WP/26987/2007 of Md. Mahamood Ali, Vs The Deputy Collector and Tahsildar, on 31 December 2007

O R D E R:

HON’BLE SRI JUSTICE P.S.NARAYANA

WRIT PETITION No. 26987 of 2007

1. This Court issued Rule Nisi on 20-12-2007 and heard Sri V.H.V.R.R.Swamy, learned counsel representing the petitioner, and the learnedGovernment Pleader for Civil Supplies at lengthand at the request of both thecounsel, the matter is being disposed of finally.

2. This writ petition is filed praying for issuance of a writ of Mandamus declaringthe action of respondents in seizing the lorry bearing No. AP 13-T 5402 dated 14-11-2007 as null and void and consequently issuance of proceedings under Sections 6-Aand 6-B of the Essential Commodities Act, 1955 (for short ‘the Act’) in Case No.A7/828/2007 dated 30-11-2007 served on 13-12-2007 as null and void and to passother suitable orders.

3. Sri Swamy, learned counsel representing the petitioner, had taken this Courtthrough the contents of the affidavit filed in support of the writ petition and hadpointed out to the relevant provisions of the Act and would maintain that on a carefulreading of the show cause notice, it is clear that violation of the contract agreementalone had been referred to, even otherwise diversion of the vehicle had beenspecified as having taken halt at the petrol bunk. The learned counsel in elaborationhad pointed out to the relevant portion of the impugned proceedings and also wouldmaintain that what are the contraventions had not been specified. The power ofseizure to be exercised when there is only contravention of a particular control order,even otherwise notice to be given to the owner as contemplated under Section 6-B ofthe Act. The learned counsel also had taken this Court through Section 6-A andSection 3 of the Act as well. The seizure of vehicle would not arise when a Stage-Icontractor is said to have contravened the conditions of the agreement. The power ofseizure can be exercised only where either the provisions of the Act are contravenedor the specific control order as such had been contravened and therefore, the RiceLevy Procurement Order, which is being relied on, is not applicable to the facts of thecase at all. The learned counsel also explained what a reasonable belief maymean. The counsel relied on several decisions to substantiate his submissions.

4. The learned Government Pleader for Civil Supplies would maintain that therice is meant for Public Distribution System and the same was being illegallytransported. The power of seizure is there when there is contravention of provisionsof the Act referred to above and the relevant control orders. The learned Governmentpleader for Civil Supplies placed a strong reliance on clauses 20, 7 and 14 of theRice Levy Procurement Order. Further the learned Government pleader wouldmaintain that if the provisions of Sections 3, 6-A of the Act, carefully read in a way,the present writ petition is a premature one since the show cause notice was issuedonly in relation to the immediate steps to be take in relation to the essential

commodity and hence, the vehicle had not been referred to. The confiscation stagedid not reach till now and further the release application of the vehicle had alreadybeen moved. Further the counsel would submit that the decisions, relied upon by thecounsel for the writ petitioner are distinguishable on facts and are not applicable tothe facts of the present case. The leaned counsel also placed reliance on certaindecisions.

5. The petitioner is the owner of the lorry bearing No. A.P.13-T 5402. SriSashidrar Reddy is the stage-I transport contractor, who hired the vehicle of thepetitioner for the purpose of transport of rice from depot FCI Cherlapally, RangaReddy District to the MLS point Ramanthapur on a rent of Rs.1,000/-. On 14-11-2007stage-I contractor loaded the lorry with stocks of PDS rice of 153.65 quintals anddispatched the lorry at 4.30 P.M. and the same was seized by the respondent on 14-11-2007 at 6.00 PM. at Peda Amberpet village, National High Way No.9. At the timeof seizure, the lorry was halted near petrol bunk. The first respondent seized thevehicle, conducted panchanama and submitted report under sections 6-A (1) of theEssential Commodities to second respondent on 17-11-2007. He alleged that thedriver of the lorry with a mala fide intention diverted the rice meant for PublicDistribution System into black market and at present the lorry has been kept inHayatnagar Police Station. The first respondent seized the lorry and handed overthe same to the Hayatnagar police and as on today, no orders had been passed. It isalso stated that the petitioner filed an application to second respondent-JointCollector, Ranga Reddy District, Hyderabad praying for release of lorry bearingNo.AP 13-T 5402 on 27-11-2007. As the second respondent cannot initiate proceedings under Section 6-A of the Act and as there is no contravention of any of the control orders made underSection 3 of the Act, the second respondent has no power or authority to confiscatethe seized rice as the rice belongs to the Government and the petitioner being theowner of the vehicle transporting the vehicle from FCI Godown to Ramanthapur MLSpoint. Several decisions also had been relied upon in this regard and appropriatereleifs had been prayed for as already specified above in the present writ petition.

6. The report under Section 6-A (1) of the Act reads a hereunder:

-Report under Section 6A (1) of Essential Commodities Act, 1955

1. Section of law contravened : Contravention of provisions of the E.C. Act 1955 and the AP PDS

(Control) Order, 2001.

2. Date of Inspection : 14-11-2007

3. Date of 6-A report : 17-11-2007

4. Name of the Inspecting Officers : 1. Sri A.Nagendra, Dy.Collector &

Tahsildar,Hayathnagar

Mandal, R.R.District.

5. Name of the respondent : 1. Sri Md.Fareed, Driver of the Lorry bearing No.AP 13 T 5402 2. Sri Md.Mahamood, Owner of the Lorry bearing No. AP 13 T 5402 3. Sri P.Shashidar Reddy, Stage-I, Transport Contractor, R.R.District.6. Property seized : 1. 315 bags @ 49 Kgs each of PDS rice Total: 153,65 Qtls Rs.1,38,000/- 2. Lorry bearing No. AP 13 T 5402worth of Rs.3,00,000/- -------------------- Rs.4,38,000/- --------------------7. Whether the seized property has : Handed over the seized rice been shifted and the address of the stocks to Smt.N.Nagalaxmi, person with whom it is kept for Asst.Gr-II incharge of MLS safe custody Point, Hayathnagar and handed over the empty lorry bearing No.AP 13 T 5402 to the Station House Officer, Hayatnagar for Safe custody until further orders received fromthe Collector(CS), R.R. District.8. Records Seized : ---9. Name of the Panchas : 1. Sri Jurka Yadaiah, S/o. gandaiah Age 42 Yrs., R/o 1-121,Kuntloor, Occ: Business.2. Sri Kodanda Rajendra Prasad, S/o Swamy, Age: 30 Yrs., R/o 4-7-44, Hayatnagar, Occ:Pvt.Employee. 3. Sri Padi Chandu,S/o.Lingamaiah, Age 25Yrs., R/04-7-36, Hayathnagar,Occ:Labour.10. Name of the witnesses : 1.Sri K.Venkatesh 2. Sri N.Laxmaiah11. Facts of the case :In the Court of the Collector (CS): Rangareddy District.

Sir,

Sir,

On receipt of credible information about diversion and illegal transportation of FCI Ricemeant for Public Distribution System on the National Highway leading to Vijayawada and asper the instructions received from the Joint Collector-II, Ranga Reddy District. I, along withthe Assistant Supply Officer, Circle-II, Uppal, Circle-III, Saroornagar and the DeputyTahsildar (Enf), Hayathnagar and Ibrahimpatnam have proceeded to Pedda amberpetvillage of Hayathnagar Mandal on 14-11-2007 at about 6.00 PM and summoned the above mediators. After introducing our identity, explained them about the information received and purpose of our visit andrequested them to act as Panch Witnesses, which they agreed willingly. After that we allproceeded to the out skirts of the Pedda Amberpet Village on the National Highway No.9 andwhile checking the lorries which were passing on the National Highway, we noticed a lorrybearing No.AP 13 T 5402 with the load covered by the Tarpalein was halted near a PetrolBunk. We all approached the said lorry and on noticing us one person jumped down fromthe lorry’s cabin and fled away from the scene. We made our efforts to catch hold thatperson, but our efforts were proved futile. Then we verified cabin of the lorry for trace outdocuments pertaining to the load, but at the time of verification we found no documents,permits, Registration Certificates etc. Further no person was available near by to the saidlorry. Though we waited there for some time, no body come forward claiming the vehicleand stock. After that we noticed that there was rice bags load in the lorry, which wascovered by Tarpalein and tightened with the ropes. We opened the tapalein in the presenceof mediators and verified that stocks and found that there were PDS rice bags in the lorry. The bags were machine stiched and having FCI emblem with lot numbers, ACK numbersand Rice Mill Addresses.

Thus prima facie, it is established that the rice load in Lorry bearing No.AP 13 T 5402was being illegally transported without any Way Bill, truck chit, Permit or any valid documentcontravening the provisions of the EC. Act, 1955 and the A.P.PDS (Control) Order, 2001 fordiversion into black market. As I have reason to believe that there were contraventions asstated about, I have seized the lorry baring No.AP 13 T 5402 along with PDS rice bags andhanded over the seized property to the Station House Officer, Hayathnagar for temporarysafe custody, as the near by MLS Point was not available at that time and obtained receiptfrom the Station House Officer. After that I called upon the in charge of MLS Point,Hayathnagar on Smt. N.Nagalaxmi, Assistant Grade-II. Then, requested the Station HouseOfficer, Hayathnagar to handedover the rice stocks along with Lorry to the Deputy Tahsildar(Enf), Hayathnagar. In turn the Inspecting officials have taken over the lorry bearing No.AP13 T 5402 from the Station House Officer, Hayathnagar and proceeded to the MLS Point tothe Hayathnagar. In turn the Inspecting officials have taken over the lorry bearing No.AP 13T 5402 from the Station House Officer, Hayathnagar and proceeded to the MLS Point to theHayathnagar. The in charge of the MLS point has unloaded the rice stocks from the lorryand wighed every bag with the help of hamalies on counting and physical weightment it wasfound that there were 315 bags weighing 153.65 Qtls of PDS rice available. Further, it wasnoticed that all bags were machine stiched and printed with FCI emblem lot numbers /ACKnumbers. We handedover the above rice stocks to Smt.N.Nagalaxmi, Assistant Grade-II,In charge of MLS Point, Hayathnagar for safe custody under cover of Panchanama, untilfurther orders received from the Collector (CS) Ranga Reddy District and obtained receiptfrom her in token of receipt of PDS rice stock will full details of lot numbers, ACK numbersetc. We have also drawn the samples of Rice randomly from the rice bags in the presenceof mediators duly sealed them in the cartool bags. Further I have handedover the emptylorry bearing No.AP 13 T 5402 to the Station House Officer, Hayathnagar for safe custody,until further received from the Collector (CS) Ranga Reddy District under properacknowledgment. The value of the seized property is worked out as follows

1. Lorry bearing No.AP 13 T 5402 worth Rs.3,00,00/-

2. PDS Rice bags weighing 153-65 Qtls containing in 315 bags worth Rs.1,38,000/- (Total worth of Rs.4,38,000/-) (Total worth of Rs.4,38,000/-)

During the course of further investigation about the above seized stocks, we obtainedthe details of the loads dispatched on 14-11-2007 from the Depot Manager, FCI, Cherlapally,Ranga Reddy District and the movement in charge of APSCSC Limited at the abovegodown. As per the statement furnished by the Depot Manager, FCI, Cherlapally, it revealsthat the lorry bearing No.AP 13 T 5402 was loaded with 315 bags of AP Rice and dispatchedfrom the godown at 4-15 PM with a destination of Ramanthapur MLS point under truck chitNo.2211. Further as per the statement furnished by the Movement in charge of APSCSCLimited, it reveals that the said lorry was dispatched from the Godown point at 4-35 PM on14-11-2007 with truck chit number 27839 to Ramanthapur MLS point as destination. As perthe truck wise movement particulars of rice moved on 14-11-2007 obtained from the DistrictManager, APSCSC Limited, Ranga Reddy District, it reveals that the said lorry was notreached to the MLS point, Ramanthapur and as per the stock receipt register Xerox extract furnished by the MLS point incharge, Ramanthapur also reveals that the above load of ricewas not reached the MLS point. Thus, it is clearly proved that the driver of the lorry with amala fide intention to divert the rice stocks meant for PDS into black market only, proceededtowards Pedda Amberpet village of Hayathnagar Mandal, R.R. District instead of destinatedplace i.e., MLS point, Ramanthapur.

Hence, it is prayed that action may kindly be initiated against the respondents underSection 6-A(1) of the E.C. Act, 1955 and to pass orders for confiscation of the entire seizedstocks in favour of the State Government. Further, it is prayed that pending final ordersunder Section 6-A (1) of E.C. Act, 1955, interim disposal orders under Section 6-A (2) ofE.C. Act, 1955 may be issued as deemed fit as the seized stocks are perishable in nature.

7. It is pertinent to note that in the report itself it is specified that on receipt ofcredible information about diversion and illegal transportation of FCI rice meant forPublic Distribution System on the National highway leading to Vijayawada and asper the instructions received from Joint Collector-II, Ranga Reddy District, he alongwith the Assistant Supply Officer, Circle-II, Uppal, Circle-III, Saroornagar and theDeputy Tahsildar (Enf), Hayathnagar and Ibrahimpatnam had proceeded to PeddaAmber village of Hayathnagar Mandal on 14-11-2007 at about 6.00 PM andsummoned the above mediators. Further it is specified that prima facie, it is established that the rice load in lorry bearing No.A.P.13-T 5402 wasbeing illegally transported without any way bill, truck chit, permit or any valid document contravening the documents of theAct and A.P.PDS Control Order 2001 for diversion into black market. Further, itclearly reveals that the said lorry was not reached to the MLS point, Ramanthapurand as per the xerox extract of the stock receipt register furnished by the MLS pointin-charge, Ramanthapur also the above load of rice did not reach the MLS point.

8. The applications moved by the writ petitioner and by the Sasidhar Reddy forrelease of the vehicle in question are also placed before this Court. Strong reliancewas placed on the wording employed in the show cause notice dated 30-11-2007 bythe Joint Collector-II, Ranga Reddy District under Section 6-B of the Act and thesame reads as hereunder:

IN THE COURT OF THE JOINT COLLECTOR-II RANGAREDDY DISTRICTNOTICE UNDER SECTION 6-B OF THE E.C.ACT, 1955.

6-A CASE NO.A7/828/2007 Dated:30-11-2007

Between:The Deputy Collector & Tahsildar,Hayathnagar Mandal,Ranga Reddy District …Complainant/Petitioner

and

1. Sri md.Fareed, Driverof the lorry bearing No.AP 13 T 5402.2. Sri Md.Mahamood, Ownerof the lorry bearing No.AF 13 T 5402.3. Sri P.ShashidarStage-I, Transport Contractor,R.R.District.

….Respondents.

ToThe above named Respondent.

Whereas the complainant has seized 153.65Qtls of PDS Rice, from your possessionand filed a report dated 17-11-2007 under Section 6-A of Essential Commodities Act and forcontravention of conditions of Contract Agreement as Stage I Contractor for enrooting the vehicle andrequested for confiscation of the same in favour of the Government. Upon perusing the same there arereasons to believe that, the prima facie of diversion of Essential Commodities is proved.

Therefore, the following charges have been leveled against the Respondent.

Charge1:

It is found that being a stage 1 contractor you have colluded with the owner and the driver of thelorry bearing No.AP 13 T 5402, you have enrooted the vehicle along with 153.65 Qtls of PDS Riceinstead of giving delivery at MLS point Ramanthapur for black marketing the PDS rice andrespondent No.3 being a Stage-I Transport Contractor you have violated the Contract agreement asStage-I Contractor read with the provisions of the E.C. Act, 1955.

Since there are sufficient grounds to proceed under Section 6-a of the Essential CommoditiesAct, 1955 you are hereby directed to submit your explanation in writing within 15 days from thedate of receipt of this notice to show cause as to why the seized stocks should not be confiscatedunder Section 6-A of Essential Commodities Act, 1955.

You are further directed to appear before this Court on 19-01-2008 at 3.00 P.M. before JointCollector-II, R.R.District at Court Hall, Collectorate, R.R.District either in person or throughAdvocate to adduce evidence in support of your written explanation.

Sd/- Solomon Arokia Raj

Collector (C.S.)

Ranga Reddy District.

//By Order//

Assistant Supply Officer,DSOs Office, R.R.District.

9. Submissions at length were made that the seizure of the lorry had not beenreferred to in the show cause notice at all and hence, even on this ground, thevehicle should be released by this Court.

10. As can be seen from the averments made in the affidavit filed in support of thewrit petition and also the proceedings placed before this Court, certain factualcontroversies are involved in this matter and this Court as a writ Court cannot express any opinion relating to these aspects. Strong reliance was placed on Sections 3, 6-A 6-B of the Act and the said provisions read as hereunder:-Section 3:- Where any person sells any essential commodityin compliance with an order made with reference to clause (f)of sub-section(2), there shall be paid to him the price thereforeas hereinafter provided—Sections 3, 6-A 6-B of the Act and the said provisions read as hereunder:-Section 3:- Where any person sells any essential commodityin compliance with an order made with reference to clause (f)of sub-section(2), there shall be paid to him the price thereforeas hereinafter provided—

(a) where the price can, consistently, with the controlled price, ifany, fixed under this Section, be agreed upon the agreed price;any, fixed under this Section, be agreed upon the agreed price;(b)where no such agreement can be reached, the pricecalculated with reference to the controlled price, if any:calculated with reference to the controlled price, if any:

(c) where neither clause (a) nor clause (b) applies, the price,calculated at the market rate prevailing in the locality at thedate of sale.calculated at the market rate prevailing in the locality at thedate of sale.

Section 6-A:-Confiscation of essential commodity.- (1)Where any essential commodity is seized in pursuance of anorder made under Section 3 in relation thereto, a report of suchseizure shall, without unreasonable delay, be made to theCollector of the district or the Presidency Town in which suchessential commodity is seized and whether or not aprosecution is instituted for the contravention of such order,the Collector may, if he thinks it expedient so to do, direct theessential commodity so seized to be produced for inspectionbefore him, and if he is satisfied that there has been acontravention of the order may order confiscation of- (a) the essential commodity so seized; (b) any package, covering or receptacle in which suchessential commodity is found; andessential commodity is found; and

(c) any animal, vehicle, vessel or other conveyanceused in carrying such essential commodity :used in carrying such essential commodity :

Section-6-B : Issue of show-cause notice before confiscation of Essential Commodity:-

(1) No order confiscating any essential commodity,package, covering, respectable, animal, vehicle, vesselor other conveyance shall be made under Section 6-Aunless the owner of such essential commodity, package,covering receptacle, animal, vehicle, vessel or otherconveyance or the person from whom it is seized—

(a) is given a notice in writing informing him of thegrounds on which it is proposed to confiscate the(essential) commodity, package, covering,receptacle, animal, vehicle, vessel or otherconveyance); (b)is given an opportunity of making a representationin writing within such reasonable time as may bespecified in the notice against the grounds ofconfiscation; andin writing within such reasonable time as may bespecified in the notice against the grounds ofconfiscation; and

(c) is given a reasonable opportunity of being heard inthe matter.the matter.

(2) Without prejudice to the provisions of sub-section (1),no order c9onfisating any animal, vehicle, vessel or otherconveyance shall be made under Section 6-a if theno order c9onfisating any animal, vehicle, vessel or otherconveyance shall be made under Section 6-a if the owner of the animal, vehicle, vessel or other conveyanceproves to the satisfaction of the Collector that it was usedin carrying the essential commodity without theknowledge or conveyance of the owner himself, hisagent, if any, and the person in charge of the animal,vehicle, vessel or other conveyance and that each ofthem had taken all reasonable and necessaryprecautions against such use.)

(3) No order confiscating any essential commodity,package, covering receptacle, animal, vehicle, vessel orother conveyance shall be invalid merely by reason ofany defect or irregularity in the notice given underclause(a) of sub-section (1), if, in giving such notice, theprovisions of that clause have been substantiallycomplied with.

11. Certain submissions were made in relation to Clause 2(d), clause 7 and Clause 14 of the Rice Levy Procurement order as well. In N.Nagedra Rao & Co. v. State of A.P.[[1]]the Apex Cour at para 5 observed -

5. Prior to adjudicating upon the legal issues, it appearsappropriate to examine in brief the objective of the Act, theprovisions dealing with search, seizure and confiscation andthe nature of their powers and manner of its exercise as it shallassist in determining if the statutory authorities are responsiblefor any loss or damage to the stocks and, if so, to what extent.The Act was enacted in the interest of the general public forthe control of the production, supply and distribution ofessential commodities and trade and commerce. In M/s.Diwan Sugar and General Mills (Pvt.) Ltd. v. Union of India,AIR 1959 SC 626 : 1959 (2) SCR 123, It was held that theprime object of the legislation was to secure availability ofessential commodities to the general public at fair prices andto protect their interest by way of equitable distribution."Essential commodity" under Cl. (a) of S. 2 of the Act meansany of the commodities mentioned therein. It extends to suchvaried items as cattle fodder, coal, component parts andaccessories of automobiles, cotton and woollen textiles,foodstuffs, iron and steel, paper, petroleum, raw cotton, juteand any other class of commodity notified by the appropriateGovernment. S.3 is the main provision directed towardssecuring equitable distribution of the essential commodity andits availability at fair prices. To achieve this objective, itsvarious sub-sections confer powers on Government to issueorders regulating or even prohibiting production, supply anddistribution of such goods. Cl. (j) of sub-sec. (2) of S. .3empowers the Government to make any provision for anyincidental or supplementary matter including in particular, theentry, search or examination of such premises, aircraft,vessels, vehicles etc. to make seizure by a person authorisedto make such entry, search or examination. But the power inrespect of the articles has been made subject to reasonablebelief that a contravention of the order has been, is being, or about to be committed. The reach of the sub-section is verywide as it empowers the person authorised to seize even ifany contravention is about to be committed. The expression'reason to believe' has been interpreted by this Court to meanthat even though formation of opinion may be subjective but itmust be based on material on the record. It cannot bearbitrary, capricious or whimsical. It is, thus, a check onexercise of power to seize the goods. The procedure afterseizure is provided for by S.6A of the Act. Sub-sec. (1) of it isextracted below :- "6-A. Confiscation of essential commodity.- (1) Whereany essential commodity is seized in pursuance of an ordermade under Section 3 in relation thereto, a report of suchseizure shall, without unreasonable delay, be made to theCollector of the district or the Presidency Town in which suchessential commodity is seized and whether or not aprosecution is instituted for the contravention of such order,the Collector may, if he thinks it expedient so to do, direct theessential commodity so seized to be produced for inspectionbefore him, and if he is satisfied that there has been acontravention of the order may order confiscation of- (a) the essential commodity so seized; (b) any package, covering or receptacle in which suchessential commodity is found; andessential commodity is found; and

(c) any animal, vehicle, vessel or other conveyanceused in carrying such essential commodity :used in carrying such essential commodity :

It requires a report of seizure of the essential commodity to bemade without unreasonable delay to the Collector of the districtwho is empowered to direct confiscation if he is satisfied thatthere has been a contravention of the order. This requirementis to ensure that the higher authority shall apply its mind andtake necessary steps in accordance with law. For instance, inthis case even non-essential goods were seized. If theCollector would have applied its mind and perused the reporthe would have immediately directed release of such goodsinstead of directing its sale by Tehsildar as the provision of theAct and the Control Orders do not apply to non-essentialgoods. The exercise of power was obviously mechanical. Thisis being mentioned only to demonstrate the nature of powerand how it is expected to be exercised. Nothing turns on it sofar this appeal is concerned. But what needs to be mentionedis that since the power is very wide as a person violating theControl Orders is to be visited with serious consequencesleading not only to the confiscation of the seized goods,packages or vessel or vehicle in which such essentialcommodity is found of is conveyed or carried, but is liable tobe prosecuted and penalized under S. 7 of the Act, it isinherent in it that those who are entrusted with responsibility toimplement it should act with reasonableness, fairness and topromote the purpose and objective of the Act. Further, itshould not be lost sight of that the goods seized are liable to beconfiscated only if the Collector is satisfied about violation of the Control Orders. The language of the section and its settingindicate that every contravention cannot entail confiscation.That is why the section uses the word 'may'. A trader indulgingin black-marketing or selling adulterated goods etc. should not,in absence of any violation, be treated at par with technicalviolations such as failure to put up the price list etc. or evendiscrepancies in stock.”

12. Further strong reliance was placed on the decision of the learned Judge ofthis Court in M/s Harsha Transport Vs. State of A.P.[[2]]wherein the learned Judgeat paras 5, 6 and 7 observed as under:

5. The argument of Mr.E.Manohar, Senior counsel for thepetitioner, is that the petitioner is an innocent of the violation ofthe alleged acts committed in the case but launching orinitiating proceedings under E.C.Act and under the A.P.Scheduled Commodities (Licensing and Distribution) Order,1982 are not attracted but the petitioner may be guilty ofviolation of provisions of Indian Penal Code and in so farclause 19 (1 if the A.P. Scheduled commodities Dealer’s(Licensing and Distribution) Order, 1982 is there, theCorporation respondent No.5 enjoys the power of purchase,sale or storage of essential commodities and if any action isinitiated for violation of provisions of E.C. Act against theproperty which is vested in the Corporation, it will be deemedto be stripping of the exemption which it enjoys in Law and inso far the essential Commodity or edible oil is deemed to beunder the ownership of 5[th] respondent, any proceedings by theauthorities in the instant case are arbitrary and withoutjurisdiction and can not be sustainable in law.

6. In the circumstances, I am inclined to take the view that thepetitioner is the agent of the 5[th] respondent and has theobligation to transport the oil from Visakahaptnam to variousplaces in Rangareddy District, and even during the course ofmovement of the oil, the respondent No.5 is not divested of itsownership and by virtue of sub-clause (i) of clause 19 of A.P.Scheduled Commodities Dealer’s (Licensing and Distribution)Order, 1982, the respondent No.4 has no jurisdiction orauthority to seize the commodity and similarly the respondentNo.2 has no authority to confiscate and sell the seizedcommodities, as such I quash the orders issued by theGovernment in G.O.Ms.No.135 Food and Agriculture (CS-II)Department dated 3-3-1988 confirming the order of the secondrespondent dated 17-8-1987 in so far with regard to thepetitioner.

7. The next question is with regard to inter se dispute betweenthe petitioner and the 5[th] respondent for reference to thearbitration as per the terms of the agreement dated 5-6-1986.

Without going into the merits of the question whether thepetitioner can raise such issue in writ proceedings Mr.N.SubbaReddy, learned Counsel appearing for respondent No.5,replying on the unreported judgment of Dasharadha RamReddy J. in W.P.No.15047 of 1990 dt 23-3-1995, submits thatdirections any be issued as his client is agreeable for referringmatter to the arbitration as requested by the petitioner in hisletter dated:2-5-1987 but submits that the petitioner may makea fresh request to the 5[th] respondent in this regard for referringthe dispute to the arbitration under clause 22 of the agreementdated: 5-6-1986.

13. Further reliance was placed on Ch.V.Ranga Rao vs. Govt. of A.P[[3]], wherein a Division Bench of this Court had observed at para 8 as under- “We have scanned the agreement and orders and heardarguments inter se, advanced on behalf of the Oil Corporationand Civil Supplies Corporation and the petitioners. From thesaid agreements spring civil action and if the respectiveCorporations want to prosecute their remedies, they can do sobut not under the provisions of Essential Commodities Act,1955, as we are not dealing with the consequences arising outof breach of contract and as we are called upon to answer asto whether the action of pilferage by the drivers while operatingthe tankers give rise to any penal action of confiscation of thevehicles while dissecting the same from the liability ofconfiscation of the commodity, be it diesel, petrol or palmoleinoil. The judgment of learned single judge of this court dated 13-3-1996 rendered in W.P.No.9963 of 1988 is brought to ournotice and we have perused the same. The Commodity Orderof 1988 vis-à-vis A.P.Civil Supplies Corporation, similar to thatof the last writ petition herein was adjudicated. Similarquestion arose with regard to the exemption of Civil SuppliesCorporation. It is held in that case that the Civil SuppliesCorporation is exempted from the Commodities Order andeven though it was seized during the course of transportation,the goods continue to be vested in the Civil SuppliesCorporation and it continued to be the owner, and when theownership was not divested merely because of process ofTransportation and such exemption covered the said processof transportation, as such the A.P. Scheduled Commodities(Licensing and Distribution) Order, 1982 was inapplicable andthere was no jurisdiction to seize the commodities. We concurwith the view of the learned Single Judge. Section 3 of theEssential Commodities Act, confers powers to promulgate theorder. Petroleum Order or Commodities Order are suchOrders in exercise of powers contained under Section 3 andthey are by way of Subordinate Legislation while the mainprovision is Section 3 which contains power of delegationempowering Subordinate Legislation. Violation of orders

promulgated under Section 3 can give rise to an action forseizure of the commodity and also the container or vehiclewhich carries the said commodities, but, when the Order itselfis not applicable, because of the exemption clause mentionedabove, the question of violation of Section 3 does not arise andconsequently Section 6-A of the Act has got no application. Further under Section 6-A of the Act, the first target forconfiscation is the commodity and only if the commodity isconfiscated, the container or vehicle can be confiscated. Evenwhile the power of confiscation of the commodity is absolute,the confiscation of the container or vehicle is not an inevitablecorollary and the owner of the container or vehicle can alwaysplead innocence by adducing evidence, get freed from theconfiscation of the said container or vehicle. While there isabsolutism insofar as confiscation of commodity is concerned,when the violation is proved, the confiscation of the vehicle orcontainer is conditional as mentioned supra and as such, therecannot be any dichotomy between the commodity and thecontainer or the vehicle and unless the commodity isconfiscated, the question of confiscation of the container orvehicle cannot and does not arise. A look at the provisions ofClause 22 of the Petroleum Order also throws some light as itspecifically excludes petroleum in a tank fixed permanently tomotor vehicle.”

14. In M/s. Vinayaka Agro Products vs. Inspector of Police[[4]]Division Benchof this Court at para 8 observed:

8. It is not as if the State and its officers entrusted with thestatutory powers and duties can behave like bull in a chinashop. Seizure or confiscation of property of the citizens isalways fraught with serious consequences. Illegal seizure andsearch would undoubtedly affect the guaranteed fundamentalrights of the citizens and their right to carry on business intrade apart from their right to equality and equal protection oflaws guaranteed by Article 14 of the Constitution of India. The‘seizure’ is nothing but taking possession by an officerauthorized in pursuance of legal process and same shouldalways be clearly supported by the authority of law. Theprinciple would apply even with regard to the power exercisedfor seizure with reference to any statute including the EssentialCommodities Act (Act 10 of 1955). The apex Court inN.Nagendra Rao & Co. vs. State of A.P. (AIR 1994 SC 2663)summarized the law on the subject.

“No civilized system can permit an executive to play with thepeople of its country and claim that it is entitled to act in anymanner as it is sovereign. The concept of public interest haschanged with structural change in the society. No legal orpolitical system today can place the State above law as it isunjust and unfair for a citizen to be deprived of his propertyillegally by negligent act of officers of the State without anyremedy. From sincerity, efficiency and dignity of State as ajuristic person, propounded in Nineteenth Century as soundsociological basis for State immunity the circle has gone round and the emphasis now is more on liberty, equality and the ruleof law. The modern social thinking of progressive societiesand the judicial approach is to do away with archaic Stateprotection and place the State the Government at par with anyother juristic legal entity. Any water-tight compartmentalizationof the functions of the State as “sovereign and non-sovereign”or “governmental and non-governmental” is not sound. It iscontrary to modern jurisprudential thinking. The need of theState to have extraordinary powers cannot be doubted. Butwith the conceptual change of statutory power being statutoryduty for sake of society and the people the claim of a commonman or because it was done by an officer of the State eventhough it was against law and negligently. Needs of the State,duty of its officials and right of the citizens are required to bereconciled so that the rule of law in a welfare State is notshaken.”

And further held:

And further held:

“Any power for regulating and controlling the essentialcommodities and the delegation of power to authorized officersto inspect, search and seize the property for carrying out theobject of the State cannot be a power for negligent exercise ofwhich the State can claim immunity. No constitutional systemcan, either on State necessity or public policy, condonenegligent functioning of the State or its Officers.”

15. Further reliance was placed on a judgment of the Full Bench of this Court inGeetha General Merchants v. Inspector of Police, VC, CSD[[5]],wherein a FullBench of this Court observed:

“4. In our opinion, the question posed by their Lordshipsdoes not admit of a definite answer either in the affirmative orin the negative. There cannot be a fetter on the Constitutionalpower of this Court under Article 226 to grant appropriate relief,including the release of goods. There cannot be a broad andinflexible proposition that in no case, the High Court can directrelease of the goods seized unless and until the proceedingsunder Section 6-A take their own course. However, havingregard to the purpose of the Act and the internal remediesavailable under the Act, the High Court should be slow andcautious in granting directions for the release of essentialcommodities, in exercise of jurisdiction under Article 226. InState of W.B vs. Calcutta Hardware Stores (AIR 1986 SC614), the Supreme Court while finding fault with the High Courtin directing release of the seized goods at the interlocutorystage observed:

“………..It is needless to stress that the questionwhether the seized goods answer the description of tin plates,tin plates waste, waste or waste material etc. or whether therespondents had committed a contravention of paragraph 3(2)of the West Bengal Declaration of Stocks and Prices ofEssential Commodities Order issued under S. 3(1) of the Act, which is an offence punishable under Ss. 7 and 8, are allquestions to be gone into and tried before the learned SpecialJudge, 24 Paraganas, Alipore before whom the trial is pending.That apart, the observations call in question the validity of theaction of the Additional Collector in serving a notice ofconfiscation under Section 6-A of the Act with respect to theseized goods. We do not see legality and propriety of makingthese observations by the learned Judges which have theeffect of prejudging the whole issue before the learned singleJudge who is seized of the writ petition, as also foreclosing thetrial of the respondents for commission of the allegedoffences.”

Adverting to the writ jurisdiction of the High Courtsunder Article 226, the oft repeated exhortation was reiteratedby their Lordships in the following words:

“Although the powers of the High Court under Art.226of the Constitution are far and wide and the judges must everbe vigilant to protect the citizens against arbitrary executiveaction, nonetheless, the Judges have a constructive role andtherefore there is always the need to use such extensivepowers with due circumspection. There has to be in the largerpublic interest an element of self-ordained restraint.”

The decision in Shambhu Dayal Agarwala vs. State of WestBengal ((1990)3 SCC 549) makes it clear that the release ofthe goods seized, if ordered as an interim measure, woulddefeat the objective and scheme of the Act. In that case, itwas held that even the Collector who is the competentauthority had no power to direct release of the goods seized tothe person from whom they were seized pending theproceedings under Section 6-A.

5. Thus, the release of goods seized should notnormally, and as a rule of prudence, be ordered in exercise ofjurisdiction under Article 226 though the powers under Article226 are wide and untrammeled by any limitations, except self-imposed limitations. It is only in rare and exceptional cases,such a direction, if at all, could be issued. In this category mayfall such cases where indisputably and ex facie, the goodswere seized without regard to the provisions of any controlOrder or by an Officer not invested with jurisdiction or there isdemonstrable proof of abuse of power suggesting thatextraneous considerations weighed with the Officerconcerned. If the seizure is wholly outside the provisions ofthe Control Order or the Essential Commodities Act, that couldbe a ground for quashing the proceedings in exercise ofjurisdiction under Article 226. Of course, in doing so, the HighCourt will not delve deep into the merits, much less into thedisputed questions of fact. If, on the face of it, the action iswholly outside the provisions of the Act and the seizure isbeyond the jurisdiction of the authority concerned, such casesmay afford justification to intervene under Article 226. One such case in point is the one decided by the very samelearned Judges who referred the matter to the Full Bench, viz.,Vinayaka Agro Products vs. Inspector of Police(1996 (3) ALT673 (D.B).

6. We would only close the discussion on this aspectof the case with an observation that the parameters of thepower of the High Court under Article 226 vis-à-vis the seizureof essential commodities cannot be put in a straight jacketformula. The only qualification, which we would like toreiterate, is that the power should only be exercised in rare andreally exceptional cases as indicated supra and it can safelybe said that the normal rule is not to direct the release until theproceedings are completed.”

16. The learned Government Pleader for Civil Supplies placed strong reliance ona decision of the Apex Court in Deputy Commissioner, Dakshina KannadaDistrict v. Rudolph Fernandes[[6]], wherein at paras 5 to 10 the Apex Courtobserved.

5. At the outset it is to be stated that the object of the Act is todeter a person from illegally dealing in an essential commodityand consequently, impose a deterrent penalty against aperson dealing in them illegally. While doing so, the law takescare to prevent the owner of any vehicle from aiding orassisting such an illegal activity. As per the preamble of theAct, the Act is to provide, in the interest of the general public,for the control of the production, supply and distribution of, andtrade and commerce, in certain commodities. For thispurpose, Section 3 empowers Central Government to providefor regulating or prohibiting the production, supply anddistribution of the essential commodity and trade andcommerce therein if the same is considered necessary orexpedient inter alia for maintaining or increasing supply of anyessential commodity or for securing their equitable distributionand availability at fair prices by passing an appropriate order.Section 6-A as quoted above provides for seizure andconfiscation of essential commodity for contravention of anyorder issued under Section 3. Further Section 6-B provides forissuance of show cause notice and the procedure forconfiscation of the seized essential commodity as well as anypackage, covering or receptacle in which the essentialcommodity is found or any animal, vehicle, vessel or otherconveyance used in carrying such essential commodity.Section 6-C provides for appeal against the confiscation orderand the procedure for return of the confiscated article in casewhere appeal filed against the confiscation order or the orderpassed under Section 7 forfeiting the essential commodity isset aside. Thereafter, Section 6-D provides that the order ofany confiscation under The Act shall not prevent the inflictionof any punishment to which the person affected thereby is liable under The Act. Therefore, even if the essentialcommodity or the vehicle is confiscated, the person can beprosecuted and the penalty provided under Section 7 can beimposed. Section 7(1)(a) provides for punishment to anyperson who contravenes any order made under Section 3.Section 7(1)(b) and (c) empowers the Court to forfeit to thegovernment any property in respect of which the order hasbeen contravened or to forfeit any package, covering orreceptacle in which the property is found and also any animal,vehicle, vessel or other conveyance used in carrying theproperty.

6. In the light of the aforesaid provisions, second proviso toSection 6-A[sic 6-A(1)] is required to be considered. First it isto be stated that the proviso limits the power of the competentauthority to recover fine up to the market price for releasing theanimal, vehicle, vessel or other conveyance sought to beconfiscated. So maximum fine that can be levied in lieu ofconfiscation should not exceed the market price. For ourpurpose, the relevant part of the proviso would be "in the caseof.... vehicle... the owner of such...... vehicle shall be given anoption to pay, in lieu of its confiscation, a fine not exceeding themarket price at the date of seizure of the essential commoditysought to be carried by such..... vehicle". Question is whetherfine should not exceed the market price of the seized essentialcommodity or whether it should not exceed the market price ofthe vehicle. For this purpose, it appears that there is someambiguity in the Section. It is not specifically provided that inlieu of confiscation of the vehicle a fine not exceeding themarket price of the vehicle or of the seized essentialcommodity is to be taken as a measure. Still however, it isdifficult to say that the measure of fine is related to the marketprice of the essential commodity at the date of its seizure. Itnowhere provides that fine should not exceed market price ofthe essential commodity at the date of seizure of the vehicle.The proviso requires the competent authority to give an optionto the owner of such vehicle to pay in lieu of confiscation a finenot exceeding the market price. What is to be confiscated isthe vehicle and, therefore, the measure of fine would berelatable to the market price of the vehicle at the date ofseizure of the essential commodity sought to be carried bysuch vehicle. This would also be consistent with the schemeof Section 7 which provides for levy of penalty. It empowersthe Court trying the criminal case to pass an order forfeiting tothe Government any property in respect of which the orderunder Section 3 has been contravened. It also empowersforfeiture to the Government of any package, covering orreceptacle in which the property is found and in addition anyanimal, vehicle, vessel or other conveyance used in carryingthe commodity. Therefore, not only the essential commoditywhich is seized is to be forfeited, but the vehicle also could beforfeited to the Government. Hence, measure of fine which is required to be levied in lieu of confiscation under secondproviso to Section 6-A(1) would be relatable to the marketprice of the vehicle and not of the seized essential commodity.And, the fine amount in lieu of confiscation is not to exceed themarket price of the vehicle on the date of seizure of essentialcommodity. That is to say, the limit of such fine would be up-tothe market price of the vehicle on the relevant date and it iswithin the discretion of the competent authority to fix suchreasonable amount considering the facts and circumstancesof each case.

7. In Shambhu Dayal Agarwala v. State of West Bengal,(1990) 3 SCC 549 after considering the scheme of Sections 6-A and 7 and dealing with the proviso (ii) to sub-sec. (2) ofSection 6-A, this Court observed :-

"Section 6-A, therefore, merely confers power ofconfiscation and not the power of release, disposal,distribution, etc., except to the limited extent permitted by sub-section (2) thereof. Of course, the second proviso to sub-section (1) of Section 6-A permits the grant of an option to pay,in lieu of confiscation of any animal, vehicle, vessel or otherconveyance, a fine equal to its market price at the date ofseizure."

(emphasis added)

8. Lastly we would mention that in the impugned order dated22nd March 1998, the High Court in support of its reasoningreferred to a similar provision under Section 115(2) of theCustoms Act, 1962, which provides for confiscation inter aliaof any vehicle used as means of transport in smuggling of anygoods or carriage of any smuggled goods which is as under :- "115. Confiscation of conveyances.- (1) * * *

(2) Any conveyance or animal used as a means of transport inthe smuggling of any goods or in the carriage of any smuggledgoods shall be liable to confiscation, unless the owner of theconveyance or animal proves that it was so used without theknowledge or connivance of the owner himself, his agent, ifany, and the person in charge of the conveyance or animal3[*****].

3. Omitted by Act 26 of 1988, Sec. 79.

Provided that where any such conveyance is used for thecarriage of goods or passengers for hire, the owner of anyconveyance shall be given an option to pay in lieu of theconfiscation of the conveyance a fine not exceeding themarket price of the goods which are sought to be smuggled orthe smuggled goods, as the case may be.

Explanation.- In this section, "market price" means marketprice at the date when the goods are seized."

9. The Court observed that though the language of theaforesaid proviso is clear, the idea sought to be conveyedunder the proviso to Section 6-A(1) of the Act appear to be thesame. In our view, the analogy drawn by the High Court iserroneous because the proviso specifically mentions that

where any such conveyance is used as a means of transportin the smuggling of goods, the owner of any conveyance is tobe given an option to pay in lieu of the confiscation of theconveyance, a fine not exceeding the market price of thegoods which are sought to be smuggled. The explanationprovides that the market price means market price at the datewhen the goods are seized. As against this, Section 6-Asecond proviso does not refer to payment of fine notexceeding market price of the essential commodity butapparent reference is a fine not exceeding the market price ofthe vehicle sought to be confiscated. This appears to beobvious because in a case where the market price of theseized essential commodity is more than the price of theconveyance then the owner of the conveyance would notcome forward to take it back if he is asked to pay somethingmore than its market price. Similarly, when the market price ofthe seized vehicle is much more than of the essentialcommodity, it cannot be said that instead of confiscation itshould be released at a price which is less than its marketprice. Further it is required to be noted that under Section 6-B(2) no order confiscating vehicle or other conveyance can bepassed if the owner proves to the satisfaction of the competentauthority that it was used in carrying the essential commoditywithout his knowledge or connivance.

10. In the result, the appeals are allowed and the impugnedorders holding that measure of imposing fine in lieu ofconfiscation under the second proviso to Section 6-A of theEssential Commodities Act would be the market price of theessential commodity seized are set aside. However,considering the fact that since vehicles are already released,no further directions are required to be given with regard to thefine amount in lieu of confiscation.”

17. On a careful analysis of the impugned proceedings, it is no doubt true that theshow cause notice is not happily worded. However, certain submissions were madeto the effect that the specified stage did not reach yet and in a way it is stated that thewrit petition itself is premature.

18. In the light of the views expressed by the Apex Court in the decisions specifiedabove and especially in the light of the observations made by the Full Bench of thisCourt in Geetha General Merchants’ case (5 supra), though the show cause assuch is not happily worded inasmuch as several factual controversies are involved,and also in view of the fact that the writ petitioner had already moved an applicationfor release of the vehicle before the second respondent, let the second respondentdispose of the application filed by the writ petitioner for release of the vehicle inquestion within a period of two weeks from the date of receipt of this order especiallyin the light of the views expressed by the Apex Court and this Court in the decisions specified above.

19. Accordingly, with the above direction, the writ petition is disposed of. Nocosts.

________________

P.S.NARAYANA,J

Date:31-12-2007KLP

[1]1994(6) SCC 205[2]1996 (2) An.W.R. 441[3]1997 (1) ALT 171 (D.B)[4]1996(3) ALT 673 (D.B.)

[5]2000(1)ALT239(F.B)[6](2000)3 Supreme Court Cases 306