana.
5.The Miller/Second Party shall ensure that the paddy
within his premises is stored in a scientific manner so
CWP-4767-2026 (O&M) -18-
that it does not get damaged or lost in any manner
whatsoever. Each stack in which the paddy is stored
shall be given a stack number. The Miller/Second Party
shall make good the loss, if any, caused to the paddy
stored in his premises due to any reason.
xxx xxx xxx
7.(i) Since the Miller/Second Party is also entitled to utilize
the part of his capacity for milling of his own paddy, he
shall keep a separate record with regard to the stocks of
paddy and rice of both the parties separately. He shall
further allow and facilitate inspection of record and
physical inspection of paddy and rice belonging to the
agency i.e. Government as well as of his own stocks.
(ii) Authorized representatives of the First Party shall be
entitled to inspect the record and the stocks at any time
during the milling season.
(iii) The Miller/Second Party shall carry out the milling
operations only of that paddy in respect of which the
Release Order has been duly issued by the First Party.
The Miller/Second Party shall apply for issuance of
Release Order to the First Party, well in time and as per
instructions on this subject.
(iv) The Miller/Second Party shall complete delivery of rice
due to Government /Agency on the total quantity of
paddy issued to him within 10 (Ten) days of the issuance
of paddy by way of Release Order to him. Rice against
entire stock kept in his mill shall be delivered not later
than the 30
th
June, 2026 (Subject to the final milling
period decided by the Government of India) as per
following schedule:-
The delivery schedule of CMR shall be regulated as
under:-
Upto Dec. 2025 = 15% of the allotted Paddy
January, 2026 = 25% -do-
February, 2026 = 20% -do-
March, 2026 = 15% -do-
Upon May, 2026 = 15% -do-
June, 2026 = 10% -do-
(Subject to the final milling period decided
by the Government of India)
CWP-4767-2026 (O&M) -19-
In the event of failure to deliver Custom Milled
Rice, within stipulated period, the miller, as a penal
provision, shall be liable to pay interest @ CCL.
In the event of failure of the due delivery of CMR
by the rice miller against the paddy issued, the miller
shall be liable to pay the cost of short quantity of rice
@110% of rates of CMR fixed by the Govt. of India,
along with compound interest@ 12%p.a. on the actual
payable amount from 1" May, 2025 till the date of actual
payment. The waiving off the penalty is not appealable.
xxx xxx xxx
12. In case the Miller/Second Party fails or neglects to
observe or perform any of his obligations under the
contract, it shall be lawful for the First Party/Agency to
forfeit the security amount after granting due opportunity
and get the work executed at the miller's/ second party's
risk and cost. In case loss is caused to the First Party/
Agency, over dues, or damage to its property/ stocks etc.,
and total losses caused to the state exchequer shall be
recoverable through concerned District Collector under
arrears of land Revenue Act of 1887 from the
Miller/Second Party/Sureties. In addition, such Miller
and his Mill premises shall be liable to be blacklisted
for future.
Provided, further that the Govt. shall be within its right
to recover the losses or damages from the millers as
well as from the sureties jointly and severally in
accordance with law.
13. The delivery of rice by miller will be regulated as under:-
(i) The Miller/Second Party shall not mill paddy without
release order. Theft or misappropriation shall
tantamount to defalcation and agency will be entitled to
initiate civil/criminal action against the miller/second
party. In addition, the Miller/Second Party and the mill
premises will also be blacklisted.
(ii) The Miller/Second Party agrees to mill the paddy kept at
any other storage point of the First Party/ Agency by way
of mutual consent.
(iii) The Miller/Second Party shall process the paddy within
five days of issuance of Release Order.
CWP-4767-2026 (O&M) -20-
(iv) In case, rice miller fails to deliver the CMR of KMS 2025
of the Agency as per the stipulated schedule and the
Agency has to shift the Paddy stocks, it would be done at
the risk and cost of the miller concerned giving him 7 day
notice for this purpose. The miller and his mill premises
shall also be blacklisted.
(v) There will be complete ban on the miller to mortgage,
gift, sell or transfer the mill through any means to any
other person till the dues of Custom Milled Rice are
cleared (Affidavit from the miller should be taken in this
regard in advance)
(vi) In case of sole proprietorship, partnership firm, Private
Limited company and Societies there shall be a complete
ban on change of proprietor, partners, Directors or
Members of Societies, once an agreement has heen
entered into for Custom Milling of Paddy or mill is
allotted for Custom Milling or Paddy is stored in the mill
for Custom Milling till the entire Custom Milled Rice due
is delivered to FCI and account is settled with concerned
Procurement agency.”
13. It is thus evident that in terms of clause 22 (v) of the Policy
(Annexure P-1), the paddy stored into the premises of the rice mill is under
the joint supervisory custody of the rice miller and the State Procurement
Agency, whereas the responsibility for quantity and quality is that of the
concerned rice miller. It is also the responsibility of the miller to ensure that
stock of the paddy/CMR within the miller premises is always available in
accountable condition for accurate physical verification [see clause 22(x) of
the Policy (Annexure P-1)].
13.1 Further in terms of clause 27(xvi), if in case, the miller
unauthorizedly converts the paddy into rice or there is theft or
misappropriation of the paddy, the same shall tantamount to defalcation and
the State Procurement Agency has been authorized to take civil/criminal
action against the miller. Further the miller is also liable to pay the interest
CWP-4767-2026 (O&M) -21-
on the value of paddy and in addition, the miller along with his mill premises
is also liable to be ‘blacklisted’.
13.2 Furthermore, under clause 31(xii); in case, the rice miller fails
to deliver the custom milled rice of the agency as per the stipulated schedule,
then the agency can shift the paddy stocks at the risk and cost of miller
concerned.
13.3 Similar provision(s) (as noticed hereinabove) in Policy
(Annexure P-1), are also contained in the agreement (Annexure P-2)
executed between the parties.
14. Now, coming to the case in hand; as regards the first contention
of petitioner that the direction for shifting of paddy from petitioner-Mill to
another Mill is without any basis or provision under the Policy (Annexure
P-1) and/or the agreement (Annexure P-2); suffice it to say that upon
conjoint reading of the provisions contained in Policy (Annexure P-1) as
well as agreement dated 10.10.2025 (Annexure P-2), as noticed hereinabove;
there is no manner of doubt that the paddy/rice is the property of the
procurement agency and even when the paddy is stored in the mill premises
of the miller, during that period as well, such paddy remains under the joint
supervisory custody of the rice miller as well as the State Procurement
Agency. It is also specifically provided in the Policy (Annexure P-1) and
agreement dated 10.10.2025 (Annexure P-2) that the responsibility for the
quality and quantity will be of the concerned rice miller. Even as per clause
5 of the agreement (Annexure P-2), the Miller is liable to make good the
loss, if any, caused to the paddy stored in his premises due to any reason.
CWP-4767-2026 (O&M) -22-
14.1 Concededly on 16.11.2025, the officials of Food and Supply
Department, Haryana, in terms of clause 7(ii) of agreement (Annexure P-2);
conducted a physical verification of the stock of paddy available in the
premises of the petitioner-firm, wherein it was found that 3772 Mt. of paddy
was allocated to the petitioner, and only 2767 Mt. of paddy was found
available and therefore, there was a shortage of 1005 Mt. paddy. Thereafter,
a case FIR No.367 of 2025 was registered against the partners of the
petitioner-firm at Police Station Butana, under Section 316(2) and 318(4) of
the BNS, 2023, for allegedly misappropriating the allocated paddy. Even the
anticipatory bail of partners of petitioner-firm was declined upto this Court.
14.2 Furthermore, the District Food and Supplies Controller (DFSC),
Karnal, vide order dated 05.12.2025 (Annexure P-9), called upon the
petitioner to deposit an amount of Rs.2,47,24,676/- towards shortage of 1005
Mt. of paddy, which has been concededly deposited by the petitioner
(without any protest) on 05.12.2025 against receipt (Annexure P-11).
14.3 Keeping in view the aforementioned circumstances and also the
express provisions contained in the Policy (Annexure P-1) as well as
agreement dated 10.10.2025 (Annexure P-2) that for all intents and
purposes, the paddy stored in the mill premises of the petitioner-firm is
under joint supervisory custody of the miller as well as the State
Procurement Agency and also that the paddy/rice shall be the property of the
State Procurement Agency; I am of the considered view that the Department
was well within its right to direct shifting of the paddy from the mill
premises of the petitioner-firm to another mill vide letter dated 09.12.2025
CWP-4767-2026 (O&M) -23-
(Annexure P-23), so as to ensure proper milling of paddy from a trustwrothy
Miller. Accordingly, the first contention raised on behalf of the petitioners is
rejected.
15. As regards the second contention of the petitioner-firm that the
order dated 09.02.2026 (Annexure P-25) regarding blacklisting the
petitioner-firm is arbitrary and bad as no opportunity of hearing has been
given to petitioner on the aspect of blacklisting nor the period for which the
petitioner-firm has been blacklisted has been specified; suffice it to say that
the petitioner had earlier approached this Court by filing CWP-3320-2026,
wherein petitioner had raised a grievance that no opportunity of hearing was
afforded to petitioner, before taking action against the petitioner. On the
other hand, it was the categoric stand of respondents-State that as per clause
13 of the agreement (Annexure P-2), Department was entitled to take
civil/criminal action in case of theft or misappropriation and the Miller may
also be blacklisted.
15.1 Upon consideration of the matter, this Court deemed it proper to
direct learned Director General, Food, Civil Supplies and Consumer Affairs,
Department to pass a speaking order after granting opportunity of hearing to
petitioner; whereupon the impugned order dated 09.02.2026 (Annexure
P-25) was passed, after affording opportunity of hearing to petitioner.
Therefore, there is no merit in the plea of the petitioner that no opportunity
of hearing was afforded to petitioner much less on the aspect of blacklisting
as the said aspect was duly highlighted as well as noticed in the order dated
06.02.2026 (Annexure P-24) passed by this Court in CWP-3320-2026. That
CWP-4767-2026 (O&M) -24-
apart, a perusal of various provisions/clauses of Policy (Annexure P-1) and
also agreement (Annexure P-2) clearly depicts that in case of theft or
misappropriation of Paddy by the Miller; the Miller and his Mil premises
shall be ‘blacklisted’. Therefore, considering the peculiar facts and
circumstances of this case where, on 16.11.2025 upon physical verification
of paddy stock lying in petitioner’s Mill, a shortage of 1005 Mt. of paddy
was found, which amounted to misappropriation, for which a case FIR
No.365 of 2025 was also registered against partners of petitioner-firm
coupled with the fact that the petitioner deposited the amount of
Rs.2,47,24,676/- towards shortage of 1005 Mt. of paddy without any protest;
there is no error so far as order of blacklisting of petitioner-firm is
concerned.
15.2 However, the issue arises as to whether petitioner-firm can be
blacklisted for an indefinite period. The said issue is no more res integra as
the same stands settled by the Hon’ble Supreme Court in case of “B.C.
Biyani Projects Pvt. Ltd. Vs. State of Madhya Pradesh and others”, 2016
SCC Online SC 2070, wherein the following observations were made:-
“7. In Kulja Industries Limited Vs. Chief General Manager,
Western Telecom Project Bharat Sanchar Nigam Limited
[(2014) 14 SCC 731], this Court held in paragraph 25 of the
report that "debarment" cannot be permanent and the period of
"debarment" would invariably depend upon the nature of the
offence committed by the erring contractor. Paragraph 25 of the
report reads as follows
"25. Suffice it to say that "debarment" is recognized and
often used as an effective method for disciplining deviant
suppliers/contractors who may have committed acts of
CWP-4767-2026 (O&M) -25-
omission and commission or frauds including
misrepresentations, falsification records and other
breaches of the regulations under which such contracts
were allotted. What is notable is that the "debarment" is
never permanent and the period of debarment would
invariably depend upon the nature of the offence
committed by the erring contractor."
8. As mentioned above, the order for blacklisting the
appellant is a permanent one. This is impermissible in law.
9. Since the appellant was blacklisted by an order dated
14th March, 2013 and since more than three years have gone by
during which period the appellant has suffered blacklisting and
also taking into consideration the fact that three out of six
contracts have been completed by the appellant, we are of
opinion that the period of blacklisting already undergone by the
appellant is sufficient to meet the ends of justice.
10. Accordingly, we allow the appeal and set aside the order
of blacklisting the appellant permanently and hold that
blacklisting of the appellant will remain valid until today.”
16. At this stage, learned senior counsel for petitioner-firm has
submitted that since petitioner-firm has already suffered consequences of
blacklisting since passing of the order dated 09.02.2026 (Annexure P-25) till
now; therefore, the order of blacklisting be modified to the effect that
blacklisting period of petitioner-firm shall be only for current milling season
i.e. upto June 2026.
16.1 On the other hand, learned State counsel has opposed the
aforesaid plea and submitted that blacklisting period should be proportional
to the acts of commission and omission.
17. I have considered the aforesaid plea raised by learned senior
counsel for petitioner-firm as well as learned State Counsel. It needs no
CWP-4767-2026 (O&M) -26-
reiteration that while considering the period of blacklisting, the principle of
proportionality has to be considered as the order of blacklisting entails both
civil and penal consequences.
17.1 Since there is no dispute as regards shortage of Paddy stored at
the Mill premises of the petitioner-firm; therefore, the order of blacklisting
of the petitioner-firm appears to be in consonance with the relevant
provisions of Policy (Annexure P-1) read with agreement (Annexure P-2),
however, since no period of blacklisting of the petitioner-Mill has been
specified; in my opinion, the same is unduly harsh. Considering the fact that
1005 Mt. paddy was found missing from the mill premises of the petitioner-
firm and an amount of Rs.2,47,24,676/-, has been assessed as value for
missing paddy; however, it is noticed that the same was deposited by the
petitioner forthwith without any protest; accordingly, in my considered view,
the ends of justice would be met if the period of blacklisting of
petitioner-mill is confined to present milling season as well as next milling
season i.e. Kharif Marketing Season (KMS) 2026-27.
18. No other argument was raised.
19. Keeping in view the above discussion, the present writ petition
is disposed of in the aforestated terms.
20. All the pending application(s), if any, shall also stand closed.
(HARSH BUNGER)
27.05.2026 JUDGE
Ankit
Whether speaking/reasoned: Yes/No
Whether reportable: Yes/No
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