Essential Commodity Act CS Executive

The Essential Commodities Act, 1955

Introduction

Contents

In the public interest,

    • to secure the equitable distribution and availability at low price,

it was considered necessary that the Centre should control production, supply and distribution of certain essential commodities.

Therefore Entry 33 of the List 3 of 7th schedule to COI was amended and power was given to the parliament to enact the required legislation.

 The Essential Commodities Act, 1955

It is an Act to provide,

  • in the interest of the general public,

for the control of the production, supply and distribution of, and trade and commerce, in certain commodities.

*Here general public means consumers not the dealers or wholesalers or manufacturers.

What is essential commodity?

According to the Schedule to the Act, “essential commodity” means any of the following classes of commodities:-

  1. drugs;
  2. fertilizer, whether inorganic, organic or mixed;
  3. foodstuffs, including edible oilseeds and oils;
  4. hank yarn made wholly from cotton;
  5. petroleum and petroleum products;
  6. raw jute and jute textiles;
    1. seeds of food-crops and seeds of fruits and vegetables;
    2. seeds of cattle fodder; and
    3. jute seeds.

Some of the commodities declared as foodstuff:

  1. Sugarcane
  2. Paddy
  3. Ice (for the purpose of Delhi Ice Control Order, 1979)
  4. Turmeric, pepper, chilies, coriander (dhaniya), cumin, cinnamon cloves, fenugreek, cardamom, dry mango peel (amchur), dry ginger
  5. Milk
  6. Wheat and wheat products

*Tea is not food stuff because one can live healthy life even without consuming it.

*Anything may be considered under the scope of foodstuff if it is essential for the existence and survival of the healthy livings or without which our daily food necessity cannot be satisfied.

Definition of Sugar

“Sugar” means –

  1. any form of sugar containing more than 90% of sucrose, including sugar candy;
  2. Khandsari sugar or bura sugar or crushed sugar or any sugar in crystalline or powdered form, or
  3. Sugar in process in vacuum pan sugar factory or raw sugar produced therein.

Essential commodities declaration, etc  (Section 2A)

Subsection 1 (what is essential commodity?)
For the purposes of this Act, “essential commodity” means a commodity specified in the Schedule.

Subsection 2 (Power of CG to amend the Schedule)
The Central Government may, if it is satisfied that it is necessary so to do in the public interest, amend the Schedule so as to-

  1. add a commodity to the said Schedule;
  2. remove any commodity from the said Schedule,
    in consultation with the State Governments.

Subsection 3 (period for which a new commodity be added in the schedule)
Any notification issued under sub-section (2) may also direct that an entry shall be made against such commodity in the said Schedule declaring that such commodity shall be deemed to be an essential commodity for such period not exceeding 6 months to be specified in the notification.

But Central Government may, in the public interest, extend such period beyond the said 6 months.

Subsection 4 (only commodity covered by Entry 33 in List III can be added/removed)
The Central Government may exercise its powers under sub-section (2) in respect of the commodity to which Parliament has power to make laws by virtue of Entry 33 in List III in the Seventh Schedule to the Constitution.

Powers to control production, supply, distribution, etc., of essential commodities (Section 3)

Subsection 1 (Power of CG to regulate or prohibit the production, supply and distribution of essential commodities)
If the Central Government is of opinion that it is necessary or expedient so to do

  • for maintaining or increasing supplies of any essential commodity or
  • for securing equitable distribution and availability at fair prices, or
  • for securing any essential commodity for the defense of India or
  • the efficient conduct of military operations

it may, by order, provide for regulating or prohibiting the production, supply and distribution thereof and trade and commerce therein.

Subsection 2 (Content of the order issued under subsection (1) or ways of regulating or prohibiting EC)
An order made under sub-section 1 may provide-

  1. for regulating the production or manufacture of any essential commodity;
  2. for bringing under cultivation any waste land for the growing thereon of food-crops;
  3. for controlling the price at which any essential commodity may be bought or sold;
  4. for regulating the storage, transport, distribution, disposal, acquisition, use or consumption of any essential commodity
  5. for prohibiting the withholding from sale of any essential commodity ordinarily kept for sale;
  6. for requiring any person holding in stock, or engaged in the production, or in the business of buying or selling, of any essential commodity –
    1. to sell the whole or a specified part of the quantity held in stock or produced or received by him, or
    2. in the case of any such commodity which is likely to be produced or received by him,
      • to sell the whole or a specified part of such commodity when produced or received by him

    to the Central Government or a State Government or to such person or class of persons as may be specified in the order.

  7. for regulating or prohibiting any class of commercial or financial transactions relating to foodstuffs or cotton textiles which are detrimental to the public interest;

Subsection 3 [price to be paid to any person selling goods to CG/SG under clause (f) of sub-section (2)]
Where any person sells any essential commodity in compliance with an order made with reference to clause (f) of sub-section (2), there shall be paid to him the price therefor as hereinafter provided:

    1. where the price can be agreed upon (consistently with the controlled price)
      • the agreed price;
    2. where no such agreement can be reached,
      • the price calculated with reference to the controlled price, if any;
    3. where neither clause (a) nor clause (b) applies,
      • the price calculated at the market rate prevailing in the locality at the date of sale.

Subsection 3A (price to be regulated under this subsection instead of subsection 3 under certain conditions of emergency)

Clause (i) [When price to be regulated under this subsection]

If the Central Government is of opinion that it is necessary so to do for controlling the rise in prices or preventing the hoarding, of any food-stuff in any locality, it may direct that the price at which the food-stuff shall be sold in the locality in compliance with an order made with reference to sub-section (2)(f), shall be regulated in accordance with the provisions of this sub-section.

Clause (ii) [tenure of notification under this subsection]

Any notification issued under this sub-section shall remain in force for such period not exceeding 3 months as may be specified in the notification.

Subsection 3 [price to be paid to any person selling goods to CG/SG under clause (f) of sub-section (2)]

Where any person sells any essential commodity in compliance with an order made with reference to clause (f) of sub-section (2), there shall be paid to him the price therefor as hereinafter provided:

    1. where the price can be agreed upon (consistently with the controlled price)
      • the agreed price;
    2. where no such agreement can be reached,
      • the price calculated with reference to the controlled price, if any;
    3. where neither clause (a) nor clause (b) applies,
      • the price calculated at the market rate prevailing in the locality at the date of sale.

The average market rate prevailing in the locality shall be determined by an officer authorized by the Central Government in this behalf. Such average market rate shall be final and shall not be called in question in any court.

Subsection 3B (payment of procurement price for foodgrains and edible oil)

Where any person is required in terms of an order under Sub-section (2)(f) to sell to the Central Government or a State Government or any officer or agent of such Government or to a Corporation owned or controlled by such Government

    • any grade or variety of foodgrains, edible oil and oilseeds
      • in relation to which
        • no notification has been issued under Section 3(3A) or
        • such notification, having been issued, has ceased to be in force,

procurement price shall be paid irrespective of the provisions of Sub-section (3).

While paying the procurement price regard shall be given to the following facts:

    1. the controlled price for such grade or variety of foodgrains, edible oils and oilseeds;
    2. the general crop prospects;
    3. the need for making such foodgrains, edible oils and seeds available at reasonable prices; and
    4. the recommendations of the Agricultural Prices Commission.

Sub-section (3C) [Fixing Price for Sugar to be paid to Producer]

Where any producer of sugar is required by an order made under Sub-section (2)(f) to sell any kind of sugar to the Central or State Government/officer or agent of such government or to any person/class of persons,

    • whether notification in this regard under Sub-section (3A) is issued or not or ceased to be in force and
    • notwithstanding anything contained in Sub-section (3),

the producer shall be paid such price for sugar as the Central Government may, by order, determine having regard to

    1. the minimum price, if any fixed for sugar cane by the Central Government under this section;
    2. the manufacturing cost of sugar;
    3. the duty or tax, if any, paid or payable thereon; and
    4. the securing of a reasonable return on the capital employed in the business of manufacturing sugar.

Further, the Central Government may determine different prices for different areas from time to time or for different factories or for different kinds of sugar.

Price fixation under Section 3(2) and 3(3B) is different from price fixation in the case of sugar under Sub-section (3C).

In the former, the dominant purpose in fixing price is to ensure that goods are available to consumers at a reasonable price.  In the latter case, price fixed must also give a reasonable return on investment to the producer.

Sub-section (3D) [Prohibition on disposal of sugar from the bonded godowns or warehouses of the importers or exporters]

No producer, importer or exporter shall

    • sell or otherwise dispose of or deliver any kind of sugar or remove any kind of sugar

from

    • the bonded godowns of the factory in which it is produced or
    • from the warehouses of the importers or exporters

except under and in accordance with the directions of central government.

Pledging of sugar by any producer or importer

Any producer or importer may pledge sugar in favour of

    • any scheduled bank or
    • any corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970,

But no such bank sells the sugar pledged to it except under and in accordance with a direction issued by the Central Government.

Sub-section (4)[Power to Appoint Authorised Controller]

If the central Government is of opinion that

    • it is necessary so to do for the maintaining or increasing the production and supply of an essential commodity,

it may, by order, authorize any person (known as authorized controller) to exercise,

    • with respect to the whole or any part of any undertaking engaged in the production and supply of the commodity as may be specified in the order

such functions of control as may be provided therein and so long as such order is in force with respect to any undertaking or part thereof.

Section 6 (Effect of the orders inconsistent with other enactments)

Any order made under section 3 shall have effect notwithstanding anything inconsistent therewith contained in any enactment other than this Act or any instrument having effect by virtue of any enactment other than this Act.

It could be seen that this section does not either expressly or by implication, repeal any of the provisions of the pre-existing laws, nor does it abrogate such laws. The object of Section 6 is simply to by-pass them.

Section 13 (Presumption as to Orders)

Where an order purports to have been made and sign by an authority in exercise of any powers conferred by or under this Act, a court so presume that such order was so made by that authority within the meaning of Indian Evidence Act, 1972.

Section 14 (Burden of Proof)

On being prosecuted for contravention of any order made under Section 3 which

    • prohibits any person from doing any act or
    • prohibits possession of a thing without lawful authority or without a permit, licence or other document

such person shall have to prove that he has such authority, permit, licence or other document as the burden of proof lies upon him.

Section 15 (Protection for Acts done in Pursuance of Order)

No suit, prosecution or other legal proceedings can be taken against any person for anything which is in good faith done, or intended to be done, in pursuance of any order made under Section 3 of the Act.

Likewise, no suit or other legal proceedings can lie against the Government, for any damage caused or likely to be caused, by anything which is in good faith done, or intended to be done, in pursuance of any order made under Section 3 of the Act.

CONFISCATION OF ESSENTIAL COMMODITIES

Seizure and Confiscation of Essential Commodities

The Essential Commodities Act envisages two independent proceedings against a person charged with contravention of the provisions of the Act:

    • under Section 6A, the Collector can confiscate the seized commodity and
    • under Section 7, the contravention would be punishable.

Section 6A (Confiscation of essential commodity)

Where any essential commodity is seized in pursuance of an order made under Section 3,

    • a report of such seizure shall be made, without any unreasonable delay,
      • to the collector of the district or
      • to the Presidency town in which such essential commodity is seized.

Further, the Collector at his discretion, may direct for the production of the seized commodity before him and if he is satisfied that there has been contravention of the order he may pass order for confiscation of

  1. the essential commodity so seized,
  2. any package or covering in which such essential commodity is found, and
  3. any animal, vehicle, vessel or other conveyance used in carrying such essential commodity.

Note:

    • Under this section,
      • no foodgrains or edible oilseeds seized in pursuance of an order made under Section 3 in relation thereto from a producer
        • shall be confiscated,
          • if the seized foodgrains or edible oilseeds have been produced by him.

Note:

    • In the case of any animal, vehicle, vessel or other conveyance
      • the owner of such animal, vehicle etc., shall be given an option to pay in lieu of its confiscation,
        • a fine not exceeding the market price at the date of seizure of the essential commodity sought to be carried by such animal, vehicle, vessel, or other conveyance.
Seizure Confiscation
Seize means to take possession contrary to the wishes of the owner of the property and that such action is unilateral action of the person seizing. Confiscation is condemnation and adjudication of property to the public treasury as of goods seized under the Customs Act.
The person from whom anything is seized loses, from the moment of seizure, the right or power to control or regulate the use of that thing. Confiscation must be an act done in some way on the part of the Government of the country where it takes place and in some way beneficial to that Government, though the proceeds may not strictly speaking be brought into its treasury.
The dictionary meaning of the word ‘seize’ means to lay hold of suddenly or forcible, to take hold of, to reach and grasp, to clutch’. In State of Kerala v. Mathai (1961 K.L.T. 169) it was pointed out that confiscation is not to be considered part of the sentence for an offence but is only a mode by which Courts can dispose of property which comes before it in criminal trials.
A reference to some provisions of the Codes of Criminal Procedure shows that the term seizure had been used therein in connection with the taking of actual physical possession of moveable property.
In the context of the Essential Commodities Act, it could be seen that an essential commodity which has been seized, could be confiscated. Therefore, confiscation is an action posterior to the seizure of the essential commodity. A commodity that has not been seized cannot be confiscated. Seizure itself does not imply confiscation. The seizure should have been made by virtue of an order passed under Section 3 of the Act.

Any contravention or intended contravention of an order passed by the Government under the Act may lead to seizure, and under the circumstances mentioned in Section 6A such seized commodity could be confiscated.

Note:

  • Where it was clear from the report of the Sub-Inspector of Police that the jeep in question was not found or used for carrying any essential commodity, it was found moving in front of the lorry which was loaded with paddy, it was held that, that by itself was no ground for its seizure.
  • The Collector has no jurisdiction to go into the validity of the seizure; he could only confiscate goods, out of those seized, in respect of which contravention is established.

Even though Section 6A authorizes confiscation of seized goods it does not say that the entire seized quantity should be directed to the confiscated. It is left to the discretion of the Distt. Revenue Officer (land) the appellate authority to decide whether the entire seized stock should be confiscated or only a portion of it

Sale of the Confiscated Commodity [Section 6A(2)]

Where the collector, on receiving a report of seizure or on inspection of any essential commodity under Section 6(1) above, is of the opinion that the essential commodity is subject to speedy and natural decay or it is otherwise expedient in the public interest so to do he may

    • order the same to be sold at the controlled price, if any, fixed for such essential commodity under this Act or under any other law for the time being in force;
    • where no such price is fixed, order the same to be sold by public auction.

Note:

    • In case of foodgrains, the collector may, for its equitable distribution and availability at fair prices, order the same to be sold through fair price shops at the price fixed by the Central Government or by the State Government as the case may be, for the retail sale of such foodgrains to the public.

Disposal of Sale Proceeds of Confiscated Goods [Section 6A(3)]

The sale proceeds of the essential commodity sold, after deduction of the expenses of any such sale or auction or other incidental expenses relating thereto shall be paid to the owner or person from whom it is seized in the following circumstances:

    1. where no order of confiscation is ultimately passed by the Collector;
    2. where an order passed on appeal under Sub-section (1) of Section 6C so requires, or
    3. where in a prosecution instituted for the contravention of the order in respect of which an order of confiscation has been made under this section, the person concerned is acquitted (accused is free from the charge of an offense).

Issue of Show Cause Notice before Confiscation of Essential Commodity (Section 6B)

Subsection (1)

Before passing an order for confiscation under Section 6A, the owner of the essential commodity, package, covering, receptacle, animal, vehicle, vessel or other conveyance or the person from whom it is seized is required to be given a notice in writing informing him of the grounds on which it is proposed to confiscate the above goods.

Such person must be provided with an opportunity of making a representation in writing within a reasonable time and must be given him a reasonable opportunity of being heard in the matter.
Subsection (2)

No order of confiscation can be made if the owner of the confiscated animal, vehicle, vessel or other conveyance proves to the satisfaction of the Collector that the said modes of transport owned by him were used in carrying the essential commodity without his knowledge or connivance of himself or his agent, if any, and each of them had taken the necessary precautions against such use.

Note:

    • It is not sufficient for the owner to prove that the vehicle carried the essential commodity without his knowledge or concurrence. He must also prove that the vehicle was used without the knowledge, or concurrence of the person in charge of the vehicle.
    • In addition, he must prove that not only he but also the person in-charge of the vehicle had taken all reasonable and necessary precautions against such use [Shai Rahhim v. State of Andhra (1976) LT 357].
    • However, once an order confiscating the goods of above description has been passed it shall not be held invalid in terms of Sub-section (3) merely by reason of any defect or irregularity in the notice given under clause (a) of Sub-section (1) if in giving such notice the provisions of that clause have been substantially complied with.

Appeal against Confiscation Order (Section 6C)

Sub-section (1)

    • Any person aggrieved by an order of confiscation under Section 6A may appeal to the State Government concerned within 1 month from the date of passing the order.
    • The State Government shall give an opportunity to the appellant to be heard and pass such order as it may think fit, confirming, modifying or annulling the order appealed against.

Sub-section (2)

If the appeal has been decided in favour of appellant, he is entitled to the possession of the confiscated goods and if it is not possible for any reason to return the essential commodity seized from him, such person shall be paid the price therefor as if the essential commodity had been sold to the Government with reasonable interest calculated from the day of seizure of essential commodity.

Such price shall be determined in accordance with:

    • Sub-section (3B) of Section 3 in case of foodgrains, edible oils and oilseeds;
    • Sub-section (3C) of Section 3 in case of sugar; and
    • Sub-section (3) of Section 3 in case of any other essential commodity.

Confiscation and punishment (Section 6D)

The award of any confiscation under this Act by the Collector shall not prevent the infliction of any punishment to which the person affected thereby is liable under this Act.

Bar of Jurisdiction in Matters of Confiscation (Section 6E)

No court, tribunal or authority shall have any jurisdiction to make an order with regard to the matters falling within the purview of this Act particularly wherever any essential commodity is seized in pursuance of an order made under Section 3 when the collector or the judicial authority appointed under Section 6C shall have the jurisdiction.

OFFENCES AND PENALTIES

Cognizance of offences (Section 10A)

Every offence punishable under the Act shall be cognizable.

*A cognizable offence is one, where, under the Criminal Procedure Code or any other law in force, a police officer may arrest a person without a warrant.

According to Section 11

    • before a Court can take cognizance of any offence punishable under the Act, the following two conditions must be satisfied, viz.
      • there must be a report in writing,
      • the report must be made by a public servant (as defined in Section 21 of Indian Penal Code), or any aggrieved person or any recognised consumer association.

Prosecution of Public Servants (Section 15A)

If any public servant is accused of any offence alleged to have been committed by him while acting, or purporting to act, in the discharge of his duties, in pursuance of any order made under Section 3, no court can take cognizance of such an offence except with the previous sanction—

    • of the Central Government in the case of a person who is employed in connection with the affairs of the Union; and
    • of the State Government in the case of a person who is employed in connection with the affairs of the State.

Penalties (Section 7)

Section 7(1)(a)(i)

Contravention of an order passed by the Central Government under Section 3 with reference to clause (h) or (i) of Sub-section (2) thereof is punishable with imprisonment for a term which may extend to

    • 1 year and also with fine.

For the contravention of an order with reference to other clauses of Sub-section (2) of Section 3

    • the punishment is
      • imprisonment for a term ranging from 3 months to 7 years and
      • in addition fine is also leviable.

Further if any person contravenes any order made under Section 3,

    • any property in respect of which the order has been contravened shall be forfeited to the Government and any package, covering, receptacle in which the property is found and any animal, vehicle, vessel or other conveyance used in carrying the property, could also be forfeited if the court so orders.

Note:

    • clause (h) is related to collecting any information or statistics with a view to regulating or prohibiting any essential commodity.
    • clause (i) is related to maintenance of book, accounts and records

If any person to whom a direction is given under Section 3(4) (b) fails to comply with it,

    • he shall be punishable with imprisonment for a term which
      • shall not be less than 3 months
      • but which may extend to 7 years and
      • shall also be liable to fine.

If any person convicted of an offence under Section 7(1)(a)(ii) or 7(2) is again convicted of an offence under the same provision

    • he shall be punishable with imprisonment for the second and for every subsequent offence for a term which
    • shall not be less than 6 months
    • but which may extend to 7 years
    • besides fine.

For adequate and sufficient reasons the court can award imprisonment for a term less than 6 months. Where an offence is committed for a second time, besides the above punishment, the Court can also order that the person shall not carry on any business of that essential commodity for such period not being less than 6 months as may be specified by the Court.

Mens rea (Sections 6A and 7)

In Nathulal v. State of Madhya Pradesh (AIR 1966 S.C. 43) it was held by the Supreme Court that mens rea or guilty mind is an ingredient of the offence punishable under Section 7 of the Essential Commodities Act, 1955 i.e., an intentional contravention of an order made under Section 3, is an essential ingredient of an offence under Section 7.

In other words, if the dealer did believe bona fide that he could store the foodgrains for instance, without infringing any order under Section 3, there could be no contravention under Section 7.

Mens rea by necessary implication may be excluded from a statute only where it is absolutely clear that the implementation of the object of the Statute would otherwise be defeated.

In Hariprasad Rao v. State (AIR 1951 SC 264), it was observed that unless a Statute either clearly or by necessary implication rules out mens rea as a constituent part of a crime, an accused cannot be found guilty of an offence against the criminal law unless he has got a guilty mind. Therefore, mens rea is an essential ingredient of an offence under Section 7 of the Act.

It is to be noted that the contravention under Section 6A is also of the same character.
Section 6A in brief provides for seizure and confiscation based on ‘contravention’ of an order under Section 3. Therefore, the Collector before exercising his powers under the section would be entitled to take into consideration the question whether there was an intentional contravention of the order or whether the conduct of the dealer was bona fide under the belief that he was acting legally.

But it should be remembered that the orders of the Collector are provisional in the sense that the Court is entitled, on appeal by the dealer, to look into whole matter to see whether there were reasons to confiscate the goods under Section 6A.

Provisions as regard ‘contravention’ under Section 6A or 7 are in pari material

    • the contravention which details confiscation is of the same kind as that for which a dealer can be punished.

An interesting question is whether the doctrine of mens rea applies to cases of vicarious liability (in the case of a master and servant)?

It is well accepted that the legislature cannot introduce the principles of vicarious liability and make the master liable for the act of his servants, although the master himself had no mens rea.

Culpable Mental State (Section 10-C)

Culpable mental state includes intention, motive, knowledge of a fact and the belief in a fact.

It is now provided that in any prosecution for an offence under the Act which requires a culpable mental state on the part of the accused,

    • the Court shall presume the existence of mental state.

Of course, it is open to the accused to prove that he had no such mental state with respect of the act committed by him.

Attempt and Abetment (Section 8)

Any person who attempts to contravene or abets a contravention of any order made under Section 3 shall be deemed to have contravened that order.

False Statement (Section 9)

A person shall be punishable under this section with imprisonment for a term of which may extend to 5 years or with fine or with both for the following offences:

    • when required by any order made under Section 3 to make any statement or furnish any information, makes any statement or furnishes any information which is false in any material particular which he knows or has reasonable cause to believe to be false or does not believe to be true, or
    • makes any such statement as aforesaid in any book, account, record, declaration, return or other document which he is required by any such order to maintain or furnish.

Publication of names of convicted companies by Court (Section 10-B)

The Court may cause to be published in newspapers or in other manner at the expense of the company the name, place of business and the offence/contravention committed by it when a company has been convicted. However, no publication shall be made until the period for preferring an appeal against the order of the Court has expired, without any appeal having been preferred or where such appeal having been preferred, was disposed of. The expenses of any publication shall be recoverable from the company as if it were a fine imposed by Court.

GRANT OF INJUNCTION BY CIVIL COURTS (SECTION 12B)

It is expressly provided by Section 12B that no Civil Court can grant any injunction or make any order for any other relief against the Central or State Government or any public officer, in respect of any act done, or purporting to be done, by such person in his official capacity under the Act, or any Order made thereunder, until after notice of the application for such injunction or other report is given to the Government or to such officer.

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