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Govind Karsan and Co. Vs. State and anr. - Court Judgment

LegalCrystal Citation
SubjectCommercial
CourtGujarat High Court
Decided On
Judge
Reported in(1983)1GLR145
AppellantGovind Karsan and Co.
RespondentState and anr.
Cases ReferredSwastik Oil Industries v. State of Gujarat
Excerpt:
.....breach or contravention of terms of licence. the object of the act as well as that of the orders passed thereunder can be to control the production, supply and distribution of the essential, commodities. 2. the contravention complained of has any bearing on the stream of supply of the commodity in the market or is it merely an incidental breach? 5. whether the contravention complained of is likely to create an artificial situation of shortage either in the town itself or in the entire market of die commodity in question?.....a search was carried out at his premises in the month of january 1981 and it was found that the stock of groundnut was in excess of prescribed limit. therefore, the entire excess stock of groundnut has been ordered to be confiscated by the assistant collector, veraval, respondent no. 2 herein. the said order is confirmed in appeal by the learned additional sessions judge, junagadh. the question that has surfaced in this petition is should the lower authorities have not exercised the discretion and order confiscation of lesser quantity of the groundnut than the entire stock found in excess of the prescribed limit?2. as per the terms and conditions of the licence held by the petitioner, it was permissible for the petitioner to keep stock of groundnut up to the limit prescribed, that is,.....
Judgment:

A.P. Ravani, J.

1. The petitioner is holding a licence of 'Wholesaler' under the provisions of the Gujarat Pulses Edible Oil Seeds and Edible Oil Dealers Licensing Order, 1977 (The order is issued under the provisions of the Essential Commodities Act, 1955). A search was carried out at his premises in the month of January 1981 and it was found that the stock of groundnut was in excess of prescribed limit. Therefore, the entire excess stock of groundnut has been ordered to be confiscated by the Assistant Collector, Veraval, respondent No. 2 herein. The said order is confirmed in appeal by the learned Additional Sessions Judge, Junagadh. The question that has surfaced in this petition is should the lower authorities have not exercised the discretion and order confiscation of lesser quantity of the groundnut than the entire stock found in excess of the prescribed limit?

2. As per the terms and conditions of the licence held by the petitioner, it was permissible for the petitioner to keep stock of groundnut up to the limit prescribed, that is, 50,000 kgs. On January 16, 1981 a search was carried out at the premises of the petitioner-licensee and it was found by the Supply Inspector who made the search that a total of 57,488 kgs. of groundnut was there with the petitioner. It was prima facie found that the excess quantity of 7,488 kgs. of groundnut was not entered in the stock register of the petitioner. Therefore, a show cause notice was issued on February 18, 1981 by the Assistant Collector, Veraval, to the petitioner calling upon him to show cause for the excess stock and to show cause why the groundnut in question should not be confiscated under the provisions of the Essential Commodities Act. It was mentioned in the notice that 228 bags of groundnut were not credited and that the entire stock found was to the extent of 57,488 kgs. of groundnut though the permissible limit was only 50.000 kgs. Over and above, it was also pointed out that the petitioner-licensee was in the habit of committing breach of the terms of licence and therefore, his licence was liable to be cancelled.

3. Against this show cause notice, the petitioner submitted his reply on March 16, 1981. In this explanation he pointed out certain arithmetical mistakes in the calculation of conversion of groundnut into groundnut seeds. He further submitted that the stock, up to the evening of January 15, 1981 was within the prescribed limit, that is, 50,000 kgs. and he maintained a gate-pass book bearing serial numbers and the stock which was received late in the evening of January 15, 1981 was shown in the gate-passbook but was not entered in the stock register. This was on account of the fact that the main person of the firm was engaged in a marriage ceremony and therefore, he was required to go out of station and due to this reason, necessary entries could not be made in the stock register. It was further pointed out that in the morning of January 16, 1981 a truck load of groundnut, which was sold to one Ahmedabad party, was being despatched and that was required to be taken into consideration and was required to be deducted from the stock of the petitioner-firm. According to the petitioner, though the request was made to take this factor into consideration, the supply inspector did not take this into consideration and hence the petitioner had to send a telegram to the Collector, Junagadh as follows:

Stock checked by purvatha Inspector at 1730. Singdana 125 bags despatched at Ahmedabad truck No. GTE 7927 which is not taken in report by Inspector in spite of my request.

4. Respondent No. 2-Assistant Collector, Veraval, heard the petitioner and gave adequate opportunity of representing his case and thereafter came to the conclusion that in support of the explanation rendered by the petitioner-firm, no documentary evidence was produced and hence he came to the conclusion that on the date of the search, the stock of groundnut exceeded by 7,488 kgs. that is, it was in all 57,488 kgs. The Assistant Collector, Veraval-respondent No. 2, ordered that the entire stock of excess groundnut, i.e.; to the extent of 7,488 kgs. be confiscated and the amount that may be realised from the sale thereof be credited to the Government account. This order was passed on March 31, 1981 which is at Annexure 'A' to the petition.

5. The petitioner preferred Criminal Appeal No. 25 of 1981 in the Court of Session Judge, Junagadh. The Appeal was heard by the learned Additional Sessions Judge, Junagadh, and he found that there was mistake in the calculation and he came to the conclusion that instead of 7,488 kgs. of groundnut 5,832 kgs. was in excess of the prescribed limit. He agreed with the reasoning and conclusion arrived at by respondent No. 2-Assistant Collector, Veraval, and therefore, except modifying the figure of excess stock, he confirmed the order passed by the lower authority. This order has been passed on August 10, 1981 which is at Annexure 'B'.

6. The Counsel for the petitioner tried to assail the orders passed by the lower authorities on the ground that the notice was vague and therefore, it was incapable of being effectively replied to. It was also tried to be contended that the telegram despatched on the same day and addressed to the Collector, Junagadh, was not taken into consideration. These contentions are required to be noted only for the purpose of being rejected. The notice by any stretch of reasoning cannot be said to be vague. The notice on the contrary gives complete details with regard to the illegalities and/or irregularities found. It has been clearly pointed out in the notice as to what were the defects which were required to be explained by the petitioner. Similarly, the contention regarding the telegram having been sent to the Collector, Junagadh, is also not well-founded, for the simple reason that the same was addressed to an authority before whom the case was not pending. The telegram was addressed to the Collector of Junagadh while the proceedings were pending before the Assistant Collector, Veraval, i.e. respondent No. 2 herein. Hence the telegram addressed to an authority other than the authority before whom the case was pending cannot be taken into consideration by the authority deciding the case. Assuming that this telegram might have been received by the Assistant Collector, Veraval, who ultimately passed the order of confiscation, then even the telegram did not give sufficient details regarding the dispatch of groundnut. Moreover, in support of this telegram no material whatsoever has been placed before the Assistant Collector, Veraval, at the time of hearing. Hence this contention also has no merit and is rejected.

7. The Counsel for the petitioner submitted that, in the reply Annexure 'E' to the petition submitted to the Assistant Collector, Veraval, it was pointed out that the stock in question was credited by entering the same in the gate-passbook, that the main person of the firm was out of station on January 15, 1981 and even if there was any mistake it was prayed that the same may be condoned. On the basis of this part of the explanation, it was contended that the lower authorities have not taken into consideration the question regarding the quantum of essential commodity seized to be confiscated. Admittedly in the order passed by the Assistant Collector, there is no discussion as to why he had thought it fit to order confiscation of the entire stock of groundnut which was found in excess of the prescribed limit. Similarly, there is no such discussion on this point in the order passed by the learned additional Sessions Judge.

8. As laid down by the Supreme Court in the case of State of Karnataka v. K.B. Walvakar reported in : 1981CriLJ867 , it is within the discretion of the authority to either order the confiscation of the entire stock in relation to which the contravention of the provisions of the Act or die Rules is committed or to order that the lesser quantity of the essential commodity be confiscated. In this connection the Supreme Court has observed that it all depends upon the facts and circumstances of each case whether the confiscation should be of the entire consignment or the pari of it, depending upon the nature of contravention of the provisions.

9. In this case there are following circumstances which ought to have been taken into consideration by the lower authorities before ordering confiscation of the entire quantity of the essential commodity found in excess of the prescribed limit:

1. That there was necessary credit entry in the gate-passbook but the corresponding entry was not made in the stock register.

2. That the omission to make entry in the relevant stock register was not actuated by any dishonest intention.

3. That the main person who was responsible for the affairs of the petitioner-firm was out of station on January 15, 1981 and therefore, there was failure to make necessary entries in the stock register.

4. That this was the first breach and/or irregularity on the part of the the petitioner-dealer.

5. That in the past the stock of groundnut with the petitioner-firm had never exceeded the prescribed limit.

6. The petitioner is a small businessman doing his business in a remote interior village of Junagadh district.

On the basis of the aforesaid circumstances, it was urged that this is a fit case in which the entire stock of groundnut found in excess of the prescribed limit should not be confiscated. It was further contended that the contention was merely a technical one.

10. The petitioner's contention that this is merely a technical contravention cannot be accepted. What is technical contravention? Technical, in contradistinction to the word substantial - means formal or procedural. Any breach or contravention which is in form only but not in substance may be regarded as a technical one. In this case the stock of groundnut has exceeded the prescribed limit. Therefore, there is breach and/or contravention in substance also. This is not a case where there is mere omission to make entries in the stock register. Mere omission to make entry in the relevant register, without anything more, may be regarded as a technical or a formal breach. But in this case the stock of groundnut has in fact exceeded the permissible prescribed limit and furthermore that stock is not entered into the stock register. Thus, there is failure to maintain proper register and over and above there is no evidence whatsoever in support of the plea that the truck load of groundnut was being despatched to some party at Ahmedabad. Therefore, it is clearly a case of substantial breach or contravention of terms of licence.

11. However, it was contended that the stock in question was entered in the gate-passbook having serial numbers. This aspect has not been taken into consideration by the lower authorities. From this it should be inferred, contends the Counsel for the petitioner, that even though it may amount to contravention of the terms of licence on the part of the petitioner, no dishonest intention whatsoever can be attributed to the petitioner. Thus, the contravention at any rate was not a deliberate one. In the absence of mens rea or dishonest intention, imposition of fine to the extent of confiscation of 5,832 kgs. of groundnut for one-time breach would be, according to the Counsel for the petitioner, very much harsh. Mens rea or dishonest intention is not an essential element of the offence under Section 6A of the Act. Once the contravention of the provisions of the Act or any order passed thereunder is proved, the liability arises. In this connection reference may be made to the case of Swastik Oil Industries v. State of Gujarat reported in 12 GLR 1117.

12. Now the question to be determined in this case is, that even when the contravention proved is substantial and not technical as urged by the learned Counsel for the petitioner was it not necessary for the authorities to exercise their discretion and confiscate lesser quantity of groundnut instead of ordering to confiscate the entire quantity of groundnut found in excess of the permissible prescribed limit? In this connection it may be pertinent to point out that the Essential Commodities Act has been enacted in the year 1955 with the Preamble which reads as under:

An Act to provide, in the interests of the general public, for the control of the production, supply and distribution of, and trade and commerce in, certain commodities.

Various control orders are being issued by the Central Government and the State Government under the provisions of Section 3 of the Act. The object of the Act as well as that of the orders passed thereunder can be to control the production, supply and distribution of the essential, commodities. Therefore, while exercising the discretion conferred under Section 6A of the Act, the authorities should take into consideration the following factors before ordering to confiscate the commodity in question:

1. Is it a technical breach meaning thereby, is it only a formal contravention?

2. The contravention complained of has any bearing on the stream of supply of the commodity in the market or is it merely an incidental breach?

3. Is the dealer actuated by motives of hoarding and thereby to reap illegitimate profits?

4. Is the dealer found to have been indulging in such activity of hoarding and/or black-marketing in past?

5. Whether the contravention complained of is likely to create an artificial situation of shortage either in the town itself or in the entire market of die commodity in question?

6. Is the dealer a petty businessman managing to make both ends meet with difficulty or is he a big trader whose insatiable hunger for profit is the motivating force behind the contravention in question?

13. These are some of the points which ought to have been taken into consideration by the authorities before ordering to confiscate the entire stock of commodity in respect of which contravention is proved. If on facts it is found that the nature of contravention is merely technical and it has no bearing on the supply of the commodity in question and if it is not likely to disarray the stream of supply in the market, then in that case, the authorities may exercise the discretion in favour of the dealer and may under to confiscate the quantity to a lesser extent than which has been found in excess of the prescribed limit. However, it should be clear that absence of mens rea or dishonest intention would not make a contravention of the provisions of terms of licence a technical one.

14. Having regard to the aforesaid circumstances (which are not exhaustive but merely illustrative) it appears that in the instant case the contravention does not appear to be deliberate inasmuch as necessary entry has been made in the gate-passbook and this contention of the petitioner is not held to be incorrect by either of the lower authorities. Moreover, up to January 15, 1981, the immediately preceding day of the search, there does not seem to be any stock in excess of the prescribed limit. Therefore, it cannot be said that the dealer was engaged in a systematic activity of hoarding the commodity in question.

15. The Counsel for the petitioner states that the firm was directed not to dispose of the excess stock of 7,488 kgs. of groundnut and direction to this effect was given at the time of the seizure of the commodity in question. Thus, since January 1981, roughly about 7,500 kgs. of groundnut has remained hoarded. It has not been allowed to enter the stream of supply. Thus, the very purpose of the Act and that of the orders passed thereunder is frustrated by keeping the stock of commodity in question as seized and undisposed of. In this connection reference may be made to the provision of Section 6A(2) of the Act:

6A(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 the essential commodity is subject to speedy and natural decay or it is otherwise expedient in the public interest so to do, he may-

(i) order the same to be sold at the controlled price, if any, fixed for such essential commodity under this Act or any other law for the, time being in force; or

(ii) where no such price is fixed, order the same to be sold by public auction: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 price, order the same to be sold through fair price shops at the price so fixed.

16. From the aforesaid provision it would be clear that a duty is cast upon the Collector to see that the essential commodity does not remain withheld from the stream of supply. One of the main purposes of the Act is to see that the continuous supply of the essential commodity in question is maintained. If the commodity in respect of which the contravention is alleged to have been made and if the entire stock or even a part of that stock is seized and allowed to remain stagnant, the very purpose of the Act is frustrated, namely, to maintain the flow of supply continuous in the market. It may be that the State itself becomes the hoarder on account of its seizure or the dealer himself hoards it, the effect in either case is the same, that much quantity of the essential commodity remains withdrawn from the market. Therefore consequently an artificial situation of shortage is created.

This may be examined from another angle also. If ultimately the dealer, whose stock is seized, succeeds in the litigation, who stands to benefit on account of such forced hoarding? The society at large suffers on account of the fact that the essential commodity remains withdrawn from the stream of supply. If the essential commodity is not controlled item, in the sense that it is not required to be sold at a particular price, then surely the dealer will get higher price on account of the continuous rising trend in prices. Thus, it would mean that indulgence in hoarding and in contravention of the provisions of the Essential Commodity Act and the orders passed thereunder would prove to be profitable to the dealer. On the other hand, if this commodity is disposed of as per the provisions of Section 6A(2) of the Act, the essential commodity will immediately enter into the stream of supply. The situation of artificial shortage could be eased at least to some extent. If this course is adopted, even the dealer cannot make any grievance. If he succeeds ultimately, he would be entitled to the amount which might have been realised while disposing of the essential commodity as per the provisions of Section 6A(2) of the Act. In view of the fact that a commodity is declared to be an essential commodity and its supply and distribution are required to be controlled and/or channelised, it should ordinarily be considered by the supply authorities that it is expedient in the public interest to see the stock of commodity seized gets into the stream of supply as soon as practicable. This should be the prime consideration even if the commodity is not subject to speedy and natural decay. Therefore, it is very much necessary that the State Government issues necessary direction to all the Collectors and other supply authorities to invoke their powers under Section 6A(2) of the Act and see that immediately after the seizure of the goods in question, they are either sold at the control price or disposed of by holding public auction as provided in the aforesaid provisions of Section 6A(2) of the Act.

17. In this case, for the reasons mentioned hereinabove, I am of the opinion that the ends of justice would be met if the order of confiscation of groundnut is modified and instead of entire stock of 5,832 kgs. of groundnut, only 2,500 kgs. of groundnut is ordered to be confiscated. Hence, instead of 5,832 kgs. of groundnut to be confiscated as ordered by the learned Additional Sessions Judge, Junagadh, 2,500 kgs. of groundnut be confiscated. Rule is made absolute to the above extent.

18. A copy of this judgment be sent to the Secretary, Department of Civil Supplies, Gandhinagar for appropriate action in the light of the observations made hereinabove.


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