Case Note & Summary
The matter arose from a criminal prosecution initiated by the State of Uttar Pradesh against Modi Paints and Varnish Works, Modinagar, and its officials including O.P. Sharma, Factory Manager, for alleged violation of the Essential Commodities Act, 1955 and related control orders. The FIR alleged that on 4 December 1985, a joint inspection by supply and marketing officials revealed that the industrial unit had stored large quantities of soyabean oil, castor oil, refined soyabean oil, and linseed oil without obtaining any licence under the U.P. Oil Seeds and Oilseeds Products Control Order, 1966 and the Pulses, Edible Oil Seeds and Edible Oils (Storage Control) Order, 1977. The oils were being used for manufacturing paints and varnishes. The FIR stated that the unit had earlier applied for a licence but the application was rejected, and it continued to purchase, store, and utilise these edible oils. The respondent and others were accused of violating Clause 4 of the 1966 Order and Clauses 2, 3 and 6 of the 1977 Order, punishable under Sections 3 and 7 of the Essential Commodities Act, 1955. The respondent filed Criminal Misc. Petition No.15985 of 1985 in the Allahabad High Court under Section 482 CrPC seeking quashing of the FIR. The High Court by order dated 7 January 1986 quashed the FIR, holding that since the respondent was engaged in manufacture of paints and varnishes and not in sale or purchase of oil seeds or edible oils, he was not a dealer under the control orders. The State appealed by special leave to the Supreme Court. The Supreme Court analyzed the definitions of dealer under Clause 2(g) of the 1966 Order and Clause 2(f) of the 1977 Order, both of which defined dealer as a person engaged in the business of purchase, sale or storage for sale of oil seeds or edible oils. The Court noted that the exemption from licensing was available only up to certain minimal quantities and for specified public undertakings. It held that a person who purchases or stores oil seeds or edible oils for use in manufacturing another commercial product is also a dealer when the quantity stored exceeds the prescribed limits. The Court relied on State of A.P. v. Abdul Bakhi & Bros., (1964) 7 SCR 764, where a three-judge bench held that buying or selling a commodity for use in another commercial product constitutes dealing. The Court rejected the respondent's argument that he could not be proceeded against because his licence application was rejected, holding that the FIR clearly disclosed storage without licence and that the merits of the licence application were not relevant at the stage of FIR. The Court also considered the scope of inherent powers under Section 482 CrPC, reiterating from State of Himachal Pradesh v. Pirthi & Anr. that such powers are exceptional and should be exercised only in rarest of rare cases where the FIR does not disclose any cognizable offence or is mala fide. At the FIR stage, the court should not weigh pros and cons or consider strict compliance with mandatory provisions. Since the FIR did disclose a cognizable offence, the High Court erred in quashing it. Accordingly, the Supreme Court allowed the appeal, set aside the High Court order, and directed that the prosecution could proceed in accordance with law.
Headnote
A) Essential Commodities Law - Dealer Definition - Storage of Edible Oils for Manufacture - U.P. Oil Seeds and Oilseeds Products Control Order, 1966, Clause 2(g) and Pulses, Edible Oil Seeds and Edible Oils (Storage Control) Order, 1977, Clause 2(f) - The respondent stored 843 quintals 57 kg of soyabean oil, 8147 quintals 45 kg of castor oil and 32 quintals 31 kg of refined soyabean oil for manufacturing paints and varnish but contended he was not a dealer because he did not sell oilseeds or edible oils; the High Court accepted this, but the Supreme Court held that a person engaged in business of purchasing or storing oilseeds or edible oils for use in another commercial product is a dealer when stocks exceed prescribed limits, overruling the High Court's construction. B) Essential Commodities Law - Licensing Requirement - Mandatory Licence for Dealers - U.P. Oil Seeds and Oilseeds Products Control Order, 1966, Clause 4 and Pulses, Edible Oil Seeds and Edible Oils (Storage Control) Order, 1977, Clauses 3 and 4 and Essential Commodities Act, 1955, Sections 3 and 7 - Both control orders require dealers to obtain licence for storage in excess of specified quantities; the respondent admittedly had no licence and the FIR disclosed storage without licence, constituting a cognizable offence under Section 3/7 of the Essential Commodities Act, 1955; the court held that whether respondent had applied for licence was irrelevant at this stage. C) Criminal Procedure - Quashing of FIR - Inherent Power under Section 482 CrPC - Code of Criminal Procedure, 1973, Section 482 - The High Court quashed FIR holding respondent not dealer; the Supreme Court reiterated that inherent power to quash FIR must be exercised sparingly only in rarest of rare cases where allegations do not disclose any cognizable offence or are mala fide, and at FIR stage the court should not weigh pros and cons or consider non-compliance of mandatory provisions; since the FIR did disclose an offence, the High Court's quashing was erroneous. D) Precedent - Interpretation of Dealer - Commercial Use as Business - State of A.P. v. Abdul Bakhi & Bros., (1964) 7 SCR 764 - The three-judge bench in Abdul Bakhi held that a person buying or selling a commodity specified in the rule for use as finished products in another commercial use is engaged in the business of buying, selling or supplying that commodity and is a dealer; this principle was applied to support the conclusion that respondent was a dealer under the control orders.
Issue of Consideration
Whether respondent O.P. Sharma was a dealer under U.P. Oil Seeds and Oilseeds Products Control Order 1966 and Pulses, Edible Oil Seeds and Edible Oils (Storage Control) Order 1977 despite storing edible oils for manufacturing paints and varnishes; whether High Court was justified in quashing FIR under Section 482 CrPC
Final Decision
Supreme Court allowed the appeal, set aside the High Court order dated 07-01-1986 quashing the FIR, held that respondent was a dealer under both control orders, the FIR disclosed a cognizable offence under Section 3/7 Essential Commodities Act 1955, and directed that prosecution may proceed in accordance with law.
Law Points
- Person purchasing or storing oilseeds or edible oils for use in manufacturing another commercial product is a dealer under control orders if stocks exceed prescribed limits
- absence of licence constitutes offence under Section 3/7 Essential Commodities Act 1955
- High Court cannot quash FIR under Section 482 CrPC unless allegations do not disclose cognizable offence or are mala fide
- at FIR stage court should not weigh merits or consider non-compliance with mandatory provisions
- storage without licence by manufacturer is covered by control orders
