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Padmanabhan, J.—A batch of seven Writ petitions are being disposed of by this common judgment. The Petitioners are all importers of palmolien and palm oil. For the purpose of this, case I shall set out the facts in Writ Petition No. 4604 of 1981 wherein the Petitioners are M/s. Hyder Enterprises, Madras. Till 2nd December 1978. the Government of India allowed free import of RBD palmolien and palm oil under open general License basis. On 2nd December 1978, the Government of India issued a notification canalising the importation of palmolien and palm oil through the state Trading Corporation. However the Government provided for the issue of import licence to such of those traders who had entered into firm contracts with foreign suppliers before 2nd December 1978 the date of the notifications. Accordingly, all the Petitioners herein obtained import licence in December 1979 and January, 1980. The Petitioners accordingly entered into agreements with their sister concerns who are the Petitioners in the other writ petitions. Under the said agreement the Petitioners had to provide the necessary finance for the import of goods from a broad either on letters of creditor documents against payment basis. Further, the Petitioners had the authority to sell the goods after the clearance of the same from the customs and out of the sale proceeds, all the amounts financed by the Petitioners were to be adjusted, and remittance had to be made to the foreign supplier against the letters of credit, D.P. or D.A. Out of the net profits Petitioners were to be paid 92 � percent and the sister concern were to be paid 7� per cent. Accordingly, the Petitioners imported consignments of palmolien and palmoil on document against payment basis. The goods reached Madras between March and April, 1980. Since the validity of the licence was only 60 days, according to the Petitioners, they had to import all the goods. The foreign suppliers sent the documents including the invoice insurance certificates, the original till of lading through their bankers, the Lakshmi Commercial Bank Ltd. They had given an undertaking to the foreign bankers that only as and when payments are made the goods will be released by them. The goods were stored in the various godowns of the Petitioners viz. (1) 16, Pattinathar Koil St., Tiruvottiyur, (1) 631, I.A. Muttakadu Road, Nilankarai, Thuvanmiyur, (3) Andiappa Gramni St., Royapuram Madras,(4) 13, Davidson St. Madras and (5) 211, Ennore High Road, Madras though the goods were kept in the godowns of the Petitioners, they were under the custody of the Lakshmi Commercial Bank, the second Respondent, who are trustees of the foreign bankers. The Petitioners could obtain delivery orders from the bank only after paying the money therefore. While so, on 16th June, 1980 the officials of Anti Hoarding Cell of Civil Supplies, C.I.D. Madras, visited the godown at Andiappa Gramani Street, Royapuram and asked for the import licence. They were told by the representatives of the Petitioners present on the spot the licences were available at the place of business viz., at 64, Thathamuthiappan Street, G.T. Madras. However, the officials seized 3,750 barrels and allowed the goods to remain at the godown, On the same day, the officials visited the godown at 16, Pattinathar Koil Street and seized 10.747 barrels. 129806 M.T. were seized on 20th June, 1980 from 13, Davidson Street, Madrse 962, 670 M.T. were seized on 21st June, 1980 from 631, LA. Mutthukadu Road, Nilankarai, Tiruvanmiyur, while 10,611 tins of RBD palm oil were seized from 211, Ennore High Road, Madras on 16th July, 1980.
On 22nd December 1960 the first Respondent, the Deputy Commissioner (City) Civil Supplies issued a show-cause notice to the Petitioners calling upon them to show-cause why the goods seized from the various godowns of the Petitioners should not be confiscated u/s 6-A of the Essential Commodities Act. The writ petition has been filed to quash the show-cause notice and for further directions being issued to the first Respondent not to proceed further pursuant to the show-cause notice.
Before considering the case of the Petitioners it is necessary to state that the police filed petitions before the sixteenth Metropolitan Magistrate, G.T. Madras and the Chief Judicial Magistrate, Chingleput for permission to sell the goods and obtained order directing the sale of the goods through public auction. The Petitioners then filed Criminal Miscellaneous Petition Nos. 3142 and 4254 of 1980 before the respective Magistrate for setting aside he orders. They also filed Criminal Miscellaneous Petition Nos. 3343 and 3344 of 1980 before the High Court for permission to sell the goods and deposit the amounts with the second Respondent, Lakshmi Commercial Bank Ltd., Madras. Criminal Miscellaneous Petition Nos. 3343 and 3344 of 1980 were heard by a Bench of this Court. The learned Judges permitted the Petitioners to sell the goods and deposit the amount with the second Respondent. Subsequently, the second Respondent filed Criminal Miscellaneous Petition Nos. 6455 and 6556 of 1980 before this Court. The same Bench passed a consent order after bearing the learned Counsel for the second Respondent, the Petitioners and the public Prosecutor, and the Counsel for the other Respondents. The learned Judges directed that 10 per cent of the amount deposited by the Petitioners with the bank till then be kept unappropriated and the balance of 90 per cent may be appropriated by the bank towards the amount due to the foreign banks and transmit it to them. A regards the 10 per cent allowed to be retained unappropriated was stated that the said amount would continue to be with the bank for the purpose of satisfying any orders that would be passed in proceedings under the Essential Commodities Act, 1955. The order was passed by this Court without reference to either factual or legal contentions raised by the respective parties. Pursuant to the order of the Bench, the second Respondent has already appropriated 90 percent of the sale proceeds deposited with them by the Petitioners.
The United Commercial Bank, has been impleaded as the third Respondent in these writ petitions.
I have had the benefit of hearing the arguments of Mr. Habibullah Badsha for the Petitioners, Mr. N.T. Vanamamalai laid on behalf of the second Respondent, the Lakshmi Commercial Bank Ltd., Madras and Mr. V. Sridevan, on behalf of the United Commercial Bank, and Mr. J. Kanakaraj, the learned Additional Government Pleader for the first Respondent. Both Mr. Haribullab Badsha and Mr. Vanamamalai whose arguments were also adopted by Mr. Sridevan raised the following contention (1) The seizure of the stock of palmolien and palm oil by the first Respondent from the godowns of the Petitioners was illegal. At the time of the seizure the stock of palmolien and palm oil was in the custody and possession of the second Respondent, Lakshmi Commercial Bank Limited as trustee for the foreign bankers. The palmolien and palm oil were imported by the Petitioners under documents against payment basis. The stock of palmolien and palm oil were under the custody of the second Respondent bank. The bank would release the goods to third parties under instructions from the Petitioners on payment of the amount for the quantity of goods released. The second Respondent Lakshmi Commercial Bank was holding the goods only in its custody as a trustee of the foreign bankers. Consequently, at the time of seizure the goods were not legally in the possession of the Petitioners, though for convenience the goods were stored in the godowns made available to the second Respondent bank by the Petitioners. (2) The impugned show cause notice has been issued without jurisdiction. The first Respondent has no power of seizure under the Tamil Nadu Essential Commodities (Display) of stocks and Prices and Maintenance of Accounts Order 1977 (For short display order and under the Pulses, Edible Oil Seeds and Edible Oil Storage Order 1977 (Fort short storage order). Consequently, the very seizure itself in invalid in the circumstances the first Respondent will have no right to confiscate the stock of palmolien and palm oil seized from the premises of the Petitioners u/s 6A of the Essential Commodities Act 1955. (3) In as much as the goods have been seized for violation of the Display Order, the seizure must be held to be illegal because under the provisions of the Display Order, the quantity and stock and prices have to be displayed in the premises of business of the Petitioners which is at 64, Thathamuthiappan Street, and not in the various godowns from which the goods had been seized...(4) In any event, the seizure is illegal as the seizure was not made by the first Respondent in the reasonable belief that the Petitioners had violated any of the provisions of the Display Order or storage order. Besides the common contentions Mr. Vanamamalai on behalf of the two banks raised the further contention that in view of the Bench order which was passed in the interest of promotion international trade, the sale proceeds of the entire palmolien and palm oil seized should be allowed to be transmitted to the foreign bankers. Any order which this Court might pass which will have the effect of preventing the remittance of money to the foreign bankers would impede international trade and the condense the foreign market would have on the Indian bankers and would adversely affect international trade and the reputation of the country in the foreign market would have on the Indian bankers and would adversely affect international trade and the reputation of the country in the foreign market. In this connection, the learned Counsel also laid stress upon the fact that under the arrangement by which the Petitioners imported palmolien and palm oil, letters of credit were opened against payment basis The Lakshmi Commercial Bank Ltd., was in possession of the goods as a trustee of the foreign bankers, that the bank was not a dealer and was not in possession of the goods as a dealer and consequently who bank is under on obligation to transfer money which has been deposited with it by the Petitioners to the foreign bankers without any interference by orders of Court. Mr. Vanamamalai also argued that the price of dollar in terms of rupee was increasing everyday and that if the Lakshmi Commercial Bank Ltd. was not allowed to remit the sale proceeds to the foreign bankers they would be compelled to pay much more than that was due to the foreign bankers and that they would be obliged to pay large amounts by way of interest. This would involve great monetary less to the second Respondent, Lakshmi Commercial Bank.
Mr. Kanakaraj, the learned Additional Government Pleader vehemently opposing the stand of the learned Counsel for the Petitioners and the other Respondents, took the that at the time of seizure the goods were in the possession of the Petitioners and not the bank. The first Respondent has only issued a show cause notice. The question as to who was really in possession on the date of seizure, was a matter which has to be decide on the materials that might be placed before it by the Petitioners and also the second Respondent bank if they were inclined to let in any evidence. On the basis of the materials available before the Court at the present stage, it could not be definitely said that the Petitioners were not in possession of the goods at the time of seizure. Admittedly, the goods were seized from the godowns of the Petitioners and there were no boards of the second Respondent Lakshmi Commercial Bank Ltd. showing that the goods were in the possession and custody of the bank and not in the possession of the Petitioner. The learned Counsel further contended that there is ample material to show that the goods had been seized in the reasonable belief that the Petitioners had violated the provisions of the Display Order and the Storage Order as mentioned in the show cause notice and consequently the goods were liable to be confiscated in terms of Section 6A of the Essential Commodities Act. Further, the learned Additional Government Pleader argued that all the contentions raised by the learned Counsel for the Petitioners were only factual and had to be determined only after the Petitioners submitted their explanation to the show cause notice and after an enquiry is held. The learned Additional Government Header farther met the arguments of Mr. Vanamamalai stating that unless it was found as a matter of fact that the goods at the time of seizure were in the custody of the second Respondent, Lakshmi Commercial Bank Ltd. the legal contentions raised by the learned Counsel and the citations urged by the learned Counsel would not be attracted. The learned Additional Government Pleader also laid emphasis on the fact that the order of the Bench in Criminal Miscellaneous Petition Nos. 3343, 3344, 6555 and 6556 of 1980 was only a tentative order passed without prejudice to the contentions of the parties in the writ petitions and was not conclusive on the question.
I shall first consider the question whether on the basis of the materials placed before me it could be said that the second Respondent Lakshmi Commercial Bank Ltd. was in possession of the goods seized. The fact that certain stock of palmolien and palm oil were seized from the godowns of the Petitioners in the various places in the city of Madras is not disputed. It is also not disputed that there were no sign boards in the godowns showing, that the goods were in the legal custody and constructive possession of the Lakshmi Commercial Bank Limited. It is the definite case of the Respondents that at the time the seizure was made the goods were in the possession of the Petitioners. The case of the Petitioners as well as the Lakshmi Commercial Bank Limited is that the goods were imported on the basis of an import licence issued by the Government of India, that since the sale had to be completed within a period of 60 days the Petitioners were burdened with a heavy stock of good, that under the import arrangement the second Respondent bark was put in legal custody and possession of the goods, that the goods were being delivered directly to the purchaser under instruction from the Petitioners on prepayment of the requisite price, and therefore at the time of seizure the Petitioners were not but only the second Respondents the Lakshmi Commercial Bank Ltd. was in possession. In this connection, my attention has been drawn to certain document. The first document is the import license. There is no dispute that the Petitioners had an import license and that the import license was valid only for a period of 60 days, and that the grace period of 60 days under paragraph 79 of the handbook of import export procedure, 1979-80 was not available against the license issued to the Petitioners. The bill of exchange shows that the documents had to be presented through the second Respondent Lakshmi Commercial Bank Ltd. It states that the payment should be made to the United Commercial Bank. The letters dated 11th February, 1980 addressed by the second Respondent to the South India Shipping Service is relied on to show that it was the bank that cleared the goods and the shipping agents were directed to store the merchandise with them under lien to the bank. A copy of the said communication was addressed to the Petitioners. The certificate of registration of the Petitioners under the Tamil Nadu General sales Tax Act T.N.G.S.T 97401 78-79 is relied upon to show that the principal place of business of the Petitioners at the relevant time was at No. 50, Thatha-muthiappan Street, Madras 1. The letter dated 10th March 1980 addressed by the Lakshmi Commercial Bank Ltd. to Messrs. South India Shipping Services which is relict on show that the bank has directed the clearing agents to release 39.559 M.T. on R.B.D. palmolien to the Petitioners from the consignment store by the clearing agents. Apart from above, no other documents has been placed before the Court by the Petitioners. A statement has been filed be the Petitioners showing the import sale and stock held by them and their sister concerns and the goods under lieu with the Lakshmi Commercial Bank at the time of seizure. From the above documents, it is not possible to say conclusively whether at the time of seizure entire quantity of good seized were in the possession of Lakshmi Commercial Bank Ltd. or the Petitioners. In fact, the communication dated 11th February 1980 sent by Lakshmi Commercial Bank to the clearing agents South India Shipping Service would (sic) the clearing agents.
to clear and store the merchandise with you under lieu to the bank in our name and send us storage receipt as soon as the goods are stored.
The communications dated 10th March 1980 issued by the Lakshmi Commercial Bank Limited to the clearing agent South India Shipping Services would direct the releases of 39.550 M.T. of R.B.D. palmolien to the Petitioners from the consignments stored with the clearing agents. Apart from this, there is nothing to show that at the time of seizure, the goods were in the legal possession and custody of Lakshmi Commercial Bank Ltd., though in the godowns of the Petitioners. Even according to the Petitioners and the second Respondent Lakshmi Commercial Bank Ltd. the bank would release the goods as and when payments are made to them. There is noting on record before me to show how much stock was released by the Lakshmi Commercial Bank Limited on payment and the quantity that remained in the possession of the bank as on the date of seizure. Merely from the fact that under the arrangement of import, Lakshmi Commercial Bank were to hold the goods and that they would release the same to the Petitioners their nominees only on payment would no be sufficient to show that at the time of actual seizure the seized goods were in the possession and custody of the Bank Mr. Vanamamalai contended that the first Respondent did not deny that the bank was in possession of the goods at the time of seizure. This is not factually correct. The first Respondent has filed a counter affidavit in writ Petition No. 4604 of 1981. A persual of the counter affidavit would show the goods were seized from the godowns of the Petitioners. The counter affidavit also proceeds that all the contentions raised by the Petitioner in the affidavit would be gone into by the first Respondent in the enquiry to be held u/s 6A of the Essential Commodities Act. The show cause notice itself proceeds on the basis that certain quantity of palmolien and palm oil were seized from the business premises and the godowns of the Petitioners and the persons in charge of the premises at the time of seizure are not able to properly account for the stock of palmolien and palm oil held in the godown and in the business premises. In as much as the show cause notice itself proceeds on the basis that the goods were seized from the business premises and the godowns of the Petitioners, it follows that the first Respondent proceeded on the basis that the Petitioners were in possession of the goods at the relevant time. Further, in the counter affidavit filed in Criminal Miscellaneous Petition No. 6555 of 1980 in answer to the affidavit filed by the Lakshmi Commercial Bank Limited it is stated as follows: "It is contended in paragraph 5 that the goods have not passed into the legal custody of importers. I respectfully submit that when myself and other Inspectors visisted the palces where the seizures have been effected it was only Hyder Enterprises and sister concerns concerns who were found to be in possession and custody of the article seized in this case and there was no indication that the bank was having a charge over these materials. In fact the key of the various places wherein these materials have been stored were either with Hyder Enterprise or with the employees of Hyder Enterprises and the sister concerns. The bank was no where in the picture. The materials that are now available on record do not justify the contention of both Mr. Vanamamalai and Mr. Habibullah Badsha that at the time of seizure the goods were in the possession and custody of the second Respondent-Bank. Unless there is a factual finding in favour of the Lakshmi Commercial Bank Limited, the second Respondent, that at the time of seizure the goods were actually in the physical or constructive possession of the bank, the further legal contention raised by Mr. Vanamamalai that such possession of the bank could not be deemed to be the possession of a dealer either within the meaning of the Essential Commodities Act or within the meaning of the display Order and Storage Order for violation of the provisions of which the show-cause notice has been issued to the Petitioners, cannot be answered.
Mr. Vanamamalai relying upon the following three decisions, viz., Tarapore and Co. Vs. V/O Tractoroexport and Another, , United Commercial Bank Vs. Bank of India and Others, and Banwari Lal Radhe Mohan Vs. Punjab State Co-operative Supply and Marketing Federation Ltd. and Another, , argued that interests of international trade required that Courts should refrain from placing any embargo on the performance of their obligations by the Indian bankers to their counterparts abroad. Mr. Vanamamalai further argued any such restriction would not only affect the international trade, but also reduce the confidence which banks will have on the Indian banks. On the other hand, the learned Additional Government Pleader sought to distinguish this case on the ground that in those cases the dispute arose between parties to the contract and would not apply to the facts of this case. In my opinion, an answer to the contention raised by Mr. Vanamamalai will have to depend upon a factual finding when at the time of the seizure the goods were in the possession of Lakshmi Commercial Bank Limited as trustees on behalf of the foreign bankers, I have found that the Lakshmi Commercial Bank Ltd. has not been able to establish before me on the basis of the materials available before the Court that it was in possession of the goods at the time of seizure and that in their capacity of trustees of the foreign bankers. In the circumstances, it is not possible to give a finding on the legal contention raised by Mr. Vanamamalai.
I shall next consider the contention of Mr. Habibullah Badsha whether the seizure it self is vitiated by absence of jurisdiction in the sense that the Display Order and the Storage Order under which the seizure has been effected do not authorise the seizure and even conceding without admitting the two orders confer power upon the authorities to seize the essential commodities in question, whether he seizure in this case is vitiated by a violation to conform the provisions of the orders. I proceed to consider this question on the basis of the stand taken by the Respondents that at the time seizure was made palmolien and palm oil were in the possession of the Petitioners. Section 3 the Essential Commodities Act authorises the Central Government whenever it is of opinion that it is necessary or expedient so to do for maintaining or increasing supplies of any essential commodity which are defined in the Act or declared by the Central Government or for securing their equitable distribution and availability at fair prices or for securing any essential commodity for the defence of India or the efficient conduct of military operations, it may, by order, provide for regulating or prohibiting the production supply and distribution thereof and trade and commerce therein. Pursuits to Section 3 of the Essential Commodities Act, the Central Government has promulgated the pulses, Edible Oil seeds and Edible Oils (Storage control) Order, 1977 (for short Storage Order) and the State Government also promulgated what is called Tamil Nadu Essential Commodities (Display of Stocks and Prices and Maintenance of Accounts) Orders, 1977 (for short Display Order). The Storage Order by Clause 4 provides that no dealer shall after a period of fifteen days from the coming into force of this clause, either by himself or by any person on his, behalf, store or have in possession at any time any pulses, edible oil seeds or edible oils in excess of the quantities specified therein. A dealer is defined in Clause 2(f) as a person engaged in the business of purchase, sale or storage for sale of any pulses, edible oil seeds or edible oils, whether or not in conjunction with any other business and includes his representative or agent. Under Clause 2(g) edible oil means any oil used for cooking for human consumption and includes hydrogenated vegetable oil. It is not disputed that palmolien and palm oil with which are concerned in these writ petition as fall within the meaning of edible oil and it is equally not disputed that the Petitioners are dealers within the meaning of the definition of the term dealer in Clause 2(f) of the Storage Order.
The display order defines a dealer in Clause 2(g) thus:
Dealer means any person engaged in the business of purchase, movement, sale, supply, distribution or storage of essential commodities directly or otherwise whether for cash or for deferred payment or for commission, remainder or other valuable consideration and includes:
(i) a producer;
(ii) an importer;
(iii) a wholesaler;
(iv) a retailer;
(v) casual trader;
(vi) a commission agent;
(vii) a broker;
(viii) a del credere agent; or
(ix) an auctioneer;
or any other mercantile agent, by whatever I and called who carried on such business on behalf of any principal.
We are not concerned with the explanation to the definition on dealer.
Clause 3 states that every dealer shall display conspicuously at or near the entrance place of his business premises the stock of the essential commodity held by him. He shall also display a list of prices showing the cost price and the sale price of such essential commodity. Clause 5 provides that every dealer shall, if so required by the authorised officer furnish a return as specified in the second schedule at such intervals as may be specified by the authorised officer and also such other information as may be required by the authorised officer, Collector, Commissioner or Government at any time, within the periods stipulated for the purpose. Clause 8 deals with the power of entry, seizure, search, etc. It states:
8(1) If any competent officer has reason to believe that any contravention of this order has been committed or being committed or is about to be committed such officer or any other Officer not below the bank of Revenue Inspector authorised by the Collector in this behalf, may:
(a) Inspect any book, account or other document or any stock of essential commodity in the possession or under the control of any person;
(b) seize any such account or other documents;
(c) stop and search any person, boat, ....
(d) enter and search any premises or place; and
(e) seize the stock of any essential commodity in respect of which the competent officer has reason to believe that any provision of this order has been, is being or about to be contravened, along with the packages coverings or receptacles in which such essential commodity is found....
Provided that the officer conducting the seizure shall give a receipt for what is seized immediately after the seizure is effected:
Provided further that no competent officer shall seize stocks of any essential commodity without obtaining the prior concurrence of the authorised officer.
8(2) The competent officer or any officer authorised under Sub-clause (1) may requisition the services of any police Officer or of any of the Officer of the state Government to assign such officer in the lawful exercise of any power vesting in him under this clause and it shall be the duty of every officer requisitioned to comply with such requisition.
8(3) Subject to the provisions of Sub-clause (1) the provisions of Section 100 of the Code of Criminal Procedure, 1973 relating to search and seizure shall, so far as may apply to searches and seizures under this clause.
It is not disputed that the Petitioners are dealers within the meaning of the Display order. It is equally not disputed that the palmolien and palm oil are essential commodities within the meaning of the Display Order and that the Petitioners are bound to display conspicuously at or near the entrance place of their business premises the stock of essential commodities held by them and also display a list of price showing the cost price and the sale price of such commodities.
The next question that arises for consideration is whether the Display Order confers power of seizure. Clause 8(1)(c) in clear terms confers power on the competent officer to seize the stock of any essential commodity in respect of which the competent officer has reason to believe that any provision of the Display Order has been, is being or about to be contravened. But the second proviso states that no competent officer shall seize stocks of any essential commodity without obtaining the prior concurrence of the authorised officer. The authorised officer is defined under Clause 2(b) as meaning in the case of City of Madras including its belt area an officer not below the rank of Assistant Commissioner of Civil supplies and elsewhere, the Taluk Supply Officers in the grade of Tahsildar wherever they are in position and Taluk Tahsildars in other areas. Competent officer is Stated to mean in Clause 2(e) as any officer of the police Department not below the rank of Sub-Inspector or any officer of the Commercial Taxes department not below the rank of Assistant Commercial Tax Officer or any Officer of the Revenue or Civil Supplies Department not below the rank of Checking Inspectors in the City of Madras including its belt area and firka Revenue Inspectors in all the other areas. I am therefore definitely of the opinion that the Display Order confers power on the competent officer to seize stock of any essential commodity.
So far as the Storage Order is concerned, admittedly the Storage Order does not confer any power of seizure. Therefore the seizure in the instant cases cannot be justified on the basis of the Storage Order.
Mr. Habibullah Badsha then contended that the seizure itself in this case was invalid and without jurisdiction for two reasons. Firstly, the seizure was made by the competent officer without obtaining the prior concurrence of the authorised officer. Secondly, the learned Counsel submitted that the power of seizure can be exercised by a competent officer under Clause 8 of the Display Order only if he has reasonable belief that any provision of the order has been, is being or about to be contravened. According to the learned Counsel, in this case, the competent officer had no reason to believe that any violation of the order had been, was being or about to be contravened and further he had not obtained the prior concurrence of the authorised officer. This is controverted by the learned Additional Government Pleader. A persual of the file discloses that on 16th June, 1980 the Inspector of Police Anti-Hoarding Cell, Civil Supplies, C.I.D. Madras sought prior concurrence of the Assistant Commissioner of Civil Supplies, Belt Area, Madras City to authorise him to seize the essential commodities held in No. 16, Pattinathar Koil Street Thiruvottiyar as he had reliable information that the Petitioners were including in the contravention of the provisions of the Display Order. On 16th June, 1980 the Assistant Commissioner gave his concurrence and authorised S. Gokulashankar Inspector of Police C.S., C.I.D. Madras-4 to effect seizure of the essential commodities. Therefore so far as the seizure, in No. 16, Pattinathar Koil Street, Thiruvottiyur is concerned, the seizure was effected by the competent officer with the prior concurrence of the authorised officer. In so far as the seizure from the other godowns are concerned, it is admitted that the prior concurrence of the authorised officer was not obtained before the seizure was effected from the other godowns.
The learned Additional Government Pleader further contended that even though the concurrence of the authorised officer was not obtained for the seizure from the godowns other than 16, Pattinathar Koil Street, Thiruvottiyur, a police officer who was investigating into an offence u/s 11 of the Essential Commodities Act can seize the goods u/s 165 Code of Criminal Procedure and consequently the seizure in all these cases would not be illegal. This contention cannot be accepted for two reasons. Firstly, in the counter-affidavit filed in support of the writ petitions, the Respondents have not stated that the seizure has been made in accordance with the provisions of Section 165 Code of Criminal Procedure Secondly, Section 5 of the Code of Criminal Procedure states that nothing contained in the Code shall affect any special or local law for the time being in force, or any special jurisdiction or power conferred or any special form of procedure prescribed by any other law for the time being in force. It cannot be disputed that the Essential Commodities Act, the Display Order and the Storage Order constitute by themselves a special law. Where a statute specifies a particular mode of enforcing a new obligation created by it, such obligation can as a general rule be enforced in no other manner than that provided by the statute. The seizure must conform to the provisions of the Display Order and if it is not in conformity with the provisions of the Display Order and it has to be held that the seizure is illegal. The learned Additional Government Pleader could not press into service Section 165, Code of Criminal Procedure to contend that the seizure is valid.
The next question that arises for consideration is whether the competent officer had reason to believe that any violation of the order had been, was being or about to be committed so as to give him the power of seizure. What is reason to believe has come up for consideration before the various High Courts and the Supreme Court. In M.G. Abrol and Another Vs. Amichand Vallamji and Others, the scope of the words reasonable belief used in Section 178-A of the Sea Customs Act came up for determination. Shah J., observed as follows:
The restriction placed upon the powers of the Customs Officers u/s 178-A of the Act cannot be lightly treated. They are serious and it is necessary that the Customs Officers themselves should realise the importance thereof. They are intended to check the exercise of the powers given to them u/s 178-A of the Act arbitrarily and without any foundation at all, to the harassment of the general public. It would be necessary therefore, that before any person could be called upon to prove that the goods seized from him were not smuggled goods the Customs Officer making the seizure must proceed upon the foundation of a reasonable belief inspired in him by some definite materials by way of some definite information or otherwise; so that he could be said to seize the goods in the reasonable belief that they were smuggled goods. It will be then for the Inquiry Officer to enquire and be satisfied as to whether the Customs Officer who had seized the goods was not wrong in his belief that the goods that he had seized were smuggled goods, in other words he had a reasonable belief that the goods were smuggled goods at the time of seizure. Incase the Inquiry officer is satisfied that the goods were seized in such a reasonable belief he would specify the same in the show cause notice which he would thereafter issue to the person from whom the goods were seized and call upon him u/s 178-A of the Act to prove that goods were not smuggled goods.
In Sheo Nath Singh Vs. Appellate Assistant Commissioner of Income Tax, Calcutta, the Supreme Court was concerned with the interpretation of the words reason for belief occurring in Section 34(1A)of the Income Tax Act. The Supreme Court stated as follows:
The words reason to believe suggest that the belief must be that of an honest and reasonable person based upon reasonable grounds and that the income tax Officer may act on direct or circumstantial evidence but not on mere suspension, gossip or rumour. He will be acting without jurisdiction if the reason for his belief that the conditions are satisfied does not exist or is not material or relevant to the belief required by the Section. The Court can always examine this aspect though the declaration or sufficiency of the reasons for the belief cannot be investigated by the Court.
In Hindustan Aluminium v. Controller, Aluminium AIR 1976 Del. 225 a Bench of the Delhi High Court was concerned with the validity of an order of seizure of aluminium goods. The seizure was affected under Clause 9 of the Control Order. In terms of Clause 9 of the Control Order any premises where aluminium is produced manufactured or sold or where the controller or an authorised Officer has reason to belief that the contravention of the Order is being or is about to be committed, may be entered or searched and such Controller or authorised officer may seize any aluminium in respect of which he has reason to believe that a contravention of the Order has been is being or is about to be committed and any packages, coverings or receptacles in which such aluminium is found. In dealing with this clause, the Delhi High Court observed as follows:
The reason to believe that any contravention of the Control order had taken place (to which aspect alone the discussion in their judgment has to be and is confined in the circumstances explained above) is a pre-condition to the seizure of goods. It is well-established that any exercise of statutory power interfering with the property rights of citizen is possible only after strictly complying with the pre-conditions for the exercise of such a power. The reason to believe in this case, therefore, must relate to the period of time when the impugned seizure was made namely, on 16th July, 1975 in other words even any subsequent acquisition of belief in this regard would be of no avail.
After referring to the decisions in The Collector of Customs, Madras Vs. Nathella Sampathu Chetty and Another, and in M.G. Abrol and Another Vs. Amichand Vallamji and Others, and in Barium Chemicals v. A.J. Rana AIR 1972 S.C. 59 the Bench again observed as follows: (at page 234):
The above observations would be appropriate even to the context of reason to believe in so far as it would bear upon the application of mind because reason to believe cannot be said to exist unless there is application of mind as to whether a particular state of affairs exists or does not exist at particular time.
In P. Ramachandra Chetty Vs. Secretary, Ministry of Food, Govt. of India, New Delhi and Others, the validity of a seizure made under Clause 11(b) and 11(h) of the A.P. Foodgrains Dealers Licensing Order, 1969 came up for consideration. Among others, it was contended on behalf of the Petitioners that there was no evidence that the officer who effected the seizure had reason to believe that any contravention of the provisions of the Order or the conditions of any licence issued thereunder had been or was being or was about to be committed. The Bench of the Andhra Pradesh High Court speaking through Narasinga Rao, J., held thus:
Clause 11(b) extracted above does not admit of any about that even at the time of entering or searching the premises there must be reasonable belief that any contravention has been or is likely to be committed. The reasons to believe is a condition precedent to vest any jurisdiction in the officers either to enter the premises or to make any search. In the absence of such reasonable belief, the entry and the consequent search has been vitiated. The mere fact the subsequently they discovered some discrepancy in the stock on hand and the position of stock as entered on the notice board, cannot make good the reasonable belief which an officer is bound to have initially before he makes an entry. The subsequent discovery of any material cannot be equated to the initial reasonable belief....
But Clause 11(h) of A.P. Food(sic)ins Licensing Order also enjoins upon the requirement of reasonable belief before even an entry is made into the premises. Thus, under this Order, unless such a reasonable belief exists as to the likelihood of any contravention being committed or has been committed, there is no power in the officers to make such an entry.
In K.L. Subbayya Vs. State of Karnataka, the Supreme Court was concerned with the scope and ambit of Section 53 and 54 of the Mysore Excise Act, 1966. Section 53 authorised a Magistrate upon information and after such enquiry if any as he thinks necessary has reasons to believe that an offence under Sections 32, 33, 34, 36 or 37 has been, is being or is likely to be committed, to issue a warrant for the search of any place in which he has reason to believe that any intoxicant still, utensil, implement, appearance or material which are used for the commissions of such offence or in respect of which such offence has been, is being or likely to be committed are kept or concealed and for the arrest of any person whom he has reason to believe to have been, to be or to be likely to be engaged in the commission of any such offence. It was admitted in the case that the Inspector who searched the car of the Appellant had not made any record of any ground on the basis of which he had a reasonable belief that an offence under the Act was being committed before re-proceeding to search the car. The Supreme Court observed as follows:
Thus, therefore, renders the entire search without jurisdiction and as a logical corollary vitiates the conviction. We feel that both Sections 53 and 54 contain valuable safeguards for the liberty of the citizen in order to protect them from ill-founded or frivolous prosecution or harassment. The point was taken before the High Court which appears to have brushed aside this legal lacuna without making any real attempt to analyse the effect of the provisions of Sections 53 and 54.
In Perumal v. State (1980) T.L.N.J. 171 Suryamurthy J., had to consider the validity of a confiscation order passed u/s 6-A of the Essential Commodities Act read with Tamil Nadu Paddy and Rice (Regulation of Trade) Order, 1974. The learned Judge found that there was nothing on record to prove that before entering the business premises of the first revision Petitioner the Sub-Inspector of Police, Food Cell C.I.D. had reason to believe that any contravention of the provisions of the Tamil Nadu Paddy and Rice (Regulation of Trade) Order, 1974 had been committed or was being committed or was about to be committed and consequently the entire search was illegal and the proceedings culminating into an order of confiscation was also invalid.
S. Ganga Saran and Sons. (P) Ltd. v. I.T.O. (1931) 3 S.C.C. 143 is a case which arose u/s 147(a) of the income tax Act. The Supreme Court observed as follows:
It is well settled as a result of several decisions of this Court that two distinct conditions must be satisfied before the income tax Officer can assume jurisdiction to issue notice u/s 147(a). First, he must have reason to believe that the income of the Assessee has escaped assessment and secondly he must have reason to believe that such escapement is by reason of the omission or failure on the part of the Assessee to disclose fully and truly all materials facts necessary for his assessment. If either of these conditions is not fulfilled he notice issued by the income tax Officer would be without jurisdiction. The important words u/s 147(a) are ''has reason to believe and these words are stronger than the words'' is satisfied. The belief entertained by the income tax Officer must not be arbitrary or irrational. It must be reasonable in other words it must be based on reason which are relevant and material. The Court, of course cannot investigate into the adequacy or sufficiency of the, reasons which have weighed with the income tax Officer coming to the belief, but the Court can examine whether the reasons are relevant and have a bearing on the matters in regard to which he is required to entertain the belief before he can issue notice u/s 147(a). If there is no rational and intelligible nexus between the reasons and the belief, so that, on such reasons, no one properly instructed on facts and law could reasonably entertain the belief, the conclusion would be inescapable that the Income Tax Officer could not have reason to believe that any part of the income of the Assessee bad escaped assessment and such escapement was by reason of the omission or failure on the part of the Assessee to disclose fully and truly all material facts and the notice issued by him would be liable to be struck down as invalid.
The Patna High Court had to interpret the scope of Section 66 of the Gold Control Act in Bawa Gopal Das Bedi and Sons. v. Union of India (1982) 2 E.L.T. 351. Section 66 of the Gold Control Act provides that if any Gold Control Officer has reason to believe that in respect of any gold and provision of the Act has been, or is being or is attempted to be contravened then he may seize such gold along with the package, covering or receptacle, if any in which the gold is found. P.S. Shay J., on behalf of the then Chief Justice K.B.N. Singh and himself observed that the condition precedent for application of Section 66 was the reasonable and belief that the provisions of the Act had been or was being or were attempted to be contravened and the power extended to the seizure of such gold in respect of which contravention had been either made or was about to be made and the section did not permit an indiscriminate seizure with a view to fishing out material to form a belief and justify it by reasons culled therefore. The leaned Judge further observed that search and seizure besides being an inroad on fundamental right of a citizen, adversely affected the reputation of a person, especially of dealer and was bound to bring disrepute to his business and that while exercising such powers the authorities should be rather careful and cautious.
In P. Appavu Gounder Vs. Collector of South Arcot Dt. at Cuddalore, Suryamurthy, J. was called upon to express an opinion as to the validity of a seizure made under the Tamil Nadu Paddy and Rice (Regulation of Trade) Order, 1974, Clause 25 of the order conferred power of entry, seizure and search, etc. on a competent officer if he had reason to believe that any contravention of the order had been committed or was being committed or was about to be committed. The learned Judge after referring to the report of the Assistant Collector, Tindivanam who inspected the business premises of the Petitioner observed as follows:
He (the Assistant Collector) has not stated in his report that he had reason to believe that any contravention of the order had been committed or was being committed or was about to be committed and that therefore he inspected the books of accounts and other documents and the stock of paddy and rice in the possession or under the control of the Petitioner, It is not unlikely that be had such information and, therefore, had reason to believe that such a contravention as referred to above has been or was being or was about to be committed. But then he should have said in his report to the Collector. It is unfortunate that the Assistant Collector failed to state in his report that he had such reason to believe as aforesaid and, therefore inspected the Premises, the stock and the books of account. In the absence of such a statement by the Assistants collector, I am unable to come to the conclusions, that he had reason to believe that any contravention of the order has been committed or was being committed or was about to be committed.
From the above decision the following principles emerge. The power of seizure conferred on a statutory authority is a power which interferes with the property rights of citizens. In the circumstances, it is highly important that the authority who exercises the power should strictly comply with the pre-conditions for the exercise of such a power. The display Order states that the power of seizure can only be exercised when the competent officer has reason to believe that the contravention of the order is being or about to be committed. In other words, the reasonable belief is a condition precedent which confers power upon the competent officer to exercise the power of seizure conferred under Clause 8 of the Display Order. The reasonable belief must be inspired in him by some definite materials by way of some definite information or others in order that he may be justified in seizing the goods in the reasonable belief that a contravention of the Display Order is being or is about to be committed. It is only on the basis of such materials which led to the competent officer to entertain a reasonable belief that the authorised officer will be in a position to give the concurrence to the seizure. As has been stated in the above decisions the word reason to believe suggests that the belief must be that of an honest and reasonable person based upon reasonable grounds. The records must disclose the grounds on the basis of which the competent officer entertain a reasonable belief that any contravention of the provisions of the Display Older had been committed or is being committed or is about to be committed. It will be certainly open to the Court to examine whether the condition precedent really existed, though the Court cannot go into the sufficiency or the adequacy of the reasons for the seizing authority to entertain such a reasonable belief. In the absence of such reasonable belief the seizure must be declared to be vitiated. The fact that subsequent to the seizure it is discovered that the concerned person has committed or is committing or about to commit a contravention of the Display order cannot cure the defect of the absence of reasonable belief.
In this case, on 16th June, 1980 the Inspector of Police Anti Hoarding Cell, C.S. C.I.D., Madras requested the Assistant Commissioner of Civil Supplies, Belt Area, Madras City for authorization to seize the essential commodities held in No. 16 Pattinathar Koil Street, Thiruvottiyur. The letter reads thus:
There is reliable information that the Hyder Enterprises at No. 16, Pattinathar Koil Street, Thiruvottiyur are indulging in the contravention of the provisions of the Tamil Nadu Essential Commodities (Display of Stocks, Prices and maintenance of accounts) Order, 1977 and as we are proceedings for a raid to the above said place, I request you to authorise me to seize the essential commodities held in the said premises in contravention of the said control order, if during the raid of the said premises any contravention of the said control order is detected.
The learned Additional Government Pleader has not placed any record before me which would disclose what is the source of information which the Inspector of Police had to entertain the reasonable belief. Further, the letter does not say what is the contravention that is being committed by the Petitioners. Instead the letter seeks authorisation to seize the essential commodities, if during the raid any contravention of the Order is detected. Clauses 3 to 5 of the Display order deals with various conditions to be satisfied by a dealer. The communication of the Inspector of Police is absolutely vague in that it does not specify which of the conditions mentioned in clauses 3 to 5 is violated by the Petitioners. The order of concurrence granted by the Assistant Commissioner merely refers to the report of the Inspector of Police, Anti Hoarding Cell and states that he is satisfied about the necessity to give the concurrence. It does not in any way advance the case of the Respondents. In paragraph 10 of the affidavit it is stated that the goods were not sized under any reasonable belief that any offence under the Essential Commodition Act was committed. The same ground is repeated in paragraphs 12 and 13 of the affidavit. In the counter-affidavit there is no statement that before the seizure the competent officer entertained a reasonable belief that the Petitioners had contravened or is contravening or about to contravene any provisions of the Essential Commodities Act and, if so which provisions and the material on the basis of which such reasonable belief was entertained. Paragraph 2 states that the Petitioners should display a list of prices showing the cost price and the sale price of the essential commodities under clauses 3(1) and 3(2) of the Display Order and the Petitioners had not displayed at or near the entrance of the business premises. Even here there is no denial on the part of the Respondents that the seizure was affected not from the business place of the Petitioner which was No. 64, Thathamuthiappan Street, Madras, but from the godowns and the Petitioners were obliged to display the cost price and the sale price only at or near the entrance of the business premises. In paragraph 3 of the counter-affidavit it is merely stated that there was a prima facie case for contravention of the provisions of the control order in force against the Petitioners and the Inspector of Police, Civil Supplies, C.I.D. Madras seized the entire stock of palmolien. In fact, paragraph 3 refers to Clause 4(1) of the storage Order which admittedly does not confer any power of seizure. As already stated, it is also significant to mention that the seizure is not sought to be justified in the counter-affidavit on the basis of Section 165, Code of Criminal Procedure. Paragraph 6 merely states that the Petitioners would be given a fair and full hearing. In fact the second Respondent, the Lakshmi Commercial Bank Ltd., has also filed a counter-affidavit on 26th July, 1982 in paragraph 7 which it is stated that the goods were not seized in the reasonable belief that any offence was committed under any order made u/s 3 of the Essential Commodities Act. No reply has been filed by the Respondents to this affidavit. It must therefore follow that the seizure of the palmoline and palm oil from No. 16, Pattinathar Koil Street, Thiruvottiyur was not proceded in any reasonable belief entertained by the competent officer that the Petitioners had contravened or were contravening or were about to contravene any of the provisions of the Display Order. As regards the seizure from the other godowns, admittedly, even the formal concurrence of the authorised officer as enjoined by the Display Order has not been obtained. In the circumstances, the entire seizure has to be held without jurisdiction.
Section 6A of the Essential Commodities Act reads as under:
Where essential commodity is seized in pursuance of an order made u/s 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 commodity.
* * *
It is not disputed that the power of confiscation by Collector has been delegated to the Deputy Commissioner of Civil Supplies. From the above it is clear that the Deputy Commissioner will have no jurisdiction to go into the validity of the seizure. Section 6-A only confers power on the Deputy Commissioner to confiscate goods which have been seized person to an order made u/s 3. In other words, only if the seizure is valid will the Deputy Commissioner get the jurisdiction to go into the question whether there has been any contravention of the control order in respect of the whole or portion of the goods seized. In the circumstances. I am unable to accept the contention of the learned Additional Government Pleader that the writ petitions have been filed only to quash the show cause notice and should therefore be dismissed leaving it open to the Petitioners to raise all the contentions before the Deputy Commissioner in the enquiry to be held u/s 6-A. This view of mine is supported by the Bench decision of the Delhi High Court in Hindustan Aluminum v. Controller Aluminum AIR 1976 Del. 225 where Rangaraian J. has observed as follows:
Mr. Garg argued that the Collector could himself go into the question of the validity of the seizure in terms of Section 6-A of the Act, which has already been read. As we read the said provision the Collector appears to have no jurisdiction to go into the validity of the seizure: he could only confiscate goods, out of these seized, in respect of which contravention is established. Only if the seizure is valid would the Collector have jurisdiction to go into the question whether there has been any contravention of the control order in respect of the whole or portion of the goods seized. But this is entirely different from saying that the Collector could go on with the enquiry, postulated, in 6A and 6B, when the seizure itself, on which alone his jurisdiction to make an enquiry depends, is found to be illegal. No question of the Petitioner going through such an enquiry and later on filing an appeal u/s 6C of the Act if the Collector''s order goes against him, could consequently arise. The Petitioner would not only be subjected to harassment if such an enquiry is allowed to go on when the seizure itself is seen to be illegal but even from the point of view of public interest it seems that aluminum worth nearly rupees two corers would be held up for a period much longer then necessary and this would surely be detrimental to the nations economy particularly at the present time.
It is further settled by decisions of Courts that if the show cause notice itself is without jurisdiction, this Court in exercise of its powers under Article 226 of the Constitution of India can interferes and quash the show cause notice.
In the result, the show cause notice issued to the Petitioners is quashed and the writ petitions are allowed. There will be no order as to costs.
I may also add that I have not expressed any opinion on the question whether the Petitioners had contravened any of the provisions of the Display Order or the Storage Order. The order in these writ petitions will not in any way prejudice the Respondents in prosecuting the Petitioner if they are able to establish that the Petitioners have committed contravention of any of the provisions of the Display Order or the Storage Order.