Confiscation under Section 6-A of the Essential Commodities Act requires an underlying Section 3 order.

The petitioners, an exporting company, its authorised representative and its director, were engaged in exporting seeds and grains and held valid import-export certificates and business licences.

They purchased safflower seeds, sesame seeds and rice from the open market and stored them in their godown for export according to market and delivery requirements.

On 8 March 2013, the authorities seized the commodities, and an FIR was registered by Turbhe Police Station on 9 March 2013, alleging violation of the Essential Commodities Act, 1955 (“EC Act”).

On 17 May 2013, Respondent No. 2 passed a confiscation order under Section 6-A of the EC Act. The petitioners filed an appeal under Section 6-C before the Sessions Court.

The High Court also noted that an earlier order dated 20 April 2010 had stayed further proceedings in similar matters involving commodities intended for export, but that order was not disclosed by the respondents and the seizure nevertheless proceeded.

Whether the seizure and confiscation of the petitioners’ export-oriented commodities were legally sustainable in the absence of a demonstrated contravention of a specific order issued under Section 3 of the EC Act.

Whether the petitioners were required to obtain a licence under the Maharashtra Scheduled Commodities Wholesalers Licensing Order, 1998 for storing commodities intended for export.

Whether the FIR disclosed the necessary factual basis for prosecuting the petitioners under Sections 7 and 10 of the EC Act.

Whether the respondents’ seizure and confiscation proceedings were arbitrary and contrary to the High Court’s earlier stay order dated 20 April 2010.

The Court applied Section 3 of the Essential Commodities Act, 1955, under which offences arise only from contravention of a valid order or direction issued under that provision; consequently, action under Sections 6-A and 7 must be founded on an identifiable and applicable Section 3 order.

Section 6-A governs confiscation of essential commodities seized for alleged contravention, while Section 6-C provides the appellate remedy against confiscation.

The Court also considered the Maharashtra Scheduled Commodities Wholesalers Licensing Order, 1998, the Central Government’s licensing and movement-control orders, and the export-policy provision stating that export stocks should not ordinarily be seized so as to disrupt export activity and should be released within seven days in exceptional cases.

The Court further relied on the binding effect of its earlier order dated 20 April 2010 staying further proceedings in similar matters concerning commodities intended for export.

The Court found that the petitioners’ status as exporters, their valid import-export documentation and the export purpose of the commodities were neither disproved nor seriously contested.

The FIR contained no allegation that the petitioners had stored the commodities with an intention to hoard them, raise market prices or sell them within Maharashtra, nor did it allege that their storage caused any increase in prices.

More importantly, the confiscation order merely stated that Section 3 had been violated without identifying, annexing or relying upon any specific order issued under Section 3.

In the Court’s view, Section 6-A confiscation and Section 7 prosecution could not stand without establishing such an underlying statutory order and its contravention.

The Court also treated the respondents’ failure to decide the petitioners’ 2010 licence application as significant.

If a licence was necessary, the authorities were required either to call upon the petitioners to cure any defects or to grant or reject the application; they could not leave it undecided and subsequently seize the commodities on the basis of an alleged licensing violation.

The respondents had additionally failed to explain why the earlier stay order had been ignored, making the seizure and subsequent proceedings arbitrary and illegal.

The seizure, confiscation proceedings and consequential criminal action were therefore arbitrary, illegal and unwarranted.

The writ petition was allowed in terms of prayer clause (b), resulting in the grant of the reliefs sought by the petitioners, including setting aside the impugned seizure and quashing the FIR.