Allahabad HC Quashes Arbitrary Rent Ceilings on Private Godowns used for PDS Scheme

The Allahabad High Court has struck down the state's attempt to impose a retrospective 20% rent ceiling on private godowns used for PDS Scheme, ruling that the government cannot indirectly revive policies that it has already declared inapplicable to a specific lease.

A division bench comprising Justice Shekhar B. Saraf and Justice Abdhesh Kumar Chaudhary heard the challenge against orders issued by the Regional Food Controller, which had drastically reduced the recommended rent of two godowns in Pratapgarh. The petitioner, who had been providing storage facilities for the Public Distribution System since 2003, contested the state's refusal to implement a 2017 justification certificate that recommended a four-fold rent increase based on rising circle rates.

The Doctrine of 'What Cannot Be Done Directly'

The Allahabad High Court observed that the respondent authorities engaged in a self-contradictory exercise. While the Regional Food Controller admitted that the 2018 Government Order's 20% cap did not apply to the petitioner’s pre-2015 tenancies, it subsequently issued new certificates that reached the same restricted figure. Relying on State of T.N. v. K. Shyam Sunder ( "(2011) 8 SCC 737": 2011 CaseBase(SC) 678) and Jagir Singh v. Ranbir Singh ( "(1979) 1 SCC 560": 1978 CaseBase(SC) 112), the Allahabad High Court held that such actions amount to an evasion of the law.

The Bench made it clear once and for all that "An authority cannot, on the one hand, hold a provision inapplicable to a party and, on the other, achieve the very result that provision would have produced, through a different door. The respondent authority, in substance, has done indirectly what it has expressly declared it cannot do directly, and the impugned order cannot survive this internal contradiction."

Requirement of Reasoned Administrative Orders

The bench emphasized that administrative authorities are duty-bound to pass speaking orders to curb arbitrariness, as established in S.N. Mukherjee v. Union of India ( "(1990) 4 SCC 594": 1990 CaseBase(SC) 367), Siemens Engineering & Manufacturing Co. of India Ltd. v. Union of India ( "(1976) 2 SCC 981": 1976 CaseBase(SC) 130), and Kranti Associates (P) Ltd. v. Masood Ahmed Khan ( "(2010) 9 SCC 496": 2010 CaseBase(SC) 1285). The Court noted that the sudden reduction of rent from the recommended ₹1,200 to ₹350 lacked any comparative data or market analysis. It further invoked Mohinder Singh Gill v. Chief Election Commissioner ( "(1978) 1 SCC 405": 1977 CaseBase(SC) 276) to stress that an order must stand or fall on the reasons recorded within it, rather than later justifications.

The Allahabad High Court has issued the following directions:

"(a) As per the own showing of the respondent authority, the competent authority shall determine the rent independently, without adverting to Clause 14 of the Government Order dated 02.05.2018, which apparently is not applicable to the petitioner... 

(b) The competent authority shall determine the revised rent payable to the petitioner afresh, in accordance with the policy otherwise applicable, having due regard to the justification certificate dated 27.12.2017, the S.D.M.'s report on circle rates, and any other relevant material, by a reasoned, speaking order... 

(c) If it is found, for cogent reasons recorded in writing, that the 2017 justification certificate suffers from a jurisdictional or factual infirmity warranting its supersession, the authority shall record such reasons explicitly... 

(d) The authority shall also examine, and return a specific finding on, the petitioner's claim of comparative treatment of similarly situated godowns at Babaganj, Belkharnath, Sangipur and Kalakankar, in light of the equality guarantee under Article 14... 

(e) The entire exercise shall be completed by way of a reasoned order within twelve weeks from the date of production of a certified copy of this order."

Background

The petitioner, Sudha Agarwal, owned two godowns in Pratapgarh leased to the Department of Food and Civil Supplies. After the expiry of the 2012-2017 agreement, an inquiry by the Tehsildar and Sub-Divisional Magistrate found circle rates had increased nearly five-fold. Consequently, the District Magistrate issued a justification certificate in 2017 recommending rent at ₹1,200 per 100 bags. However, the Department continued paying the old rate of ₹300.

Following multiple rounds of litigation, the authorities recalled the 2017 certificate and fixed the rent at ₹350, citing a 2018 Government Order that capped increases at 20%. The High Court previously noted that this cap only applied to godowns taken on rent after July 2015. Despite this, the authorities persisted in applying the cap, leading to the current challenge. The Allahabad High Court eventually quashed the restrictive orders, citing precedents such as State of Kerala v. K.G. Madhavan Pillai ( "(1988) 4 SCC 669": 1988 CaseBase(SC) 170) and Navjyoti Co-op. Group Housing Society v. Union of India ( "(1992) 4 SCC 477": 1992 CaseBase(SC) 377) regarding natural justice, and E.P. Royappa v. State of Tamil Nadu ( "(1974) 4 SCC 3": 1973 CaseBase(SC) 114), Ramana Dayaram Shetty v. International Airport Authority of India ( "AIR 1979 SC 1628": 1979 CaseBase(SC) 73), and Ajay Hasia v. Khalid Mujib Sehravardi ( "(1981) 1 SCC 722": 1980 CaseBase(SC) 356) regarding the mandate against arbitrary state action.

Case Details:
Case No.: WRIT C No. - 47 of 2024
Case Title: Sudha Agarwal Versus State Of U.P. Thru. Addl. Chief Secy. Food And Civil Supply, U.P. Lucknow And 6 Others
Appearances:
For the Petitioner(s): Manish Misra, Abhinav Kumar Mathur, Dileep Pandey, Manoj Kumar Mishra, Advocates
For the Respondent(s): C.S.C., Pratyush Tripathi, Additional Chief Standing Counsel

Source: 2026 CaseBase(ALL) 1170