1. The petitioners, who are e-auctioneering licensees under the Spices Board of India, are before this Court aggrieved by the enhancement effected by the Spices Board in the Bank Guarantee / Security Deposit to be provided by them.

2. The petitioners state that they are carrying on the business in cardamom as auctioneers for a considerably long period. The licence issued to them by the Spices Board is being renewed year after year without any break as at present. As per Rule 10 of the Cardamom (Licensing and Marketing) Rules, 1987, the petitioners are to provide a Security Deposit in the form of a Bank Guarantee (equivalent to the average auction sale value of cardamom in one auction during the immediate preceding block period of three years) for the block period for which the applicant desires to obtain the auctioneer licence.

3. Even though the statutory rule is so, the respondents issued Ext.P12 order dated 21.02.2024, wherein it is stated that the Spices Board has decided to introduce progressive changes in the existing e-auction system. A Committee was appointed to study the regulations of SEBI and the settlement systems of Commodity Exchanges to safeguard the interest of the stakeholders / farmers from the risk of non-payment, the alternative to Bank Guarantee and submit recommendations to the Board. The Board decided that till the time the recommendations were approved for implementation and modifications are effected in the existing software, as an interim measure, the Board approved to collect from the auctioneers, the Bank Guarantee amounts as follows:-

                  (i) Fixation of BG amount, in case of renewal applicants, equivalent to the average auction sale value in one auction, of that auctioneer during the preceding block period. For new applicants, the BG amount should be equivalent to the average auction sale value in one auction, of all auctioneers during the preceding block period.

                  (ii) Additionally, the Board should introduce a system whereby an auctioneer would not be allowed to pool / trade beyond a fixed upper limit in an auction (for example, equivalent to BG amount or not more than 125% of the BG amount), as might be fixed by the Board. The Secretary, Spices Board should reassess and modify the BG amount as per requirement to ensure minimising risk and ensuring smooth functioning of the e-auction system.

4. The petitioners submit that on the basis of the said decision, the Spices Board is pressurising the petitioners to enhance the Bank Guarantee provided by the petitioners at disproportionate levels. Such action is highly illegal and arbitrary, contend the petitioners.

5. The petitioners would submit that the Central Government has framed Cardamom (Licensing and Marketing) Rules, 1987 ('the CLMR, 1987', for short) in exercise of the powers conferred by Section 18 of the Spices Board Act, 1986. Rule 10 of the CLMR, 1987 provides that for e-auctions, the applicant shall provide a Security Deposit in the form of Bank Guarantee (equivalent to the average auction sale value of cardamon in one auction during the immediate preceding block period of three years) for the block period for which the applicant desires to obtain the auctioneer licence.

6. Since the Central Government, who is a superior authority and who is the rule making authority has specifically provided for the quantum of Bank Guarantee required for issuance of e-auction licence, the Spices Board cannot issue orders enhancing the Bank Guarantee required for issuance / renewal of e-auction licence. The coercive proceedings against the petitioners are therefore illegal and unsustainable, contend the petitioners.

7. The petitioners state that they have taken huge loan to invest in their cardamom auctioneering business. The petitioners applied for licence on the belief that the Spices Board will adhere to the conditions in the Rules and will insist only Bank Guarantee as per the Rules. The present action of the Spices Board in substantially enhancing the Bank Guarantee will result in huge loss to the petitioners.

8. Standing Counsel entered appearance on behalf of the Spices Board and resisted the writ petition. On behalf of the respondents, it is submitted that the Spices Board in its 93rd Board meeting held on 20.10.2023, approved the issuance of cardamom licence for the block period 2023-2026 to the eligible applicants. The Board suggested to explore the possibility of differentiating Bank Guarantee amount for different category of participants within a month. For the said purpose, a Committee was constituted.

9. After detailed deliberations, the Committee recommended the following for fixation of Bank Guarantee for eligible applicants for the new block period 2023-2026 in tune with the CLMR, 1987:-

                  (a) Fixation of a variable Security Deposit amount in the form of Bank Guarantee to the renewal applicants as per their average auction sale value of cardamom in one auction during the previous block period for the renewal applicants.

                  (b) In case of fresh applicants, the average sale value of cardamom in an auction conducted by all auctioneers in previous block period (2020- 2023) may be fixed initially and then BG amount may be revised after six months based on review of the average sale value of cardamom in an auction conducted by fresh applicants.

10. The renewal applicants, including the petitioners, submitted Bank Guarantee ranging from 2.60 Crores to 7.96 Crores as per the average auction sale value of cardamom in one auction during the immediate preceding block period of three years and fresh applicants submitted Bank Guarantee for ₹5.89 Crores as per the average sale value of cardamom in an auction conducted by all auctioneers of previous block period.

11. Standing Counsel representing the Spices Board submitted that the administration of Spices Board is governed by the Spices Board Act, 1986. The functions of the Board as laid down in Section 7 of the Act, 1986 include ensuring remunerative returns to growers of cardamom, regulating the sale of cardamom and stabilisation of prices of cardamom. The Spices Board, therefore, is statutorily bound to regulate the sale of cardamom and stabilise the prices of cardamom. Therefore, in spite of Section 10, the Spices Board has a right to regulate the sale of cardamom and for that purpose, enhance the Bank Guarantee amounts, in order to protect the interest of the cardamom farmers.

12. Standing Counsel further pointed out that the Spices Board has the right to reassess and modify the Bank Guarantee amount as and when deemed fit. As per the licence condition, the auctioneer shall also adhere to the instructions of the Board issued from time to time for smooth and efficient conduct of cardamom auction. Ext.P3 instructions issued by the Spices Board also insist that the auctioneer shall adhere to the instructions of the Board issued from time to time for smooth and efficient conduct of cardamom auction.

13. The respondents relied on Ext.P8 notice inviting applications for award of auctioneer licence dated 16.12.2020. Clause 14 of the said notice provided that the auctioneer shall pay the growers, whose cardamom is pooled, the applicable sale value of the cardamom sold in an auction within ten working days from the date of auction. If the auctioneer defaults to make payment as per the terms and conditions of the licence, the Board will be entitled to invoke the Bank Guarantee and use the proceeds for arranging settlement of amount due to growers and to initiate steps for suspension and/or cancellation of the licence.

14. In the 93rd Board meeting of the Spices Board held on 20.10.2023, with regard to enhancement of the Bank Guarantee to be submitted by the applicants of the auctioneer licence (e-auction), it was decided that the Bank Guarantee cannot be discontinued as the Board cannot take the entire risk in case of payment defaults under its auction system. It was suggested to explore the possibility of differentiating Bank Guarantee amount for different categories of participants, which should be examined.

15. Standing Counsel for the respondents specifically relied on Ext.P17 letter issued to the petitioner in W.P.(C) No.10104 of 2024, wherein the Board has made it clear that the Board has the right to reassess and modify the Bank Guarantee amount as and when deemed fit. All the petitioners have accepted such conditions of licence. They have been intimated about the enhancement of Bank Guarantee also. The challenge against the action taken by the respondents is therefore without any force or merit and it is liable to be dismissed, contended the Standing Counsel appearing for the Spices Board.

16. Standing Counsel relied on a decision of the Madurai Bench of the Hon'ble Madras High Court W.P(MD) No.6717 of 2024, wherein the issue of enhancement of Bank Guarantee was considered. The Madurai Bench of the Hon'ble Madras High Court has repelled the challenge to enhancement of Bank Guarantee introduced by the Spices Board. The issue involved in this case is squarely covered by the decision of the Madurai Bench of the Hon'ble Madras High Court, contended the Standing Counsel.

17. I have heard the learned Counsel for the petitioners and the learned Standing Counsel appearing for the Spices Board. I have also heard the learned counsel who appeared for the Cardamom Growers Association.

18. The petitioners are aggrieved by the enhancement of Bank Guarantee / Security Deposit effected by the Spices Board and consequential demand for the enhanced Bank Guarantee / Security Deposit from the e-auctioneering agencies. The petitioners would argue that in view of Rule 10 of the CLMR, 1987, only the Government of India can effect enhancement of Bank Guarantee / Security Deposit, whereas the Spices Board of India would insist that in the light of Section 7 and Section 8 of the Spices Board Act, 1986, the Board has a right to regulate the sale of cardamom and stabilisation of prices of cardamom and consequently, the Board has a right to enhance the Bank Guarantee / Security Deposit.

19. The Spices Board Act, 1986 has been enacted for the constitution of a Board for the development of export of spices and for the control of cardamom industry including the control of cultivation of cardamom. Section 38 of the Act, 1986 provides that the Central Government may, by notification in the Official Gazette, make rules to carry out the purposes of the Act.

20. Section 38 of the Spices Board Act, 1986 reads as follows:

                  38. Power to make rules—

                  (1) The Central Government may, by notification in the Official Gazette, make rules to carry out the purposes of this Act.

                  (2) Without prejudice to the generality of the foregoing power such rules may provide for all or any of the following matters, namely:—

                  (a) the number of members of the Board under sub-section (3) of section 3;

                  (b) the term of office and other conditions of service of the members of the Board under sub-section (5) of section 3;

                  (c) the powers and duties of the Chairman under sub-section (6) of section 3;

                  (d) the powers and functions of the Vice-Chairman under sub-section (7) of section 3;

                  (e) the constitution of committees under section 5;

                  (f) the terms and conditions for giving licences to manufacturers of spices for export under clause (viii) of sub-section (1) of section 7;

                  (g) the form and manner in which and the time at which the registered owner may furnish returns to the Board under section 10;

                  (h) the form of the application and the fees under sub-section (1) of section 12;

                  (i) the period of limitation for appeal under sub-section (1) of section 14;

                  (j) the form of appeal and the fees payable under sub-section (3) of section 14;

                  (k) the procedure for disposal of appeal under sub-section (4) of section 14;

                  (l) the form in which, and the time at which, the Board shall prepare its budget under section 22 and its annual report under section 23;

                  (m) the manner in which the accounts of the Board shall be maintained and audited and the date before which the audited copy of the accounts may be furnished to the Central Government under section 24;

                  (ma) the manner of holding inquiry and imposing penalty under sub-section (1) of section 30A;

                  (mb) the form and manner of preferring appeal under sub-section (2) of section 30A;

                  (n) the conditions and the restrictions with respect to the exercise of the power to enter under section 37;

                  (o) any other matter which is to be, or may be, prescribed or in respect of which provision is to be, or may be, made by rules.

21. In exercise of the powers conferred by Section 38 of the Act, 1986, the Central Government has framed the CLMR, 1987. Rule 3 of the Rules, 1987 provides that no person shall carry on business as auctioneer or dealer of cardamom except under and in accordance with the terms and conditions of a licence issued under the Rules and such other instructions as may be issued from time to time by the Board for the development of cardamom industry.

22. Rule 10 of the CLMR, 1987 which provides for the terms and conditions for issue or renewal of licences.      Rule 10(1)(a) of the CLMR, 1987 reads as follows:-

                  10. Terms and conditions for issue or renewal of licences-

                  (1) The terms and conditions for issue or renewal of auctioneer licence shall be as under :-

                  (a) for e-auction, the applicant shall provide a security deposit in the form of a Bank Guarantee (equivalent to the average auction sale value of cardamom in one auction during the immediate preceding block period of three years) for the block period for which the applicant desires to obtain the auctioneer licence.

23. It is therefore clear that the Central Government under Rule 10(1)(a) has statutorily prescribed the Security Deposit to be provided by auctioneers fixing the same as Bank Guarantee (equivalent to the average auction sale value of cardamom in one auction during the immediate preceding block period of three years) for the block period for which the applicant desires to obtain the auctioneer licence.

24. The argument of the respondents is that notwithstanding Rule 10 of the Rules, 1987, the petitioners are bound by the conditions of licence issued to them and the licence conditions stipulate that the auctioneer shall adhere to the instructions of the Board issued for smooth and efficient conduct of cardamom auction. In view of the said conditions, the petitioners are bound to honour the demand made by the Spices Board for enhanced Bank Guarantee.

25. Ext.P8 notice inviting application for award of auctioneer licence, in its general terms and conditions provides that the auctioneer shall pay the growers whose cardamom is pooled, the applicable sale value of the cardamom sold in auction within ten working days from the date of auction. If the auctioneer defaults to make payment as per the terms and conditions of the licence, the Board will be entitled to invoke the Bank Guarantee and use the proceeds for arranging settlement of amount due to growers and to initiate steps for suspension and/or cancellation of the licence. It is the contention of the Spices Board that enhanced Bank Guarantee demanded by the Spices Board is in order to protect the interest of the cardamom growers. Therefore, the petitioners cannot challenge the enhancement.

26. The pleadings and arguments raised at the Bar do not indicate any instance of non-payment of sale value of the cardamom sold in auction to the cardamom growers, though the Standing Counsel for the Spices Board would assert that there were instances of delay on the part of certain auctioneers in making payment.

27. There is no doubt that interest of the cardamom growers is to be protected and payment due to the farmers are to be ensured. But, such protective mechanism can be enforced by the Spices Board only in accordance with the law and the rules prescribed for the same and such mechanism should be within the framework of law. It is true that as per Section 7 of the Spices Board Act, 1986, the Board has the power to ensure remunerative returns to growers of cardamom and to regulate the sale of cardamom and stabilisation of prices of cardamom. But, such power can be exercised only adhering to the provisions of the Act and the Rules.

28. Rule 3 of the CLMR, 1987 provides that no person shall carry on business as auctioneer or dealer of cardamom except and in accordance with the terms and conditions of a licence issued under the rules and such other instructions as may be issued by the Board from time to time. The question arising here is whether the Board can prescribe rules or issue any instructions contrary to the provisions contained in the CLMR, 1987 itself.

29. Rule 10 of the CLMR, 1987 specifically provides that for e-auction, the applicant shall provide a Security Deposit in the form of a guarantee, (equivalent to the average auction sale value of cardamom in one auction during the immediate preceding block period of three years) for the block period for which the applicant desires to obtain the auctioneer licence. When the Central Government has statutorily incorporated in the Rules the quantum of Bank Guarantee to be provided by the auctioneers, the Board will not be justified in enhancing the same without amending the Rules.

30. It is evident that the present quantum of Security Deposit in the form of Bank Guarantee is revised by the Central Government itself by effecting an amendment to the Rule inserted as per notification GSR 816(E) dated 18.11.2014. It is true that under Section 39(1) of the Act, the Board may, with the previous approval of the Central Government, by notification in the Official Gazette, make regulations consistent with the Act and the Rules generally to carry out the purposes of the Act. From Section 39(1), it is clear that such regulations issued by the Board shall be consistent with the Act and the Rules. The enhancement of Security Deposit / Bank Guarantee now being effected by the Spices Board, is inconsistent with Rule 10 of the CLMR, 1987 framed by the Central Government. Due to the afore reasons, I disagree with the judgment of the Madurai Bench of the Hon'ble Madras High Court in W.P.(MD) No.6717/2024.

31. In the facts and circumstances of the case, the petitioners are entitled to succeed. The impugned notices/letters issued by the Spices Board of India to the petitioners seeking enhanced Security Deposit / Bank Guarantee are set aside. The petitioners shall be permitted to conduct e-auction / sale of cardamom without insisting for more Bank Guarantee as long as the Cardamom (Licensing and Marketing) Rules, 1987 are not amended accordingly.

                  The writ petitions are disposed of as above.