Manipur Administration vs M. Nila Chandra Singh

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Criminal Appeal No. 143 of 1962

Decision Date: 29 November 1963

Coram: P.B. Gajendragadkar, K.C. Das Gupta

In this case the Court recorded that the petition was brought by the Manipur Administration against M Nila Chandra Singh and that judgment was delivered on 29 November 1963 by a bench comprising P B Gajendragadkar, P B Gupta and K C Das. The matter arose under the Manipur Foodgrains Dealers Licensing Order, 1958, particularly clauses 2(a), 3(1) and 3(2) dealing with storage of foodgrains, the definition of a dealer and the statutory presumption under clause 3(2). The Court also considered whether the presumption under clause 3(2) could bring the provisions of clause 3(1) into play, which in turn would attract the penalty prescribed in section 7 of the Essential Commodities Act, 1955 (Act 10 of 1955). The headnote of the judgment explained that the respondent had been found storing more than one hundred maunds of paddy in a godown without obtaining any licence, thereby violating clause 3 of the Licensing Order. He was charged with an offence under section 7 of the Essential Commodities Act. The respondent’s principal defence was that the paddy was intended for the consumption of his family members. The Trial Magistrate rejected this defence, observing that clause 3(2) created a presumption against the respondent, that his case therefore fell under clause 3(1), and consequently clause 7 of the Order and section 7 of the Essential Commodities Act applied. On that basis the magistrate convicted the respondent under section 7. The respondent appealed to the Sessions Judge, whose dismissal was upheld, after which he filed a revision application before the Judicial Commissioner. The Commissioner set aside the conviction, holding that the presumption correctly raised under clause 13(2) of the Order did not by itself declare the person a dealer in the goods concerned, and therefore clause 3(1) could not be invoked merely on the strength of that presumption. On special leave, the Court examined the legal questions and held that, firstly, clause 2(a) requires that a person be shown to be carrying on a business of purchase, sale or storage for sale of any commodity listed in the Schedule, and that such sale must involve a quantity of one hundred maunds or more at any one time; the notion of business necessarily implies a continuity of transactions, so a single, casual or isolated transaction, whether of sale, purchase or storage, would not qualify a person as a dealer. Secondly, the Court explained that clause 3(2) raises a statutory presumption that any stock of one hundred maunds or more of the specified goods found with an individual has been stored for the purpose of sale. Once that presumption is raised, the prosecution must produce additional evidence to demonstrate that the storage was indeed made by the person for the purpose of carrying on a business, because the element of business required to attract clause 3(1) is not satisfied by the presumption alone.

The Court observed that the requirement of carrying on a business of purchase, sale or storage is essential to bring a person within the scope of clause 3(1) of the Manipur Foodgrains Dealers Licensing Order, 1958. That business element is not supplied by the statutory presumption created by clause 3(2). The Court further noted that clause 3(2) appears to have been deliberately drafted to raise only a limited presumption, the purpose of which is to spare cultivators who, on occasion, may be in possession of more than one hundred metric tons of foodgrains produced on their own fields. Accordingly, the Order did not intend that such possession, sale or storage by a cultivator should be treated as an offence punishable under clause 3(1) read with section 7 of the Essential Commodities Act, 1955.

In the present appeal, the Court explained that the short question of law concerned the interpretation of clause 3(2) of the 1958 Order. The respondent had been charged under section 7 of the Essential Commodities Act, 1955 for allegedly storing one hundred seventy‑eight metric tons of paddy in his godown on 9 February 1960 without obtaining the licence required by clause 3 of the Order. The respondent admitted that the paddy was found in his godown but contended that it was intended for the consumption of his fifteen‑member family and that forty metric tons of the stock belonged to his relative, Lalito Singh. The Sub‑Divisional Magistrate at Bishanpur did not accept the family‑consumption claim, although he accepted Lalito Singh’s assertion of ownership of the forty metric tons and ordered that portion to be released to Singh. Regarding the remaining one hundred thirty‑eight metric tons, the Magistrate held that clause 3(2) raised a presumption against the respondent, which consequently brought the case within clause 3(1). That, in turn, attracted the provisions of clause 7 of the Order and made the respondent liable under section 7 of the Essential Commodities Act. On that basis, the Magistrate convicted the respondent of the offence and, while deciding that forfeiture of the paddy was unnecessary, concluded that a monetary fine would satisfy the ends of justice.

The order imposed a fine of five hundred rupees and, in the event of default, a term of rigorous imprisonment for three months. The respondent challenged this order by filing an appeal before the Sessions Judge at Manipur. The Sessions Judge largely concurred with the findings of the magistrate, accepting the testimony concerning the circumstances under which the paddy stored in the respondent’s godown had been recovered, and he concluded that the respondent had been properly convicted under section seven of the Essential Commodities Act. Accordingly, he confirmed the sentence that had been imposed. Unsatisfied with this outcome, the respondent thereafter filed a revision application before the Judicial Commissioner of Manipur, and the revision was granted.

Before the present revision application was heard, the Judicial Commissioner had examined the question of law relating to the interpretation of clause three, paragraph two of the Order in a series of earlier revision proceedings, namely revision applications numbered seven, eleven and thirteen of the year 1961. In a judgment delivered on June fifth, 1961, the Commissioner held that the presumption that could be raised under clause three, paragraph two did not, by itself, render the person against whom the presumption was drawn a dealer in the relevant goods. Consequently, the Commissioner reasoned that the mere existence of that presumption could not, on its own, invoke clause three, paragraph one. Relying on that reasoning, the Judicial Commissioner allowed the respondent’s revision application, set aside the conviction and sentence, and restored the respondent to the position he occupied prior to the Sessions Judge’s judgment.

The Manipur Administration subsequently obtained special leave to challenge that decision before this Court. Counsel for the appellant submitted that the Judicial Commissioner’s view amounted to a misinterpretation of clause three, paragraph two of the Order. The Court therefore identified the sole issue for determination in the present appeal as the proper construction of the said clause. To assist in that construction, the Court set out the relevant provisions of the Order. Clause two, paragraph (a) defines “dealer” as any person engaged in the business of purchase, sale or storage for sale of one or more of the specified foodgrains in a quantity of one hundred maunds or more at any one time. Clause two, paragraph (b) defines “foodgrains” as any one or more of the foodgrains listed in the Order, including products of such foodgrains but excluding husk and bran. It is uncontested that paddy is among the foodgrains enumerated in Schedule 1. Clause three, to which the appeal is directly concerned, provides that (1) no person shall carry on the business of a dealer except under a licence issued by the licensing authority and in accordance with its terms, and (2) for the purpose of this clause, any person who stores any foodgrains in a quantity of one hundred maunds or more at any one time shall, unless the contrary is proved, be deemed to store the foodgrains for the purpose of sale.

In this case, the Court observed that Clause 7 of the Order states that any person who holds a licence issued under the Order must not violate any of the licence’s terms and conditions, and that a licence may be cancelled or suspended if the holder is found to have breached those conditions. The Court identified these provisions as the principal matters before it in the present appeal. When considering the argument presented by counsel for the petitioner, the Court held it essential to remember that Clause 3, which is directly in dispute, imposes a penalty on anyone who violates its requirements and therefore constitutes a penal clause. Because of its penal nature, the Court emphasized that Clause 3 must be given a strict construction. The Court acknowledged the petitioner’s contention that Clause 3(2) operates as a deeming provision creating a legal fiction, and that this fiction should be interpreted to the fullest extent that the language of the clause permits. According to the petitioner’s submission, the practical effect of Clause 3 is that once it is proved that the respondent stored more than one hundred maunds of paddy, the respondent must be deemed to have stored the grain for the purpose of sale. The petitioner further argued that this statutory presumption is to be applied for the enforcement of sub‑clause (1) of Clause 3, and that it would frustrate the purpose of Clause 3(2) if the view of the learned Judicial Commissioner were maintained, whereby the presumption under Clause 3(2) would not be regarded as sufficient to establish the charge against the respondent. Turning to the issue of whether the respondent could be held guilty under section 7 of the Essential Commodities Act, the Court noted that the determination depends on whether the respondent can be characterized as a “dealer” within the meaning of Clause 3 of the Order. The definition of “dealer” is found in Clause 2(a), which the Court had already examined. That definition requires that a person must be engaged in the business of purchasing, selling, or storing for sale any of the commodities listed in the Schedule, and that the quantity involved must be at least one hundred maunds at any one time. The Court pointed out that the definition does not merely require an isolated act of purchase, sale, or storage; rather, it demands that the person be carrying on a continuous business of such activities. Consequently, a single, casual, or solitary transaction does not satisfy the definition of a dealer. Only when there is evidence of a sustained pattern or continuity of purchasing, selling, or storing the specified quantity does the statutory concept of “business” under the definition become satisfied, thereby allowing the respondent to be classified as a dealer for the purposes of the Order.

If the definition’s requirement that the activity be carried on as a business were disregarded, the term “business” would become redundant and meaningless. The counsel, Mr. Khanna, had fairly acknowledged before the Court that the condition that each transaction involve at least one hundred maunds at a time applied to every category of dealing with the commodities listed in the definition. Whether the transaction was a purchase, a sale or a storage, the volume at any one time had to be one hundred maunds or more. Consequently, there was no dispute before the Court that retail transactions involving less than one hundred maunds of the prescribed commodities fell outside the definition of a dealer. The forms prescribed by the Order reinforced this conclusion. The application form for a licence required the applicant to indicate the length of time he had been trading in foodgrains and to specify the place or places of his business. Form B, which set out the licence, authorized the licence‑holder to purchase, sell or store for sale the foodgrains mentioned in the licence, and clause 2 of the licence stipulated that the licencee must carry on the stated business at the place indicated in the licence. Likewise, Form C, which dealt with stocks, required the details of the godown where stocks were kept, and demanded separate entries for the quantity sold and delivered and for the quantity sold but not delivered. These forms therefore supported the view that a dealer falling within clause 2(a) must be engaged in the business of purchase, sale or storage, thereby excluding isolated or single instances of such activities. Bearing this necessary implication of the term “dealer” in mind, the Court proceeded to examine whether the respondent’s case fell within clause 3(1). Clause 3(1) prohibited any person from carrying on business as a dealer unless the person did so under and in accordance with a licence issued to him. In other words, anyone who wished to conduct the business described in clause 2(a) had to obtain a licence. It was indisputable that a person who engaged in the business described by clause 2(a) without obtaining the licence required by clause 3(1) would be guilty under section 7 of the Essential Commodities Act. In this context, clause 3(2) created a statutory presumption, which was a rebuttable presumption raised by the provision. If it was shown, by a person whose storage of more than one hundred maunds of any prescribed foodgrain was discovered, that the storage was for personal needs or some other legitimate purpose unrelated to the purpose of sale, then the presumption would be rebutted, provided that the explanation offered was accepted as reasonable and sufficiently proved.

In this case, the Court observed that the presumption is accepted as reasonable and sufficient when it is applied. The Court explained that the presumption means only that any stock of one hundred maunds or more of the specified foodgrains found with a particular individual is presumed to have been stored by that individual for the purpose of sale. Even after this presumption is applied, the prosecution must still prove that the storage presumed to be for sale was undertaken by the individual with the intention of carrying on a business of storing those foodgrains. The element of business, which is necessary to bring the provisions of clause 3(1) into operation, is therefore not covered by the presumption created by clause 3(2). Consequently, the prosecution must provide independent evidence to establish that business element. The prosecution may be able to satisfy this requirement by demonstrating that the individual was found in possession of a hundred maunds or more of the foodgrains on more than one occasion. The Court stated that it does not need to determine how many repetitions are required to prove the existence of a business, as that question is not relevant to the present decision. What is essential, according to the Court, is that after the presumption under clause 3(2) is raised, some additional evidence must be produced to justify the conclusion that the storage, although presumed to be for sale, was actually carried out by the individual for the purpose of conducting a business. Counsel for the respondent, Mr Khanna, argued that because clause 3(2) makes a direct reference to clause 3(1), the presumption should be interpreted more broadly. He maintained that the reference to clause 3(1) does not expand the scope of the presumption and that the presumption still merely indicates that the storage is for sale and that this inference is drawn for the purpose of applying clause 3(1). Mr Khanna further contended that if the legislature had intended the prosecution to prove an additional business element after the presumption of storage for sale, then the statutory presumption would be rendered useless. The Court acknowledged that this argument contains some merit, but cautioned that the Court cannot add words to clause 3(2) when interpreting it. As previously indicated, the language of the provision, when given its ordinary meaning, does not allow the presumption to incorporate the requirement of a business, which is a separate ingredient of the definition of a dealer.

The Court considered the statutory definition of a dealer. In this case, the Court observed that the argument advanced by counsel for the respondent concerning the underlying policy of clause three of sub‑section two could not support his position because the language of clause three sub‑section two is clear and unambiguous. The Court explained that clause three sub‑section two appears to have been intentionally drafted to create only a narrow presumption, whose purpose was to keep out from prosecution cultivators who, on rare occasions, might hold more than one hundred metric tons of food grains that they have grown on their own farms. The Court further noted that when a cultivator harvests more than one hundred metric tons in a single year, or otherwise acquires such a quantity, and then merely sells a portion of it or stores it without any commercial intention, the statutory order seemed designed not to treat that possession, sale or storage as an offence punishable under clause three sub‑section one together with section seven of the Essential Commodities Act. Nevertheless, after examining the precise wording of clause three sub‑section two, the Court concluded that it was not appropriate to find error in the Judicial Commissioner’s finding that the provision by itself does not establish that the respondent acted as a dealer within the meaning of clause three sub‑section one. Because the prosecution could not rely on clause three sub‑section two to prove the element of dealing, the charge under section seven of the Essential Commodities Act could not be sustained against the respondent. Consequently, the Court held that the Judicial Commissioner’s order of acquittal was legally correct. Accordingly, the appeal was dismissed and the judgment of acquittal stood.