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ESSENTIAL COMMODITIES

ACT, 1955

CONSUMER LAW PROJECT

SUBMITTED TO: Ms. Manprit Kaur

Faculty for Consumer Law

NALSAR University of Law

SUBMITTED BY: Kirti Mahapatra

Roll No. 2005-35

Vth Year, Xth Semester

NALSAR UNIVERSITY OF LAW, HYDERABAD


TABLE OF CONTENTS
ESSENTIAL COMMODITIES ACT, 1955..................................1

TABLE OF CONTENTS.........................................................II

LIST OF ABBREVIATIONS...................................................IV

INDEX OF AUTHORITIES.....................................................V
TABLE OF STATUTES..........................................................V
LIST OF CASES...................................................................V

1.INTRODUCTION..............................................................1
1.1 RESEARCH PLAN..........................................................1
1.2 RESEARCH METHODOLOGY...........................................2

2.HISTORY OF COMMODITY CONTROL.................................3

IN INDIA...........................................................................3
2.1.COMMODITY CONTROL DURING 1939-45....................................3
2.1.1 PROVISIONS OF THE DEFENCE OF INDIA ACT...........................4
2.2 COMMODITY CONTROL DURING INDEPENDENCE ............5
2.2.1. ESSENTIAL SUPPLIES (TEMPORARY POWERS) ACT, 1946........5
2.3 COMMODITY CONTROL IN PRESENT TIMES.....................6

3.ESSENTIAL COMMODITIES ACT, 1955...............................9


3.1 APPOINTMENT OF AUTHORISED CONTROLLER..............14
3.2 DELEGATION OF POWERS...........................................15
WHO CAN MAKE ORDERS.................................................15
3.3.PUBLICATION OF ORDERS...........................................16
3.4.MISCELLANEOUS PROVISIONS....................................18

4.ADMINISTRATION OF....................................................22

ESSENTIAL COMMODITIES ACT.........................................22


4.1.PRICE MONITORING CELL ...........................................23
ACTION TAKEN TO CHECK RISE IN PRICE OF ESSENTIAL
COMMODITIES.................................................................23

5.THE PREVENTION OF BLACKMARKETING AND


MAINTENENCE OF SUPPLIES OF ESSENTIAL COMMODITIES
ACT, 1980.......................................................................27

6.MAJOR AMENDMENTS TO THE ESSENTIAL COMMODITIES


ACT................................................................................30
6.1 2005 AMENDMENT TO PROMOTE OPERATION OF MARKET FORCES.......30
6.2.SUGAR INDUSTRY......................................................32
6.2.1. 2009 AMENDMENT TO THE ESSENTIAL COMMODITIES ACT. .35
CONCLUSION AND SUGGESTIONS.....................................37

BIBLIOGRAPHY..................................................................V
LIST OF ABBREVIATIONS

AIR All India Reporter


Anr Another
AP Andhra Pradesh
Cal Calcutta
GoI Government of India
Govt Government
Ltd. Limited
Mad Madras
MSP Minimum Support Price
Ori Orissa
Ors Others
PC Privy Council
PDS Public Distribution System
Raj Rajasthan
S. Section
SC Supreme Court
SCC Supreme Court Cases
SCJ Supreme Court Journal
SCR Supreme Court Reported
UoI Union of India
UP Uttar Pradesh
INDEX OF AUTHORITIES

TABLE OF STATUTES
Defence of India Act, 1939
Essential Commodities (Amendment and Validation)
Ordinance, 2009
Essential Commodities (Amendment) Bill, 2005
Essential Commodities Act, 1955
Essential Supplies (Temporary Powers) Act of 1946
Government of India Act, 1935
India (Central Government and Legislature) Act, 1946,
Prevention of Black Marketing and Maintenance of Supplies of
Essential Commodities Act, 1980
Sugarcane (Control) Order, 1966
LIST OF CASES
Ambalal M. Shah v. Hathi Singh Mfg. Co., 1962 S.C.J. 718
Bharat Sugar Mills Ltd. and Another vs. UoI [T.C.(Civil)
Nos.15-17/1993]
Bihar v. Hiralal Kejriwal, A.I.R. 1960 S.C. 47.
Dayanand v. Bihar, A.I.R. 1951 Pat. 47
In Ram Rich Pal v. W. Bengal, A.I.R. 1958 Cal. 257
In re Pesala Subramanyam A.I.R. 1950 Mad. 308.
K. P. Khetan v Union of India, A.I.R. 1957 S.C. 676
Kcdar Nath v. State, A.I.R. 1962 Cal. 410.
Maheswar Ram v State, A.I.R 1901 Orissa 44
Modi Industries Ltd. and Anr. vs. Union of India and Ors [T.C.
(Civil) No.9/1990] on the 20th February, 1996
Narendra Kumar v. India, A.I.R, 196O S.C.430.
Nathmal v. Commissioner, Civil Supplies, Rajasthan, A.I.R.
1952 Raj.74.
Saraswati Industrial Syndicate Case, LPA No. 1053/2007
Malaprabha Co-operative Sugar Factory Ltd. vs. UoI and Anr
1994 (1) SCC 648
Srikrishna Rice Mills v. Dy. Dir., A.I.R, 1960 A.P. 431.
Tikaramji v. State of U.P., 1956 S.C.R.393,
Udairaj Baikal Lai v. Rajasthan, A.I.R. 1052 S.C 79
UoI and Ors vs. Triveni Engineering Works Ltd. and Ors
1999(9) SCC 244
1.INTRODUCTION
The Indian State has always followed the principle of a welfare
state. These principles find place in the Constitution of India,
which is the supreme law of the land. A.39 of the Constitution
enjoins the state to direct its policy towards securing the
ownership and control of material resources, such that the
commodities are so distributed as best to serve the common
good, and that the operation of the economic system does not
result in concentration of wealth.
In adherence to this Directive Principle of State Policy, the
Parliament and the State Legislatures have enacted a number
of laws to control the economic system. One of these very
important legislations is the Essential Commodities Act which
confers upon the government broad powers to control the
economic system and under which a system of control and
regulation of production, supply, trade and commerce of
number of commodities is in force.
However, the Essential Commodities Regulations have their
origin in situations of dearth of certain commodities. But in
the present day context when the Indian economy is a self-
sufficient one and the Govt constantly strives to bring in
foreign investment and generate revenue from trade and
commerce of commodities, the importance and need of the
EC Act has been questioned time and again. The researcher in
the present project seeks to understand the need for keeping
the EC Act intact for the stability of the Indian Economy
despite its rapid leaps of development.
1.1 RESEARCH PLAN
The researcher in the present project seeks to analyze the EC
Act. An attempt has been made, first, to understand the
evolution of the laws relating to control of essential
commodities. The researcher then has looked into EC Act and
its effect and administration. The researcher then looks into
the various other legislations, which help in better
implementation of the EC Act. The final part of the project
deals with the major amendments that have been made to
the EC Act according to change in economic conditions and
demands of the various market players.
1.2 RESEARCH METHODOLOGY
The research methodology is purely doctrinal in nature. The
research has relied upon secondary sources found in the
NALSAR Law Library.
2.HISTORY OF COMMODITY CONTROL
IN INDIA
The pedigree of the commodity control regimes dates back to
the days of the II WW, 1939-45. During the emergency,
controls were resorted to on an extensive scale in order to
fight inflation, scarcity and high prices of essential
commodities. There is, therefore, a kind of historic continuity
through the legal provisions in the area of commodity control
since their inception in 1939. In the present chapter of the
project the researcher shall deal with the commodity control
laws that existed in the 1940s in India, i.e., the Defence of
India Act and Defence of India Rules. This evaluation is
undertaken, to show how the Essential Commodities Act is
greatly influenced by the Defence of India Act.

2.1.COMMODITY CONTROL DURING 1939-45


In the constitutional framework envisaged under the GoI Act,
1935, the legislative powers pertaining to commodity control
were distributed between the Centre and the Provinces1. As
the II WW necessitated a centralized control for the essential
commodities. In 1939, the GoI made certain rules to control
the production, supply and distribution of certain commodities
under the Defence of India Act. But this Act ceased to be
effective after 30th September 1946. It was, however,
considered necessary that control in respect of certain
commodities essential for human beings should continue in
the interests of the general public. Therefore. The Essential
Supplies (Temporary Powers) Ordinance of 1946 was
promulgated by, which certain provisions of the Defence of
India Act were continued. This ordinance was subsequently

1
S.100 of the GoI Act, 1935.
replaced by the Essential Supplies (Temporary Powers) Act,
1946, which then expired on 26th January 1955. Since it was
considered necessary in public interest that the centre should
control the production, supply, and distribution of certain
essential commodities, the need of a permanent measure on
the subject was felt. For the above purpose certain
amendments were to be made to the Constitution. The IIIrd
Amendment to the Constitution made the required changes in
Entry 33 of List III in the VIIth Schedule to enable the
Parliament to enact the required legislation. Thus, the
Essential Commodities Act, 1955 came into force. The Act
intended to provide for the control of production, supply and
distribution of, and trade and commerce in, certain
commodities essential for human beings, in the interest of the
general public.

2.1.1 PROVISIONS OF THE DEFENCE OF INDIA ACT


S. 2(1) empowered the Central Govt, to make such rules as
appear to be necessary or expedient for securing the defence
of British India, the public safety, the maintenance of public
order or the efficient prosecution of war, or for maintaining
supplies and services essential to the life of the community.
Without prejudice to any of the provisions of the Act, the ruled
made by the Govt could provide for or empower an authority
to make orders providing for all or any matters set out in S.2
(2)2.
The Central Govt was empowered to direct that any power or
duty conferred or imposed by it u/s.2 (1) would, in
circumstances and conditions specified in the order, be
discharged or exercised by any authority or officer

2
S.2(2) was merely illustrative and restrictive of the rule making power
conferred by S. 2(1). Emperor v. Sibnath, AIR 1945 PC 156.
subordinate to it or the Provincial Govt3. Any rule made under
this Act was considered to be in effect even though it was to
be inconsistent with any other enactment in force in the
country at the given point of time.

2.2 COMMODITY CONTROL DURING


INDEPENDENCE
The Defence of India system of controls was based on the
concept of emergency. With the cessation of hostilities in
1945, the proclamation of emergency in the country was
revoked in April, 1946, thus putting an end to the Defence of
India Act4. The economic condition of the country did not,
however, permit dispensation with commodity-control as war-
time inflation, scarcity and high prices of commodities still
ruled in the country. It thus became inevitable to amend the
scheme of distribution of powers in the GoI Act. Thus, the
Central Legislature, by virtue of the India (Central
Government and Legislature) Act, 1946, became empowered
to legislate on issues of trade and commerce and supply,
production and distribution of certain essential commodities5.

2.2.1. ESSENTIAL SUPPLIES (TEMPORARY POWERS)


ACT, 1946
The imbibing of these powers in the hands of the Central Govt
led to the enactment of the Essential Supplies (Temporary
Powers) Act, 19466 to meet the prevailing economic
emergency of inflation, high prices and acute shortage of
essential commodities. The Government was empowered to
3
S.2(4).
4
According to S. 102(4) of the GoI Act, 1935, a law made by the Federal
Legislature, which it would not have been competent to make but for the
issue of the proclamation of the emergency had to come to an end six
months after the proclamation ceased to operate.
5
These commodities included: cotton and woolen textiles, paper (including
newsprint), foodstuff, petroleum, coal, iron, steel, mica, etc.
6
Act XXIV of 1946
provide for regulating or prohibiting the production, supply
and distribution of, and trade and commerce in, an essential
commodity, so far as it appeared to be necessary or
expedient for maintaining or increasing supplies of the
commodity or securing its equitable distribution and
availability at fair prices7.
The Act also empowered the Govt to appoint any person as an
authorized controller to exercise the functions of control, as
specified in the Order, with respect to an undertaking
engaged in the production and supply of a commodity
specified in the order8.
This Act was different than the Defence of India Act to the
extent that the latter did not contain restrictions wrt
commodities, which could be regulated thereunder, while the
former applied to commodities mentioned in the Act, beyond
which the Govt was not allowed to exercise its powers.
Further, under the Defence of India Act concurrent powers
were given to the Centre and the Provinces to make orders,
but under the Essential Supplies Act, all the power was
conferred solely upon the Centre, which could then delegate
these powers to the Provinces9.

2.3 COMMODITY CONTROL IN PRESENT TIMES


There can be no place for any confusion, when one states that
the commodity control in India has undergone a drastic
change. Though, the Essential Commodities Act was enacted
in 1955 trying to keep up the need for Govt control in the
commodities supply market, the Indian economy has
undergone drastic changes, resulting in a need for change in

7
Indian Law Institute Study No. 9, “Administrative Process Under the
Essential Commodities Act, 1955, 1964, p.27.
8
S. 3 (4) of Essential Supplies Act.
9
Infra note 7, at.31.
the commodity control regime time and again.
The most important change in circumstances is that of India
now being a essential commodities surplus state, which
participates in intra and inter country trade and commerce.
This is precisely the reason why time and again various
interests groups have sought for the repeal of the Essential
Commodities Act, for it continues to place a great degree of
power in the hands of the Central Govt.
Subsequent amendments to the Essential Commodities Act,
and the Orders made thereunder stand privy to the fact that
the Indian Govt is in favor of moving beyond a control and
command regime to give a certain amount of free reign to the
producers.
However, there is no ignoring the fact that certain sections of
the society will continue to suffer from lack of access to
essential commodities. And, keeping in mind the fact that
India continues to play the role of a welfare state, the Govt,
despite protests from various sectors intends to keep the
Essential Commodities Act in place. This decision becomes
more relevant when analyzed from the context of the prices of
essential commodities.
During the year 2008-09, the prices of essential commodities
were closely monitored and various measures were taken to
augment supplies and stabilize prices of certain essential
commodities. Rise in domestic prices was owing to the
combined effect of factors such as, growing demand on
account of increase in population and income, hardening of
international prices, changes in consumption pattern,
diversion of food grains for fuel, adverse weather and climate
change, increase in crude oil prices and increase in freight
rates. Reasons for inflation in some food articles mainly rice
and pulses (except gram dal) are listed below: (i) Prices of rice
ruled high as there was a hike in the Minimum Support Price
(MSP). Increase in international prices also contributed to rise
in domestic prices of rice.
Production of pulses is estimated to be lower at 14.25 million
tonnes during 2008-09 as against 14.76 million tonnes during
2007-08 as per Second advance estimates released by
Department of Agriculture & Cooperation on 12.02.2009.
Domestic prices of pulses have risen mainly on account of the
supply-demand mismatch. The gap between demand and
supply is met through imports, which also slackened owing to
increase in international prices of pulses.
3.ESSENTIAL COMMODITIES ACT, 1955

The Essential Commodities Act was passed by Parliament on


1st April, 195510. It provides, in the interest of the general
public, for the control of the production, supply and
distribution of, and trade and commerce in, the following
essential commodities11:
(i) Cattle fodder (including oilcakes and other concentrates);
(ii) Coal (including coke and other derivatives);
(iii) Component parts and accessories of automobiles;
(iv) Cotton and woolen textiles;
(v) Foodstuffs (including edible oilseeds and oils);
(vi) Iron and steel (including manufactured products of iron
and steel);
(vii) Paper (including newsprint, paperboard and strawboard);
(viii) Petroleum and its products;
(ix) Raw cotton (whether ginned or unginned) and cotton seed
and
(x) Raw jute.
These commodities, it will be seen, fall into three categories:
(1) Food for human beings and cattle12;
(2) Raw materials for industries;13
(3) Products of industries controlled by Parliament14.
10
The Essential Supplies Act, 194G, expired on January 26, 1055, and the
Essential Commodities Act was passed on April 1, 1S55. In between, there
was an interregnum. The Parliament's powers to control commodities,
pending a constitutional amendment, were limited to regulation of the
products of controlled industries, inter-state trade and commerce in all
commodities. Thus, an ordinance was promulgated on January 26, 1955 by
the Central Government to cover these matters. Certain States also took
legal action open to them to continue controls in respect of such
commodities as could not be included in the Central Ordinance. The
Essential Commodities Act replaced this ordinance, and much of the Slate
legislation in this area.
11
S. 2 (a)
12
Entries (i) & (v)
13
Entries (ix) & (x).
14
Entries (ii), (iii), (iv), (vi), (vii), (viii)
The list of essential commodities is not, however, exhaustive,
as the Central Government is empowered15 to declare, by
notified order, as an "essential commodity' for the purpose of
the Act, any commodity with respect to which Parliament has
power to make laws by virtue of entry 33, List III16.
It deals mainly with the following subjects:
1. By the provisions set out in Section 3- Control of
production, supply and distribution of essential
commodities.
2. Under Section 4 there is conferment of power and
imposition of duties on State Governments.
3. Under Section 5 the Central Government is provided
with the power to delegate its powers to the State
Government or its officers.
4. Section 6 provides for the removal of difficulties arising
by reason of inconsistency of any order made under S.3
of the Act.
5. Securing obedience to the provision of orders made and
directions issued under the Act by making the
contravention and attempt to contravene such
provisions, orders and directions, punishable as offence
u/s.7
6. Section 11 contains the provisions regarding cognizance
of offences under the Act. Special provision relating to
fines is provided in Sec.12.
7. Section 12-A provides for summary trials, which was

15
S. 2(a) (xi).
16
In this entry is to be found the following clause: "The products of any
industry where the control of such industry by the Union is declared by
Parliament by law to be expedient in the public interest and imported
goods of the same kind as such products," Under this power, the following
commodities have been declared to be essential commodities : jute
textiles (S.R'O. 325, dated February 15, I9G6); drugs (S.R.O. 828/April
195G); non-ferrous metals (S.R.O. 2175-A); press mud (sugarcane),
Notification No. G.S.E./ Ess. Comm., dated 15.4.1959.
inserted by the Essential Commodities Amendment Act
of 1964.
8. Provision in respect of judicial presumption as regards
any order purporting to have been made and signed by
an authority in exercise of any power conferred by or
under this Act is made u/s.13.
According to S. 3(1), the Central Government may, by order,
provide for regulating or prohibiting the production, supply
and distribution of an essential commodity, and trade and
commerce therein if it is of the opinion that it is necessary or
expedient so to do for maintaining or increasing supplies of
the commodity or for securing their equitable distribution, and
availability at fair prices17. Without restricting the generality of
the above, provision may specifically be made for the
following18:
• for regulating by licenses, permits or otherwise, the
production or manufacture, storage, transport,
distribution, disposal, acquisition, use or consumption,
of an essential commodity;
• for bringing under cultivation any water or arable land
for growing, and for otherwise maintaining or increasing
the cultivation of foodcrops;
• for controlling the price at which any essential
commodity may be bought or sold19;
17
The Supreme Court has held that an order made under S. 3, though
within its compass; may still be challenged on the ground of violating a
fundamental right, Narendra Kumar v. India, A.I.R, 196O S.C.430.
18
S. 3(2), The Calcutta High Court has held in Motion Lai v. State, A.I.R
1961 Cal, 240, that if a person contravenes an order made under S. 3 of
the Act, he exposes himself to the risk of punishment prescribed by the
Act. Proof of mens rea or guilty mind is not necessary. The language
employed in the statute and the object of the Act appear to indicate lhat
an absolute prohibition was intended to be conveyed by any order passed
under S. 3.
19
This provision has been interpreted by the Supreme Court in the Divan
Sugar Mill's case very broadly as authorizing the fixation of price at any
stage whether of production, wholesale or retail sale. There is no
• for prohibiting the withholding from sale of any essential
commodity ordinarily kept for sale;
• for requiring any person holding in stock any essential
commodity to sell the whole or a specified part thereof
to the Central or State Government or to its officer or
agent or to such other person and in such
circumstances as are specified in the order;20
• for regulating or prohibiting any class of commercial or
financial transactions relating to foodstuffs or cotton
textiles which, in the opinion of the authority making the
order, are or are likely to be detrimental' to the public
interest;
• for collecting any information or statistics for regulating
or prohibiting any of the aforesaid matters;
• for requiring the production and maintenance of books,
accounts and business records and furnishing of
information specified in the order, by those engaged in
production etc., of an essential commodity;
• for the grant or issue of licenses, permits, or other
documents, the charging of fees therefore, requiring
deposit of securities for due performance of conditions
of license and forfeiture of such deposit for breach of
conditions;
• for any incidental and supplementary matters including
compulsion on the government to fix prices at the consumer's level; supra,
p. 55.
20
Before 1957, the words "government" or "officers" or "agent" did not
occur in this clause. In Ram Rich Pal v. W. Bengal, A.I.R. 1958 Cal. 257, the
Calcutta High Court held that the word "person" in the clause did not
include government and, therefore, the government had no power to order
a stockholder to sell to it or its officers. Thus, while the government under
this clause could direct a stockholder to sell its stocks to a private person it
could not direct him to sell to itself. The clause was, therefore, amended
on September 17, 1967, so that the government may have the "very
healthy power of enabling the government to virtually requisition stocks of
food and other essential commodities by directing compulsory sales to
persons nominated by the government."
search of premises etc., seizure by an authorized person
of articles in respect of which he has reason to believe
that a contravention of order might take place21.
S. 3(3) prescribes the following bases for granting
compensation to a person selling any essential commodity
under Cl. (e) above:
• he is to be paid the agreed price, if it can be agreed
upon, consistently with the controlled price, if any:
• in case no such agreement can be reached, price is to
be calculated with reference to the controlled price, if
any;
• in other cases, the price is to be the market rate
prevailing in the locality on the date of sale.
S. 3(3) (A)22, a rather drastic provision, relating to foodstuffs.,
21
In anticipation of the lapse of the Essential Supplies Act, 1046, on Jan.
26, 1955, (supra), S. 1S(G) was added to the Industries (Regulation &
Development) Act providing for control of the product of centrally-
controlled industries mentioned in the schedule to the Act.
This provision empowers the Central Government to regulate supply
and distribution of, and trade and commerce in, any 'article reSatable1 to
a scheduled industry, which means finished products of the industry,
finished products of a cognate character produced in the course of
manufacturing process of the industry and also imported articles of the
same nature and description as the articles manufactured (Tikaramji v.
State of U.P., 1956 S.C.R.393,at p.432). The provision is parallel to S. 3 of
the Essential Commodities Act and was added in 1953 in anticipation of
the lapse of the Essential Supplies Act, 1946 in 1955, as the Central
Government wanted to continue price control as an integral part
of its economic policy and also to protect new industries being floated
from losing money. The Centre took the power also to avoid each State
seeking to interfere with the industries. A number of orders have been
promulgated under this provision 10 control products of centrally
controlled industries. The Cement Control Order, 1953, requires every
producer to sell the entire quantity of cement produced by him to the
State Trading Corporation at a fixed price. The S.T.C. sells the cement at a
price fixed. The sale price for wholesalers and retailers is fixed by the
State Governments. The Motor Cars (Distribution & Sale) Control Order,
1959, and the Scooters (Distribution and Sale) Control Order, I960, seek to
secure equitable distribution of motorcars and scooters at fair prices.
Other orders are: the Ethyl Alcohol (Price Control) Order, 1961; the
Imported Tourist Cars Control Order, 1961; the Molasses Control Order,
1961. These orders have not been considered in this study, which is
confined to the Essential Commodities Act, 1955.
22
Similar provision is to be found in the Industries (Development
& Regulation) Act, added in 1937.
says that on government issuing a notification under it23 the
price payable for the foodstuffs under Cl. (e) is to be regulated
as follows: (a) the agreed price, if it can be agreed upon
consistently with the controlled price of the foodstuff; or (b) if
no such agreement can be reached, the price calculated with
reference to the controlled price; or (c) where none of the first
two options applies, the price calculated with reference to the
average market rate prevailing in the locality during the
period of three months immediately preceding the date of the
notification; the "average market rate" being determined by
an officer authorized by the Central Government with
reference to the prevailing market rates for which published
figures are available in respect of that locality or a
neighboring locality. The average market rate so determined
is to be final and is not to be called in question in any court24.

3.1 APPOINTMENT OF AUTHORISED


CONTROLLER
Under S.3 (4) of the Essential Commodities Act, the
government is empowered to appoint an authorized controller
for an undertaking engaged in the production and supply of
an essential commodity. The government can do so if it is of
opinion that it is necessary for maintaining or increasing the
production and supply of the commodity. The controller
exercises such functions of control as may be specified in the
order. He exercises his function in accordance with
23
It can remain in force upto a maximum period of three months.
24
The drastic provision was necessitated, as the Minister of Food and
Agriculture explained, because of excessive hoarding in foodgrains going
on in the country pushing up prices. In the absence of this provision, the
government was required by S. 3(3) to pay prices at the market rate,
which helped the hoarders. By the new provision, the government wanted
to deprive the hoarder of the undue benefit, which he wanted to derive
from his anti-social activities. Parliamentary Debates, 1957, Vol. II, Cols.
3248-9. The provision applies to sales, not generally, but only those made
under Cl. (e) above. See, Srikrishna Rice Mills v. Dy. Dir., A.I.R, 1960 A.P.
431.
government instructions. The undertaking is to be carried on
in accordance with the controller's directions. Any person
having any functions of management in relation to the
undertaking has to comply with his directions25.

3.2 DELEGATION OF POWERS


According to S. 4, an order made under S. 3 could confer
powers and impose duties upon:
(1)the Central Government,
(2)the State Government,
(3)authorities of the Central Government, and
(4)authorities of the State Government.
Such an order could contain directions to any State
Government or to its officers or authorities as to the exercise
of such powers or discharge of any such duties.

WHO CAN MAKE ORDERS


The power to make orders under S. 3 has been vested
primarily in the Central Government. This power may be
exercised by the Central Government itself, or under S. 5(1)
may be delegated by it, by a notified order, to any of its
officers or authorities. Under S. 5(b), the Central Government
25
A more drastic and broader provision is contained in S. 18-A of the
Industries (Development and Regulation) Act, 1951. The government first
conducts an inquiry into the affairs of the undertaking (S.15). It may issue
directions to it (under S. 16) thereafter. If these directions are not
complied with, or if after the investigation the government is of opinion
that the undertaking is being managed in a manner highly detrimental to
the scheduled industry concerned or in public interest, its management or
control can be taken over by the government. Thus inquiry is a pre-
condition for making an order under S. 18-A.but there is no such procedure
prescribed under S. 3 (4) of the Essential Commodities Act. These
provision, have been commented upon by the Supreme Court in K. P.
Khetan v Union of India, A.I.R. 1957 S.C. 676 and Ambalal M. Shah v. Hathi
Singh Mfg. Co., 1962 S.C.J. 718 in, which the question of mala fides of the
government was raised and rejected. This aspect has not been considered
further in this report. While under S. 3(4) of the. Essential Commodities
Act. the controller may be assigned some functions of control over the
undertaking, under S. 1S-A of the Industries Ace, the whole management
of the undertaking can be taken over.
can also delegate the power to make orders under S. 3 to
State Government or any officer or authority subordinate
thereto. The delegation of power to make orders can be in
relation to such matters and subject to such conditions as
may be specified by the Central Govt in the order itself. An
order u/s. 2 (a) (xi), adding an item to the list of essential
commodities, can be made only by the Central Govt and the
power cannot be delegated.
Also, the notification under S.3 (3A) is to be made by the
Central Govt and this power cannot be delegated. The reason
being that u/s.5, what can be delegated by the Central Govt is
the power to make order, while the power of the Central Govt
u/s.3(3A) is to make a notification.

3.3.PUBLICATION OF ORDERS
The Central Govt can exercise its power under the EC Act
either by an ‘order’ or a ‘notified order’ or a ‘notification’ in
the gazette. In the former category come the following:
1. providing for regulating or prohibiting production,
supply and distribution of an essential commodity and
trade and commerce therein under Cl. (1) and (2) of S.3;
2. Appointment of authorized controller u/s.3(4).
The Central Govt can do the following things by a ‘notified
order’. U/s.5 it can:
1. sub-delegate the power to make order u/s.3 on an
officer or authority subordinate to the Central Govt.
2. sub-delegate the same power on the State Govt or an
officer or authority subordinate to the State Govt.
After the power is conferred by a notified order, it is to be
exercised u/s.3 by an order. U/s. 2 (a) (xi), it can, by such
notified order, ass an item to the list of essential commodities.
Then u/s.3 (3A) the Central Govt may issue a notification in
official gazette regulating the price of foodgrains as provided
in the subsection for the purpose of selling it in compliance
with an order u/s. 3(2) (f), i.e., an order requiring any person
holding in stock foodgrains to sell the whole or a specified part
of it to specified persons under specified circumstances.
An order maybe of general application, of general nature, one,
which affects a class of persons, or, may be directed to a
specified individual. According to S. 3(5), an order of a general
nature is to be notified in the official gazette. An order on an
individual need not be so notified; it is to be served on the
individual concerned by delivering or tendering it to him or if
it cannot be so delivered, by affixing it on the outer door or
some other conspicuous part of the premises in which that
individual lives.
A "notified order" means an order notified in the official
gazette26. The term "official gazette" is not defined in the Act,
but under the General Clauses Act, it means the Gazette of
India or of a State as the case may be. The tenor of the
various provisions noted above is that, except an order made
under S. 3 and directed to a specified individual, every other
order must be notified in the Gazette of India, if it is being
made by the Central Government, or the Gazette of a State, if
it is being made by the State Government. An order not
fulfilling the conditions of publication cannot be enforced. In re
Pesala Subramanyam27, the Collector of the District fixed the
controlled rate of salt and notified it in the District Gazette. It
was held that the order could not be enforced without its
being published in the State Gazette as its notification in the
District Gazette only was not sufficient.

26
S. 2(c).
27
A.I.R. 1950 Mad. 308.
3.4.MISCELLANEOUS PROVISIONS
S. 7 prescribes the penalties for contravention of any order
made under S. 3. For contravention of an order'—(a) under
Ch. (g) or (h)28, the punishment is to be imprisonment up to
one year and also fine; (b) under any other clause, the
punishment is to be imprisonment upto three years and fine,
though the court has an option to impose only fine, for
reasons to be recorded, if it is of opinion that it will meet the
ends of justice. In addition, whole or part of any property in
respect of which the order has been contravened is to be
forfeited to the government. For reasons to be recorded, the
court may not pass an order of forfeiture if it is of opinion that
it is not necessary so to do. For failure to comply with a
direction of the "authorized controller", punishment
prescribed is imprisonment upto three years, or fine, or both.
According to S. 8, an attempt or abetment to contravene an
order is to be deemed as contravention of the order.
According to S. 9, making of a false statement or furnishing
false information knowingly is to be punishable with
imprisonment upto three years, or with fine, or with both29. S.

28
Supra, p. 71.
29
Under the Preventive Detention Act, an order of preventive detention
can be made to prevent a person from acting in any manner prejudicial to
the maintenance of supplies and services essential to the community. This
provision does not define the commodities whose supply is essential to the
community. The Punjab High Court has held in Jagannath v. Punjab, A.I.R.
1952 Punjab 124 at p. 128., that what is regarded by the executive as an
essential commodity is subject to review by the courts. In Jagannath v.
Bihar, A.I.R 1952 Pat. 185, action under the provision was permitted for
evasion of control orders. In this case, the order of preventive detention
was served on a licensee of cloth under the Bihar Cotton Cloth and Yarn
(Control) Order for having infringed its condition. Also see, Dayanand v.
Bihar, A.I.R. 1951 Pat. 47. The Preventive Detention Act places a very
drastic power in the hands of the executive and the scope of judicial
review under it is extremely limited. In the Jagannath case, the executive
had several alternative remedies: (1) to prosecute the licensee under the
Essential Supplies Act; (-) Cancellation of (he licence; and (3) the
preventive detention; and the executive resorted to the latter because it
was very convenient for it. It is, of course, for the government to decide
which alternative to adopt.
10 provides for punishment in case an offence is committed
by a company. In such a case, the company and every person
in charge of, and responsible for, the company for the conduct
of its business at the time the order is contravened, are liable
to be punished. A person is not to be liable to any punishment
if he proves that the contravention took place without his
knowledge or that he exercised ail due diligence to prevent
the contravention. Further, if it is proved that the offence is
committed by a company with the consent or connivance of,
or is attributable to any negligence of any director, manager,
secretary or any other officer of the company, then he also is
to be deemed guilty of the offence and so liable to be
punished30.
No court is to take cognizance of any offence under this Act
except on a report in writing of the facts constituting such
offence made by a public servant31. Where an order purports
to have been made and signed by an authority in exercise of
any power conferred under the Act, a court is to presume that
such order has been made by that authority within the
meaning of the Indian Evidence Act. According to S. 14, the
burden of proving that he has a licence, permit etc. is on the
person who is being prosecuted for contravening an order
30
In the Select Committee, the provision was criticized on several
grounds, viz., it was an unusual departure from the modern concept of
criminal law that a criminal action would always be a personal liability and
this would put a discount on the desire of a capable man handling an
important industry, that punishment of neglect by three years was a
serious matter and in criminal law neglect was not usually punished unless
it was of culpable or of serious nature, as there is no mms rea, which is
usually regarded as an essential element in crimes. It was also feared that
the provision might fail to work as it was vague. The administration and
business of a company is carried on through a large number of persons,
and it would thus be difficult to catch hold of the real offender. See, State
v. Dhanraj Mills, A.I.R. 1960 Bom. 453. Merely appointing a manager to
attend to day-to-day administration and working of the mills does not
absolve the directors from responsibility. They have to prove that the
contravention took place without their knowledge or that they exercised
due diligence to prevent the contravention.
31
Kcdar Nath v. State, A.I.R. 1962 Cal. 410.
prohibiting him from doing any act or possessing a thing
without such permit32 etc.
The usual immunity from judicial action for anything done or
intended to be done in good faith is contained in S. 15(1).
Also, government is protected from being sued for any
damage caused or likely to be caused by anything done or
intended to be done in good faith under any order. An
interesting case to be noted with reference to this provision is
Nathmal v. Commissioner, Civil Supplies, Rajasthan33. Grain
was requisitioned under a State order, which the HC later held
to be bad as the procurement price was unreasonable. The
procuring authority had sold grain in the meantime. Due to S.
15(2)j it was not possible for the petitioner to recover money
from the government in a civil suit, which was barred by this
provision. The High Court thus gave remedy under Article 226
of the Constitution as no other remedy was available and thus
damages were given against the State34. S. 16(2) saves the
orders made under the Essential Supplies Act, which were in
force immediately before the commencement of the Act35. It
will be seen from the above that a thread of historical
continuity runs through the provisions of the Essential
Commodities Act as compared with the Essential Supplies Act.
The former, though more elaborate than the latter in some
respects, is yet based on it. Ss. 3(2), 3(4), 3(5), 4, 5, 6, 8,9,
11, 12, 14, 15, 13 of the Essential Commodities Act are
32
Maheswar Ram v Stale, A.I.R, 1901 Orissa 44. The burden cast on the
petitioner is heavy to prove that a commodity possessed by him requiring
a licence for possession was lawfully possessed by him.
33
A.I.R. 1952 Raj.74.
34
Udairaj Baikal Lai v. Rajasthan, A.I.R. 1052 S.C, 79. In this case, a
similar relief was given by the court in a similar situation as the suit was
barred under S. 15.
35
Bihar v. Hiralal Kejriwal, A.I.R. 1960 S.C. 47. The Supreme Court held
that the Cotton Textiles (Control of Movement) Order, 1948, continued in
force under S. 16 (2) inspitc of the repeal of the Essential Supplies Act,
1046, under which the order was made.
parallel respectively to Ss. 3(2), 3(4), 3(1A), 3(3), 4, 6, 8, 10,
11, 13, 15, 16 and 14(2) of the Essential Supplies Act as
amended upto 1950. There are, however, a few differences
between the two enactments, viz. (1) The Commodities Act
applies to raw jute, item 2(a) (x).(2) List of essential
commodities in the Commodities Act is not exhaustive for it
can be expanded under S. 2(a)(xi) by the Central Government.
(3) S. 3(3) and 3(3A) of the Commodities Act provide a
formula for fixing the price to be paid to a person who is
required to sell essential commodities in his stock under an
order. It appears that this provision was added in view of
Article 31 of the Constitution under which the basis of
compensation is to be fixed for acquisition of private property
for a public purpose. (4) S. 3(6) provides for laying of an order
made under the Act as soon as it is made. This provision is in
line with the new trend of strengthening legislative control
over delegated legislation after the advent of the new
Constitution.
On the other hand, the Essential Commodities Act does not
contain any of the following provisions found in the Essential
Supplies Act: (1) summary trial of offences; (2) orders
promulgated under the Act being made non-justiciable; (3)
provision for expediting trial of cases; (4) empowering the
Centre to give directions to a State Government to carry into
execution in the State an order promulgated under the Act. As
regards (2), such a provision could not obviously bar the
courts from scrutinizing an order under the new Constitution
and so was dropped. As regards (4), no such provision was
necessary as such power is given by the Constitution itself to
the Centre. Punishments under the new Act are milder than
the old Act36.
36
Under the Essential Supplies Act, 7 years' imprisonment was prescribed
4.ADMINISTRATION OF
ESSENTIAL COMMODITIES ACT

Legislature promulgated the Essential Commodities Act, 1955 to


ensure easy availability of essential commodities to consumers and to
protect them from exploitation by traders. It provides for regulation
and control of production, distribution and pricing of commodities,
which are declared as essential under the Act. Presently, there are 44
classes of commodities, which are declared essential under the Act.
The Act has been amended from time to time to make its provision
more effective. In order to create greater impact on the defaulting
traders, the provisions of the Essential Commodities Act, 1955 have
been made more stringent making the offences non-bailable and
providing for summary trial of such offences by Special Courts through
the Essential Commodities (Special, Provisions) Act, 1981, the validity
of which has been extended upto August, 1997 on the basis of
unanimous recommendations of all the State/UT Governments. The
Central Government regularly monitors the action taken by State
Governments/`UT Administrations to implement the provisions of the
Essential Commodities Act, 1955. The action taken by States/UTs
under the Act during the year 1995 (as reported upto 31.12.1995) is an
indicated below:-

(i) No. of raids made -- 80927


(ii) No-. of persons arrested -- 9528
(iii) No. of persons prosecuted -- 3387
(iv) No. of persons convicted -- 2714
for holding of foodstuffs. This provision was criticised by die Commodity Control
Committee. Further, the Essential Supplies Act classified punishment with reference
to commodities, viz., foods tuffs, cotton, etc. The Essential Commodities Act classifies
the punishments with reference to the nature of the order infringed.
(v) Value of goods confiscated -- 1472.65
(Rs. in Lakhs)

4.1.PRICE MONITORING CELL


The Department of Consumer Affairs is entrusted with the task of
monitoring prices and availability of essential commodities in the
country. The Price Monitoring Cell (PMC) of the Department of
Consumer Affairs continued to monitor regularly the wholesale and
retail prices of 17 essential commodities, viz., rice, wheat, atta, gram
dal, tur/arhar dal, moong dal, urad dal, masoor dal, tea, milk, sugar,
vanaspati, mustard oil, groundnut oil, potato, onion and salt. Meetings
of the Committee of Secretaries (CoS), High Powered Price Monitoring
Board (HPPMB) and of the Cabinet Committee on Prices (CCP) of
essential commodities were held regularly to review the prices of
essential commodities. Analytical notes on latest price situation and
availability of essential commodities were prepared based on the WPI
numbers, wholesale/retail prices, production, procurement and
exports/imports of select essential commodities for consideration of
the meetings of other high level meetings. Notes on the measures
taken by the Government for ensuring adequate supplies and
containing the rise in prices of essential commodities were also
prepared and given to Press Information Bureau (PIB) on a weekly
basis for giving publicity.

ACTION TAKEN TO CHECK RISE IN PRICE OF ESSENTIAL


COMMODITIES
In the context of unprecedented rise in prices of some essential
commodities, there had been wide spread concern from various
corners for taking immediate steps to mitigate the rising trend of
prices of essential commodities. Representations from the Chief
Ministers of Punjab and Delhi and also from the Govt. of Andhra
Pradesh, Rajasthan and Maharashtra were received for restoration of
powers under the Essential Commodities Act, 1955 for undertaking
dehoarding operations in view of the assumption that there is
speculative holding back of stocks particularly of wheat and pulses in
anticipation of further rise in prices. Central Govt. has already taken a
number of steps to control the price rise in essential commodities. The
Govt further reviewed the situation and it was decided with the
approval of the Cabinet to keep in abeyance some provisions in the
central order dated 15.02.2002 for a period of six months with respect
to wheat and pulses (whole and split), so as to tackle the crisis on
availability and prices of these commodities37.
Accordingly, the Central Govt. issued a Central Order No. 1373(E)
dated 29.08.2006 by virtue of which the words or expressions made
in respect of purchase, movement, sale, supply, distribution or storage
for sale in the “Removal of (Licensing requirements, Stock limits and
Movement Restrictions) on Specified Foodstuffs Order, 2002” notified
on 15.02.200238 have been kept in abeyance for commodities namely
wheat and pulses for a period of six months from the date of issue of
the order or further order, which ever is earlier. This order however
would not affect the transport, distribution or disposal of wheat and
pulses (whole or split) to places outside the State, nor shall it be
applicable to import of these commodities. The Order of 29.08.2006
was initially in force for a period of 6 months, which was extended
thrice for a period of 6 months each by Central Notification dated
27.02.2007,31.8.2007, 28.02.200839. The same was again extended
upto 30.04.2009 vide Central Notification dated 27.08.2008. To enable
the State Governments/UT Administrations to continue to take
37
“Chief Ministers' conference reviews prices of essential commodities; core group
set up on agriculture & food matters”,
http://www.orissadiary.com/ShowBussinessNews.asp?id=16645, accessed on 5th April
2010.
38
fcamin.nic.in/annual%20report/ar_2007-08/ch_4.pdf
39
Ibid.
effective action for undertaking de-hoarding operations under the
Essential Commodities Act,1955, the price situation was further
reviewed by the Government and it was decided with the approval of
the Cabinet to further impose similar restrictions by keeping in
abeyance some provisions of the Central Order dated 15.02.2002 for a
period of one year with respect to edible oils edible oilseeds and rice,
so as to tackle the rising trend of prices as well as availability of these
commodities to the common people. However, it was also decided
that there shall not be any restriction on the inter-state movement of
these items, and that imports of these items would also be kept out of
the purview of any controls by the State Governments40.
An Order dated 7th April 2008 was published in Gazette of India to this
effect. Further it was decided by the Cabinet in its meeting on
21.08.2008 that similar restriction may be imposed by keeping in
abeyance some provisions of the Central Order dated 15.02.2002 for a
period upto 30.04.2009 with respect to Paddy, so as to tackle the rising
trend of prices as well as availability of these commodities to the
common people. An Order dated 27.08.2008 was published in Gazette
of India to this effect. The price situation was again reviewed by the
Government and it has been decided with the approval of the Cabinet
to further relax restrictions and to keep in abeyance some provisions of
the Central Order dated 15.02.2002 for period of four months from the
date of publication of Order with respect to Sugar so as to tackle the
availability and prices of this commodity. Accordingly, an Order
No.S.O.649 (E) dated 09.03.2009 has been published in Gazette of
India to this effect41.
The Cabinet has further taken following decision in its meeting held on
30.03.200942 (i)- Removal of Wheat from the list of commodities on

40
Id.
41
dcmsme.gov.in/publications/circulars/649E.pdf
42
www.pib.nic.in/release/release.asp?relid=49252&kwd=
which orders relating to fixation of stock holding limits have been
imposed by keeping in abeyance provisions of Central Order dated
15.02.2002, (ii)- Extension of validity of Central Notification dated
29.08.2006 in respect of Pulses and Paddy beyond 30.04.2009 (upto
30.09.2009) and (iii) in respect of Edible Oils, Edible Oilseeds and Rice
beyond 06.04.2009 (upto 30.09.2009). These Notifications have been
notified in the Gazette of India vide S.O.880(E) dated 30.03.2009,
S.O.905 (E) dated 02.04.2009 and S.O.906 (E) dated 02.04.200943.
These Orders have permitted State/UT Governments to fix stock limits
in respect of sugar, pulses, paddy, edible oils, edible oilseeds and rice.
So far as implementation of these orders is concerned it is mentioned
that only 18 State Governments/UTs have either issued stock limits for
all the five items or wheat and pulses only or have issued only
licensing requirements/ stock declaration (of these 18, 13 States/UTs
have actually issued stock limit Orders/ in the process of issuing. 5
States/UTs have issued licensing requirements/stock declarations). In
pursuance to the above Orders all State Governments/UTs were
requested to implement this order by issuing either a fresh control
order or reviving the old control order for fixing stock limits for various
categories of dealers such as millers/producers, wholesalers and
retailers in respect of wheat and pulses. States/UTs have also been
empowered to take effective action exercising the powers vested with /
delegated to them under the Essential Commodities Act, 1955 to bring
out hoarded stock of these items in the open market to ensure their
availability to the common people at reasonable prices44.

43
fcamin.nic.in/annual%20report/annualreport_eng_2008-09.pdf
44
Ibid.
5.THE PREVENTION OF BLACKMARKETING AND
MAINTENENCE OF SUPPLIES OF ESSENTIAL
COMMODITIES ACT, 1980

The Prevention of Black marketing and Maintenance of Supplies of the


Essential Commodities Ordinance, 1979 was promulgated on the 5th
October, 1979 to deal effectively with malpractices like black
marketing, boarding, profiteering, and to arrest the unjustified rise in
prices of essential commodities by providing for the preventive
detention of person likely to indulge in such practices. Although the
Essential Commodities Act, 1955 made comprehensive provisions for
the regulation of production, supply, distribution, prices and trade and
commerce in commodities declared essential under the Act and
although the penal provisions in the Act were made more stringent in
accordance with the recommendations of the Law Commission in their
Forty –Seventh Report, it was found not adequate to deal with the
situation45.
The Ordinance recognized preventive detention as a necessary evil
and accordingly sought to provide for various safeguards to avoid
scope for possible abuse of powers thereunder. The ground on which a
person could be detained under the Ordinance was defined
specifically46. It provided that an order directing the detention of a
person could be made thereunder only with a view to preventing such
person from acting in any prejudicial manner prejudicial to the
maintenance of supplies of commodities essential to the community
and it also defined the expression "acting in any manner prejudicial to
the maintenance of supplies of commodities essential to the

45
47th Law Commission Report, lawcommissionofindia.nic.in/1-50/Report48.pdf
46
http://www.lawyersclubindia.com/section/SHORT-TITLE-EXTENT-AND-
COMMENCEMENT/27518
community"47.
The Ordinance made provisions to ensure that the composition of the
Advisory Boards thereunder was in accordance with the amendments
proposed to Article 22 of the Constitution by section 3 of the
Constitution (Forty -Fourth Amendment) Act, 197848. It also made the
necessary provisions for ensuring, in accordance with the said
amendments, that a person is not detained for a period longer than
two months without the approval of an Advisory Board. Unlike the
earlier laws as to preventive detention, the Ordinance limited the
maximum period of detention to six months.
Section 9 of the Prevention of Black marketing and Maintenance of
Supplies of Essential Commodities Act, 1980, provides for the
construction of Advisory Boards by the Central Government and each
State Government. Under sub-sections (2) and (3) of this section/the
constitution of every Advisory Board has to be in accordance with the
recommendations of the Chief Justice of the appropriate High Court.
'The Chairman of an Advisory Board has to be a Judge of an
appropriate High Court and the other members shall be serving or
retired Judges of any High Court49.
Under section 7 of the Prevention of Black marketing and Maintenance
of Supplies of Essential Commodities Act, 1980, action against a

47
THE PREVENTION OF BLACK MARKETING AND MAINTENANCE OF SUPPLIES OF
ESSENTIAL COMMODITIES ACT, 1980,
http://www.karmayog.org/govtactsschemes/govtactsschemes_2369.htm
48
THE CONSTITUTION (FORTY-SEVENTH AMENDMENT),
http://india.gov.in/govt/documents/amendment/amend47.htm
49
S.9. Constitution of Advisory Boards:
(1) The Central Government and each State Government shall, whenever necessary,
constitute one or more Advisory Boards for the purpose of this Act.
(2) Every such Board shall consist of three persons who are, or have been, or are
qualified to be appointed as Judge of a High Court, and such persons shall be
appointed by the appropriate Government.
(3) The appropriate Government shall appoint one of the members of the Advisory
Board who is, or has been, a Judge of a High Court, to be its chairman, and it the case
of a Union territory the appointment to the Advisory Board of any person who is a
Judge of the High Court of a State shall be with the previous approval of the State
Government concerned.
person who has absconded or is concealing himself with a view to
avoiding the execution of a detention order can be initiated only by the
appropriate Government. This leads to delay in cases where the order
of detention is made by a District Magistrate or a Commissioner of
Police, referred to in section 3(2) of the Act. Under the corresponding
provisions in the National Security Act, 1980(vide section 7thereof),
power is conferred on the officers empowered to
Order detention to take action against absconding persons In that
context and keeping in view the need for expeditious action against
absconding persons, it is proposed to amend section 7 of the
Prevention of Blackmarketing and Maintenance of Supplies of Essential
Commodities Act, 1980, so as to enable officers referred to in section
3(2)of that Act also to exercise the powers in relation to absconding
persons.
The Prevention of Black-marketing and Maintenance of Supplies of
Essential Commodities Act, 1980 is being implemented by the State
Governments/UT Administrations for the prevention of unethical trade
practices like hoarding and black-marketing etc. The Act empowers the
Central and State Governments to detain persons whose activities are
found to be prejudicial to the maintenance of supplies of commodities
essential to the community. Detentions are made by the States/UTs in
selective cases to prevent hoarding and black-marketing of the
essential commodities. The State Governments made detention orders
in 162 cases during the period from 01.01.2008 to 31.12.2008. The
Central Government and the State Governments also have the power
to modify or revoke the detention orders. The representations made by
or on behalf of the persons ordered for detention are considered and
decided by the Central Government. 57 such representations were
considered and decided by the Central Government during the period
from 01.01.2008 to 31.12.2008.
6.MAJOR AMENDMENTS TO THE ESSENTIAL
COMMODITIES ACT

The Essential Commodities Act, 1955 provides for the control of the
production, supply and distribution of essential commodities. Powers to
issue Control Orders under this Act have been delegated by the Central
Government to the State Governments. Exercising powers delegated
under the Act, the State Government/UT Administrations have issued
several Control Orders to regulate various aspects of trading in various
essential commodities.
In the context of liberalization of the economy and the changed
situation, particularly with regard to the relatively more comfortable
food situation, it has been felt that restrictions such as licensing of
dealers, limits on stock and control on movement are no longer
required and only hamper the growth of the agricultural sector and
promotion of food processing industries.

6.1 2005 AMENDMENT TO PROMOTE OPERATION OF


MARKET FORCES
The need to relax various controls on agricultural products including
controls on inter-State Movement of such products was discussed in
the Conference of Chief Ministers held on May 21, 2001 and thereafter
in the Standing Committee of some Union Ministers and Chief Ministers
which was set up pursuant to the recommendations made in the
Conference of Chief Ministers. The Standing Committee has suggested
that the Essential Commodities Act, 1955 may continue as umbrella
legislation for the Centre and the States to use when needed, but a
progressive dismantling of controls and restrictions was also required.
In pursuance of the said decision, various controls under the said Act
pertaining to licensing, stock limits and movement restrictions have
already been dispensed with in respect of agricultural products vide
notifications dated February 15, 2002 and June 16, 200350.
The list of Essential Commodities has been reviewed from time to time
with reference to the production and supply of these commodities and
in the light of economic liberalization. It is now universally accepted
that all unnecessary and redundant restrictions, which distort and
impede operation to market forces should be removed. Such
restrictions neither benefit the producer nor the consumer. In case of
agricultural commodities, such restrictions/regulations have been
adversely affecting the interest of the farmers without any benefit
flowing to the consumers. Moreover, the goal of a common Indian
market, particularly for agricultural commodities, and promotion of
agro-exports and agro processing industries will be difficult to achieve
unless and until trade and commerce is freed from such unnecessary
and discretionary restrictions51.
Accordingly, Cabinet approved the proposal of Department of
Consumer Affairs for introduction of the Essential Commodities
(Amendment) Bill, 2005 in the Parliament seeking its approval to
delete all the items listed in clause (a) of Section 2 of the said Act and
simultaneously to retain only those commodities52 recommended for
continuance by the concerned Ministries as essential commodities
which would be specified in the Schedule to the Act.
It is also proposed to give powers to the central government to add,
remove or modify any essential commodity in that schedule. This
power will be exercised by the central government in the public
interest when there is a scarcity or non-availability of the commodity in
a situation like war, natural calamities, disruption or threat of
50
“Amendment To Essential Commodities Act To Promote Operation Of Market
Forces”, 28 December, 2005, http://www.indlaw.com/guest/DisplayNews.aspx?
980D6A25-8AED-4685-A739-10F634DB2A5C
51
Ibid.
52
Namely, (i) drugs; (ii) foodstuffs including edible oilseeds and oils; (iii) fertilizer,
whether inorganic, organic or mixed, (iv) petroleum and petroleum products; (v) hank
yarn made wholly from cotton; (vi) raw jute and jute textile; and (vii) seeds of food
crops and seeds of fruits and vegetables, seeds of cattle fodder, and jute seeds
disruption or supply of such essential commodity which can not be
tackled through normal trade channels requiring Government's
intervention under the said Act53.
The central government will also specify the reasons in the notified
orders while adding/removing any commodity to/from the said
Schedule and lay every notified order made under the said provision
before both Houses of Parliament.

6.2.SUGAR INDUSTRY
Government has been following a policy of partial control and dual
pricing for sugar. Under this policy, a certain percentage of sugar
produced by sugar factories is requisitioned by the Government as
compulsory levy at a price fixed by Government in every sugar season.
That levy sugar is distributed under the Public Distribution System
(PDS). The non-levy, free sale sugar is allowed to be sold as per the
quantity released by the Government under the free sale sugar release
mechanism.
Sugar and sugarcane are essential commodities under the Essential
Commodities Act, 1955. Under the system of partial control on sugar, a
part of the sugar produced by sugar mills is requisitioned as levy sugar
and the balance is allowed to be sold as non-levy (free sale) sugar in
the open market. While the market forces determine price of non-levy
sugar, the price of levy sugar is determined by the Central Government
under the provisions of sub-section (3C) of section 3 of the Essential
Commodities Act, 1955, having regard to certain factors54.

53
“Amendment To Essential Commodities Act To Promote Operation Of Market
Forces”, 28 December, 2005, http://www.indlaw.com/guest/DisplayNews.aspx?
980D6A25-8AED-4685-A739-10F634DB2A5C
54
a) The minimum price, if any, fixed for sugarcane by the Central Government;
(b) The manufacturing cost of sugar;
(c) The duty or tax, if any, paid or payable thereon; and
(d) The securing of a reasonable return on the capital employed in the business of
manufacturing of sugar.
A new clause 5A was inserted in the Sugarcane (Control) Order, 1966,
with effect from the 1st October, 1974, providing for additional cane
price to the cane growers as fifty per cent. share of the excess
realization from sale of sugar after the working results of the sugar
factory become known.
The methodology regarding determination of price of levy sugar by the
Central Government has been under continuous litigation in various
courts. The Hon'ble Supreme Court in its two judgments55 on levy sugar
prices delivered on the 22nd September, 1993 directed the Central
Government to amend the notifications taking into account the liability
of the manufacturers under clause 5A of the Sugarcane (Control)
Order, 1966 as regards cane price and re-fix the price of levy sugar for
the years 1974-75 to 1979-80 having regard to the factors mentioned
in S.3(3C) of the Essential Commodities Act, 1955.
The Hon'ble Supreme Court also in its Order dated the 28th January,
1997 clarified that the liability of additional price of sugarcane under
clause 5A of the Sugarcane (Control) Order, 1966 would get reflected
in factors (a) or (b) or both of S.3(3C). The Hon'ble Supreme Court
further held that mopping up of extra realization is an element of
factor (d) of sub-section (3C) of section 3 of the Essential Commodities
Act, 1955.
The SC, in Modi Industries Ltd. and Anr. vs. Union of India and Ors.56
upheld the determination of price of levy sugar in respect of the sugar
season 1982-1983 by taking note of the statement made by the
Central Government in its additional affidavit that while determining
the price of levy sugar regard had been taken only to the minimum
cane price as spoken to in section 3(3C)(a) of the Essential
Commodities Act, 1955 and the additional cane price payable under
clause 5A of the Sugarcane (Control) Order, 1966 had not been taken
55
C.A. Nos. 122-123 of 1981 (Malaprabha-I) and on the 28th January, 1997 also in
C.A. Nos. 122-123 of 1981 (Malaprabha-II)
56
[T.C. (Civil) No.9/1990] on the 20th February, 1996
into account and that also there had been no mopping up of excess
realisation on free sale sugar while fixing the price of levy sugar for
the season 1982-83.
The Hon'ble Supreme Court was satisfied that this matter is not
covered by the decision of the Supreme Court in Shri Malaprabha Co-
operative Sugar Factory Ltd. vs. Union of India and Another57.
Subsequently, in the case of Bharat Sugar Mills Ltd. and Another vs.
UoI and Others58 the Hon'ble Supreme Court held that the price of levy
sugar fixed for the sugar season 1982-83 was not covered by the
decision of the Supreme Court in Shri Malaprabha Co-operative Sugar
Factory Ltd. vs. UoI and that the decision in the Modi Industries case59
is directly applicable to the set of transferred cases which also deal
with the sugar price fixed for the season 1982-83. In UoI and Ors vs.
Triveni Engineering Works Ltd. and Others60 SCagain held that the
price of levy sugar for the year 1982-83 has already been upheld in its
earlier three decisions. The Central Government has consistently
followed the methodology upheld by these judgments of the Supreme
Court for determination of prices of levy sugar from the year 1980-81
onwards.
The Government has taken the steps for decontrol of the sugar
industry. Accordingly, the compulsory levy obligation of the sugar
factories was reduced from 40% to 30% w.e.f. January 1, 2000. With
effect from February 1, 2001, the compulsory levy obligation has been
further reduced to 15%. The levy obligation now stands at 10% of the
production w.e.f. March 1, 2002. In order to safeguard the interests of
sugarcane growers, the producers of sugar and the general public, to
stabilize the open market price of sugar and to obviate intervention in
the ‘regulated release’ mechanism, the Essential Commodities Act,
57
1994 (1) SCC 648
58
[T.C.(Civil) Nos.15-17/1993]
59
T.C. (Civil) No. 9 of 1990]
60
[(1999(9) SCC 244]
1955 was amended in June, 2003. “The Essential Commodities
(Amendment) Act, 2003,” incorporates the provisions of Clause 4 & 5
of the Sugar (Control) Order, 1966 in the Essential Commodities Act,
1955 through insertion of Clause 3D & 3E. As per this amended Act,
no producer, importer or exporter of sugar shall sell or otherwise
dispose of or deliver any kind of sugar except under and in accordance
with the direction issued by the Government61.

6.2.1. 2009 AMENDMENT TO THE ESSENTIAL


COMMODITIES ACT
The SC in Mahalakshmi Sugar Mills Company Ltd. and Anr vs. UoI and
Ors62 has considered the scope and ambit of sub-section (3C) of section
3 of the Essential Commodities Act, 1955 and construed that both the
additional price paid to the cane growers in terms of clause 5A of the
Sugarcane (Control) Order, 1966 made under the said Act and the
State Advised Price (SAP) or actual price of sugarcane paid should be
factored in the computation of price of levy sugar63.
The SC also ordered for refixation of prices of levy sugar for the sugar
years 1983-84 and 1984-85. Following the issues settled in the
Mahalakshmi Sugar Mills Company Ltd. Case, the Hon'ble SC in a later
Order upheld the judgment of the Delhi HC in the case of Saraswati
Industrial Syndicate64 directing the Central Government to re-fix the
prices of levy sugar for the sugar years 1980-81 to 2000 - 2001(except
for the year 1982-83). Thus, due to the ambiguities in the existing law
pertaining to determination of price of levy sugar, there have been
conflicting decisions as to the factors to be taken into consideration in
determining the price of levy sugar. It, therefore, became absolutely
61
http://fcamin.nic.in/dfpd/EventDetails.asp?
EventId=105&Section=Annual+Report&ParentID=0&child_continue=1&child_check=
0
62
[2008 (6) Scale 275]
63
Policy Watch, “Essential Commodities (Amendment and Validation) Act, 2009”,
http://www.indlaw.com/display.aspx?4801
64
LPA No. 1053/2007
necessary to amend the Essential Commodities Act, 1955 to remove
the defects and ambiguities in the law pertaining to determination of
price of levy sugar thereby clarifying the expressions of cost
components of levy sugar mentioned in S. 3(3C) EC Act, 1955. Further,
since the refixation of prices of levy sugar for the years since 1980-81
would have led to controversy and confusion regarding the benefit of
such refixation to various sugar mills with potential for huge
unbudgeted financial burden on the Central Exchequer, it also became
necessary to validate the actions of the Central Government taken
since the 1st October, 197465 under the orders issued for determination
of price of levy sugar under sub-section (3C) of section 3 of the
Essential Commodities Act, 1955. Having regard to the above, it is
considered necessary to replace the concept of 'Minimum Price' of
sugarcane with 'Fair and Remunerative Price' (FRP) of sugarcane by
giving a reasonable margin to the farmers of sugarcane on account of
'risk' and 'profit' and, therefore, section 3 of the Essential Commodities
Act, 1955 had to be amended to provide in clause (a) of sub-section
(3C) thereof, the fair and remunerative price . Fixation of Fair and
Remunerative Price not only meant giving higher price to the farmers
for their sugarcane than the statutory minimum price fixed previously,
but also ensured that a fair and remunerative price for sugarcane is
fixed by the Central Government. The sugar season 2009-2010 had
already commenced on the 1st October, 2009 and, therefore, to
achieve the above purposes immediately, the Essential Commodities
(Amendment and Validation) Ordinance, 2009 (Ord. 9 of 2009) was
promulgated by the President on the 21st October, 2009.

65
That is the date of insertion of clause 5A in the Sugarcane (Control) Order, 1966.
CONCLUSION AND SUGGESTIONS
Increased production and rising productivity makes the proper
management of the food economy more critical then ever before. Our
policy has to be transformed to deal with surpluses rather than only
shortages. The researcher proposes, therefore, to give an enlarged role
to the State Governments in both procurement and distribution of
foodgrains for PDS in their respective States. Instead of providing
subsidized foodgrains, financial assistance will be provided to the State
Governments to enable them to procure and distribute foodgrains to
BPL families at subsidized rates. FCI will continue to procure foodgrains
for maintaining food security reserves and for such State Governments
who will assign it this task on their behalf.
The agricultural sector continues to be constrained by the existence of
a number of inhibiting controls and regulations. In the changed present
situation undue restrictions on movement and stocking of foodgrains
and agricultural produce is acting as a disincentive to farmers.
Government, therefore, proposes to review the operation of the EC Act,
1955, and remove many of the restrictions that have been imposed on
the free inter- State movement of foodgrains and agricultural produce
and also on the storage and stocking of such commodities. It will also
review the list of commodities declared as essential under the said Act
and bring down their number to the minimum required. The researcher
believes that in the present scenario where sky high inflation is
effecting an unprecedented price rise in the economy and also where
despite surplus production of food grains the failure of the PDS has
resulted in the non-availability of the food grains to the public, the
repeal of the Essential Commodities Act is not a solution.
Effectively the Govt has to seek a tight-rope balance between allowing
for liberal policies of trade and commerce and the right to food of the
masses. Thus, amendments as well as effective implementation of the
present Essential Commodities Act is called for rather than its repeal.
The recent Chief Ministers’ meet to discuss the issue of price rise in
India has resulted in the decision that a Core Group has to be set up
which provides recommendations on the following: increasing
agricultural production reduction the gap between farmgate prices and
retail prices, better implementation of and amendment to E.C. Act, etc.
Thus, it is important that the EC At remains in place for ensuring
equitable justice for all sections of the society.
BIBLIOGRAPHY

BOOKS REFFERED:
M.P. Jain, Indian Law Institute Study No. 9, “Administrative Process
Under the Essential Commodities Act, 1955, 1964, United India Press,
New Delhi.

ARTICLES:
Kritika Narula, “ONE COUNTRY ONE MARKET: A MYTH”, Working Paper
No 221, 2009, Centre for Civil Society
Rajendra Bahadur Shrestha, “SUPPLY MANAGEMENT OF ESSENTIAL
COMMODITIES”, Policy Paper 6, ECONOMIC POLICY NETWORK
H. C. L. Merillat, “Administrative Process under the [Indian] Essential
Commodities Act by M. P. Jain”, American Journal of Comparative Law,
Vol. 13, No. 4 (Autumn, 1964), pp. 648-650, American Society of
Comparative Law, http://www.jstor.org/stable/838442

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