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This article has been written by Shalu Gothi from FIMT, School of law, New Delhi. This article gives you an overview of the Essential Commodities Act which was passed by the Government in the year 1995.

Table of Contents

Introduction 

Nowadays, every person’s life depends upon some essential commodities, which are used by them every day. These commodities are the basic requirements to sustain a normal life. Thus, the availability and price of such commodities impose a major effect on the life of the general public. Therefore, to regulate the pricing, production, demand, and supply of these products, The Essential Commodities Act, 1955 plays a major role.   

Historical Background of the Act

The roots of this Act can be traced back to 1939 when, the Government of India made rules regarding control, production, supply, and distribution of certain specific commodities under the Defence of India Act, 1939 during World War 2. The Act ceased to exist in 1946. However, it was felt that certain regulations are needed urgently for the protection of some essential commodities in the interest of the general public. Therefore, The Essential Supplies (Temporary Powers) Ordinance passed in 1946, which was subsequently replaced by the Essential Supplies (Temporary Powers) Act, 1946.

The provisions of this Act were further extended by two resolutions of the General Assembly in 1948 and 1949. After independence, by the 3rd Constitutional Amendment, the first Essential Commodities Ordinance was passed, which was subsequently replaced by the present Act namely, The Essential Commodities Act, 1955.

Object and Scope of the Act

This Act extends to the whole of India. The Act was enacted to ensure the availability of essential commodities to consumers and protect them from the exploitation of unscrupulous traders, therefore, the Act provides rules related to the regulation and control of production, pricing, and distribution of the essential commodities. 

There are two main aims of this Act: 

(1)To maintain or increase the supply of these essential commodities, and

(2)To secure equitable distribution and availability of these essential commodities. 

Important Definitions

Essential Commodity

According to the Essential Commodities Act, essential commodities mean any commodity specified in the schedule. Thus, there are 7 following commodities that are specified in the schedule: 

  • Drugs (this is used in the same sense as defined under clause b of Section 3 of the Drugs and Cosmetics Act, 1940);
  • Fertilizers, whether organic, inorganic or mixed;
  • Foodstuffs, including edible oils and its seeds; 
  • Hank yarn, made  wholly with cotton;
  • Petroleum and its products;
  • Jute, whether in the form of raw or textiles;
  • Seed, whether of fruits and vegetables, of cattle fodder, or of jute.  

“Collector”  

According to the Act, collector means an Additional Collector or such other officer, not below the rank of the sub-divisional officer who is authorized by the Collector to perform the powers and functions of the Collector. 

‘’Notified order’’ 

 This means an order which is notified in the Official Gazette.

“Sugar”

According to the Act, the word sugar includes any form of sugar which contains more than ninety percent of sucrose, including sugar candy, khandsari sugar, bura sugar, crushed sugar, crystalize or powder sugar or the sugar whether in a form of process in a factory or raw produce.

“Foodstuff” 

This term “foodstuff” is not defined anywhere under the essential commodities Act. However, the scope of this term had been developed through various cases such as:

  • Satpal Gupta v. State of Haryana 

In this case, it was established that cattle and poultry foods are included within the meaning of the ‘foodstuff. Therefore, it concludes that the foodstuff is related to both humans and animals. 

  • State of Bombay v. Virkumar Gulab Chand Shah AIR 1952 SC335

In this case, it was established that the foodstuff includes raw material, things used in the process and things used in the preparation of food. Therefore, turmeric has been included in the scope of foodstuff.

  • S.Samuel, M.D., Harrisons v. Union of India 2004 SSC 256

In this case, it was decided that tea is not a foodstuff and merely a stimulant. It neither used in the preparation of food nor contains any nutritional value, however in general parlance also when a person takes tea doesn’t consider it as having food.

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Laws relating to maintenance of Essential Supplies

In order to control illegal Activities and offenses under the Essential Commodities Act,1955, the government had enacted the Prevention of Black Marketing and Maintenance of Supplies of Essential Commodities Act, in the year 1980. This Act provides powers to officers of the Central Government as well as State Government to pass the detention order against the persons who seek to control production, distribution, and supply, trade, and commerce of those essential commodities defined under Section 2 of the Essential Commodities Act,1955. The Act also contains the manner according to which these detention orders pass or execute. 

Powers of Central Government Under the Essential Commodities (Section 3)

The Central Government under this Act have two important powers: 

  • Power to Notify the essential commodity

Under this power, the Central Government from time to time adds and removes any commodity from the schedule for the interest of the general public. However, the commodities in regard to those such powers are exercise must have to be given under entry 33, list 111 of the 7th schedule of the constitution.

  • Power to issue a control order (Section 3)

Under this Act, the Central Government has the power to issue control orders. Such orders provide for regulation and prohibition of essential commodities scheduled in one of the following circumstances:

  • When the government finds that it is necessary and expedient to do in favor of the general public.
  • When they have to secure equitable distribution and availability of these commodities in the market.
  • When they have to secure any specific commodity for the Defence of India.  

Purposes for passing control order

  • To regulate by license, permit or otherwise

The central government by issuing license and permit regulates the production, distribution, supply, storage, transport, acquisition of any essential commodity. Therefore the government issue ration/fair price shop license, importing/exporting license, etc.

  • To bring under cultivation of any wasteland or arable land

The Central Government by passing control order may bring any wasteland or arable land under cultivation for the purpose of growing, maintaining and increasing cultivation of any general or specific food crop.  

  • To control the buying and selling price of any essential commodity

The Central Government may pass any control order to control the buying and selling price of any essential commodity. This type of control order can be issued: 

  • To Improve domestic availability;
  • Keep the price at a reasonable level, and
  • Regulate the artificial inflation due to hoarding and black marketing.

Example- Drug Price Control Order(DPCO-2013), Kerosene (restriction on use and fixation of ceiling price order )1994-2015

  • To determine entry, search, examine, seizure of any essential commodities

The Central Government by passing control order may determine entry, search, examination, seizure of: 

  • Any conveyance such as aircraft, vessels, vehicles used to carry essential commodity;
  • Any packages, covering or receptacle in which any essential commodity are found or packed;
  • Any book of account and documents which gave the information about any essential commodity.
  • To require any person to do specific works

The central government may pass the control order for required any person who is engaged in production or business of buying and selling of the essential commodity to sell whole or any specific part of a commodity held in stock or when any commodity is likely to receive in future whole or specific part of such commodity when received to the Central Government or State Government or to the corporation owned or controlled by the government or to the officer or agent of the government or to another person or class of person specified thereof.

The Central Government also requires such a person to maintain and produce for inspection such books, accounts, and records related to his business and furnish such information specified under the order.

  • To  regulate or prohibit any class of commercial and financial transactions

The Central Government may pass the control order to regulate or prohibit any class of commercial or financial transactions relating to any foodstuff which is in the opinion of the authority unregulated and is likely to be detrimental to the public interest.

Price control under the Essential Commodities Act,1955 [Section 3(3)]

Where any person sells any essential commodity in compliance of the order made under Section 3, the price of that essential commodity shall be determined as:

  • Agreed price– When the parties have already agreed upon the controlled price fixed under this Section. 
  • Controlled price– When no such agreement can be reached, the price is calculated with reference to the controlled price. 
  • Market price– Where neither the above prices apply, then the price is calculated according to the average market rate prevailing in the locality.

Fixing the price of essential commodities during an emergency  Section 3A)

The Central Government, when finds necessary to control the emergency situation, may issue a notification regarding the selling price of any foodstuff in any locality.

The price of such food-stuff would be determined according to the following rule:

  1. If the foodstuff constantly falls under the category of controlled price and the parties have already agreed upon it then the price is calculated according to that agreement. 
  2. If there is no such agreement related to the foodstuff can be reached then the price is calculated with reference to the controlled price.
  3. When there is a situation where condition 1 and condition 2 do not apply then the price of such foodstuff is calculated according to the average market rate prevailing in the locality.

The notification issued under this Section shall remain in force for 3 months only.

Payment of procurement price (Section 3B)

When there is no aforesaid notification issued regarding the price of any food crop, edible oilseeds or edible oils the price of such would be determined after keeping in the mind:

  • The controlled price, fixed under this law or any other law for the time being in force such food crop, edible oilseeds or edible oil;
  • The general crop prospects; 
  • The need for such grade or variety;
  • Recommendation of the Agriculture Price Commission. 

Fixing a price for sugar to be paid to the producer(Section 3C)

When there is no aforesaid notification issued regarding the price of sugar, then the price of sugar would be determined after considering the following: 

  • The price of sugarcane.
  • The manufacturing cost
  • The duty and tax
  • The reasonable return to the business and manufActurers 

However, it is provided that the government may from time to time decide different prices for different areas, factories, and varieties of sugar.

Price Monitoring Cell (PMC)

This is a body of individuals appointed by the Central Government, to monitor the price of essential commodities such as rice, wheat, dal, sugar, tea, potatoes, onions, milk, etc. Apart from monitoring the division, it is also responsible for predicting the future price, analyzing the price situation and giving advance feedback of these commodities which will help the policymakers in making future policies. In event of shortfall of any essential commodity, the price monitoring cell also implements commodity-specific market intervention schemes to give temporary relief to the consumers.

At present, the price monitoring cell is monitoring the price of 22 essential commodities. For this purpose, the cell has to calculate data of all the 114 markets situated in 4 regions such as East, West. North and South of our country.

Power to appoint Authorised Controller [Section 3(4)]

The Central Government has the power to authorize any person to undertake powers and functions for maintaining or increasing the production, supply and equal distribution of any essential commodity. The authorized controller empowered only to exercise such power and function which may be provided in the undertaking. Thus the authorized controller empowered would continue his function as long as such order remains in force.

Issuance and Service of Control Orders Under (Section 3)

The control orders which are issued by the government is notified in the following manner: 

  1. If the order is directed to the general public, it will be notified in the Official Gazette, and
  2. If the order is directed to a specific person, it will be served to such individual: 
  • by delivering and tendering it to that specific person, or 
  • if it cannot be so delivered or tendered, it can be served by affixing it on the outer side or any other conspicuous part of the premises in which such person lives. A written report thereof shall also be prepared and witnessed by two persons living in the neighborhood. 

The imposition of Duties on State Government (Section 4)

The Central Government or officer or authority of the Central Government or any State Government has the power to, direct any state government or officer or authority of that State Government to exercise any such power and discharge any such duties in which the direction confers.

Delegation of Powers (Section 5

The central government by issuing notified order  may delegate its power to make orders and issue notifications to

  • Any  authority and officer of the central government or to any State Government; or
  • Any state government or any authority or officer of such state government.

Effect of the Order made under Section 3 (Section 6)

The order which is made under Section 3 shall have an effect on all the pre-existing laws of the country. This type of order neither repeal nor abrogate any provision of pre-existing laws but simply bypass them.

Seizure and Confiscation of Essential Commodities (Section 6A)

This Section talks about the power of the collector to confiscate or seize any essential commodity, the collector may pass orders to confiscate any package or covering or receptacle under which such commodity was packed or to confiscate any animal, vehicle, or any other conveyance of such commodity.

However, it is provided that no order of confiscation will be passed against any person if such food grains or foodstuffs are produced by himself.

It is further provided that when the order of seizing and confiscation is made for the animal, vessels, vehicle or other conveyances which are owned or hired by the owner then it is necessary to give the offender an option to pay in lieu of such seizure or confiscation, however, the fine imposed does not exceed the market price of the commodity sought to be carried by such conveyance.

  • Difference between Seizure and Confiscation

According to the Act, in seizure, the ownership of seized articles gets wested upon on the hands of the government however the proprietorship constant to stay with the proprietor, However, in confiscation, both ownership and proprietorship of confiscated article get vested upon the hands of the government.    

  • Disposal of Sale Proceeds of Confiscated Goods (Section 6A)

The collector, on receiving the report of seizure or on inspecting such essential commodity finds that if it is necessary and expedient in the public interest so to do, he may:

  • Immediately pass the Order to sell that commodity at the controlled price. if fixed 
  • Where no such price is fixed then pass the order to sell it on a public auction.

The sale proceeds of aforesaid  confiscated good after deducting necessary expenses shall be paid to the owner or person from whom it is seized and in the  following circumstances:  

  • Where no order is ultimately passed  by the collector; 
  • Where the order passed is on appeals; 
  • Where in the prosecution of contravention of the order, the person concerned is acquitted.
  • Issuance of Show Cause Notice before Confiscation of Essential Commodity (Section 6B)

There is no order for confiscation of any essential commodity is passed against any person without giving him a written notice which informs him about the grounds on which such order is proposed and to provide him an opportunity to make his presentation in writing.

  • An appeal against Confiscation Order (Section 6C)

Any person aggrieved by any order of confiscation is entitled to appeal to the judicial authority appointed by the government within one month from the date of the communication. And the appellate Court, after hearing the case, may confirm, modify, or annul such an order.

Offences and Penalties

Cognizance of Offences (Section 10A and Section 11)

According to these above Sections it is held that notwithstanding anything contained in the CrPc, every offence punishable under this Act, shall be cognizable, but the Court shall not take cognizance of any such offence except on the report, made by a public servant, defined under Section 21 of the Indian Penal Code. 

Burden of proof in certain cases (Section 14)

Under this Act, it is said that the burden of proof shall always lie upon the person who possesses any essential commodity without having any lawful authority or permit or license.

Prosecution of action taken under the Act (Section 15)

This section provides that no prosecution or proceeding shall be instituted against the person who acted in good faith or in pursuance of the order made under Section 3.

Cognizance of offences against the public servants (Section 15A)

When any public servant alleged to have committed any offence while discharging of his duty given under Section 3 of this Act, In that case, the Court of law can take cognizance, only after taking sanction from the Central Government, or state government under whose authority such a person is employed.

Penalties (Section 7)

There are different kinds of penalties imposed upon different kinds of offences. 

OFFENCES

PENALTIES

Contravene the  order made under clause (h) and (i) of the SubSection(2)

Imprisonment for a term which may extend to 1 year with fine

Contravene the other orders except above two.

Imprisonment not less than 3 months which may extend up to 7 years with fine 

Fails to comply with the direction given under clause (b) of Sub-Section (4)

Imprisonment not less than 3 months which may extend up to 7 years with fine 

If any person convicted for offences under Section Sub-clause (ii) of clause (a) of Sub-Section (1) or under Sub-Section (2)  again convicted on the same provision

Imprisonment not less than 6 months which may extend up to 7 years with fine 

If the offences convicted under Sub-clause (ii) of clause (a) of Sub-Section (1) or under Sub-Section (2)  does not cause any substantial harm to any individual or the general public.

Imprisonment for the term of 3 months or 6  months whichever is required as per the case.

 

Offences by the company (Section10)

When the above offences are committed by any company. Then every person who is in charge or responsible for the conduct and business of the company is held guilty for the offences and is liable for the punishment. For the purpose of this Section, the term ‘company’ generally includes a body corporate, a firm, or any other association of individuals.

However, it is provided that when any person liable for punishment successfully proved that the contravention has been taken place without his knowledge and he exercised due diligence at the time of contravention to prevent it then he would not become liable for any punishment for such offence.

Presumption of Culpable Mental State (Section 10C)

The culpable mental state means having a mala-fide intention under which any person commits offences. Under this Act, the Court always presumes that the culpable mental state exists at the time of commitment of every offence. However, the defense has to prove that he does not have any such intention. So we can conclude that at earlier the burden of proof is always upon the prosecution. In the Essential Commodities Act, 1955 the culpable mental state of any person shall be presumed under the following two situations.

Attempt or abetment

If any person is found guilty of attempts to contravene or abets to contravene any order made under Section 3 of the Act, then it will be presumed that such person has a ‘culpable mental state’. 

False statement

If any person, when required by the law, makes any statement that is false or presumed to be false or presents any false statement in any book, account, record, declaration, etc then it shall be presumed that he has a culpable mental state. 

Landmark Judgments

  • Nathu Lal v. State of Madhya Pradesh (AIR 1966 SC 43)

This case established the importance of the concept of mens rea under the essential commodities Act,1996

Facts 

In this case, the applicant was the dealer of foodgrains at Dhar in Madhya Pradesh. He was prosecuted for having in stock 885 maunds and 21/4 seers of wheat without a license for the purpose of sale thereby committed an offence under Section 7 of essential commodities Act,1995. The appellant pleaded that he did not intentionally contravene the provision of the Act, he said that he stored the goods after applying for the license and he was fully convinced by the government authorities that it would be issued to him.

Held 

In this case, it was held that the mere fact that the nature of the statute is to promote welfare Activity and eradicate the social evil itself does not exclude mens rea from its ambit. The elements of mens rea excluded from any statute only if it defeats the object to such a statute. Thus when we read the object of the Essential Commodities Act which is “to control trade in certain commodities for the interest of the general public” we can not say that this would be defeated if the mens rea is read like an ingredient of offences committed under it. Therefore in offence under Section 7 would be committed only if a person intentionally contravenes the provision of Section 3 of the Act. However, in this case, the appellant successfully proved that he had no guilty intention at the time of having stored the seized essential commodities however despite having contravening of the order issued under Section 3 he was not prosecuted for this offence. 

  • State of Madhya Pradesh v. Narayan Singh & Ors (1989 AIR 1789)

Facts

In this case, the respondents who were lorry driver, cleaners and coolie were prosecuted for the offence committed under Section 3 and Section 7 of the essential commodities Act. They were carrying bags of fertilizers in trucks from Indore to Maharashtra. The lorry driver possessed invoice and other records but they did not include a permit issued under the Fertilizers (movement control) Order, 1973. However, the accused did not deny the fact that they transport bags of fertilizers in their respective lorries and intercepts the lorries at Sendhwa sales tax barrier but said that they had no knowledge about the contents of the document so seized.

Held

The Supreme Court, in this case, held that the main reason to amend Section 7 in 1967 was to impose strict liability on the offender in contravention of the control order through adding the crucial words like “whether knowingly, intentionally, or otherwise”. Therefore now this Section is comprehensively worded so to take within the fold of not only the offences of contraventions done knowingly or intentionally but even unintentionally. In this case, the mere fact that the respondent exports bags of fertilizers without permit itself does not consider as a valid reason for convicting them in this case, the prosecution also failed to prove that there is any culpable mental state or innocuous purpose involved in the parts of the respondents. Therefore the Supreme Court did not award any punishment to the respondent for the commitment of the aforesaid offence.

Conclusion 

The Essential Commodities Act,1955 is one of the important laws of the country that applies for the protection of the interest of the general public. Under this Act, the Central Government possesses a wide range of powers to control the production and supply of essential commodities. Under this Act, the Central Government controls the price of the confiscated or seized essential commodities. All these powers are necessary to maintain the market.

References


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