Holding

The fine in lieu of confiscation under the second proviso to Section 6‑A(1) of the Essential Commodities Act, 1955 is limited to the market price of the vehicle, not the essential commodity, and the authority may fix a reasonable amount within that limit.

Summary

The Supreme Court considered two appeals where vehicles carrying essential commodities were seized under the Essential Commodities Act, 1955. The Deputy Commissioner ordered the release of the vehicles on payment of a fine based on the market price of the vehicles, which the High Court struck down, holding that the fine should be limited to the market price of the essential commodity. The Supreme Court examined the object of the Act, the relevant statutory provisions, and the analogy with Section 115(2) of the Customs Act. It held that the fine in lieu of confiscation under the second proviso to Section 6‑A(1) must be measured by the market price of the vehicle, not the commodity, and that the authority may fix a reasonable amount up to that limit. Consequently, the appeals were allowed, setting aside the High Court's orders.

Issues considered

Whether the fine in lieu of confiscation under the second proviso to Section 6‑A(1) of the Essential Commodities Act, 1955 is to be based on the market price of the seized essential commodity or on the market price of the vehicle used for its carriage.
Whether the High Court's reliance on the analogy with Section 115(2) of the Customs Act, 1962 is appropriate.
Whether the competent authority has discretion to fix a reasonable fine within the statutory ceiling.

Legislation cited

Customs Act, 1962s. 115(2)
Essential Commodities Act, 1955s. 6-A(1), s. 6-B, s. 6-C, s. 6-D, s. 7

Subjects

Essential Commodities Actconfiscationfine in lieumarket pricevehiclestatutory interpretationdeterrent penaltyCustoms Act analogy

Judgment

A DEPWY COMMISSIONER, DAKSHINA KANNADA DISTRICT
v.
RUDOLPH FERNANDES

FEBRUARY 29, 2000

B [B.N. KIRPAL AND M.B. SHAH, JJ.]

Essential Commodities Act, 1955 : S. 6-A( 1) second proviso.

Confiscation of vehicle-Fine payable-Jn lieu of confiscation-Limit
of-Held : Is limited to market price of the vehicle and not to the market price
c of the essential commodity carried in such vehicle-The contrary view taken by
the High Court on the analogy of S.115(2) of Customs Act is erroneous-
Further, it is within the discretion of the competent authority to fix such
reasonable amount considering the facts and circumstances of each case-
Customs Act, 1962, S.115(2).
D
Essential Commodities Act-Object of-Held : To deter a person from
illegally dealing in an essential commodity and, consequently, impose a deter-
rent penalty against such person.

Interpretation of Statutes :
E
Basic Rules-Legislative intent-Determination of-Object of an Act-
Preamble and other Sections of the Act-Consideration of-Held : Can be
taken into consideration in order to determine the legislative intent.
'
In these two appeals the respondents' vehicles carrying commodities
F were intercepted and seized by the Police. Proceedings under Section 6-A
of the Essential Commodities Act, 1955 were initiated before the appellant-
Deputy Commissioner. During the pendency of the proceedings, the re-
spondent applied for interim release of the vehicles and the same was
granted on payment of a certain amount as fine based on the market price
of the vehicles. That order was challenged by the respondents before the
G
High Court on the ground that imposition of such fine was illegal and
onerous.

The High Court on the analogy of Section 115(2) of the Customs Act,
1962 held that the second proviso to Section 6-A(l) of the Essential Com-
H modities Act, 1955 provided for levy of fine limited to the market price of
24
DY. COMMR. DAKSHINA KANNADA DISIT. v. RUDOLPH FERNANDES 25
the essential commodities and not the market price of the vehicle. The A
High Court, therefore, directed release of the vehicles on payment of fine
based on the market price of the essential commodities. Hence this appeal.

The following question arose before this Court :

Whether fine in lieu of confiscation contemplated under the proviso B
to Section 6-A(l) of the Essential Commodities Act, 1955 provides for levy
of fine on the basis of market value of the confiscated vehicle or on the
basis of the market price of the essential commodity sought to be carried

. -
by such vehicle?

Allowing the appeal, this Court

HELD : 1. The object of the Essential Commodities Act, 1955 is to
c

deter a person from illegally dealing in an essential commodity and, conse-
quently, impose a deterrent penalty against a person dealing in them
illegally. While doing so, the law takes care to prevent the owner of any D
vehicle from aiding or assisting such an illegal activity. [128-H; 29-AJ

2. The second proviso to Section 6-A(l) of the Act is required to be
considered in the light of the Preamble and Sections 6-B, 6-C, 6-D and 7 of
the Act. There may be some ambiguity in Section 6-A(l). But it cannot be
said that the measure of fine is related to the market price of the essential E
commodity on the date of its seizure. It nowhere provides that fine should
not exceed market price of the essential commodity on the date of seizure
of fine vehicle. What is to be confiscated is the vehicle and, therefore
measure of the would be relatable to the market price of the vehicle on the
date of the essential commodity sought to be carried by such vehicle. This F
would also be consistent with the scheme of Section 7, which provides for
levy of penalty. It also empowers forfeiture to the Government any pack-
age, covering or receptacle in which the property is found and in addition
any animal, vehicle, vessel or other conveyance used in carrying the com-
modity. Hence, a measure of fine which is required to be levied in lieu of
G
confiscation under second proviso to Section 6-A(l) would be relatable to
the market price of the vehicle and not of the seized essential commodity
and the fine amount in lieu of confiscation is not to exceed the market price
of the vehicle on the date of seizure of essential commodity. It is within the
discretion of the competent authority to fix such reasonable amount con-
sidering the facts and the circumstances of each case. [29-G; 30-B-G] H
26 SUPREME COURT REPORTS [2000] 2 S.C.R.
A Shambhu Dayal Aganvala v. State of West Bengal and Anr:, (1990) 3
sec 549, relied on.
Rudolph Fernandes v. Deputy Commissione1; DK (1984) 1 Kar. LJ 200,
overruled.

B 3. The analogy drawn by the High Court on the basis of Section
115(2) of the Customs Act, 1962 is erroneous because the proviso to Section
115(2) specifically mentions that where any such conveyance is used as a
means of transport in the smuggling of goods, the owner of any convey-
ance is to be given an option to pay in lieu of the confiscation of the
c conveyance, a fine not exceeding the market price of the goods which are
sought to be smuggled. As against this, Section 6-A second proviso does not
refer to payment of fine not exceeding the market price of the essential
commodity but apparent reference is a fine not exceeding the market price
of the vehicle sought to be confiscated. Further, it is to be noted that under
Section 6-B(2) no order confiscating the vehicle or other conveyance can
D be passed if the owner proves to the satisfaction of the competent authority
that it was used in carrying the essential commodity without his knowledge
or connivance. [32-A-E]

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 3214of1989.
E ----
From the Judgment and Order dated 22.3.88 of the Karnataka High
Court in W.A. No. 2248 of 1983.

With

F Civil Appeal Nos. 5074-75 of 1989.

From the Judgment and Order dated 7.3.89 of the Kamataka High
Court in W.P. No. 3563 and C.W. No. 3579 of 1989.

K.H. Nobin Singh for M. Veerappa for the Appellant.
~·
G
The Judgment of the Court was delivered by

SHAH, J. C.A.No.3214 of 1989!

In this appe'!-1, a Matador (Mini Lorry) carrying 44 bags of cement was
H intercepted and seized by the Bajpe Police, Dakshina Kannada on 22.8.1983.
DY. COMMR. DAKSHINA KANNADA DISTI. v. RUDOLPH FERNANDES [SHAH, J.] 27
Proceedings under Section 6A of the Act were initiated before the Deputy A
Conunissioner. During the pendency of the proceedings, the respondent
applied for interim release of vehicle and the same was granted by order dated
1.9.1983 on his furnishing a bank guarantee of Rs. one lakh. That order was
challenged by the respondent before the High Court of Karnataka at Bangalore
in W.P. No.16668 of 1983 on the ground that imposition of such condition B
was illegal and onerous. The learned Single Judge after considering second
proviso to Section 6A( 1) held that the words "market price" occurring in the
section relate only to "the essential commodity sought to be carried". Accord-

...
ing to the learned Judge "the proviso gives a concession to the owner to avert
confiscation by paying fine not exceeding the market price prevalent on the
date of its seizure of the essential commodity". According to the learned c
Judge if option is to pay a fine equivalent to the market price of the vehicle
then there is no necessity to give such option. Owner instead of paying a fine
equivalent to the market price can as well think of purchasing a new or fresh
vehicle. He, therefore, directed release of the vehicle accepting the Bank
Guarantee to the extent of Rs.500 only. Being aggrieved the State preferred D
an appeal before the Division Bench of the High Court in WA No.224& of
1983 which was also dismissed by the impugned order dated 22.3.1988.

C.A. Nos. 5074-75 of 1989

In these appeals, two transport vehicles belonging to the respondents E
carrying paddy were seized by the Police for the alleged contravention of
Food Control Orders. Applications were filed before the Deputy Commis-
sioner for release of said vehicles. By order dated 16.2.1989 the Deputy
Conunissioner passed an order directing the release of the vehicles in question
on their furnishing Bank Guarantee in a sum of Rupees three lakhs each. That F
order was challenged before the High Court of Karnataka by filing writ
petition Nos. 3563 and 3579 of 1989. The High Court following its earlier
decision in Rudolph Fernandes v. Deputy Commissioner, D.K. (1984) l Kar.
L.J. 200 (C.A.No.3214/89 before us) allowed the writ petitions and reduced
the fine amount to rupees 10,000 each.
G
Both the orders are challenged before us in these appeals.

- The short question involved in these appeals is - whether fine in lieu
of confiscation contemplated under the second proviso to Section 6A(l) of
the Essential Commodities Act, 1955 (hereinafter referred to as 'The Act') H
I
-"

28 SUPREME COURT REPORTS [2000] 2 S.C.R.
A provides for levy of fine on the basis of market value of the confiscated
vehicle or on the basis of the market price of the essential commodity sought
to be carried by such vehicle. Section 6A of the Act is as under : -

"6A. Confiscation of essential commodity ( 1) Where any essential
commodity is seized in pursuance of an order made under Section 3
B
in relation thereto, a report of such seizure shall, without unreasonable
delay, be made to the collector of the district or the Presidency town
in which such essential commodity is seized and whether or not a
prosecution is instituted for the contravention of such order, the
Collector may, if he thinks it expedient so to do, direct the essential
c commodity so seized to be produced for inspection before him, and
if he is satisfied that there has been a contravention of the order may
order confiscation of-

(a) the essential commodity so seized;
(
D
(b) any package, covering or receptacle in which such essential
commodity is found; and

(c) any animal, vehicle, vessel or other conveyance used in carry-
ing such essential commodity:
E

PROVIDED ...

PROVIDED FURTHER that in the case of any animal, vehicle,
F vessel or other conveyance used for t.he carriage of goods or
passengers for hire, the owners of such animal, vehicle, vessel, or
other conveyance shall be given an option to pay, in lieu of its
confiscation, a fine not exceeding the market price at the date of
seizure of the essential commodity sought to be carried by such
G animal, vehicle, vessel or other conveyance."

(emphasis supplied)

H
At the outset it is to be stated that the object of the Act is to deter a
perso.n from illegally dealing in an essential commodity and consequently,
impose a deterrent penalty against a person dealing in them illegally. While
-
DY. COMMR. DAKSIDNA KANNADA DISTI. v. RUDOLPH FERNANDES [SHAH, J.] 29
doing so, the law takes care to prevent the owner of any vehicle from aiding A
or assisting such an illegal activity. As per the preamble of the Act, the Act
is to provide, in the interest of the general public, for the control of the
production, supply and distribution of, and trade and commerce, in cert.ain
commodities. For this pmpose, Section 3 empowers Central Government to
provide for regulating or prohibiting the production, supply and distribution B

-- of essential commodity and trade and commerce therein if the same is
considered necessary or expedient inter alia for maintaining or increasing
supply of any essential commodity or for securing their equitable distribution
and availability at fair prices by passing an appropriate order. Section 6A as
quoted above provides for seizure and confiscation of essential commodity for
contravention of any order issued under Section 3. Further Section 6B c
provides for issuance of show cause notice and the procedure for confiscation
of the seized essential commodity as well as any package, covering or
receptacle in which essential commodity is found or any animal, vehicle,
vessel or other conveyance used in carrying such essential commodity.
Section 6C provides for appeal against the confiscation order and the proce- D
dure for return of confiscated article in case where appeal filed against the
confiscation order or the order passed under Section 7 forfeiting the essential
commodity is set aside. Thereafter, Section 6D provides that the order of any
confiscation under the Act shall not prevent the infliction of any punishment
to which the person affected thereby is liable under the Act. Therefore, even E
if the essential commodity or the vehicle is confiscated, the person can be
prosecuted and the penalty provided under Section 7 can be imposed. Section
7(1)(a) provides for punishment to any person who contravenes any order
made under Section 3. Section 7(l)(b) and (c) empowers the Cowt to forfeit
to the government any property in respect of which the order has been
contravened or to forfeit any package, covering or receptacle in which the
F
property is found and also animal, vehicle, vesselor other conveyance used
in canying the property.

In the light of aforesaid provisions, second proviso to Section 6A is
required to be considered. First it is to be stated that the proviso limits the G
power of the competent authority to recover fine up-to the market price for
releasing the animal, vehicle, vessel or other conveyance sought to be
confiscated. So maximum fine that can be levied in lieu of confiscation should
not exceed the market price. For our purpose, relevant part of proviso would
be "in the case of ... vehicle ... the owner of such ... vehicle shall be given an H
....

30 SUPREME COURT REPORTS [2000] 2 S.C.R.
A option to pay, in lieu of its confiscation, a fine not exceeding the market price
'I
at the date of seizure of the essential commodity sought tb be cfuied by
such ... vehicle". Question is - whether fine should not exceed the market price
of the seized essential commodity or whether it should not exceed the market
price of the vehicle? For this purpose, it appears that there is some ambiguity
B in the Section. It is not specifically provided that in lieu of confiscation of
vehicle a fine not exceeding the market price of the vehicle or of the seized
essential commodity is to be taken as measure. Still however, it is difficult
to say that measure of fine is related to the market price of the essential -
commodity at the date of its seizure. It nowhere provides that fine should not
exceed market price of the essential commodity at the date of seizure of the
c vehicle. The proviso requires the competent authority to give an option to the
.owner of such vehicle to pay in lieu of confiscation a fine not exceeding the
market price. What is to be confiscated is the vehicle and, therefore, measure
of fine would be relatable to the market price of the vehicle at the date of
seizure of the essential commodity sought to be carried by such vehicle. This
,D would also be consistent with the scheme of section 7 which provides for levy
of penalty. It empowers the Court tJ:ying the criminal case to pass an order
forfeiting to the Government any property in respect of which the order under
Section 3 has been contravened. It also empowers forfeiture to the Govern-
ment any package, covering or receptacle in which the property is found and
in addition any animal, vehicle, vessel or other conveyance used in ca.trying
E
the commodity. Therefore, not only the essential commodity which is seized
is to be forfeited, but the vehicle also could be fo1feited to the Government.
Hence, measure of fine which is required to be levied in lieu of confiscation
under second proviso to Section 6A(l) would be relatable to the market price
of the vehicle and not of the seized essential commodity. And, the fine ainount
F in lieu of confiscation is not to exceed the market price of the vehicle on the
date of seizure of essential commodity. That is to say, limit of such fine would
be up-to the market price of the vehicle on the relevant date and it is v.1ithin
the discretion of the competent authority to fix such reasonable ainount
considering the facts and circumstances of each case.
G
In Shambhu Dayal Agarwala v. State of West Bengal and another,
[ 1990] 3 SCC 549 after conside~ing the scheme of Sections 6A and 7 and
dealing with the proviso (ii) t-0 sub-section (2) of Section 6A, this <;:ourt
observed: -

H "Section 6-A, therefore, merely confers power of confiscation
DY. COMMR. DAKSHINA KANNADA DISTI. v. RUDOLPH FERNANDES [SHAH, J.] 31
and not the power of release, disposal, distribution, etc., except to the A
limited extent permitted by sub-section (2) thereof. Of course, the
second proviso to sub-section (1) of Section 6A permits the grant of
an option to pay, in lieu of confiscation of any animal, vehicle, vessel
or other conveyance, a fine equal to its market price at the date of
seizure."
B
(emphasis added)

Lastly we would mention that in the impugned order dated 22nd March
1998, the High Court in support of its reasoning referred to a similar provision
under Section 115(2) of the Customs Act, 1962, which provides for confis- C
cation inter alia of vehicle used as means of transport in smuggling of any
goods or carriage of any smuggled goods which is as under:-

"115. Confiscation of conveyance.-

(1)' ........... . D

(2) Any conveyance or animal used as a means of transport in the
smuggling of any goods or in the carriage of any smuggled
goods shall be liable to confiscation, unless the owner of the
conveyance or animal proves that it was so used without the
E
knowledge or connivance of the owner himself, his agent, if any,
and the person in charge of the conveyance or animal, Ommitted
by Act 26 of 1988, Sec. 79.

Provided that where any such conveyance is used for the carriage
of goods or passengers for hire, the owner of any conveyance shall F
be given an option to pay in lieu of the confiscation of the conveyance
a fine not exceeding the market price of the goods which are sought
to be smuggled or the smuggled goods, as the case may be.

Explanation.-In this section, "market price" means market price
G
at the date when the goods are seized."

The Court observed that though the language of the aforesaid proviso
is clear, the idea sought to be conveyed under the proviso to Section 6A(l)
of the Act appears to be the same. In our view, the analogy drawn by the High
Court is erroneous because the proviso specifically mentions that where any H
32 SUPREME COURT REPORTS (2000] 2 S.C.R.
A such conveyance is used as a means of transport in the smuggling of goods, -
~...--'
the owner of any conveyance is to be given an option to pay in lieu of tbe
confiscation of the conveyance, a fine not exceeding the market price of the
goods which are sought to be smuggled. Explanation provides that market
price means market price at the date when the goods are seized. As against
this, Section 6A second proviso does not refer to payment of fine not
B
exceeding market price of the essential commodity but apparent reference is
a fine not exceeding the market price of the vehicle sought to be confiscated.
This appears to be obvious because in case where market price of the seized
essential commodity is more than the price of the conveyance then owner of
the conveyance would not come forward to take it back if he is asked to pay
c something more than its market price. Similarly, when the market price of the
seized vehicle is much more than of the essential commodity, it cannot be said
that instead of confiscation it should be released at a price which is less than
its market price. Further it is required to be noted that under Section 6B(2)
no order confiscating vehicle or other conveyance can be passed if the owner
D proves to the satisfaction of the competent authority that it was used in
carrying the essential commodity without his knowledge oi connivance.

In the result, the appeals are allowed and the impugned orders holding
that measure of imposing fine in lieu of confiscation under second proviso to
Section 6A of the Essential Commodities Act would be the market price of
E the essential commodity seized are set aside. However, considering the fact
that since vehicles are already released, no further directions are required to
be given with regard to the fine amount in lieu of confiscation.

Ordered accordingly. No costs .

.F V.S.S. Appeals allowed.