The Essential Commodities Act, 1955

Introduction

From the very beginning of the human life every person’s living depends upon some essential
commodities, which are used by them in their day to day life. These commodities are the basic
requirements to sustain a normal life. By the development of time and human civilization the use
of such commodities has been increased very rapidly and the range of such commodities has
become very wider. These commodities have now become certain basic needs which are essential
for every person. Thus, the availability and price of such commodities impose a major effect on
the life of the general public. Therefore, to regulate the pricing, production, demand and supply
of these products, The Essential Commodities Act, 1955 was enacted by the Government of India
which plays a major role in regulating the proper supply and availability of such essential
commodities to the general public.

Historical Background of the Act

The roots of this Act can be traced back to 1939 when, the Government of India made rules
regarding control, production, supply, and distribution of certain specific commodities under the
Defence of India Act, 1939 during World War 2 (1939-1945). The Act ceased to exist in 1946.
However, it was felt that certain regulations are needed urgently for the protection of some
essential commodities in the interest of the general public. Therefore, The Essential Supplies
(Temporary Powers) Ordinance passed in 1946, which was subsequently passed as the
Essential Supplies (Temporary Powers) Act, 1946.

After independence, by the 3rd Constitutional Amendment, the first Essential Commodities
Ordinance was passed, which was subsequently replaced by the present Act namely, The Essential
Commodities Act, 1955.

The Aim of the Act

The aim of this Act is to
1. To check black marketing and hoarding;
2. To prevent and punish the offenders of law related to any essential commodity;
 3. To check the inflationary trends in prices and commodities; and
4. To ensure equitable distribution of essential commodities.

Object and Scope of the Act

This Act extends to the whole of India. The Act was enacted to ensure the availability of essential
commodities to consumers and protect them from the exploitation of unscrupulous traders,
therefore, the Act provides rules related to the regulation and control of production, pricing, and
distribution of the essential commodities. There are two main objectives of this Act:

(1) To maintain and increase the supply of the essential commodities, and
(2) To secure equitable distribution and availability of the essential commodities.

Important Definitions

Essential Commodity (Sec. 2A)

According to the Essential Commodities Act, essential commodities means any commodity
specified in the schedule of the Act. Thus, there are 7 following commodities that are specified in
the schedule:
 Drugs (this is used in the same sense as defined under clause b of Section 3 of the Drugs
and Cosmetics Act, 1940);
 Fertilizers, whether organic, inorganic or mixed;
 Foodstuffs, including edible oils and its seeds;
 Hank yarn, made wholly with cotton;
 Petroleum and its products;
 Jute, whether in the form of raw or textiles;
 Seed, whether of fruits and vegetables, of cattle fodder, or of jute.

“Collector” [sec. 2(ia)]

According to the Act, collector means an Additional Collector or such other officer, not below the
rank of the sub-divisional officer who is authorized by the Collector to perform the powers and
functions of the Collector.

‘’Notified order’’ [sec. 2 (c)]

This means an order which is notified in the Official Gazette.
“Sugar” [sec. 2 (e)]
According to the Act, the word sugar includes:-
i. any form of sugar which contains more than ninety percent of sucrose, including sugar
candy,
ii. khandsari sugar (unrefined raw sugar), bura sugar, crushed sugar, crystalize or powder
sugar or
iii. the sugar whether in a form of processed sugar in a factory or raw sugar.

Seizure
Seizure is taking over of actual possession of the goods by the authority. Seizure can be made only
after inquiry/investigation that the goods are liable to confiscation.

Confiscation
Confiscation of the goods is the ultimate act after proper adjudication. Once confiscation takes
place, the ownership as well as the possession goes out of the hands of the original owner and into
the hands of the Government Authority.

Powers of Central Government under the Essential Commodities

The Central Government under this Act have two important powers:
Power to notify the essential commodity
Under this power, the Central Government from time to time adds and removes any commodity
from the schedule for the interest of the general public.
According to section 2A (2) the Central Government may, if it is satisfied that it is necessary so
to do in the public interest and for reasons to be specified in the notification published in
the Official Gazette, amend the Schedule so as to―
(a) add a commodity to the said Schedule;
(b) remove any commodity from the said Schedule

Power to issue a control order (Section 3)

Under this Act, the Central Government has the power to issue control orders. Such orders provide
for regulation and prohibition of essential commodities scheduled in one of the following
circumstances:
  When the government finds that it is necessary and expedient to do in favour of the general
public.
 When the government have to secure equitable distribution and availability of these
commodities in the market.
 When the government have to secure any specific commodity for the Defence of India.

Purpose for passing control order

(i) To regulate by license, permit or otherwise [sec. 3 (2) (a)]

The central government by issuing license and permit regulates the production, distribution,
supply, storage, transport, acquisition of any essential commodity. Therefore the Government
Issue ration/fair price shop license, importing/exporting license, etc.
(ii) To bring under cultivation of any wasteland or arable land [sec. 3 (2) (b)]
The Central Government by passing control order may bring any wasteland or arable land under
cultivation for the purpose of growing, maintaining and increasing cultivation of any general or
specific food crop.
(iii) To control the buying and selling price of any essential commodity
The Central Government may pass any control order to control the buying and selling price of any
essential commodity. This type of control order can be issued:
 To Improve domestic availability;
 Keep the price at a reasonable level, and
 Regulate the artificial inflation due to hoarding and black marketing.
(iv) To require any person to do specific works [sec. 3 (2) (f)]
The central government may pass the control order for required any person who is engaged in
production or business of buying and selling of the essential commodity to sell whole or any
specific part of a commodity held in stock or when any commodity is likely to receive in future
whole or specific part of such commodity when received to the Central Government or State
Government or to the corporation owned or controlled by the government or to the officer or agent
of the government or to another person or class of person specified thereof.
The Central Government also requires such a person to maintain and produce for inspection such
books, accounts, and records related to his business and furnish such information specified under
the order.

(v) To regulate or prohibit any class of commercial and financial transactions [sec. 3 (2) (g)]
The Central Government may pass the control order to regulate or prohibit any class of commercial
or financial transactions relating to any foodstuff which is in the opinion of the authority
unregulated and is likely to be detrimental to the public interest.
(vi) To determine entry, search, examine, seizure of any essential commodities [sec. 3 (2) (j)]
The Central Government by passing control order may determine entry, search, examination,
seizure of:
 Any conveyance such as aircraft, vessels, vehicles used to carry essential commodity;
 Any packages, covering or receptacle in which any essential commodity are found or
packed;
 Any book of account and documents which gave the information about any essential
commodity.

Regulations related to pricing under The Essential Commodities Act, 1955

Price control under the Essential Commodities Act, 1955 [Section 3(3)]
Where any person sells any essential commodity in compliance of the order made under Section
3, the price of that essential commodity shall be determined as:
(a) Agreed price– When the parties have already agreed upon the controlled price fixed under
this Section.
(b) Controlled price– When no such agreement can be reached, the price is calculated with
reference to the controlled price.
(c) Market price– Where neither the above prices apply, then the price is calculated according
to the average market rate prevailing in the locality.

Fixing the price of essential commodities for an emergency situation (Section

3A)
The Central Government, when finds necessary to control the emergency situation such as
controlling the rise in prices or preventing the hoarding , may issue a notification regarding the
selling price of any foodstuff in any locality.
The price of such food-stuff would be determined according to the following rule:
1. If the foodstuff constantly falls under the category of controlled price and the parties have
already agreed upon it then the price is calculated according to that agreement.
2. If there is no such agreement related to the foodstuff can be reached then the price is
calculated with reference to the controlled price.
3. When there is a situation where condition 1 and condition 2 do not apply then the price of
such foodstuff is calculated according to the average market rate prevailing in the locality.
The notification issued under this Section shall remain in force for 3 months only.
Payment of procurement price (Section 3B)
When there is no aforesaid notification issued regarding the price of any food crop, edible oilseeds
or edible oils the price of such would be determined after keeping in the mind:
 The controlled price, fixed under this law or any other law for the time being in force such
food crop, edible oilseeds or edible oil;
 The general crop prospects;
 The need for such grade or variety;
 Recommendation of the Agriculture Price Commission.

Fixing a price for sugar to be paid to the producer (Section 3C)

When there is no aforesaid notification issued regarding the price of sugar, then the price of sugar
would be determined after considering the following:
 The price of sugarcane.
 The manufacturing cost
 The duty and tax
 The reasonable return to the business and manufacturers
However, it is provided that the government may from time to time decide different prices for
different areas, factories, and varieties of sugar.

Manner of exercise of power by central government

The central government, before the exercise of power, has to form an opinion on the fact that it is
necessary and expedient to issue orders for the purpose of:
(a) Maintaining or increasing the supply of any essential commodities or
(b) Securing their equitable distribution and availability at fair prices;
Based on the opinion, the central govt. may by Order
(a) Either provide for regulation; or
(b) Provide for prohibiting; the production supply or distribution of essential commodity and trade
and commerce therein.
The power of central government to make regulation

The regulation that the central government can make may include the following:
1) By way of grant of license and permits, either for the production and manufacture of goods
or for storage, transport and distribution of goods, disposal, acquisition of essential
commodities etc.
2) For bringing under cultivation any waste or arable land;
3) For controlling the price at which the essential commodity may be bought or sold;
4) For prohibiting the withholding from sale of any essential commodity, ordinarily kept for
sale;
5) For regulating or prohibiting any class of commercial or financial transactions relating to
food stuffs or cotton textiles which, in the opinion of the authority making order, are, if
unregulated are, likely to be, detrimental to the public interest etc.

Delegation of powers (Section 5)

Section 5 of the Act stipulates that the central government may, by notified order, delegate power
to officers/ authority subordinate to the central government or to state government and officers or
authority subordinate to the, state government on such matters and subjects and conditions, if any,
specified in the direction.

Confiscation of essential commodity (Section 6A)

As per Section 6A of the Essential Commodities Act, 1955-

(1) Where any essential commodity is seized in pursuance of an order made under section 3 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 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;
(b) any package, covering or receptacle in which such essential commodity is found; and
(c) any animal, vehicle, vessel or other conveyance used in carrying such essential
Provided that without prejudice to any action which may be taken under any other provision of
this Act, no food grains or edible oilseeds in pursuance of an order made under section 3 in relation
thereto from a producer shall, if the seized food grains or edible oilseeds have been produced by
him, be confiscated under this section:

Provided further that in the case of any animal, vehicle, vessel or other conveyance used for the
carriage of goods or passengers for hire, the owner 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 animal,
vehicle, vessel or other conveyance.

(2) Where the Collector, on receiving a report of seizure or on inspection of any essential
commodity under sub-section (1), is of the opinion that the essential commodity is subject to
speedy and natural decay or it is otherwise expedient in the public interest so to do, he may―
i. order the same to be sold at the controlled price, if any, fixed for such essential commodity
under this Act or under any other law for the time being in force; or
ii. where no such price is fixed, order the same to be sold by public auction:

Provided that in case of food grains, the Collector may, for its equitable distribution and
availability at fair prices, order the same to be sold through fair price shops at the price fixed by
the Central Government or by the State Government, as the case may be, for the retail sale of
such food grains to the public.

(3) Where any essential commodity is sold, as aforesaid, the sale proceeds thereof, after deduction
of the expenses of any such sale or auction or other incidental expenses relating thereto, shall―
(a) where no order or confiscation is ultimately passed by the Collector,
(b) where an order passed on appeal under sub-section (1) of section 6C so requires, or
(c) where in a prosecution instituted for the contravention of the order in respect of which an
order of confiscation has been made under this section, the person concerned is acquitted,
be paid to the owner thereof or the person from whom it is seized.

Section 6 A of the Act states that where an Essential Commodity is seized in pursuance of any
order under section 3 and the designated authority satisfies that there is a contravention of any
order, may order confiscation of essential commodity, package etc so seized.
Essential ingredients for confiscation of goods:

(1) The power to order for confiscation of goods is vested with district collector;
(2) There is no condition precedent for making the order of confiscation that a prosecution
case is pending;
(3) The conferment of powers upon the authority to order confiscation for the contravention
of the order made under this act.
(4) The general provision of criminal procedure code 1973 need not to be followed.
(5) In the case of perishable commodity, confiscated can be sold and deposited with the court.
(6) If the parties are acquitted, the amount shall be given back to the aggrieved party along
with interest if convicted. The amount shall go to the state exchequer.

Penalties (Section 7)
As per section 7, person who contravenes any order under section 3, shall be punishable with
imprisonment for a term varying from 3 months to 7 years depending upon the offence, or shall
also be liable to fine or both as may decided by the court. In addition, the property of the person
who contravened the provisions of the act may also be forfeited.

Offences by companies (Section 10)

(1) If the person contravening an order made under section 3 is a company, every person who,
at the time the contravention was committed, was in charge of, and was responsible to, the
company for the conduct of the business of the company as well as the company, shall be
deemed to be guilty of the contravention and shall be liable to be proceeded against
and punished accordingly:
Provided that nothing contained in this sub-section shall render any such person
liable to any punishment if he proves that the contravention took place without his
knowledge or that he exercised all due diligence to prevent such contravention.

(2) Notwithstanding anything contained in sub-section (1), where an offence under this
Act has been committed by a company and it is proved that the offence has been committed
with the consent or connivance of, or is attributable to any neglect on the part of
any director, manager, secretary or other officer of the company, such director, manager,
 secretary or other officer shall also be deemed to be guilty of that offence and shall be
liable to be proceeded against and punished accordingly.

Explanation.―For the purposes of this section-

(a) “company” means any body corporate, and includes a firm or other association of
individuals; and
(b) “director” in relation to a firm means a partner in the firm.

In the case of offences committed by the companies, the person who committed the offence or
person who is incharge of the company shall be held responsible for the offence and punishment.
The offences under the Act are treated as cognizable offences.

Burden of proof in certain cases (Section 14)

Section 14 stipulates that if a person is prosecuted for an offence under section 3 which prohibits
him for doing any act or being in possession of a thing unlawfully or without license or legal
document, the burden of proving that he has such authority, permit, license or other documents
lies on him.

The Competition Act, 2002

Important Definitions:

Sec 2. Definitions.—In this Act, unless the context otherwise requires,—

(a) “acquisition” means, directly or indirectly, acquiring or agreeing to acquire—
i. shares, voting rights or assets of any enterprise; or
ii. control over management or control over assets of any enterprise;

(b) “agreement” includes any arrangement or understanding or action in concert,—

i. whether or not, such arrangement, understanding or action is formal or in writing; or
ii. whether or not such arrangement, understanding or action is intended to be enforceable by
legal proceedings;
(c) “cartel” includes an association of producers, sellers, distributors, traders or service providers
who, by agreement amongst themselves, limit, control or attempt to control the production,
distribution, sale or price of, or, trade in goods or provision of services;

(f) “consumer” means any person who—

(i) buys any goods for a consideration which has been paid or promised or partly paid and partly
promised, or under any system of deferred payment and includes any user of such goods other than
the person who buys such goods for consideration paid or promised or partly paid or partly
promised, or under any system of deferred payment when such use is made with the approval of
such person, whether such purchase of goods is for resale or for any commercial purpose or for
personal use;
(ii) hires or avails of any services for a consideration which has been paid or promised or partly
paid and partly promised, or under any system of deferred payment and includes any beneficiary
of such services other than the person who hires or avails of the services for consideration paid or
promised, or partly paid and partly promised, or under any system of deferred payment, when such
services are availed of with the approval of the first-mentioned person whether such hiring or
availing of services is for any commercial purpose or for personal use;

(m) “practice” includes any practice relating to the carrying on of any trade by a person or an
enterprise;

(n) “prescribed” means prescribed by rules made under this Act;

(o) “price”, in relation to the sale of any goods or to the performance of any services, includes
every valuable consideration, whether direct or indirect, or deferred, and includes any
consideration which in effect relates to the sale of any goods or to the performance of any services
although ostensibly relating to any other matter or thing;

Tie-in Arrangement:-
Section 3 of the Competition Act deals with anti-competitive agreements and further Section 3 (1)
of the Competition Act prohibits any agreement by enterprise or person or association of
enterprises or association of persons with respect to production, supply, distribution, storage, and
acquisition or control of goods or provision of services which causes or is likely to cause an
appreciable adverse effect on competition within India. Section 3 clause (4) provides that, any
agreement amongst enterprises or persons at different stages or levels of the production chain in
different markets, in respect of production, supply, distribution, storage, sale or price of, or trade
in goods or provision of services, including—
(a) tie-in arrangement;
(b) exclusive supply agreement;
(c) exclusive distribution agreement;
(d) refusal to deal;
(e) resale price maintenance,
shall be an agreement in contravention of sub-section (1) if such agreement causes or is likely to
cause an appreciable adverse effect on competition in India.

Tie-in Arrangement:

As prescribed under Section 3(4) explanation, tie-in arrangement includes any arrangement
requiring a purchaser of goods, as a condition of such purchase, to purchase some other goods.
The product or service that is obtain by the buyer as per as requirement is called the tying product
or service and the product that is compelled or forced to the buyer is called the tied product. It is
also referred to as tying agreement, tying arrangement, tie-in sale, tie-up sale, or clubbed sale.
A good or service is to be treated as being the subject of a tie-in arrangement when its
supply is offered on the condition that the buyer who ordered for some good or service required
by him is also forced to purchase some other product or service. The basic objection that would
arise from the point of view of the buyer is that he is required by compulsion to buy a product or
service that he does not need and so is forced to incur unnecessary cost. This compulsion that is
created is where the problem arises. Also, from the point of view of the law protecting competition
in the market, this would be objectionable on the ground that it reduces competition in the supply
of the tied product. An example of ‘tie-in’ or ‘tying’ arrangement is when manufacturer of product
‘A’ and ‘B’ requires an intermediate buyer who wants to purchase product ‘A’ to also purchase
product ‘B’.