Essential Commodities Act,1955.

The Government uses the Act to manage and regulate essential

commodities’ production, supply, and distribution, making them
available to consumers at fair prices.

Naurina Ashraf Khan

LL.M. (2 n d Semester)
 Assignment on :

Essential Commodities Act, 1955

submitted by: submitted to:

Naurina Ashraf Khan Ms. Asima Punjabi

LLM. 2nd Semester. Assistant professor school

of Law
Enrollment Number:
21044122004 (UOK)

Subject : Socio Economic

Offences

1
[Link] CONTENTS PAGE
. NO.

1. Abstract 3

2. Introduction 4

3. Scope Of the Act 5

4. Objectives Of the Act 5

5. Area Of Study: - 5-15

 Essential Commodities Act And Covid-19:
 Historical Background Of The Act
 Features Of The Essential Commodities Act
 Need For Essential Commodities Act
 Laws Relating To Maintenance Of Essential Supplies
 Powers Of Central Government Under The Essential
Commodities (Section 3)
 Power To Notify The Essential Commodity
 Power To Issue A Control Order (Section 3)
 To Require Any Person To Do Specific Works
 To Regulate Or Prohibit Any Class Of Commercial And
Financial Transactions.
 Commodities Included In the Act.
 Satpal Gupta Vs. The State Of Haryana
 State Of Bombay Vs. Virkumar Gulab Chand Shah
 Limitations Of Essential Commodities Act

6. Conclusion 15-17

7. References 18

Index…

2
 Abstract
Essential Commodities Act was introduced by the parliament on 1st
April 1955. The Government uses the Act to manage and regulate
essential commodities’ production, supply, and distribution, making
them available to consumers at fair prices. Through the provisions of
the Essential Commodities Act, the government intends to control the
price rise of essential commodities like fertilizers, pulses, edible oil,
cereals, oilseeds, petroleum and allied products, and fruit and
vegetable seeds. However, when obstructed, the supply of these
commodities can affect people’s normal life.

Recently, the Government included masks and hand sanitizers under

the Essential Commodities Act. The government’s order came due to
the reports of a shortage of these commodities and a sudden and sharp
spike in their prices because of the alleged hoarding of stock
manufacturers. The recent coronavirus pandemic (COVID-19) triggered
panic in buying masks and hand sanitizers in many places in India.

KEYWORD(S)

 Essential Commodities

 Fertilizers

 Food Crops

 Notified Order

 Sugar.

3
 Introduction
THE ESSENTIAL COMMODITIES ACT, 1955.

The preamble of the Essential Commodities Act, 1955 clearly states

that the Act is meant to be in public interest, for the control of
production, supply and distribution of trade and commerce in certain
commodities. The Act seeks to prevent hording and black marketing of
essential goods as they may cause harm to the society. Mens rea is an
important part of an offence under this Act which deals with the
provisions relating to carrying out business in certain commodities only
after satisfying the requirements set about in the order. The Act was
amended in 1974 and section 10C was inserted, which reads as under:-

Section 10C: In any prosecution for an offence under this Act, which
requires culpable mental state on the part of the accused, the court
shall presume the existence of such mental state, but it shall be a
defense to prove the fact that he had no such mental state with respect
to the offence charged.

This section shifts the burden of proof on the defense to prove that the
act was innocent. Also, as provided in explanation to Sec.10C, the
standard of proof required is that the defense must prove the absence
of culpable mental state beyond reasonable doubt and hence the
burden of proof is as high as that of the prosecution and the defendant
cannot escape liability by creating a doubt as to his mental state.

Nowadays, every person’s life depends upon some essential

commodities, which are used by them every day. These commodities
are the basic requirements to sustain a normal life. 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 plays a major role.

4
 SCOPE OF THE ACT
The act provides certain provisions which have punishments for the
people committing black marketing or hoarding. It further has the
below-mentioned scope,

• The Act authorizes the state and federal governments, or an

official representative, to detain those individuals or groups who
are engaged in black marketing.

• The Act also gives district magistrates and the commissioner of

police the authority to prosecute offenders.

• The Act does not cover the state of Jammu and Kashmir.

OBJECTIVES OF THE ACT

1. Maintaining an uninterrupted supply of essential products in the
country.

2. The government (Department of Consumer Affairs, Food,and

Public Distribution) tries to keep the prices of basic necessities
stable. They set the maximum retail price for such goods.

3. Avoid unnecessary stocking of essential products.

4. Stop the covert or black marketing of essential products.

5
 AREA OF STUDY

ESSENTIAL COMMODITIES ACT and COVID-19:

[8]As a result of the COVID'19 outbreak, the government declared
masks and sanitizers as commodities under the ECA. This was because
the coronavirus pandemic has activated frenzy purchasing of covers
and hand sanitizers at numerous spots the world over. Remembering
for India, the administration's organization has come in the wake of
reports of a lack of these wares and an abrupt and sharp spike in their
costs, and the supposed accumulating of stocks by producer.

Without the ECA the regular man would be helpless before shrewd
merchants and retailers. It engages the legislature to control costs
straightforwardly as well. The Administration can fix the retail cost of
any bundled ware that falls under the ECA.

As a feature of keeping up smooth stockpile of basic things in the

nation, Union Home Secretary, Ajay Kumar Bhalla has kept in touch
with all State Chief Secretaries to find a way to guarantee accessibility
of fundamental merchandise, by summoning arrangements of the ECA
1955.

These measures incorporate fixing of stock cut-off points, topping of

costs, upgrading creation, assessment of records of sellers and other
such activities. In addition to the amendment to the Essentials
Commodity Act, the finance minister unleashed an eight-point-reform
program aimed to boost the self-sufficient India vision under the Rs
20,000 crore Atma Nirbhar Bharat special economic package, being
announced in the wake of the disaster unleashed by coronavirus
pandemic.

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 Defense of India
Act, 1939 during World War 2. The Act ceased to exist in 1946.
However, it was felt that certain regulations are needed urgently for the

6
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 replaced by the Essential
Supplies (Temporary Powers) Act, 1946.

The provisions of this Act were further extended by two resolutions of

the General Assembly in 1948 and 1949. 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

FEATURES OF THE ESSENTIAL COMMODITIES ACT

Once the limit is decided and published, the States get into action to
ensure that no wholesaler, retailer, importer, or exporter accumulates
the commodities beyond the specified limit. If a state decides to add
prohibitions, it can take action by punishing wholesalers, retailers,
shopkeepers, and the like, who do not obey the limit and hoard
commodities. The state government can take the help of the police to
conduct raids and auction surplus goods. The major features of the
Essential Commodities Act enacted by the parliament to govern India’s
production, supply, and distribution of essential commodities are as
under-

The items under the Act include fertilizers, drugs, edible oils and pulses,
petroleum, and petroleum products.

The Centre government can include new commodities when needed

and exclude them from the list once the situation improves.

Under the Act, the government can also fix the maximum retail price
(MRP) of any packaged product declared an “essential commodity.”

Under the Essential Commodities Act, powers of the Central

Government have already been delegated to the States by way of
orders from 1972 to 1978. The States/UTs may take action against the
offenders.

7
NEED FOR ESSENTIAL COMMODITIES ACT

Without the Essential Commodities Act, consumers would be at the

mercy of opportunistic traders and shopkeepers. Thus, the commodities
which qualify as ‘essential’ are not subjected to unfair profiteering. The
Act also empowers the government to control the prices of such
commodities directly and Thus ensure the welfare of the consumers.

The framing of the Essential Commodities Act was one of the most
demanded acts for the welfare of consumers. The following benefits
were called up for the introduction of the Act-

There was a risk of irrational spikes in essential commodities prices. So,

the ECA was introduced. This granted protection to the consumers
against such hikes.

At times, to ensure an adequate supply of goods, the Act has been

invoked by the Government.

The Acts stands against the Black- market practitioners and hoarders
that hamper the smooth working of the market.

Because of the act introduced, the State agencies have the power to
conduct raids in orde4 to catch the defaulters and subject them to
harsh punishments. The act also empowers the agencies to sell the raid
goods via shops with fair prices or in some scenarios, the excess stocks
can be auctioned.

There was a need to make a balance between genuine stock build-up

and speculative hoarding. In India, the crops are seasonal. So, in order
to maintain the all-time supply of goods, it is required to store the
stocks adequate during the season. However, this makes it difficult to
differentiate between speculative hoarding and genuine stockpiling. Not
only the shortage because of being in the off-season but the bad
weather conditions also contribute to the hike in prices. If the prices for

8
 such crops are monitored regularly, it would be difficult for the farmers
to grow such crops.

Also, the traders may find it inconvenient to invest in a better storage

infrastructure if the stock limit is too-frequent. Perhaps the industries
dealing with food processing are required to maintain an adequate
amount of stock (usually larger than required) so as to work smoothly.
In such a scenario, private investments on a large scale are hard to flow
into cold storage facilities or food processing.

LAWS RELATING TO MAINTENANCE OF ESSENTIAL SUPPLIES

In order to control illegal Activities and offenses under the Essential

Commodities Act,1955, the government had enacted the Prevention of
Black Marketing and Maintenance of Supplies of Essential Commodities
Act, in the year 1980. This Act provides powers to officers of the Central
Government as well as State Government to pass the detention order
against the persons who seek to control production, distribution, and
supply, trade, and commerce of those essential commodities defined
under Section 2 of the Essential Commodities Act,1955. The Act also
contains the manner according to which these detention orders pass or
execute.

POWERS OF CENTRAL GOVERNMENT UNDER THE ESSENTIAL

COMMODITIES (SECTION 3)

The Central Government under this Act have two important powers:

1. 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. However, the commodities in regard to those such
powers are exercise must have to be given under entry 33, list 111 of
the 7th schedule of the constitution.

9
2. 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 favor of the general public.

• When they have to secure equitable distribution and availability

of these commodities in the market.

• When they have to secure any specific commodity for the

Defence of India.

• Purposes for passing control order

• To regulate by license, permit or otherwise

• 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.

• To bring under cultivation of any wasteland or arable land

• 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.

• 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:

10
 • To Improve domestic availability;

• Keep the price at a reasonable level, and

• Regulate the artificial inflation due to hoarding and black

marketing.

• To determine entry, search, examine, seizure of any essential

commodities

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.

3. To require any person to do specific works:-

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.

4. To regulate or prohibit any class of commercial and financial

transactions:-

The Central Government may pass the control order to regulate or

prohibit any class of commercial or financial transactions relating to any

11
foodstuff which is in the opinion of the authority unregulated and is
likely to be detrimental to the public interest.

COMMODITIES INCLUDED IN THE ACT:

Section 2 (a) of the act defines the meaning of the essential commodity
and provides a list of 7 such commodities. Thecommodities include,

• Fertilizers, whether organic, inorganic as well as mixed,

• Drugs which are defined under Section 3 (b) of the Drugs and
Cosmetics Act, 1940,

• Edible Oil and its seeds,

• Cereals,

• Hank yarn, made with cotton,

• Petroleum and its products,

• Seeds of fruits and vegetables or jute.

The act does not provide any specific definition for the word ‘foodstuff’.
Nevertheless, the scope of the word is derived from various case laws.
Some of them are given below:-

SATPAL GUPTA Vs. THE STATE OF HARYANA

12
 In this case, it was determined that cattle and poultry
foods fall under the definition of “foodstuff.” As a result, it
is concluded that food is related to both humans and
animals.

STATE OF BOMBAY Vs. VIRKUMAR GULAB CHAND SHAH

In this case, it was determined that the foodstuff

includes raw materials, items used in the process, and
items used in food preparation.

LANDMARK JUDGMENT UNDER THE ACT

NATHU LAL V. STATE OF MADHYA PRADESH (AIR 1966 SC 43)

This case established the meaning of the term ‘mens rea’ under the
Act.

In this case, the applicant was the grain trader in Dhar, Madhya
Pradesh. He was prosecuted for storing 885 Maundsand 21/4 Seers of
wheat without a license for sale, for which he committed an offense
under Section 7 of the Act. The applicant argued that he did not
intentionally violate the provision of the law, said that he stored the
goods after applying for the license and that the government
authorities had fully convinced him that they would grant it to him.

It was held that the nature of the statute is to remove social evil
and promote welfare but it does not exclude the element of mens rea
from its ambit. The elements of mens reaexcluded from any statute
only if it defeats the object to such a statute. Thus when we read the

13
object of the Essential Commodities Act which is “to control trade in
certain commodities for the interest of the general public” we cannot
say that this would be defeated if the mens rea is read like an
ingredient of offences committed under it. In this case, the applicant
has successfully demonstrated that he was not guilty of wrongful intent
or mens rea at the time the confiscated essential products were stored
but, despite violating the Section 3 order, was not prosecuted for that
offence.

LIMITATIONS OF ESSENTIAL COMMODITIES ACT

The stock limits on commodities under the Essential Commodities Act
(ECA) neither bring down prices nor reduce price volatility. The Act is
anachronistic as it was passed in 1955 out of an India stressed over
starvations and deficiencies; it is unessential in the present India and
must be cast off.

According to a survey, in 2019 alone, there were 76,033 raids under

ECA, as per the report. Nonetheless, the conviction rate was
exceptionally low only 2,941, or .8 percent of the total raids directed.

Section 3 of the Essential Commodities Act gives the central

government powers to control the production, supply and distribution of
specified essential commodities listed in it. The rundown is drawn up
after joint discussion between the center and the states, and the last
force stockholding limits on the listed products. And it is the
stockholding limits under the Essential Commodities Act that defines
hoarding. It is this anomaly that needs to be addressed, not pushing
more and more items under the Act whenever there is a price shock.
And thus, if Act to be retained and strengthened, looks like the country
is going to have to live with an ineffective, harassment-prone law.

Identifying the actual hoarders is not at all easy. These may not be
small brokers however their tasks are not corporatized and they have
numerous roads to spirit away and hoard supplies. The conviction rate
under the Act is likewise wretchedly low. So, the hoarders go without

14
any penalty and authentic players in the nourishment economy are
bugged.

The Act isn't on top of present occasions. It appeared well and good
when the transport infrastructure across the nation was poor and
markets not coordinated. So, a production stock in one piece of the
nation could result in hoarding and black marketing. That is not the
case anymore. Deficiencies in a single piece of the nation can be
countered if there is abundant inventory elsewhere.

Also, food processing industries need to maintain large stocks to run

their operations smoothly.

The Act doesn't distinguish between food processors and

wholesale/retail food chains that stock food, and hampers the creation
of what's needed the most storage and warehouse infrastructure in the
agriculture space.

The ECA disincentivizes investments in warehouses and storage for

crops. It makes useless any effort of the government to improve the
income of farmers. Till the time the ECA isn't rejected, the private
sector won't approach to put resources into Agri distribution centers.

Also, due to the fact that ECA act fails to differentiate between
Hoarding and Storage, the recent Economic Survey said that this act is
outdated and must go.

CONCLUSION
The Essential Commodities Act of 1955 is one of the most important
laws in the country for protecting the general public’s interests. The
Central Government has broad powers under this Act to control the
production and supply of essential commodities. The Central
Government controls the price of confiscated or seized essential
commodities under this Act. All of these powers are required to keep
the market running.

15
The Essential Commodities Act, 1955, enacted by Parliament for control
over the production, supply, distribution, etc. of essential commodities,
to maintain or increasing supplies, to secure equitable distribution and
availability of commodities at fair price -in the interests of the general
public. Hence, it is imperative that the Central Government should
regularly monitor its own action, as well as, action taken by State
Governments/ UT Administrations.

But the improper implementation of Law, orders and circulars of Supply

and Distribution have resulted in maldistribution. Thus, there is need for
proper and objective application of this delegated power so as to assure
that the fundamental rights are not encroached upon. Also, vexatious
complaints have been sought to be discouraged by providing immunity
to public officials in discharge of their official duty under S. 15A.

Also, black marketing and bribery and corruption is rampant and a

glaring problem in the implementation of orders and directions on
essential commodities. Additionally, it was observed that states most
frequently withdraw from prosecutions related to cases registered
under the Essential Commodities Act as compared with other
prosecutions. This shows not only the tolerance that various state
governments exhibit towards bribery and corruption but also the
influence of the licensees upon the government.

Moreover, another acute problem is that Budgetary subsidies are not

able to reach the beneficiaries, and the Absence of stringent Penal
liability creates proliferation of Essential Commodity related offenses.

Hence, the following suggestions including both legal and

administrative measures are advanced for incorporation in the law and
to bring administrative reforms in the control over the essential
commodities encompassing, the opinions and views of the Courts, other
Connected authorities, general public, stakeholders and media reports.

Legal measures and suggested changes in the Law:

An order issued under Section 3 of the Essential Commodities Act,

1955, is legislative m nature and requires to be notified in the official
gazette which is being done by some state governments at present.
However, orders issued by the Central Government must also be
notified in the Central gazette.

16
Presently, all offenses and violation of the provision of this law is
viewed / seriously and are made cognizable and non-bailable. But the
trader's associations have demanded that all offenses be made
bailable. As it is, a large number of offenses are being reported and if
the offenses are made bailable (as demanded by some dealers) will
weaken the Act and its prohibitive nature.

Provision for punishment to erring officials under the Act would give it
the vital crucial stringency, needless to explain, that traders have been
unnecessarily harassed by the officials for obvious reasons.

A provision that officer, if proved guilty in a court of law, will be

punished for harassing the traders will benefit both the traders and
consumers; will welcome this amendment.

Similarly, the power of the officials under the Act should be reduced.
The officials should be made to take the permission of the First-Class
Magistrate or its equivalent before making entry, examination, or
seizure of commodities from a trader and produce a copy of the order
of permission taken from the Magistrate to the trader.

Preventive Detention: The basic concept underlying detention is that if

preventive steps are not taken then the person sought to be detained is
likely to indulge in an activity that is prejudicial to the maintenance of
supplies essential to the community.

Administrative Measures like: For efficient implementation of the law

and administration of the Essential Commodities Act, 1955 and
administration of Prevention of Black Marketing and Maintenance of
Supplies of Essential Commodities Act, 1980, a review of their
provisions and other policy matters must be done periodically.

For price control - Emphasis on Food Stuffs and fertilizers.

For effective Prosecution - The Government of India must take

immediate steps to prevent widespread corruption in the supply and
distribution of essential commodities through the establishment of
independent and separate mechanisms to investigate offenses. This
mechanism must be independent of the local police, as the latter is
corrupt and therefore, inefficient in investigating corruption. This
requires a change in the existing law -The Essential Commodities Act,

17
1955, and the government of India must be urged to make, such
changes and facilitate this process. Confiscation proceedings under
Section 6A must be delegated to specially designated full-time officers
under the Collectors.

For smooth supply and distribution - Proposed Supply chain

Reforms/Changes/Modifications in existing Mechanism like for
effectiveness in supply and distribution, minimization of cost of
kerosene oil price reduction and putting a check on illegal activities is
the need of an hour.

REFERENCES

• The Essential commodities Act,1995

• Essential commodities Act , Reference book by Raju Raval

• [Link]
commodities-act-1955-1585305727-1#:~:text=The%20Essential
%20Commodities%20Act%2C%201955,up%20to%2030th
%20June%202020

• [Link]

• [Link]
essential-commodty-regulation-and-enforcement-ecr-and-e/
essential-commodities-Act

• The Business Line. (09/03/2018). All you wanted to know about

Essential Commodities Act.

• The Hindu. (08/04/2020). Coronavirus lockdown: Invoke Essential

Commodities Act to curb black marketing, Home Secretary tells
States.

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