SREE ESWARA RICE MILL INDUSTRIES, SHIMOGA v. DEPUTY COMMISSIONER SHIMOGA DISTRICT, SHIMOGA — 1984 DIGILAW 227 (KAR)

JUDGEMENT 1. At the stage of preliminary hearing Sri. M.R. Achar, learned Government Advocate was directed to take notice on behalf of the respondents. Accordingly, he has put in appearance for the respondents. 2. In these petitions under Arts.226 and 227 of the Constitution, the petitioners have sought for a declaration that the seizure and consequential proceedings held pursuant thereto are illegal and without jurisdiction, they have also sought for issue of a direction to the respondents to release the seized commodities. 3. The different quantities of paddy and rice were seized from the premises of the petitioners. Pursuant to the seizure, the first respondent has also passed orders on 17-3-1984, produced as Annexures A, B and C under S.6A(2) of the Essential Commodities Act (hereinafter referred to as the 'Act'), directing the seized commodities to be taken towards levy by the KFCSC Ltd./FCI, shimoga and the amount thereof be deposited in the P.D. Account of the Deputy Commissioner. 4. It is contended on behalf of the petitioners that there is no seizure effected, that without the seizure the proceedings initiated against the petitioners under Section 6A of the Act are without jurisdiction; that the order directing disposal of the seized commodities under S.6A(2) of the Act can be passed only on being satisfied by the Deputy Commissioner that there is a prima facie case for proceeding under S.6A of the Act, that the commodities seized are subject to speedy and natural decay or it is otherwise expedient in the public interest so to do. It is submitted that no such findings are either separately recorded or apparent from the impugned orders in question. It is also further contended that seized commodities - if at all the same are to be disposed of pending final decision in the case - cannot be disposed of by directing that the same be taken towards levy; that in such an event the seized commodities can be disposed of only in the manner provided under S.6A(2) of the Act. Interim disposal of the seized commodities in question, in the manner it is done by the 1st respondent under the impugned orders, it is contended, does not fall in any one of the modes mentioned in S.6A(2) of the Act. Interim disposal of the seized commodities in question, in the manner it is done by the 1st respondent under the impugned orders, it is contended, does not fall in any one of the modes mentioned in S.6A(2) of the Act. The "purchase price" otherwise known as levy price or levy rate at which the seized commodities are directed to be disposed of cannot be equated either to the controlled price or to the price to be paid under the proviso to S.6A(2) of the Act. 5. On the contrary, it is contended by Sri. Achar, learned Government Advocate that pursuant to the seizure only the proceedings under S.6A of the Act have been initiated by the Deputy Commissioner, therefore, the contention of the petitioners that there is no seizure does not call for consideration or at any rate it is submitted that it is a matter for the Deputy Commissioner to decide under S.6A(1) of the Act as it is a question of fact. It is also further contended that once there is a seizure and initiation of the proceeding under S.6A of the Act, the Deputy Commissioner gets jurisdiction to dispose of the seized commodities as per S.6A(2) of the Act and the impugned orders do fall under S.6A(2) of the Act; that the impugned orders of the Deputy Commissioner are not happily worded, and the effect of the same is not to take the seized commodities towards levy; but to dispose them of at the levy rate, in other words at the "purchase price". Learned Government Advocate has also tried to bring the impugned orders within the scope of the proviso to S.6A(2) of the Act and has contended that a direction to take the seized commodities towards the levy in substance amounts to a direction to dispose of the same through the fair price shops at the retail sale price. 6. Having regard to the aforesaid contentions, the following points arise for consideration : 1. Whether it is necessary to go into the contention of the petitioners that there is no seizure? 2. Whether, before initiating a proceeding under S.6A of the Act it is necessary for the Deputy Commissioner to be satisfied that there is a prima facie case? 3. Having regard to the aforesaid contentions, the following points arise for consideration : 1. Whether it is necessary to go into the contention of the petitioners that there is no seizure? 2. Whether, before initiating a proceeding under S.6A of the Act it is necessary for the Deputy Commissioner to be satisfied that there is a prima facie case? 3. Whether before passing the order under S.6A(2) of the Act, it is necessary for the Deputy Commissioner to record a finding in terms of S.6A(2) of the Act? 4. Whether it is necessary to afford an opportunity of being heard to the affected party at the stage of directing the seized commodities to be disposed of in one of the modes prescribed by S.6A(2) of the Act? 5. Whether the impugned orders fall within the proviso to S.6A(2) of the Act? 6. What order? Point No.1 : 7. The impugned orders to mention that the Tahsildar on seizure has reported the matter, to the Deputy Commissioner. The Tahsildar being one of the enforcement officers has the authority to effect seizure. It is on the report of seizure, made by the Tahsildar, of the commodities in question, the Deputy Commissioner has initiated the proceedings under S.6A of the Act. Whether in fact there is a seizure or nor is a matter which can be verified by the Deputy Commissioner. In fact the seizure of essential commodity in pursuance of an order made under S.3 of the Act in relation to such essential commodity, is the foundation for the initiation of the proceeding under S.6A of the Act. As such, if such a contention is raised before the Deputy Commissioner, he has an undoubted jurisdiction to decide the same. Therefore, this contention is left open to be urged before the Deputy Commissioner. Point No.2 : 8. A proceeding under S.6A of the Act can be initiated by the Deputy Commissioner only on receipt of the report of seizure of the essential commodity for the contravention of the ORDER made under S.3 of the Act in relation to such essential commodity - i.e. the essential commodity which is seized. The initiation of a proceeding under S.6A of the Act has serious consequences which are of grave nature. The initiation of a proceeding under S.6A of the Act has serious consequences which are of grave nature. It enables the Deputy Commissioner, even before the final decision in the case, and if the facts and circumstances of the case demand, even without giving notice and affording an opportunity of being heard to the affected party or person, to dispose of the seized essential commodity under sub-sec.(2) of S.6A of the Act; thereby the person or the party concerned with such essential commodity is deprived of it irrespective of the result of the proceeding. Of course, if the proceeding ends in favour of such person or party he or it will be entitled to the value of the seized essential commodity as per the provisions of the Act, if the seized essential commodity has already been disposed of under S.6A(2) of the Act. But, it cannot be denied that such value of the seized essential commodity is not equivalent to the market value of such commodity prevailing on the date of seizure. In addition to this, such person or party will be put to great stress and strain and expenses. Therefore, it is necessary that the Deputy Commissioner, before he initiates the proceeding under S.6A of the Act, must satisfy himself that there is a prima facie case for enquiring into the alleged contravention of the provisions of the order issued under S.3 of the Act in relation to the seized essential commodity. Thus, at the stage of initiation of the proceeding there must be application of mind to the facts of the case. It must appear from the records that there has been application of the mind. It is possible only when such a satisfaction is placed on record. It is necessary to do so as otherwise it is likely to lead to arbitrary exercise of power which is negation of rule of law. Accordingly, point No.2 is held in favour of the petitioners and answered in the affirmative. Point No.3 : 9. In the normal course it is only after the order of confiscation is passed under S.6A(1) of the Act the seized essential commodity will be available to the Deputy Commissioner or to the Station for disposal. However, S.6A(2) of the Act enacts an exception to it. It enables the Deputy Commissioner to dispose of the seized essential commodities even before the case is finally decided. However, S.6A(2) of the Act enacts an exception to it. It enables the Deputy Commissioner to dispose of the seized essential commodities even before the case is finally decided. It is even possible under S.6A(2) of the Act to dispose of the seized essential commodity without giving notice, and without affording an opportunity of being heard, to the affected person or party if the facts and circumstances of the case warrant it. Such being the consequences, it is necessary that the requirements of S.6A(2) of the Act should he strictly adhered to. To avoid an arbitrary exercise of power, S.6A(2) of the Act itself lays down certain conditions. According to it, it is only when the Deputy Commissioner is satisfied that the seized essential commodity is subject to speedy and natural decay or it is otherwise expedient in the public interest so to do. Unless any one of these conditions is satisfied it is not permissible to dispose of the seized essential commodity. Therefore, in every such case it is necessary to record a positive finding on any one of the aforesaid conditions before the seized essential commodity is ordered to be disposed of under S.6A(2) of the Act. In other words, a direction to dispose of the seized essential commodity pending disposal of the proceeding initiated under S.6A of the Act must be supported by a finding that having regard to the nature and condition of such essential commodity, it is either subject to speedy and natural decay, or, having regard to the requirement of such essential commodity for public consumption, it is expedient in the public interest to dispose of the same. In the absence of any such finding the order directing the disposal of the seized essential commodity under S.6A(2) of the Act becomes unsustainable. In the instant case there is no finding to the effect that the seized essential commodity is either subject to speedy and natural decay or it is otherwise expedient in the public interest to dispose of the same. Therefore, the impugned orders directing the disposal of the seized essential commodities under S.6A(2) of the Act cannot be sustained. Accordingly, point No.3 is answered in the affirmative and in favour of the petitioners. Point No.4 : 10. Therefore, the impugned orders directing the disposal of the seized essential commodities under S.6A(2) of the Act cannot be sustained. Accordingly, point No.3 is answered in the affirmative and in favour of the petitioners. Point No.4 : 10. It appears to me that it is not possible to lay down as a proposition of law that it is necessary to issue a notice and afford an opportunity of being heard to the affected party or person before an order under S.6A(2) of the Act directing the disposal of the seized essential commodity is passed. Of course, once the seized essential commodity is disposed of pursuant to the order passed under S.6A(2) of the Act there is no question of revising the said order at any subsequent stage of the proceeding because the seized essential commodity itself will not be available and in addition to this sub-sec.(3) of S.6A of the Act specifically provides that in case no order of confiscation is passed or where it is passed and it is set aside in the appeal or where a prosecution instituted for the contravention of the order in respect of which an order of confiscation has been made and the person concerned is acquitted, the sale proceeds of such essential commodities after deducting the necessary incidental expenses alone are required to he paid to the owner thereof or the person from whom it is seized. Thus, the order for disposal of the seized essential commodity passed as per S.6A(2) of the Act will remain unaffected irrespective of the result of the proceeding, even though it is passed without notice and without affording an opportunity of being heard to the affected party or person; but nevertheless it is not a final order nor it can be said that it assumes the character of a final order, because ultimately it is the final order under S.6A(1) of the Act, that determines whether the person or the party concerned with the seized essential commodity is or is not entitled to it or the value thereof. The nature and condition of the seized essential commodity may be such that it may not be in a condition to last long and in such an event it may not be in the interest of the party or the person affected to retain it. The nature and condition of the seized essential commodity may be such that it may not be in a condition to last long and in such an event it may not be in the interest of the party or the person affected to retain it. In such a situation if the rule of audi alteram partem has to be applied, it will result in delay of disposal of the seized essential commodity, consequently it may decay and ultimately it may become useless. Thus it will neither be in the interest of the affected party or person, nor it serves the public interest. Similarly, it may so happen that the seized essential commodity may be urgently required for public consumption because of the varied circumstances such as famine, flood, scarcity, etc. In such a situation if a notice and an opportunity of being heard has to be given to the affected party or person the public interest will suffer. Sub-sec.(2) of S.6A of the Act itself provides sufficient safeguard. It is not permissible for the Deputy Commissioner to order for disposal of the seized essential commodity unless he is satisfied and is of the opinion; which must be reduced to writing that the seized essential commodity is subject to speedy and natural decay or it is otherwise expedient in the public interest so to do. This requirement sufficiently safeguards the interest of the affected party or person and also acts as a limitation on the arbitrary exercise of power. With all this still there may be cases in which no harm or prejudice is caused by issuing notice and affording an opportunity of being heard to the affected party or person before an order for disposal of the seized essential commodity is passed under S.6A(2) of the Act. In such cases it is necessary for the Deputy Commissioner to issue notice and afford an opportunity of being heard to the affected party or person and failure to do so, in such cases, vitiates the order. In such cases it is necessary for the Deputy Commissioner to issue notice and afford an opportunity of being heard to the affected party or person and failure to do so, in such cases, vitiates the order. In S.R. Balasubramanian v. District Collector, Palghat, reported in AIR 1984 Ker 87 , a similar question arose and it has been held as follows (para 9) :- "We make it clear that there is no invariable rule that it is only after notice and an opportunity of being heard given to the person affected, the sale or disposal of the seized commodity, pending final orders in the confiscation proceedings, could be ordered. The decision on this aspect of the matter has to be taken on the facts and circumstances of each case. There might be cases where such action has to be taken dispensing with notice and opportunity of being heard given to the person affected; there might be other cases, as in the present case, where substantial justice could be done by taking a decision with respect to the manner in which the seized article should be preserved or disposed of after giving a notice and an opportunity of being heard to the person affected. In the light of the modern trend of thought in the branch of administrative law, as stressed by the judgments of the Supreme Court referred to above, with due respect, we are not inclined to accept the views expressed by the Andhra Pradesh High Court to which reference has already been made". For the reasons stated above, Point No.4 is answered as follows : As a rule it cannot be laid down that notice and an opportunity of being heard must he given to an affected party or person before an order for disposal of the seized essential commodity in accordance with the provisions of S.6A(2) of the Act is passed. However, there may be cases in which having regard to the facts and circumstances involved therein nothing is lost if a notice is issued and an opportunity of being heard is afforded to the affected person or the party. In such cases, it is necessary to comply with the rule of audi alteram partem, failure to do so, vitiates the order passed under S.6A(2) of the Act. Point No.5 : 11. In such cases, it is necessary to comply with the rule of audi alteram partem, failure to do so, vitiates the order passed under S.6A(2) of the Act. Point No.5 : 11. Section 6A(2) of the Act provides for three modes in which the seized essential commodity can be disposed of pending the final decision in the proceeding under S.6A(1) of the Act. They are : (i) Sale at the controlled price, if any, fixed for such essential commodity under the Act or any other law for the time being in force; or (ii) Where no such price is fixed sale by public auction; or (iii) Sale through fair price shops at the retail sale price fixed by the Central Government or the State Government under the Act or any other law for the time being in force. The third mode for disposal of the seized essential commodity is incorporated in the proviso to S.6A(2) of the Act as substituted by the Essential Commodities (Special Provisions) Act.1981, which reads as follows : "Provided that in the case of any such essential commodity the retail sale price whereof has been fixed by the Central Government or a State Government under this Act or under any other law for the time being in force, the Collector may, for its equitable distribution and availability at fair prices, order the same to be sold through fair price shops at the price so fixed". In the instant case we are not concerned with the first two modes of disposal because it is not claimed by learned Government Advocate that the impugned orders directing disposal of the seized essential commodities in question fall within any one of such modes. However, it is claimed by him that the impugned orders fall within the aforesaid proviso to sub-sec.(2) of S.6A of the Act. From the aforesaid proviso it is clear that the seized essential commodities if at all they are required to be disposed of pending decision in the case, they can also be disposed of through the fair price shops at the retail sale price so fixed by the Central Government or the State Government under the Act or under any other law for the time being in force. In the instant case, what the Deputy Commissioner has done is to direct the seized essential commodities to be taken towards levy by the KFCSC Ltd., Shimoga. In the instant case, what the Deputy Commissioner has done is to direct the seized essential commodities to be taken towards levy by the KFCSC Ltd., Shimoga. The levy is imposed and collected under the provisions of the Karnataka Rice and Paddy Procurement (Levy) Order, 1983. KFCSC Ltd., is one of the purchase agents of the State Government for purchasing the rice or paddy surrendered by the dealers or millers under the aforesaid Levy Order. Therefore, there is no reason to hold that the impugned orders do not direct that the seized essential commodities be taken towards levy. However, Sri Achar, learned Government Advocate contends that the order is not happily worded and it should be read as directing the disposal of the seized essential commodities at the "purchase price" otherwise known as levy rate or levy price, and not taking them towards levy. In this regard, it is also contended by learned counsel for the petitioners that since the levy price cannot be equated to controlled price, even if the contention of the learned Government Advocate that the impugned orders amount to directing disposal of seized essential commodities at the levy rate is accepted, it does not help to sustain the impugned orders. Reliance is placed on a decision of this Court reported in AIR 1979 Kant 12 (Joe Pereira v. Union of India) in which a Division Bench of this Court has considered the question as to what is the controlled price. Though there is an amendment to S.3(3-B) of the Act subsequent to the aforesaid decision, but the said amendment in my opinion does not affect the aforesaid decision on the question as to what is the controlled price. It is held in the said decision that: "Controlled price is a price which is required to be determined by taking into consideration all the circumstances like the interest of the grower, the consumer and the general public. It must be fair from the point of view of the producer and also from the point of view of the consumer. It has to be determined in such a way that the producer does not perish and the consumer is not crippled. The controlled price once fixed must he applicable to all sales and purchases. It should not be intended to control the price of a particular type of transaction. It has to be determined in such a way that the producer does not perish and the consumer is not crippled. The controlled price once fixed must he applicable to all sales and purchases. It should not be intended to control the price of a particular type of transaction. The price which the State Government fixed in the Levy Order or paid to the petitioners was evidently intended to govern the particular type of transaction, i.e., compulsory sale by grower to the State. Such a price cannot automatically become the controlled price". That being so, even if the contention of learned Government Advocate is accepted and it is held that the direction amounts to directing the disposal of the seized essential commodities at the levy rate, the same is not permissible, inasmuch as the levy rate is neither the controlled price nor it can be equated to the retail sale price fixed for distribution of such essential commodity through fair price shops. The "purchase price" otherwise known as levy rate or levy price is specified in Schedules I and II of the Karnataka Rice and Paddy Procurement (Levy) Order, 1983 for the purchase of the paddy and rice surrendered towards levy. The "purchase price" so specified is neither the controlled price nor the retail sale price. Therefore, the order directing the disposal of the seized essential commodities at the levy rate is not sustainable. The point is also answered in the negative and in favour of the petitioners. 12. For the reasons stated above, these writ petitions are allowed. The impugned orders dated 17-3-1984 bearing Nos. FSD. RPR. (SPI) 205, 203 and 205 of 1983-84 (Annexures-A, B and C respectively) passed by the first respondent directing the disposal of the seized essential commodities in question under Sec.6A(2) of the Act are hereby quashed. The first respondent is directed to dispose of the proceedings initiated under Sec.6A of the Act, against each of the petitioners expeditiously in accordance with law and in the light of the observations made in this order. Pending the disposal of the aforesaid proceedings initialed under Sec.6A of the Act, against the petitioners, the seized essential commodities in question shall not be disposed of. 13. Pending the disposal of the aforesaid proceedings initialed under Sec.6A of the Act, against the petitioners, the seized essential commodities in question shall not be disposed of. 13. Since several matters of this nature are coming up before this court, it is necessary that all the Deputy Commissioners who are empowered to exercise power under S.6A of the Act must be posted with this order. Therefore, Sri Achar, learned Government Advocate, submits that he be permitted to send the copies of the order to all the Deputy Commissioners. He is permitted to do so. 14. Sri M.R. Achar, learned Government Advocate, is permitted to file his memo of appearance on, behalf of the respondents in six weeks. Petitions allowed.