IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD (Special Original Jurisdiction) THURSDAY, THE SIXTEENTH DAY OF JULY TWO THOUSAND AND NINE PRESENT THE HON'BLE SRI JUSTICE C.V.RAMULU WRIT PETITION NO : 14516 of 2008 Between: Poonem Saraiah S/o. Ramaiah R/o. 4-8/3, Godown Street, Lakshmidevipalli, Kothagudem Taluk, Khammam District. ..... PETITIONER AND 1 Government of Andhra Pradesh, rep. by its Principal Secretary, Food, Civil Supplies and Consumer Affairs (CS-I) Department, Hyderabad. 2 Revenue Divisional Officer, Kothagudem, Khammam District. 3 Joint Collector, Khammam, Khammam District. 4 Deputy Tahsildar (CS), Kothagudem, Khammam District. 5 G. Narsing Rao S/o. Sattaiah R/o.H.No.3-1-3, Hanuman Basti, Kothagudem, Khammam District. .....RESPONDENT(S) Petition under Article 226 of the constitution of India praying that in the circumstances stated in the Affidavit filed herein the High Court will be pleased to issue a writ, order or direction more in the nature of Writ of Mandamus declaring the action of the Revenue Divisional Officer, Kothagudem, who is the Respondent No.2 herein, in keeping the petitioner's authorisation to run the Fair Price bearing No.35022 of Lakshmidevipalli being part of show cause notice issued in his Rc.No.J/773/2008, dated 01.05.2008 as illegal, arbitrary, void and also opposed to principles of natural justice and fair play after striking down the provisions contained in clause 17 (a), (b) and (c) of A.P. State Public Distribution System (Control) Order, 2001 as without jurisdiction for want of legislative competence of the State Government. Counsel for the Petitioner: MR.P.V.MAHESH Counsel for the Respondents: GP FOR CIVIL SUPPLIES The Court made the following : THE HON’BLE SRI JUSTICE C.V. RAMULU W.P. No. 14516 of 2008 O R D E R: This writ petition is filed seeking a Mandamus declaring the action of the Revenue Divisional Officer, Kothagudem – 2nd respondent herein, in keeping the petitioner’s authorization to run the Fair Price Shop bearing No.35022 of Lakshmidevipalli under suspension, being the part of show-cause notice issued in his Rc.No.J/773/2008 dated 1.5.2008 and the subsequent order of cancellation of authorization to run the Fair Price Shop issued by respondent No.2 in Rc.No.J/773/2008 dated 18.11.2008 as arbitrary, illegal and to strike down the provisions contained in Clause 17 (a), (b) and (c) of the A.P. State Public Distribution System (Control) Order, 2001 as without jurisdiction for want of legislative competence of the State Government. Alleging that excess stock was available in the Fair Price Shop No.35022 of the petitioner at Laxmidevipalli village, which was ready for diversion to black market and that several irregularities have been committed by the petitioner, vide proceedings dated 1.5.2008 the authorization of the petitioner was suspended and he was directed to show-cause as to why his authorization should not be cancelled besides forfeiting of Trade Deposit to the Government for the contraventions pointed out in the said order. It is the case of the petitioner that in the show-cause notice dated 1.5.2008 one Narsing Rao, who proclaims to be the Gumasta of the petitioner for running the Fair Price Shop No.35022 of Lakshmidevipalli, is shown to have been instrumental for mishandling the stocks of the said Fair Price Shop, but the said Narsing Rao was never engaged by the petitioner as Gumasta and he is nothing to do with the business of the petitioner. In fact, he has been doing rice business on behalf of certain ryots who are having rooms in the neighbourhood of petitioner’s Fair Price Shop. The stock that was shown to have been seized as excess stock is not the stock belonging to the petitioner. The petitioner was not even asked for production of records for verification. The so-called excess stock to an extent of 18 Quintals 64 kgs. was not seized from the petitioner’s shop or premises. On the other hand, it was seized from another room belonging to one Manchineella Venkateswarlu of Chetakonda. Respondent No.5 (Narsing Rao) is working as an agent of the said Manchineela Venkateswarlu and they are having grievance against the petitioner for possessing Fair Price Shop as they are non- tribals and the petitioner belongs to Schedule Tribe community and the Fair Price Shop is situated wholly in the Scheduled Area. Due to that grievance, the said Narsing Rao did not give proper reply when questioned by the Deputy Tahsildar and, therefore, the Deputy Tahsildar concluded that he was the Gumasta of petitioner and that the rice found in his possession belongs to the petitioner. Basing upon the statement of Hamalis who are illiterate and without verification or enquiry, the Deputy Tahsildar gave report against the petitioner to the Revenue Divisional Officer and the Revenue Divisional Officer, without any further verification and without seeking explanation from him, has chosen to suspend the authorization of the petitioner pending enquiry, which is arbitrary and illegal. It is the further case of the petitioner that subsequently he has received another show-cause notice requiring him to explain as to why confiscation proceedings should not be passed. After receiving the suspension order pending enquiry, he submitted his explanation and filed an appeal before the Joint Collector-3rd respondent. Though the Joint Collector has power to stay the operation of the impugned suspension order, he did not choose to exercise such power and the matter is still pending. The petitioner further questioned the validity of the orders issued by the State Government under the A.P. State Public Distribution System (Control) Order, 2001 on various grounds. It is stated that the order passed by the 2nd respondent suspending the authorization pending enquiry while issuing show-cause notice and requiring the petitioner to explain why his authorization should not be cancelled is without any power and authority. The suspension contemplated under Clause 5(iv) is only a suspension after enquiry by way of punishment for having contravened the conditions of licence or the provisions of the Act or the orders issued thereunder. The incidental power that is required for any authority to pass a final order is not available to an authority granting the authorization, as the authorization is in terms of the authority conferred upon such designated authority. While passing the Control Order, 2001 the State Government has acted upon beyond the powers of re-delegation made by the Central Government by way of a notified Order issued in GSR 630(E) dated 31.8.2001. Therefore, the whole action initiated is contrary to law. The very Control Order, 2001 is bound to be treated as outside the purview of the re-delegated power conferred upon the State Government. The Control Order issued by the Central Government in exercise of powers conferred upon it under Section 3 of the Essential Commodities Act is still in force throughout the country and the said Control Order issued by the Central Government dated 31.8.2001 is enforceable and binding and the State Government has no power or authority or jurisdiction to issue the impugned Control Order inconsistent with the purpose sought to be achieved under the Control Order, 2001 of the Central Government. The State Government being a delegatee of Central Government, its powers are only those which are delegated by the Central Government under Section 5 of the Essential Commodities Act. The scope of delegated power does not permit the State Government to act contrary to the power exercised by the Central Government already. In the instant case, Clause 17 of the Control Order speaks of penalties and imposition of such penalties by State Government or its authorities inconsistent with the scope of prosecution referred in Section 7 of the Act. Therefore, the provisions under Clause 17 are bound to be treated as illegal and without power or jurisdiction. Creation of any type of penalty is not available to the State Government in the light of the delegated powers on specified and enumerated matters mentioned in GSR 630 dated 31.8.2001. The provisions of the Control Order made by the Central Government are bound to be followed and it is not competent for the State Government to substitute the Control Order made by the Central Government. Respondents 1 to 4 have filed counter affidavit denying the allegations made by the petitioner. It is stated in the counter that on the information received on 25.4.2008 at about 10.15 a.m. that PDS rice is being refilled into other bags with an intention to divert to black market, the 4th respondent – Deputy Tahsildar proceeded to the shop of the petitioner and found that PDS rice is being refilled into other plastic bags by one Narsing Rao, who was working as Gumastha in the said Fair Price Shop. The 4th respondent further noticed in the room that 33 tikkies of PDS rice bags, each containing 50 kgs. are available with FCI gunny bag marks with machine stitched and also loose rice of about 20 kgs. When 4th respondent asked the Gumasta about the said refilling, he did not give any reply. Thereafter, 4th respondent had called upon the petitioner and conducted panchanama in the presence of panchas and petitioner and seized 74 tikkies and 30 kgs. of PDS rice. He further recorded the statement of four hamalies who refilled the PDS rice into other plastic bags and submitted his report to 2nd respondent-R.D.O. Kothagudem. The 2nd respondent, after examining the entire material placed before him, satisfied that the Fair Price Shop dealer has committed irregularities in distribution of essential commodities apart from collecting coupons in advance. Accordingly, in exercise of the powers under Clause 4 of the Control Order, 2001, suspended the authorization of the petitioner with immediate effect and directed the petitioner to show cause as to why his authorization should not be cancelled besides forfeiting the Trade Deposit to the Government for the contraventions committed by him. The petitioner did not submit any explanation within the stipulated time. Meanwhile the Joint Collector & Additional District Magistrate, Khammam vide proceedings dated 13.5.2008 issued show cause notice under Section 6- B of the Act calling upon the petitioner to submit his explanation against the proposed grounds of confiscation of the seized goods. It is further stated in the counter that Clause 4 of the Control Order, 2001 empowers the appointing authority to suspend the licence at any time in the public interest. The 2nd respondent has jurisdiction to suspend the authorization of the dealer. Clause 20 provides that any person aggrieved by the order passed by the appointing authority under Clause 5 may prefer appeal within 30 days from the date of receipt of the order. Sofar as the contention that while passing Control Order, 2001 the State Government has acted beyond the powers of re-delegation made by the Central Government and that the penalties provided in Clause 17 are bound to be treated as outside the purview of re-delegation and contrary to Section 3(1) of the Essential Commodities Act, it is stated that GSR 630(E) dated 31.8.2001, under which the Public Distribution System (Control)Order 2001 was issued by the Union Government empowering the State Governments to exercise necessary checks to ensure that full quantity lifted by them is reached their godowns and in turn the fair price shops. Similarly, under Annex 4(10) of the Central Order, 2001 the State Government shall ensure that stocks of essential commodities under the Public Distribution System, as issued from the FCI godowns, are not replaced by stocks of inferior quality during storage, transit or any other stage till delivery to the ration card holder. In consonance with the said Control Order, the State Government incorporated Clause 17 prescribing penalties for possessing cards, making false entries or diverting stock. These penalties are well within the power conferred under the Central Control Order and they have been prescribed to ensure full compliance of guidelines issued in Annex to the Central Public Distribution Control Order, 2001. The object of prescribing penalties is to protect Public Distribution System and prevent the dealers from diverting the stocks. This exercise of penalty is well within the power delegated under the Central Control Order as the Central Control Order no way prevents or restricts the State Government to formulate its own mechanism to deal with the erred Fair Price Shop dealers. Section 3(1) of the Act contemplates that if the Central Government is of the opinion that I is necessary or expedient so to do for maintaining or increasing supplies of any essential commodities or for securing their equitable distribution and availability at fair prices, it may by order, provide for regulating or prohibiting the production, supply and distribution thereof and trade and commerce therein. The Essential Commodities Act, 1955 no way restricts or prevents either the Union Government or a State Government for prescribing penalties. So long as those penalties serve the public interest, they cannot be faulted on vexatious and untenable grounds. Therefore, the penalties prescribed in Clause 17 in the State Control Order, 2001 are well within the powers of the State and in tune with the Central Control Order. Sofar as the contention of the petitioner that the Control Order, 2001 is one of the devices to implement the objective of the Act and it does not create any offence by itself as Section 7 of the Essential Commodities Act, 1955 itself provides penalties for contravention of the Control Order, 2001, it is stated that Section 7 provides penalties for contravention of any order made under Section 3(1) of the Essential Commodities Act, 1955. At the same time, while implementing the said Control Orders, the State Government is empowered to prescribe penalties to regulate public distribution system. The penalties prescribed under Section 7 are independent in nature, which no way affect or prevent the State Government to prescribe penalties as contemplated under Clause 17 of the State Control Order, 2001. In the instant case, the petitioner diverted the rice meant for public distribution by collecting coupons from the stake holders and acted in contravention of not only Central Control Order but also State Control Order and, therefore, the writ petition deserves to be dismissed. An additional counter affidavit is also filed by respondents 1 to 4 seeking to justify the action taken by them. It is further stated that no penalty has been imposed basing on Clauses 17(a), (b) & (c) of the A.P. State Public Distribution System Control Order, 2001 and, therefore, the petitioner cannot question the said provisions. It is also stated that the action was initiated as per the State Government Control Order and not as per the Central Public Distribution System Control Order, hence, the State Government is vested with the powers as per the A.P. State Public Distribution System Control Order, 2001 to impose penalty on erring Fair Price Shop dealers for the irregularities committed and noticed by the Inspecting Officers; that there was no violation of principles of natural justice and that the action taken against the petitioner is as per the A.P. Public Distribution System Control Order, 2001 promulgated by the State Government on the powers delegated under Section 3 of the Essential Commodities Act, 1955. Learned senior counsel Sri M.R.K. Chowdary, appearing for the petitioner, strenuously contended that under the impugned order a penalty is sought to be imposed under the State Control Orders which is inconsistent with the Central Control Order, 2001 and beyond the legislative power or the delegatory power under the Central Control Orders. The Central Government may delegate certain powers in favour of State Government but the State Control Order, 2001 is not in consonance with the Central Control Order. The State Control Order, 2001 is one of the devises to implement the object of the Act and it does not give power to create any offence. The offences are notified under Section 7 of the Essential Commodities Act. For the purpose of implementation of the Control Order the State Government is empowered to prescribe the penalties to regulate the public distribution system. But, at the same time, the State Control Order, prescribing penalties as contemplated under Clause 17, is beyond the powers of the State Government. The Control Order issued by the Central Government in exercise of the powers conferred by it under Section 3 is still in force throughout the country and the said Control Order issued by the Central Government dated 31.8.2001 is enforceable and binding and the State Government has no power or authority to issue the impugned Control Order inconsistent with the purpose sought to be achieved under the Control Order, 2001 of the Central Government. Being a delegatee of the Central Government, the powers of the State Government are only those which are delegated by the Central Government under Section 5 of the Essential Commodities Act. The scope of delegated power does not permit the State Government to act contrary to the power exercised by the Central Government already. In the instant case, Clause 17 of the Control Order speaks of penalties and imposition of such penalties by State Government or its authorities inconsistent with the scope of prosecution referred in Section 7 of the Act. Therefore, the provisions under Clause 17 are bound to be treated as illegal and without power or jurisdiction. Creation of any type of penalty is not available to the State Government in the light of the delegated powers on specified and enumerated matters mentioned in GSR 630 dated 31.8.2001. The provisions of the Control Order made by the Central Government are bound to be followed and it is not competent for the State Government to substitute the Control Order made by the Central Government. Learned counsel for the petitioner relied on the following decisions in support of his contentions: (1) D. Heeralal & Others v. The State[1], wherein it is held: . It is well settled that the Legislature is free to legislate to the extent of delegating powers in any manner it thinks fit to give effect to its intention and policy in enacting any law. 7. In re : Article 143, Constitution of India and Delhi Laws Act (1912) AIR 1951 SC 332. Saiyed Fazl Ali, J. observed on the subject of delegated legislation, thus: This form of legislation has become a present day necessity and it has come to stay... it is both inevitable and indispensable. The legislature has now to make so many laws that it has no time to devote to all the legislative details, and sometimes the subject on which it has to legislate is of such a technical nature that all it can do is to state the broad principles and leave the details to be worked out by those who are more familiar with the subject. The Courts have also held that the re-delegation provided under Section 5 of the Act is within the constitutional and legal competence of the Parliament. In Sudhanshu Bhushan Pal v. State of West Bengal, the Calcutta High Court considered the scope of Section 5 of the Act and held thus: This redelegation is also not unreasonable in the context. This further delegation under Section 5 of the Act is also controlled by a number of factors, viz., (1) it has to be notified by an order of the Central Government. (2) The matters and conditions under which such such-delegation has to be exercised by the Authorities specified in Section 5 are to be observed by the sub-delegate. Parliament's competence to pass such a law is unquestioned. Parliament can select not only the Central Government as an instrument to make the order but also can authorise the Central Government that such instrument may be inter alia a State Government. Besides, this delegation by the Central Government is not abdication of the responsibility under Section 3(1) of the Act because of the word 'also' in Section 5 of the Essential Commodities Act. In other words even where there is a delegation by the Central Government under Section 5 of the Act that delegation is concurrent with the responsibility which still remains with the Central Government under Section 3 of the Act. Therefore, if the sub-delegate in any way acts beyond or in conflict with the Central Government, the Central Government can certainly withdraw the delegation. That again is good enough control of the sub-delegation under Section 5 of the Essential Commodities Act. In Maram Ramachandraiah v. State, while upholding the validity of Section 5 of the Act the Court held that the Andhra Pradesh Sugar Dealers' Licencing Order, 1963 made by the State Government by virtue of the delegation of powers under Section 5 is also a valid one. In State of A.P. v. Potta Sanyasi, their Lordships of the Supreme Court considered the scope of delegation of power by the Central Government under Section 5, and held thus: Delegation under Section 5 is a general delegation and will inure in favour of exercise of power by the State Government with respect to commodities declared essential by the Central Government from time to time under Section 2(a)(xi) even subsequent to the order of delegation. 8. The above discussion shows that the delegation of power as provided under Section 5 has been upheld by the Courts. It, therefore, follows that the contention that the federal concept would be affected, has to be rejected. 9. It is next contended that the Control Order is contrary to Articles 20 and 21 of the Constitution inasmuch as the State Government or an officer is authorised "to create offences". We see no force in this submission. The penalties are provided in Section 7 of the Act itself. The State Government made the Control Order by virtue of the powers delegated by the Central Government under Section 5 and the the powers conferred under Section 3 of the Act. The Control Order is meant to ensure the availability of the essential commodities to the consumers which is the main object of the Act. It is Section 7 of the Act that makes any contravention of the control order made under Section 3, punishable. It can thus be seen that the control order is one of the devices, to implement the object of the Act and it does not create an offence by itself. It is the contravention of this order that is made punishable under the Act. These are all the contentions raised and the learned Counsel has not placed any decided cases before us in support of these contentions. (2) Tata Iron and Steel Company Ltd. v. The State of Kerala and Anr[2] wherein it is stated: “The petitioner's case has been presented before us with ability and learning by its learned Counsel, Shri T. K. Kochu Thommen. He raised three points :-- "(i) The whole power under Section 3 of the Act has been exercised by the Central Government in respect of Iron and steel to the extent it was deemed necessary by passing the Iron and Steel Control Order. The State Government has, therefore, no scope to make any regulation in respect of iron and steel and Ext. P-3 is as a whole illegal; (ii) Clauses 4 and 6 of Ext. P-3 relate to controlling of prices, which is a power under Clause (c) Section 3 (21 of the Act. This power is not delegated to the State Government by Ext. P-2; and therefore the above two clauses of Ext. E-3 are ultra vires of its powers; and (iii) The power under Clause (e) of Section 3 (2) of the Act is only to prohibit the withholding from sale of any essential commodity ordinarily kept for sale. Refusal to sell is different from withholding from sale. Therefore Clause (3) of Ext. P-3 in so far as it also prohibits refusal to sell is ultra vires of the powers conferred on the State Government," 4. The power of the State Government under Section 3 of the Act to the extent it has been delegated to it by the Central Government as per Ext. P-2 is concurrent with that of the Central Government. The power of the delegate can only be subject to the power of the principal. Section 5 of the Act has expressly provided that the delegation may be subject to such conditions as may be specified. Sub-clause (iii) of Clause (a)