Court’s decision
The Supreme Court of India allowed criminal appeals filed by two accused convicted under Section 3 read with Section 7 of the Essential Commodities Act, 1955, holding that on the date of the alleged offence in March 1994, no operative control order regulating cement existed. The Court ruled that once statutory price and distribution control over cement stood withdrawn in 1989 and state-level licensing powers were rescinded in 1990, prosecution under the E.C. Act was fundamentally misconceived. The convictions recorded by the trial court and affirmed by the High Court were set aside, and the appellants were acquitted.
Facts
The case arose from alleged diversion of 400 bags of government quota cement supplied by the Public Works Department for construction work on a road project in Aurangabad. The prosecution claimed that cement released under a government contract was unlawfully diverted and stored in premises linked to the appellants with intent to sell at higher prices.
A police raid conducted on 24.03.1994 allegedly resulted in seizure of 365 bags of cement from two trucks and additional bags from a shop. The appellants were charged under Section 3 read with Section 7 of the Essential Commodities Act for violation of the Maharashtra Cement (Licensing and Control) Order, 1973.
The trial court convicted the appellants and sentenced them to one year rigorous imprisonment. The High Court affirmed the conviction, leading to the present appeals before the Supreme Court.
Issues
The primary issue before the Supreme Court was whether any subsisting statutory control order under Section 3 of the Essential Commodities Act was in force on 24.03.1994, whose contravention could attract penal liability under Section 7.
A related issue was whether the Cement Control Order, 1967 and the Maharashtra Cement (Licensing and Control) Order, 1973 continued to operate after the Cement Control (Amendment) Order, 1989 and subsequent notifications rescinding state-level delegation.
The Court also examined the broader principle of whether prosecution can survive when the underlying regulatory framework stands withdrawn without a saving clause applicable to the alleged conduct.
Appellants’ arguments
The appellants contended that cement had been substantially decontrolled by the Central Government through the Cement Control (Amendment) Order, 1989, which deleted key regulatory provisions with effect from 01.03.1989. Further, delegation of powers to State Governments for retail regulation was rescinded on 07.08.1990.
It was argued that in the absence of any operative order under Section 3 of the E.C. Act, no offence under Section 7 could be sustained. The prosecution failed to produce any subsisting control order or notification applicable on the date of the alleged seizure.
Reliance was placed on judicial precedents holding that omission of a statutory provision without a saving clause obliterates the basis of prosecution.
State’s arguments
The State argued that possession of large quantities of government quota cement by private individuals without licence itself established contravention. It contended that once unauthorised possession was proved, the burden shifted to the accused to explain legality.
The prosecution maintained that cement meant exclusively for government work had been diverted and stored without authority, thereby violating statutory provisions under the Essential Commodities Act.
The State urged that the High Court had correctly affirmed the conviction after appreciating evidence of diversion and unlawful possession.
Analysis of the law
The Supreme Court examined the statutory history of cement regulation. Cement had been declared an essential commodity in 1962 and was regulated under the Cement Control Order, 1967. State-level licensing powers were exercised under delegated authority.
However, by notification dated 01.03.1989, the Central Government removed price and distribution control over cement and omitted key operative clauses. Subsequently, on 07.08.1990, delegation to State Governments to regulate retail cement distribution through licensing was rescinded.
The Court found that on 24.03.1994, no statutory control order regulating cement pricing, storage or licensing remained in force. Crucially, the prosecution failed to prove existence of any operative order under Section 3 of the E.C. Act whose violation could attract Section 7 penalties.
Relying on Kolhapur Canesugar Works Ltd. v. Union of India (2000) 2 SCC 536, the Court reiterated that omission of a statutory provision without a saving clause obliterates its future operation. In such circumstances, criminal prosecution based on the repealed framework cannot survive.
Precedent analysis
The Court relied primarily on Kolhapur Canesugar Works Ltd. v. Union of India, where it was held that unconditional omission of a statutory provision without a saving clause causes pending and future proceedings founded on it to lapse.
The Court also referred to principles requiring proof of a valid and subsisting order under Section 3 before invoking Section 7 of the E.C. Act.
The ruling reinforces the settled doctrine that penal liability under the Essential Commodities Act is contingent upon proof of contravention of a legally operative control order.
Court’s reasoning
The Court held that while evidence suggested possible diversion of cement meant for public works, penal liability under the Essential Commodities Act could not be sustained in the absence of a subsisting regulatory order.
It observed that the trial court and High Court failed to examine the legal effect of decontrol and instead proceeded solely on factual appreciation. This omission went to the root of the conviction.
The Court clarified that although prosecution under the E.C. Act was untenable, acts such as diversion of government-supplied cement might attract provisions of the Indian Penal Code if appropriately invoked. However, such substitution could not be undertaken at the appellate stage.
Conclusion
The Supreme Court set aside the conviction and sentence imposed on the appellants. The criminal appeals were allowed, bail bonds cancelled, and fine amounts directed to be refunded. The Court held that in the absence of a subsisting statutory order under Section 3 of the Essential Commodities Act on the date of the alleged offence, conviction under Section 7 was legally impermissible.
Implications
This judgment underscores that criminal liability under the Essential Commodities Act depends entirely on existence and proof of a valid control order. Once regulatory control is withdrawn, prosecution cannot proceed on the basis of repealed or omitted provisions.
The ruling highlights the necessity for investigating agencies to correctly identify the applicable statutory framework before filing charges. It also reinforces the principle that penal statutes must be strictly construed.
For practitioners, the decision is a significant reaffirmation that decontrol notifications can extinguish the very foundation of prosecution under economic regulatory laws.
Case law references
- Kolhapur Canesugar Works Ltd. v. Union of India (2000) 2 SCC 536
Held that omission of a statutory provision without a saving clause obliterates its effect and pending proceedings cannot continue. - (Principles relating to requirement of subsisting Section 3 order under the Essential Commodities Act applied.)
FAQs
1. Can someone be convicted under the Essential Commodities Act if the control order has been withdrawn?
No. Penal liability under Section 7 requires proof of contravention of a valid and operative order under Section 3. If regulatory control has been rescinded, prosecution cannot survive.
2. What happens when a statutory provision is omitted without a saving clause?
Such omission generally obliterates the provision from the statute book, and proceedings founded upon it cannot continue unless specifically saved.
3. Does decontrol of cement mean diversion of government cement is legal?
Not necessarily. While prosecution under the E.C. Act may fail, diversion of government property may attract offences under the Indian Penal Code, depending on evidence.
