Bombay High Court
Arvind Trading Company And Ors. vs State Of Maharashtra And Ors. on 5 August, 1991
Equivalent citations: (1991)93BOMLR403
JUDGMENT M.M. Qazi, J.
1. Since both the petitions are on identical point and involve common question of facts and law, they Eire being disposed of by this common judgment.
2. The petitions are directed against the order passed by the respondent No. 1 in Appeal No. 2 of 1988 filed under Section 6-C of the Essential Commodities Act, 1955, dated 14th March 1988, confirming the order passed by the Additional Collector, Nagpur, in Case No 11/Pulses/87 and 12/Pulses/87 dated 8th May 1987, directing confiscation of the stock of the petitioners kept in the Central Warehouse Corporation, Nagpur, in exercise of the powers conferred by Section 6-A of the Essential Commodities Act, 1955, with the further direction, directing the Food Distribution Officer to dispose of the said goods by public auction.
3. The facts giving rise to the present petition are, in brief, as under:
On 14.9.1987 at about 4.30 P.M. the Supply Inspector of Mahal Zone along with the Zonal Officer visited the shop of the petitioners and enquired about the stock and registers, but the servant who was present, informed that the licence-holder had gone out and that he had no knowledge about the registers and the stock. At about 5.20 P.M. the partner Shri Jain came, but he also informed that the records were kept in the almirah and that the keys were with the Manager. The partner was, therefore, given a notice to produce the records for inspection. Shri Jain produced the records at 7.45 P.M.. The proceedings were conducted before the panchas and Ashok Jain-Managing Partner of the company. The Manager Vinod Sharma of Deepika Agencies was also present. The petitioners have a godown at Plot No. 190, Garoba Maidan, Nagpur, The inspection was stopped at 8.30 P.M. on 14.9.1987 and the same was carried on the next day i.e. 15.9.1987 from 10.00 A.M. onwards. The inspection party noticed several irregularities and it was discovered that 1504 bags of Chana and 857 bags of Batana have been kept in the Central Warehouse Corporation's godown from 14.5.1987.
4. A show cause notice was, therefore, issued to the petitioners. The petitioners submitted their explanation and denied the charges. The petitioners requested that the stock of the company frozen by inspecting staff should be released forthwith as they were already pledged with the Bank.
5. During the pendency of the proceedings before the Additional Collector, the State Bank of Travancore, Nagpur, who is an Intervener here, was also Intervener before the Additional Collector. It was submitted on its behalf that it advanced Rs. 2,87,996.30/- to the petitioners on 21.9.1987 against the stock stored by the petitioners in the Central Ware-house Corporation's godown.
6. The Additional Collector rejected the explanation of the petitioners and found that the petitioners had stored the stock in the godown other than the place mentioned in the licence granted to them. He further found that the stock was stored in excess of the limit prescribed by law and that 'C' forms were not regularly sent to the Licensing Authority as per the condition laid down in the licence. It was held that the transaction between the petitioners and Deepika Agencies was entered into to defeat the provisions of law, and that the petitioners did it with intention to hoard the commodity so as to create artificial scarcity. It was further found that the petitioners contravened the provisions of the Maharashtra Pulses (Dealers and Millers) Licensing Order, 1977 hereinafter referred to as 'the Licensing Order') and the Maharashtra Pulses Edible Oil Seeds and Edible Oil (Storage Control) Order, 1977. This order was challenged by the petitioners by way of an appeal under Section 6-C of the Essential Commodities Act, 1955. The appeal came to be dismissed and hence this petition.
7. Mr. Manohar appearing on behalf of the petitioners has raised several challenges before us, but in our view, it is not necessary to deal with all those challenges since the petition has to be allowed on the ground that there was no seizure of the goods in accordance with law. He has further submitted that if the seizure is found to be not in accordance with law, then the impugned order confiscating the goods is without jurisdiction. It may be pointed out at the outset that Mr. Gohokar appearing for the respondents has in all fairness conceded that if the seizure is found to be not in accordance with law, then the order of confiscation would be sustainable. Therefore, the real question that falls for our consideration is whether the seizure effected in the present case is in accordance with law. Mr. Manohar has invited our attention to Clause 15 of the Licensing Order, which deals with the power of search and seizure. Clause 15(2) reads as under:
The provisions of the Code of Criminal Procedure, 1973 (2 of 1974) relating to search and seizures shall so far as may be, apply to searches and seizures under this clause.
It is obvious that the search and seizure effected under the Licensing Order has to be in accordance with the provisions of the Code of Criminal Procedure, 1973. Sections 100 and 165 are the relevant provisions in the Code of Criminal Procedure, 1973, which pertain to search and seizure. It is pertinent to note here that the inspecting party did not visit the Central Warehouse Corporation's godown where the goods were stored. It is only on the basis of the stock registers that the note has been prepared. Mr. Manohar has, therefore, argued that since the power of sejzure was never exercised by the Collector, as required under Section 6-A of the Essential Commodities Act, the question of confiscating the goods did not arise. The challenge is raised by the petitioners in para 7 of the petition, which reads thus:
Without prejudice, it is further submitted that in reply it was also stated that none of the provisions as referred to in the show cause notice of the Licensing Order and/or Storage Control Order were breached by the petitioner. Consequently it was replied that there is no breach of the Essential Commodities Act and/or Licensing Order issued thereunder. It will not be out of place to mention that the stock of the petitioner was never seized by the Collector. Consequently the show cause notice under Section 6(A) itself was bad and illegal. Section 6(A) lays down the procedure for confiscation of the essential commodities, whereas Section 6(B) contemplates issue of show cause notice before the confiscation of the essential commodities. Therefore, it would be clear that the show cause notice is given under Section 6(A) and not under Section 6(B) of the Essential Commodities Act, 1955. The powers of seizure were never exercised by the Collector. Consequently, the question of confiscation of the goods never arose. A copy of the reply to the show cause notice is annexed herewith as Annexure B to the petition.
8. No return has been filed on behalf of the respondents. However submissions were filed on 19.4.1988 at the stage of 'notice before admission', and when the matter came up for hearing parties, a request was made that those submissions should be read as a return. In the submissions, it has been shown that the petitioners had stored I bag of Batari, 13 bags of Tur, 1529 bags of Chana and 857 bags of Batana (each bag containing one quintal) in the Central Warehouse Corporation's godown, though in the licence issued to the petitioers that godown has not been mentioned as a place where the petitioners were authorised to store the goods, nor was any intimation given by the petitioners to the Licensing Authorities upto 14.9.1987 regarding storage of the aforesaid goods of the petitioners in the Central Warehouse Corporation's godown. The respondents have admitted in their submissions that the goods in the Central Warehouse Corporation's godown were freezed on 14.9.1987 and a notice was given to the petitioners to show cause why action under Section 6-A of the Essential Commodities Act should not be taken. It is further stated in the submissions that though the respondents used the word and expression "freezed" while seizing the goods in question, they intended to effect seizure and, therefore, they claimed that there was substantial compliance with the provisions of Section 6-A of the Essential Commodities Act, 1955, and therefore, no illegality was committed.
9. Mr. Manohar has submitted that Section 6A of the Essential Commodities Act contemplates seizure of goods and it is only thereafter that the order of confiscation has to be issued by the Collector. Thus, the seizure of goods is a condition precedent, he contended. We think, there is much substance in this contention. A plain reading of Section 6A fully supports his contention. The portion, which is material for our purpose, of Section 6A reads thus:
6-A. Confiscation of the seized commodities.-I (1) Where any essential commodity is seized in pursuance of an order made under Section 3 in relation thereto, a report to that effect shall, without any unreasonable delay, be sent to the Collector within whose jurisdiction the seizure is made, and the Collector may, if he thinks it expedient so to do, inspect or cause to be inspected such essential commodity, and whether or not a prosecution is instituted for the contravention of such order, the Collector, if satisfied that there has been contravention of the order, may order confiscation of-
(a) the essential commodity so seized;
(b) x x x
(c) x x x (2) Where the Collector on receiving a report of seizure or on inspection of any essential commodity under Sub-section (1) is of the opinion that such essential commodity is subject to speedy and natural decay or that 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 under any law for the time being in force, or where no such price is fixed, by auction:
xx xx xx xx xx We have already observed above that even Mr. Gohokar did not dispute that unless there was a seizure of the goods, there could be no order of confiscation.
10. The respondents have placed on record certain documents, viz., the report dated 17.9.1987 sent by the Supply Inspector to the Food Distribution Officer, Nagpur, showing that 2400 bags of Dal were frozen; the panchanama dated 14.9.1987, the Notes of Inspection dated 15.9.1987, made by the Supply Inspector, copy of the statement of Ashok Jain-Managing partner of the petitioner Firm, as also a copy of the letter dated 18.9.1987 sent by the Food Distribution Officer, Nagpur, to the Manager, Central Warehouse Corporation, Nagpur, directing him not to release the stock stored by the Arvind Trading Company and Deepika Agencies, Nagpur, until further orders. The licence in Form 'B' dated 18.8.1979 issued in favour of the petitioners has also been placed on record. It may be pointed out that none of these documents show that the goods involved in the present petition were seized. These documents merely indicate that the goods Were frozen and that the petitioners were directed not to sell the same until further orders.
11. Mr. Manohar has relied on the following decisions in support of his contention that in the absence of seizure of goods, the impugned order passed by the Additional Collector directing confiscation of goods cannot be sustained:
(1) 1978 Cri.L.J. page 1469, Sardar Finance Corporation v. State of U.P. He has relied on the following observations from para 9:
9. A perusal of the above section would show that a vehicle carrying essential commodity can be confiscated only when that essential, commodity has been seized in pursuance of an order made under Section 3 of the Act. In the instant case, the levy wheat that was being transported on the truck In question from Jaswant Nagar to Etawah had never been seized at any time. That being so, the provisions of Section 6A never come into play and the Collector was not legally competent to order for the confiscation of this truck. Even the learned Counsel for the State conceded this thing before me. Such being the position there can be no doubt about the fact that the order dated 22.2.1977 passed by the Collector confiscating Truck No. MPJ 3990 was without jurisdiction, and not legally maintainable. The truck belongs to the applicant and it must go to it.
(ii) Hindustan Aluminium Corporation Ltd. v. The Controller of Aluminium and Ors.
In this decision, the Delhi High Court was dealing with Clause 9(2) of the Aluminum (Control) Order, 1970, which is identical to Clause 15(2) of the Licensing Order, which is reproduced below:
9. Powers of examination, entry, search and seizure.
(1) xxxxx (2) The provisions of the Code of Criminal Procedure, 1973 (2 of 1974) relating to search and seizure shall, as far as may be, apply to searches and seizures under this clause.
The Delhi High Court has observed in para 31 as under:
31. The reason to believe that any contravention of the Control Order had taken place (to which aspect alone the discussion in this judgment has to be and is confined in the circumstances explained above is a pre-condition to the seizure of goods. It is well established that any exercise of statutory power interfering with the property rights of citizens is possible only after strictly complying with pre-conditions for the exercise of such a power. The reason to believe in this case, therefore, must relate to the period of time when the impugned seizure was made, namely, on 16.7.1975; in other words, even any subsequent acquisition of belief in this regard would be of no avail.
The Delhi High Court has further observed in para 34 as under:
34. If the power of seizure was not validly exercised when the entire stock was seized no distinction could be made between the stocks released subsequently and what was retained. On the facts of the present case, which have been set out earlier, it is clear that the third respondent did not in fact (at least could not) have reason to believe that the goods which were seized on 16.7.1975 were those in respect of which contravention of the Control Order had been made.
Mr. Manohar has also cited other decisions, which, in our view, are not relevant and hence not necessary to be referred to. Mr. Manohar has argued that in the present case the documents placed on record by the respondents do not indicate that the raiding party had any reason to believe that any contravention of the Licensing Order had taken place and hence it was necessary for them to effect the raid.
12. In the present case, as we have shown above, unless the goods are, seized in view of Section 6A of the Essential Commodities Act (referred supra) it would not be proper on the part of the Collector to pass an order of confiscation. Mr. Gohokar has fairly conceded that there Is not a single document to show that the goods were seized. However, he submitted that though the Authorities have used the word 'freeze', they meant seizure thereby, and hence the word 'freeze' should be read as 'seizure'. It is difficult to accept this contention. In Aiyar's Judicial Dictionary (10th Edition) 'seizure' has been defined as 'forcible taking of possession'. It results in deprivation of possession. Mr. Gohokar has admitted that in the instant case the petitioners were not deprived of possession of the goods. On. the other hand, the goods continued to be in their possession. The only restriction that was put on the petitioners was that they could not sell the goods until further orders. In view of this, it is difficult to accept that the Authorities intended to effect seizure. The report of the Supply Inspector dated 17.9.1987 (Annexure R-1) clearly shows that the petitioners were prevented from disposing of the goods until further orders. Thus, the present case is not merely one of defective seizure but of no seizure at all, and hence it is difficult to sustain the order of confiscation. Seizure of goods is a condition precedent before the order of confiscation could be passed.
13. Mr. Jain appearing on behalf of the Intervener submitted that the goods which were frozen by the Authorities were pledged with the State Bank of Travancore and they were in the custody of the Central Warehouse Corporation; It is significant to note that there is an admission on the part of the petitioners in the reply to the show cause notice (Annexure B) that the goods were pledged with the Bank. There is no dispute that when the goods were auctioned, they were with the Central Warehouse Corporation. In view of these facts, Mr. Jain submitted that the sale proceeds received on account of the auction of the goods should be placed in the custody of the Central Warehouse Corporation, inasmuch, as had the goods been not auctioned under the orders of this Court, they would have continued in the custody of the Central Warehouse Corporation only. There is much substance in his contention. Having regard to these facts, we see no difficulty in ordering status quo ante. The Additional Registrar of this Court is directed to deliver the amount of the sale proceeds to the Central Warehouse Corporation, Nagpur. The petitions are accordingly allowed. The impugned order dated 8.1.1988 passed by the Additional Collector, Nagpur, and the order dated 14.3.1988 passed by the State Government in appeal, are quashed and set aside. Rule made absolute in the above terms.