In Brief
The Food Corporation of India (FCI) blacklisted rice mills for supplying sub-standard rice and declined to allocate paddy to new lessees who took over these mills. The new lessees argued they were separate entities with no liability for the original millers' defaults. The Supreme Court held that unregistered lease deeds cannot create a separate legal entity insulated from previous liabilities, and new lessees cannot claim allocation of paddy unless the original miller's dues are satisfied. The Court set aside the High Court's decision favouring the lessees, holding that liability for defaults cannot be evaded through lease transactions, but permitted the lessees to pay the original dues with penalty/interest and thereafter seek allocation.
The lawyer headnote and full judgment text are available to registered users.