Prosecution Impermissible Absent Subsisting Statutory Control Order On Date Of Offence: Supreme Court Sets Aside Conviction Under Essential Commodities Act

The Court clarified that contravention of a valid and subsisting order under Section 3 is a foundational requirement for conviction under Section 7, and where such an order is absent, the prosecution itself cannot stand.

The Court was hearing criminal appeals challenging concurrent findings of guilt recorded by the Special Judge and affirmed by the High Court in proceedings arising from Special Case No. 22 of 1994, in which the appellants had been sentenced to one year’s rigorous imprisonment and fine.

A Bench of Justice B.V. Nagarathna and Justice R. Mahadevan, while allowing the appeals, observed: “…in the absence of any subsisting statutory control or saving provision operative on the date of the alleged incident, the prosecution of the appellants under the E.C. Act is legally untenable”.

Background

The prosecution case arose out of a Public Works Department contract for construction work along a road in Aurangabad district, for which cement was supplied from the government quota to a cooperative society entrusted with the execution of the project. According to the prosecution, part of this cement was diverted from the supply chain and was later found stored in premises allegedly linked to the appellants.

Acting on information received by a police officer in March 1994, a raid was conducted in which trucks carrying cement bags were intercepted, and a large quantity of cement was recovered from premises connected with the accused. The prosecution alleged that the cement had been unlawfully obtained from government supplies meant exclusively for public works and stored with the intent to sell at higher prices.

Seventeen witnesses were examined during the trial, including police officials, truck drivers and departmental personnel, and documentary as well as material evidence was relied upon. The trial court convicted several accused under Sections 3 and 7 of the Essential Commodities Act, sentencing them to imprisonment and fine, and the High Court affirmed those findings.

Court’s Observation

The Court began by examining the statutory framework governing prosecution under the Essential Commodities Act. It noted that cement had historically been declared an essential commodity and was subject to regulation through the Cement Control Order, 1967, issued under Section 3. The State Government had also framed licensing and storage regulations pursuant to delegated powers under Section 5.

However, the Court observed that substantial regulatory provisions of the Cement Control Order were omitted through amendments issued in 1989, which removed price and distribution controls with effect from March 1989. The Central Government subsequently rescinded the delegation of powers to States to regulate retail cement distribution in August 1990. These developments materially altered the regulatory regime governing cement.

The Bench held that the alleged offence was said to have occurred on 24 March 1994. On that date, neither the Cement Control Order provisions nor State-level licensing controls were shown to be in force in a manner that would attract penal consequences under Section 7. Crucially, the prosecution failed to produce any notification, statutory order, or regulatory instrument operative on the relevant date whose violation could constitute an offence.

The Court emphasised that the existence of a valid and subsisting order under Section 3 is a jurisdictional prerequisite for prosecution. Without proof of such an order, the very foundation of criminal liability under the Act collapses.

Relying on precedent, the Court reiterated the settled principle that where a statutory provision is omitted without a saving clause, proceedings founded on such provision cannot continue unless saved by law. The Court referred to the ruling in Kolhapur Canesugar Works Ltd. v. Union of India, which explains that repeal or deletion ordinarily obliterates the provision as if it had never existed, unless expressly preserved.

Applying this principle, the Bench concluded that once regulatory control over cement had been withdrawn and no saving clause preserved penal consequences, prosecution for alleged contravention of such regulatory provisions could not be sustained.

The Court noted that both the trial court and the High Court had focused primarily on the appreciation of evidence relating to possession of cement and diversion from government supply channels. While those findings were factual and supported by evidence, the courts below failed to examine whether any statutory prohibition actually existed on the relevant date.

The Supreme Court held that such an omission struck at the root of the conviction, because criminal liability under the Essential Commodities Act cannot be imposed unless a statutory prohibition is proved to be in force at the time of the alleged act.

The Bench clarified that although prosecution under the Essential Commodities Act was unsustainable, allegations such as diversion of government-supplied material or dishonest retention of public property could, depending on evidence, attract offences under the Indian Penal Code. The Court observed that the investigating agency ought to have examined such provisions in light of the allegations and evidence collected.

It further noted that trial courts possess the power to convict for a minor offence under procedural law where ingredients are established, even without a specific charge, but such an exercise had not been undertaken in the present case.

Conclusion

The Supreme Court, accordingly, ruled that the conviction under Section 7 in the case at hand was legally impermissible.

The criminal appeals were accordingly allowed, the judgments of conviction and sentence passed by the courts below were set aside, bail bonds were cancelled, and any fine paid was directed to be refunded.

Cause Title: Manoj v. State of Maharashtra & Anr.; Prakash v. State of Maharashtra & Anr. (Neutral Citation: 2026 INSC 152)

Appearances

Appellants: Dr Aditya Sondhi, Senior Advocate; Faisal Sherwani, AOR; Anubhav Kumar; Samarjit G. Pattnaik; Gaurav Vutts; Kashish Seth; Nikhil Rumwal; Rahul Totala, Advocates.

Respondents: Aaditya Aniruddha Pande, AOR; Siddharth Dharmadhikari; Shrirang B. Varma; Bharat Bagla; Sourav Singh; Aditya Krishna; Adarsh Dubey; Chitransha Singh Sikarwar, Advocates.

Click here to read/download Judgment