Madras High Court
In All These Cases vs Unknown on 17 September, 2009
Author: P.Jyothimani
Bench: P.Jyothimani
IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 17/09/2009 CORAM THE HON'BLE MR. JUSTICE P.JYOTHIMANI M.P.Nos.1, 2 and 3 of 2009 in W.P.No.15893 of 2009, M.P.Nos.1, 2 and 3 of 2009 in W.P.No.15894 of 2009, M.P.Nos.1 and 2 of 2009 in W.P.No.15895 of 2009 and M.P.No.1 of 2009 in W.P.No.15896 of 2009. ORDER
In all these cases, the first respondent has passed orders of seizure of stock of fertilizer/Potassium Chloride stated to have been in possession of the petitioners and alleged to have been stocked in contravention of clause 25(1) and (2) of the Fertilizer (Control) Order, 1985 (in short, "the Order") and the seizure has been effected under clause 28(1)(d) of the said Order.
2. The petitioner companies are manufacturers and sellers of Potassium Chlorate, which is used as raw-material in hand made safety match industries. The said Potassium Chlorate is derived from Potassium Chloride, which is a fertilizer used in the agricultural industries. The Potassium Chloride technical grade is sold by several registered dealers in the open market. The Potassium Chloride becomes Potassium Chlorate by technical process. In respect of Potassium Chloride , specification has been given by the Indian Standards Institute as IS 2779-1980 by the Food and Agriculture Department, which is also approved under the Fertilizers (Control) Order, 1985.
2(a). It is the case of the petitioners that they purchased Potassium Chloride technical grade with ISI specification of IS 4150:1984, which is stated to be a specification even as on today. The petitioners are stated to have purchased Potassium Chloride technical grade from the registered dealers for the past many years and the finished product called, Potassium Chlorate for the use in match industries are made and supplied to Sivakasi. The said Potassium Chlorate is covered under the Arms Act. It is the case of the petitioners that the first respondent has inspected the factory premises of the petitioner and took Potassium Chloride technical grade otherwise called Carnalite under Form-J. 2(b). It has been the consistent case of the petitioners that the sample taken in April, 2009 was only Potassium Chloride technical grade as per ISI specification 4150 by the subsequent letters as well as legal notice and the respondents were requested to send the same to the laboratory at Anna University to find out the components. In the communication dated 30.4.2009, the first respondent by enclosing an analysis report of the sample issued by the Office of the Joint Director of Agriculture (Chem), Puducherry has stated that the petitioners have contravened clause 25(1) of the Fertilizer (Control) Order, 1985. The first respondent has also stated that the sample taken was found to be muriate of potash, which is of fertiliser status.
2(c). It is the case of the petitioners that after receiving the said analysis report, they requested the respondents to send all six reference samples available with them for analysis by any of the reputed chemical laboratory outside the Union Territory of Puducherry. According to the petitioners, till date, no action has been taken and instead, the respondents have seized all materials from the petitioners premises. In respect of the petitioner in W.P.No.15893 of 2009, the following were seized:
(1) Potassium Chloride 276.850 mts. approximately.
(2) Potassium Chlorate 53.2 mts. approximately.
(in the impugned seizure notice, the petitioner signed under protest that what were seized were Potassium Chloride technical grade).
In respect of petitioner in W.P.No.15894 of 2009, approximately 915.900 mts. of Potassium Chloride was seized. In respect of petitioner in W.P.No.15895 of 2009, 14.550 mts. of Potassium Chlorate was seized. The petitioners in W.P.Nos.15894 to 15896 of 2009 are one and the same and in all these cases, while seizure was effected, the petitioners have signed under protest as stated above.
2(d) It is the case of the petitioners that they have purchased Potassium Chloride from registered dealers as raw material to be used as a chemical and not as fertilizer. ISI Standard Potassium Chloride fertilizer will have 95% purity of Potassium Chloride as against 97% purity of Potassium Chloride technical grade. It is the case of the petitioners that on the analysis of samples sent by the petitioners to several reputed laboratories, it was found that the commodity is Potassium Chloride technical grade with technical specifications required for the same. Therefore, according to the petitioners, the raw material purchased by them viz., Potassium Chloride stood confirmed to the technical grade.
2(e) The first respondent also directed the petitioners to intimate the respondents on the arrival of every fresh load of raw material of Potassium Chloride into the factory to take samples and only after clearance from the Agricultural Department, they would be allowed to be used by the factory. The case of the petitioners is that such direction is not permissible in law and the impugned seizure and directions are challenged in all these writ petitions on various legal grounds. Pending the said writ petitions, the above interim applications have been filed.
3. It is the case of the respondents in the counter affidavit that the petitioners have been purchasing Potassium Chloride, which is a fertilizer sold on subsidised price to be used as fertiliser/manure and illegally converting the same into Potassium Chloride technical grade or Potassium Chlorate to be used for match industries as raw material, selling it for higher price. Therefore, it is in violation of the Fertilizer (Control) Order, 1985 which is liable for seizure and confiscation under the Essential Commodities Act apart from prosecution.
3(a) It is the case of the respondents that it is not as if the petitioners factories have been closed, but the petitioners have been advised to run the factories by purchasing non-subsidised Potassium Chloride from Indian Potash Limited, which is a Government of India concern. It is also stated that on preliminary investigation, it was found that the petitioners were not having valid industrial licence to handle Potassium Chloride under Fertilizer (Control) Order, 1985. The analysis of the sample was effected in the Fertilizer Quality Control Laboratory, Puducherry which is a notified Lab by the Government of India.
3(b). It is also stated that as per the request of the petitioners, the samples were also sent to the Regional Fertilizer Control Laboratory, Chennai (Central Fertilizer Quality Control and Training) Institute and what was seized was Potassium Chloride and the raw material viz., Potassium Chloride was purchased by the petitioners for an amount of Rs.5400/- to Rs.6000/- per MT. which is to be sold as Potassium Chloride for industrial purpose at the rate of Rs.30,000/- per MT and it is an illegal diversion of subsidised material meant for fertilizer and the petitioners have unjustly enriched with the subsidy by many crores of rupees of the Government revenue. It is also stated that for the offence, the petitioners are liable for prosecution and therefore, the release of seized materials at this stage is not possible. It is also stated that the seized Potassium Chloride raw material and finished produce Potassium Chlorate are the only materials available to prove the case and the stock cannot be released at this stage and the case has been handed over to Special Police Establishment (CBI) by the Government of Puducherry for investigation.
4. It is the contention of Mr.P.S.Raman and Mr.R.Muthukumarasamy, leaned senior counsel appearing for the petitioners that pending disposal of the writ petitions, the impugned orders must be stayed and directions must be issued to send the samples to an independent Laboratory like, Council of Scientific and Industrial Research (CSIR) to find out as to whether it is Potassium Chloride technical grade confirmed to ISO:4150-1984.
4(a). It is also submitted by the learned senior counsel that the petitioners would undertake to purchase from Indian Potash Limited and duly account the same to the respondents. It is their further submission that there must be a direction to release the Potassium Chlorate quantity which was seized as per the impugned seizure notices after retaining samples of the same as per law so as to enable the petitioners to use it for match industries which have been detrimentally affected for the past two months because of the impugned orders.
4(b). It is their submission that the release of Potassium Chlorate can be made without prejudice to the rights of the respondents to prosecute or to take any action in accordance with law for the alleged violation due to the reason that when the material is converted into Potassium Chlorate, the same would cease to become a fertilizer and cannot be used as a manure and therefore, there is no purpose in retaining the entire quantity of Potassium Chlorate seized by the respondents till the completion of legal process under the Essential Commodities Act or any other law which may take many years and by that time the process comes to an end, the seized Potassium Chlorate would have no value at all and on the other hand, the same can be used as raw materials in match industries.
5. On the other hand, it is the contention of Mr.T.Murugesan, learned Special Government Pleader (Pondicherry) appearing for the respondent in all these cases that the seizure has been effected as per the statutory order on a grave violation and an economic offence was committed by the petitioners in purchasing the raw materials viz., Potassium Chloride, which is a fertilizer at low and subsidised rate and illegally converting and making it as Potassium Chlorate and selling it for the match manufacturing units at exorbitant rate and therefore, unless and until that criminal prosecution and other legal processes are completed, the materials either Potassium Chloride or Potassium Chlorate seized from the petitioners cannot be directed to be released, because the respondents while prosecuting have to prove that the said quantities seized have been illegally converted from the material Potassium Chloride. It is his submission that ultimately when the criminal prosecution is laid before the criminal Court under the Essential Commodities Act and when the offences against the petitioners are proved, the seized materials have to be confiscated to the Government which is entitled to dispose of the same in its own way. It is his submission that in such event, it cannot be stated by the petitioners that for the same price, the materials can be given to the petitioners, at this stage.
6. On a reference, it is found that this Court has passed the following order on 12.8.2009:
"The Government Pleader Pondicherry is allowed time till 18.08.2009 to file counter. The cases may be disposed of at the stage of admission. Post all the cases on 18.08.2009.
The result of the test conducted by the laboratory at Chennai with regard to the seized material shall be placed before the Court on 18.08.2009, if completed. M.P.Nos.2 of 2009 in W.P.Nos.15893 and 15894 of 2009 stands disposed of."
By directing to produce the report of the test conducted by the Laboratory at Chennai, M.P.Nos.2 of 2009 in W.P.Nos.15893 and 15894 of 2009 stood disposed of. The said order came to be recalled subsequently on 1.9.2009 on the basis that there was no specific order earlier on the point of direction issued and therefore, all the applications have been posted for hearing.
7. In the analysis report on the samples taken by the respondents as per the above said direction, received from the Regional Fertilizer Control Laboratory, Ministry of Agriculture, Department of Agriculture and Co-operation, Madhavaram Milk Colony P.O., Chennai 600051, the remarks in respect of the said samples uniformly show that 'as per analysis result, the sample material is fertilizer grade M.O.P. (Muriate Of Potash). The said report in detail shows that the sample was analysed on 17.8.2009 and 18.8.2009. It also contains the percentage of Potassium Chloride apart from the particulars regarding water soluble potash, moisture, etc.
8. The question as to whether the said refined Potassium Chloride seized from the petitioners conforms to the required percentage viz., 95%, to make it as fertilizer or above 95% to be treated as Potassium Chloride technical grade is a matter to be decided at the time of final disposal in the context of analysis report received from the above said laboratory of Government of India. However, the contention of the learned senior counsel for the petitioners is that the analysis report is a must to find out as to whether the sample analysed is Potassium Chloride technical grade and since that aspect has not been taken into consideration, in all fairness, the sample should be sent to a reputed laboratory like, CSIR to give a report. In fact, for this suggestion, there is no much resistance from the respondents. Therefore, I am of the considered view that to have a fair decision, the samples of Potassium Chloride said to have been taken/seized from the petitioners should be sent to CSIR, Pune for analysis about the contents and for a specific report as to whether the said samples could be treated as Potassium Chloride or Potassium Chloride technical grade to enable this Court to decide finally by taking note of both the analysis reports.
9. Inasmuch as it is the specific case of the respondents in the counter affidavit as it is seen in paragraph 17 that the petitioners factories are not closed and only the above said materials have been seized and it is also admitted by the learned senior counsel for the petitioners that the petitioners are prepared to purchase the non-subsidised potassium chloride from Indian Potash Limited, the quantity of potassium chlorides which were seized as per the impugned orders cannot be directed to be released pending disposal of the writ petitions. Since the samples of the same are also directed to be sent to CSIR, Pune for further analysis, there cannot be an order of stay of the impugned seizure, at this stage. Therefore, the stay petitions are to be disposed of with direction to the petitioners to purchase non-subsidised potassium chloride from Indian Potash Limited and to involve in the activities of manufacturing and sale, subject to the inspection to be made by the respondents.
10. The other aspect which has to be considered is about the direction to release the stocks of potassium chloride technical grade seized under the impugned orders. It is true that when either by manufacturing process or otherwise, the commodity becomes potassium chlorate/potassium chloride technical grade it is unusable as fertilizer and the same can be used only as raw material in match industries and it is a different commodity altogether. It is the case of the respondents that the petitioners have purchased potassium chloride at subsidised rate, it can only be used as fertilizer and instead of using it as fertilizer, at the cost of agricultural benefits, the petitioners have illegally converted the commodity into potassium chlorate by manufacturing process or potassium chloride technical grade so as to sell it as a different commodity to the match industries at higher rate and this, according to the respondents, is an offence punishable under the Essential Commodities Act in accordance with the Fertilizer (Control) Order, 1985.
11. As per the impugned seizure orders, in respect of the petitioner in W.P.No.15893 of 2009, viz., M/s.MEPCO Industries Limited, Madurai, the seized quantity of potassium chlorate stated to have been manufactured by M/s.Karaikal Chlorate was 53.2 mts; in respect of Vaigai Chemicals Industries Limited (petitioner in W.P.No.15895 of 2009) the seized quantity of potassium chlorate, manufactured by Vaigai Chemicals Industries Ltd. was 14.55 mts. In these two cases, as it is seen in the endorsement made on the impugned orders, it is the case of the petitioners that the above quantities denote the potassium chlorate manufactured from potassium chloride technical grade and under protest, the impugned orders were received. In respect of other materials seized under the impugned orders, they relate to potassium chloride, about which samples have been sent and directions have been issued earlier.
12. As far as the said quantities of potassium chlorate are concerned, it is the contention of the learned senior counsel for the petitioners that prosecution can go on and for that, the bulk quantity of potassium chlorate which cannot be reconverted as potassium chloride to be used for agricultural purposes need not been kept idle and even if confiscation is effected ultimately, the goods which are confiscated are to be disposed of only by sale after following the legal process, that too, after lapse of many years and if the same is sold at a later point of time, the Government will be the loser and on the other hand, if the petitioners are permitted to take possession of the same on the basis of some security against the present value of the commodity, the Government will be getting more money, in case the prosecution ends in favour of the respondents and confiscation is ordered. Either in the prosecution or in any other legal proceedings, what is going to be decided is as to whether the petitioners had purchased potassium chloride technical grade from which potassium chlorate was manufactured or as to what was purchased by the petitioners was raw material/potassium chloride which was converted into either potassium chloride technical grade or potassium chlorate and whether the same was in violation of the Fertiliser (Control) order, 1985 which would consequently amount to an offence under the provisions of the Essential Commodities Act. If the prosecution ultimately ends in favour of the respondents, the goods will be confiscated in accordance with the Essential Commodities Act and the Government will ultimately have to sell the same. In such circumstances, without obstructing the prosecution, which may be launched by the respondents against the petitioners, I am of the considered view that a practical view must be taken, as the commodity would not be destroyed in the confiscation proceedings as they are not contraband goods and the same would be used in match industries.
13. It is also relevant to point out that for the purpose of deciding the technical question, the entire quantity of material need not be kept idle. It must also be considered at this stage that in a criminal prosecution, the ultimate order by a competent Court shall not be prevented to take into account the total quantity of potassium chlorate which was seized as per the impugned orders and it has to be taken note that the quantity of potassium chlorate seized is not disputed by the petitioners. It is only in such circumstances, an order can be passed for the release of said commodities on certain conditions which should not affect the rights of prosecution by the respondents in full-fledged manner and at the same time, there should be no loss caused to anyone. I am therefore of the considered view that suitable directions should be issued relating to the quantity of potassium chlorate.
14. Taking note of the above said facts, the following orders are passed:
1. The petitions for stay in M.P.Nos.1, 1, 2 & 1/09 in W.P.Nos.15893 to 15896 of 2009 stand dismissed with direction to the petitioners to purchase non-subsidised potassium chloride from Indian Potash Limited and use the same for the manufacture and sale by the petitioner companies, subject to the inspection and approval and proper certification by the respondents.
2. In the direction petitions M.P.Nos.2, 2 and 1 of 2009 in W.P.Nos.15893, 15894 and 15895 of 2009, the respondents are directed to refer the samples of potassium chloride from the quantities mentioned in the impugned orders and seized in accordance with law to the Council for Scientific and Industrial Research (CSIR), Pune for an analysis to find out with details as to whether those are potassium chloride or potassium chloride technical grade and to file a report within a period of two weeks from the date when the samples are referred by the respondents and the said report shall be taken into consideration along with the analysis report submitted by the Regional Fertiliser Control Laboratory, Madhavaram, Chennai, Department of Agricultural and Co-operation, Ministry of Agriculture, Government of India dated 19.8.2009, at the time of final disposal of the writ petitions.
3. In M.P.Nos.3 & 3 of 2009 in W.P.No.15893 & 15894 of 2009, the respondents are directed to fix the value of the quantity of potassium chlorate viz., 53.2 mts. in W.P.No.15893 of 2009 and 14.55 mts. in W.P.No.15895 of 2009 as per the market rate available as on date and the petitioners shall furnish a bank guarantee for the said value fixed by the respondents initially for a period of six months, which has to be renewable as per the further directions of the Court and on furnishing such bank guarantee, the respondents shall release the said quantity to the respective petitioners. This shall be on condition that the petitioners shall give a written undertaking to the respondents to the effect that in case the writ petitions or the criminal prosecution go in favour of the respondents resulting in conviction of goods, the bank guarantee can be invoked by the respondents and the petitioners shall also give an undertaking that they would not dispute about the quantity of potassium chlorate seized under the impugned orders. On fulfilment of the above said conditions fully, the petitioners would be entitled to use the said potassium chlorate for their business activities.
The petitions are ordered accordingly.
15. Since the pleadings in the matter are completed, Registry is directed to post the writ petitions for final disposal in the second week of January,2010.
Index:Yes Internet:Yes kh Note to Office:
Issue on 18.09.2009.
P.JYOTHIMANI,J.
P.D.Common Order in M.P.Nos.1,2 and 3/09 in W.P.No.15893 of 2009, M.P.Nos.1,2 and 3/09 in W.P.No.15894 of 2009, M.P.Nos.1 and 2/09 in W.P.No.15895 of 2009 and M.P.No.1 of 2009 in W.P.No.15896 of 2009. Dated:17.09.2009