Acquittal Under Essential Commodities Act Doesn't Automatically Entitle Trader To Interest Or Higher Compensation: Kerala High Court

For context, Section 3 deals with the power of the Central Government to control production, supply, distribution, etc, of essential commodities. Section 6C deals with the compensation for commodities that have been seized when the person is acquitted of the charges.

A Division Bench comprising Justice Sushrut Arvind Dharmadhikari and Justice P V Balakrishnan were delivering the judgment in an intra Court appeal against a Single Judge's order that had directed payment of the procurement price of seized wheat along with interest to a roller flour mill following its acquittal in a criminal case.

The respondent, who is a flour mill engaged in processing wheat products was raided in 2007 by the Taluk Supply Officer and the Rationing Inspector, which led to the seizure of 2,34,610 kg of wheat from its godown alleging that the wheat was exclusively meant for distribution through the Public Distribution System and the respondent was in possession of the same for illegal sale.

The respondents were acquitted of the crime by the Judicial First Class Magistrate Court - I, Changanacherry. Subsequent to the acquittal, an application under Section 6C(2) of the Act seeking refund of an amount of ₹28,15,320/- along with interest of 12% was placed before the District Collector, Kottayam. The District Collector only sanctioned a sum of ₹14,49,440/-. Aggrieved by this, a writ petition was filed before the High Court praying for grant of reasonable interest for the price of wheat seized from the godown.

The Single Bench directed the payment of the procurement price of the seized wheat along with interest to the respondent rather than the control price. The appeal was filed against this direction.

The Court examined whether an acquittal in a prosecution for contravention of Section 3(1) of the Essential Commodities Act automatically attracts the compensation mechanism under Section 6C(2), including payment of procurement price and interest, when the confiscation proceedings were conducted under Section 6A and the seized goods were already sold as per Section 6A(2).

The Court noted that Section 6C will be attracted only when an order of confiscation under Section 6A is modified or annulled in appeal or when the accused is acquitted in a prosecution for the contravention in respect of which confiscation was ordered under Section 6A, and it is not possible to return the seized commodity.

The Court further took note that the confiscated food grains were perishable and hence the District Collector sold them through Fair Price Shops and deposited the sale proceeds in the revenue Deposit (RD) account. The Court noted that the respondent Mill was prosecuted and acquitted only under Section 3(1) read with Kerala Rationing Order and there was no prosecution or acquittal under Section 6A of the Act.

“The situation would have been different had the crime against the respondent been registered under Section 6A of the Act and the respondent thereafter acquitted. Therefore, the provisions of Section 6C(2) of the Act are not attracted in the present case.” Court said

The Court held that the trader's entitlement is governed solely by Section 6A(3)(c) of the Act which limits the refund to the actual sale proceeds, without any statutory right to interest.

“The entitlement under Section 6C(2) of the Act arises only in a situation where the person concerned is acquitted of an offence under Section 6A of the Act. In the present case, the respondent was neither proceeded against nor acquitted under Section 6A of the Act….. In such circumstances, the statutory pre-conditions for invoking Section 6C(2) of the Act are not satisfied.” the Court held

The Court thus held that compensation with interest under Section 6C(2) is not a general consequence of acquittal, but a conditional statutory benefit.

The Court restored the District Collector's order and allowed the appeal.

Case Title: State of Kerala and Ors. v Niradeepam Roller Flour Mill

Case No: WA 1819/ 2025

Citation: 2026 LiveLaw (Ker) 86

Counsel for Petitioner: Renjith S (Spl. GP)

Counsel for Respondents: Sanil Jose, Bonny Benny, P G Sudheesh, K P Antony Binu, Amaljith