THE ESSENTIAL COMMODITIES ACT, 1955

Department

Ministry

Enforcement Date: 31 Mar 1955

SECTIONS

  1. Section 1. Short title and extent.
  2. Section 2. Definitions.
    • Section 2A. Essential commodities declaration, etc.
  3. Section 3. Powers to control production, supply, distribution, etc., of essential commodities.
    • Section 3A. Special provisions relating to foodstuffs.
    • Section 3B. Price of foodgrains, edible oilseeds or edible oils sold to Government.
    • Section 3C. Price of sugar.
    • Section 3D. Control over sale and movement of sugar.
    • Section 3(4). Appointment of authorised controller.
    • Section 3(5). Notification of orders.
    • Section 3(6). Laying of orders before Parliament.
  4. Section 4. Imposition of duties on State Governments, etc.
  5. Section 5. Delegation of powers.
  6. Section 6. Effect of orders inconsistent with other enactments.
    • Section 6A. Confiscation of essential commodity.
    • Section 6B. Issue of show cause notice before confiscation.
    • Section 6C. Appeal.
    • Section 6D. Award of confiscation not to interfere with other punishments.
    • Section 6E. Bar of jurisdiction in certain cases.
  7. Section 7. Penalties.
    • Section 7A. Power of Central Government to recover certain amounts as arrears of land revenue.
  8. Section 8. Attempts and abetment.
  9. Section 9. False statement.
  10. Section 10. Offences by companies.
    • Section 10A. Offences to be cognizable.
    • Section 10B. Power of court to publish name, place of business, etc., of companies convicted under the Act.
    • Section 10C. Presumption of culpable mental state.
  11. Section 11. Cognizance of offences.
  12. Section 12. Special provision regarding fine.
    • Section 12A. Power to try summarily.
    • Section 12B. Grant of injunction, etc., by civil courts.
  13. Section 13. Presumption as to orders.
  14. Section 14. Burden of proof in certain cases.
  15. Section 15. Protection of action taken under Act.
    • Section 15A. Prosecution of public servants.
  16. Section 16. Repeals and savings.

The Schedule

The Schedule lists the commodities declared as essential commodities under the Act.

Introduction

The Constitution of India originally had 395 articles, 22 parts, and 8 schedules when it was adopted in 1950. However, these numbers have changed over time due to amendments. As of now, the Constitution consists of 448 articles, 25 parts, 12 schedules, and 104 amendments.

Article 246 deals with the distribution of legislative powers between the Union and the States and it explicitly refers to the three lists in the 7th Schedule.

The 7th Schedule is divided into three parts:

1. Union List (List I):

2. State List (List II):

3. Concurrent List (List III):

In the Concurrent list, there is one entry no. 33, which is related to the Essential Commodity Act.

Entry No. 33

Trade and commerce in, and the production, supply and distribution of,—

Why Invoking the Act?

In 1955, India was facing a food shortage and relied on imports, like wheat from the US, to feed the population. To prevent prices from rising during the busy festival season, the government took steps to make sure there was enough food, especially pulses. These measures were meant to stop traders from creating an artificial scarcity— a situation where they limit supply on purpose to raise prices.

Historical Background of the Act

The Essential Commodities Act traces its origins to 1939, when the Government of India enacted rules under the Defence of India Act to regulate essential goods during World War II (1939 – 1945). In 1946, the Essential Supplies (Temporary Powers) Ordinance was introduced, later replaced by the Essential Supplies (Temporary Powers) Act, 1946. After India gained independence in 1947, the Act was further extended through two resolutions in 1948 and 1949.

In 1955, the government passed the Essential Commodities Act, which replaced earlier legislation and provided permanent measures for regulating the production, supply, and distribution of essential goods. The Act came into force on April 1, 1955.

Scope of this 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.

The basic objective of this Act

There are two main aims:

What happens when a commodity is declared essential?

The Act empowered the government to:

Sections and Schedules in the Act

The Act comprises 16 main sections and 1 Schedule. The sections provide the framework for implementing control orders, and the Act includes one Schedule, listing the commodities subject to regulation.

The Schedule lists the specific items deemed essential commodities (e.g., food grains, oils, medicines, fuels, etc.) which the government can control to ensure their availability and prevent scarcity, price hikes, or exploitation in the market.

Section 1 - Short title and extent

(1) This Act may be called the Essential Commodities Act, of 1955.

(2) It extends to the whole of India.

Section 2 - Definitions:

(a) Collector: This term refers to the main officer in charge, but it can also include an Additional Collector or other officers, such as a Sub-Divisional Officer, who are authorized by the Collector to do the same work and use the same powers under this law.

(b) Food-crops: There is no specific definition of Food Crops. It is related to both humans and animals. This includes crops like sugarcane is in foodstuffs and tea is not a foodstuff.

(c) Notified order: This means an order that has been officially published in the government’s Official Gazette.

a. Order: This includes any direction given under a Notified order.

(d) State Government: When referring to a Union Territory, this means the administrator of that territory.

(e) Sugar: This includes:

  1. Satpal Gupta v. State of Haryana: Foodstuff is related to both humans and animals. In this case, it was established that cattle and poultry foods are included within the meaning of the ‘foodstuff. Therefore, it concludes that foodstuff is related to both humans and animals.
  2. State of Bombay v. Virkumar Gulab Chand Shah: Turmeric has been included in the scope of foodstuff. In this case, it was established that the foodstuff includes raw materials, things used in the process and things used in the preparation of food. Therefore, turmeric has been included in the scope of foodstuff.
  3. S. Samuel, M.D., Harrisons v. Union of India: Tea is not a foodstuff. In this case, it was decided that tea is not a foodstuff and merely a stimulant. It is neither used in the preparation of food nor contains any nutritional value, however in general parlance also when a person takes tea doesn’t consider it as having food.

Section 2A - Essential Commodities:

(1) What is an Essential Commodity? An "essential commodity" is a product listed in the Schedule (a list in the law).

List of Commodities and Definitions:

  1. Drugs, (this is used in the same sense as defined under Clause b of Section 3 of the Drugs and Cosmetics Act, 1940).
  2. Fertilisers, whether organic, inorganic, or mixed.
  3. Foodstuffs, including edible oils and seeds.
  4. Hank yarn, made wholly with cotton.
  5. Petroleum and its products.
  6. Jute, whether in the form of raw or textiles.
  7. Seed,
    1. seeds of food crops and seeds of fruits and vegetables,
    2. seeds of cattle fodder; and
    3. jute seeds.

(2) Changes to the List: The Central Government can change this list if it believes it is necessary for public interest. The government can:

(3) Temporary Essential Commodities: The government can also declare a commodity as an "essential commodity" for up to six months. This can be extended beyond six months if needed, and the reason for this decision will be stated in an official notification.

(4) Parliament’s Role: The government can make changes to the list based on laws that Parliament has the power to make under a specific part of the Constitution.

(5) Parliament’s Oversight: Any changes made to the list must be presented to both Houses of Parliament after they are made.

Section 3 - Powers to Control Production, Supply, Distribution, etc:

The Powers to Control Production, Supply, and Distribution are conferred upon governments to regulate or control the production, supply, and distribution of essential goods. These powers help prevent hoarding, black marketing, and ensure equitable distribution during shortages or emergencies. Authorities can impose stock limits, licensing requirements, and price controls to safeguard public interest.

Section 3(1): Central Government's Power to Regulate or Prohibit Essential Commodities

The Essential Commodities (Amendment) Act, 2020 is a law that modifies the Essential Commodities Act, 1955. Here's the Changes:

Key Points:

  1. Title & Commencement:
    This law is called the Essential Commodities (Amendment) Act, 2020, and it came into effect on June 5, 2020.
  2. Changes to Section 3 of the Essential Commodities Act, 1955:
    • New Provision (1A):

Section 3 (1A): Regulation of Supply of certain foodstuffs Under Extraordinary Circumstances:

The government can only regulate the supply of certain foodstuffs (like cereals, pulses, potatoes, onions, edible oilseeds, and oils) under special situations, such as 1. war, 2. famine, 3. major price hikes, or 4. serious natural disasters.

Section 3(2): Specific Powers the Government May Use

In addition to the powers in Subsection (1), the Central Government can make specific rules about essential commodities. These rules can include:

(a) Regulating Production:

(b) Using Wasteland (Restricted) or Arable (Unused) Land for Farming:

(c) Controlling Prices:

(d) Regulating Storage and Distribution:

(e) Preventing Hoarding:

(f) Selling to the Government:

(g) Regulating Harmful Transactions:

(h) Collecting Information:

(i)

  1. Record-Keeping and Inspections: The government can require people and businesses involved in essential goods to maintain records and books (like financial accounts) and allow inspectors to check them. They may also need to provide specific information when asked.
  2. Issuing Licenses and Permits: The government can issue licenses, permits, or other official documents for businesses, and charge fees for these. They may also require a security deposit, which can be taken if the conditions of the license or permit are violated.

(j) Search and Seizure:

  1. Authorized officials (like inspectors) can enter and search premises, vehicles, ships, or even animals if they suspect a violation of the rules.
  2. If the inspector finds illegal goods or contraband, they can seize the goods.
  3. The government can also seize books, accounts, or documents related to the business if they are relevant to any legal proceedings. The business owner can take copies of these documents while they are being inspected.

Section 3(3): Price Payments for Essential Commodities

If someone sells an essential commodity following a government order (like selling stock to the government), the price they get is based on:

  1. Agreed Price: If the buyer and seller can agree on a price that follows the controlled price rules, that's the price they get.
  2. Controlled Price: If no agreement can be made, the controlled price (if set by Govt.) will apply.
  3. Market Price: If no controlled price is set, the price will be based on the market rate at the time of sale.

Section (3A) Special Provisions for Foodstuffs

  1. If the Central Government believes it's necessary to control rising prices or prevent hoarding of food in a certain area, it can issue a notification in the Official Gazette. This notification will regulate the price at which food is sold in that area, even if it contradicts earlier rules.
  2. Any notification issued under this rule will be valid for a period of up to three months, as mentioned in the notification.
  3. After the notification is issued, if someone sells the specified food in the mentioned area, the price they charge will be:
    1. If the price can be agreed upon, it will be the agreed price, but it must be consistent with any controlled price.
    2. If no agreement on price can be reached, it will be the price based on the controlled price, if one exists.
    3. If neither of the above applies, the price will be based on the average market rate for the food in that area during the three months before the notification was issued.
  4. For determining the average market rate, an officer appointed by the Central Government will check the market prices in the area or a nearby area. The determined average market rate will be final and cannot be disputed in court.

Section (3B): Compensation for Sale of Food Items to Government Without Notification:

If someone is ordered to sell a certain type of foodgrain, edible oilseed, or edible oil to the Central or State Government (or to a government officer, agent, or a government-owned corporation), and no price notification has been issued for it, or if the notification has expired, the person will be paid a procurement price.

This price is set by the State Government with prior approval from the Central Government, and the price will be based on the following factors:

  1. Any controlled price that is already set for that specific foodgrain, oilseed, or oil, either under this law or another law.
  2. The overall crop prospects (how good the harvest is expected to be).
  3. The need to ensure that this food is available to consumers at reasonable prices, especially for vulnerable groups.
  4. Any recommendations from the Agricultural Prices Commission about the price of the foodgrain, oilseed, or oil.

Section (3C): Price Determination for Sugar Sale:

If a sugar producer is required by the government to sell sugar (whether to the Central or State Government, its officers, or other buyers) under a government order, the price for that sugar will be decided by the Central Government. This applies whether there was a prior notification under Subsection (3A).

The price the producer receives will consider:

  1. The cost of producing sugar, including the cost of converting sugarcane into sugar and transporting it to the factory.
  2. A reasonable profit or return on the money invested in the sugar business.

The Central Government may set different prices for different areas, factories, or types of sugar.

Provisional Price Determination for Earlier Seasons:

If the price for sugar produced up to the 2008-2009 season was decided provisionally, the final price will be set based on the rules that applied before October 1, 2009.

Section - (3D) - Control Over Sale and Movement of Sugar

The Central Government can order that no producer, importer, or exporter of sugar can sell, give away, or move sugar from their factory's storage (whether inside or outside the factory) or the warehouses of importers or exporters, unless they follow specific government directions.

Exception:

This rule does not apply if the sugar is pledged (used as collateral) by the producer or importer to a scheduled bank (a bank recognized by the Reserve Bank of India) or a similar bank. However, even in this case, the bank can only sell the pledged sugar if the Central Government gives permission.

Section - 3(4) - Appointment of an Authorized Controller

If the Central Government believes that it is necessary to maintain or increase the production and supply of an essential commodity, it can issue an order to appoint a person (called an authorized controller) to oversee and manage part or all of the operations of a business involved in producing and supplying that commodity.

The authorized controller will have the following powers and responsibilities while the order is in effect:

  1. Following Government Instructions:
    The controller must carry out their duties based on instructions from the Central Government. However, they cannot give directions that go against any law or rules that govern the management of the business, unless the order specifically allows them to do so.
  2. Managing the Business:
    The business (or the specific part of the business) must be run according to the directions given by the authorized controller. Any manager or person in charge of the business must follow these directions.

Section - 3(5): Notification of Orders:

Section - 3(6): Parliament Oversight:

Section 4: Imposition of Duties on State Governments, etc.

Section 5: Delegation of Powers.

The Central Government can, through an official order, decide that certain powers given to them under Section 3 of the Essential Commodities Act can also be used by other people or organizations, such as:

  1. Any Officers or Authorities under the Central Government: The Central Government can give its powers to lower-ranking officials or departments working under it.
  2. State Governments or Their Officers: The Central Government can also allow State Governments or their officials to use these powers.

Conditions:

Section 6 - Effect of Orders Inconsistent with Other Laws:

If an order is made under Section 3 of the Essential Commodities Act (e.g., controlling the production or supply of essential goods), it will override any conflicting rules or laws that are not part of this Act. This means that even if other laws say something different, the order under the Essential Commodities Act will still apply.

Section 6A: Confiscation of Essential Commodities:

This section outlines what happens if essential commodities are seized (taken) under an order made in connection with Section 3. Here's a breakdown:

(1) Seizure and Reporting

  1. Confiscation (taking away) of the seized essential commodity.
  2. Confiscation of any containers (like packages or boxes) that were holding the seized goods.
  3. Confiscation of any vehicles, animals, or vessels used to transport the seized goods (e.g., trucks, boats, or animals).

Exception:

Further Exception:

(2) Sale of Seized Commodities

  1. Sell the goods at a controlled price (if a price is fixed for such goods under this Act or any other law).
  2. If no price is fixed, the Collector can sell the goods at a public auction.

For Foodgrains:

(3) Handling the Sale Proceeds

  1. If the Collector doesn't confiscate the goods, the proceeds will go to the owner of the goods.
  2. If the Collector's confiscation order is appealed and overturned, the proceeds go to the owner.
  3. If a person is acquitted (found not guilty) in a court case related to the seized goods, the proceeds from the sale will also go to the person who owned the goods.

Section 6B - Issuance of Show Cause Notice before Confiscation of Essential Commodity:

There is no order for confiscation of any essential commodity that is passed against any person without giving him a written notice that informs him about the grounds on which such order is proposed and provides him an opportunity to make his presentation in writing.

Section 6C - Appeal Against Confiscation Order:

(1) Appeal Process:

If someone is unhappy with an order of confiscation (where their goods are taken by the government) under Section 6A, they can appeal to a judicial authority (District and Sessions Judge) appointed by the State Government.

The appeal must be made within one month from the date they are informed of the confiscation order. The judicial authority (District and Sessions Judge) will hear the case and can either:

  1. Confirm the confiscation order,
  2. Change (modify) the order, or
  3. Cancel the order.

(2) Compensation After Modification or Acquittal:

If the judicial authority changes or cancels the confiscation order, or if a court finds the person not guilty in a related prosecution, and the seized goods cannot be returned for some reason, then the person is entitled to be paid for the goods.

The payment will be calculated as though the goods were sold to the government.

The payment will include the price of the goods, along with reasonable interest starting from the day the goods were seized.

The price will be decided based on the type of goods:

  1. Foodgrains, edible oilseeds, or edible oils: As per Section 3(3B).
  2. Sugar: As per Section 3(3C).
  3. Other essential commodities: As per Section 3(3).

Section 6D - Award of confiscation not to interfere with other punishments:

Section 6E - Bar of Jurisdiction in Certain Cases:

  1. When the government seizes an essential commodity (like food, fuel, etc.) under an order, or when it seizes things related to it (like a vehicle, animal, or packaging used to carry the goods), these items are taken pending confiscation (pending the decision to permanently take them away).
  2. In such cases, only the Collector (or the State Government) has the authority to decide what happens to these seized goods.
  3. No other court, tribunal, or authority (such as any judge or other legal body) can interfere or make any decisions on:
    • Who gets the goods
    • What happens to the goods
    • When or how they are returned or disposed of

This rule applies even if other laws say otherwise.

Section 7: Penalties for Contravention

(1) Punishment for Violating Orders

(2) Failure to Comply with Section 3(4)(b)

Punishable with imprisonment from 3 months to 7 years and fine, subject to judicial discretion for special reasons.

(3) Repeat Offences

Repeat offenders face imprisonment from 6 months to 7 years along with fine.

(4) Lesser Punishment for No Substantial Harm

Courts may impose reduced sentences where no significant harm is caused to individuals or the public.

Offences and Penalties

OFFENCES PENALTIES
Contravene the order made under clause (h) and (i) of the Sub-Section (2) Imprisonment for a term which may extend to 1 year with fine
Contravene the other orders except above two Imprisonment not less than 3 months which may extend up to 7 years with fine
Fails to comply with the direction given under clause (b) of Sub-Section (4) Imprisonment not less than 3 months which may extend up to 7 years with fine
If any person convicted for offences under Sub-clause (ii) of clause (a) of Sub-Section (1) or under Sub-Section (2) again convicted on the same provision Imprisonment not less than 6 months which may extend up to 7 years with fine
If the offences convicted under Sub-clause (ii) of clause (a) of Sub-Section (1) or under Sub-Section (2) does not cause any substantial harm to any individual or the general public Imprisonment for the term of 3 months or 6 months whichever is required as per the case

(5) Additional Punishment

Courts may prohibit repeat offenders from carrying on business in the essential commodity for a minimum of six months.

Section 7A: Recovery of Amounts as Arrears of Land Revenue

Section 8 - Attempts and Abetment:

Breakdown:

  1. Attempt to Contravene: If a person tries to violate (or contravene) an order made under Section 3 of the Act, even if the violation isn't completed, the law treats it as if the violation has already occurred.
  2. Abetment: If a person encourages, assists, or incites another person to violate the order (known as abetting), they will also be treated as having violated the order themselves.

Consequence:

Section 9 - False Statement:

If a person:

  1. Gives false information when they are required to provide information or make a statement under any order made under Section 3 of the Act, and they know or have reasonable cause to believe that the information is false, or they do not believe it to be true, or
  2. Records a false statement in any book, account, record, declaration, return, or any other document they are required to maintain or submit under the Act,

Then, that person can be punished with:

Section 10 - Offences by Companies:

(1) If a company breaks the law (violates an order under Section 3 of the Act):

(2) If the violation was caused by a director or other officer of the company:

Section 10A - Offences to be Cognizable:

Section 10B - Power of Court to Publish Information About Convicted Companies:

(1) When a company is convicted under this Act, the court has the power to make public certain details about the company, such as:

This information will be published at the company’s expense, in newspapers or in any other way the court decides.

(2) However, the court can’t publish this information until:

(3) The cost of publishing this information will be charged to the company as if it were a fine imposed by the court.

Section 10C - Presumption of Culpable Mental State:

(1) In any case where a person is being prosecuted for an offence under the Essential Commodities Act that requires a "culpable mental state" (meaning the person must have had a guilty mind, such as knowing they were breaking the law or intending to do something wrong), the court will assume that the person had that mental state.

(2) What does "culpable mental state" mean?

(3) In court, a fact is considered proven only if the judge is completely convinced (beyond a reasonable doubt), not just if it seems likely or probable.

Section 11: Cognizance of Offences

No court shall take cognizance of any offence punishable under this Act except upon a report in writing of the facts constituting such offence, made by:

  1. A public servant as defined under Section 21 of the Indian Penal Code; or
  2. Any person aggrieved by the offence; or
  3. A recognised consumer association, whether or not the person making the report is a member of such association.

Who is a Public Servant?

As per Section 21 of the Indian Penal Code, a public servant includes:

Recognised Consumer Association

A recognised consumer association must be:

Examples include:

Section 12: Special Provision Regarding Fine

Notwithstanding anything contained in Section 29 of the Code of Criminal Procedure, 1973, which places limits on the amount of fine that can be imposed by a Magistrate, this section empowers certain Magistrates to impose a fine exceeding ₹5,000 for contravention of an order made under Section 3 of the Essential Commodities Act.

This power may be exercised by:

Section 12A: Power to Try Summarily

(1) Summary Trial

(2) Notification and Duration

(3) Authorities Competent to Conduct Summary Trials

(4) Punishment in Summary Trials

(5) Restriction on Appeals

(6) Pending Cases

Section 12B: Grant of Injunction by Civil Courts

Section 13: Presumption as to Orders

Meaning and Scope

  1. When an order is produced before a court, it shall be presumed that the order was duly made by the competent authority under the powers conferred by this Act.
  2. If an order appears to be signed and issued by an authority empowered under the Act, the court shall presume that it was validly made and properly executed.
  3. The court will assume that the order complies with all legal requirements and procedures.

Indian Evidence Act, 1872

This presumption is based on Section 114 of the Indian Evidence Act, 1872, which allows courts to presume the existence of certain facts unless disproved.

Burden of Proof

Illustration

If a government officer issues an order under this Act and it is challenged in court, the court will presume that the officer acted lawfully and within authority unless evidence proves otherwise.

Section 14: Burden of Proof in Certain Cases

Section 15: Protection of Action Taken Under the Act

(1) Protection of Individuals

No suit, prosecution, or other legal proceeding shall lie against any person for anything done in good faith in pursuance of an order made under Section 3.

(2) Protection of Government

No legal proceeding shall lie against the Government for any damage caused by actions taken in good faith under this Act.

Section 15A: Prosecution of Public Servants

No court shall take cognizance of an offence alleged to have been committed by a public servant while acting or purporting to act in discharge of official duties under Section 3, except with prior sanction:

Legal Implications

  1. Encourages effective enforcement of the Act.
  2. Protects officials from harassment for actions taken honestly.
  3. Protection applies only when actions are taken in good faith and within lawful authority.

Illustrative Example

If a Civil Supplies Officer seizes wheat stock believing it violates a Section 3 order, and later it is found that the trader had a valid permit, the officer cannot be sued or prosecuted provided the action was taken honestly and within official powers.

Section 16: Repeals and Savings

(1) Repeals

The following laws are repealed:

(2) Savings

(3) Application of the General Clauses Act, 1897

The repeal mentioned in this section shall be subject to the provisions of Section 6 of the General Clauses Act, 1897. These provisions shall apply as if the repealed enactments were Acts of Parliament.

Landmark Judgments under the Essential Commodities Act

1. Nathu Lal v. State of Madhya Pradesh ( AIR 1966 SC 43)

Facts

Held

2. State of Madhya Pradesh v. Narayan Singh & Others ( AIR 1989 SC 1789)

Facts

Held

Conclusion

THE END