SCA/5823/1996 1/37 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD SPECIAL CIVIL APPLICATION No. 5823 of 1996 For Approval and Signature: HONOURABLE MR.JUSTICE K.M.THAKER ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ========================================================= SANTRAM GRAIN SUPPLIERS - Petitioner(s) Versus STATE OF GUJARAT & 1 - Respondent(s) ========================================================= Appearance : MR HARIN P RAVAL for Petitioner(s) : 1, MS TRUSHA PATEL, ASST. GOVERNMENT PLEADER for Respondent(s) : 1 - 2. ========================================================= CORAM : HONOURABLE MR.JUSTICE K.M.THAKER Date : 05/12/2007 ORAL JUDGMENT 1. The petitioner has preferred this petition under Articles 226 and 227 of the Constitution challenging the orders dated 30.7.1994 and SCA/5823/1996 2/37 JUDGMENT 4.4.1996. 2. The factual background in light of which present petition is preferred is as follows :- 2.1 The petitioner firm is a grain merchant and commission agent and was granted License No.679 in the year 1988. The Gujarat Essential Articles (Licensing Control and Stock Declaration) Order 1981 was at relevant time, applicable to it. 2.2 It is the case of the petitioner that on 21.7.1994 it had dispatched 201 bags of ground- nut weighing 7035 kgs. in favour of M/s. B.A.Matalia & Company, Jamnagar. 2.3 It is further stated that the truck bearing registration No. GRY-4078 carrying on the said goods was intercepted by the respondent authorities on 21.7.1994 when, upon inspection, the respondent authorities noticed that the aforesaid quantity of ground-nut was being transported merely on memo on the letterhead of SCA/5823/1996 3/37 JUDGMENT the petitioner firm, however, there was no invoice and/or gate pass, in respect of the said goods. 2.4 According to the respondent authorities the said irregularities constitute breach of clause No. 18(4) of the Gujarat Essential Articles (Licensing Control and Stock Declaration) Order 1981 (hereinafter referred to as “the 1981 order”) and condition No. 9 of petitioner's license. 2.5 A show cause notice dated 21.7.1994 was issued in respect of the breach alleged to have been committed by it. The show cause notice dated 21.7.1994 recites the said factual matrix. The petitioner was asked to submit its explanation by virtue of the said show cause notice. 2.6 Despite the claim that it had submitted its explanation – reply to the said notice, the same is not available on record of the present SCA/5823/1996 4/37 JUDGMENT petition. The petitioner was afforded an opportunity of hearing by the concerned authority in respect of the said show cause notice. The said aspect is not disputed by the petitioner. After hearing, the order dated 30.7.1994 came to be passed by the Assistant Collector, Rajkot. 2.7 On 21.7.1994 a seizure order was also passed by the District Supply Officer and the goods in question were seized. 2.8 After hearing the parties the order dated 30.7.1994 came to be passed whereby the authority concluded that the petitioner was guilty of having committed breach of clause – 18(4) of the 1981 Order as well as condition No.9 of its license. 2.9 In light of the said findings and conclusion, the goods in question came to be confiscated in exercise of powers under section 6(A) of the Essential Commodities Act. At the SCA/5823/1996 5/37 JUDGMENT relevant time, market value of the goods in question was assessed at the rate of Rs.1,00,248.75 ps. 2.10 The petitioner, being aggrieved by the said, order carried the same before the respondent No.1 by way of an appeal which was registered as Appeal No.485 of 1994. At the time when the said appeal was registered by respondent No.1, an order was passed by respondent No.1 staying the operation of the seizure order as well as order dated 30.7.1994 on the condition that the petitioner must submit bank guarantee to the extent of 50% of the market value assessed by the Officer at the time of seizure and for the balance 50% solvency may be submitted. The petitioner has stated that the said direction was complied with. 2.11 The aforesaid order 30.7.1994 passed by the Assistant Collector, Rajkot was taken in appeal which came to be registered as Appeal No.485 of 1994. The Deputy Secretary i.e. respondent No.1 SCA/5823/1996 6/37 JUDGMENT passed order dated 4.4.1996 after hearing the petitioner herein and after considering the contentions raised by present petitioner in the said appeal. 3. It is against the said order dated 4.4.1996 and the earlier order (i.e. the order in original dated 30.7.1994) that the petitioner has preferred present petition. 4. Heard Mr. Jinesh H. Kapadia, advocate for Mr. H.P.Rawal, advocate for petitioner and Ms. Trusha Patel, learned AGP for respondents. 5. Since as per the condition of the stay order the petitioner was required to submit bank guarantee for 50% of the assessed value of the goods i.e. for an amount of about Rs.50,124/-. A query was put to the petitioner about the status of the bank guarantee i.e. as to whether the bank guarantee has been kept alive by renewing the same from time to time, or not. Unfortunately, neither the petitioner nor the respondents are SCA/5823/1996 7/37 JUDGMENT able to throw light on this point. 5.1 In the event the bank guarantee is not renewed from time to time and is not kept alive, then, it would reflect upon the conduct and intention of the petitioner. 5.2 No proof of any nature has been produced by the petitioner to establish that the condition imposed for releasing the goods pursuant to order of seizure, has been complied with. Neither the petitioner nor the respondents are in a position to show even initial bank guarantee which as per the petitioner's claim, was required to be submitted. 5.3 In such circumstances, it is difficult to assume that the petitioner has regularly renewed the bank guarantee, more particularly, because the petitioner's advocate did not give any satisfactory reply, much less evidence regarding renewal of bank guarantee from time to time. SCA/5823/1996 8/37 JUDGMENT 6. The petitioner has, with regard to the issue involved in the matter, raised a defence that the said goods had been dispatched for the purpose of approval and not for sale, and for that purpose a memo on the letterhead of the petitioner firm was prepared and that the said memo accompanying the goods in question. The petitioner has, however, not produced the said memo on record of this petition though heavy reliance is placed on the said memo. It is also submitted that no sale had taken place and, therefore, invoice was not issued. It is further contended that in the district where the petitioner has its establishment, there is no practice of issuing gate pass and, therefore, when the vehicle was intercepted, the gate pass could not be produced. In support of the said submission the petitioner has produced certificate of Mamlatdar which is dated 27.7.1994. 7. The petitioner has, in support of his contentions, relied on the judgment between N. SCA/5823/1996 9/37 JUDGMENT Nagendra Rao & Company V/s. State of Andhra Pradesh reported in AIR 1994 SC 2663, M/s. Navjivan Roller Floor Mill V/s. State of Gujarat and Another reported in 2001 (3) GLH 341 and Damodar Oil Mill v/s District Supply Officer, Junagadh reported in 2001 (1) GLH 580. 8. In response, Ms. Patel, learned AGP appearing for the respondents submitted that the provisions of 1981 Order are provisions of law, they are mandatory and on ground of alleged absence of tradition, such requirement cannot be by passed. 8.1 She further contended that the goods were dispatched and were transported in violation of the provisions under 1981 Order and the action of the petitioner also amounted to breach of condition No.9 of the license. Since the petitioner, by its action, committed breach of the provisions under 1981 Order as well as of its license, the goods in question were confiscated and as the goods were perishable in SCA/5823/1996 10/37 JUDGMENT nature, the same were released. In her submission, the respondents' action is justified and does not call for interference. 8.2 Ms. Patel, learned AGP also submitted that there is no jurisdictional error committed by the respondent authorities in passing the order and in fact, the orders have not been challenged on ground of jurisdictional error. In support of her said submission, she has relied on in case of Mohd. Yunus V/s. Mohd. Mustaqim and others reported in 1984 SC 38 and the judgment of this Court in case between Chhagan Ranchhod Kukvava V/s. General Manager, Western Railway, Bombay & Another reported in 1998 (1) GLH 461. 9. So far as the factual backdrop is concerned, the facts are not in dispute. However, the submission of the petitioner to the effect that there is no practice of issuing invoice and/or there is no practice of issuance of gate pass by the Mamlatdar, is disputed by the respondent. The action impugned in present petition has been SCA/5823/1996 11/37 JUDGMENT taken on the strength of provisions contained under 1981 Order, and more particularly, clause – 18 thereof. The said provision reads, “18. General conditions for dealers.- A license holder under this order shall, apart from any special conditions that may be imposed by the licensing authority, observe the following general conditions:- (1) XXX (2) XXX (3) XXX (4) (i) Every producer, or as the case may be, wholesaler shall issue to every transport operator transporting the stock of any essential article from his installation or depot or the place of storage, a correct invoice or a gatepass, as the case may be, showing the producer's or wholesaler's name, address, the the name and address of the consignee, the date and time of delivery and quantity delivered and shall keep a duplicate of the same to be made available for inspection on demand by any officer specified in Clause 26, or as the case may be, by any officer authorised in this behalf. SCA/5823/1996 12/37 JUDGMENT (ii) Every transport operator to whom an invoice or a gatepass, as the case may be, issued by a producer or a wholesaler under paragraph (1) shall, where the stock of the essential article is in transit, retain with him such invoice or gatepass and make it available for inspection on demand by any officer specified in Clause 26 or the authorised officer and shall deliver the same to the consignee dealer at the time of the delivery of such stocks.” 9.1 In the impugned orders, the respondents authorities have also concluded that there is breach of condition No.9 of the license. The petitioner has preferred not to produce the copy of the license on record. The said condition in the prescribed form of licence, reads thus :- “9. The licence holder shall, except when specially exempted by the State Government or by the licensing authority in this behalf, issue to every customer a correct-receipt of invoice, as the case may be, giving SCA/5823/1996 13/37 JUDGMENT his own name, address and licence number, (if any) of the purchaser, the date of transaction, the quantity of essential articles sold, the price at which it is sold and the total amount charged and shall keep a duplicate of the same to be available for inspection on demand by the licensing authority or any officer authorized by it in this behalf; Provided that it shall not be necessary to issue such receipt or invoice in respect of retail sale costing not more than fifteen rupees unless demanded by a customer but true and correct account of such sale showing therein the date of sale, quantity of essential articles so sold and price charged shall be maintained.” 10.It is not in dispute that ground-nut is one of the commodities covered under Schedule – I to the said 1981 Order. 10.1 Under the said 1981 Order clause – 2(8) defines the term essential articles. The said provision reads, thus, :- SCA/5823/1996 14/37 JUDGMENT “2. Definitions – In this Order, unless the context otherwise requires,- (1) XXX (2) XXX (3) XXX (4) XXX (5) XXX (6) XXX (7) XXX (8) “essential articles” means an article specified in the Schedule I;” Thus, as per the said 1981 Order ground-nut, at the relevant time, was an essential article. 11.It is pertinent to note that the quantity in question is 7035 kgs. It is not palatable that the grain merchant and commission agent would dispatch and deliver such a huge quantity for mere approval. Therefore, the authorities below cannot be faulted in not accepting such explanation of the petitioner that the goods were dispatched only for approval and, therefore, there was no invoice. SCA/5823/1996 15/37 JUDGMENT 11.1 Further, the language of clause – 18(4) does not make the requirement of issuance of correct invoice or gatepass, conditional to event of sale. 11.2 It is, at this stage, pertinent to note that the respondent No.2 has in his order also taken note of the fact that such a huge quantity was being transported only on the basis of a note written on the letterhead of the petitioner, however, interestingly the same was not signed by any authorized representative of the petitioner. 11.3 It is also equally relevant to note that the petitioner, though raised a contention in the petition and during the hearing that the goods in question were forwarded for approval, no such contention was urged before the first authority, whose order is impugned in the present petition. The said contention is, therefore, raised only subsequently in the petition. SCA/5823/1996 16/37 JUDGMENT 11.4 An order cannot be faulted or struck out on the ground which was not urged before the authority passing the order. Even otherwise, as noted earlier, the said explanation of the petitioner that since the goods were being transported only for approval, the invoice was not issued and, therefore, the same was not available at the time of confiscation is not palatable considering the quantity of the said goods. 11.5 Even if that be so then also as contended by Ms. Patel, learned AGP on behalf of the respondents the so called practice will not justify breach of provisions of law and nobody can be excused from violation of provisions of law on the ground of alleged absence of tradition. 11.6 The respondent is also right in contending that mere assertion cannot be construed as an evidence and the petitioner has, so far as SCA/5823/1996 17/37 JUDGMENT invoice part is concerned, failed to substantiate and establish the claim that the dispatch was only for approval and not for sale. It is pertinent to note that under clause – 18 (4) the requirement of invoice and gatepass is not cumulative but is alternative and the petitioner has ignored both. It is submitted by Ms. Patel, learned AGP that the word “shall” has been consciously used in the said clause, which makes the requirement of issuance of invoice or a gatepass unavoidable and mandatory requirement. 11.7 The purpose behind incorporating such a requirement in the order is obvious. Section 3 of the Essential Commodities Act provides, inter alia, that for the purpose of maintaining supply of essential commodities and for securing equitable distribution and availability at fair prise, if the Government feels necessary, then, it may by issuing notification regulate the essential commodities. SCA/5823/1996 18/37 JUDGMENT 11.8 The issuance of 1981 Order makes it clear that the Government felt it necessary to regulate the essential commodities mentioned in Schedule – I of the said order. 11.9 In that view of the matter, diligent compliance with the requirement of the said order by the licensee is obvious and assumes more significance, and breach of any of the requirements would justify the conclusion that the concerned person committed breach knowingly. 12.Under clause – 27 of the said 1981 Order there is a provision for exemption whereby power is conferred on the State Government that by a general or special order it may exempt any person or class of persons from operation of all or any of the provisions of the order. 12.1 If the petitioner had any genuine and practicable difficulty either on account of the alleged practice or for any special reason then it could have taken necessary steps for seeking SCA/5823/1996 19/37 JUDGMENT exemption from the rigour of clause – 18(4) and/or condition No.9 of its license, however, the petitioner preferred not to do so and opted to commit breach of the said provision. 12.2 This aspect of the matter is important also for the reason that the document produced by the petitioner i.e. the certificate dated 27.7.1994 gives out that the petitioner had not even asked the authorities for gatepass. 12.3 An attempt to put stress on the Mamlatdar's certificate regarding absence of practice is made, however, while stressing the said particulars mentioned in Mamlatdar's certificate, the petitioner is conveniently underplaying and ignoring other fact mentioned in the said certificate viz. the petitioner had not even cared to ask for the gatepass. 12.4 The said convenient inaction of the petitioner coupled with the fact that the petitioner ignored the provision under clause – SCA/5823/1996 20/37 JUDGMENT 27 also exhibits petitioner's attitude or belief that the provision of law can be violated with impunity. 13.When the 1981 Order provided two options to the petitioner viz. either to issue an invoice or to issue a gatepass, it was obligatory for the petitioner to fulfill the requirement. 13.1 In the facts noted above and in light of the provisions the petitioner cannot be heard to contend that the said requirements were not complied with because of the alleged absence of practice and considering the quantity involved, the explanation that the dispatch was not for sale but merely for approval is also not palatable more particularly due to conspicuous absence of any cogent corroborative and supporting evidence, documents or even oral (e.g. Of the so-called dealer to whom allegedly the said goods were forwarded) and that therefore the authority cannot be said to have acted arbitrarily, or without application of SCA/5823/1996 21/37 JUDGMENT mind or irrationally. 14.Reliance has been placed on the judgment of the Hon'ble Supreme Court in case of N. Nagendra Rao & Company (supra). In the said case the question for consideration by the Hon'ble Supreme Court was mainly regarding State's obligation to pay compensation and as to whether seizure of the goods in exercise of statutory powers immunizes the State completely from any loss or damages suffered by the owner. 14.1 In present case, the said goods, after seizure, were immediately released by the concerned authority on condition requiring the petitioner to give bank guarantee for the 50% of the value of the goods in question and solvency for balance 50% and in that view of the matter, the petitioner has not come forward with any claim for damages. Reliance, however, has been placed on what their Lordships held with regard to exercise of powers of confiscation of the goods in question. The petitioner's advocate, in SCA/5823/1996 22/37 JUDGMENT particular, relied upon what their Lordships held in para – 6(A) of the said judgment. The relevant part of said para – 6(A) reads thus:- “But what needs to be mentioned is that since the power is very wide as a person violating the Control Orders is to be visited with serious consequences leading not only to the confiscation of the seized goods, packages or vessel or vehicle in which such essential commodity is found of is conveyed or carried, but is liable to be prosecuted and penalized under S. 7 of the Act, it is inherent in it that those who are entrusted with responsibility to implement it should act with reasonableness, fairness and to promote the purpose and objective of the Act. Further, it should not be lost sight of that the goods seized are liable to be confiscated only if the Collector is satisfied about violation of the Control Orders. The language of the section and its setting indicate that every contravention cannot entail confiscation. That is why the section uses the word 'may'. A trader indulging in black- marketing or selling adulterated goods SCA/5823/1996 23/37 JUDGMENT etc. should not, in absence of any violation, be treated at par with technical violations such as failure to put up the price list etc. or even discrepancies in stock.” 15.As noted hereinabove earlier the petitioner had option of issuing invoice or gatepass. The petitioner did not issue either invoice or gatepass and consciously dispatched the said goods, though covered by 1981 Order and also in breach of condition No.9 of its license, along with remark or under a note, on its letterhead, which was not even signed by any authorized representative of petitioner and then the person to whom the said goods were dispatched was not brought before the authority. 15.1 While dispatching the goods, the petitioner did not even make request for gatepass to the authority and when the goods came to be confiscated, the petitioner gave only one explanation that there was no practice of issuing gate pass. Further a large quantity of ground-nut was dispatched by the petitioner. SCA/5823/1996 24/37 JUDGMENT 15.2 The explanation regarding non-issuance of invoice came to be raised subsequently in the appeal memo. 16.The findings and decisions are concurrent, and in the facts of the case and in light of the material on record, it cannot be said that the authorities have acted arbitrarily. 17.Since the goods in question were released immediately, the petitioner must have thereafter immediately sold the goods in market and, that therefore, it cannot be said to have suffered any loss so far as the said goods are concerned. 17.1 Upon sale of the goods, the petitioner must have derived its profit as well. Thus, in view of aforesaid discussion, the question which may survive for consideration is only to the limited extent viz. as to whether confiscation of 100% quantity is justified or not. SCA/5823/1996 25/37 JUDGMENT 18.While countering the submissions made on the basis of the judgment of the Hon'ble Supreme Court in the case of N. Nagendra Rao & Company, Ms. Patel, learned AGP contends that in present case the 1981 Order was issued by the Government for maintaining supply of certain essential commodities and for securing their equitable distribution and availability at fair price. So it was with a view to properly and diligently implementing the 1981 Order that the authorities passed the orders impugned in present petition. In her submission, the impugned orders are, therefore, justified and cannot be said to be unwarranted or excessive or harsh. 18.1 It is true that considering the object of such orders if such actions of commission agent or dealer which constitute breach of the provisions are countenanced by the authorities or if the authorities deal with such infractions lightly then the purpose of the Order would be frustrated. SCA/5823/1996 26/37 JUDGMENT 19.On behalf of the petitioner, so as to contend that 100% confiscation was not justified, reliance is placed on the decision of this Court in case of Damodar Oil Mill (supra). In the said judgment, the Court took into account the fact that the raid was carried out around 8.30 p.m. when the machines of the mill were in operation and light was being obstructed and that, therefore, it could not have been concluded that the business for the day was closed at the time when the raid was carried out. The Court, in the background of such facts and treating the breach as a technical breach or formal contravention, set aside the confiscation order. The petitioner by relying on the said judgment submits that the present breach also is technical breach. Countering the said submission, Ms. Patel, learned AGP submitted that in the said case there was probability of curing the defect before closing of the business