AIR 2012 SUPREME COURT 1797 "Krishi Utpadan Mandi Samiti v. Ved Ram"
(From : 2008 (4) ALJ 144)
Coram : 2
T. S. THAKUR AND DIPAK MISRA, JJ.
Civil Appeal No. 9589 of 2010, D/- 23 -3 -2012.
Krishi Utpadan Mandi Samiti and Anr. v. Ved Ram.
U.P. Krishi Utpadan Mandi Adhiniyam (25 of 1964), S.17 - AGRICULTURAL PRODUCE
- PRECEDENT @page-SC1798
Market fee - Levy of - Procedure provided by Supreme Court - Modification by High
Court - Is against judicial discipline - Finding by High Court that removal of goods
without gate pass would only call for levy of penalty and is unrelated to assessment of
fee on such goods - Improper - Market committee had every authority to demand fee on
goods removed without gate pass and without material to show that there was no sale Plea of absence of opportunity to produce material - Not available to dealer removing
goods in defiance of Rules - Order setting aside demand raised by market committee
liable to be set aside.
Constitution of India, Art.141.
2008 (4) ALJ 144, Reversed.
Cases Referred :
(Paras 7, 8)
Chronological Paras
(1998) Civil Appeal Nos. 1769-1773 of 1998, D/- 25-3-1998 (SC)
1995 (Supp) 3 SCC 433
3, 5
3, 4, 5, 6
Pradeep Misra for Appellant; Ajay Kumar, for Respondents.
Judgement
T. S. THAKUR, J. :- This appeal by special leave calls in question the correctness of an
order passed by the High Court of Judicature at Allahabad whereby Civil Misc. Writ
Petition No. 58900 of 2007 (reported in 2008 (4) ALJ 144) filed by the respondentcompany has been allowed, the order passed by the Krishi Utpadan Mandi Samiti,
Ghaziabad and that passed by the Deputy Director, Rajya Krishi Utpadan Mandi
Parishad, Meerut in revision set aside. The High Court has further directed the Krishi
Utpadan Mandi Samiti, Ghaziabad to make a fresh assessment of the market fee for the
period in question after providing an opportunity of being heard to the writ-petitioner or
his authorised agent. The challenge arises in the following factual backdrop.
The respondent-company is engaged in the business of manufacture and sale of milk
products including desi ghee which it markets under the brand name 'Paras'. The
company has set up a manufacturing unit at Sahibabad, District Ghaziabad, which falls
within the market area of Krishi Utpadan Mandi Samiti, Ghaziabad ('KUMS' for short).
The company's case is that it sells the milk products manufactured by it through its
consignee agents located at several places in different parts of the country. A list of 15
consignee agents spread over the States of West Bengal, Gujarat, Goa, Orissa,
Maharashtra, Rajasthan and New Delhi was in that regard enclosed by the respondent
with the writ petition filed by it before the High Court. These consignee agents,
according to the respondent-company, provide to the company services like, unloading
of goods from the trucks, storage in the depots of the company, dispatch of the stocks
by trucks to redistribution stockists as per sale orders, raising sale invoices on behalf of
the company and collecting payments for the stocks sold.
In terms of a show-cause notice issued by the appellant-Samiti, the respondentcompany was called upon to produce all relevant documents with regard to the
production, sale-purchase, movement and storage of its product for the relevant period.
This notice was triggered by a declaration received from the respondent-company that
consignment note No.94 dated 14th May, 2004 dispatching 5250 Kgs. of desi ghee to
Anand Sales Corporation at Ahmedabad was a stock transfer which did not require any
gate pass for its movement outside the market area.
On receipt of the notice the respondent-company filed a reply explaining the nature of
the transaction and claiming that transfer of stocks to its godowns outside the mandi
area was on "stock transfer basis" and not pursuant to any sale effected within the
mandi area. The Mandi Samiti remained dissatisfied with that explanation with the result
that by an order dated 27th April, 2005 the Samiti held that obtaining of gate passes
after producing evidence to rebut the presumption arising under
@page-SC1799
Explanation to Section 17(iii)(b) of the Uttar Pradesh Krishi Utpadan Mandi Adhiniyam,
1964 was necessary. The Samiti further held that the respondent-company had not
adduced sufficient evidence to rebut the presumption that the movement of goods from
the mandi area to places outside such area was pursuant to a sale effected within the
said area. The Samiti accordingly levied a market fee of Rs.9,39,200/- and development
fee of Rs.2,34,800/- totalling Rs.11,74,000/- for 3906.80 quintals of desi ghee taken out
from the market area of KUMS, Ghaziabad under Section 17(iii)(b) of the Adhiniyam
mentioned above. It was further directed that in future the respondent-company shall
produce the details of its business and obtain gate passes whenever it removes ghee
from the market area of KUMS, Ghaziabad.
Aggrieved by the order passed by the Samiti, the respondent-company filed a revision
under Section 32 of the Adhiniyam before the Regional Deputy Director, Rajya Krishi
Utpadan Mandi Parishad, U.P. which was dismissed by the Deputy Director by its order
dated 31st October, 2007. The Deputy Director while affirming the order passed by the
Samiti held that the transactions in question were not by way of stock transfers but
sales within the market area of KUMS Ghaziabad, hence exigible to market fee.
The respondent-company then filed Writ Petition No.58900 of 2007 before the High
Court of Judicature at Allahabad, challenging the orders passed by the Samiti and the
Deputy Director on several grounds. The High Court has, by the order impugned in the
present appeal, allowed the said petition set aside the orders of the Samiti and the
Deputy Director and remanded the matter back to the Samiti for a fresh assessment in
accordance with law. While doing so, the High Court has not only found fault with the
approach adopted by the Samiti and the Deputy Director but also commented adversely
about the capacity of the officers making the orders in deciding the questions of law and
fact that arise in connection with such transactions. According to the High Court the
entire approach adopted by the Samiti and the Deputy Director was biased, arbitrary,
and authoritative and based on a misreading of the legal provisions and the judgments
of this Court. The High Court felt that all this happened because the officers who were
handling the issue of such importance were not equipped with the requisite knowledge
about the legal principles and procedure applicable while dealing with complex
questions of law and fact. More importantly, the High Court evolved a new and
somewhat novel procedure for examination of the issues involved in such cases while
providing for safeguards by way of securing the amount claimed by the Mandi Samiti
towards market fee. The High Court observed:
"The market fee is levied on the sale of agricultural produce in the market area. The
Explanation only raises a rule of presumption which may be rebutted by manufacturing
trader or the trader as the case may be. The Court cannot presume that the movement
of goods cannot be occasioned unless the sale is affected. The nature of evidence to be
produced at the time of gate pass is a contentious matter which has not been resolved
in the last three decades. A number of attempts made by the courts have not
succeeded in proper understanding of law by the officers and employees of the market
committees and Mandi Parishad. In the circumstances, in addition to the directions,
which have been given by the judgments cited above, the Court directs that the
Petitioner will furnish to Secretary, KUMS Ghaziabad, a 'revolving bank guarantee' of
the amount of market fees on yearly basis based on the average of the historical sales
and payments of the market fees in the last three years. The bank guarantee will be
furnished on the first of April and unless revoked, it shall be revalidated every year. The
market committee will issue gate passes on a declaration
@page-SC1800
made by the petitioners that the goods are moving by way of stock transfer and have
not been sold. They will produce the consignment note, and the proof of dispatch giving
names and addresses of stockists. These documents will constitute sufficient proof of
rebuttal at the stage of a request for gate pass. The market committee will assess the
market fee on yearly basis after 31st March of the next year and consider documents
furnished by way of rebuttal of the presumption of sale in respect of each and every
transactions separately. It will not be sufficient to say that the gate pass was not
obtained or obtained without payment of market fees or that documents are not
sufficient. The order would show application of mind and reasoning for both accepting or
rejecting the proofs furnished in respect of each and every transactions separately."
2. On behalf of the appellant-Samiti it was argued by Mr. Rakesh Dwivedi, learned
senior counsel, that the observations made by the High Court regarding the capacity of
the officers to understand and effectively determine the contentious issues that arose
for determination was wholly unjustified. He submitted that instead of finding fault with
the capacity of the officers to understand the issues, the High Court would have done
better in pointing out the errors committed by the authorities below in either appreciating
the law or applying the same to the facts of the case at hand. He urged that the officers
had appreciated the evidence adduced by the respondent properly and were well within
their powers to reject the same for reasons which they had set out in their respective
orders. So long as there was no perversity in the approach adopted by the Samiti and
the Deputy Director in appreciating evidence and/or the application of principles of law
to the facts of the case, the mere fact that those officers were not formally trained in law
was no reason to dub them as incompetent or incapable, especially when any such
training was no guarantee against commission of mistakes.
3. It was further argued that the High Court had completely overlooked the fact that the
respondent-company had, in complete breach of the directions and procedure
sanctioned by the orders passed by this Court, removed the stock of ghee without the
requisite gate passes necessary for such removal. The High Court had also committed
an error in evolving a procedure which was different from the one that was stipulated by
this Court in Krishi Utpadan Mandi Samiti and Ors. v. Shree Mahalaxmi Sugar Works
and Ors., 1995 Supp (3) 433 and Krishi Utpadan Mandi Samiti v. M/s Saraswati Cane
Crusher and Co. and Ors. (Civil Appeal Nos. 1769-1773 of 1998) decided on 25th
March, 1998. Mr. Sudhir Chandra appearing for the respondent supported the order
passed by the High Court and prayed for dismissal of this appeal.
4. In Shree Mahalaxmi Sugar Works (supra) this Court noticed the Explanation under
Section 17 of the Uttar Pradesh Krishi Utpadan Mandi Adhiniyam, 1964 and declared
that the Samiti was entitled to raise demands against the dealers before passes for
removal of the goods could be issued to them. This Court held that if there was a valid
rebuttal to the statutory presumption that a sale had taken place within the notified
market area, the dealers will be entitled to the passes, otherwise not. If the dealers are
compelled to pay market fee as demanded, it shall be open to the aggrieved to
challenge the same in the manner provided under the Act. The order passed by this
Court being a short order may be extracted in extenso:
"1. Leave granted.
2. The Explanation to Section 17 of the Uttar Pradesh Krishi Utpadan Mandi Adhiniyam,
1964 reads as follows:
"Explanation.- For the purpose of clause (iii), unless the contrary is proved, any
specified agricultural produce taken out or proposed to be taken out of a market area by
or on behalf of a licensed trader
@page-SC1801
shall be presumed to have been sold within such area and in such case, the price of
such produce presumed to be sold shall be deemed to be such reasonable price as
may be ascertained in the manner prescribed."
From this it is clear that there is a presumption against the dealers. In view of that
presumption, it is open to the appellants-Krishi Utpadan Mandi Samiti to raise demands
against the dealers before passes could be issued. If there is a valid rebuttal in that the
sale did not take place within the notified market area, the dealers will be entitled to the
passes, otherwise not. Of course, even the dealers are compelled to pay the market fee
as demanded. It is open to them to challenge it in the manner provided under the Act.
3. The appeals are disposed of in the above terms."
5. Pursuant to the above pronouncements the Mandi Samiti appears to have started
issuing gate passes on payment of mandi fee demanded by them at the time of issue of
gate pass. A change in the procedure came about as a result of the decision of this
Court in M/s. Saraswati Cane Crusher (supra). In that case the dealers had argued that
the procedure being followed pursuant in Shree Mahalaxmi Sugar Works (supra) was
not satisfactory inasmuch as the requirement of hearing and of an adjudication was not
being satisfied unless an aggrieved dealer was in a position to challenge the
assessment in the manner provided under the Act. A three-Judge Bench of this Court
found merit in that contention and held that the order passed in Shree Mahalaxmi Sugar
Works (supra) required some repair work. The Court observed:
"We are satisfied that the orders of this Court aforereferred to would need some repair
work. We treat the said order to be conceiving of a provisional assessment whereafter
doors are opened for a final assessment. We conceive that when demands are raised
by the Krishi Utpadan Mandi Samiti against a trader before he could ask for transit of
goods outside the market area, the trader would be entitled to tender a valid rebuttal to
say that no sale had taken place within the notified area and that if the explanation is
accepted there and then by the Mandi Samiti, no question of payment would arise as
also of withholding the gate passes. If prima facie evidence led by the trader is not
accepted by the Mandi Samiti, the trader or the dealer can be compelled to pay the
market fee as demanded before issuance of gate pass. If the trader makes the payment
without demur, the matter ends and the assessment finalized. But in case he does so
and raises protest, then the assessment shall be taken to be provisional in nature
making it obligatory on the trader to pay the fee before obtaining the requite gate pass.
After protest has been lodged and the provisional assessment has been made, a time
frame would be needed to devise making the final assessment. We, therefore, conceive
that it innately be read in the order of this Court that a final assessment has to be made
within a period of two months after provisional assessment so that the entire transaction
in that respect is over enabling the aggrieved party, if any, to challenge the final
assessment in the manner provided under the afore Act or under the general law of the
land in appropriate fora. Having added this concept in this manner in the two Judge
Bench decision of this Court, we declare that what repair has been done instantly would
add to the order of the High Court and the instant corrective decision shall be the
governing rule. The Civil Appeals would thus stand disposed of.
Since the assessment thus far made against the traders, who are involved in the instant
appeals, would have to be treated as provisional awaiting final assessment, we permit
the concerned traders to move the respective Mandi Samiti within two months from
today to hear their objections and proceedings onwards be regulated in accordance with
procedure devised hereinbefore. Nonetheless we add that should
@page-SC1802
the basis of provisional assessment be knocked off, the Samiti would refund the market
fee to the traders/dealers within two months thereafter."
6. It appears from the above that the orders passed by this Court in Shree Mahalaxmi
Sugar Works (supra) was interpreted to mean that a provisional assessment would be
made against the trader before he could ask for a transit pass for removal of the goods
outside the market area. In the course of the said provisional assessment the trader
would be entitled to tender a valid rebuttal to the statutory presumption under Section
17 of the Adhiniyam and argue that no sale having taken place within the notified area,
it was not liable to pay any market fee on the movement of goods. If the explanation
offered by the trader was accepted the gate pass would be issued without insisting upon
any payment of the fee. But if the evidence laid by the trader is not prima facie accepted
by the Mandi Samiti the trader or the dealer can be compelled to pay market fee before
issue of gate pass to him. The Court further held that if the trader makes the payment
without demand the matter ends and the issue finalised. In case, however, he raises a
protest then the assessment shall be taken to be provisional in nature making it
obligatory for the trader to pay the fee before obtaining the requisite gate pass. After
protest has been lodged the provisional assessment shall be followed by a final
assessment within a time frame. The Court prescribed a period of two months in respect
of each such transaction enabling the aggrieved party to challenge the same under the
Act or under the general law of the land before the appropriate fora.
7. The above procedure has been working effectively for the past decade and a half and
ought to have been effective in the instant case also. The unfortunate part, however,
was that the respondent-company did not respect the procedure stipulated under the
above orders of this Court. It did not apply for and obtain gate passes for removal of its
goods. The Samiti, therefore, had no occasion to pass any provisional or final order
based on the material adduced before it. It is only when the respondent-company filed a
declaration that the removal of the stocks pursuant to consignment note No.94 dated
14th May, 2004 in favour of Anand Sales Corporation at Ahmedabad was a stock
transfer and did not require a gate pass that the Samiti issued a show-cause notice
asking the respondent-company to furnish the documents with regard to the production,
sale, purchase, movement and storage of the goods. Based on the figures furnished
pursuant to the said show-cause notice the Samiti determined the market fee and the
development fee and raised a demand for payment thereof with a direction to the
company to follow the prescribed procedure for removal of goods from the mandi area.
The revisional authority, as seen above, upheld the assessment of the fee and the
consequential directions issued by the Samiti. The High Court, however, completely
overlooked the effect of the orders passed by this Court in the two cases mentioned
earlier and brought in a new mechanism which could in its opinion be more effective, in
dealing with the situation that arose so very often between the Samiti on the one hand
and the traders on the other. The High Court failed to appreciate that it was not on virgin
ground. The matter was fully covered by the decisions of this Court. Further repair of the
procedure and the mechanism so provided could only be under the orders of this Court.
The High Court ought to have left it to this Court to determine as to whether the
mechanism and procedure provided by our orders required any modification, and if so,
in what form and to what extent. Instead of doing that, the High Court embarked upon
an exercise which was not necessary especially when the same did no service to
judicial discipline.
8. The High Court was also in error in holding that even when the movement of
@page-SC1803
goods without gate passes may have been in violation of the rules regulating the issue
of such passes, any such violation could only call for a penalty under the said rules.
Assessment of market fee on the removal of such goods from the mandi area was,
according to the High Court, a different matter unrelated to the breach of the rules
requiring the traders to remove goods only on the authority of validly issued gate
passes. The High Court appears to have overlooked the fact that if gate passes are
required to be obtained under the rules, removal of stocks without applying for such
gate passes and without furnishing prima facie evidence of proof that there was no sale
of the goods involved, was a reason enough for the Mandi Samiti to demand payment of
the market fee on the stocks that were removed. The absence of gate passes was
tantamount to removal of the goods in breach of the relevant rules and also in breach of
the directions issued by this Court in the two cases mentioned above. A dealer who
adopted such dubious procedure and means could not complain of a failure of
opportunity to produce material in support of its claim that no sale was involved. No
opportunity to a dealer who was acting in defiance of the rules and removing the goods
without any intimation and permission of the Samiti could be granted for the occasion to
grant such an opportunity would arise only when the trader applied for the issue of a
gate pass. As a matter of fact, the goods having been taken away without gate passes
and without any material to show that there was no sale, the Samiti could demand
payment of the market fee and leave it open to the respondent-trader to claim refund by
rebutting the presumption that the removal was pursuant to a sale. At any rate, the
Samiti and the Deputy Director have concurrently held that the respondent-company
has not been able to rebut the presumption under Section 17 of the Adhiniyam. We see
no reason to interfere with that finding especially when the appraisal of the evidence by
the said two authorities has not been shown to us to be in any way perverse to warrant
interference with the same.
9. In the result, we allow this appeal, set aside the order passed by the High Court and
restore that passed by the Samiti and the Deputy Director in revision. The parties are
left to bear their own costs.
Appeal allowed.
AIR 2012 SUPREME COURT 1160 "National Seeds Corporation Ltd., M/s. v. M.
Madhusudhan Reddy"
Coram : 2
G. S. SINGHVI AND ASOK KUMAR GANGULY, JJ.
Civil Appeal Nos. 7543, 7542 of 2004 with 622, 623 of 2012 (arising out of SLP (C) Nos.
32750 with 35350 of 2009) with Civil Appeal Nos. 3499, 3498, 3596, 3598, 4509 to
4522, 4962, 4798, 4964, 4957, 4955, 4954, 4963, 4824, 4959, 4967 and 4704 of 2009,
D/- 16 -1 -2012.
M/s. National Seeds Corporation Ltd. v. M. Madhusudhan Reddy and Anr.
(A) Consumer Protection Act (68 of 1986), S.12, S.2(d), S.3, Pre. - Seeds Act (54 of
1966), S.19, S.21 - CONSUMER PROTECTION - APPLICABILITY OF AN ACT AGRICULTURAL PRODUCE - District forum - Jurisdiction - Complainant of defective
seeds by farmer - Can be entertained by consumer forums - Seeds Act though Special
Act to ensure supply of quality seeds - Does not make provision for compensating
farmers who suffered loss - More over it contains no provision excluding applicability of
Consumer Act.
Though, the Seeds Act is a special legislation enacted for ensuring that there is no
compromise with the quality of seeds sold to the farmers and others and provisions
have been made for imposition of substantive punishment on a person found guilty of
violating the provisions relating to the quality of the seeds, the legislature has not put in
place any adjudicatory mechanism for compensating the farmers/growers of seeds and
other similarly situated persons who may suffer loss of crop or who may get insufficient
yield due to use of defective seeds sold/supplied by the appellant- seeds corporation, or
any other authorized person. No one can dispute that the agriculturists and
horticulturists are the largest consumers of seeds. They suffer loss of crop due to
various reasons, one of which is the use of defective/sub-standard seeds. The Seeds
Act is totally silent on the issue of payment of compensation for the loss of crop on
account of use of defective seeds supplied by the appellant and others who may obtain
certificate under Section 9 of the Seeds Act. A farmer who may suffer loss of crop due
to defective seeds can approach the Seed Inspector and make a request for
prosecution of the person from whom he purchased the seeds. If found guilty, such
person can be imprisoned, but this cannot redeem the loss suffered by the farmer. The
preamble to the Consumer Act on other hand shows that this legislation is meant to
provide for better protection of the interests of consumers and for that purpose to make
provision for establishment of consumer councils and other authorities for the settlement
of consumer disputes and for matters connected therewith. It can thus be said that in
the context of farmers/growers and other consumer of seeds, the Seeds Act is a special
legislation insofar as the provisions contained therein ensure that those engaged in
agriculture and horticulture get quality seeds and any person who violates the
provisions of the Act and/or the Rules is brought before the law and punished. However,
there is no provision in that Act and the Rules framed there under for compensating the
farmers etc. who may suffer adversely due to loss of crop or deficient yield on account
of defective seeds supplied by a person authorized to
@page-SC1161
sell the seeds. That apart, there is nothing in the Seeds Act and the Rules which may
give an indication that the provisions of the Consumer Act are not available to the
farmers who are otherwise covered by the wide definition of 'consumer' under Section 2
(d) of the Consumer Act. As a matter of fact, any attempt to exclude the farmers from
the ambit of the Consumer Act by implication will make that Act vulnerable to an attack
of unconstitutionality on the ground of discrimination and there is no reason why the
provisions of the Consumer Act should be so interpreted. Since the farmers/growers
purchased seeds by paying a price to the appellant, they would certainly fall within the
ambit of Section 2 (d)(i) of the Consumer Act and there is no reason to deny them the
remedies which are available to other consumers of goods and services. (Paras
17,
20, 23, 26)
(B) Consumer Protection Act (68 of 1986), S.12, S.3 - Arbitration and Conciliation Act
(26 of 1996), S.8 - CONSUMER PROTECTION - AGRICULTURAL PRODUCE ARBITRATION - Complaint to Consumer Forum - Locus Standi to file - Growers of
seeds - Entering into contract with Seed Corporation - Contract containing arbitration
clause - Not prevented thereby from filing complaint to consumer forum about defective
seeds supplied to them.
The growers of seeds who have entered into contract with Seeds Corporation
containing an arbitration clause are not prevented thereby from filing complaint to
consumer forum about defective foundation seeds supplied to them by Corporation. The
remedy of arbitration is not the only remedy available to a grower. Rather, it is an
optional remedy. He can either seek reference to an arbitrator or file a complaint under
the Consumer Act. If the grower opts for the remedy of arbitration, then it may be
possible to say that he cannot, subsequently, file complaint under the Consumer Act.
However, if he chooses to file a complaint in the first instance before the competent
Consumer Forum, then he cannot be denied relief by invoking Section 8 of the
Arbitration and Conciliation Act. Moreover, the plain language of Section 3 of the
Consumer Act makes it clear that the remedy available in that Act is in addition to and
not in derogation of the provisions of any other law for the time being in force.
(Para
29)
(C) Consumer Protection Act (68 of 1986), S.2(d) - CONSUMER PROTECTION AGRICULTURAL PRODUCE - Consumer - Growers of seeds on behalf of Seeds
Corporation - Evidence showing that they have purchased seeds for earning livelihood
and not for commercial purpose - Growers of seeds not excluded from definition of
consumer. (Para 33)
(D) Consumer Protection Act (68 of 1986), S.13 - CONSUMER PROTECTION AGRICULTURAL PRODUCE - Procedure for trial of complaint - Complaint by
farmers/growers of seeds supplied by appellants resulting in less field - Sample seeds
not available with complainants as all seeds purchased were sown - Appellant also not
providing sample of seeds sold for analysis - Consumer forum appointing agricultural
experts to ascertain status and cause of failure of crop - Compensation awarded to
complainants on basis of report of experts - Procedure adopted by Forum cannot be
said to be contrary to Section 13(1)(c) - Order of forum not liable to be set aside on
specious ground that procedure prescribed under Section 13(1)(c) had not been
followed.
(1998) 6 SCC 738, Rel. on.
(2002) CPJ 13, (2006) CPJ 178 and (2008) 3 CPJ 96, Ref.
Cases Referred :
(Paras 35, 34)
Chronological Paras
2011 AIR SCW 6028
22, 31
(2008) CPJ 96 (Ref.)
38
AIR 2007 SC 1819 : 2007 AIR SCW 3032 : 2007 (4) ALJ 196 : 2007 (4) AIR Kar R 267
24
(2006) 3 SCC 721 6.6
(2006) CPJ 178 (Ref.)
38
@page-SC1162
AIR 2004 SC 184 : 2003 AIR SCW 5887 6.6, 22
AIR 2004 SC 448 : 2003 AIR SCW 6873 : 2004 All LJ 172
22, 24
AIR 2004 SC 3474 : 2004 AIR SCW 3164 : 2004 All LJ 2047 : 2004 AIR Kant HCR
1845 22
AIR 2003 SC 1043 : 2003 AIR SCW 558 : 2003 AIR Kant HCR 532 6.6, 22, 24
(2002) CPJ 13 (Ref.)
38
AIR 2000 SC 2008 : 2000 AIR SCW 1866 : 2000 CLC 1170 22, 30
AIR 1998 SC 1801 : 1998 AIR SCW 1590
(1998) 6 SCC 738 (Rel. on)
24
37, 39
AIR 1997 SC 533 : 1996 AIR SCW 3852 6.6, 22, 29
AIR 1995 SC 1428 : 1995 AIR SCW 2114
AIR 1994 SC 787 : 1994 AIR SCW 97
32
22, 25
Sudhir Kulshreshtha, for Appellant.
Judgement
G. S. SINGHVI, J. :- Leave granted in SLP (C) Nos. 32750 of 2009 and 35350 of 2009.
2. Appellant - M/s. National Seeds Corporation Ltd. (NSCL) is a Government of India
company. Its main functions are to arrange for production of quality seeds of different
varieties in the farms of registered growers and supply the same to the farmers. The
respondents own lands in different districts of Andhra Pradesh and are engaged in
agriculture/seed production. They filed complaints with the allegation that they had
suffered loss due to failure of the crops/less yield because the seeds sold/supplied by
the appellant were defective. District Consumer Disputes Redressal Forums, Kurnool,
Mehboob Nagar, Guntur, Khamman and Kakinada allowed the complaints and awarded
compensation to the respondents. The appeals and the revisions filed by the appellant
were dismissed by the Andhra Pradesh State Consumer Disputes Redressal
Commission (for short, 'the State Commission') and the National Consumer Disputes
Redressal Commission respectively.
3. The appellant has questioned the orders of the National Commission, which also
implies its challenge to the orders of the State Commission and the District Forums
mainly on the following grounds:
(a) the District Forums did not have the jurisdiction to entertain complaints filed by the
respondents because the issues relating to the quality of seeds are governed by the
provisions contained in the Seeds Act, 1966 (for short, 'the Seeds Act') and any
complaint about the sale or supply of defective seeds can be filed only under the Seeds
Act and not under the Consumer Protection Act, 1986 (for short, 'the Consumer Act').
(b) the District Forums could not have adjudicated upon the complaints filed by the
respondents and awarded compensation to them without following the procedure
prescribed under Section 13(1)(c) of the Consumer Act.
(c) the growers of seeds, who had entered into agreements with it, are not covered by
the definition of 'consumer' under Section 2(d) of the Consumer Act because they had
purchased the seeds for commercial purpose.
4. For the sake of convenience, we may advert to the facts leading to the passing of
orders by three Consumer Forums, which have been impugned in Civil Appeal Nos.
7543 of 2004, 3499 of 2009 and 4519 of 2009. We may also mention that in their
complaints the respondents had impleaded the officers of the appellant as parties but
for the purpose of this judgment we shall only refer to them as the appellant.
Civil Appeal No.7543 of 2004
5.1 Respondents M. Madhusudan Reddy and K. Rambhupal Reddy claim to have
purchased 46 kg. of KBSH-1 Sunflower seeds from Area Manager of the appellant at
Kurnool. They undertook cultivation by adopting the recognized modes of preparing
@page-SC1163
the field and irrigation and also used the prescribed fertilizer but there was germination
only in 60% seeds and the height of the plants was uneven. The germination in the
remaining 40% plants was slow. Not only this, flowering did not take place
simultaneously. At the request of the respondents, Area Manager of the appellant
inspected their field on 19.11.1999. He is said to have agreed that there was less
germination and the growth of the plants was uneven, but declined to give any
assurance for payment of compensation.
5.2 Dissatisfied with the response of the Area Manager, the respondents filed a
complaint under Section 12 of the Consumer Act and prayed for award of compensation
of Rs.1,79,505/- towards the cost of seeds, fertilizer and pesticides and value of the lost
crop with interest at the rate of 12 per cent. per annum by alleging that they did not get
the expected yield because the seeds sold by the appellant were defective.
5.3 In the reply filed on behalf of the appellant, it was pleaded that the seeds were
purchased by respondent No. 1 alone and there was no evidence of joint cultivation by
the respondents. The appellant denied that the seeds were defective and pleaded that
respondent No. 1 did not get the expected yield because sufficient quantity of seeds
had not been used for cultivation and there were no rain during the relevant period. It
was also claimed that there was no complaint from any other farmer, who had
purchased the same variety of seeds.
5.4 By an order dated 1.12.1999 passed in IA No.141 of 1999, District Forum, Kurnool
appointed Shri D. C. Rama Rao, retired Assistant Director of Agriculture as
Commissioner and directed him to submit a report after inspecting the field of the
respondents. The Commissioner conducted the inspection and submitted report dated
1.12.1999, the relevant portions of which are extracted below "The sunflower crop is raised under rainfed conditions. The soil is black and suitable for
the Sunflower Crop. The cultivation aspects as observed is very satisfactory. The field is
clean and free. The variety is said to be KBSJI the crop may be of 80 days above.
Flowering is seen but it is not uniform. About 55% of the plants have flowers. About
25% of the plants have the head natured and about 10% of the plants are in the bud
stage, while rest of the plants do not have flowers and there is no possibility for these
plants to get flower, as they are only 3 feet height and the crop period to give flowers is
over.
The following are the variation, I have noticed.
No.
Observed % Height of the
Plants Flowers Stage
1.
Remarks
45% 6 feet Flowering and grain
setting is in progress
Only two to three rows
of flowers in head is
setting seed. (Convex
and flat heads)
2.
10% 4 feet Flowering and the seed
setting is started
No possibility for further
growth.
3.
20% 6 feet Head dropping
since seed setting is over. No growth is possible
4.
5%
4 feet Head dropping
since seed setting is over. -do-
5.
10% 4 to 6 feet
In bud stage Growth can not be ex-
pected further.
6.
10% 3 to 4 feet
No flowering is seen.
Growth also is stunted.
@page-SC1164
Presence of leaf heairyness is seen in all the items except item (3) above to a certain
extent i.e., 3 to 4 %.
In all the cases I have noticed difference in Head shape i.e., a few or convex a few a flat
and a few are concave.
In all the cases I have seen the heads are not uniform in size. Twenty five per cent of
heads which are dropping because of full maturity are bigger in size while many are of
medium size.
I have noticed 0.1% of flowers with multiple heads.
There are gaps which are may be due to faulty seed or may be due to non-germination
of the seed.
In the heads which are flat and concave are having three rows of seed setting while in
the convex heads the filling or setting of seed is satisfactory.
I have also seen two different plots of sunflower grown adjacent to the plot in question
and are exhibiting uniformity of the plant, in height, size and opening of flower etcetra.
This is an indication of a standard seed.
Similar uniformity is lacking in the plot in question. In all the three plots, there prevailed
uniform physical and climatelogical factors.
Hence the wide variation in all the aspects as explained in the earlier paras gives a
scope this seed is not standard up to the mark.
Particularly Hybrid seed be having with such a wide variation is not ideal.
From this I estimate the yield may be around 150 to 200 kgs/Ac as against the 600 to
700 kgs/Ac expected from the variety."
(Emphasis supplied)
5.5 The appellant filed objections against the Commissioner's report and claimed that
the assessment made by him was not based on any scientific method and the
comparison with the adjacent field without having regard to the nature of soil, water
facility etc. was unacceptable. The appellant also contested the Commissioner's
observation regarding satisfactory nature of cultivation by asserting that as per
Vyavasaya Panchangam of Acharya N. G. Ranga Agriculture University, Hyderabad, 10
to 12 kgs. seeds were required for one hectare but respondent No.1 had used
substantially less quantity of seeds for his holding of 21.10 acres.
5.6 The respondents filed their affidavits along with copies of Invoice bill H.No.000691
dated 11.6.1999, No.3 Adangal, letter dated 6.11.1999 given to the appellant, bill dated
29.6.1999 showing the purchase of fertilizers from Chaitanya Chemicals and Fertilizers,
Kurnool and the photographs showing the unevenness in the plants. On behalf of the
appellant, an affidavit was filed along with copies of the documents mentioned therein.
5.7 The District Forum rejected the appellant's objection to the Commissioner's report
and held that the complainants (the respondents herein) have succeeded in proving that
the seeds sold to them were defective resulting in loss of crop. Accordingly, the
complaint of the respondents was allowed and the appellant was directed to pay
Rs.1,00,000/- towards loss of crop and Rs.10,000/- towards the cost of fertilizer,
pesticides, labour etc. with a stipulation that if the amount is not paid within one month,
the appellant shall be liable to pay interest @ 9% per annum.
5.8 The State Commission dismissed the appeal and held that Commissioner's report
was rightly accepted by the District Forum because the appellant had not produced any
evidence to controvert the findings contained therein that the respondent had taken
proper steps for cultivation but did not get the expected yield due to faulty seeds.
5.9 The National Commission rejected the appellant's plea that the only remedy
available to the respondents was to file a complaint under the Seeds Act, which is a
@page-SC1165
special legislation vis-?is the Consumer Act, by observing that there is no provision in
that Act for compensating a farmer whose crop may be adversely affected due to use of
defective seeds sold by the appellant. The argument that the District Forum could not
have decided the complaint without complying with the mandate of Section 13(1)(c) of
the Consumer Act was negatived by the National Commission and it was held that the
report of the Commissioner, who was an expert in agriculture, was rightly relied upon by
the District Forum for coming to the conclusion that the crop had failed due to the use of
defective seeds.
Civil Appeal No. 3499 of 2000
6.1 Respondent P. V. Krishna Reddy is a grower having land in Khanpur village of
Manopad Mandal of Mahabubnagar District of Andhra Pradesh. He was one of the
persons selected by the appellant in March 2000 for growing 'bitter gourd' seeds. The
appellant entered into an agreement with the respondent and assured him that by
producing seeds on its behalf he will get minimum net profit of Rs.38,000/- per acre
within a span of three months. In furtherance of the terms of agreement, the appellant
supplied 5 kgs. of 'bitter gourd' foundation seeds to the respondent by charging Rs.
1,852.50 towards cost of the seeds, inspection fee etc. The appellant also appointed a
supervisor and the respondent sowed seeds under his supervision by spending a sum
of Rs. 22,470/- towards labour charges, fertilizers and pesticides. In September, 2000,
officials of the appellant visited the field of the respondent and others, who had entered
into similar agreements, and rejected the seeds grown by them on the pretext that the
same were not fit for certification.
6.2 On receipt of the inspection report prepared by the officials of the appellant, the
respondent contacted the Horticulture Officer, who also inspected the field and
submitted a report with the conclusion that the crop had failed because the seeds were
defective. The respondent then filed a complaint under the Consumer Act and prayed
for issue of a direction to the appellant to pay compensation of Rs.1,38,322/- with
interest at the rate of 18% per annum and compensation of Rs.1,00,000/- by alleging
that he had suffered loss because the foundation seeds supplied by the appellant were
defective.
6.3 In the reply filed on behalf of the appellant, the following objections were taken to
the maintainability of the complaint:
(i) that in view of the arbitration clause contained in the agreement, the only remedy
available to the respondent was to apply for arbitration and the District Forum did not
have the jurisdiction to entertain the complaint.
(ii) that the respondent had entered into an agreement for commercial production of the
seeds and, as such, he cannot be treated as a 'consumer' within the meaning of Section
2(d) of the Consumer Act.
On merits, it was pleaded that Shri M. V. Narsimha Rao, Seed Officer of NSC Kurnool
had advised the respondent and other growers to remove off-types and diseased plants,
which were liable to be rejected but the growers ignored his advice. It was then averred
that during their visit on 8.9.2000, Shri M. V. Narsimha Rao, Shri M. V. Sudhakar and
Area Manager, NSCL, Kurnool found 7% off-types seeds which were more than the
prescribed standards and, therefore, their crops were rejected. The report of the
Horticulture Officer was contested on the premise that the respondent did not get the
seeds tested in any government laboratory.
6.4 District Forum, Mahabubnagar overruled the objections of the appellant by
observing that the respondent had purchased the seeds for earning livelihood by selfemployment and not for any commercial purpose and that availability of remedy by way
of arbitration does not operate as a bar to the entertaining of a complaint
@page-SC1166
filed under the Consumer Act. The District Forum also referred to the appellant's plea
that issue relating to quality of the seeds can be determined only by getting the samples
tested in a laboratory and rejected the same by making the following observations:
"The complainant purchased 5 kgs. of bitter gourd seeds under Ex.A-1 and sowed the
seeds in an extent of 3 acres in his land. He sowed the entire seeds purchased by him.
At the time of sowing, he might not have known that he had to keep back some seeds
out of the seeds purchased by him as sample in the event of his approaching Forum if
the seed crop was ultimately rejected by NSC. As all the seeds were sowed, he could
not have taken out any seeds from the soil and produce them before the District Forum
for following the procedure contemplated under Section 13(1) of C.P. Act. In those
circumstances, the sample of seeds could not be sent to the appropriate Laboratory for
analysis as contemplated under Section 13 of C.P. Act by the District Forum."
(Emphasis supplied)
6.5 The District Forum also opined that the appellant had failed to substantiate its
assertion that the respondent had not removed off types and diseased plants despite
the advice given by the Seed Officer by observing that no evidence had been produced
in that regard. The District Forum finally concluded that the foundation seeds supplied to
the respondent were faulty and the appellant was liable to compensate him.
6.6 The State Commission dismissed the appeal filed by the appellant and confirmed
the order passed by the District Forum. The National Commission considered the
objections raised by the appellant to the maintainability of the complaint, referred to the
judgments of this Court in Fair Air Engineers (P) Ltd. v. N.K. Modi (1996) 6 SCC 385 :
(AIR 1997 SC 533 : 1996 AIR SCW 3852), State of Karnataka v. Vishwabharathi House
Building Coop. Society (2003) 2 SCC 412 : (AIR 2003 SC 1043 : 2003 AIR SCW 558),
CCI Chambers Housing Co-operative Society Ltd. v. Development Credit Bank Ltd.
(2003) 7 SCC 233 : (AIR 2004 SC 184 : 2003 AIR SCW 5887) and Indochem Electronic
v. Additional Collector of Customs (2006) 3 SCC 721 and held that the complaint filed
by the respondent was maintainable because the jurisdiction of the consumer forums is
in addition to other remedies which may be available to him. The National Commission
further held that the respondent is covered by the definition of 'consumer' contained in
Section 2(d) of the Consumer Act because he did not purchase the seeds for any
commercial purpose. The appellant's plea that the District Forum could not have
awarded compensation to the respondents without complying with Section 13(1)(c) of
the Consumer Act was negatived by the National Commission by observing that after
having used all the seeds for sowing the respondent was not in a position to provide
sample for testing and the report of the Horticulture Officer was sufficient for proving
that the foundation seeds supplied by the appellant were defective.
Civil Appeal No. 4519 of 2009
7.1 The respondent is an agricultural labourer. He used to take the lands of other
farmers on lease and cultivate the same for his livelihood. He purchased tomato seeds
from the appellant in the name of the landowners. When the respondent noticed that
there was no yield from the plants, he approached the appellant's Manager at
Vijayawada and requested him to inspect the field and assess the damages, but the
latter did not respond. He then filed a complaint for award of compensation of
Rs.60,000/- with interest at the rate of 12% per annum by alleging that he had suffered
loss because the seeds sold by the appellant were defective.
7.2 The appellant controverted the claim of the respondent and pleaded that the
complaint was liable to be dismissed because
@page-SC1167
the District Forum was not competent to decide the issue relating to the quality of
seeds. It was also pleaded that the crop had failed because while sowing the seeds the
respondent did not take necessary precaution.
7.3 By an order dated 27.12.1995, District Forum, Khammam appointed Shri A. Jeevan
Babu, Advocate as Commissioner to inspect the field of the respondent and estimate
the loss, if any, sustained by him. The Advocate Commissioner requested the Principal,
Agriculture College, Aswaraopet and Mandal Revenue Officer, Yerrupalem to depute an
expert and an Administrative Officer of Peddagopavaram and Yerrupalem to assist him.
The Principal deputed Shri P. Sesha Reddy, Associate Professor and the M.R.O.
deputed two executive officers to assist the Advocate Commissioner. Notice of the date
of inspection was given to the appellant but no one appeared on its behalf on the
appointed day. After conducting inspection with the assistance of Shri P. Sesha Reddy
and other officers, the Advocate Commissioner submitted report dated 31.1.1996, the
relevant portions of which are extracted below:
"The field and the tomato fruits were examined by me and the Agriculture Officer and all
the persons. The petitioner was also present, who told that he purchased the tomato
seeds from the opposite party/respondent as usual and transplanted the same in the
month of Sep. 1995 and also manured and applied pesticides as previous. The plants
were sown at a distance of 3 feets from each plant. The tomato trees were grown upto 3
to 5 feets height, but no progress in the tomato fruits. The tomato fruits are small just
like small bolls. There is no saleable value in the market for the said tomato fruits. The
Agrl. Associate Professor Sri P. Seshi Reddy has collected the earth in the field and
also trees along with the tomato fruits for testing purpose. On enquiry the petitioner told
regarding the mode of cultivation that he adopted in sowing 'Naru' applying manure and
pesticides. The petitioner complainant told that he was purchasing the tomato seeds
from National Seeds Corporation Ltd., Vijayawada since more than 5 years and he
sustained heavy loss this year due to non-production of the tomato yield since he supply
of with inferior quality of tomato seeds. I conducted Panchanama at the field to that
effect on 4.1.1996. Number of villagers gathered and they also opined that the petitioner
complainant has sustained heavy loss this year. He has shown empty tomato seeds
packet, which is available with him. Sri P. Sesha Reddy, Associate Professor, Agrl.
College, Aswaraopet has sent a report which is being submitted herewith. He opined
that the seed 'Pusa Early Dwarf' supplied by, NSC, Vijayawada to the farmers of
Yerrupalem and Pedergopalem villages may not be true type and crop failure to yield
true type may be due to defective seed. I returned back to Khammam on 4-1-1996 at 930 p.m. by passengers train."
(Emphasis supplied)
7.4 The District Forum considered the material produced before it including the
Commissioner's report, allowed the complaint of the respondent and directed the
appellant to pay him Rs. 36,200/-. The State Commission and the National Commission
approved the conclusion recorded by the District Forum that the respondent had
suffered loss because the seeds sold by the appellant were defective. The National
Commission dealt with the appellant's plea that the District Forum had not complied with
Section 13(1)(c) and that there was violation of the Andhra Pradesh Seeds (Control)
Order, 1983 and held:
"It is well settled by now that under Section 13 of the Consumer Protection Act, 1986
(hereinafter referred to as 'the Act' for short), the burden to prove the deficiency, if any,
on the part of the respondent, is on the complainant. Section 13(1)(c) provides that
where a complainant alleges a defect in the goods which cannot be determined without
proper analysis or test of the goods, the District Forum shall
@page-SC1168
obtain a sample of the goods from the complainant, seal it and authenticate it in the
manner prescribed and refer the sample so sealed to the appropriate laboratory along
with a direction to make an analysis/test, whichever may be necessary. In other words,
there has to be some expert opinion to prove the fact. In the present case, Dr. P. Sesha
Reddy had inspected only 9 fields, the details of which have been given by him in his
Report and which have been referred to in the earlier paragraph. He did not inspect the
fields of other respondents. His Report is relevant insofar as the respondents in
Revision Petition Nos. 131, 135, 136, 137, 140, 142, 143 and 150 of 2003 are
concerned. Insofar as respondents in the other 12 Revision Petitions, i.e., Revision
Petition Nos. 132, 133, 134,138, 139, 141, 144, 145, 146, 147, 148 and 149 of 2003 are
concerned, they have failed to produce any expert opinion to show that the seeds did
not germinate in their fields because the seeds supplied were defective.
Learned Counsel for the petitioner raised another objection that under the Seeds
Control Order, 1983, the Divisional Officer, Seeds alone is competent to inspect and
report about the causes of failure of the crop. It was submitted that Revision Petition
Nos. 131, 135, 136, 137, 140, 142, 143 and 150 of 2003 are liable to be dismissed as
the defects cannot be determined without analysis or tests, which the respondents in
these Revision Petitions failed to get done. We find no substance in this submission.
The Seeds Control Order, 1983 issued under G.O.M.s No. 97 FandA FP(2) dated
11.02.1985 does not debar any other agency from conducting an enquiry into the
causes of failure of crop other than the officers mentioned therein. In the present case, it
is at the instance of the District Forum that a Report was got from a Local
Commissioner through Dr. P. Sesha Reddy, the expert who inspected the fields of 8
respondents and not others.
The petitioners had not sent their representatives to the fields of the
complainant/respondents in spite of their making representations to that effect.
Petitioner failed to take any step on the representations/complaints received from the
respondents. The Report submitted by the Expert can certainly be taken into
consideration even if there was no analysis of the seeds from a laboratory. Nonexamination of the seeds from the laboratory is not fatal to the case of the complainants
whose fields were inspected by Dr. P. Sesha Reddy regarding which he gave an
opinion as an expert. Nothing stopped the petitioner from sending the sample seeds for
analysis to a laboratory. There is no explanation as to why it could not send the seeds
for analysis."
(Emphasis supplied)
8. Factual matrix of other cases is substantially similar except that some of the
respondents had purchased Castor seeds while others had purchased Chilli seeds. In a
number of cases, the District Forums appointed Commissioner or referred the matter to
the officers of the Agriculture Department for their opinion about the quality of seeds
and ordered payment of compensation by relying upon their reports.
9. We may also mention that in none of these cases, the appellant had offered to
produce samples of the variety of the seeds sold/supplied to the respondents and made
a prayer before the District Forum that the same may be got tested/analysed in an
appropriate laboratory.
10. Learned counsel for the appellant argued that the impugned orders are liable to be
set aside because the District Forums did not have the jurisdiction to entertain the
complaints filed by the respondents and the State and National Commissions committed
grave error by brushing aside the appellant's objections to the maintainability of the
complaints. Learned counsel emphasized that the Seeds Act is a special legislation
enacted for regulating the quality of seeds and if the respondents had any grievance
about the quality of the seeds then the only remedy available to them was to either file
an application under Section
@page-SC1169
10 of the Seeds Act or to approach the concerned Seed Inspectors for taking action
under Section 19 read with Section 21 of that Act. They further argued that even if the
complaints filed by the respondents under the Consumer Act are held to be
maintainable, the finding recorded by the District Forums that the seeds sold/supplied
by the appellant were defective is liable to be set aside because the procedure
prescribed under Section 13(1)(c) of the Consumer Act was not followed. Learned
counsel relied upon Section 8 of the Arbitration and Conciliation Act, 1996 and argued
that in view of the arbitration clause contained in the agreements entered between the
appellant and the growers, the latter could have applied for arbitration and the
Consumer Forums should have non-suited them in view of Section 8 of the Arbitration
and Conciliation Act, 1996. An ancillary argument made by the learned counsel is that
the growers of seeds cannot be treated as 'consumer' within the meaning of Section
2(d) because they had purchased seeds for commercial purpose.
11. Learned counsel for the respondents supported the impugned orders and argued
that the District Forums did not commit any illegality by entertaining the complaints filed
under the Consumer Act because the Seeds Act and the Rules framed thereunder do
not contain any provision for compensating a farmer whose crop is lost or who does not
get the expected yield if the seeds sold/supplied by the appellant are defective. Learned
counsel submitted that the remedy available under the Consumer Act is in addition to
other remedies available to a consumer and the complaints filed by the respondents
under that Act cannot be held as barred merely because they could also approach the
Seed Inspector for taking action under Section 19 read with Section 21 of the Seeds
Act. Learned counsel further argued that the growers of seeds are covered by the
definition of consumer because they had agreed to undertake cultivation of seeds on
behalf of the appellant for earning livelihood. On the issue of non-compliance of Section
13(1)(c) of the Consumer Act, learned counsel submitted that the District Forums had
rightly relied upon the reports of the Court Commissioners and other evidence for
recording findings that the seeds sold/supplied by the appellant were defective. Learned
counsel emphasized that the respondents had used the entire quantity of seeds
purchased by them for sowing and they had not retained samples by anticipating loss of
crop or less yield. Learned counsel pointed out that the Commissioners had inspected
the fields of the respondents and recorded categorical findings that the farmers had
suffered losses because the seeds supplied by the appellant were defective and the
District Forums did not commit any illegality by relying upon their reports. Learned
counsel also submitted that the appellant could have produced samples of the seeds
sold/supplied to the respondents and get them tested to prove that the same were not
defective, but no such step was taken by it.
12. We shall first consider the question whether the Seeds Act is a special legislation
vis-?is the Consumer Act and the District Forums could not have entertained and
decided the complaints filed by the respondents because they could seeks redressal of
their grievance regarding the quality of seeds sold by the appellant by lodging complaint
with the concerned Seed Inspectors with a request for taking action under Section 19
read with Section 21 of the Seeds Act.
13. With a view to increase agricultural production in the country, the Central
Government felt the necessity of regulating the quality of certain seeds to be sold for the
purpose of agriculture including horticulture and for achieving that object, Parliament
enacted the Seeds Act. The Statement of Objects and Reasons enshrined in the Bill,
which led to the enactment of the Seeds Act read as under:
"In the interest of increased agricultural production in the country, it is considered
@page-SC1170
necessary to regulate the quality of certain seeds, such as seeds of food crops, cotton
seeds, etc., to be sold for purpose of agriculture (including horticulture).
The method by which the Bill seeks to achieve this object are(a) Constitution of a Central Committee consisting of representatives of the Central
Government and the State Government, the National Seeds Corporation and other
interests, to advise those Governments on all matters arising out of the proposed
Legislation;
(b) fixing minimum standards of germination, purity and other quality factors;
(c) testing seeds for quality factors at the seed testing laboratories to be established by
the Central Government and the State Governments;
(d) creating seed inspection and certification service in each State and grant of licences
and certificates to dealers in seeds;
(e) compulsory labelling of seed containers to indicate the quality of seeds offered for
sale, and
(f) restricting the export, import and inter-State movement of non-descript seeds."
14. Section 2 of the Seeds Act contains definitions of various terms including "Central
Seed Laboratory", "Certification Agency", "Committee", "Seed", "Seed Analyst", "Seed
Inspector" and "State Seed Laboratory". Section 3 casts a duty on the Central
Government to constitute a Committee called the Central Seed Committee to advise it
and the State Governments on matters arising out of the administration of the Act and to
carry out other functions assigned to it by or under the Act. Section 4(1) empowers the
Central Government to establish a Central Seed Laboratory or declare any seed
laboratory as the Central Seed Laboratory to carry out the functions entrusted to such
laboratory by or under the Act. Section 4 (2) contains similar provisions for
establishment of State Seed Laboratories by the State Government. Section 6
empowers the Central Government to issue a notification, after consulting the
Committee constituted under Section 3 and specify the minimum limit of germination
and purity with respect to any seed of any notified kind or variety and the mark or label
to indicate that such seed conforms to the minimum limit of germination and purity.
Section 7 regulates the sale of seeds of notified kinds or varieties. Under Section 8, the
State Government can establish a certification agency for the State to carry out the
functions entrusted to such agency by or under the Act. This power can also be
exercised by the Central Government in consultation with the State Government.
Sections 8-A to 8-E provide for establishment of the Central Seed Certification Board
and appointment of other Committees by the Board. Section 9(1) provides for grant of
certificate by certification agency to any person selling, keeping for sale, offering to sell,
bartering or otherwise supplying any seed of any notified kind or variety. Sections 9(2)
and 9(3) contain the procedure for grant of certificate. Section 10 provides for
revocation of the certificate granted under Section 9. Any person aggrieved by an order
made under Section 9 or 10 can file an appeal under Section 11. Under Section 12, the
State Government is empowered to issue notification for appointment of Seed Analysts
and define the area of their jurisdiction. Similar provision is contained in Section 13 for
appointment of Seed Inspectors. The powers of the Seed Inspector are enumerated in
Section 14. Section 15(1) contains the procedure which is required to be followed by the
Seed Inspector for taking samples. In terms of Section 15(2)(b), the sample taken by
the Seed Inspector is required to be sent to the Seed Analyst for the purpose of
analysis. Section 16 lays down the procedure for submission of the report by the State
Seed Laboratory and Central Seed Laboratory. Section 19 specifies the acts which can
be punished with an imprisonment upto six months or with fine of Rs.1,000/- or with
both. Section 21
@page-SC1171
deals with offences by the companies. Sections 6, 7, 9, 10, 11, 14(1)(a) and (b), 16, 19,
20 and 21 of the Seeds Act, which have bearing on the decision of the first question
raised by the appellant are reproduced below "6. Power to specify minimum limits of germination and purity, etc. The Central Government may, after consulting with the Committee and by notification in
the Official Gazette, specify (a) the minimum limits of germination and purity with respect to any seed of any notified
kind or variety;
(b) the mark or label to indicate that such seed conforms to the minimum limits of
germination and purity specified under Cl.(a) and the particulars which such mark or
label may contain.
7. Regulation or sale of seeds of notified kinds or varieties No person shall, himself or by any other person on his behalf, carry on the business of
selling, keeping for sale, offering to sell, bartering or otherwise supplying any seed of
any notified kind or variety, unless (a) such seed is identifiable as to its kind or variety;
(b) such seed conforms to the minimum limits of germination and purity specified Cl.(a)
of Section 6;
(c) the container of such seed bears in the prescribed manner the mark or label
containing the correct particulars thereof specified under Cl.(b) of Section 6; and
(d) he complies with such other requirements as may be prescribed.
9. Grant of certificate by certification agency (1) Any person selling, keeping for sale, offering to sell, bartering or otherwise supplying
any seed of any notified kind or variety may, if he desires to have such seed certified by
the certification agency, apply to the certification agency for the grant of a certificate for
the purpose.
(2) Every application under sub-section (1) shall be made in such form, shall contain
such particulars and shall be accompanied by such fees as may be prescribed.
(3) On receipt of any such application for the grant of a certificate, the certification
agency may, after such enquiry as it thinks fit and after satisfying itself that the seed to
which the application relates conforms to the prescribed standards grant a certificate in
such form and on such conditions as may be prescribed.
Provided that such standards shall not be lower than the minimum limits of germination
and purity specified for that seed under Cl. (a) of Sec.6.
10. Revocation of certificate If the certification agency is satisfied, either on a reference made to it in this behalf or
otherwise, that(a) the certificate granted by it under section 9 has been obtained by misrepresentation
as to an essential fact; or
(b) the holder of the certificate has, without reasonable cause, failed to comply with the
conditions subject to which the certificate has been granted or has contravened any of
the provisions of this Act or the rules made thereunder,
then, without prejudice to any other penalty to which the holder of the certificate may be
liable under this Act, the certification agency may, after giving the holder of the
certificate an opportunity of showing cause, revoke the certificate.
11. Appeal (1) Any person aggrieved by a decision of a certification agency under Section 9 or
Section 10, may, within thirty days from the date on which the decision is communicated
to him and on payment of such fees as may be prescribed, prefer an appeal to such
authority as may be specified by the State Government in this behalf:
Provided that the appellate authority may entertain an appeal after the expiry of the said
period of thirty days if it is satisfied that the appellant was prevented by
@page-SC1172
sufficient cause from filing the appeal in time.
(2) On receipt of an appeal under sub-section (1), the appellate authority shall, after
giving the appellant an opportunity of being heard, dispose of the appeal as
expeditiously as possible.
(3) Every order of the appellate authority under this section shall be final.
14. Powers of Seed Inspector. - (1) The Seed Inspector may-
(a) take samples of any seed of any notified kind or variety from(i) any person selling such seed; or
(ii) any person who is in the course of conveying, delivering or preparing to deliver such
seed to a purchaser or a consignee; or
(iii) a purchaser or a consignee after delivery of such seed to him;
(b) send such sample for analysis to the Seed Analyst for the area within which such
sample has been taken
16. Report of Seed Analyst. - (1) The Seed Analyst shall, as soon as may be after the
receipt of the sample under sub-Section (2) of Section 15, analyse the sample at the
State Seed Laboratory and deliver, in such form as may be prescribed, one copy of the
report of the result of the analysis to the Seed Inspector and another copy thereof to the
person from whom the sample has been taken.
(2) After the institution of a prosecution under this Act, the accused vendor or the
complainant may, on payment of the prescribed fee, make an application to the Court
for sending any of the samples mentioned in clause (a) or clause (c) of sub-section (2)
of Section 15 to the Central Seed Laboratory for its report and on receipt of the
application, the Court shall first ascertain that the mark and the seal or fastening as
provided in clause (b) of sub-section (1) of Section 15 are intact and may then despatch
the sample under its own seal to the Central Seed Laboratory which shall thereupon
send its report to the Court in the prescribed form within one month from the date of
receipt of the sample, specifying the result of the analysis.
(3) The report sent by the Central Seed Laboratory under sub-section (2) shall
supersede the report given by the Seed Analyst under sub-section (1).
(4) Where the report sent by the Central Seed Laboratory under sub-section (2) is
produced in any proceedings under Section 19, it shall not be necessary in such
proceeding to produce any sample or part thereof taken for analysis.
19. Penalty. - If any person(a) contravenes any provision of this Act or any rule made thereunder; or
(b) prevents a Seed Inspector from taking sample under this Act; or
(c) prevents a Seed Inspector from exercising any other power conferred on him by or
under this Act, he shall, on conviction, be punishable(i) for the first offence with fine which may extend to five hundred rupees, and
(ii) in the event of such person having been previously convicted of an offence under
this section, with imprisonment for a term which may extend to six months, or with fine
which may extend to one thousand rupees, or with both.
20. Forfeiture of property - When any person has been convicted under this Act for the
contravention of any of the provisions of this Act or the rules made thereunder, the seed
in respect of which the contravention has been committed may be forfeited to the
Government.
21. Offences by companies. - (1) Where an offence under this Act has been committed
by a company, every person who at the time the offence was committed was in charge
of, and was responsible to the company for the conduct of the business of the company,
as well as the company, shall be deemed to be guilty of the offence and shall be liable
to be proceeded
@page-SC1173
against and punished accordingly:
Provided that nothing contained in this sub-section shall render any such person liable
to any punishment under this Act if he proves that the offence was committed without
his knowledge and that he exercised all due diligence to prevent the commission of
such offence.
(2) Notwithstanding anything contained in sub-section (1), where an offence under this
Act has been committed by a company and it is proved that the offence has been
committed with the consent or connivance of, or is attributable to any neglect on the part
of, any director, manager, secretary or other officer of the company, such director,
manager, secretary or other officer shall also be deemed to be guilty of that offence and
shall be liable to be proceeded against and punished accordingly.
Explanation. - For the purpose of this section, (a) "company" means any body corporate and includes a firm or other association of
individuals; and
(b) "director", in relation to a firm, means a partner in the firm."
15. In exercise of the power vested in it under Section 25 of the Seeds Act, the Central
Government framed the Seeds Rules, 1968 (for short, 'the Rules'). Rules 13, 23(a) to
(d), (g) and 23-A of the Rules, which are also relevant for deciding the first question are
reproduced below:
"13. Requirements to be complied with by a person carrying on the business referred to
in Section 7 -
(a) No person shall sell, keep for sale, variety, after the date recorded on the container,
mark or label as the date upto which the seed may be expected to retain the
germination not less than that prescribed under Clause (a) of Section 6 of the Act.
(2) No person shall alter, obliterate or deface any mark or label attached to the
container of any seed.
(3) Every person selling, keeping for sale, offering to sell, bartering or otherwise
supplying any seed of notified kind or variety under Section 7, shall keep over a period
of three years a complete record of each lot of seed sold except that any seed sample
may be discarded one year after the entire lot represented by such sample has been
disposed of. The sample of seed kept as part of the complete record shall be as large
as the size notified in the Official Gazette. This sample, if required to be tested, shall be
tested only for determining the purity.
23. Duties of a Seed Inspector. - In addition to the duties specified by the Act the Seed
Inspector shall.(a) inspect as frequently as may be required by certification agency all places used for
growing, storage or sale of any seed of any notified kind or variety;
(b) satisfy himself that the conditions of the certificates are being observed;
(c) procedure and send for analysis, if necessary, samples of any seeds, which he has
reason to suspect are being produced, stocked or sold or exhibited for sale in
contravention of the provisions of the Act or these rules;
(d) investigate any complaint, which may be made to him in writing in respect of any
contravention of the provisions of the Act or these rules;
(g) institute prosecutions in respect of breaches of the Act and these rules; and
23-A. Action to be taken by the Seed Inspector if a complaint is lodged with him. - (1) If
farmer has lodged a complaint in writing that the failure of the crop is due to the
defective quality of seeds of any notified kind or variety supplied to him, the Seed
Inspector shall take in his possession the marks or labels, the seed containers and a
sample of unused seeds to the extent possible from the complainant for establishing the
source of supply of seeds and shall investigate the causes of the failure of his crop by
sending samples of the lot to the Seed Analyst for detailed analysis at the
@page-SC1174
State Seed Testing Laboratory. He shall thereupon submit the report of his findings as
soon as possible to the competent authority.
(2) In case, the Seed Inspector comes to the conclusion that the failure of the crop is
due to the quality of seeds supplied to the farmer being less than the minimum
standards notified by the Central Government, he shall launch proceedings against the
supplier for contravention of the provisions of the Act or these Rules."
16. An analysis of the above reproduced provisions shows that for achieving the object
of regulating the quality of certain seeds to be sold for the purposes of agriculture
including horticulture, the legislature has made provisions for specifying the minimum
limits of germination and purity of notified kind or variety of seeds and the affixation of
mark or label to indicate that such seed conforms to those limits, for restricting sale,
etc., of any notified kind or variety of seed unless the same is identifiable as to its kind
or variety and conforms to the minimum limits of germination and purity; grant of
certificate by the certification agency to certain category of person; revocation of the
certificate; appointment of Seed Analysts and Seed Inspectors with power to the latter
to take sample of any seed of any notified kind or variety from any person selling such
seed or a producer of seeds and send the same for analysis by the State Seed
Laboratory or the Central Seed Laboratory. The Seed Inspector can launch prosecution
for violation of any provision of the Seeds Act or any Rule made thereunder. If a person
is found guilty then he can be punished with imprisonment upto a maximum period of
six months or he can be visited with a penalty of fine upto Rs.1,000/- or with both. If an
offence is committed by a company, then every person who, at the time of commission
of offence was in-charge of and was responsible to the company of the conduct of its
business can be punished. Rule 13 of the Rules casts a duty on very person selling,
keeping for sale, offering to sell, bartering or otherwise supplying any seed of notified
kind or variety to keep complete record of each lot of seeds sold for a period of three
years. He is also required to keep sample of the seed, which can be tested for
determining the purity.
17. Though, the Seeds Act is a special legislation enacted for ensuring that there is no
compromise with the quality of seeds sold to the farmers and others and provisions
have been made for imposition of substantive punishment on a person found guilty of
violating the provisions relating the quality of the seeds, the legislature has not put in
place any adjudicatory mechanism for compensating the farmers/growers of seeds and
other similarly situated persons who may suffer loss of crop or who may get insufficient
yield due to use of defective seeds sold/supplied by the appellant or any other
authorised person. No one can dispute that the agriculturists and horticulturists are the
largest consumers of seeds. They suffer loss of crop due to various reasons, one of
which is the use of defective/sub-standard seeds. The Seeds Act is totally silent on the
issue of payment of compensation for the loss of crop on account of use of defective
seeds supplied by the appellant and others who may obtain certificate under Section 9
of the Seeds Act. A farmer who may suffer loss of crop due to defective seeds can
approach the Seed Inspector and make a request for prosecution of the person from
whom he purchased the seeds. If found guilty, such person can be imprisoned, but this
cannot redeem the loss suffered by the farmer.
18. At this stage, we may notice the background in which the Consumer Act was
enacted and its salient features. The General Assembly of the United Nations after
extensive discussion and negotiations among Governments and taking into account the
interest and needs of consumers in all countries, particularly those in developing
countries, adopted the draft guidelines submitted by the Secretary General
@page-SC1175
to the Economic and Social Council (UNESCO) in 1983. The objectives of these
guidelines are:
(a) To assist countries in achieving or maintaining adequate protection for their
population as consumers.
(b) To facilitate production and distribution patterns responsive to the needs and desires
of consumers.
(c) To encourage high levels of ethical conduct for those engaged in the production and
distribution of goods and services to consumers.
(d) To assist countries in curbing abusive business practices by all enterprises at the
national and international levels which adversely affect consumers.
(e) To facilitate the development of independent consumer groups.
(f) To further international co-operation in the field of consumer protection.
(g) To encourage the development of market conditions which provide consumers with
greater choice at lower prices.
19. India is a signatory to the resolution passed by the General Assembly which is
known as Consumer Protection Resolution No.39/248. With a view to fulfill the
objectives enshrined in the guidelines adopted by the General Assembly of the United
Nations and keeping in view the proliferation of international trade and commerce and
vast expansion of business and trade which resulted in availability of variety of
consumer goods in the market, the Consumer Protection Bill was introduced to provide
for better protection of the interest of consumers. The salient features of the Consumer
Protection Bill were to promote and protect the rights of consumers such as:
(a) the right to be protected against marketing of goods which are hazardous to life and
property;
(b) the right to be informed about the quality, quantity, potency, purity, standard and
price of goods to protect the consumer against unfair trade practices;
(c) the right to be assured, wherever possible, access to an authority of goods at
competitive prices;
(d) the right to be heard and to be assured that consumers interests will receive due
consideration at appropriate forums;
(e) the right to seek Redressal against unfair trade practices or unscrupulous
exploitation of consumers, and
(f) right to consumer education.
20.The preamble to the Act shows that this legislation is meant to provide for better
protection of the interests of consumers and for that purpose to make provision for
establishment of consumer councils and other authorities for the settlement of
consumer disputes and for matters connected therewith. Section 2 of the Consumer Act
contains definitions of various terms. Clauses (d) and (f) thereof read as under:
"2. (d) 'consumer' means any person who,(i) buys any goods for a consideration which has been paid or promised or partly paid
and partly promised, or under any system of deferred payment and includes any user of
such goods other than the person who buys such goods for consideration paid or
promised or partly paid or partly promised, or under any system of deferred payment
when such use is made with the approval of such person, but does not include a person
who obtains such goods for resale or for any commercial purpose; or
(ii) hires or avails of any services for a consideration which has been paid or promised
or partly paid and partly promised, or under any system of deferred payment and
includes any beneficiary of such services other than the person who hires or avails of
the services for consideration paid or promised, or partly paid and partly promised, or
under any system of deferred payment, when such services are availed of with the
approval of the first-mentioned person but does not include a person who avails of such
services for any commercial
@page-SC1176
purpose;
Explanation.-For the purposes of sub-clause (i), 'commercial purpose' does not include
use by a consumer of goods bought and used by him exclusively for the purpose of
earning his livelihood, by means of self-employment; (The explanation was substituted
w.e.f. 15.3.2003 by Consumer Protection (Amendment) Act (62 of 2003)
(f) 'defect' means any fault, imperfection or shortcoming in the quality, quantity, potency,
purity or standard which is required to be maintained by or under any law for the time
being in force or under any contract, express or implied, or as is claimed by the trader in
any manner whatsoever in relation to any goods."
21. Section 3 declares that the provisions the Consumer Act shall be in addition to and
not in derogation of the provisions of any other law for the time being in force. Section 9
provides for establishment of the Consumer Forums at the District, State and National
level. Section 11 relates to jurisdiction of the District Forum. Section 12 prescribed the
manner in which the complaint can be filed before the District Forum and the procedure
required to be followed for entertaining the same. Once the complaint is admitted, the
procedure prescribed under Section 13 is required to be followed by the District Forum.
Sub-section (1) of Section 13, which lays down the procedure to be followed after
admission of the complaint reads as under:
"13. Procedure on admission of complaint. - (1) The District Forum shall, on admission
of a complaint, if it relates to any goods,(a) refer a copy of the admitted complaint, within twenty-one days from the date of its
admission to the opposite party mentioned in the complaint directing him to give his
version of the case within a period of thirty days or such extended period not exceeding
fifteen days as may be granted by the District Forum;
(b) where the opposite party on receipt of a complaint referred to him under clause (a)
denies or disputes the allegations contained in the complaint, or omits or fails to take
any action to represent his case within the time given by the District Forum, the District
Forum shall proceed to settle the consumer dispute in the manner specified in clauses
(c) to (g);
(c) where the complaint alleges a defect in the goods which cannot be determined
without proper analysis or test of the goods, the District Forum shall obtain a sample of
the goods from the complainant, seal it and authenticate it in the manner prescribed and
refer the sample so sealed to the appropriate laboratory along with a direction that such
laboratory make an analysis or test, whichever may be necessary, with a view to finding
out whether such goods suffer from any defect alleged in the complaint or from any
other defect and to report its findings thereon to the District Forum within a period of
forty-five days of the receipt of the reference or within such extended period as may be
granted by the District Forum;
(d) before any sample of the goods is referred to any appropriate laboratory under
clause (c), the District Forum may require the complainant to deposit to the credit of the
Forum such fees as may be specified, for payment to the appropriate laboratory for
carrying out the necessary analysis or test in relation to the goods in question;
(e) the District Forum shall remit the amount deposited to its credit under clause (d) to
the appropriate laboratory to enable it to carry out the analysis or test mentioned in
clause (c) and on receipt of the report from the appropriate laboratory, the District
Forum shall forward a copy of the report along with such remarks as the District Forum
may feel appropriate to the opposite party;
(f) if any of the parties disputes the correctness of the findings of the appropriate
laboratory, or disputes the correctness of
@page-SC1177
the methods of analysis or test adopted by the appropriate laboratory, the District Forum
shall require the opposite party or the complainant to submit in writing his objections in
regard to the report made by the appropriate laboratory;
(g) the District Forum shall thereafter give a reasonable opportunity to the complainant
as well as the opposite party of being heard as to the correctness or otherwise of the
report made by the appropriate laboratory and also as to the objection made in relation
thereto under clause (f) and issue an appropriate order under section 14."
22. The scope and reach of the Consumer Act has been considered in large number of
judgments - Lucknow Development Authority v. M.K. Gupta (1994) 1 SCC 243 : (AIR
1994 SC 787 : 1994 AIR SCW 97), Fair Air Engineers (P) Ltd. v. N. K. Modi (AIR 1997
SC 533 : 1996 AIR SCW 3852) (supra), Skypay Couriers Limited v. Tata Chemicals
Limited (2000) 5 SCC 294 : (AIR 2000 SC 2008 : 2000 AIR SCW 1866), State of
Karnataka v. Vishwabharathi House Building Co-operative Society (AIR 2003 SC 1043 :
2003 AIR SCW 558) (supra), CCI Chambers Co-operative Housing Society Limited v.
Development Credit Bank Limited (AIR 2004 SC 184 : 2003 AIR SCW 5887) (supra),
Secretary, Thirumurugan Co-operative Agricultural Credit Society v. M. Lalitha (2004) 1
SCC 305 : (AIR 2004 SC 448 : 2003 AIR SCW 6873), H.N. Shankara Shastry v.
Assistant Director of Agriculture, Karnataka (2004) 6 SCC 230 : (AIR 2004 SC 3474 :
2004 AIR SCW 3164) and Trans Mediterranean Airways v. Universal Exports and
another (2011) 10 SCC 316 : (2011 AIR SCW 6028). However, we do not consider it
necessary to discuss all the judgments and it will be sufficient to notice some passages
from the judgment in Secretary, Thirumurugan Co-operative Agricultural Credit Society
v. M. Lalitha (AIR 2004 SC 448 : 2003 AIR SCW 6873) (supra). In that case, the 2Judge Bench noticed the background, the objects and reasons, and the purpose for
which the Consumer Act was enacted, referred to the judgments in Lucknow
Development Authority v. M. K. Gupta (supra), Fair Air Engineers Private Limited v. N.
K. Modi (supra) and proceeded to observe as under:
"The preamble of the Act declares that it is an Act to provide for better protection of the
interest of consumers and for that purpose to make provision for the establishment of
Consumer Councils and other authorities for the settlement of consumer disputes and
matters connected therewith. In Section 3 of the Act in clear and unambiguous terms it
is stated that the provisions of the 1986 Act shall be in addition to and not in derogation
of the provisions of any other law for the time being in force.
From the Statement of Objects and Reasons and the scheme of the 1986 Act, it is
apparent that the main objective of the Act is to provide for better protection of the
interest of the consumer and for that purpose to provide for better redressal, mechanism
through which cheaper, easier, expeditious and effective redressal is made available to
consumers. To serve the purpose of the Act, various quasi-judicial forums are set up at
the district, State and national level with wide range of powers vested in them. These
quasi-judicial forums, observing the principles of natural justice, are empowered to give
relief of a specific nature and to award, wherever appropriate, compensation to the
consumers and to impose penalties for non-compliance with their orders."
23. It can thus be said that in the context of farmers/growers and other consumer of
seeds, the Seeds Act is a special legislation insofar as the provisions contained therein
ensure that those engaged in agriculture and horticulture get quality seeds and any
person who violates the provisions of the Act and/or the Rules is brought before the law
and punished. However, there is no provision in that Act and the Rules framed
thereunder for compensating the farmers etc. who may suffer adversely due to loss of
crop or deficient yield on account
@page-SC1178
of defective seeds supplied by a person authorised to sell the seeds. That apart, there is
nothing in the Seeds Act and the Rules which may give an indication that the provisions
of the Consumer Act are not available to the farmers who are otherwise covered by the
wide definition of 'consumer' under Section 2(d) of the Consumer Act. As a matter of
fact, any attempt to exclude the farmers from the ambit of the Consumer Act by
implication will make that Act vulnerable to an attack of unconstitutionality on the ground
of discrimination and there is no reason why the provisions of the Consumer Act should
be so interpreted.
24. In Kishore Lal v. Chairman, Employees' State Insurance Corporation (2007) 4 SCC
579 : (AIR 2007 SC 1819 : 2007 AIR SCW 3032), this Court was called upon to
consider the question whether a person (appellant) who got his wife treated in ESI
dispensary could file a complaint under the Consumer Act for award of compensation by
alleging negligence on the part of the doctors in the dispensary. The District Forum, the
State Commission and the National Commission declined relief to the appellant on the
ground that the medical services provided in ESI dispensary were gratituous. This Court
referred to Sections 74 and 75 of the Employees State Insurance Act, 1948, the
definition of the 'consumer' contained in Section 2(d) of the Consumer Act, referred to
the judgments in Spring Meadows Hospital v. Harjol Ahluwalia (1998) 4 SCC 39 : (AIR
1998 SC 1801 : 1998 AIR SCW 1590), State of Karnataka v. Vishwabharathi House
Building Co-operative Society (AIR 2003 SC 1043 : 2003 AIR SCW 558) (supra),
Secretary, Thirumurugan Co-operative Agricultural Credit Society v. M. Lalitha (AIR
2004 SC 448 : 2003 AIR SCW 6873) (supra) and observed:
"The trend of the decisions of this Court is that the jurisdiction of the Consumer Forum
should not and would not be curtailed unless there is an express provision prohibiting
the Consumer Forum to take up the matter which falls within the jurisdiction of civil court
or any other forum as established under some enactment. The Court had gone to the
extent of saying that if two different fora have jurisdiction to entertain the dispute in
regard to the same subject, the jurisdiction of the Consumer Forum would not be barred
and the power of the Consumer Forum to adjudicate upon the dispute could not be
negated."
25. The definition of 'consumer' contained in Section 2(d) of the Consumer Act is very
wide. Sub-clause (i) of the definition takes within its fold any person who buys any
goods for a consideration paid or promised or partly paid and partly promised, or under
any system of deferred payment. It also includes any person who uses the goods
though he may not be buyer thereof provided that such use is with the approval of the
buyer. The last part of the definition contained in Section 2(d)(i) excludes a person who
obtains the goods for resale or for any commercial purpose. By virtue of the explanation
which was added w.e.f. 18.6.1993 by the Consumer Protection (Amendment) Act, 50 of
1993, it was clarified that the expression 'commercial purpose' used in sub-clause (i)
does not include use by a consumer of goods bought and used by him for the purpose
of earning his livelihood by means of self-employment. The definition of 'consumer' was
interpreted in Lucknow Development Authority v. M. K. Gupta (AIR 1994 SC 787 : 1994
AIR SCW 97) (supra). The Court referred to the dictionary meanings of the word
'consumer', definition contained in Section 2(d) and proceeded to observe:
"It is in two parts. The first deals with goods and the other with services. Both parts first
declare the meaning of goods and services by use of wide expressions. Their ambit is
further enlarged by use of inclusive clause. For instance, it is not only purchaser of
goods or hirer of services but even those who use the goods or who are beneficiaries of
services with approval of the
@page-SC1179
person who purchased the goods or who hired services are included in it. The
legislature has taken precaution not only to define 'complaint', 'complainant', 'consumer'
but even to mention in detail what would amount to unfair trade practice by giving an
elaborate definition in clause (r) and even to define 'defect' and 'deficiency' by clauses
(f) and (g) for which a consumer can approach the Commission. The Act thus aims to
protect the economic interest of a consumer as understood in commercial sense as a
purchaser of goods and in the larger sense of user of services. The common
characteristics of goods and services are that they are supplied at a price to cover the
costs and generate profit or income for the seller of goods or provider of services. But
the defect in one and deficiency in other may have to be removed and compensated
differently. The former is, normally, capable of being replaced and repaired whereas the
other may be required to be compensated by award of the just equivalent of the value or
damages for loss."
(Emphasis supplied)
26. Since the farmers/growers purchased seeds by paying a price to the appellant, they
would certainly fall within the ambit of Section 2(d)(i) of the Consumer Act and there is
no reason to deny them the remedies which are available to other consumers of goods
and services.
27. The next question which needs consideration is whether the growers of seeds were
not entitled to file complaint under the Consumer Act and the only remedy available to
them for the alleged breach of the terms of agreement was to apply for arbitration.
According to the learned counsel for the appellant, if the growers had applied for
arbitration then in terms of Section 8 of the Arbitration and Conciliation Act the dispute
arising out of the arbitration clause had to be referred to an appropriate arbitrator and
the District Consumer Forums were not entitled to entertain their complaint. This
contention represents an extension of the main objection of the appellant that the only
remedy available to the farmers and growers who claim to have suffered loss on
account of use of defective seeds sold/supplied by the appellant was to file complaints
with the concerned Seed Inspectors for taking action under Sections 19 and/or 21 of the
Seeds Act.
28. The consideration of this issue needs to be prefaced with an observation that the
grievance of a farmer/grower who has suffered financially due to loss or failure of crop
on account of use of defective seeds sold/supplied by the appellant or by an authorised
person is not remedied by prosecuting the seller/supplier of the seeds. Even if such
person is found guilty and sentenced to imprisonment, the aggrieved farmer/grower
does not get anything. Therefore, the so-called remedy available to an aggrieved
farmer/grower to lodge a complaint with the concerned Seed Inspector for prosecution
of the seller/supplier of the seed cannot but be treated as illusory and he cannot be
denied relief under the Consumer Act on the ground of availability of an alternative
remedy.
29. The remedy of arbitration is not the only remedy available to a grower. Rather, it is
an optional remedy. He can either seek reference to an arbitrator or file a complaint
under the Consumer Act. If the grower opts for the remedy of arbitration, then it may be
possible to say that he cannot, subsequently, file complaint under the Consumer Act.
However, if he chooses to file a complaint in the first instance before the competent
Consumer Forum, then he cannot be denied relief by invoking Section 8 of the
Arbitration and Conciliation Act, 1996 Act. Moreover, the plain language of Section 3 of
the Consumer Act makes it clear that the remedy available in that Act is in addition to
and not in derogation of the provisions of any other law for the time being in force. In
Fair Air Engineers (P) Ltd. v. N.K. Modi (AIR 1997 SC 533 : 1996 AIR SCW 3852)
(supra), the 2-Judge Bench interpreted that section and held as under:
@page-SC1180
"the provisions of the Act are to be construed widely to give effect to the object and
purpose of the Act. It is seen that Section 3 envisages that the provisions of the Act are
in addition to and are not in derogation of any other law in force. It is true, as rightly
contended by Shri Suri, that the words "in derogation of the provisions of any other law
for the time being in force" would be given proper meaning and effect and if the
complaint is not stayed and the parties are not relegated to the arbitration, the Act
purports to operate in derogation of the provisions of the Arbitration Act. Prima facie, the
contention appears to be plausible but on construction and conspectus of the provisions
of the Act we think that the contention is not well founded. Parliament is aware of the
provisions of the Arbitration Act and the Contract Act, 1872 and the consequential
remedy available under Section 9 of the Code of Civil Procedure, i.e., to avail of right of
civil action in a competent court of civil jurisdiction. Nonetheless, the Act provides the
additional remedy.
It would, therefore, be clear that the legislature intended to provide a remedy in addition
to the consentient arbitration which could be enforced under the Arbitration Act or the
civil action in a suit under the provisions of the Code of Civil Procedure. Thereby, as
seen, Section 34 of the Act does not confer an automatic right nor create an automatic
embargo on the exercise of the power by the judicial authority under the Act. It is a
matter of discretion. Considered from this perspective, we hold that though the District
Forum, State Commission and National Commission are judicial authorities, for the
purpose of Section 34 of the Arbitration Act, in view of the object of the Act and by
operation of Section 3 thereof, we are of the considered view that it would be
appropriate that these forums created under the Act are at liberty to proceed with the
matters in accordance with the provisions of the Act rather than relegating the parties to
an arbitration proceedings pursuant to a contract entered into between the parties. The
reason is that the Act intends to relieve the consumers of the cumbersome arbitration
proceedings or civil action unless the forums on their own and on the peculiar facts and
circumstances of a particular case, come to the conclusion that the appropriate forum
for adjudication of the disputes would be otherwise those given in the Act."
(Emphasis supplied)
30. In Skypay Couriers Limited v. Tata Chemicals Limited (AIR 2000 SC 2008 : 2000
AIR SCW 1866) (supra) this Court observed:
"Even if there exists an arbitration clause in an agreement and a complaint is made by
the consumer, in relation to a certain deficiency of service, then the existence of an
arbitration clause will not be a bar to the entertainment of the complaint by the
Redressal Agency, constituted under the Consumer Protection Act, since the remedy
provided under the Act is in addition to the provisions of any other law for the time being
in force."
31. In Trans Mediterranean Airways v. Universal Exports (2011 AIR SCW 6028) (supra)
it was observed:
"In our view, the protection provided under the CP Act to consumers is in addition to the
remedies available under any other statute. It does not extinguish the remedies under
another statute but provides an additional or alternative remedy."
32. The aforementioned judgments present a clear answer to the appellant's challenge
to the impugned orders on the ground that the growers had not availed the remedy of
arbitration. An ancillary point which may not detain us for long but needs consideration
is whether a grower is excluded from the definition of 'consumer' because the seeds
produced by him are required to be supplied to the appellant. The argument of the
learned counsel for the appellant is that the foundation seeds were supplied to the
growers for commercial
@page-SC1181
purpose and as such their cases would fall in the exclusion part of the definition of
'consumer'. In the first blush, this argument appears attractive but on a deeper
examination, we do not find any merit in it. The expression "any commercial purpose"
was considered in Laxmi Engineering Works v. P.S.G. Industrial Institute (1995) 3 SCC
583 : (AIR 1995 SC 1428 : 1995 AIR SCW 2114). The two-Judge Bench referred to the
amended definition of 'consumer' contained in Section 2 (d) and observed:
"Now coming back to the definition of the expression 'consumer' in Section 2(d), a
consumer means insofar as is relevant for the purpose of this appeal, (i) a person who
buys any goods for consideration; it is immaterial whether the consideration is paid or
promised, or partly paid and partly promised, or whether the payment of consideration is
deferred; (ii) a person who uses such goods with the approval of the person who buys
such goods for consideration; (iii) but does not include a person who buys such goods
for resale or for any commercial purpose. The expression 'resale' is clear enough.
Controversy has, however, arisen with respect to meaning of the expression
"commercial purpose". It is also not defined in the Act. In the absence of a definition, we
have to go by its ordinary meaning. 'Commercial' denotes "pertaining to commerce"
(Chamber's Twentieth Century Dictionary); it means "connected with, or engaged in
commerce; mercantile; having profit as the main aim" (Collins English Dictionary)
whereas the word 'commerce' means "financial transactions especially buying and
selling of merchandise, on a large scale" (Concise Oxford Dictionary). The National
Commission appears to have been taking a consistent view that where a person
purchases goods "with a view to using such goods for carrying on any activity on a large
scale for the purpose of earning profit" he will not be a 'consumer' within the meaning of
Section 2(d)(i) of the Act. Broadly affirming the said view and more particularly with a
view to obviate any confusion - the expression "large scale" is not a very precise
expression - Parliament stepped in and added the explanation to Section 2(d)(i) by
Ordinance/Amendment Act, 1993."
33. What needs to be emphasized is that the appellant had selected a set of farmers in
the area for growing seeds on its behalf. After entering into agreements with the
selected farmers, the appellant supplied foundation seeds to them for a price, with an
assurance that within few months they will be able to earn profit. The seeds sown under
the supervision of the expert deputed by the appellant. The entire crop was to be
purchased by the appellant. The agreements entered into between the appellant and
the growers clearly postulated supply of the foundation seeds by the appellant with an
assurance that the crop will be purchased by it. It is neither the pleaded case of the
appellant nor any evidence was produced before any of the Consumer Forums that the
growers had the freedom to sell the seeds in the open market or to any person other
than the appellant. Therefore, it is not possible to take the view that the growers had
purchased the seeds for resale or for any commercial purpose and they are excluded
from the definition of the term 'consumer'. As a matter of fact, the evidence brought on
record shows that the growers had agreed to produce seeds on behalf of the appellant
for the purpose of earning their livelihood by using their skills and labour.
34. We shall now deal with the question whether the District Forum committed a
jurisdictional error by awarding compensation to the respondents without complying with
the procedure prescribed under Section 13(1)(c). A reading of the plain language of that
section shows that the District Forum can call upon the complainant to provide a sample
of goods if it is satisfied that the defect in the goods cannot be determined without
proper analysis or test. After the sample is obtained, the same is
@page-SC1182
required to be sent to an appropriate laboratory for analysis or test for the purpose of
finding out whether the goods suffer from any defect as alleged in the complaint or from
any other defect. In some of these cases, the District Forums had appointed agricultural
experts as Court Commissioners and directed them to inspect the fields of the
respondents and submit report about the status of the crops. In one or two cases the
Court appointed Advocate Commissioner with liberty to him to avail the services of
agricultural experts for ascertaining the true status of the crops. The reports of the
agricultural experts produced before the District Forum unmistakably revealed that the
crops had failed because of defective seeds/foundation seeds. After examining the
reports the District Forums felt satisfied that the seeds were defective and this is the
reason why the complainants were not called upon to provide samples of the seeds for
getting the same analysed/tested in an appropriate laboratory. In our view, the
procedure adopted by the District Forum was in no way contrary to Section 13(1)(c) of
the Consumer Act and the appellant cannot seek annulment of well-reasoned orders
passed by three Consumer Forums on the specious ground that the procedure
prescribed under Section 13(1)(c) of the Consumer Act had not been followed.
35. The issue deserves to be considered from another angle. Majority of the farmers in
the country remain illiterate throughout their life because they do not have access to the
system of education. They have no idea about the Seeds Act and the Rules framed
thereunder and other legislations, like, Protection of Plant Varieties and Farmers' Rights
Act, 2011. They mainly rely on the information supplied by the Agricultural Department
and Government agencies, like the appellant. Ordinarily, nobody would tell a farmer that
after purchasing the seeds for sowing, he should retain a sample thereof so that in the
event of loss of crop or less yield on account of defect in the seeds, he may claim
compensation from the seller/supplier. In the normal course, a farmer would use the
entire quantity of seeds purchased by him for the purpose of sowing and by the time he
discovers that the crop has failed because the seeds purchased by him were defective
nothing remains with him which could be tested in a laboratory. In some of the cases,
the respondents had categorically stated that they had sown the entire quantity of seeds
purchased from the appellant. Therefore, it is na? to blame the District Forum for not
having called upon the respondents to provide the samples of seeds and send them for
analysis or test in the laboratory.
36. It may also be mentioned that there was abject failure on the appellant's part to
assist the District Forum by providing samples of the varieties of seeds sold to the
respondents. Rule 13(3) casts a duty on every person selling, keeping for sale, offering
to sell, bartering or otherwise supplying any seed of notified kind or variety to keep over
a period of three years a complete record of each lot of seeds sold except that any seed
sample may be discarded one year after the entire lot represented by such sample has
been disposed of. The sample of seed kept as part of the complete record has got to be
of similar size and if required to be tested, the same shall be tested for determining the
purity. The appellant is a large supplier of seeds to the farmers/growers and growers.
Therefore, it was expected to keep the samples of the varieties of seeds sold/supplied
to the respondents. Such samples could have been easily made available to the District
Forums for being sent to an appropriate laboratory for the purpose of analysis or test.
Why the appellant did not adopt that course has not been explained. Not only this, the
officers of the appellant, who inspected the fields of the respondents could have
collected the samples and got them tested in a designated laboratory for ascertaining
the purity of the seeds and/or the extent of germination,
@page-SC1183
etc. Why this was not done has also not been explained by the appellant. These
omissions lend support to the plea of the respondents that the seeds sold/supplied by
the appellant were defective.
37. In Maharashtra Hybrid Seeds Co. Ltd. v. Alavalapati Chandra Reddy (1998) 6 SCC
738, this Court did not decide the issue relating to the alleged non-compliance of
Section 13(1)(c) of the Consumer Act, but approved the reasoning of the State
Commission which found fault with the appellant for not taking steps to get the seeds
tested in an appropriate laboratory. In that case, the respondent had complained that
the sunflower seeds purchased by him did not germinate because the same were
defective. The complaint was contested by the appellant on several grounds. The
District Forum allowed the complaint and declared that the respondent was entitled to
compensation @ Rs.2,000/- per acre in addition to the cost of the seeds. The State
Commission rejected the objection of the appellant that the District Forum had not
collected the sample of the seeds and sent them for analysis or test for determining the
quality. The National Commission summarily dismissed the revision filed by the
appellant. In paragraph 4 of the judgment, this Court extracted the finding recorded by
the State Commission for upholding the order of the District Forum and declined to
interfere with the award of compensation to the respondent. The relevant portions of
paragraph 4 are reproduced below:
"Thus, it is clear that it is on the permit granted by the Agricultural Officer that the
complainants purchased seeds from the opposite parties and that the same Agricultural
Officer visited the land and found that there was no germination. In view of the letter
written by the Agricultural Officer to the opposite parties to which they sent no reply, it is
clear that the same seeds that were purchased from the opposite parties were sown
and they did not germinate. In view of the aforesaid letter of the Agricultural Officer, the
District Forum felt that the seeds need not be sent for analysis. Moreover, if the
opposite parties have disputed that the seeds were not defective they would have
applied to the District Forum to send the samples of seeds from the said batch for
analysis by appropriate laboratory. But the opposite parties have not chosen to file any
application for sending the seeds to any laboratory. Since it is probable that the
complainants have sown all the seeds purchased by them, they were not in a position to
send seeds for analysis. In these circumstances, the order of the District Forum is not
vitiated by the circumstance that it has not on its own accord sent the seeds for analysis
by an appropriate laboratory.
***
It is clear from the letter of the Agricultural Officer that the opposite parties in spite of
their promise, never visited the fields of the complainants. The opposite parties did not
adduce any material to show that the complainants did not manure properly or that
there is some defect in the field. In the absence of such evidence and in view of the
conduct of the opposite parties not visiting the fields and having regard to the allegation
in the complaint that there were rains in the month of September, 1991 and the
complainants sowed the seeds, it cannot be said that there is any defect either in the
manure or in the preparation of the soil for sowing sunflower seeds."
(Emphasis supplied)
38. Reference can usefully be made to the orders of the National Commission in N.S.C.
Ltd. v. Guruswamy (2002) CPJ 13, E.I.D. Parry (I) Ltd. v. Gourishankar (2006) CPJ 178
and India Seed House v. Ramjilal Sharma (2008) 3 CPJ 96. In these cases the National
Commission considered the issue relating to non-compliance of Section 13(1)(c) in the
context of the complaints made by the farmers that their crops had failed due to supply
of defective seeds and held that the District Forum and State Commission did not
commit any error by entertaining the complaint of the farmers and
@page-SC1184
awarding compensation to them. In the first case, the National Commission noted that
the entire quantity of seeds had been sown by the farmer and observed:
"There is no doubt in our mind that where complainant alleges a defect in goods which
cannot be determined without proper analysis or test of the goods, then, the sample
need to be taken and sent to a laboratory for analysis or test. But, the ground reality in
the instant case is that reposing faith in the seller, in this case the leading Public Sector
Company dealing in seed production and sale, the petitioner sowed whole of the seed
purchased by him. Where was the question of any sample seed to be sent to any
laboratory in the case? Whatever the Respondent/Complainant had, was sown. One
could have appreciated the bona fides better, if sample from the crop was taken during
the visit of Assistant Seed Officer of Petitioner - N.S.C. and sent for analysis. Their
failure is unexceptionable. In our view, it is the Petitioner Company which failed to
comply with the provisions of Section 13 (c) of the Act. By the time, complaint could be
filed even this opportunity had passed. If the Petitioner Company was little more
sensitive or alert to the complaint of the Respondent/Complainant, this situation might
not have arisen. Petitioner has to pay for his insensitivity. The Respondent/Complainant
led evidence of State's agricultural authorities in support who made their statements
after seeing the crop in the field. The onus passes on to the Petitioner to prove that the
crop which grew in the field of the complainant was of 'Arkajyothi' of which the seed was
sold and not of 'Sugar Baby', as alleged. He cannot take shelter under Section 13 (c) of
the CP Act. Learned Counsel's plea that Respondent/Complainant should have kept
portion of seeds purchased by him to be used for sampling purposes, is not only
unsustainable in law but to say the least, is very unbecoming of a leading Public Sector
Seed Company to expect this arrangement."
In the second case, the National Commission took cognizance of the objection raised by
the appellant that the procedure prescribed under Section 13(1)(c) of the Consumer Act
had not been followed and observed:
"Testimony of the complainant would show that whatever seed was purchased from
respondent No. 2 was sown by him in the land. Thus, there was no occasion for
complainant to have sent the sample of seed for testing to the laboratory. It is in the
deposition of Jagadish Gauda that after testing the seed the petitioner company packed
and sent it to the market. However, the testing report of the disputed seed has not been
filed. Since petitioner company is engaged in business of sunflower seed on large scale,
it must be having the seed of the lot which was sold to complainant. In order to prove
that the seed sold to complainant was not sub-standard/defective, the petitioner
company could have sent the sample for testing to the laboratory which it failed to do.
Thus, no adverse inference can be drawn against complainant on ground of his having
not sent the sample of seed for testing to a laboratory."
In the third case, the National Commission held:
"Holding in favour of the complainant, the National Commission stated that, "it is not
expected from every buyer of the seeds to set apart some quantity of seeds for testing
on the presumption that seeds would be defective and he would be called upon to prove
the same through laboratory testing. On the other hand a senior officer of the
Government had visited the field and inspected the crop and given report under his
hand and seal, clearly certifying that the seeds were defective."
39. The reasons assigned by the National Commission in the aforementioned three
cases are similar to the reasons assigned by the State Commission which were
approved by this Court in Maharashtra Hybrid Seeds Company Ltd. v. Alavalapati
Chandra Reddy (supra) and in our view the
@page-SC1185
proposition laid down in those cases represent the correct legal position.
40. In the result, the appeals are dismissed. The appellant shall pay cost of Rs.25,000/to each of the respondents. The amount of cost shall be paid within a period of 60 days
from today.
Appeals dismissed.
AIR 2012 SUPREME COURT 1515 "Lalita Kumari v. Government of U. P."
Coram : 3
DALVEER BHANDARI, T. S. THAKUR AND DIPAK MISRA, JJ.
Writ Petition (Criminal) No. 68 of 2008 with Criminal Appeal No. 1410 of 2011 with SLP
(Criminal) No. 5200 of 2009 with 5986 of 2010 (arising out of D. 26722 of 2008 in writ
petn. (Cri) No. 68 of 2008), D/- 27 -2 -2012.
Lalita Kumari v. Government of U. P. and Ors.
WITH
Samshudheen v. State, Represented by Dy. Superintendent of Police T. N.
WITH
Baldev Singh Cheema v. State of Punjab and Ors.
WITH
Surjit Singh and Anr. v. State of Punjab and Ors.
AND
Daljit Singh Grewal v. Ramesh Inder Singh.
Criminal P.C. (2 of 1974), S.154 - FIR - F. I. R. - Recording of - Whether mandatory for
police - Can police hold same kind of preliminary investigation before recording of F. I.
R. - Questions referred to larger Bench. (Para 112)
Cases Referred :
Chronological Paras
AIR 2011 SC 1925 : 2011 AIR SCW 2546 : 2011 Lab IC 2166
AIR 2011 SC (Cri) 339 : 2011 (1) AIR Bom R 456
13
78
AIR 2011 SC (Cri) 529 : 2011 AIR SCW 1185 : 2011 Cri LJ 1619 : 2011 (2) ALJ 445
71
AIR 2010 SC 2261 : 2010 AIR SCW 4064 : 2010 Cri LJ 3827 : AIR 2011 SC (Cri) 1103
52, 88
AIR 2010 SC 3363 : 2010 AIR SCW 4975 : 2010 Cri LJ 4303 : 2011 (2) AIR Jhar R 203
64
2009 (1) Mah LJ 97 46
AIR 2008 SC 178 : 2007 AIR SCW 6453 : 2008 Cri LJ 356
28, 29, 97, 104
AIR 2008 SC 907 : 2008 AIR SCW 309 : 2008 (1) ALJ 752
46
AIR 2008 SC 1603 : 2008 AIR SCW 1777 : 2008 Cri LJ 2038 54
AIR 2007 SC 1274 : 2007 AIR SCW 1415
96, 101
AIR 2007 SC (Supp) 684 : 2007 AIR SCW 4783 : 2007 Cri LJ 3729 : 2008 (1) AIR Jhar
R 348 10, 11, 30, 96, 102
AIR 2007 SC (Supp) 1372 : 2007 AIR SCW 326
52
AIR 2006 SC 1322 : 2006 AIR SCW 1021 : 2006 Cri LJ 1622 : 2006 (2) AIR Jhar R 290
10, 29, 32, 33, 35, 96, 100, 104
AIR 2006 SC 2648 : 2006 AIR SCW 3608 : 2006 Cri LJ 3636 47, 110
AIR 2004 SC 3693 : 2004 AIR SCW 3659 : 2004 Cri LJ 3121 49
AIR 2004 SC 4091 : 2004 AIR SCW 4442 : 2004 Cri LJ 3876 47, 110
AIR 2003 SC 4140 : 2003 AIR SCW 2133 : 2003 Cri LJ 2322 31
AIR 2003 SC 4414 : 2003 AIR SCW 5050 : 2003 Cri LJ 5014 19, 20
AIR 2003 SC 4603 : 2003 AIR SCW 5396
52, 89
AIR 2001 SC 3404 : 2001 AIR SCW 3261
13
AIR 1997 SC 322 : 1997 AIR SCW 78 : 1997 Cri LJ 362
22
AIR 1997 SC 3104 : 1997 AIR SCW 3146 : 1997 Cri LJ 3757 24, 25, 26
1995 AIR SCW 3054 : 1995 Cri LJ 3612 63
1994 AIR SCW 2042 : 1994 Cri LJ 3067 19
AIR 1993 SC 1082 : 1993 AIR SCW 423 : 1993 Cri LJ 859
46
AIR 1992 SC 604 : 1992 AIR SCW 237 : 1992 Cri LJ 527
32, 35, 96, 99
(1990) 1 SCC 328 50
@page-SC1516
AIR 1985 SC 218
13
AIR 1981 SC 746 : 1981 Cri LJ 306
65
AIR 1981 SC 1230 : 1981 Cri LJ 736
97, 107
AIR 1978 SC 597
50, 56, 57, 60
AIR 1976 SC 263 : 1975 Cri LJ 1993
13
AIR 1974 SC 1936 : 1974 Cri LJ 1385
27
AIR 1973 SC 1 : 1973 Cri LJ 185 75
AIR 1973 SC 1034 : 1973 Tax LR 1743 13
AIR 1971 SC 520 : 1971 Cri LJ 523
97, 106
AIR 1971 SC 1891 : 1971 Cri LJ 1411
46
AIR 1970 SC 564
60
AIR 1967 SC 276 : 1967 Cri LJ 285
87
AIR 1964 SC 221 : 1964 (1) Cri LJ 1405 15, 17, 97, 105
AIR 1963 SC 447 : 1963 (1) Cri LJ 341 46
AIR 1961 SC 751 : 1961 (1) Cri LJ 773 86
AIR 1961 SC 1480 85
AIR 1957 SC 366 : 1957 Cri LJ 550
46
AIR 1955 SC 196 : 1955 Cri LJ 526
16, 18
AIR 1955 SC 549
49
AIR 1945 PC 18 : (1945) 46 Cri LJ 413 14, 75
Mrs. Mona K. Rajvanshi, for Petitioner; Ms. Sharmila Upadhyay, for Respondents.
Judgement
DALVEER BHANDARI, J. :- We propose to deal with the above-mentioned writ petition,
the criminal appeals and the contempt petition by this judgment. The question of law
involved in these cases is identical, therefore, all these cases are being dealt with by a
common judgment. In order to avoid repetition, only the facts of the writ petition of Lalita
Kumari's case are recapitulated.
2. The petition has been filed before this Court under Article 32 of the Constitution of
India in the nature of habeas corpus to produce Lalita Kumari, the minor daughter of
Bhola Kamat.
3. On 5.5.2008, Lalita Kumari, aged about six years, went out of her house at 9 p.m.
When she did not return for half an hour and Bhola Kamat was not successful in tracing
her, he filed a missing report at the police station Loni, Ghaziabad, U.P.
4. On 11.5.2008, respondent No. 5 met Bhola Kamat and informed him that his
daughter has been kidnapped and kept under unlawful confinement by the respondent
Nos. 6 to 13. The respondent-police did not take any action on his complaint. Aggrieved
by the inaction of the local police, Bhola Kamat made a representation on 3.6.2008 to
the Senior Superintendent of Police, Ghaziabad. On the directions of the
Superintendent of Police, Ghaziabad, the police station Loni, Ghaziabad registered a
First Information Report (F.I.R.) No. 484 dated 6.6.2008 under Section
363/366/506/120B, IPC against the private respondents.
5. Even after registration of the FIR against the private respondents, the police did not
take any action to trace Lalita Kumari. According to the allegation of Bhola Kamat, he
was asked to pay money for initiating investigation and to arrest the accused persons.
Ultimately, the petitioner filed this petition under Article 32 of the Constitution before this
Court.
6. This Court on 14.7.2008 passed a comprehensive order expressing its grave anguish
on non-registration of the FIR even in a case of cognizable offence. The Court also
issued notices to all Chief Secretaries of the States and Administrators of the Union
Territories. In response to the directions of the Court, various States and the Union
Territories have filed comprehensive affidavits.
7. The short, but extremely important issue which arises in this petition is whether under
Section 154 of the Code of Criminal Procedure Code, a police officer is bound to
register an FIR when a cognizable offence is made out or he has some latitude of
conducting some kind of preliminary enquiry before registering the FIR.
@page-SC1517
8. Mr. S.B. Upadhyay, learned senior advocate appearing for the petitioner has tried to
explain the scheme of Section 154, Cr.P.C. with the help of other provisions of the Act.
According to him, whenever information regarding cognizable offence is brought to the
notice of the SHO, he has no option but to register the First Information Report.
9. This Court also issued notice to the learned Attorney General for India to assist the
Court in this matter of general public importance. Mr. Harish P. Raval, the learned
Additional Solicitor General appeared before the Court and made comprehensive
submissions. He also filed written submissions which were settled by him and re-settled
by the learned Attorney General for India.
10. Learned Additional Solicitor General submitted that the issue which has been
referred to this Court has been decided by a three-Judge Bench of this Court in the
case of Aleque Padamsee and others v. Union of India and others (2007) 6 SCC 171 :
(AIR 2007 SC (Supp) 684 : 2007 AIR SCW 4783). In this case, this Court while referring
to the judgment in the case of Ramesh Kumari v. State (NCT of Delhi) and others
(2006) 2 SCC 677 in paragraph 2 (AIR 2006 SC 1322 : 2006 AIR SCW 1021) of the
judgment has observed as under:"Whenever cognizable offence is disclosed the police officials are bound to register the
same and in case it is not done, directions to register the same can be given."
11. The State of Gujarat, the respondent in the above case, on the facts thereof,
contended that on a bare reading of a complaint lodged, it appears that no offence was
made and that whenever a complaint is lodged, automatically and in a routine manner
an FIR is not to be registered. This Court after considering Chapter XII and more
particularly Sections 154 and 156 held (paragraphs 6 and 7) that "whenever any
information is received by the police about the alleged commission of offence which is a
cognizable one, there is a duty to register the FIR." There could be no dispute on that
score as observed by this Court. The issue referred to in the reference has already
been answered by the Bench of three Judges. The judgment in Aleque Padamsee and
others (supra) is not referred in the reference order. It is therefore prayed that the
present reference be answered accordingly.
12. It was submitted on behalf of the Union of India that Section 154 (1) provides that
every information relating to the commission of a cognizable offence if given orally, to
an officer incharge of a police station shall be reduced in writing by him or under his
directions. The provision is mandatory. The use of the word "shall" by the legislation is
indicative of the statutory intent. In case such information is given in writing or is
reduced in writing on being given orally, it is required to be signed by the persons giving
it. It is further provided that the substance of commission of a cognizable offence as
given in writing or reduced to writing "shall" be entered in a book to be kept by such
officer in such form as the State Government may prescribe in this behalf. Sub-section
(2) provides that a copy of such information as recorded in sub-section (1) shall be
given forthwith free of cost to the informant.
13. In light of the provisions contained in Section 154 (1) and the law laid by this Court
on the subject, the following submissions were placed by the Union of India for
consideration of this Court.
a) The statutory intention is manifest on a bare reading of provisions of Section 154(1)
to the effect that when an officer incharge of a police station to whom information
relating to commission of cognizable offence has been disclosed, he has no discretion
save and except to reduce the said information in writing by him or under his direction.
b) Section 154(1) does not have ambiguity
@page-SC1518
and is in clear terms.
c) The use of expression "shall" clearly manifest the mandatory statutory intention.
d) In construing a statutory provision, the first and the foremost rule of construction is
the literal construction. It is submitted that all that the Court has to see at the very outset
is what does that provision say. If the provision is unambiguous and if from that
provision, the legislative intent is clear, the Court need not call into it the other rules on
construction of statutes. [Para 22 of Hiralal Rattanlal etc.etc. v. State of U.P. and
another etc.etc. 1973(1) SCC 216 : (AIR 1973 SC 1034)]. This judgment is referred to
and followed in a recent decision of this Court in B. Premanand and others v. Mohan
Koikal and others (2011) 4 SCC 266 paras 8 and 9 : (AIR 2011 SC 1925 : 2011 AIR
SCW 2546). It is submitted that the language employed in Section 154 is the
determinative factor of the legislative intent. There is neither any defect nor any
omission in words used by the legislature. The legislative intent is clear. The language
of Section 154(1), therefore, admits of no other construction.
e) The use of expression "shall" is indicative of the intention of the legislature which has
used a language of compulsive force. There is nothing indicative of the contrary in the
context indicating a permissive interpretation of Section 154. It is submitted that the said
Section ought to be construed as pre-emptory. The words are precise and unambiguous
(Govindlal Chhaganlal Patel v. Agricultural Produce Market Committee, Godhra and
others, 1975 (2) SCC 482 : (AIR 1975 SC 263)). It is submitted that it is settled law that
judgments of the courts are not to be construed as statutes [para 11 of three-Judge
Bench decision of this court in the case of M/s. Amar Nath Om Prakash and others etc.
v. State of Punjab and others (1985) 1 SCC 345 : (AIR 1985 SC 218)]. The abovesaid
decision is followed by a judgment of this Court in the case of Hameed Joharan (dead)
and others v. Abdul Salam (dead) by Lrs. and others (2001) 7 SCC 573 : (AIR 2001 SC
3404 : 2001 AIR SCW 3261).
f) The provision of Section 154(1) read in light of statutory scheme do not admit of
conferring any discretion on the officer-in-charge of the police station of embarking upon
an preliminary enquiry prior to registration of an FIR. A preliminary enquiry is a term
which is alien to the Code of Criminal Procedure, 1973 which talks of (i) investigation (ii)
inquiry and (iii) trial. These terms are definite connotations having been defined under
Section 2 of the Act.
g) The concept of preliminary enquiry as contained in Chapter IX of the CBI (Crime)
Manual, first published in 1991 and thereafter updated on 15.7.2005 cannot be relied
upon to import the concept of holding of preliminary enquiry in the scheme of the Code
of Criminal Procedure.
h) The interpretation of Section 154 cannot be depended upon a Manual regulating the
conduct of officers of an organization, i.e., CBI.
i) A reference to para 9.1. of the said Manual would show that preliminary enquiry is
contemplated only when a complaint is received or information is available which may
after verification as enjoined in the said Manual indicates serious misconduct on the part
of the public servant but is not adequate to justify registration of a regular case under
provisions of Section 154, Cr.P.C. Such preliminary inquiry as referred to in para 9.1 of
the CBI Manual as also to be registered after obtaining approval of the competent
authority. It is submitted that these provisions cannot be imported into the statutory
scheme of Section 154 so as to provide any discretion to a police officer in the matter of
registration of an FIR.
j) The purpose of registration of an FIR are manifold -that is to say :
i) To reduce the substance of information disclosing commission of a cognizable
offence, if given orally, into writing
ii) if given in writing to have it signed
@page-SC1519
by the complainant
iii) to maintain record of receipt of information as regards commission of cognizable
offences
iv) to initiate investigation on receipt of information as regards commission of cognizable
offence
v) to inform Magistrate forthwith of the factum of the information received.
14. Reference has also been made to the celebrated judgment of the Privy Council in
the case of Emperor v. Khwaza Nazim Ahmad, AIR 1945 PC 18 in which it is held that
for the receipt and recording of an information, report is not a condition precedent to the
setting in motion of a criminal investigation. It is further held, that no doubt, in the great
majority of cases criminal prosecution are undertaken as a result of the information
received and recorded in this way. (As provided in Sections 154 to 156 of the earlier
Code). It is further held that there is no reason why the police, if in possession through
their own knowledge or by means of credible though informal intelligence which
genuinely leads them to the belief that a cognizable offence has been committed,
should not of their own motion undertake an investigation into the truth of the matters
alleged. It is further held that Section 157 of the Code when directing that a police
officer, who has a reason to suspect from information or otherwise, that an offence
which he is empowered to investigate under Section 156 has been committed, he shall
proceed to investigate the facts and circumstances of the case. It is further held in the
said judgment that, in truth the provisions as to an information report (commonly called
a First Information Report) are enacted for other reasons. Its object is to obtain early
information of alleged criminal activity, to record the circumstances before there is time
for them to be forgotten or embellished, and it has to be remembered that the report can
be put in evidence when the informant is examined, if it is desired to do so. It is further
held in the said judgment that there is a statutory right on part of the police to
investigate the circumstances of an alleged cognizable crime without requiring any
authority from the judicial authorities.
15. On behalf of the Union of India reference was made to the judgment of this Court
delivered in The State of Uttar Pradesh v. Bhagwant Kishore Joshi, AIR 1964 SC 221
wherein it has been held vide para 8 that Section 154 of the Code prescribed the mode
of recording the information received orally or in writing by an officer in-charge of a
police station in respect of commission of a cognizable offence. Section 156 thereof
authorizes such an officer to investigate any cognizable offence prescribed therein.
Though, ordinarily investigation is undertaken on information received by a police
officer, the receipt of information is not a condition precedent for investigation.
16. It is further held that Section 157 prescribes the procedure in the matter of such an
investigation which can be initiated either on information or otherwise. It is also held that
it is clear from the said provision that an officer-in-charge of a police station can start
investigation either on information or otherwise. The Judges in the said judgment
referred to a decision of this Court in the case of H.N. Rishbud and Inder Singh v. The
State of Delhi, 1955 SCR (1) 1150 at pp.1157-58 : (AIR 1955 SC 196) that the graphic
description of the stages is only a restatement of the principle that a vague information
or an irresponsible rumour would not by itself constitute information within the meaning
of Section 154 of the Code or the basis of an investigation under Section 157 thereof.
The said case was in respect of an offence alleged under Prevention of Corruption Act,
1947. The said case was under the old Code which did not define the term
'investigation' (paragraph 18 of the concurring judgment of Justice Mudholkar at page
226). It is also observed that the main object of investigation mean to bring home the
offence to the
@page-SC1520
offender. The essential part of the duty of an Investigating Officer in this connection is,
apart from arresting the offender, to collect all material necessary for establishing the
accusation "against" the offender.
17. The following observations in the concurring judgment of Bhagwant Kishore Joshi
(AIR 1964 SC 221) (supra) were found in paragraph 18 :
"In the absence of any prohibition in the Code, express or implied, I am of opinion that it
is open to a Police Officer to make preliminary enquiries before registering an offence
and making a full scale investigation into it. No doubt, S. 5A of the Prevention of
Corruption Act was enacted for preventing harassment to a Government servant and
with this object in view investigation, except with the previous permission of a
Magistrate, is not permitted to be made by an officer below the rank of a Deputy
Superintendent of Police. Where however, a Police Officer makes some preliminary
enquiries, does not arrest or even question an accused or question any witnesses but
merely makes a few discreet enquiries or looks at some documents without making any
notes, it is difficult to visualise how any possible harassment or even embarrassment
would result therefrom to the suspect or the accused person."
18. In case of H.N. Rishbud (AIR 1955 SC 196) (supra), in the case under the
Prevention of Corruption Act, 1947, it is observed as under:"Investigation usually starts on information relating to the commission of an offence
given to an officer-in-charge of a police station and recorded under section 154 of the
Code. If from information so received or otherwise, the officer-in-charge of the police
station has reason to suspect the commission of an offence, he or some other
subordinate officer deputed by him, has to proceed to the spot to investigate the facts
and circumstances of the case and if necessary to take measures for the discovery and
arrest of the offender."
It is further held :"Thus investigation primarily consists in the ascertainment of the facts and
circumstances of the case. By definition, it includes "all the proceedings under the Code
for the collection of evidence conducted by a police officer".
It is further held in the said judgment that :
"Thus, under the Code investigation consists generally of the following steps:(1)
Proceeding to the spot, (2) Ascertainment of the facts and circumstances of the case,
(3) Discovery and arrest of the suspected offender, (4) Collection of evidence relating to
the commission of the offence which may consist of (a) the examination of various
persons (including the accused) and the reduction of their statements into writing, if the
officer thinks fit, (b) the search of places of seizure of things considered necessary for
the investigation and to be produced at the trial, and (5) Formation of the opinion as to
whether on the material collected there is a case to place the accused before a
Magistrate for trial and if so taking the necessary steps for the same by the filing of a
charge-sheet under section 173."
19. It was further submitted that this Court in the case of Damodar v. State of
Rajasthan, reported in 2004 (12) SCC 336 : (AIR 2003 SC 4414 : 2003 AIR SCW 5050)
referred to the observations of the judgment of this Court rendered in case of Ramsinh
Bavaji Jadeja v. State of Gujarat, 1994 (2) SCC 685 : (1994 AIR SCW 2042) and
observed that the question as to at what stage the investigation commence has to be
considered and examined on the facts of each case especially when the information of
alleged cognizable offence has been given on telephone. The said case deals with
information received on telephone by an unknown person. In paragraph 10 it is
observed thus "in order to constitute the FIR, the information must reveal commission of
act which is a cognizable offence."
20. It is further observed in paragraph 11 in the case of Damodar (supra) that in
@page-SC1521
the context of the facts of the said case, that any telephonic information about
commission of a cognizable offence, if any, irrespective of the nature and details of such
information cannot be treated as an FIR. It is further held that if the telephonic message
is cryptic in nature and the officer incharge proceeds to the place of occurrence on the
basis of that information to find out the details of the nature of the offence, if any, then it
cannot be said that the information which had been received by him on telephone shall
be deemed to be an FIR.
21. It is also observed that the object and purpose of giving such telephonic message is
not to lodge an FIR, but to make the officer-in-charge of the police station reach the
place of occurrence. It is further held that if the information given on telephone is not
cryptic and on the basis of that information the officer-in-charge is prima facie satisfied
about commission of a cognizable offence and he proceeds from the police station after
recording such information, to investigate such offence, then any statement made by
any person in respect of the said offence including the participants shall be deemed to
be statement made by a person to the police officer in the course of investigation
covered by Section 162 of the Code.
22. This Court in the case of Binay Kumar Singh v. The State of Bihar, 1997(1) SCC
283 : (AIR 1997 SC 322 : 1997 AIR SCW 78) observed as under:"…..It is evidently a cryptic information and is hardly sufficient for discerning the
commission of any cognizable offence therefrom. Under Section 154 of the Code the
information must unmistakably relate to the commission of a cognizable offence and it
shall be reduced to writing (if given orally) and shall be signed by its maker. The next
requirement is that the substance thereof shall be entered in a book kept in the police
station in such form as the State Government has prescribed. First Information Report
(FIR) has to be prepared and it shall be forwarded to the Magistrate who is empowered
to take cognizance of such offence upon such report. The officer-in-charge of a police
station is not obliged to prepare FIR on any nebulous information received from
somebody who does not disclose any authentic knowledge about commission of the
cognizable offence. It is open to the officer-in-charge to collect more information
containing details about the occurrence, if available, so that he can consider whether a
cognizable offence has been committed warranting investigation thereto."
23. It is submitted that in the said judgment what fell for consideration of the Court was
the conviction and sentence in respect of the offence under Section 302/149 of the IPC
in respect of a murder which took place in a Bihar village wherein lives of 13 people
were lost and 17 other were badly injured along with burning alive of large number of
mute cattle and many dwelling houses. It is also submitted that the interpretation of
Section 154 was not directly in issue in the said judgment.
24. Reliance is placed on a decision of this Court in the case of Madhu Bala v. Suresh
Kumar and others, reported as 1997 (8) SCC 476 : (AIR 1997 SC 3104 :1997 AIR SCW
3146) in the context of Sections 156(3), 173(2), 154 and 190(1) (a) and (b) and more
particularly upon the following paragraphs of the said judgment. The same read as
under:"Coming first to the relevant provisions of the Code, Section 2(d) defines "complaint" to
mean any allegation made orally or in writing to a Magistrate, with a view to his taking
action under the Code, that some person, whether known or unknown has committed
an offence, but does not include a police report. Under Section 2(c) "cognizable
offence" means an offence for which, and "cognizable case" means a case in which a
police officer may in accordance with the First Schedule (of the Code) or under any
other law for the time being in force, arrest without a warrant. Under Section 2(r)
@page-SC1522
"police report" means a report forwarded by a police officer to a Magistrate under subsection (2) of Section 173 of the Code. Chapter XII of the Code comprising Sections
154 to 176 relates to information to the police and their powers to investigate. Section
154 provides, inter alia, that the officer-in-charge of a police station shall reduce into
writing every information relating to the commission of a cognizable offence given to him
orally and every such information if given in writing shall be signed by the person giving
it and the substance thereof shall be entered in a book to be kept by such officer in such
form as the State Government may prescribe in this behalf. Section 156 of the Code
with which we are primarily concerned in these appeals reads as under:
"(1) Any officer-in-charge of a police station may, without the order of a Magistrate,
investigate any cognizable case which a court having jurisdiction over the local area
within the limits of such station would have power to inquire into or try under the
provisions of Chapter XIII.
(2) No proceeding of a police officer in any such case shall at any stage be called in
question on the ground that the case was one which such officer was not empowered
under this section to investigate.
(3) Any Magistrate empowered under Section 190 may order such an investigation as
above-mentioned."
On completion of investigation undertaken under Section 156(1) the officer-in- charge of
the police station is required under Section 173(2) to forward to a Magistrate
empowered to take cognizance of the offence on a police report, a report in the form
prescribed by the State Government containing all the particulars mentioned therein.
Chapter XIV of the Code lays down the conditions requisite for initiation of proceedings
by the Magistrate. Under sub-section (1) of Section 190 appearing in that Chapter any
Magistrate of the First Class and any Magistrate of the Second Class specially
empowered may take cognizance of any offence (a) upon receiving a "complaint" of
facts which constitutes such offence; (b) upon a "police report" of such facts; or (c) upon
information received from any person other than a police officer, or upon his own
knowledge that such offence has been committed. Chapter XV prescribes the
procedure the Magistrate has to initially follow if it takes cognizance of an offence on a
complaint under Section 190(1)(a).
25. Learned counsel for the Union of India relied on the following passage from Madhu
Bala (supra) :"From a combined reading of the above provisions it is abundantly clear that when a
written complaint disclosing a cognizable offence is made before a Magistrate, he may
take cognizance upon the same under Section 190(1)(a) of the Code and proceed with
the same in accordance with the provisions of Chapter XV. The other option available to
the Magistrate in such a case is to send the complaint to the appropriate police station
under Section 156(3) for investigation. Once such a direction is given under sub-section
(3) of Section 156 the police is required to investigate into that complaint under subsection (1) thereof and on completion of investigation to submit a "police report" in
accordance with Section 173(2) on which a Magistrate may take cognizance under
Section 190(1)(b) - but not under 190(1)(a). Since a complaint filed before a Magistrate
cannot be a "police report" in view of the definition of "complaint" referred to earlier and
since the investigation of a "cognizable case" by the police under Section 156(1) has to
culminate in a "police report" the "complaint" - as soon as an order under Section 156(3)
is passed thereon - transforms itself to a report given in writing within the meaning of
Section 154 of the Code, which is known as the first information report (FIR). As under
Section 156(1), the police can only investigate a cognizable "case", it has to formally
register a case on that report."
@page-SC1523
26. Mr. Raval also relied on the following passage from Madhu Bala' s case (AIR 1997
SC 3104 : 1997 AIR SCW 3146) :"From the foregoing discussion it is evident that whenever a Magistrate directs an
investigation on a "complaint" the police has to register a cognizable case on that
complaint treating the same as the FIR and comply with the requirements of the above
Rules. It, therefore, passes our comprehension as to how the direction of a Magistrate
asking the police to "register a case" makes an order of investigation under Section
156(3) legally unsustainable. Indeed, even if a Magistrate does not pass a direction to
register a case, still in view of the provisions of Section 156(1) of the Code which
empowers the police to investigate into a cognizable "case" and the Rules framed under
the Indian Police Act, 1861 it (the police) is duty-bound to formally register a case and
then investigate into the same. The provisions of the Code, therefore, do not in any way
stand in the way of a Magistrate to direct the police to register a case at the police
station and then investigate into the same. In our opinion when an order for
investigation under Section 156(3) of the Code is to be made the proper direction to the
police would be "to register a case at the police station treating the complaint as the first
information report and investigate into the same".
27. This Court in the case of Hallu and others v. State of Madhya Pradesh, 1974 (4)
SCC 300 : (AIR 1974 SC 1936) in the context of Section 154 of the Code held (para 7)
that Section 154 of the Code does not require that the Report must be given by a
person who has personal knowledge of the incident reported. It is further held that the
said Section speaks of an information relating to the commission of a cognizable
offence given to an officer-in-charge of a police station.
28. Mr. Raval placed reliance on para 8 of the judgment of this Court in the case of
Rajinder Singh Katoch v. Chandigarh Administration and others, 2007 (10) SCC 69 :
(AIR 2008 SC 178 : 2007 AIR SCW 6453), wherein this Court observed as under:"8. Although the officer-in-charge of a police station is legally bound to register a first
information report in terms of Section 154 of the Code of Criminal Procedure, if the
allegations made by them give rise to an offence which can be investigated without
obtaining any permission from the Magistrate concerned, the same by itself, however,
does not take away the right of the competent officer to make a preliminary enquiry, in a
given case, in order to find out as to whether the first information sought to be lodged
had any substance or not. In this case, the authorities had made investigations into the
matter. In fact, the Superintendent of Police himself has, pursuant to the directions
issued by the High Court, investigated into the matter and visited the spot in order to
find out the truth in the complaint of the petitioner from the neighbours. It was found that
the complaint made by the appellant was false and the same had been filed with an
ulterior motive to take illegal possession of the first floor of the house."
29. While referring to the decision of this Court in Ramesh Kumari (AIR 2006 SC 1322 :
2006 AIR SCW 1021) (supra) in para 11 of the judgment in Rajinder Singh's case, it is
observed as under:"11. We are not oblivious to the decision of this Court in Ramesh Kumari v. State (NCT
of Delhi) wherein such a statutory duty has been found in the police officer. But, as
indicated hereinbefore, in an appropriate case, the police officers also have a duty to
make a preliminary enquiry so as to find out as to whether allegations made had any
substance or not."
30. It is further submitted that the above observations run concurrently to the settled
principles of law and more particularly the three Judge Bench decision of this Court in
Aleque Padamsee and others (AIR 2007 SC (Supp) 684 : 2007 AIR SCW 4783)
(supra).
@page-SC1524
31. In the context of the statutory provisions, the learned counsel for the Union of India
drew the attention of this Court to the decision of this Court in the case of
Superintendent of Police, CBI and others v. Tapan Kumar Singh, AIR 2003 SC 4140,
paragraph 20 at page 4145 : (2003 AIR SCW 2133) as under:"It is well settled that a First Information Report is not an encyclopedia, which must
disclose all facts and details relating to the offence reported. An informant may lodge a
report about the commission of an offence though he may not know the name of the
victim or his assailant. He may not even know how the occurrence took place. A first
informant need not necessarily be an eye-witness so as to be able to disclose in great
details all aspects of the offence committed. What is of significance is that the
information given must disclose the commission of a cognizable offence and the
information so lodged must provide a basis for the police officer to suspect the
commission of a cognizable offence. At this stage it is enough if the police officer on the
basis of the information given suspects the commission of a cognizable offence, and not
that he must be convinced or satisfied that a cognizable offence has been committed. If
he has reasons to suspect, on the basis of information received, that a cognizable
offence may have been committed, he is bound to record the information and conduct
an investigation. At this stage it is also not necessary for him to satisfy himself about the
truthfulness of the information. It is only after a complete investigation that he may be
able to report on the truthfulness or otherwise of the information. Similarly, even if the
information does not furnish all the details, he must find out those details in the course
of investigation and collect all the necessary evidence. The information given disclosing
the commission of a cognizable offence only sets in motion the investigative machinery,
with a view to collect all necessary evidence, and thereafter to take action in
accordance with law. The true test is whether the information furnished provides a
reason to suspect the commission of an offence, which the concerned police officer is
empowered under Section 156 of the Code to investigate. If it does, he has no option
but to record the information and proceed to investigate the case either himself or
depute any other competent officer to conduct the investigation. The question as to
whether the report is true, whether it discloses full details regarding the manner of
occurrence, whether the accused is named, and whether there is sufficient evidence to
support the allegations are all matters which are alien to the consideration of the
question whether the report discloses the commission of a cognizable offence. Even if
the information does not give full details regarding these matters, the investigating
officer is not absolved of his duty to investigate the case and discover the true facts, if
he can."
32. This Court in its decision in the case of Ramesh Kumari (AIR 2006 SC 1322 : 2006
AIR SCW 1021) (supra) has observed as under in paragraphs 3, 4 and 5 :"3. Mr Vikas Singh, the learned Additional Solicitor General, at the outset, invites our
attention to the counter-affidavit filed by the respondent and submits that pursuant to the
aforesaid observation of the High Court the complaint/representation has been
subsequently examined by the respondent and found that no genuine case was
established. We are not convinced by this submission because the sole grievance of the
appellant is that no case has been registered in terms of the mandatory provisions of
Section 154(1) of the Criminal Procedure Code. Genuineness or otherwise of the
information can only be considered after registration of the case. Genuineness or
credibility of the information is not a condition precedent for registration of a case. We
are also clearly of the view that the High Court erred in law in dismissing the petition
solely on the ground that the contempt petition was pending and the appellant had an
alternative remedy. The
@page-SC1525
ground of alternative remedy nor pending of the contempt petition would be no
substitute in law not to register a case when a citizen makes a complaint of a cognizable
offence against a police officer.
4. That a police officer mandatorily registers a case on a complaint of a cognizable
offence by the citizen under Section 154 of the Code is no more res integra. The point
of law has been set at rest by this Court in State of Haryana v. Bhajan Lal (AIR 1992 SC
604 :1992 AIR SCW 237). This Court after examining the whole gamut and intricacies of
the mandatory nature of Section 154 of the Code has arrived at the finding in paras 31
and 32 of the judgment as under: (SCC pp. 354-55) : (Paras 30 and 31,of AIR, AIR
SCW)
31. At the stage of registration of a crime or a case on the basis of the information
disclosing a cognizable offence in compliance with the mandate of Section 154(1) of the
Code, the police officer concerned cannot embark upon an enquiry as to whether the
information, laid by the informant is reliable and genuine or otherwise and refuse to
register a case on the ground that the information is not reliable or credible. On the
other hand, the officer-in-charge of a police station is statutorily obliged to register a
case and then to proceed with the investigation if he has reason to suspect the
commission of an offence which he is empowered under Section 156 of the Code to
investigate, subject to the proviso to Section 157. (As we have proposed to make a
detailed discussion about the power of a police officer in the field of investigation of a
cognizable offence within the ambit of Sections 156 and 157 of the Code in the ensuing
part of this judgment, we do not propose to deal with those sections in extenso in the
present context.) In case, an officer-in-charge of a police station refuses to exercise the
jurisdiction vested in him and to register a case on the information of a cognizable
offence reported and thereby violates the statutory duty cast upon him, the person
aggrieved by such refusal can send the substance of the information in writing and by
post to the Superintendent of Police concerned who if satisfied that the information
forwarded to him discloses a cognizable offence, should either investigate the case
himself or direct an investigation to be made by any police officer subordinate to him in
the manner provided by sub-section (3) of Section 154 of the Code.
32. Be it noted that in Section 154(1) of the Code, the legislature in its collective wisdom
has carefully and cautiously used the expression 'information' without qualifying the
same as in Section 41(1)(a) or (g) of the Code wherein the expressions, 'reasonable
complaint' and 'credible information' are used. Evidently, the non-qualification of the
word 'information' in Section 154(1) unlike in Section 41(1)(a) and (g) of the Code may
be for the reason that the police officer should not refuse to record an information
relating to the commission of a cognizable offence and to register a case thereon on the
ground that he is not satisfied with the reasonableness or credibility of the information.
In other words, 'reasonableness' or 'credibility' of the said information is not a condition
precedent for registration of a case. A comparison of the present Section 154 with those
of the earlier Codes will indicate that the legislature had purposely thought it fit to
employ only the word 'information' without qualifying the said word. Section 139 of the
Code of Criminal Procedure of 1861 (Act 25 of 1861) passed by the Legislative Council
of India read that 'every complaint or information' preferred to an officer-in-charge of a
police station should be reduced into writing which provision was subsequently modified
by Section 112 of the Code of 1872 (Act 10 of 1872) which thereafter read that 'every
complaint' preferred to an officer-in-charge of a police station shall be reduced in writing.
The word 'complaint' which occurred in previous two Codes of 1861 and 1872 was
deleted and in that place the word 'information'
@page-SC1526
was used in the Codes of 1882 and 1898 which word is now used in Sections 154, 155,
157 and 190(c) of the present Code of 1973 (Act 2 of 1974). An overall reading of all the
Codes makes it clear that the condition which is sine qua non for recording a first
information report is that there must be an information and that information must
disclose a cognizable offence."
33. Finally, this Court in Ramesh Kumari (supra) in para 33 said :"33. It is, therefore, manifestly clear that if any information disclosing a cognizable
offence is laid before an officer-in-charge of a police station satisfying the requirements
of Section 154(1) of the Code, the said police officer has no other option except to enter
the substance thereof in the prescribed form, that is to say, to register a case on the
basis of such information."
34. The views expressed by this Court in paras 31, 32 and 33 as quoted above leave no
manner of doubt that the provision of Section 154 of the Code is mandatory and the
officer concerned is duty-bound to register the case on the basis of such an information
disclosing cognizable offence.
35. In the case of Ramesh Kumari (AIR 2006 SC 1322 : 2006 AIR SCW 1021) (supra),
this Court has held that the views expressed by this Court in the case of State of
Haryana and others v. Bhajan Lal and others 1992 Suppl (1) SCC 335 : (AIR 1992 SC
604 : 1992 AIR SCW 237) leave no matter of doubt that the provisions of Section 154 of
the Code is mandatory and the officer concerned is duty-bound to register the case on
the basis of such information disclosing a cognizable offence.
36. Mr. Raval while concluding his arguments reiterated that under Section 154 of the
Code it is mandatory for the officer concerned to register the case on the basis of such
information including cognizable offence. According to Union of India, the police officer
has no discretion in the matter and this is according to the legislative intention behind
enacting Section 154 of the Code of Criminal Procedure.
37. Mr. Ratnakar Das, learned senior advocate appearing for the State of U.P. adopted
the arguments addressed by Mr. Raval on behalf of the Union of India and submitted
that the word 'shall' appearing in Section 154 mandates the police to enter the
information about commission of a cognizable offence in a book in such form commonly
known as "First Information Report'. At that stage, the police cannot go into the question
about the truth or otherwise of the information and make a roving enquiry.
38. It was also submitted by Mr. Das that the word 'information' is not qualified by
credible information. It has to be recorded with utmost dispatch and if its recording is
dependent upon any type of preliminary enquiry, then there would be a great temptation
to incorporate the details and circumstances advantageous to the prosecution which
may be lacking in the earlier information. Similarly, if the police is given the power to
hold a preliminary inquiry before registration of an FIR it may benefit the wrongdoer
because by afflux of time, the evidence would be obliterated or destroyed and thereby
justice would be denied to the victim of crime.
39. Mr. Das gave an example that in a bride burning case, when a person makes a
complaint that the husband and the in-laws of his daughter have doused her with
kerosene and set her ablaze and arrangements were being made to cremate the dead
body, in that case, if the police instead of taking immediate steps to register an FIR
proceeds to the spot to seize the dead body and the burnt clothes etc. on the plea that
he is required to make preliminary enquiry to ascertain the truth, then during the
interregnum, no evidence would be available to bring the offenders to book. It needs to
mention that power is conferred upon the police under the Code to make seizure in
course of investigation and not during the
@page-SC1527
enquiry. So, the police being in connivance with the accused may permit them to
cremate the dead body in order to cause disappearance of the evidence.
40. It is further submitted by Mr. Das that now-a-days custodial violence is on the rise.
Horror of Bhagalpur blinding case and the Maya Tyagi case in Uttar Pradesh are still in
the minds of the people. It is complained that the police do not take action against their
own brethren who commit crimes. Most of the times the Court intervenes and it is only
then that the person wronged gets justice. In such cases if the police is given handle to
hold a preliminary enquiry the offender will get a scope to fabricate evidence and
ultimately the police will deny registration of an FIR on the ground that the preliminary
enquiry does not reveal any such offence having been committed at all.
41. It was submitted on behalf of the Union of India and the State of U.P. that in the
Code the Legislature never intended to incorporate any provision for conducting any
'preliminary enquiry' before registering an FIR when a report regarding commission of a
cognizable offence is made. The specific question on this issue was never raised or
agitated earlier before this Court at any point of time whether as a general rule the
police should hold a preliminary enquiry before registering an FIR and take further steps
in the investigation. Only in two cases in respect of the offence under Prevention of
Corruption Act which was to be investigated by the Central Bureau of Investigation
(CBI) this Court taking note of the peculiar facts and circumstances of those cases,
made an observation that where public servant is charged with acts of dishonesty
amounting to serious misdemeanor, registering an FIR should be preceded by some
suitable preliminary enquiry. In another case in which dispute regarding property
between the brothers was involved, this Court in the peculiar facts of that case made an
observation that though the officer-in-charge of a police station is legally bound to
register a First Information Report in terms of Section 154 of the Code, if the allegations
give rise to an offence which can be investigated without obtaining permission from the
Magistrate, the same however, does not take away the right of the competent officer to
make a preliminary enquiry in a given case in order to find whether the FIR sought to be
lodged has any substance or not.
42. According to him, the grievance of the appellant in the said case was that his report
which revealed commission of a cognizable case was not treated as an FIR by the
concerned police. It was not the issue nor was any argument advanced as to whether
registering of an FIR as provided under Section 154 of the Code should be preceded by
some sort of preliminary enquiry or not. In such view of the matter, the observation of
this Court that it does not take away the right of the competent officer to make a
preliminary enquiry in a given case is nothing but a passing observation.
43. According to Mr. Das, the provision of law about registration of an FIR is very clear
and whenever information relating to cognizable offence is received by the police, in
that event the police had no option but to register the FIR.
44. Mr. Shekhar Naphade, learned senior counsel appearing for the State of
Maharashtra on the other hand has taken a different view as taken by the Union of India
and submitted that before registering an FIR under Section 154, Cr.P.C. it is open to the
SHO to hold a preliminary enquiry to ascertain whether there is prima facie case of
commission of cognizable offence or not.
45. Mr. Naphade has comprehensively explained the statutory scheme of Section 154,
Cr.P.C.. According to him, Sections 41, 57, 154(3), 156(1) and 156(3), 157, 167, 190
and 202 are an integral part of the statutory scheme relating to investigation of
@page-SC1528
crimes. These provisions clearly contemplate that the police officer can exercise powers
under the aforesaid provisions provided he is prima facie satisfied that there are
reasonable grounds to believe that the accused is guilty of commission of the
cognizable offence.
46. Section 154 of Cr.P.C. forms a part of a chain of statutory provisions relating to
investigation, and therefore, it must follow that the provisions of Sections 41, 157, 167
etc. have a bearing on the interpretation of Section 154 of Cr.P.C. The said judgments
have interpreted Section 154 of Cr.P.C. purely on the literal interpretation test and while
doing so, the other important tests of statutory interpretation, like a statute must be read
as a whole and no provision of a statute should be considered and interpreted de hors
the other provisions, the rule of purposive construction etc. are lost sight of. He referred
to the following cases - Tarachand and another v. State of Haryana, 1971 (2) SCC 579 :
(AIR 1971 SC 1891), Sandeep Rammilan Shukla v. State of Maharashtra and others,
2009 (1) Mh.L.J. 97, Sakiri Vasu v. State of Uttar Pradesh and others, 2008 (2) SCC
409 : (AIR 2008 SC 907 : 2008 AIR SCW 309), Nasar Ali v. State of Uttar Pradesh 1957
SCR 657 : (AIR 1957 SC 366), Union of India and another v. W.N. Chadha 1993
(Suppl) 4 SCC 260 : (AIR 1993 SC 1082 : 1993 AIR SCW 423), State of West Bengal v.
S.N. Basak, 1963 (2) SCR 52 : (AIR 1963 SC 447).
47. Mr.Naphade submitted that in the case of allegations relating to medical negligence
on the part of doctors, this Court has clearly held that no medical professional should be
prosecuted merely on the basis of the allegations in the complaint. There should be an
indepth enquiry into the allegations relating to negligence and this necessarily
postulates a preliminary enquiry before registering an FIR or before entering on
investigation. He reported to State of M.P. v. Santosh Kumar, 2006 (6) SCC 1 : (AIR
2006 SC 2648 : 2006 AIR SCW 3608) and Dr. Suresh Gupta v. Govt. of NCT of Delhi
and another, 2004(6) SCC 422 : (AIR 2004 SC 4091 : 2004 AIR SCW 4442).
48. He also submitted that the same principle can also be made applicable to the
people of different categories. The literal interpretation of Section would mean the
registration of an FIR to a mechanical act. The registration of an FIR results into serious
consequences for the person named as accused therein. It immediately results in loss
of reputation, impairment of his liberty, mental anguish, stigma, etc. It is reasonable to
assume that the legislature could not have contemplated that a mere mechanical act on
the part of SHO should give rise to such consequences.
49. He submitted that the registration of an FIR under Section 154 of Cr.P.C. is an
administrative act of a police officer. In the case of Rai Sahib Ram Jawaya Kapur and
others v. State of Punjab, 1955 (2) SCR 225 : (AIR 1955 SC 549), this Court has
explained what is administrative function and has said that ordinarily the executive
power connotes the residue of Government functions that remain after
legislative/judicial functions are taken away. Every administrative act must be based on
application of mind, scrutiny and verification of the facts. No administrative act can ever
be a mechanical one. This is the requirement of rule of law. Reference was made to
paras 12 and 13 of State (Anti-Corruption Branch), Govt. of NCT of Delhi and another v.
Dr. R.C. Anand and another, 2004 (4) SCC 615 : (AIR 2004 SC 3693 : 2004 AIR SCW
3659).
50. According to Mr. Naphade, these judgments have not considered the impact of
Article 21 on Section 154 of Cr.P.C. After and beginning with Maneka Gandhi v. Union
of India and another, 1978 (1) SCC 248 : (AIR 1978 SC 597), this Court has applied
Article 21 to several provisions relating to criminal law. This Court has also said that the
expression "law" contained in Article 21 necessarily postulates law which
@page-SC1529
is reasonable and not merely a statutory provision irrespective of its reasonableness or
otherwise. In the light of Article 21, provisions of Section 154 of Cr.P.C. must be read
down to mean that before registering an FIR, the Station House Officer must have a
prima facie satisfaction that there is commission of cognizable offence as registration of
an FIR leads to serious consequences for the person named as accused and for this
purpose, the requirement of preliminary enquiry can be spelt out in Section 154 and can
be said to be implicit within the provisions of Section 154 of Cr.P.C. Reliance was
placed on Maneka Gandhi (supra) and S.M.D. Kiran Pasha v. Government of Andhra
Pradesh and others 1990 (1) SCC 328.
51. The fact that Sections 154 (3), 156(3), 190, 202 etc. clearly provide for remedies to
a person aggrieved by refusal on the part of the SHO to register an FIR, clearly show
that the statute contemplates that in certain circumstances the SHO can decline to
register an FIR.
52. To require SHO to register an FIR irrespective of his opinion that the allegations are
absurd or highly improbable, motivated etc. would cause a serious prejudice to the
person named as accused in the complaint and this would violate his rights under
Article 21. This Court has recognized the concept of previolation protection implicit in
Article 21. The said judgments while relying upon the literal interpretation test have not
considered the rule of statutory interpretation that in certain situations the expression
"shall" does not convey mandatory character of the provisions. For example, proviso to
Section 202 (2) has been held using the expression "shall" not to be mandatory but
directory. After all, Section 154 of Cr.P.C. is a part of the procedural law and in respect
of procedural law, the expression "shall" may not always necessarily convey that the
provision is mandatory. Mr. Naphade placed reliance on the following cases - P.T.
Rajan v. T.P.M. Sahir and others, 2003(8) SCC 498 : (AIR 2003 SC 4603 : 2003 AIR
SCW 5396), Shivjee Singh v. Nagendra Tiwary and others, 2010 (7) SCC 578 : (AIR
2010 SC 2261 : 2010 AIR SCW 4064) and Sarbananda Sonowal (II) etc. v. Union of
India, 2007 (1) SCC 174 : (AIR 2007 SC (Supp) 1372 : 2007 AIR SCW 326). The said
judgments have also not considered the rule of purposive interpretation and also that
the statute must be considered as a whole and no provision can be interpreted in
isolation.
53. The non-registration of an FIR does not result in crime going unnoticed or
unpunished. The registration of an FIR is only for the purpose of making the information
about the cognizable offence available to the police and to the judicial authorities at
earliest possible opportunity. The delay in lodging an FIR does not necessarily result in
acquittal of the accused. The delay can always be explained.
54. Mr. Naphade also submitted that this Court has also held that registration of an FIR
is not a condition precedent for initiating investigation into the commission of a
cognizable offence. Section 154, Cr.P.C. clearly imposed a duty on the police officer.
When an information is received, the officer-in-charge of the police station is expected
to reach the place of occurrence as early as possible. It is not necessary for him to take
steps only on the basis of an FIR. It is the duty of the State to protect the life of an
injured as also an endeavour on the part of the responsible police officer to reach the
place of occurrence in his implicit duty and responsibility. This has been held in the case
of Animireddy Venkata Ramana and others v. Public Prosecutor, High Court of Andhra
Pradesh, 2008 (5) SCC 368 : (AIR 2008 SC 1603 : 2008 AIR SCW 1777).
55. Mr. Naphade further submitted that ordinarily the SHO should record an FIR upon
receiving a complaint disclosing the ingredients of a cognizable offence, but in certain
situations he should have the discretion of holding a preliminary enquiry and thereafter if
he is satisfied, register an
@page-SC1530
FIR.
56. The provisions contained in Section 154, Cr.P.C. of 1973 were also there in the
1898, Cr.P.C. and even the earlier one of 1877. The interpretation that was placed by
the High Courts and the Privy Council on these provisions prior to Maneka Gandhi (AIR
1978 SC 597) (supra) rested principally on the words used in the Section de-hors the
other provisions of the Act and also de-hors the impact of Article 21 of the Constitution
on the criminal jurisprudence. In other words, the courts have followed the test of literal
interpretation without considering the impact of Article 21.
57. It is a trite proposition that a person who is named in an FIR as an accused, suffers
social stigma. If an innocent person is falsely implicated, he not only suffers from loss of
reputation but also mental tension and his personal liberty is seriously impaired. After
Maneka Gandhi's case, the proposition that the law which deprives a person of his
personal liberty must be reasonable, both from the stand point of substantive aspect as
well as procedural aspect is now firmly established in our constitutional law. This
warrants a fresh look at Section 154 of Cr.P.C. Section 154, Cr.P.C. must be read in
conformity with the mandate of Article 21. If it is so interpreted, the only conclusion is
that if a Police Officer has doubts about the veracity of the complaint, he can hold
preliminary enquiry before deciding to record or not to record an FIR.
58. It is the mandate of Article 21 which requires a Police Officer to protect a citizen
from baseless allegations. This, however, does not mean that before registering an FIR
the police officer must fully investigate the case. A delicate balance has to be
maintained between the interest of the society and protecting the liberty of an individual.
Therefore, what should be the precise para meters of a preliminary enquiry cannot be
laid down in abstract. The matter must be left open to the discretion of the police officer.
59. A proposition that the moment the complaint discloses ingredients a cognizable
offence is lodged, the police officer must register an FIR without any scrutiny
whatsoever, is an extreme proposition and is contrary to the mandate of Article 21.
Similarly, the extreme point of view is that the police officer must investigate the case
substantially before registering an FIR is also an argument of the other extreme. Both
must be rejected and a middle path must be chosen.
60. Mr. Naphade mentioned about Maneka Gandhi's case (AIR 1978 SC 597) and
observed that the attempt of the Court should be to expand the reach and ambit of the
fundamental rights, rather than to attenuate their meaning and contents by a process of
judicial construction. The immediate impact of registration of an FIR on an innocent
person is loss of reputation, impairment of personal liberty resulting in mental anguish
and, therefore, the act of the police officer in registering an FIR must be informed by
reason and it can be so only when there is a prima facie case against the named
accused.
61. According to Mr. Naphade, the provisions of Article 14 which are an anti-thesis of
arbitrariness and the provisions of Articles 19 and 21 which offer even a previolation
protection require the police officer to see that an innocent person is not exposed to
baseless allegations and, therefore, in appropriate cases he can hold preliminary
enquiry. In Maneka Gandhi's case (AIR 1978 SC 597) this Court has specifically laid
down that in R.C. Cooper's case (AIR 1970 SC 564) it has been held that all
fundamental rights must be read together and that Articles 14, 19 and 21 overlap in their
content and scope and that the expression 'personal liberty' is of the widest amplitude
and covers a variety of rights which go to constitute personal liberty of a citizen.
(Reliance was particularly placed on paras 5,6 and 7 on pages 278-284) : (of SCC) : (at
pp. 604-605 of AIR).
62. Mr. Naphade further argued that this
@page-SC1531
Court has held that in order to give concrete shape to a right under Article 21, this Court
can issue necessary directions in the matter. If directions as regards arrest can be
given, there is no reason why guidelines cannot be framed by this Court as regards
registration or non-registration of an FIR under Section 154, Cr.P.C.
63. Mr. Naphade also submitted that the importance of the need of the police officer's
discretion of holding a preliminary inquiry is well illustrated by the judgment of this Court
in the case of Uma Shankar Sitani v. Commissioner of Police, Delhi and Ors., 1996 (11)
SCC 714 : (1995 AIR SCW 3054). In that case the complaint was lodged by one
Sarvjeet Chauhan against one Uma Shankar relating to alleged cognizable offence.
Uma Shankar was arrested and upon investigation it was found that the complainant
was a fictitious person. Somebody else had filed the false complaint. The residential
address of the fictitious complainant was also fictitious. In the whole process Uma
Shankar went through serious mental turmoil as not only the allegation was found to be
false, but he was arrested by the police and had to undergo humiliation and loss of
reputation. Such incidents can happen and must have happened in scores of cases as
filing of false cases due to personal, political, business rivalry, breakdown of matrimonial
relationship etc. are rampant.
64. Mr. Naphade submitted that Section 498-A of I.P.C. which was meant to be a
measure of protection, turned out to be an instrument of oppression. Judicial notice of
this has been taken by this Court in the case of Preeti Gupta and another v. State of
Jharkhand and another (2010) 7 SCC 667 : (AIR 2010 SC 3363 : 2010 AIR SCW 4975).
In the said case, this Court has referred to rapid increase in filing of complaints which
are not bona fide and are filed with oblique motives. Such false complaints lead to
insurmountable harassment, agony and pain to the accused. This Court has observed
that the allegations of the complainant in such cases should be scrutinized with great
care and circumspection. Is it, therefore, not advisable that before registering an FIR, a
preliminary inquiry at least to verify the identity of the complainant and his residential
address should be carried out. This case illustrates how on a false complaint, a person's
right to life and liberty under Article 21 of the Constitution can be put to serious
jeopardy.
65. This Court in its judgment in Francis C. Mullin v. Administrator, Union Territory of
Delhi, 1981 (1) SCC 608 [paras 4 and 5) : (AIR 1981 SC 746) has held that Article 21
requires that no one shall be deprived of his life and personal liberty except by
procedure established by law and this procedure must be reasonable, fair and just. If
the procedure is not reasonable, fair and just, the Court will immediately spring into
action and run to the rescue of the citizen. From this it can be easily deduced that where
the police officer has a reasonable doubt about the veracity of the complaint and the
motives that prompt the complainant to make the complaint, he can hold a preliminary
inquiry. Holding of preliminary inquiry is the mandate of Article 21 in such cases. If the
police officer mechanically registers the complaint involving serious allegations, even
though he has doubts in the matter, Article 21 would be violated. Therefore, Section 154
must be read in the light of Article 21 and so read preliminary inquiry is implicit in
Section 154. In paras 7 and 8 of the said judgment, this Court has made an unequivocal
declaration of the law that any act which damages or injures or interferes with use of
any limb or faculty of a person, either permanently or even temporarily, would be within
the ambit of Article 21.
66. Not only this, every act which offends against and imperils human dignity, would
constitute deprivation pro tanto of this right to live and it would have to be in accordance
with the reasonable, just and fair procedure established by law which stands the test of
other fundamental rights.
@page-SC1532
A baseless allegation is a violation of human dignity and despite the police officer
having doubts about the allegation, he being required to register an FIR, would be a
clear infringement of Article 21.
67. Mr. Naphade further submitted that it is settled principle of law that no single
provision of a statute can be read and interpreted in isolation. The statute must be read
as a whole. In the present case, the provisions of Sections 41,57, 156, 157, 159, 167,
190, 200 and 202 of Cr.P.C. must be read together. These provisions constitute the
statutory scheme relating to investigation of offences and, therefore, no single provision
can be read in isolation. Both, Sections 41 and 154 deal with cognizable offence.
Section 41 empowers the police to arrest any person without warrant from the
Magistrate if such person is concerned in any cognizable offence or against whom a
reasonable complaint has been made or credible information has been received or
reasonable suspicion exits of such person having been so concerned with the
cognizable offence. Section 41 also specifically refers to a cognizable complaint about
commission of a cognizable offence.
68. The scheme of the Act is that after the police officer records an FIR under Section
154, Cr.P.C., he has to proceed to investigate under Section 156, Cr.P.C. and while
investigating the police officer has power to arrest. What is required to be noted is that
for the purpose of arresting the accused, the police officer must have a reasonable
ground to believe that the accused is involved in the commission of a cognizable
offence. If Sections 41 and 154 are so read together, it is clear that before registering an
FIR under Section 154 the police officer must form an opinion that there is a prima facie
case against the accused. If he does not form such an opinion and still proceeds to
record an FIR, he would be guilty of an arbitrary action. Every public authority exercising
any powers under any statute is under an obligation to exercise that power in a
reasonable manner. This principle is well settled and it forms an integral part of the legal
system in this country.
69. Mr. Naphade submitted that the provisions of Section 154(3) enable any
complainant whose complaint is not registered as an FIR by the SHO to approach the
higher police officer for the purpose of getting his complaint registered as an FIR and in
such case, the higher police officer has all the powers of recording an FIR and directing
investigation into the matter. Apart from this power under Section 36 any police officer
senior in rank to an officer-in-charge of the police station can exercise the same powers
as may be exercised by such officer-in-charge of the police station. Provisions of
Section 154 (3) and Section 36 are clear indication that in an appropriate case a police
officer can either decline to register the FIR or defer its registration. The provisions of
Section 154(3) and Section 36 is a sufficient safeguard against an arbitrary refusal on
the part of a police officer to register the FIR. The very fact that a provision has been
made in the statute for approaching the higher police officer, is an indication of
legislative intent that in appropriate cases, a police officer may decline to register an FIR
and/or defer its registration.
70. In addition to the remedy available to the aggrieved person of approaching higher
police officer, he can also move the concerned Magistrate either under Section 156(3)
for making a complaint under Section 190. If a complaint is lodged, the Magistrate can
examine the complainant and issue process against the accused and try the case
himself and in case triable by Sessions Court, then he will commit the case to Sessions
under Section 209.
71. The Magistrate can also on receipt of a complaint, hold an enquiry or direct the
police to investigate. In addition to the above, the Magistrate also has a power to direct
investigation under Section 159, Cr.P.C. In the case of Mona Panwar v. High Court of
Judicature of Allahabad (2011)
@page-SC1533
3 SCC 496 in paras 17 and 18 on page 503 : (AIR 2011 SC (Cri) 529 : 2011 AIR SCW
1185) this Court has, inter alia, held that if the complaint relating to a cognizable officer
is not registered by the police, then the complainant can go to Magistrate and then the
Magistrate has the option of either passing an order under Section 156(3) or proceeding
under Section 200/202 of the Code.
72. It was also submitted by Mr. Naphade that an order under Section 156(3) of the
Code is in the nature of a pre-emptory reminder or intimation to the police to exercise its
plenary power of investigation under Section 156(1). Such an investigation embraces
the entire continuous process which begins with the collection of evidence under
Section 156 and ends with the vital report either under Section 169 or submission of a
charge-sheet under Section 173 of the Code. A Magistrate can under Section 190 of the
Code before taking cognizance, direct investigation by the police by order under Section
156(3) of the Code.
73. Mr. Naphade also submitted that the very fact that the Legislature has provided
adequate remedies against refusal to register an FIR and hold investigation in
cognizable offences is indicative of legislative intent that the police officer is not bound
to record an FIR merely because the ingredients of cognizable offences are disclosed in
the complaint if he has doubt about the veracity of the complaint.
74. In further support of the proposition that a police officer is not bound to register an
FIR on mere disclosure of existence of ingredients of cognizable offence, it is submitted
that the statute does not contemplate that for the purpose of investigation, recording of
an FIR is a condition precedent. Section 156 empowers the police to do so. Similarly,
Section 157 clearly lays down that if from information received or otherwise an officerin-charge of the police station has reason to suspect the commission of an offence, he
can investigate into the same. In Section 157(1) the expression "from information
received" obviously refers to complaint under Section 154, Cr.P.C. registered as an FIR.
The word "otherwise" in Section 157, Cr.P.C. clearly indicates that recording of an FIR
is not a condition precedent to initiation of investigation. The very fact that the police
have a power of investigation independent of registration of an FIR is a clear pointer to
the legislative intent that a police officer is not bound to register an FIR in each and
every case.
75. Mr. Naphade relied on the case of Apren Joseph alias current Kunjukunju and
others v. State of Kerala, 1973 (3) SCC 114 : (AIR 1973 SC 1) wherein in para 11 this
Court has held that recording of an FIR is not a condition precedent for setting in motion
criminal investigation. In doing so, this Court has approved the observation of Privy
Council made in the case of Khwaja Nazim Ahmad (AIR 1945 PC 18) (supra).
76. Mere recording of an FIR under Section 154, Cr.P.C. is of no consequence unless
the alleged offence is investigated into. For the purpose of investigation after
registration of the FIR, the police officer must have reason to suspect commission of an
offence. Despite registration of the FIR, the police officer may not have a reasonable
ground to suspect that an offence has been committed and in that situation he may
decline to carry out investigation and may come to the conclusion that there is no
sufficient ground for carrying out investigation. If under the proviso (b) to Section 157,
Cr.P.C. the police officer has such discretion of not investigating, then it stands to
reason that registration of an FIR should not result into an empty formality.
77. The registration of an FIR should be effective and it can be effective only if further
investigation is to be carried out and further investigation can be carried out only if the
police officer has reasonable ground to suspect that the offence is committed. If,
therefore, there is no reasonable ground to suspect the commission of cognizable
@page-SC1534
offence, the police officer will not investigate and if that is a situation, then on the same
footing he may decline to register the FIR. This is clearly implicit in the provisions of
Section 154(1). It is, submitted that if the provisions of Section 154 are read with
Sections 41, 57, 156, 157, 159, 167, 190, 200 and 202, Cr.P.C., the only possible
conclusion is that a police officer is not bound to register each and every case.
78. Mr. Naphade placed reliance on State of Maharashtra and others v.
Sarangdharsingh Shivdassingh Chavan and another (2011) 1 SCC 577 : (AIR 2011 SC
(Cri) 339) wherein in paragraphs 29 and 30, this Court has observed as follows:"29. The legal position is well settled that on information being lodged with the police
and if the said information discloses the commission of a cognizable offence, the police
shall record the same in accordance with the provisions contained under Section 154 of
the Criminal Procedure Code. The police officer's power to investigate in case of a
cognizable offence without order of the Magistrate is statutorily recognised under
Section 156 of the Code. Thus the police officer-in-charge of a police station, on the
basis of information received or otherwise, can start investigation if he has reasons to
suspect the commission of any cognizable offence.
30. This is subject to provisos (a) and (b) to Section 157 of the Code which leave
discretion with the police officer-in-charge of police station to consider if the information
is not of a serious nature, he may depute a subordinate officer to investigate and if it
appears to the officer-in-charge that there does not exist sufficient ground, he shall not
investigate. This legal framework is a very vital component of the rule of law in order to
ensure prompt investigation in cognizable cases and to maintain law and order."
79. He submitted that if the police officer is of the opinion that the complaint is not
credible and yet he is required to register the FIR, then he would be justified in not
investigating the case. In such a case the FIR would become a useless lumber and a
dead letter. The police officer would then submit a closure report to the Magistrate. The
Magistrate then would issue notice to the complainant and hear him. If the Magistrate is
of the opinion that there is a case, then he may direct police to investigate.
80. Mr. Naphade submitted that the aforesaid analysis of various provisions of Criminal
Procedure Code clearly bring out that the statutory provisions clearly maintain a balance
between the rights of a complainant and of the Society to have a wrongdoer being
brought to book and the rights of the accused against baseless allegations.
81. The provisions have also to be read in the light of the principle of malicious
prosecution and the fundamental rights guaranteed under Articles 14, 19 and 21. Every
citizen has a right not to be subjected to malicious prosecution and every police officer
has an inbuilt duty under Section 154 to ensure that an innocent person is not falsely
implicated in a criminal case. If despite the fact that the police officer is not prima facie
satisfied as regards commission of a cognizable offence, and proceeds to register an
FIR and carry out investigation and thereby putting the liberty of a citizen in jeopardy, he
would expose himself to the charge of malicious prosecution and against the charge of
malicious prosecution the doctrine of sovereign immunity will not protect him. There is
no law protecting a police officer who takes part in the malicious prosecution.
82. Mr. Naphade also submitted that the word "shall" used in the statute does not
always mean absence of any discretion in the matter.
83. The word "shall" does not necessarily lead to provision being imperative or
mandatory.
84. The use of word "shall" raises a presumption that the particular provision is
@page-SC1535
imperative. But, this presumption may be rebutted by other considerations such as,
object and scope of the enactment and other consequences flowing from such
construction. There are numerous cases where the word "shall" has, therefore, been
construed as merely directory.
85. In the case of Sainik Motors, Jodhpur and others v. State of Rajasthan, AIR 1961
SC 1480, Hidayatullah, J. has held that the word "shall" is ordinarily mandatory, but it is
sometimes not so interpreted if the context of intention otherwise demands.
86. Further, Subba Rao, J. in the case of State of Uttar Pradesh and others v. Babu
Ram Upadhya AIR 1961 SC 751, has observed that when the statute uses the word
"shall" prima facie it is mandatory, but the Court may ascertain the real intention of the
legislature carefully attending to the whole scope of the statute.
87. In the case of State of Madhya Pradesh v. M/s. Azad Bharat Finance Co. and
another AIR 1967 SC 276 it has been held that the word "shall" does not always mean
that the provision is obligatory or mandatory. It depends upon the context in which the
word "shall" occur and the other circumstances.
88. In the case of Shivjee Singh (AIR 2010 SC 2261 : 2010 AIR SCW 4064) (supra) it
has been held that the use of word "shall" in proviso to Section 202 (2) of Cr.P.C. prima
facie is indicative of mandatory character of the provision contained therein. But, a close
and critical analysis thereof along with other provisions show that the same is not
mandatory. Further, it has been observed that by its very nomenclature, Cr.P.C. is a
compendium of law relating to criminal procedure. The provisions contained therein are
required to be interpreted keeping in view the well recognized rule of construction that
procedural prescriptions are meant for doing substantial justice. If violation of procedural
provisions does not result in denial of a fair hearing or causes prejudice to the party, the
same has to be treated as directly notwithstanding the use of the word "shall".
89. In P.T. Rajan (AIR 2003 SC 4603 : 2003 AIR SCW 5396) (supra), this Court has
discussed the principles as to whether a statute is mandatory or directory. The Court
has observed that a statute as is well known must be read in the text and context
thereof. Whether a statute is directory or mandatory would not be dependent on the use
of the word "shall" or "may". Such a question must be posed and answered having
regard to the purpose and object it seeks to achieve. It has further been held that a
provision in a statute which is procedural in nature although employs the word "shall"
may not be held to be mandatory if thereby no prejudice is caused. The analysis of
various provisions of Cr.P.C. clearly shows that no prejudice is caused if police officer
does not register an FIR. The complainant has effective remedies under Sections
154(3), 156, 190, Cr.P.C. etc.
90. Mr. Naphade, the learned senior counsel submitted that it is impossible to put the
provisions of Section 154, Cr.P.C. in any straight jacket formula. However, some
guidelines can be framed as regards registration or non-registration of an FIR.
According to him, some such guidelines are as follows:1. Normally in the ordinary course a police officer should record an FIR, if the complaint
discloses a cognizable offence. However, in exceptional cases where the police officer
has reason to suspect that the complaint is motivated on account of personal or political
rivalry, he may defer recording of the FIR, and take a decision after preliminary enquiry.
2. In case of complaints which are a result of vendetta like complaints under Section
498A, Cr.P.C. (IPC), the police officer should be slow in recording an FIR and he should
record an FIR only if he finds a prima facie case.
3. The police officer may also defer recording
@page-SC1536
of an FIR if he feels that the complainant is acting under a mistaken belief.
4. The police officer may also defer registering an FIR if he finds that the facts stated in
the complaint are complex and complicated, as would be in respect of some offences
having financial contents like criminal breach of trust, cheating etc.
91. The aforesaid are only illustrations and not exhaustive of all conditions which may
warrant deferment of an FIR.
92. The second aspect of the matter is what test should the police officer take in case
he is of the opinion that registration of an FIR should be deferred. He suggested the
following measures :1. The police officer must record the complaint in the Station/General Diary. This will
ensure that there is no scope for manipulation and if subsequently he decides to
register an FIR, the entry in Station/General Diary should be considered as the FIR.
2. He should immediately report the matter to the superior police officer and convey him
his reasons or apprehensions and take his permission for deferring the registration. A
brief note of this should be recorded in the station diary.
3. The police officer should disclose to the complainant that he is deferring registration
of the FIR and call upon him to comply with such requisitions the police officer feels
necessary to satisfy himself about the prima facie credibility of the complaint. The police
officer should record this in the station diary. All this is necessary to avoid any charge as
regard to the delay in recording the FIR. It is a settled law that a mere delay in
registering an FIR is not harmful if there are adequate reasons to explain the delay in
filing an FIR.
93. According to him, in the light of the above discussion in respect of the impact of
Article 21 on statutory provisions, it must be held that Section 154 of Cr.P.C. must be
interpreted in the light of Article 21. The requirement of Article 21 is that the procedure
should be just and fair. If, therefore, the police officer himself has doubts in the matter, it
is imperative that he should have the discretion of holding a preliminary inquiry in the
matter. If he is debarred from holding such a preliminary inquiry, the procedure would
then suffer from the vice of arbitrariness and unreasonableness.
94. Learned counsel appearing for the State of Tamil Nadu adopted the arguments
submitted by Mr. Naphade, the learned senior counsel for Maharashtra and submitted
that ordinarily a police officer has to register an FIR when a cognizable offence is made
out, but in exceptional cases he must have some discretion or latitude of conducting
some kind of preliminary inquiry before recording of the FIR.
95. Learned counsel for the parties have drawn our attention to two sets of cases
decided by this Court expressing totally divergent judicial opinions. We deem it
appropriate to briefly summarise them in the following paragraphs.
96. This Court in the case of Bhajan Lal and others (AIR 1992 SC 604 : 1992 AIR SCW
237) (supra), Ramesh Kumari (AIR 2006 SC 1322 : 2006 AIR SCW 1021) (supra),
Parkash Singh Badal and another v. State of Punjab and others (2007) 1 SCC 1 : (AIR
2007 SC 1274 : 2007 AIR SCW 1415) and Aleque Padamsee and others (AIR 2007 SC
(Supp) 684 : 2007 AIR SCW 4783) (supra) held that if a complaint alleging commission
of cognizable offence is received in the Police Station, then the S.H.O. has no option
but to register an F.I.R. under Section 154, Cr.P.C.
97. On the other hand, this Court in following cases, namely, Rajinder Singh Katoch
(AIR 2008 SC 178 : 2007 AIR SCW 6453) (supra), P. Sirajuddin etc. v. State of Madras
etc., 1970 (1) SCC 595 : (AIR 1971 SC 520), Bhagwant Kishore Joshi (AIR 1964 SC
221) (supra), Sevi and another etc. v. State of Tamil Nadu and another 1981 (Suppl)
SCC 43 : (AIR 1981 SC 1230) have
@page-SC1537
taken contrary view and held that before registering the FIR under Section 154 of
Cr.P.C., it is open to the SHO to hold a preliminary enquiry to ascertain whether there is
a prima facie case of commission of cognizable offence or not.
98. We deem it appropriate to give a brief ratio of these cases.
99. In Bhajan Lal (AIR 1992 SC 604 : 1992 AIR SCW 237) (supra), this Court observed
as under:"It is, therefore, manifestly clear that if any information disclosing a cognizable offence is
laid before an officer-in-charge of a police station satisfying the requirements of Section
154(1) of the Code, the said police officer has no other option except to enter the
substance thereof in the prescribed form, that is to say, to register a case on the basis
of such information."
100. In Ramesh Kumari (AIR 2006 SC 1322 : 2006 AIR SCW 1021) (supra), this Court
observed that the provision of Section 154 of the Code is mandatory and the officer
concerned is duty-bound to register the case on the basis of such an information
disclosing cognizable offence.
101. In Parkash Singh Badal (AIR 2007 SC 1274 : 2007 AIR SCW 1415) (supra), this
Court observed as under:"It is, therefore, manifestly clear that if any information disclosing a cognizable offence is
laid before an officer-in-charge of a police station satisfying the requirements of Section
154(1) of the Code, the said police officer has no other option except to enter the
substance thereof in the prescribed form, that is to say, to register a case on the basis
of such information."
102. In Aleque Padamsee (AIR 2007 SC (Supp) 684 : 2007 AIR SCW 4783) (supra),
this Court observed as under :"The correct position in law, therefore, is that the police officials ought to register the FIR
whenever facts brought to their notice show that cognizable offence has been made
out."
103. There is another set of cases where this Court has taken contrary view.
104. In Rajinder Singh Katoch (AIR 2008 SC 178 : 2007 AIR SCW 6453) (supra), this
Court observed as under:"We are not oblivious to the decision of this Court in Ramesh Kumari v. State (NCT of
Delhi) wherein such a statutory duty has been found in the police officer. But, as
indicated hereinbefore, in an appropriate case, the police officers also have a duty to
make a preliminary enquiry so as to find out as to whether allegations made had any
substance or not."
105. In Bhagwant Kishore Joshi (AIR 1964 SC 221) (supra), Mudholkar, J. in his
concurring judgment has observed as under:"I am of opinion that it is open to a Police Officer to make preliminary enquiries before
registering an offence and making a full scale investigation into it."
106. In P. Sirajuddin etc. (AIR 1971 SC 520) (supra), this Court quoted the observations
of the High Court as under:"(a) "substantial information and evidence had been gathered before the so-called first
information report was registered"."
107. In Sevi and another (AIR 1981 SC 1230) (supra), this Court observed as under:"If he was not satisfied with the information given by PW 10 that any cognizable offence
had been committed he was quite right in making an entry in the general diary and
proceeding to the village to verify the information without registering any FIR."
108. It is quite evident from the ratio laid down in the afore-mentioned cases that
different Benches of this Court have taken divergent views in different cases. In this
case also after this Court's notice, the Union of
@page-SC1538
India, the States and the Union Territories have also taken or expressed divergent
views about the interpretation of Section 154, Cr.P.C.
109. We have carefully analysed various judgments delivered by this Court in the last
several decades. We clearly discern divergent judicial opinions of this Court on the main
issue whether under Section 154, Cr.P.C., a police officer is bound to register an FIR
when a cognizable offence is made out or he (police officer) has an option, discretion or
latitude of conducting some kind of preliminary enquiry before registering the FIR.
110. Learned counsel appearing for the Union of India and different States have
expressed totally divergent views even before this Court. This Court also carved out a
special category in the case of medical doctors in the afore-mentioned cases of Santosh
Kumar (AIR 2006 SC 2648 : 2006 AIR SCW 3608) (supra) and Dr. Suresh Gupta (AIR
2004 SC 4091 : 2004 AIR SCW 4442) (supra) where preliminary enquiry had been
postulated before registering an FIR.
111. Some counsel also submitted that the CBI Manual also envisages some kind of
preliminary enquiry before registering the FIR. The issue which has arisen for
consideration in these cases is of great public importance.
112. In view of the divergent opinions in a large number of cases decided by this Court,
it has become extremely important to have a clear enunciation of law and adjudication
by a larger Bench of this Court for the benefit of all concerned - the courts, the
investigating agencies and the citizens.
113. Consequently, we request Hon'ble the Chief Justice to refer these matters to a
Constitution Bench of at least five Judges of this Court for an authoritative judgment.
Order accordingly.
AIR 2009 SUPREME COURT 187 "Nagar Palika Nigam v. Krishi Upaj Mandi Samiti"
(From : Madhya Pradesh)*
Coram : 3
Dr. A. PASAYAT, P. SATHASIVAM AND AFTAB ALAM, JJ.
Civil Appeal No. 1921 of 2006, D/- 14 -10 -2008.
Nagar Palika Nigam v. Krishi Upaj Mandi Samiti and Ors.
(A) INTERPRETATION OF STATUTES - Interpretation of Statutes - Proviso - Function
of - Proviso carves out an exception.
The proper function of a proviso is to except and to deal with a case which would
otherwise fall within the general language of the main enactment and its effect is
confined to that case. It is a qualification of the preceding enactment which is expressed
in terms too general to be quite accurate. As a general rule, a proviso is added to an
enactment to qualify or create an exception to what is in the enactment and ordinarily, a
proviso is not interpreted as stating a general rule. Normally, a proviso does not travel
beyond the provision to which it is a proviso. It carves out an exception to the main
provision to which it has been enacted as a proviso and to no other.
(Para 8)
(B) INTERPRETATION OF STATUTES - Interpretation of Statutes - Court cannot read
words in Statute.
Court cannot read any thing into a statutory provision which is plain and unambiguous.
A statute is an edict of the Legislature. The language employed in a statute is the
determinative factor of legislative intent. A casus omissus cannot be supplied by the
Court except in the case of clear necessity and when reason for it is found in the four
corners of the statute itself but at the same time a casus omissus should not be readily
inferred and for that purpose all the parts of and statute or section must be construed
together and every clause of a section should be construed with reference to the
context and other clauses thereof so that the construction to be put on a particular
provision makes a consistent enactment of the whole statute. This would be more so if
literal construction of a particular clause leads to maifestly absurd or anomalous results
which could not have been intended by the Legislature.
(Paras 15, 20)
@page-SC188
(C) Constitution of India, Art.145 - Supreme Court Rules (1966), O.7, R.2 - SUPREME
COURT - LARGER BENCH - AGRICULTURAL PRODUCE - LEGISLATIVE
COMPETENCE - Reference to larger Bench - Question as to legislative competence of
State to enact S.9(3) Proviso of 1972 Act - Neither raised before High Court nor before
Supreme Court - Reference held need not be answered.
M.P. Krishi Upaj Mandi Adhiniyam (24 of 1973), S.9(3).
Cases Referred :
(Para 24)
Chronological Paras
2004 AIR SCW 4396 : AIR 2004 SC 3946 : 2004 Cri LJ 3860 23
2003 AIR SCW 2931 : AIR 2003 SC 4006 : 2003 Lab IC 2131 (Ref.)
2000 AIR SCW 1297 : AIR 2000 SC 1578 (Ref.)
19
1998 AIR SCW 1323 : AIR 1998 SC 1429 (Ref.)
16
14
1997 AIR SCW 4023 : AIR 1998 SC 74 (Ref.) 16
1994 AIR SCW 3297
8
1991 AIR SCW 1246 : AIR 1991 SC 1406 : 1991 Lab IC 1227 (Rel. on)
1991 AIR SCW 1467 : AIR 1991 SC 1538 (Rel. on)
AIR 1990 SC 981 (Ref.)
17
(1978) 1 All ER 948 (HL)
16
AIR 1977 SC 842 (Ref.)
18
1966 AC 557 20
(1966) 1 QB 878
20
AIR 1965 SC 1728 (Rel. on)
AIR 1962 SC 847 (Ref.)
8
16
AIR 1961 SC 1596 (Rel. on)
8
1940 AC 206 13
(1922) 1 AC 256
10
1910 AC 445 (HL) 16
1897 AC 647 (HL) 8
(1880) 4 QBD 170 (Rel. on)
8
8
8
1846 (6) Moore PC 1
16
218 FR 547 17
25 QBD 285 12
11 CB 378
22
11 Moore PC 345
21
9 B and C 836
11
6 HL Cas 61 22
1 TR 52
21H.K. Puri, for Appellant; S.K. Dubey, Sr. Advocate, Mrs. Nandita Dubey,
Vikas Upadhyay, Yogesh Tiwari and B.S. Banthia, with him for Respondents.
*W.P. No. 251 of 1995 and L. P. A. No. 327 of 1999, D/-29-10-1998 and D/-14-10-2004
(M.P.) (Indore Bench)
Judgement
Dr. ARIJIT PASAYAT, J. :- A Bench of two learned Judges being of the view that one of
the questions which is interlinked with the interpretation of Section 9(3) of Madhya
Pradesh Krishi Upaj Mandi Adhiniyam, 1972 (in short the 'Adhiniyam') would be whether
having regard to the provisions contained in Part IXA of the Constitution of India, 1950
(in short the 'Constitution') the Legislature of the State of M.P. had the requisite
legislative competence therefor. Respondent No. 1 filed a writ petition before the
Madhya Pradesh High Court under Article 226 of the Constitution with basically two
prayers. They are as under :
"(1) The respondent No. 1-Municipal Corporation, Ratlam has no jurisdiction or right to
claim the property tax from the petitioner for the building and the superstructure
constructed in the Market Yard within the area of Municipal Corporation, Ratlam.
(2) That the amount of Rs. 70,000/-which has been deposited by the petitioner with
respondent No. 1 pursuant to the notice and auction proceedings initiated against the
petitioner should be directed to be refunded to the petitioner. Interest on the said
amount is also being claimed."
2. With reference to Section 9(3) of the Adhiniyam it was submitted that exemption had
been provided on the property on which no property tax could be levied even if the
same falls within the area of Municipal Corporation, Municipal Council, Notified Area,
Gram Panchayat or a Special Area Development Authority. Learned Single Judge
accepted the first prayer, but permitted the respondent-writ petitioner to avail such
remedy as is available by filing a civil suit in respect of second prayer.
3. Review petition was filed by the present appellant which was dismissed. A Letters
Patent Appeal was also filed, which was dismissed on the ground that the same was not
maintainable against an order passed in the review petition. The appeal was also
without merit.
4. The basic stand in the appeal was whether the Corporation had jurisdiction and
authority to assess and recover the property tax from respondent No. 1 for the buildings,
superstructure constructed in the market yard within the area of Municipal Corporation,
Ratlam.
5. During the course of hearing of the appeal, learned counsel for the appellant fairly
accepted that there was no challenge to the proviso appended to subjection (3) of
Section and of the Adhiniyam. It is also fairly accepted that the proviso casts out an
exception.
@page-SC189
6. Learned counsel for the respondents on the other hand submitted that in the absence
of a challenge to the legality of the proviso, there is no question of adjudicating the issue
which the reference Bench has considered to be of importance.
7. Section 9(3) of the Adhiniyam so far as relevant reads as under :
"(3) Nothing contained in the Madhya Pradesh Land Revenue Code, 1959 (No. 20 of
1959), and rules made thereunder insofar as they relate to diversion of land, revision of
land revenue consequent on the change in the use of land from agriculture to any other
purpose and other matters incidental thereto shall apply to land acquired by the market
committee under sub-section (1) or acquired by transfer, purchase gift or otherwise and
use for the purpose of establishment of a market yard or a sub-market yard :
Provided that the premises used for market yard, sub-market yard or for the purpose of
the Board shall not be deemed to be included in the limits of the Municipal Corporation,
Municipal Council, Notified Area, Gram Panchayat or a Special Area Development
Authority, as the case may be."
8
. The normal function of a proviso is to except something out of the enactment or to
qualify something enacted therein which but for the proviso would be within the purview
of the enactment. As was stated in Mullins v. Treasurer of Survey [1880 (5) QBD 170],
(referred to in Shah Bhojraj Kuverji Oil Mills and Ginning Factory v. Subhash Chandra
Yograj Sinha (AIR 1961 SC 1596) and Calcutta Tramways Co. Ltd. v. Corporation of
Calcutta (AIR 1965 SC 1728); when one finds a proviso to a section the natural
presumption is that, but for the proviso, the enacting part of the section would have
included the subject-matter of the proviso. The proper function of a proviso is to except
and to deal with a case which would otherwise fall within the general language of the
main enactment and its effect is confined to that case. It is a qualification of the
preceding enactment which is expressed in terms too general to be quite accurate. As a
general rule, a proviso is added to an enactment to qualify or create an exception to
what is in the enactment and ordinarily, a proviso is not interpreted as stating a general
rule. "If the language of the enacting part of the statute does not contain the provisions
which are said to occur in it you cannot derive these provisions by implication from a
proviso." Said Lord Watson in West Derby Union v. Metropolitan Life Assurance Co.
(1897 AC 647) (HL). Normally, a proviso does not travel beyond the provision to which it
is a proviso. It carves out an exception to the main provision to which it has been
enacted as a proviso and to no other. (See A. N. Sehgal and Ors. v. Raje Ram
Sheoram and Ors. (AIR 1991 SC 1406), Tribhovandas Haribhai Tamboli v. Gujarat
Revenue Tribunal and Ors. (AIR 1991 SC 1538) and Kerala State Housing Board and
Ors. v. Ramapriya Hotels (P) Ltd. and Ors. (1994 (5) SCC 672).
1991 AIR SCW
1246
1991 AIR SCW 1467
1994 AIR SCW 3297
9. "This word (proviso) hath divers operations. Sometime it worketh a qualification or
limitation; sometime a condition; and sometime a covenant" (Coke upon Littleton 18th
Edition, 146)
10. "If in a deed an earlier clause is followed by a later clause which destroys altogether
the obligation created by the earlier clause, the later clause is to be rejected as
repugnant, and the earlier clause prevails . . . . But if the later clause does not destroy
but only qualifies the earlier, then the two are to be read together and effect is to be
given to the intention of the parties as disclosed by the deed as a whole" (per Lord
Wrenbury in Forbes v. Git [1922] 1 A.C. 256).
11. A statutory proviso "is something engrafted on a preceding enactment" (R. v.
Taunton, St. James, 9 B. and C. 836).
12. "The ordinary and proper function of a proviso coming after a general enactment is
to limit that general enactment in certain instances" (per Lord Esher in Re Barker, 25
Q.B.D. 285).
13. A proviso to a section cannot be used to import into the enacting part something
which is not there, but where the enacting part is susceptible to several possible
meanings it may be controlled by the proviso (See Jennings v. Kelly [1940] A.C. 206).
14
. The above position was noted in Ali M.K. and Ors. v. State of Kerala and Ors. (2003
(4) SCALE 197).
2003 AIR SCW 2931
15. It is well settled principle in law that the Court cannot read any thing into a statutory
provision which is plain and unambiguous.
@page-SC190
A statute is an edict of the Legislature. The language employed in a statute is the
determinative factor of legislative intent.
16
. Words and phrases are symbols that stimulate mental references to referents. The
object of interpreting a statute is to ascertain the intention of the Legislature enacting it.
(See Institute of Chartered Accountants of India v. M/s. Price Waterhouse and Anr. (AIR
1998 SC 74)) The intention of the Legislature is primarily to be gathered from the
language used, which means that attention should be paid to what has been said as
also to what has not been said. As a consequence, a construction which requires for its
support, addition or substitution of words or which results in rejection of words as
meaningless has to be avoided. As observed in Crawford v. Spooner (1846 (6) Moore
PC 1), Courts, cannot aid the Legislatures' defective phrasing of an Act, we cannot add
or mend, and by construction make up deficiencies which are left there. (See The State
of Gujarat and Ors. v. Dilipbhai Nathjibhai Patel and Anr. (JT 1998 (2) SC 253)). It is
contrary to all rules of construction to read words into an Act unless it is absolutely
necessary to do so. (See Stock v. Frank Jones (Tiptan) Ltd. (1978) 1 All ER 948 (HL)).
Rules of interpretation do not permit Courts to do so, unless the provision as it stands is
meaningless or of doubtful meaning. Courts are not entitled to read words into an Act of
Parliament unless clear reason for it is to be found within the four corners of the Act
itself. (Per Lord Loreburn L.C. in Vickers Sons and Maxim Ltd. v. Evans (1910) AC 445
(HL), quoted in Jamma Masjid, Mercara v. Kodimaniandra Deviah and Ors. (AIR 1962
SC 847)).
1997 AIR SCW 4023
1998 AIR SCW 1323
17. The question is not what may be supposed and has been intended but what has
been said. "Statutes should be construed not as theorems of Euclid". Judge Learned
Hand said, "but words must be construed with some imagination of the purposes which
lie behind them". (See Lenigh Valley Coal Co. v. Yensavage 218 FR 547). The view
was reiterated in Union of India and Ors. v. Filip Tiago De Gama of Vedem Vasco De
Gama (AIR 1990 SC 981).
18. In Dr. R. Venkatchalam and Ors. etc. v. Dy. Transport Commissioner and Ors. etc.
(AIR 1977 SC 842), it was observed that Courts must avoid the danger of a priori
determination of the meaning of a provision based on their own pre-conceived notions
of ideological structure or scheme into which the provision to be interpreted is
somewhat fitted. They are not entitled to usurp legislative function under the disguise of
interpretation.
19
. While interpreting a provision the Court only interprets the law and cannot legislate it. If
a provision of law is misused and subjected to the abuse of process of law, it is for the
legislature to amend, modify or repeal it, if deemed necessary. (See Commissioner of
Sales Tax, M.P. v. Popular Trading Company, Ujjain (2000 (5) SCC 515). The
legislative casus omissus cannot be supplied by judicial interpretative process. 2000
AIR SCW 1297
20. Two principles of construction - one relating to casus omissus and the other in
regard to reading the statute as a whole - appear to be well settled. Under the first
principle a casus omissus cannot be supplied by the Court except in the case of clear
necessity and when reason for it is found in the four corners of the statute itself but at
the same time a casus omissus should not be readily inferred and for that purpose all
the parts of a statute or section must be construed together and every clause of a
section should be construed with reference to the context and other clauses thereof so
that the construction to be put on a particular provision makes a consistent enactment of
the whole statute. This would be more so if literal construction of a particular clause
leads to manifestly absurd or anomalous results which could not have been intended by
the Legislature. "An intention to produce an unreasonable result", said Danackwerts,
L.J. in Artemiou v. Procopiou (1966 1 QB 878), "is not to be imputed to a statute if there
is some other construction available". Where to apply words literally would "defeat the
obvious intention of the legislature and produce a wholly unreasonable result" we must
"do some violence to the words" and so achieve that obvious" intention and produce a
rational construction. (Per Lord Reid in Luke v. IRC (1966 AC 557) where at p. 577 he
also observed : "this is not a new problem, though our standard of drafting is such that it
rarely emerges".
21. It is then true that, "when the words of a law extend not to an inconvenience rarely
happening, but due to those which
@page-SC191
often happen, it is good reason not to strain the words further than they reach, by saying
it is casus omissus, and that the law intended quae frequentius accidunt." "But," on the
other hand, "it is no reason, when the words of a law do enough extend to an
inconvenience seldom happening, that they should not extend to it as well as if it
happened more frequently, because it happens but seldom" (See Fenton v. Hampton 11
Moore, P.C. 345). A casus omissus ought not to be created by interpretation, save in
some case of strong necessity. Where, however, a casus omissus does really occur,
either through the inadvertence of the legislature, or on the principle quod semel aut bis
existit proetereunt legislators, the rule is that the particular case, thus left unprovided
for, must be disposed of according to the law as it existed before such statute - Casus
omissus et oblivioni datus dispositioni communis juris relinquitur; "a casus omissus,"
observed Buller, J. in Jones v. Smart (1 T.R. 52), "can in no case be supplied by a court
of law, for that would be to make laws."
22. The golden rule for construing wills, statutes, and, in fact, all written instruments has
been thus stated: The grammatical and ordinary sense of the words is to be adhered to
unless that would lead to some absurdity or some repugnance or inconsistency with the
rest of the instrument, in which case the grammatical and ordinary sense of the words
may be modified, so as to avoid that absurdity and inconsistency, but no further" (See
Grey v. Pearson 6 HL Cas 61). The latter part of this "golden rule" must, however, be
applied with much caution, "if," remarked Jetvis, C.J., "the precise words used are plain
and unambiguous in our judgment, we are bound to construe them in their ordinary
sense, even though it lead, in our view of the case, to an absurdity or manifest injustice.
Words may be modified or varied where their import is doubtful or obscure. But we
assume the functions' of legislators when we depart from the ordinary meaning of the
precise words used, merely because we see, or fancy we see, an absurdity or manifest
injustice from an adherence to their literal meaning" (See Abley v. Dale 11, C.B. 378).
23. At this juncture, it would be necessary to take note of a maxim "Ad ea quae
frequentius accidunt jura adaptantur" (The laws are adapted to those cases which more
frequently occur).
The above position was highlighted in Maulavi Hussein Haji Abraham Umarji v. State of
Gujarat (2004 (6) SCC 672).
2004 AIR SCW 4396
24. Since there was no challenge at any point of time by the appellant to the proviso to
sub-section (3) of Section 9 on the alleged ground of lack of legislative competence,
obviously the High Court could not have dealt with that issue. Till now also, no such
challenge has been made by the appellant. That being so, we find no scope for
interference with the order passed by the High Court. In the circumstances indicated
above, there is no need to answer the reference made. If and when challenge is made
to the legislative competence to enact proviso to sub-Section (3) of Section 9, it goes
without saying, the same shall be considered in its proper perspective and in
accordance with law.
25. The appeal is disposed of without any order as to costs.
Order accordingly.
AIR 2008 SUPREME COURT 34 "Fruit Commission Agents Association v.
Government of Andhra Pradesh"
(From : Andhra Pradesh)*
Coram : 2
A. K. MATHUR AND MARKANDEY KATJU, JJ.
Civil Appeal Nos. 2426-2428 of 2000, D/- 20 -9 -2007.
Fruit Commission Agents Association and Ors. v. Government of Andhra Pradesh and
Ors.
A.P. Agricultural Produce and Live Stock Markets Act (16 of 1966), S.7 - Constitution of
India, Art.226, Art.162, Art.50 - AGRICULTURAL PRODUCE - WRITS - STATE
LEGISLATURE - DIRECTIVE PRINCIPLES - Lease of shops by market committee Fixation of Rent - Administrative function - Court would not sit in appeal over it Montesquieu's theory of separation of powers broadly applies in India.
(Paras
14,
15)
Cases Referred :
Chronological Paras
2007 AIR SCW 5480 (Rel. on)
15
1994 AIR SCW 3344 : AIR 1996 SC 11 14M. N. Rao and I. C. Narayana, Sr.
Advocates, T. N. Rao, Ms. Manjeet Kirpal, Paramjeet and D. Mahesh Babu, with them
for the Appellants; S. Sundarvardan, Sr. Advocate, B. Sridhar, K. Ram Kumar, Mrs. D.
Bharathi Reddy and Debojit Borkakati, with him for the Respondents.
* W. P. No. 2820 of 1992, D/- 17-2-1997 and W. P. Rev. Misc. P. Nos. 9554 and 9555
of 1997, D/- 29-4-1999 (A.P.)
Judgement
1. JUDGMENT :- Heard learned counsels for the parties.
2. These appeals under Article 136 of the Constitution have been filed against the
impugned judgment of the Andhra Pradesh High Court dated 17.2.1997 in W.P.
No.2820 of 1992 which has followed the decision of the High Court dated 17.2.1997 in
W.P. No.2806 of 1992.
3. We have carefully perused the decision of the High Court in W.P. No.2806 of 1992
and find no infirmity therein.
4. The facts of the case are that the wholesale business in fruits was located at
Jambagh area in Hyderabad city. Because of its location on either side of the road it
gave rise to a lot of traffic problems, and there were no facilities to the sellers and
purchasers. Hence to ease the growing traffic problems and provide better marketing
facilities the Agricultural Market Committee acquired 22 acres of spacious land at
Gaddiannaram on the outskirts of Hyderabad city at a cost of Rs.3.5 crores in 1985 for
shifting of the wholesale market there. It is alleged by the respondents that the typedesign and proposed construction of shop-cum-godowns (sheds) was taken up only
after consultation with the representatives of the Fruit Commission Agents who were
doing business in Jambagh area, and shops were constructed accordingly.
5. A procedure was formulated duly constituting a sub-committee for allotment of shops,
and the sub-committee invited the representatives of the Fruit Commission Agents, and
after consultation with them the shop-cum-godowns were allotted on lease for eleven
months based on the quantum of business turnover of each individual subject to
payment of monthly rent as fixed by the Agricultural Market Committee, Hyderabad.
6. On allotment of shop-cum-godowns the Commission agents have shifted their
wholesale business to the Fruit Market at Gaddiannaram. It is stated that the Market
Committee has constructed shop-cum-godowns on semi-permanent basis, the height of
each shed wall being 14' with brick masonry wall in cement mortar, well fabricated steel
tubular trusses covered by CGI sheets.
7. The appellants have alleged that the sheds are not pucca constructions and are not
permanent in nature, but this has been denied by the respondents. It is not possible for
this Court to adjudicate on this issue, and there is no discussion on this question in the
impugned judgment of the High Court. Hence it is evident that this point was not
pressed before the High Court.
8. The dispute in this case is about the rent. The rent was fixed by the Market
Committee taking into consideration the view expressed by the Fruit Commission
Agents, and the Government vide G.O. Rt. No. 589
@page-SC35
Food and Agriculture Department dated 6.4.1987 approved of the rent. The Market
Committee reviewed the rent after two years on the recommendation of the Executive
Engineer of the Market Committee.
9. The respondents have alleged that they have spent Rs.3.50 crores for purchase of
the land, and have provided various amenities and facilities to the traders e.g. bank
building, ryot rest house, open auction platforms, laying of cement roads in the market
yard incurring expenditure of Rs.3 crores etc. apart from spending Rs.2 lacs every
month for upkeep of the market yard. Water and electric supply, drainage and sanitation
arrangements have also been made there.
10. It may be mentioned that the appellant Fruit Commission Agents Association had
also filed W.P. No.10026 of 1992 in the High Court praying for a direction to the
respondents to construct a pucca permanent market complex and a learned Single
Judge by order dated 4.12.1992 directed the Market Committee to construct permanent
sheds and hand them over to the traders within six months. Aggrieved, appeals were
filed being W.A. No.342 of 1993 and 172 of 1993 which were disposed of with a
direction to make certain improvements. It is alleged by the respondents that
accordingly cement concrete was laid in between the two platforms, and other
improvements were made. It is alleged that if the present sheds are converted into
R.C.C. structures it will involve a huge further cost. It is alleged that the present shopscum-godowns were constructed by the Market Committee in 1986 after consultation
with the appellant association. Concessional rent was initially charged, and when the
rent was revised W.P. Nos.2806 of 1992, 2820 of 1992 and 3565 of 1992 were filed, in
which the impugned judgment was passed.
11. It is alleged by the respondents that they have already spent Rs.6.50 crores for this
purpose (Rs.3 crores for the land, and Rs.3.5 crores for the constructions). Two big size
platforms for auction of the fruits have been built in the market yard at a cost of Rs.62
lacs. Apart from that, one electronic weigh bridge and one cold storage plant with
capacity 3000 M.T. have been provided there. The Market Committee has constructed
RCC platforms for conduct of auctions, and has provided for free electricity, garbage
disposal etc. Rs.1.75 lac is spent every month for garbage disposal.
12. It is alleged that if pucca shops have to be built by the Market Committee it will entail
further expenditure of Rs.3.70 crores for only 51 shops-cum-godowns.
13. On the facts and circumstances of this case, we find there is no merit in these
appeals. In the judgment in W.P. No.2806 of 1992 which has been followed in the
impugned judgment in W.P. No.2820 of 1992 of 17.2.1997, it has been clearly
mentioned that various factors were taken into consideration by the Market Committee
before fixing the revised rent.
14. Fixation of rent is an administrative function and the court cannot sit as a Court of
Appeal over administrative decisions vide Tata Cellular vs. Union of India AIR 1996 SC
11. Hence the view taken by the High Court is correct. 1994 AIR SCW 3344
15. As we have held in S.C. Chandra and Ors. vs. State of Jharkhand and Ors. JT 2007
(10) 4 SC 272, the judiciary should exercise restraint and should not ordinarily encroach
into the legislative or executive domain. In our opinion fixing of the rent is an executive
function and hence the judiciary cannot interfere with the same except on Wednesbury
principles. There is broad separation of powers under the Constitution and ordinarily
one organ of the State should not encroach into the domain of another. Montesquieu's
theory of separation of powers (XIth Chapter of his book 'The Spirit of Laws') broadly
applies in India too. 2007 AIR SCW 5480
16. In the facts and circumstances of this case, we dismiss these appeals but with the
request to the Market Committee to consider any genuine grievances of the appellant
expeditiously. No costs.
Appeal dismissed.
AIR 2008 SUPREME COURT 48 "Dhampur Sugar Mills Ltd., M/s. v. State of U. P."
(From : 2005 (5) All WC 5089)
Coram : 2
C. K. THAKKER AND ALTAMAS KABIR, JJ.
Civil Appeal No. 4466 of 2007 (arising out of SLP (Civ.) No. 4137 of 2005), D/- 24 -9 2007.
M/s. Dhampur Sugar Mills Ltd. v. State of U.P. and Ors.
(A) Constitution of India, Art.226 - U.P. Sheera Niyantran Adhiniyam (24 of 1964), S.9 WRITS - APPEAL - POLICY DECISION - Alternative remedy - Petition challenging
Govt. order directing Sugar Mills to supply 20% of molasses to manufacturer of country
liquor - Appeal provided under Act - Would be an empty formality - Being against policy
decision of Govt. - Writ petition is maintainable. (Para 16)
(B) U.P. Sheera Niyantran Adhiniyam (24 of 1964), S.14, S.22 - U.P. Sheera Niyantran
Niyamavali (1974), R.14 - AGRICULTURAL PRODUCE - IMPORT AND EXPORT Sugar Mill - Compulsory supply of molasses to country liquor manufacturers - Order
dated 9-6-2004, Cl. (3) - Makes supply compulsory only in case sugar mill has "balance
stock" available.
2005 (5) All WC 5089, Reversed. (Paras 20, 46)
(C) U.P. Sheera Niyantran Adhiniyam (24 of 1964), S.3, S.22 - U.P. Molasses Advisory
Committee Rules (1965), R.3 - INTERPRETATION OF STATUTES - Advisory
Committee - Constitution of - Mandatory on Govt. - Use of word 'may' in S. 3 - Cannot
be construed as directory.
Interpretation of Statutes - Word "may" - Connotation.
The Govt. ought to constitute an "advisory committee" as provided under Act. From the
mere use of expression 'may' in S. 3 it cannot be said that the provision is directory.
Mere use of word 'may' or 'shall' is not conclusive. The question whether a particular
provision of a statute is directory or mandatory cannot be resolved by laying down any
general rule of universal application. Such controversy has to be decided by
ascertaining the intention of the Legislature and not by looking at the language in which
the provision is clothed. And for finding out the legislative intent, the Court must
examine the scheme of the Act, purpose and object underlying the provision,
consequences likely to ensue or inconvenience likely to result if the provision is read
one way or the other and many more consideration relevant to the issue. (Para 29)
Considering the legislative scheme as also Rules and particularly Rules relating to
constitution of Committee the investment of power in the State Government is not
merely enabling or discretionary. It is obligatory on the Government to constitute a
Committee to carry out the purpose and object of the Act. The Committee has to
perform an important role of advising the State Government "on matters relating to the
control of storage, preservation, gradation, price, supply and disposal of molasses". The
constitution of the Committee, as envisaged by Rule 3 of Rules clearly shows the
representation of various groups and interests likely to be affected. Rule 11 requires the
Chairman (Controller of Molasses) to "give due consideration of the resolutions passed
by the Committee and forward it to the State
@page-SC49
Government for orders together with a copy of the proceedings and his
recommendations". It is not open to the State Government to ignore this salutary
provision taking specious plea that the provision relating to constitution of Committee is
enabling, directory or discretionary and State, therefore, is not obliged to constitute such
Committee. (Para 45)
Cases Referred :
Chronological Paras
1998 AIR SCW 2985 : AIR 1998 SC 3076 : 1998 All LJ 2239 14, 15
1995 AIR SCW 313 7, 9
AIR 1980 SC 1622 : 1980 Cri LJ 1075
41
AIR 1978 SC 955 (Rel on) (Pt-C) 37
(1968) AC 997 : (1968)1 All ER 694 : (1968)2 WLR 924 (HL) 36
AIR 1952 SC 16
39
AIR 1923 PC 138 (Rel on) (Pt C) 38
(1911)2 QB 1311
37
(1980) 44 Ch D 262 : 59 LJ Ch 661
(1889) 60 LT 963
31
37
(1880) 5 AC 214 : 49 LJ QB 577 : (1874-80) All ER (Rep) 43 (HL) 32,
44Dushyant
Dave, Sr. Advocate, Rajesh Kumar and Bharat Singh, for Appellants; Dinesh Dwivedi,
Sr. Advocate, Raj Kumar Gupta, Rajeev Dubey and Kamlendra Mishra, for
Respondents.
Judgement
C. K. THAKKER, J. :- Leave granted.
2. The present appeal is directed against the judgment and final order passed by the
Division Bench of the High Court of Judicature at Allahabad dated October 29, 2004 in
Civil Miscellaneous Writ Petition No. 1369 of 2004. By the said order, the High Court
dismissed the writ petition filed by the writ petitioner-appellant herein.
3. Facts in nutshell giving rise to the writ petition as well as present appeal may now be
stated.
4. The appellant-M/s Dhampur Sugar Mills Ltd. ('Company' for short) is a Public Limited
Company incorporated under the Companies Act, 1956 having its registered office at
Dhampur (Bijnor). The appellant has sugar mill in the State of Uttar Pradesh and has
also a distillery. The distillery manufactures ethyl alcohol, used for blending of petrol,
manufacture of chemicals and rectified spirit for medicines. It is also having a similar
business at Asmouli, District Moradabad, Mansurpur, District Muzaffarnagar and
Rozagaon, District Barabanki The writ petitioner approached the High Court by invoking
Article 226 of the Constitution against the respondents for issuance of appropriate writ,
direction or order quashing certain Government Orders said to have been passed by the
Authorities under the Uttar Pradesh Sheera Niyantran Adhiniyam, 1964 [Act XXIV of
1964] (hereinafter referred to as the Act) directing the writ-petitioner to supply 20% of
the molasses produced by the sugar mills for manufacturing country made liquor by
distilleries for the financial years 2003-04 and 2004-05. The writ petitioner also
challenged consequential action of issuance of show cause notices as to why it should
not be prosecuted for committing offences punishable under the Act since it has not
complied with the orders issued by the Authorities and has not supplied 20% molasses
for manufacturing country liquor. The main challenge of the writ petitioner was that
though the Company was producing molasses, the entire production was required by
the Company itself which was used for captive consumption and even that was not
sufficient. The Company had, therefore, obtained permission from the Government for
import of molasses from other States as also other Countries. Since the writ petitioner
did not have balance or extra stock of molasses for being supplied to distilleries for
manufacturing country-made liquor, the Authorities could not compel the writ petitioner
to supply molasses as directed in various Government Orders and Letters. Such action
was improper, illegal, arbitrary and unreasonable, inconsistent with the provisions of the
Act as also violative of Articles 14 and 19(1)(g) of the Constitution. The action was also
against public policy reflected in Article 47 of the Constitution. It was contended that
since the above directives could not have been issued by the Authorities, issuance of
show cause notices as to why the writ petitioner should not be prosecuted also were not
legal and the prosecution should be quashed. It was also the case of the writ petitioner
that the State Government ought to have constituted 'Advisory Committee' under
Section 3 of the Act.
5. The stand of the Government before the High Court was that in accordance with the
provisions of the Act and the Uttar Pradesh Sheera Niiyantran Niyamavali, 1974
(hereinafter referred to as 'the Rules'), it was open to the Authorities to ask the writ
petitioner to supply 20% molasses for the
@page-SC50
purpose of manufacturing country liquor. As the said action was in consonance with law,
the Company was bound to supply 20% molasses for the said purpose and the action
could not be termed as illegal or unlawful.
6. It was also contended by the respondents that an alternative and equally efficacious
remedy of filing an appeal under Section 9 of the Act was available to the Company and
hence writ petition was not maintainable.
7
. As to Article 47 of the Constitution, the case of the State Government was that the
point was finally concluded by a decision of this Court in Khoday Distilleries Ltd. and
Ors. v. State of Karnataka and Ors., (1995) 1 SCC 574 : JT 1994 (6) SC 588 in favour
of the State. Section 3 of the Act, according to the State, was merely an enabling
provision and thus directory in nature and the writ petitioner could not compel the State
to constitute 'Advisory Committee'.
1995 AIR SCW 313
8. The High Court, after hearing the parties, held that preliminary objection raised by the
respondents was not well-founded. Considering the totality of facts and circumstances
and the decisions taken by the respondents, the High Court held that approaching the
Appellate Authority would be a 'futile attempt'. The High Court, considering various
decisions of this Court on the point, held that it would not be justified in dismissing the
petition on the ground of alternative remedy and the said objection was not wellfounded.
9. The Court ruled that apart from the fact that Article 47 of the Constitution could not be
enforced by a Court of Law, the point no longer survived in the light of decision of the
Apex Court in Khoday Distilleries Ltd. Section 3 of the Act, according to the High Court,
was only directory and if 'Advisory Committee' was not constituted by the State, the
powers under the Act could be exercised by the Controller appointed by the State.
10. On merits, the Court held that the reservation for 20% of molasses and directive
issued to the writ petitioner to supply such stock for manufacturing country liquor was
neither contrary to law nor against public policy. The order, therefore, could have been
issued by the Authorities as it was open to the Authorities to ask for 20% molasses from
the writ petitioner for manufacturing country liquor. The Company was bound to supply
the stock and as it was not done, the Authorities were right in taking appropriate action
in accordance with law. Accordingly, the High Court dismissed the writ petition.
11. On May 2, 2005, notice was issued by this Court. The matter appeared on Board
thereafter from time to time and ultimately on March 2, 2007, the Registry was directed
to place the matter for final disposal on a non-miscellaneous day. That is how the matter
has been placed before us.
12. We have heard the learned counsel for the parties.
13. The learned counsel for the appellant contended that Section 3 of the Act enjoins
the State Government to constitute an 'Advisory Committee' to advise on matters
relating to the control of storage, preservation, gradation, price, supply and disposal of
molasses under the Act. It was, therefore, incumbent on the State Government to
constitute such Committee. There is no such Committee at present as envisaged by the
Act though such Committee was there in past. This is contrary to law and against the
legislative mandate. In absence of such Committee, no directive can be issued by the
Controller to supply molasses. All the directives are, therefore, without authority of law
and are required to be set aside. It was also contended that such directives are against
public policy reflected in the Directive Principles of State Policy enshrined in Part IV of
the Constitution and in particular, Article 47 which requires the State to endeavour to
bring about prohibition of intoxicating drinks. The State Government wedded with
implementation of principles enumerated in Part IV of the Constitution cannot issue an
order that molasses should be reserved for manufacturing 'country liquor' and such a
directive cannot be enforced. On that ground also, the impugned directives are liable to
be quashed. It was further urged that alternatively the impugned directive is explicitly
clear and requires a sugar mill to reserve 20% of molasses from the balance stock i.e.
over and above actual consumption by the industry for manufacturing country liquor.
Since the writ petitioner did not have balance stock of molasses and the record clearly
revealed that even for captive consumption, it had to import molasses from other States
in the country and from foreign countries for which necessary permission was granted
by the Government, it could not be
@page-SC51
compelled to reserve 20% molasses for manufacturing country liquor. It was submitted
that even if the directive is held to be legal, lawful and in consonance with law, the writ
petitioner could not be asked to supply 20% molasses for manufacturing country liquor.
The directive could not be applied to the writ petitioner and notices could not be issued
to show cause as to why the Company should not be prosecuted. On that limited
ground also, the writ petition ought to have been allowed and the High Court was wrong
in dismissing it.
14
. The learned counsel for the respondents, on the other hand, submitted that the
constitutional validity of the Act has not been challenged by the writ-petitioner. Even
otherwise, the validity has been upheld by this Court in SIEL Ltd. and Ors. v. Union of
India and Ors., (1998) 7 SCC 26 : JT 1998 (6) SC 323. It was, therefore, open to the
respondents to implement the provisions of the Act. Section 8 of the Act empowers the
Authorities to issue necessary directions relating to sale and supply of molasses and in
exercise of the said power, orders were issued by the Authorities and the High Court
was right in upholding them. Regarding Advisory Committee, it was submitted that it is
in the discretion of the State Government to constitute the Committee and if no such
Committee is constituted, there is no violation of law. The High Court was right in
holding that in absence of Advisory Committee, Controller could have exercised the
power conferred on him by the State Government. As to public policy and provisions in
Part IV of the Constitution, the counsel contended that the High Court was called upon
to consider a limited question as to whether the action was illegal or unconstitutional
and once it was held that it was in consonance with law, the Court was right in
upholding it and in dismissing the petition. It was, therefore, submitted that the appeal
deserves to be dismissed. 1998 AIR SCW 2985
15. Having considered the rival contentions of the parties, in our opinion, the appeal
deserves to be partly allowed. So far as the constitutional validity of the Act is
concerned, it is rightly not challenged by the writ petitioner since the point is concluded
by a decision of this Court in SIEL Ltd. decided in 1998. It was held by this Court that
the Act was within the legislative competence of the State and the State Act was not
inconsistent with the Industries (Development and Regulation) Act, 1951, i.e. Central
Act. But even otherwise, the U.P. Act having received the assent of the President as
required by Article 254(2) of the Constitution, would operate.
16. As to alternative remedy available to the writ petitioner, a finding has been recorded
by the High Court in favour of the writ-petitioner and the same has not been challenged
by the State before us. Even otherwise, from the record, it is clear that the decision has
been taken by the Government. Obviously in such cases, remedy of appeal cannot be
terms as alternative, or equally efficacious. Once a policy decision has been taken by
the Government, filing of appeal is virtually from 'Caesar to Caesar's wife', an 'empty
formality' or 'futile attempt'. The High Court was, therefore, right in overruling the
preliminary objection raised by the respondents.
17. On merits, the learned counsel for the appellant drew our attention to an order dated
June 9, 2004 which was relied upon by the High Court for dismissing the writ petition.
Clause (3) of the said order relates to supply of 20% molasses for manufacturing
country liquor. The High Court in its order reproduced the said clause which is in Hindi
and reads thus;
"PRATYEK CHINI MILL KE SHEERE KE AWASHESHA STAAK ME SE DESHI
MADIRA KE LIYE 20 PRATISHAT SHEERE KA AARKSHAN EISI AASHWANI YO KE
LIYE HOGAA JO USKAA UPYOG DESHI MADIRA UTPADAN ME KAREGI. AISI
CHINI MILE JINKI SWAYAM KI BHI AASHWANIYA HAI, UKTANUSAR KIYE JA RAHE
SHEERE KE AARAKSHAN SE OOS SEEMA TAK BAHAR RAHEGI KI CHINI MILL
SAH-AASHWANI DWARA SWAYAM KE VASTAVIK UPBHOG KE ATIRIKT JO
SHEERA BACHATA HAI, OOS PER 20 PRATISHAT KA AARAKSHAN LAGOO
HOGA."
18. The English translation supplied by the appellant at Annexure P-3 reads thus;
"From the balance stock of molasses with each sugar mill, 20% of molasses shall be
reserved for the distilleries manufacturing country liquor. The sugar mills having their
own distilleries shall not be covered with this reservation to the extent that after the
actual consumption of molasses in their captive distillery, 20% reservation shall be
applicable on the balance stock".
@page-SC52
19. The learned counsel for the writ petitioner, in our opinion, is right in contending that
the said order applies only to balance stock (Avshesh staak). According to the High
Court, 20% molasses must be reserved by each and every sugar mill for manufacturing
country liquor notwithstanding whether there is balance stock or not. In other words, the
High Court held that 20% molasses must be reserved by every sugar mill for the
purpose of manufacturing country liquor. If such sugar mill is having facility of
manufacturing country liquor, it should utilize the said stock for the said purpose,
otherwise it should supply to the Authorities.
20. In our opinion, however, clause (3) applies only to excess stock of molasses, that is,
molasses which is in excess of and not used for captive consumption by sugar factory
and is thus balance stock. It is the assertion of the writ petitioner that the Company has
no excess stock of molasses. Not only that, but it has to import molasses from other
sources even for its own requirement for manufacturing industrial alcohol and such
permission has been granted by the Central Government as well as by the State
Government. If it is so, the case does not fall within the mischief of clause (3) and said
clause cannot be pressed in service by the Authorities. The High Court, in our opinion,
was not right in holding that all sugar mills were bound to supply 20% molasses to the
Authorities under clause (3) of the Government Order dated June 9, 2004 irrespective of
stock possessed. Only on that ground, the appeal deserves to be allowed.
21. So far as the submission of the learned counsel as to Article 47 of the Constitution
in Part IV comprising of Directive Principles of State Policy is concerned, in our opinion,
on the facts and in the circumstances, it is not necessary to express any opinion one
way or the other and we refrain from doing so.
22. Before the High Court as well as before us it was strenuously urged by the writ
petitioner that it was obligatory on the State Government to constitute Advisory
Committee under Section 3 of the Act. Section 3 reads thus :
3. Constitution of Advisory Committee.- (1) The State Government may, by notification
in the Gazette, constitute an Advisory Committee to advise on matters relating to the
control of storage, preservation, gradation, price, supply and disposal of molasses.
(2) The Committee shall consist of such number of persons and shall be constituted on
such terms and conditions as may be prescribed.
23. Section 22 is a rule making power and enables the State Government to make rules
to carry out the purposes of the Act. Sub-section (2) enacts that in particular and without
prejudice to the generality of the power, such rules may provide for(a) the composition of the Advisory Committee, the manner in which its members shall
be chosen, the term of office of its members, the allowances, if any, payable to them,
the manner in which the Advisory Committee shall tender its advice and the procedure
for the conduct of its business;
(b) the procedure relating to the removal of members of the Advisory Committee;
(c) ...
24. Rule 14 of 1974 Rules is also relevant and reads thus;
14. Orders regarding sale or supply of molasses.-- A consolidated statement of the
estimated availability of molasses will be drawn up and placed before the Advisory
Committee, constituted under Section 3(1) of the Act, by the Controller who may make
orders regarding the sale or supply of molasses in accordance with the provisions of
Section 8 of the Act.
25. In exercise of power under Clauses (a) and (b) of sub-section (2) of Section 22 read
with Section 3 of the Act, the Governor of Uttar Pradesh framed rules known as the U.P.
Molasses Advisory Committee Rules, 1965. Rule 3 provides for constitution of
Committee and reads as under :
3. Constitution- (1) The Advisory Committee to be constituted under Section 3 of the Act
shall consist of :
(i) the Controller who shall be ex officio Chairman.
(ii) the Assistant Excise Commissioner, In charge of Molasses at the Headquarters of
the Excise Commissioner, Uttar Pradesh who shall be ex officio Secretary.
(iii) The Director of Industries, Uttar Pradesh or his representative not below the rank of
Deputy Director of Industries;
(iv) The Cane Commissioner,
@page-SC53
Uttar Pradesh, or his representative not below the rank of Deputy Cane Commissioner;
(v) Three representatives of sugar factories in Uttar Pradesh to be nominated by the
Indian Sugar Mills' Association (U.P. Branch);
(vi) Three representatives of distilleries in Uttar Pradesh to be nominated by the Uttar
Pradesh Distillers Association;
(vii) One representative of the alcohol based industries in Uttar Pradesh to be
nominated by the Uttar Pradesh Alcohol Based Industries Development Association.
(viii) One representative of Moulding and Foundry Industry in Uttar Pradesh to be
nominated by the Excise Commissioner, Uttar Pradesh; and
(ix) Managing Director, the Uttar Pradesh Co-operative Sugar Factories Federation Ltd.
(2) If a representative is not nominated by the concerned Association under Clause (v),
(vi) or (vii) of sub-rule (1) within the time specified in that behalf by the State
Government, it shall be lawful for the State Government to nominate the representative
or representatives, as the case may be, under that clause.
26. While Rule 6 prescribes term of office of members and reconstitution of the
Committee, Rule 7 deals with vacancy caused by death, resignation or removal of
members. Rule 8 provides for quorum for meeting. Rules 9 and 10 prescribe time, place
and agenda for the meeting of the Committee and preparation of minutes of resolutions
passed and decisions taken. Rule 11 requires the Chairman of the Committee to
forward such resolutions to the State Government.
27. It further appears that by a notification dated November 24, 1965, such Committee
had been constituted. The Notification was also published in U.P. Government Gazette,
Extraordinary and reads thus :
Notification No.5586-E/XIII-251-65, dated 24th November, 1965, published in U.P.
Gazette, Extra., dated November 24, 1965.
In exercise of the powers under Section 3 of Uttar Pradesh Sheera Niyantran
Adhiniyam, 1964 (Uttar Pradesh Act XXIV of 1964) read with Rules 3 and 5 of the Uttar
Pradesh Molasses Advisory Committee Rules, 1965, the Governor of Uttar Pradesh is
pleased to constitute an Advisory Committee to advise on matters relating to the control
on storage, supply, gradation and prices of molasses with effect from the date of issue
of this notification and further pleased to direct that the said Committee shall consist of
the following persons :
(a) the Controller of Molasses, Uttar Pradesh-Ex Officio Chairman
(b) the Assistant Excise Commissioner (Molasses), Uttar Pradesh-Ex Officio Secretary.
(i) The representatives of Sugar Factories - Sri V.D. Jhunjhunwala Kamlapat Moti Lal
Sugar Mills, Motinagar, district Faizabad.
Sri B.C. Kohli, Ganga Sugar Corporation Ltd., Deoband, district Saharanpur.
Sri L.N. Wahi, Indian Sugar Mills Association, Uttar Pradesh Branch, Sri Niwas, I, Kabir
Marg, Lucknow.
(ii) Three representatives of DistilleriesSri Bansi Dhar, Director, Managing Agents, Messrs Delhi Cloth and General Mills Co.
Ltd., Bara Hindu Rao, Post Box No.1039, Delhi.
Sri D.S. Majithia Messrs, Saraya Distillery, Sardarnagar, Gorakhpur.
Sri V.R. Mohan, Dyer Meakin Brewery Ltd., Lucknow.
(iii) One representative of Moulding and Foundry IndustriesSri Raman, Secretary, Agra Iron Founders Association, Agra.
(iv) One representative of Tobacco Manufacturers Association, Varanasi.
(v) The Director of Industries, U.P. or his representative.
(vi) Sri Ram Surat Prasad, M.L.A., Mohalla Mohaddipur, Gorakhpur.
28. Reading the substantive provisions in the Act as also subordinate legislation by way
of Rules, there is no doubt in our minds that the submission of the learned counsel for
the writ petitioner that such a Committee ought to have been constituted by the State is
well-founded and must be upheld. The High Court dealt with the submission of the writ
petitioner but did not accept it observing that the Legislature had used the expression
'may' and not 'shall' in Section 3 of the Act. The Court ruled that the provision was
merely directory and not mandatory.
29. We are unable to subscribe to the
@page-SC54
above view. In our judgment, mere use of word 'may' or 'shall' is not conclusive. The
question whether a particular provision of a statute is directory or mandatory cannot be
resolved by laying down any general rule of universal application. Such controversy has
to be decided by ascertaining the intention of the Legislature and not by looking at the
language in which the provision is clothed. And for finding out the legislative intent, the
Court must examine the scheme of the Act, purpose and object underlying the
provision, consequences likely to ensue or inconvenience likely to result if the provision
is read one way or the other and many more considerations relevant to the issue.
30. Several statutes confer power on authorities and officers to be exercised by them at
their discretion. The power is in permissive language, such as, 'it may be lawful', 'it may
be permissible', 'it may be open to do', etc. In certain circumstances, however, such
power is coupled with duty and must be exercised.
31. Before more than a century in Baker, Re, (1890) 44 Ch D 262, Cotton, L.J. stated;
I think that great misconception is caused by saying that in some cases 'may' 'means'
must. It never can mean must, so long as the English language retains its meaning; but
it gives a power, and then it may be question in what cases, where a Judge has a power
given by him by the word may, it becomes his duty to exercise it.
(Emphasis supplied)
32. In leading case of Julius v. Lord Bishop of Oxford, (1880) 5 AC 214 : 49 LJ QB 580 :
(1874-80) All ER Rep 43 (HL), the Bishop was empowered to issue commission of
inquiry in case of alleged misconduct by a clergyman, either on an application by
someone or suo motu. The question was whether the Bishop had right to refuse
commission when an application was made. The House of Lords held that the Bishop
had discretion to act pursuant to the complaint and no mandatory duty was imposed on
him.
33. Earl Cairns, L.C., however, made the following remarkable and oft-quoted
observations :
"The words 'it shall be lawful' are not equivocal. They are plain and unambiguous. They
are words merely making that legal and possible which there would otherwise be no
right or authority to do. They confer a faculty or power and they do not of themselves do
more than confer a faculty or power. But there may be something in the nature of the
thing empowered to be done, something in the object for which it is to be done,
something in the title of the person or persons for whose benefit the power is to be
exercised, which may couple the power with a duty, and make it the duty of the person
in whom the power is reposed, to exercise that power when called upon to do so".
(Emphasis supplied)
34. Explaining the doctrine of power coupled with duty, de Smith, (Judicial Review of
Administrative Action, 1995; pp.300-01) states :
Sometimes the question before a court is whether words which apparently confer a
discretion are instead to be interpreted as imposing duty. Such words as 'may' and 'it
shall be lawful' are prima facie to be construed as permissive, not imperative.
Exceptionally, however, they may be construed as imposing a duty to act, and even a
duty to act in one particular manner.
(Emphasis supplied)
35. Wade also says (Wade and Forsyth; 'Administrative Law' : 9th Edn. : p.233) :
"The hallmark of discretionary power is permissive language using words such as 'may'
or 'it shall be lawful', as opposed to obligatory language such as 'shall'. But this simple
distinction is not always a sure guide, for there have been many decisions in which
permissive language has been construed as obligatory. This is not so much because
one form of words is interpreted to mean its opposite, as because the power conferred
is, in the circumstances, prescribed by the Act, coupled with a duty to exercise it in a
proper case."
(Emphasis supplied)
36. In the leading case of Padfield v. Minister of Agriculture, Fisheries and Food, 1968
AC 997 : (1968) 1 All ER 694 : (1968) 2 WLR 924 (HL), the relevant Act provided for the
reference of a complaint to a committee of investigation 'if the Minister so directs'. The
Minister refused to act on a complaint. It was held that the Minister was required to act
on a complaint in absence of good and relevant reasons to the contrary.
37. Likewise, it was held that the licensing authorities were bound to renew licences of
cab drivers if the prescribed procedural requirements had been complied with
@page-SC55
[R.V. Metropolitan Police Commissioner, (1911) 2 QB 1131]. Similarly, local authorities
were held bound to approve building plans if they were in conformity with bye-laws [R.V.
Nescastle-upon-Tyne Corporation, (1889) 60 LT 963]. Again, the court was required to
pass a decree for possession in favour of a landlord, if the relevant grounds existed
[Ganpat Ladha v. Shashikant, (1978) 3 SCR 198 : (1978) 2 SCC 573].
38. In Alcock v. Chief Revenue Authority, 50 IA 227 : AIR 1923 PC 138, the relevant
statute provided that if in the course of any assessment a question arises as to the
interpretation of the Act, the Chief Revenue Authority 'may' draw up a statement of the
case and refer it to the High Court. Holding the provision to be mandatory and following
Julius, Lord Phillimore observed :
"When a capacity or power is given to a public authority, there may be circumstance
which couple with the power of duty to exercise it".
39. In Commissioner of Police v. Gordhandas Bhanji, 1952 SCR 135 : AIR 1952 SC 16,
Rule 250 of the Rules for Licensing and Controlling Theatres and Other Places of Public
Amusement in Bombay City, 1884 read as under :
"The Commissioner shall have power in his absolute discretion at any time to cancel or
suspend any licence granted under these Rules....."
40. It was contended that there was no specific legal duty compelling the Commissioner
to exercise the discretion. Rule 250 merely vested a discretion in him but it did not
require him to exercise the power. Relying upon the observations of Earl Cairns, L.C.,
the Court observed :
"The discretion vested in the Commissioner of Police under Rule 250 has been
conferred upon him for public reasons involving the convenience, safety, morality and
the welfare of the public at large. An enabling power of this kind conferred for public
reasons and for the public benefit is, in our opinion, coupled with a duty to exercise it
when the circumstances so demand. It is a duty which cannot be shirked or shelved nor
can it be evaded..."
(Emphasis supplied)
41
. In Ratlam Municipality v. Vardichan, (1981) 1 SCR 97 : (1980) 4 SCC 162; some
residents of Ratlam Municipality moved the Sub-Divisional Magistrate under Section
133 of the Code of Criminal Procedure, 1973 for abatement of nuisance by directing the
municipality to construct drainpipes with flow of water to wash the filth and stop the
stench. The Magistrate found the facts proved and issued necessary directions. The
Sessions Court, in appeal, reversed the order. The High Court, in revision, restored the
judgment of the Magistrate and the matter was carried to the Supreme Court.
AIR
1980 SC 1622
42. Krishna Iyer, J. pithily summarized the principle thus;
"The key question we have to answer is whether by affirmative action a court can
compel a statutory body to carry out its duty to the community by constructing sanitation
facilities at great cost and on a time-bound basis. At issue is the coming of age of that
branch of public law bearing on community actions and the court's power to force public
bodies under public duties to implement specific plans in response to public
grievances."
43. Holding the provision obligatory, the Court observed :
"Judicial discretion when facts for its exercise are present, has a mandatory import.
Therefore, when the sub-Divisional Magistrate, Ratlam, has, before him, information
and evidence, which disclose the existence of a public nuisance and, on the materials
placed, he considers that such unlawful obstruction or nuisance should be removed
from any public place which may be lawfully used by the public, he shall act....... This is
a public duty implicit in the public power to be exercised on behalf of the public and
pursuant to a public proceeding".
(Emphasis supplied)
44. We do not wish to refer to other cases on the point. We are, however, in agreement
with the observations of Earl Cairns, L.J. in Julius referred to above wherein His
Lordship stated;
"(W)here a power is deposited with a public officer for the purpose of being used for the
benefit of persons who are specifically pointed out, and with regard to whom a definition
is supplied by the Legislature of the conditions upon which they are entitled to call for its
exercise, that power ought to be exercised, and the Court will require it to be exercised."
(Emphasis supplied)
45. In the case on hand, considering the
@page-SC56
legislative scheme as also Rules and particularly Rules relating to constitution of
Committee, namely, the U.P. Molasses Advisory Committee Rules, 1965, in our opinion,
investment of power in the State Government is not merely enabling or discretionary. It
is obligatory on the Government to constitute a Committee to carry out the purpose and
object of the Act. The Committee has to perform an important role of advising the State
Government "on matters relating to the control of storage, preservation, gradation, price,
supply and disposal of molasses". The constitution of the Committee, as envisaged by
Rule 3 of the 1965 Rules clearly shows the representation of various groups and
interests likely to be affected. Rule 11 requires the Chairman (Controller of Molasses) to
"give due consideration of the resolutions passed by the Committee and forward it to the
State Government for orders together with a copy of the proceedings and his
recommendations". In our considered opinion, it is not open to the State Government to
ignore this salutary provision taking specious plea that the provision relating to
constitution of Committee is enabling, directory or discretionary and State, therefore, is
not obliged to constitute such Committee. In our judgment, the High Court was not right
in upholding the argument of the respondents. We, therefore, hold that in accordance
with the provisions of 1964 Act, the Rules framed thereunder as also under 1965 Rules,
it is the duty of the State Government to constitute Advisory Committee. We accordingly
direct the State of Uttar Pradesh to constitute Advisory Committee as expeditiously as
possible.
46. For the foregoing reasons, in our opinion, the appeal deserves to be allowed and
the order of the High Court deserves to be set aside. It is, accordingly held that the
directive issued by the respondents would not apply in case there is no balance stock of
molasses with any sugar mill. The respondent-authorities have no right to compel such
sugar mills to supply 20% molasses for the purpose of manufacturing country liquor.
47. We may, however, make one thing clear. As seen above, the assertion of the
appellant was that it has no balance stock and even for its own requirement, it has to
import molasses. On the other hand, the allegation of the respondents is that excess
and balance molasses was available with the appellant which it had sold in open
market. The High Court, in the impugned order has not decided the question finally.
Quoting certain paragraphs from the writ-petition, the High Court observed that there
was no proper pleading and as such, the Court was not in a position to go into the
question. It is, therefore, made clear that it is open to the respondents to take
appropriate action in accordance with law on the basis of our decision and observations
made in this judgment.
48. The appeal is allowed to the extent indicated above. On the facts and in the
circumstances of the case, however, the parties will bear their own costs.
Order accordingly.
AIR 2008 SUPREME COURT 2215 "Mumbai Agri. Produce Market Committee v.
Hindustan Lever Ltd."
(From : Bombay)*
Coram : 2
S. B. SINHA AND LOKESHWAR SINGH PANTA, JJ.
Civil Appeal No.3042 of 2008 (arising out of SLP (C) No. 1847 of 2007), D/- 29 -4 -2008.
Mumbai Agri. Produce Market Committee and Anr. v. Hindustan Lever Ltd. and Ors.
Maharashtra Agricultural Produce Marketing (Regulations) Act (20 of 1964), S.34B AGRICULTURAL PRODUCE - Supervision charges - Distinct from market fee - Premise
for levy is service rendered by supervising, buying and selling of commodity - No such
service found to be rendered - Market Committee not entitled to recover the same.
(Paras 8, 10, 14, 15, 16, 18)
Cases Referred :
Chronological Paras
2007 AIR SCW 3603 (Ref.)
14
2006 AIR SCW 3396 : AIR 2006 SC 2550
13Ramakant P. Bhatt, Sr. Advocate,
Y.R. Naik and Rakesh K. Sharma, for Appellants; Gopal Jain, R.N. Karanjawala, Mrs.
Manik Karanjawala, Ms. Ruby Singh Ahuja, Manu Agarwal and Ms. Asha Gopalan Nair,
for Respondents.
* W. P. No. 1341 of 1998, D/- 16-6-2006 (Bom.)
Judgement
S. B. SINHA, J. :- Leave granted.
2. Appellant is a Market Committee constituted under the Maharashtra Agricultural
Produce Marketing (Regulation) Act, 1963 (for short, 'the Act'). First respondent herein
deals in Edible Oils and Vanaspati. By reason of a Notification dated 25-9-1987, the
State of Maharashtra in exercise of its power under Section 62 of the said Act added
some items in the Schedule appended thereto such as sugar, dry fruits, edible oils and
vanaspati to the Schedule of the Act. Appellant No.1, Market Committee, started
collecting market fee as also supervision charges on all notified agricultural produces
marketed on wholesale basis. The wholesale market in respect of condiments, spices,
dry fruits etc. was shifted from Greater Bombay to New Bombay on and from 1-1-1991
where a huge market had been constructed by the appellants.
3. Respondents allegedly, despite the applicability of the provisions of the said Act as
also the Notification dated 25-9-1987, did not get itself registered thereunder contending
that 'Vanaspati' had not been included in the Schedule appended thereto. Some of the
traders dealing in edible oil had also obtained exemption from payment of market fee
and supervision charges for a short time. Such exemption granted was, however,
withdrawn.
Various litigations were initiated before the Bombay High Court questioning the validity
of the said notification as also levy of market fee and supervision charges by the
Committee.
4. Respondent Nos. 1 and 2 also filed writ petitions in the year 1988 contending that
they were not liable to pay any market fee or supervision charges.
5. The High Court by reason of a judgment and order dated 16-6-2006 although
rejected the contention that the respondents were not liable to pay any market fee,
opined that the appellant was not entitled to collect supervision charges. Supervision
charges as also interest accrued thereon were payable to the State Government.
The High Court in its judgment held : "The impugned orders which have been passed
either during the pendency of the petition or before the petition was filed are silent on
the quantum of supervision charges paid by the respondent No. 1-Committee to the
State Government in respect of the sale/distribution of vanaspati produced by the
petitioners and marketed in the market area of respondent No. 1, though not from the
market yard. In the absence of the petitioners having an outlet or a depot or a trading
centre in the market yard of respondent No. 1, the other place is only
@page-SC2216
the premises of the petitioners as admittedly the respondent No. 1 has not established
any other collection centres or subsidiary markets by exercising powers under Section 5
and Section 30A of the Act. We are, therefore, of the considered view that the
respondent No. 1-Committee has no powers to cause recovery of supervision charges
from the petitioners as at present and the impugned orders to that extent are
unsustainable."
In regard to the payment of interest, it was held :
"We are afraid Clause (y) below Rule 120 does not come to the rescue of the Market
Committee in support of its case that it has the power to charge interest varying from
12% to 21% on the delayed dues of market fees and supervision charges under bye-law
No. 14(A). Section 31 as well as sections 34A to 34C clearly provide for only penal
charges and bye-law No. 14 cannot be termed so as to cover condition of trading and
marketing in the market area. We have also noticed that on issuance of the notice by
the Market Committee, the petitioners have taken due steps and during the pendency of
the petitions or before the impugned orders for recovery were passed, they have
deposited certain sums. In both the petitions, it is not a case of inordinate delay in
responding to the demands and, in fact, the demands have been substantially met
within few months. No reasons have been given in the impugned orders as to why the
Market Committee felt it appropriate to recover interest and not the penal charges from
the petitioners. We, therefore, hold that the respondent No. 1 has no powers to charge
interest at the rate of 12% or any higher rate upto 21% on the delayed payment of
market fees and supervision charges and it was not even otherwise justified to levy
such charges in the instant cases."
6. Mr. Bhatt, learned senior counsel appearing on behalf of the appellant, would submit
that the question as to whether any supervision charges were payable or not had not
been raised by the respondents and in that view of the matter, the High Court
committed a serious error in arriving at the aforementioned conclusion.
7. Mr. Gopal Jain, learned counsel for the respondents, however, would support the
impugned judgment.
8. Levy of market fee and supervision charges stand on different footings. Whereas
market fee is payable on the transactions carried out in the market area, the power to
realize the supervision charges is vested in the State. For the said purpose, it has to
issue a general or special order. Staff must be appointed by the State for the purpose of
carrying out supervision of the market areas. Only when the pre-requisites contained in
Section 34A of the Act are fulfilled, the question of recovery of such charges from the
person purchasing such produce in such market or market area would arise. The costs
of supervision is to be calculated by the Market Committee in such a manner so as to
enable it to levy the said fee under Section 31. Sub-section (2) of Section 34B of the Act
provides that the cost of supervision collected by a Market Committee shall be paid to
the State Government in the prescribed manner.
9. The fact that Vanaspati is an item which has validly been added to the Schedule
appended to the Act and the Rules framed thereunder is now not in dispute. The
judgment of the High Court rendered in this regard has been accepted by the
respondent. It deposited the amount of market fee on various dates as detailed herein
below :
"Date of Payment
2-03-1998
Amount Deposited
Rs. 4,00,000/-
31-03-1998 Rs. 18,00,000/-
21-07-1998 Rs. 62,84,779/7-09-1998
Rs. 6,000/-"
10. It, however, appears that the validity of the levy and collection of the supervision
charges was specifically raised by the respondent herein on the ground that no service
whatsoever of any kind was being rendered in the said market area. The High Court, by
reason of its judgment, opined that the costs for supervision were incidental charges to
be recovered and paid to the Government in respect of the staff employed by it. It is not
a power vested in the Committee and, thus, the conditions precedent therefor were
required to be shown to be existing, i.e., that the Government had employed staff and
had been rendering services by way of supervising the buying and selling of the
agricultural produces in the market area.
11. The power to recover the charges for the supervisory staff employed at the
expenses of a section of the industry is not a general power. It is provided for
specifically in terms of the Act. When the statute mandates
@page-SC2217
that the cost of supervision would be borne by the licensee, it does not constitute levy of
tax. It may be a part of contract. It may have to be paid as a liability to comply with the
provisions of the statute and statutory Rules validly made. The cost has to be
determined. It may have to be apportioned. It cannot be levied or calculated in such a
manner so as to cause unjust enrichment in favour of the State.
12. The quantum of recovery, however, need not be based on mathematical exactitude
as such cost is levied having regard to the liability of all the licensees or a section of
them. It would, however, require some calculation.
13
. A finding of fact has been arrived at by the High Court that no service was being
rendered by the State. If no service is being rendered, even no fee could have been
levied. It has been so held by a Constitution Bench of this Court in Jindal Stainless Ltd.
and Anr. v. State of Haryana and Ors. [(2006) 7 SCC 241] in the following terms : 2006
AIR SCW 3396, (Paras 38 and 39)
"40. Tax is levied as a part of common burden. The basis of a tax is the ability or the
capacity of the tax payer to pay. The principle behind the levy of a tax is the principle of
ability or capacity. In the case of a tax, there is no identification of a specific benefit and
even if such identification is there, it is not capable of direct measurement. In the case
of a tax, a particular advantage, if it exists at all, is incidental to the State's action. It is
assessed on certain elements of business, such as, manufacture, purchase, sale,
consumption, use, capital, etc. but its payment is not a condition precedent. It is not a
term or condition of a licence. A fee is generally a term of a licence. A tax is a payment
where the special benefit, if any, is converted into common burden.
41. On the other hand, a fee is based on the "principle of equivalence". This principle is
the converse of the "principle of ability" to pay. In the case of a fee or compensatory tax,
the "principle of equivalence" applies. The basis of a fee or a compensatory tax is the
same. The main basis of a fee or a compensatory tax is the quantifiable and
measurable benefit. In the case of a tax, even if there is any benefit, the same is
incidental to the government action and even if such benefit results from the
government action, the same is not measurable. Under the principle of equivalence, as
applicable to a fee or a compensatory tax, there is an indication of a quantifiable data,
namely, a benefit which is measurable."
14. The principle of equivalence, therefore, is the foundation for levy of a fee. It must be
held to be the foundation of a statutory charge like supervisory charges. It was for the
State to prove it. Once the State has failed to bring record the foundational facts, it is
not for the appellant who is merely a statutory authority for collecting the same as an
agent of the State to contend that the same was payable. The State of Maharashtra is
not before us.
In Aashirwad Films v. Union of India (UOI) and Ors. [(2007) 6 SCC 624], it has been
held : 2007 AIR SCW 3603
"It is also required to be realized that imposition of reasonable tax is a facet of good
governance."
15. Cost of supervision, if borne by the State has to be recovered by it. The burden was,
therefore, on the State to justify the levy. Even the general or special order, if any,
purported to have been issued by the State has not been brought on record. On what
basis, the supervision charges were being calculated is not known. The premise for levy
or recovery of the amount of supervisory charges is not founded on any factual matrix.
Only the source of the power has been stated but the basis for exercise of the power
has not been disclosed.
16. We, therefore, are of the opinion that there is no infirmity in the impugned judgment.
17. So far as the question of payment of interest is concerned, it must be referable to
the statute. When the statute controls the levy, the interest payable thereupon, as
envisaged thereunder must also govern the field. The general principle of restitution
may not apply in this case.
18. The High Court having exercised its discretionary jurisdiction in the matter, we do
not find any reason to take a different view. The impugned judgment, therefore, needs
no interference. The appeal is dismissed with no order as to costs.
Appeal dismissed.
AIR 2008 SUPREME COURT 2411 "Haryana State Agricultural Marketing Board v.
Sadhu Ram"
(From : Punjab and Haryana)*
Coram : 2
TARUN CHATTERJEE AND HARJIT SINGH BEDI, JJ.
Civil Appeal No.2549 with 2550 to 2557 of 2008 (arising out of SLP (C) No.17473 with
17594, 17552, 17675, 17686, 17693, 17712, 17840 of 2006 and 3347 of 2007), D/- 8 -4
-2008.
Haryana State Agricultural Marketing Board and Ors. v. Sadhu Ram and etc. etc.
Constitution of India, Art.14 - Punjab Agricultural Produce Markets Act (23 of 1961),
S.18 - EQUALITY - AGRICULTURAL PRODUCE - ALLOTMENT OF PREMISES Allotment of plots - Cancellation of - Non disclosure of reserve price to bidders at time of
auction - Cannot be ground to hold cancellation of allotment to highest bidder as
arbitrary - Final authority to approve or disapprove best offer being Chief Administrator
of Board, empowered to reject offer without assigning any reason - Moreover when
fresh auction had fetched higher price.
1994 AIR SCW 3344, 2006 AIR SCW 5968, Rel. on.
Civil W. P. No.816 of 2005, D/-27-04-2006 (P And H), Reversed.
15)
Cases Referred :
(Paras 9, 11, 12,
Chronological Paras
2006 AIR SCW 5968 (Rel. on)
11, 12
1994 AIR SCW 3344 : AIR 1996 SC 11 (Rel. on)
11, 14Neeraj Kumar Jain, Bharat
Singh, Sanjay, Sandeep Chaturvedi, Umang Shankar, Ugra Shankar Prasad, for
Appellants; P.S. Patwalia, Sr. Advocate, A.P. Bhandari, S.C. Patel, Tejas Patel, Subash
Bhommick, Sanjeev K. Pabbi, Ms. Shikha Roy, S.K. Sabharwal, J.S. Puri, Yash Pal
Dhingra, Senthil Jagadeesan, for Respondents.
* C. W. P. No.816 of 2005, D/-27-04-2006 (P and H).
Judgement
TARUN CHATTERJEE, J. :- Leave granted.
2. These bunch of appeals have arisen from a common judgment and order dated
@page-SC2412
27th of April, 2006 of the High Court of Punjab and Haryana at Chandigarh whereby the
High Court had allowed a bunch of writ petitions filed by the respondents challenging an
order dated 17th of December, 2004 cancelling the allotments of Plots in their favour in
an open auction. Since common questions of law and fact arise in the disposal of these
bunch of appeals and the High Court has disposed of the entire bunch of writ petitions
following the judgment passed in Mangat Ram and Ors. Vs. State of Haryana and Ors.
[CWP No. 213 of 2005 decided on 27th of April, 2006], we take up the facts leading to
the filing of these appeals from the judgment dated 27th of April, 2006 passed in CWP
No. 213 of 2005 of the High Court of Punjab and Haryana at Chandigarh, which are as
under :3. The appellants are statutory authorities under the Punjab Agricultural Produce
Markets Act, 1961 (in short "the Act"). A public notice was issued by the office of Market
Committee, Panchkula, Haryana, appellant No. 2 inviting traders and general public to
purchase commercial sites in an open auction to be held on 8th of July, 2004 in the New
Grain and Vegetable Market, Panchkula. By this auction, Shop plots (62 Nos.) and
Booth plots measuring 20' X 50' were to be auctioned. On 16th of May, 2003, the High
Powered Committee constituted by an office order recommended that the reserve price
for a plot measuring 20' X 50' be fixed at Rs. 33,91,391/- which was approved at the
level of the Chief Administrator of the Board. However, the reserve price so fixed was
neither mentioned in the public notice nor was the same announced before the start of
the auction. The auction of the plots was held as per schedule. The respondents were
declared to be the highest bidders for the plots who deposited 25% of the bid money as
per the requirement of law. On 24th of July, 2004, the auction committee report of the
aforesaid auction held on 8th of July, 2004 was put up before the Market Committee,
Panchkula, which by a resolution dated 24th of July, 2004 recommended the
confirmation of the auction bids and resolved that the approval of the Chief
Administrator, Haryana State Agricultural Marketing Board be taken under Section 18 of
the Act. On 30th of November, 2004, a letter was sent on behalf of the Chief
administrator to the Executive Officer-cum-Secretary, Market Committee, Panchkula by
which some discrepancies were conveyed. On 6th of December, 2004, the Executive
Officer addressed a letter to the Chief Administrator informing him that the
discrepancies pointed out have been attended to and requested for approval. The Chief
Administrator, on 15th of December, 2004 conveyed his approval in respect of the bids
given for plot No. 1 measuring 20' X 50' and three booths bearing Nos. 149, 150, 152
measuring 12' X 27½'. The auction of all the other plots was rejected and it was directed
to refund the amounts to the respondents and to put the plots in open auction on 20th of
December, 2004. On 17th of December, 2004, the respondents received a
communication from the Market Committee that since the auction in their favour had not
been approved by the Chief Administrator, 25% of the bid money deposited by them
was being refunded. The second public auction, as scheduled, was held on 20th of
December, 2004, and a price higher than that of the earlier price was fetched from the
auction purchasers.
4. On 4th of January, 2005, the respondents filed a batch of writ petitions seeking
quashing of the order dated 17th of December, 2004 cancelling the allotments of plots
in their favour. The batch of writ petitions filed by the respondents before the High Court
were taken up for hearing and the main judgment that was passed was in the case of
Mangat Ram and Ors. Vs. State of Haryana and Ors., CWP No. 213 of 2005 decided on
27th of April, 2006 and thereafter, following the same judgment, all the remaining writ
petitions were disposed of by holding that the respondents were entitled to be allotted
alternative plots. It is against these judgments of the High Court that separate appeals
have now been filed by the respondents, in respect of which leave has already been
granted. As noted herein earlier, the High Court, while deciding the bunch of writ
petitions, had taken into consideration the facts from one of the writ petitions bearing
CWP No. 213 of 2005 on the ground that the writ petitions involved common questions
of law and fact. That being the stand taken by the High Court, we also, therefore, at this
stage look at the findings of the High Court in CWP No. 213 of 2005, which are as under
:i) In view of non-disclosure of the reserve price to the auction purchasers, the auction
proceedings in their favour could neither
@page-SC2413
be cancelled nor the approval be denied on the ground that the bid price offered by
them was lower than the reserve price;
ii) The non-disclosure of the reserve price amounted to an unfair practice;
iii) The auction in favour of the highest bidders was subject to final approval by the Chief
Administrator but the approval could be declined only for reasons which were relevant
and could justify the non-acceptance of highest bids of the auction purchasers but the
same could not be arbitrary or absolute;
iv) The order dated 17th of December, 2004 would be quashed but it would be open to
the Chief Administrator to exercise his powers in compliance with the terms and
conditions of auction so as to consider the question of approval of the auction in
accordance with law.
v) Mere encashing of cheques, refunding the amount, by the auction purchasers could
not be taken to be a fact against them.
5. The learned counsel for the appellants argued that the auction in favour of the
respondents was subject to final approval of the Chief Administrator of the Board and
since the Chief Administrator had rejected the said auction in their favour, the action of
the appellants was wholly justified. He further argued that the bids offered by the
respondents were lower than the reserve price, which resulted in the rejection of the
bids by the Chief Administrator who under Section 18 of the Act had the prerogative to
accept or to reject the bids without assigning any reason. The learned counsel for the
appellants also submitted before us that in the subsequent auction conducted on 20th of
December, 2004, a higher price was fetched in respect of the same plots. He
accordingly argued that the High Court was not justified in invalidating the action of the
appellants on the ground of non-disclosure of the reserve price and even if the nondisclosure of the reserve price at the time of auction was to be treated as an irregularity
or illegality, the High Court could at the most quash the entire auction but could not
confirm the auction in favour of the respondents and in fact, the respondents had
already received back the cheques from the Market Committee and encashed them and
therefore, had no subsisting right qua their claim.
6. These submissions of the learned counsel for the appellants were hotly contested by
the learned senior counsel for the respondents. Mr. Patwalia, the learned senior counsel
for the respondents argued that since the reserve price was not disclosed either in the
Public notice or at the time of the auction to the persons participating in the same, the
offers made by the respondents in the auction held on 8th of July, 2004 could not be
rejected by the Chief Administrator of the Board as such rejection mush be treated as
unfair, unreasonable and illegal. The learned senior counsel for the respondents Mr.
Patwalia further submitted that the respondents were not informed the reason for
rejection of their bids even in the letter dated 17th of December, 2004 and that the bids
offered by them were rejected by the appellants after 6 months without affording them
any opportunity of being heard.
7. We have examined the aforesaid submissions of the learned counsel for the parties.
We have also examined the judgment of the High Court allowing the writ petitions and
holding that since the reserve price was not disclosed before the auction, which was
mandatory, and the respondents proceeded to participate in the auction without
knowing such reserve price, it could not be said that since the offer of the respondents
was less than the reserve price, the same was liable to be rejected. Having heard the
learned counsel for the parties and after carefully examining the impugned judgment of
the High Court and also the order dated 17th of December, 2004 and other materials on
record including the terms and conditions of the auction held on 8th of July, 2004, we
are of the view that this appeal must succeed for the reasons stated hereinafter.
8. Before we proceed to consider the submissions made on behalf of the parties, at the
risk of repetition, we may keep it on record that it is not in dispute that the reserve price
for holding the auction of the plots in question was neither shown in the Public Notice of
the appellants nor was it known to the respondents. It is also an admitted position that
the money that was deposited by the respondents was refunded by the appellants by
account payee cheques, which were duly encashed by the respondents. As mentioned
herein earlier, the High Court had practically allowed the writ petition on a finding that
since the reserve price was not shown in the Public Notice, the
@page-SC2414
authorities had no jurisdiction to cancel the auction in favour of the respondents on the
ground that their offers were less than the reserve price and therefore, the auction held
on 8th of July, 2004 could not be cancelled by the order of the Chief Administrator of the
Board.
9. We are unable to agree with this view expressed by the High Court in the impugned
judgment. It is true that the reserve price was neither known to the respondents nor was
it advertised for the purpose of allotting the plots to the respondents but that could not,
in our view, permit the High Court to direct allotment of alternative plots to the
respondents. Even assuming that there was error on the part of the authorities in not
mentioning the reserve price in the Public Notice, then also, it was not proper for the
High Court to direct allotment of alternative plots to the respondents on the basis of the
auction held on 8th of July, 2004.
10. It is also not in dispute that the final authority to approve the auction bids was the
Chief Administrator of the Board. Before proceeding further, we may refer to Section 18
of the Act which runs as under :"Under Section 18 of the Act all the sales of plots whether by open auction or draw of
lots, are subject to approval by the CA of the Board. However, he may or may not
accord such approval without assigning any reason. In case of offer is rejected, the
amount deposited as 1/4th of the total price would be refunded without interest by the
M.C." (Emphasis supplied)
11
. A perusal of the provisions under Section 18 of the Act, as quoted hereinabove, would
show that the auction would be final only after the same is approved by the Chief
Administrator of the Board. In case the Chief Administrator of the Board rejects the
auction, he may not be required to assign any reason for such rejection. If such
rejection is made, Section 18 only provides that the amount deposited by the bidder
must be refunded without interest by the Market Committee of the Board. Keeping this
provision in mind, it is clear that since the Chief Administrator of the Board was the final
authority to approve the auction bids, which in his own discretion, were not approved, it
could not be said that since the reserve price was not mentioned in the Public Notice
and was not known to the respondents, the High Court could have directed allotment of
alternative plots in the exercise of its power under Article 226 of the Constitution. The
scope of judicial review/interference under Article 226 in contractual matters including
Government contracts and auction of plots by State Government has been extensively
dealt with by this Court in a catena of decisions. In Tata Cellular Vs. UOI [1994 (6) SCC
651], the principle that ought to be applied in judicial review of decisions especially
those relating to acceptance of tender and award of contract was considered in detail
and it was held that the principle of judicial review would apply to the exercise of
contractual powers by Government bodies in order to prevent arbitrariness or
favouritism. But it must also be kept in mind that there are inherent limitations in
exercise of the power of judicial review. In that decision, it was held that the right to
refuse the lowest or any tender is also available to the Government but the principles
laid down in Article 14 of the Constitution must be kept in mind while accepting or
refusing a tender. There can be no question of infringement of Article 14 if the
Government tries to get the best quotation and also to cancel the best quotation if it was
of the view that the best quotation also was not to the satisfaction of the Government to
get a better market price of the plots in question. Therefore, it was held in that decision
that the State Government and its instrumentalities cannot be said to have exercised an
arbitrary power when they found that the best offer made by the respondents could not
be accepted because the market value of the plots in question would fetch better than
the amount offered by the respondents. It was further held in that decision that since the
power of judicial review is not an appeal from the decision, the court cannot substitute
its own decision. In the present case, it is not in dispute that the plots auctioned by the
appellants belonged to the instrumentalities of the State Government, which must be
expected to protect the financial interests of the State. In the decision reported in
[2007(1) SCC 477] Rajasthan Housing Board and Another Vs. J.S. Investments and
Another, this Court, after thoroughly considering the earlier decisions of this Court
including the decision in Tata Cellular Vs. Union of India [supra], considered the
contours of power which the High Court would exercise in a writ petition 1994
AIR
SCW 3344
2006 AIR SCW 5968
@page-SC2415
filed under Article 226 of the Constitution when the challenge was to cancellation of
auction held by a public body where the prime consideration was fairness and
generation of public revenue and held that even if some defect was found in the ultimate
decision resulting in cancellation of the auction, the court should exercise its
discretionary power under Article 226 with great care and caution and should exercise it
only in furtherance of public interest. It was also held in that decision that when the
Chairman of the Housing Board had the final authority regarding acceptance of the bid,
a person who had made the highest bid in the auction did not acquire any right to have
the auction concluded in his favour until the Chairman had passed an order to that
effect.
12
. Keeping the principles laid down in the aforesaid decisions of this Court in mind, let us,
therefore, consider whether non-disclosure of the reserve price in the Public Notice is a
ground on which the High Court could direct the authorities to allot alternative plots in
favour of the respondents in exercise of its powers under Article 226 of the Constitution.
At the risk of repetition, we may note that one of the conditions in the Public Notice was
that the final authority to approve or disapprove the best offer in the auction was that of
the Chief Administrator of the Board. It is true that the Chief Administrator of the Board
rejected the offers without assigning any reason but Section 18 of the Act clearly
provides that such rejection could be made without assigning any reason. Let us now
consider whether the action on the part of the Chief Administrator of the Board
cancelling the auction was unfair, arbitrary and invalid. In our view, considering the facts
and circumstances of the case, the action of the Chief Administrator of the Board was
fair and the cancellation was not arbitrary. The second 'auction was held in respect of
the plots in question on 20th of December, 2004 and from the said auction, although the
reserve price was not mentioned, much higher offers were received by the appellants.
Apart from that, we should not keep this fact out of mind that the amounts deposited by
the respondents with the appellants were refunded to the respondents by account
payee cheques, which were duly encashed by them. Such being the position, we
neither find any mala fide, unfairness or arbitrariness on the part of the Chief
Administrator of the Board in rejecting the offers of the respondents nor do we find it a
colourable exercise of power. That apart, in view of the decision of this court in
Rajasthan Housing Board and another Vs. G.S. Investments and another [supra], since
the final authority to approve the bids was with the Chief Administrator, it is obvious that
a person who had made the highest bid in the auction did not acquire any right to have
the auction concluded in his favour until the Chief Administrator had passed an order to
that effect and the auction proceedings could always be cancelled. It is on record that
the offers made by the respondents in the auction dated 8th of July, 2004 could not
fetch the amount expected from the said plots and that is the reason a fresh Public
Notice was issued by the appellants for a subsequent auction. The said auction was
held and as noted herein earlier, from the said auction, the price fetched was much
higher than the offers made by the respondents. That being the position and
considering the fact that a subsequent auction was held and concluded, it was not open
to the High Court to direct the allotment of alternative plots at the rate offered by the
respondents treating the auction held on 8th of July, 2004 to be valid.
2006
AIR
SCW 5968
13. Mr. Patwalia, the learned senior counsel appearing for the respondents submitted
that his clients were ready to pay the enhanced amounts which were offered by the
bidders in the second auction and therefore, in view of this, the decision of the High
Court should be upheld with such modification. We are unable to accept this submission
of Mr. Patwalia because at the present moment, third party interests have also been
created in the matter and the bidders in the second auction were not made parties to
the writ petitions.
14
. Let us now take up the other aspect of the matter. As noted herein earlier, the reserve
price was not shown in the Public Notice and therefore, the respondents had no
knowledge of the reserve price. Even assuming that the reserve price had to be given in
the Public Notice, then also, we are of the view that the best course for the High Court
would be to cancel the entire auction in view of the decision of this court in Tata Cellular
Vs. Union of India [supra] rather than substituting its own opinion by directing allotment
of
1994 AIR SCW 3344
@page-SC2416
alternative plots. It is, therefore, difficult to accept the views expressed by the High
Court that since reserve price was not known to the respondents and they were found to
be the highest bidders in the said auction, they have acquired a right to get the
allotment of alternative plots and the appellants had no authority to reject the highest
offers given by the respondents or to cancel the auction itself. Since the entire auction
was cancelled, we do not find any justification how the High Court could pass an order
directing allotment of the alternative plots on the same terms and conditions when, after
cancellation, the second auction was held in which the price fetched was much higher
than the offers made by the respondents. That apart, we do not find anything unfair in
not disclosing the reserve price. It is common knowledge that when reserve price is
disclosed, the bidders often form cartels and bid at or around the disclosed price,
though the market price is much higher. We, therefore, do not agree with the High Court
that the appellants had acted in an unfair manner in not disclosing the reserve price at
the time of inviting tenders or even at the time of holding the auction.
15. In view of the admitted fact that the money deposited by the respondents with the
appellants was refunded to the respondents by account payee cheques which were duly
encashed by them and in view of the admitted fact that subsequently, a second auction
was held on 20th of December, 2004 in respect of the same plots which were put up for
auction on 8th of July, 2004 and in the second auction, some other parties have now
acquired interest in the said plots, it was not open to the High Court to direct the
appellants, in the exercise of its writ jurisdiction, to allot alternative plots to the
respondents only on the ground that the auction dated 8th of July, 2004 could not be
cancelled by the Chief Administrator of the Board without assigning any reason and also
on the ground that the reserve price was not disclosed in the Public Notice issued by
the appellants.
16. In this view of the matter, we are, therefore, unable to sustain the decision of the
High Court and accordingly, the judgment of the High Court is liable to be set aside.
17. For the foregoing reasons, the impugned judgment of the High Court is set aside
and the appeals are allowed and the writ petitions stand rejected. There will be no order
as to costs.
Appeals allowed.
AIR 2008 SUPREME COURT 2610 "Dharampal Satyapal Ltd. v. State of
Bihar"
(From : Patna)*
Coram : 2
S. B. SINHA AND LOKESHWAR SINGH PANTA, JJ.
Civil Appeal Nos. 5779 with 5782 and 5785 of 2005, D/- 14 -5 -2008.
M/s. Dharampal Satyapal Ltd. and Anr. v. State of Bihar and Ors.
WITH
M/s. Agricultural Produce Market Committee, Muzzafarpur v. M/s. Prabhat Zarda
Factory (India) Ltd. and Ors.
AND
M/s. Prabhat Zarda Factory (India) Ltd. and Anr. v. State of Bihar and Ors.
Bihar Agricultural Produce Markets Act (16 of 1960), S.4A, S.39, S.3, S.4 AGRICULTURAL PRODUCE - HIGH COURT - Notification "No. 6/Misc. 13/91-6386,
S.O. 220 dated 31-6-1991 - Market fee - Levy on Zafrani Zarda, a manufactured item Petition challenging levy so also vires of notification dated 31-6-1991 including Zardas
in schedule - High Court disposing of petition by upholding levy from 31-8-1992 - Vires
of notification however not considered - Order of H.C. liable to be set aside - Matter
remitted.
(Paras 7, 8, 9)
Cases Referred :
Chronological Paras
1994 Supp (2) SCC 514 (Ref.)
2Rakesh Dwivedi, Anoop G. Chaudhary, Vijay
Hansaria, S. B. Sanyal, R. G. Padia, Mathai M. Paikeday, Mrs. Shobha Dikshit, K. K.
Mohan, Amit Kr. Singh, Shantanu Krishna, Ms. Mukti Chowdhary, Anant Prakash. Ms.
Sneha Kalita, Sanjai K. Pathak, Vivek Narayan, Ajit Kumar Pande, Sunil Roy, Ms.
Mandhurima Tatia, Anil Katiyar, V. K. Verma, Shishir Pinaki, Amit Singh, P. L. Jose,
Pradeep Misra, Daleep Dhayanti, Gopal Singh, Anukul Raj, Manish Kr. and Chandan
Kr. with them, for appearing parties.
* C.W.J.C. No. 10145 of 2001, D/- 7-10-2002 (Pat).
Judgement
S. B. SINHA, J. :- These three appeals involve a question as to whether the levy
of market fee on Zafrani Zarda in terms of the provisions of Bihar Agricultural Produce
Markets Act, 1960 (for short the Act) is valid which arise out of a common order dated
7th October, 2002 passed by the High Court of Patna in three writ petitions filed by the
appellants.
2. Writ petitioners are manufacturers of Zafrani Zarda. It is indisputably a
manufactured form of tobacco.
The question as to whether Zafrani Zarda is manufactured item of tobacco or not
came up for consideration before this Court in Agricultural Produce Market Committee
and others v. M/s. Prabhat Zarda Factory and another, [1994 Supp (2) SCC 514]. This
Court noticed that the definition of agricultural produce' has undergone a change so as
to include the 'manufactured goods' therefrom by way of amendment on 30th April,
1982. This Court noticed that the judgment of the High Court did not take into
consideration the changed definition of 'agricultural produce' with effect from 30th April,
1982 but upheld the judgment of the High Court in respect of levy of market fee prior
thereto.
3. Indisputably again with effect from 30th April, 1982 Zafrani Zarda was inserted
in the Schedule appended to the said Act, by reason of a Notification dated 31st July,
1991, issued by the State of Bihar which reads thus :"No. 6/Misc. 13/91 - 6386 .... Governor of Bihar in exercise of its powers
conferred under Section 39 of Bihar Agricultural Produce Markets Act, 1960 (Bihar Act
16 of 1960) makes the following amendment in the Schedule of the abovementioned
Act :AMENDMENT
In the said list - Heading 11 - following heads should be added or included after
head 1 under Narcotic - Tobacco.
2. Zarda
3. Zafrani Zarda etc.
@page-SC2611
The effect of this amendment shall be considered to be in force from the date of
implementation of Bihar Agricultural Produce Marketing Act, 1960.
By order of Governor of Bihar
Nagendra Tiwari
Joint Secretary to Govt."
4. The State Government issued another Notification being S.O. 220 dated 31st
August, 1992 for regulation of sale, purchase, storage and process of all agricultural
produce mentioned in the Schedule of the Act in the areas covering 122 market
committees including the respondent Market Committee.
5. Questioning the orders of assessment of market fee relying on and on the
basis of the said G.Os., by the Assessing Authority, the Writ Petitioners filed writ
applications before the Patna High Court inter alia for the following reliefs :"i) issue Rule NISI calling upon the respondent to show cause as to why the
notice No.569 dated 08-06-2001, 638 dated 26-06-2001 and 770 dated 24-07-2001 as
contained in Annexures 6, 7, 9 and issued by the respondent Secretary, Agricultural
Produce Market Committee should not be set aside and quashed and upon return of the
rule and after hearing the parties make the rule absolute.
ii) Issue rule in the nature of mandamus restraining the respondents from
enforcing the provisions of Bihar Agriculture Produce Market Committee Act and the
Rules thereunder in respect of the petitioners dealing in zafrani zarda and spices and
demanding any fee in respect thereof and upon return of the rule and after hearing the
parties make the rule absolute.
iii) Issue Rule NISI in the nature of writ of mandamus calling upon the
respondents to show cause as to why the notification issued under section 39 published
in the Bihar Gazette Extra Ordinary dated 31-07-2001 (Annexure-2) be not declared
invalid, illegal without jurisdiction and unenforceable and upon return of the rule and
after hearing the parties make the rule absolute.
iv) Issue such other writ(s) order(s) direction(s) as your Lordships may deem fit
and proper."
6. In the said writ petitions, inter alia it was contended on behalf of the
respondent-Market Committee, that the market fee would be assessed from the date of
coming into force of the Amendment i.e. 30th April, 1982 from which date the definition
of 'agricultural produce' had been amended.
7. The High Court by reason of the impugned judgment did not go into other
contentions raised by the parties. It was held that the market fee would be leviable with
effect from 31st August, 1992. It failed to take into consideration the important question
raised by the petitioners that the Notifications were ultra vires the Act and/or would have
no application in relation to Zafrani Zarda. It also did not take into consideration the
contention of the Market Committee that having regard to the provisions of Section 4-A
of the Act, Sections 3 and 4 thereof were not required to be complied with.
8. The questions raised by the parties are of significance. They should have been
dealt with by the High Court.
9. We, therefore, are of the opinion that the impugned judgment cannot be
sustained. They are set aside accordingly and the matters are remitted to the High
Court for consideration and disposal thereof afresh as expeditiously as possible and
preferably within a period of six months from the date of receipt of a copy of this order.
If any application is filed by the parties hereto raising additional contentions, the
same may be considered by the High Court on their own merits.
10. The appeals are disposed of accordingly with no order as to costs.
Order accordingly.
AIR 2008 SUPREME COURT 2733 "Kesarwani Zarda Bhandar, M/s. v. State
of U.P."
(From : 2003 (6) All WC 5441)
Coram : 2
S. B. SINHA AND LOKESHWAR SINGH PANTA, JJ.
Civil Appeal No. 5760 with 5761 of 2005, D/- 14 -5 -2008.
M/s. Kesarwani Zarda Bhandar v. State of U. P. and Ors.
U.P. Krishi Utpadan Mandi Adhiniyam (25 of 1964), S.17, S.2(a) AGRICULTURAL PRODUCE - Market fee - Eligibility - Zafrani Zarda - Is a
manufactured product - Not a processed agricultural produce - Not exigible to market
fee - Manufacture and processing - Distinction.
2003 (6) All WC 5441, Reversed.
Market fee is leviable on specified agricultural produce, not on agricultural
produce simpliciter. Zarda is not a specified agricultural produce. It can be subjected to
payment of market fee provided it is held to be 'tobacco'. Zafrani Zarda, as an
agricultural produce for the purpose of market fee must answer the description of
'specified agricultural produce' as defined in Section 2(a). If it is held that Zafrani Zarda
is merely a processed form of tobacco, it would be subjected to levy of market fee, but if
it is manufactured, it would not. Zafrani Zarda being a 'manufactured tobacco' would not
answer the description of processed tobacco. No market fee can, therefore, be levied.
2003 (6) All WC 5441, Reversed. (Paras 15, 16, 18)
The distinction between 'manufactured' and 'processed' may not in all situation
depend upon the nature of the Statute involved. It must pass the requisite test, namely,
as to whether it is a completely new item. Raw material of a manufactured produce has
to be distinguished from the manufactured product. Zarda is used by a class of
consumers. It is used for a specific purpose. Tobacco in a processed form is used for
many purpose, by many persons and in many ways. Tobacco in raw form or in any
other processed form is not commercially known as Zarda. The common parlance test
may have to be applied for the purpose of finding out as to whether the product in
question is manufactured goods or not. (Paras 17, 18)
Cases Referred :
Chronological Paras
2008 AIR SCW 1981 (Ref.)
17
2005 AIR SCW 2526 : AIR 2005 SC 4043 (Rel. on)
2003 AIR SCW 6696 : 2004 All LJ 1 (Ref.)
11
12
2001 AIR SCW 757 : AIR 2001 SC 931 : 2001 All LJ 498
1999 AIR SCW 3074 : AIR 1999 SC 3125 (Ref.)
13
12
1994 Supp (2) SCC 514 (Rel. on) 9
AIR 1984 SC 1870 (Ref.) 12
AIR 1966 SC 1000 (Rel. on)
8Rakesh Dwivedi, Anoop G. Chaudhary, Vijay
Hansaria, S. B. Sanyal, R. G. Padia, Mathai M. Paikeday, Mrs. Shobha Dikshit, Sr.
Advocates, K. K. Mohan, Amit Kr. Singh, Shantanu Krishna, Ms. Mukti Chowdhary,
Anant Prakash, Ms. Sneha Kalita, Sanjal K. Pathak, Vivek Narayan, Ajit Kumar Pande,
Sunil Roy, Ms. Madhurima Tatia, Mrs. Anil Katiyar, V. K. Verma, Shishir Pinaki, Amit
Singh, P. I. Jose, Pradeep Misra, Daleep Dhayani, Gopal Singh, Anukul Raj, Manish Kr.
and Chandan Kr., for the Appearing Parties.
@page-SC2734
Judgement
1. S. B. SINHA, J. :-Levy of market fee on Zafrani Zarda in terms of the
provisions of the U.P. Krishi Utpadan Mandi Adhiniyam, 1964 (for short, 'the Act') is in
question in these appeals which arise out of a common judgment and order dated 21st
July, 2003.
2. The Act was enacted to provide for the regulation of sale and purchase of
agricultural produce and for the establishment, superintendence and control of markets
therefor in Uttar Pradesh.
3. Before embarking on the question, we may notice some of the relevant
provisions of the Act.
Sections 2(a), 2(d), 6, 8, 17(iii)(b) read as under :
2(a) 'Agricultural produce' means such items of produce of agriculture,
horticulture, viticulture, apiculture, sericulture, pisciculture, animal husbandry or forest
as are specified in the Schedule, and includes admixture of two or more of such items,
and also includes any such item in processed form and further includes gur, rab,
shakkar, khandsari and jaggery;
2(a-1) "Board" means the State Agricultural Produce Markets Board constituted
under Section 26-A;
2(d) "Central Warehousing Corporation" means the Central Warehousing
Corporation established or deemed to be established under the Warehousing
Corporations Act, 1962;
2(d-1) "Collector", in relation to a Committee for a Market Area means the
Collector of the District where the principal Market Yard of that Market Area is situated,
and includes such other officer as may be authorized by him in that behalf;
6. Declaration of Market Area. - On the expiry of the period referred to in Section
5, the State Government shall consider the objections received within the said period
and may thereupon declare, by notification in the Gazette, and in such other manner as
may be prescribed, that the whole or any specified portion of the area mentioned in the
notification under Section 5 shall be the Market Area in respect of such agricultural
produce, and with effect from such date as may be specified in the declaration.
8. Alteration of Market Area and Modifications of the List of Agricultural produce.
- (1) The State Government, where it considers necessary or expedient in the public
interest so to do, may, by notification in the Gazette, and in such other manner as may
be prescribed and with effect from the date specified in the notification, (a) include any agricultural produce in, or exclude any agricultural produce from,
the list of agricultural produce specified in the notification under Section 6;
(b) include any area in, or exclude any area from, the Market Area specified in
the notification under Section 6;
(c) divide a Market Area specified in the notification under Section 6 into two or
more separate Market Areas;
(d) amalgamate two or more Market Areas specified in the notification under
Section 6 into one Market Area; or
(e) declare that a Market Area specified in the notification under Section 6 shall
cease to be such area :
Provided that before action under this sub-section is taken, the State
Government shall invite and consider, in the prescribed manner, objections, if any,
against the proposed action.
(2) When during the term of a Market Committee the limits of the Market Area for
which it is established are altered under clause (b), clause (c) or clause (d) of
subsection (1), the following consequences shall, with effect from the date specified in
the notification, follow :
(a) the Market Committee shall stand dissolved and its members shall vacate
their offices as such members;
(b) a new Market Committee shall be constituted for the modified or newly
created Market Area in accordance with the provisions of Section 13;
(c) all property and assets, all rights, liabilities and obligations of the dissolved
Market Committee in respect of civil or criminal proceedings, contracts, agreements or
other matter or thing arising in relation to any part of the Market Area of a dissolved
Market Committee shall be vested in and stand transferred to the new Market
Committee having jurisdiction over that part.
(3) Where a Market Area ceases to be such area under clause (e) of sub-section
(1), the following consequences shall, with effect from the date specified in the
notification, follow :
(a) the Market Committee shall stand dissolved
@page-SC2735
and its members shall vacate their offices as such members;
(b) the Principal Market Yard and Sub-Market Yards, if any, established therein
shall cease to be such;
(c) the unspent balances of the Market Committee Fund and other assets and
liabilities of the Market Committee shall vest in the State Government :
Provided that the liability of the State Government shall not extend beyond the
assets so vested.
17. Powers of the Committee. - A Committee shall, for the purposes of this Act,
have the power to (i) and (ii) ....
(iii) Levy and collect (a) such fees as may be prescribed for the issue or renewal of licences; and
(b) market fee which shall be payable on transactions of sale of specific
agricultural produce in the market area at such rates, being not less than one
percentum and not more than two and a half percentum of the price of the agricultural
produce so sold as the State Government may specify by notification, and development
cess which shall be payable on such transactions of sale at the rate of half percentum of
the price of the agricultural produce so sold, and such fee or development cess shall be
realized in the following manner :(1) If the produce is sold through a commission agent, the commission agent
may realize the market fee and the development cess from the purchaser and shall be
liable to pay the same to the Committee;
(2) if the produce is purchased directly by a trader from a producer, the trader
shall be liable to pay the market fee and development cess to the Committee;
(3) if the produce is purchased by a trader from another trader, the trader selling
the produce may realize it from the purchaser and shall be liable to pay the market fee
and development cess to the Committee :
Provided that notwithstanding anything to the contrary contained in any
judgment, decree or order of any court, the trader selling the produce shall be liable and
be deemed always to have been liable with effect from June 12, 1973 to pay the market
fee to the Committee and shall not be absolved from such liability on the ground that he
has not realized it from the purchaser :
Provided further that the trader selling the produce shall not be absolved from the
liability to pay the development cess on the ground that he has not realized it from the
purchaser;
(4) in any other case of sale of such produce, the purchaser shall be liable to pay
the market fee and development cess to the Committee :
Provided that no market fee or development cess shall be levied or collected on
the retail sale of any specified agricultural produce where such sale is made to the
consumer for his domestic consumption only :
Provided further that notwithstanding anything contained in this Act, the
Committee may at the option of, as the case may be, the commission agent, trader or
purchaser, who has obtained the licence, accept a lump sum in lieu of the amount of
market fee or development cess that may be payable by him for an agricultural year in
respect of such specified agricultural produce, for such period, or such terms and in
such manner as the State Government may, by notified order specify :
Provided also that no market fee or development cess shall be levied on
transactions of sale of specified agricultural produce on which market fee or
development cess has been levied in any market area if the trader furnishes in the form
and manner prescribed, a declaration or certificate that no such specified agricultural
produce market fee or development cess has already been levied in any other market
area."
4. In the Schedule appended to the Act, tobacco is mentioned at Item No. V.
The question which arises for consideration is as to whether Zafrani Zarda is a
processed form or manufactured form prepared from the raw material tobacco.
The process undertaken to manufacture Zafrani Zarda is admitted. It was stated
by the appellant in their writ petition to be as under :"7. That the petitioner used to purchase the raw tobacco/processed tobacco
outside the Mandi Samiti, Allahabad. However, it is stated that the Zafrani Zarda or
Zafrani Patti is used for chewing which is prepared from the raw tobacco. The Jaggery
Juice is sprinkled on the raw Tobacco and then it is cut into small pieces by shearing
machine. The resulting tobacco is called as "nice tobacco". The "Nice Tobacco", is
allowed to dry
@page-SC2736
for few days and then flavouring essence are being sprinkled oh it and at this
stage, this tobacco is known as "Chewing tobacco". Then, thereafter, menthol, Geru,
Lime and spices etc. are being homogeneously mixed with the same, either from
electric machine or by the manually operated machine. These items get un-separately
mixed with the processed tobacco and the resulting tobacco is called as "Zafrani Zarda"
and "Zafrani patti". In this way, the raw tobacco loses its original identity and its physical
and chemical properties are changed. It is a different commodity in the commercial
world as well as amongst the consumers. The quality, cost and liking amongst the
consumers are vary according to the material mixed with it."
5. Mr. Rakesh Dwivedi, learned senior counsel appearing on behalf of the
appellant, would submit that the question, i.e., it is a manufactured form of agricultural
produce, is no longer res integra in view of several decisions of this Court.
6. On the other hand, Ms. Shobha Dikshit, learned senior counsel appearing on
behalf of the respondents, submits that Zafrani Zarda is a processed form of tobacco.
7. It is not in dispute that having regard to the definition of 'agricultural produce'
as contained in Section 2(a) of the Act as also Section 2(d) therein, market fee would be
leviable only in the event Zafrani Zarda is held to be a processed form of tobacco and
not the manufactured form.
8 The question came up for consideration before this Court in State of Madras v.
Swastik Tobacco Factory, [ (1966) 3 SCR 79 ] wherein, upon taking into consideration
the provisions of Section 5(l)(i) of the Madras General Sales Tax (Turnover and
Assessment) Rules, 1939, it was held that Zafrani Zarda is a manufactured form of
tobacco.
AIR 1966 SC 1000
9. The issue apparently is directly covered by a decision of this Court in
Agricultural Produce Market Committee v. Prabhat Zarda Factory, [ 1994 Supp (2) SCC
514], in relation to the definition of 'agricultural produce' as contained in Bihar
Agricultural Produce Markets Act, 1960, which is pari materia with the definition of
'agricultural produce' under 2(a) of the Act, which reads :" 'Agricultural produce' includes all produce, whether processed or nonprocessed of agriculture, horticulture, animal husbandry, and forest specified in the
Schedule."
Later, however, the said definition was amended by the Amending Act of 1982
effective from April 30, 1982, the English rendering of which is as under :
" 'Agricultural produce' means all produce whether processed or non-processed,
manufactured or not, product of agriculture, horticulture, plantation, animal husbandry,
forest, sericulture, pisciculture, livestock or poultry, as specified in the Schedule."
10. This Court clearly affirmed the finding of the Patna High Court that 'Zarda' is
a variety of manufactured tobacco and not in its processed or non-processed form.
11. Similar reasonings have been adopted by this Court in Dharampal Satyapal
v. CCE, [(2005) 4 SCC 337 ] wherein in relation to levy of central excise, it was held :2005 AIR SCW 2526
"19. Applying the above tests to the facts of this case, we find that sada kimam
was bought by the assessee as a raw material which was then blended with saffron,
perfumes, menthol, etc. to form a compound which was then packed in "balties" and
cleared to the above three licensed units at Okhla Industrial Estate, Phase II, New
Delhi, Noida (U.P.) and Barotiwala (H.P.), where Tulsi Zafrani Zarda was manufactured.
That, the assessee used to buy a similar compound (Lucknowi kimam) from the market
from time to time and use it in the manufacture of their final product. That, the
compound (kimam) prepared by the assessee at 96, Okhla Industrial Estate, Phase III,
New Delhi and at E-1, Maharani Bagh, New Delhi, in the highly concentrated form, was
cleared therefrom and taken to the above three licensed factories where it was diluted
and used in the manufacture of Tulsi Zafrani Zarda. In their reply to the show-cause
notice, the assessee admitted that the said "compound" was not capable of being used
for any purpose, other than for manufacture of branded chewing tobacco. (Underline
supplied by us) This statement of the assessee in reply to the show-cause -notice
establishes that the said compound (kimam) was not edible, it was not capable of
consumption as such, however, it was used as preparation in the manufacture of Tulsi
Zafrani Zarda which was a branded chewing tobacco manufactured in the licensed
factories of the assessee at Okhla Industrial
@page-SC2737
Estate, Phase II, New Delhi, Noida (U.P.) and Barotiwala (H.P.). Further, from
time to time, the assessee herein bought from the market a similar compound
(Lucknowi kimam) and used it in the manufacture of the final product which indicated
that on blending of sada kimam with saffron, spices, menthol, etc., the compound in
question (kimam) which emerged was a distinct, identifiable product, known to the
market as kimam. Hence, we do not find any infirmity in the impugned judgment of the
Tribunal which has held that the said compound (kimam) was marketable and
classifiable as chewing tobacco or a preparation for chewing tobacco under Chapter
Sub-Headings 2404.49/ 2404.40."
12. Indisputably an agricultural produce has to be a specified one for the purpose
of levy of market fee. [See KUMS v. Ganga Dal Mills, [(1984) 4 SCC 516 ; Belsund
Sugar Co. Ltd. v. State of Bihar and others, [(1999) 9 SCC 620 ] and Krishi Utpadan
Mandi Samiti and others v. Pilibhit Pantnagar Beej Ltd. and another, [(2004) 1 SCC 391.
AIR 1984 SC 1870
1999 AIR SCW 3074
2003 AIR SCW 6696
13. Ms. Shobha Dikshit, however, relied upon the decision of this Court in Park
Leather (P) Ltd. v. State of U.P. and others, [(2001) 3 SCC 135] wherein a Division
Bench opined that leather is only a processed form of hides and skins. Process
undertaken for making leather from hides and skins has been noticed therein.
2001
AIR SCW 757
14. It is not in dispute that when a new form comes into being and in the market
parlance it is considered to be a new product; the same would be deemed to be
manufactured goods as contradistinguished from processed goods.
15. Market fee is leviable on specified agricultural produce, not on agricultural
produce simpliciter. Zarda is not a specified agricultural produce. It can be subjected to
payment of market fee provided it is held to be 'tobacco'. Zafrani Zarda, as an
agricultural produce for the purpose of market fee must answer the description of
'specified agricultural produce' as defined in Section 2(a) of the Act. If it is held that
Zafrani Zarda is merely a processed form of tobacco, it would be subjected to levy of
market fee, but if it is manufactured, it would not.
16. In this case, Zafrani Zarda, in view of the decision of this Court in Prabhat
Zarda (supra), must be held to be a manufactured product.
17. The distinction between 'manufactured' and 'processed' may not in all
situation depend upon the nature of the Statute involved. It must pass the requisite test,
namely, as to whether it is a completely new item. Raw material of a manufactured
product has to be distinguished from the manufactured product.
The distinction between 'processing' and 'manufacturing' is well known. When a
new thing comes into being, the steps which are taken for manufacture may be relevant
but may not be decisive. {[See Commissioner of Central Excise, Tamil Nadu v.
Vinayaga Body Building Industries Ltd. (2008) 3 SCC 666]}. 2008 AIR SCW 1981
18. Zafrani Zarda being a 'manufactured tobacco' would not answer the
description of processed tobacco. It is used by a class of consumers. It is used for a
specific purpose. Tobacco as a processed form is used for many purposes, by many
persons and in many ways. Tobacco in raw form or in any other processed form is not
commercially known as Zarda. The common parlance test may have to be applied for
the purpose of finding out as to whether the product in question is manufactured goods
or not.
19. The High Court, unfortunately, had not considered this aspect of the matter.
The impugned judgment cannot, thus, be sustained. It is set aside accordingly. The
appeals are allowed. In the facts and circumstances of the case, there shall be no order
as to costs.
Appeals allowed.
AIR 2008 SUPREME COURT 2883 "Krishi Utpadan Mandi Samiti, Ghaziabad
v. M/s. Metal Craft"
(From : 2001 All LJ 1947)
Coram : 3
Dr. A. PASAYAT, P. SATHASIVAM AND AFTAB ALAM, JJ.
Civil Appeal No. 8690 of 2001, D/- 7 -7 -2008.
Krishi Utpadan Mandi Samiti, Ghaziabad and Anr. v. M/s. Metal Craft and Ors.
U.P. Krishi Utpadan Mandi Adhiniyam (25 of 1964), S.17(iii)(b) AGRICULTURAL PRODUCE - SALE - Market fee - Levy of - Firm having its office in
market - Purchased rice from outside State of U.P. and exported the same in terms of
agreement - Rice was never brought or was in existence within market area - Thus,
there was no transaction of sale within market area - No market fee can be levied in
respect of said transaction.
(Paras 9, 13, 16)
Cases Referred :
Chronological Paras
AIR 1980 SC 1124 : 1980 All LJ 490 (Ref.)
AIR 1968 SC 741 (Ref.)
10
11
(1834) 2 Cr and M 530 : 149 ER 871
11
AIR 1961 SC 1214 (Ref.) 12
(1910) ILR 38 Cal 127
Respondents.
12Pradeep Misra, for Appellants; T.N. Singh, for
Judgement
Dr. ARIJIT PASAYAT, J. :- Challenge in this appeal is to the judgment of a
Division Bench of the Allahabad High Court holding that the appellant was not entitled to
levy market fee under Section 17(iii) (b) of the U.P. Krishi Utpadan Mandi Adhiniyam,
1964 (in short the 'Adhiniyam') if the agricultural produce is neither brought nor taken
out of the market place, and deciding in favour of respondent No. 1.
2. Background facts in a nutshell are as follows :
Respondent is a registered partnership firm having its business premises and
office at 14, Navyug Market, Ghaziabad, and it carried on the business of sale and
purchase of iron and steel and also export of rice. It wanted to purchase broken rice
from the rice millers of U.P. for the purpose of export to foreign countries and
accordingly, made an application on July 31, 1997, to Krishi Utpadan Mandi Samiti,
Ghaziabad, for grant of a licence. It was also stated in the application that the
respondent had exported rice in November, 1996 by purchasing it from places outside
U.P. Appellant No. 1 asked the respondent No. 1 to deposit the licence fees for the
years 1995-96, 1996-97 and 1997-98, which was done as per the demand. Thereafter,
the appellant No. 1 sent a demand notice to the respondent No. 1 on October 12, 1997,
demanding market fee at the rate of 2 per cent amounting to Rs. 12,94,860.00. The
respondent No. 1 sent a reply on October 18, 1997, stating that it had never purchased
any rice from inside the State of U.P. nor any transaction of sale or purchase of rice was
carried out within the State. It was accordingly requested that the demand notice/order
dated October 12, 1997, be rescinded. The appellant No.1, however, initiated
proceeding for recovery of the amount in question and issued a citation dated
December 6, 1997. The respondent No. 1 thereafter, filed C.M. Writ Petition No, 43329
of 1997 in the High Court which was disposed of on December 17, 1997, with a
direction to appellant No. 1 to decide the respondent No. 1's representation within a
month and the recovery proceeding were suspended for six months. The respondent
No.1 appeared before appellant No.1 on the date fixed, namely January 14, 1998, along
with the relevant records and submitted that the rice had been purchased from places
outside the State of U.P. and had been sent directly to the ports for being exported to
South Africa and as such, it was not liable to pay any market fee. The appellant passed
an order on January 25, 1998, holding that the transaction of sale of the rice exported
by the respondent No.1 firm took place within the market area of Ghaziabad, and,
accordingly, the market fee imposed by the order dated October 12, 1997 was valid and
proper. Feeling aggrieved, the respondent No. 1 preferred a revision under Section 32
of the Act before the Rajya Krishi Utpadan Mandi Parishad, Lucknow (appellant No.2)
which was dismissed by order dated March 9, 1998. The writ petition under Article 226
of the Constitution of India, 1950 (in short the 'Constitution') was filed for quashing the
orders dated October 12, 1997 passed by appellant No. 1 and the order dated March 9,
1998 passed by appellant No.2. The learned Single Judge, who heard the petition, was
of the opinion that the controversy raised involved a substantial question of law of
general importance and made a reference to larger Bench. That is how the matter came
before the Division Bench.
The case of the respondent No. 1 was that the rice was exported by it because
certain dealers in South Africa wanted to buy rice from India. The respondent No. 1
quoted the rates and entered into negotiations. After the deal was settled, the rice was
purchased from rice millers in Haryana, Punjab, Madhya Pradesh from where it was
directly dispatched to the ports of Mumbai and Kandla and clearing and forwarding
agents of the respondent No. 1 loaded the same on the ship. After the goods had been
loaded a Bill of Lading was prepared and signed by the Master of the ship in the
capacity of carrier acknowledging the receipt of the goods. The Bill of Lading was given
to the clearing and forwarding agents and on receipt of the Bill of Lading by the buyer
through the respondent No.1's bankers, the rice were retired by the buyer in South
Africa. The sale price of the rice was received by the respondent No. 1 through its
banker viz. Oriental Bank of Commerce at Delhi. It is the specific case of the respondent
No. 1 was that the entire quantity of the exported rice was purchased from places
outside the State of U.P. and was directly sent to the ports without it ever coming within
the market area of Ghaziabad or in the State of U.P. It was also asserted that the sale
was effected only at the ports when the goods were loaded in the ship and the Bill of
Lading was handed over to the respondent No.1's clearing and forwarding agents.
The case of the present appellants was that the business establishment of the
respondent is at 14, Navyug Market Ghaziabad and the entire transaction was done
from the said place. The purchase order was received and accepted by it at Ghaziabad
and the sale price was also received there and therefore the transaction of sale took
place in Ghaziabad. It was also pleaded that the transport of the goods and how it was
actually exported was wholly irrelevant for ascertaining where the transaction of sale
took place.
The High court did not accept the said stand and allowed the writ petition filed.
3. In support of the appeal, learned counsel for the appellants submitted that
since the transaction took place within the jurisdiction of the market area, the levy was
justified and the High Court was wrong in its view.
4. Learned counsel for the respondent No. 1 on the other hand supported the
judgment of the High Court.
5. It is to be noted that before the High Court the learned counsel for the
appellant No. 1 had fairly admitted that rice exported by the appellant was never
brought within the market area of Mandi Parishad, Ghaziabad within the State of U.P.
6. Section 17(iii)(b) is the charging section which reads as follows:
"17. Powers of the Committee - A Committee shall, for the purposes of this Act,
have the power to (i)....................
(ii)..................
(iii) levy and collect :
(a) such fees as may be prescribed for the issue or renewal of licences, and
(b) market fee, which shall be payable on transactions of sale of specified
agricultural produce in the market area at such rates being not less than one percentum
and not more than two percentum of the price of the agricultural produce so sold as the
State Government may specify by notification, and such fee shall be realised in the
following manner (1) if the produce is sold through a commission agent may realise the market fee
from the purchaser and shall be liable to pay the same to the Committee;
(2) if the produce is purchased directly by a trader from a producer the trader
shall be liable to pay the market fee to the Committee;
(3) if the produce is purchased by a trader for another trader, the trader selling
the produce may realise it from the purchaser and shall be liable to pay the market fee
to the Committee : and
(4) in any other case of sale of such produce, the purchaser shall be liable to pay
the market fee to the Committees :
Provided that no market fee shall be levied or collected on the retail sale of any
specified agricultural produce where such sale is made to the consumer for his
domestic consumption only."
7. The object for which the Act was enacted is as follows :
"(i) to reduce the multiple trade charges, levies and exactions charged at present
from the produce-sellers;
(ii) to provide for the verification of accurate
@page-SC2885
weight and scales and see that the producer-seller is not denied his legitimate
due;
(iii) to establish market committees in which the agricultural producer will have
his due representation;
(iv) to ensure that the agricultural producer has his say in the utilization of market
funds for the improvement of the market as a whole;
(v) to provide for fair settlement of disputes relating to the sale of agricultural
produce.
(vi) to provide amenities to the producer-seller in the market;
(vii) to arrange for better storage facilities;
(vii) to stop inequitable and unauthorized charges and levies from the producerseller; and
(viii) to make adequate arrangements for market intelligence with a view to
posting the agricultural producer with the latest position in respect of the markets
dealing with his produce."
As the prefatory note and preamble clearly show the object of the Act is to save
the agricultural producer from innumerable charges, levies etc. and to enable them to
have a say in the proper utilization of amounts paid by him to reduce multiple charges
levies, exactions charged from the producer and seller and generally to help the
agricultural producer to sell his produce to his best advantage.
8. At the end of the Section there is an explanation which reads as follows :
"Explanation - For the purpose of clause (iii), unless the contrary is proved, any
specified agricultural produce taken out or proposed to be taken out of market area by
or on behalf of a licensed trader shall be presumed to have been sold within such area
and in such case the price of such produce presumed to be sold shall be deemed to be
such reasonable price as may be ascertained in the manner prescribed."
In exercise of the powers conferred by Section 40, Rules have been framed,
which are known as U.P. Krishi Utpadan Mandi Niyamavali, 1965 (hereinafter referred
to as the 'Niyamavali') and Rules 66 and 68 reads as follows:
"(66) Market Fee (Section 17 (iii) - The Market Committee shall levy and collect
market fee in the Market Area in accordance with the provisions of sub-clause (b) of
clause (iii) of Section 17 of the Act at such rate as may be specified in the bye-laws :
Provided that no market fee shall be levied and charged prior to the date on
which provisions, Section 10 of the Act are enforced
Provided further that when the specified agricultural produce is presumed to have
been sold in accordance with the explanation given under clause (viii) of Section 17 of
the Uttar Pradesh Krishi Utpadan Mandi Adhiniyam, 1964 the price of such produce
shall be the price prevailed for that type of produce in that market just on the previous
working day.
(68) No market fee shall be levied more than once on any consignment of the
specified agricultural produce brought for sale in the Market Yard if the market fee has
already been paid on it in any Market Yard of the same Market Area and in respect of
which a declaration has been made and a certificate has been given by the seller in
Form No. V."
9. A plain reading of Section 17(iii)(b) of the Act shows that the Committee is
empowered to levy and collect market fee which shall be payable on transaction of sale
of agricultural produce in the market area. The words "specified agricultural produce in
the market area" have great relevance. The manner of realization of market fee has
been enumerated in sub-clauses (1), (2), (3) and (4) of Section 17(iii)(b). Reference is to
"produce". This apparently shows that physical presence of the agricultural produce
within the market area is necessary for levy of market fee. The explanation to Section
17 (iii)(b) appended at the end of the Section lays down that unless the contrary is
proved any specified agricultural produce taken out or proposed to be taken out of a
market area by or on behalf of the licenced traders shall be presumed to have been sold
within such area. The explanation has application only if the agricultural produce is
physically present within the market area. The explanation becomes redundant if the
stand of the appellant that Section 17 (iii)(b) is applicable even in cases where
agricultural produce is neither physically brought nor is in existence within the market
area.
10. In Ram Chander Kailash Kumar and Co. v. State of U.P. (AIR 1980 SC 1124)
it was inter Para 29 of AIR alia observed as follows :
"This point urged on behalf of the appellants is well founded and must be
accepted as correct. On the very wordings of Clause (b) of Section 17(iii) market fee is
payable on transactions of sale of specified agricultural produce in the market area and
if no transaction of sale takes place in a particular market area no fee can be charged
by the Market Committee of that area. If goods are merely brought in any market area
and are dispatched outside it without any transaction of sale taking place therein, then
no market fee can be charged. If the bringing of the goods in a particular market area
and their despatch therefrom are as a result of transactions of purchase and sale taking
place outside the market area, it is plain that no fee can be levied."
11. In P.S.N.S. Ambalavana Chettiar and Company Ltd. v. Express Newspapers
Ltd. (AIR 1968 SC 741) it was observed as follows : Para 11 of AIR
"Section 18 of the Sale of Goods Act provides that where there is a contract for
the sale of unascertained goods no property in the goods is transferred to the buyer
unless and until the goods are ascertained. It is a condition precedent to the passing of
property under a contract of sale that the goods are ascertained. The condition is not
fulfilled where there is a contract for sale of a portion of a specified larger stock. Till the
portion is identified and appropriated to the contract, no property passes to the buyer. In
Gillett v. Hill [(1834) 2 CandM 535 : 149 ER 871, 873], Bayley, B. said :
"Where there is a bargain for a certain quantify ex a greater quantity, and there is
a power of selection in the vendor to deliver which he thinks fit, then the right to them
does not pass to the vendee until the vendor has made his selection, and trover is not
maintainable before that is done. If I agree to deliver a certain quantity of oil as ten out
of eighteen tons, no one can say which part of the whole quantity I have agreed to
deliver until a selection is made. There is no individuality until it has been divided."
12. Similarly, in Jute and Gunny Brokers Ltd. and Ors. v. The Union of India and
Ors. etc. (AIR 1961 SC 1214) it was held as follows : Para 14 of AIR
"The contention on behalf of the Union of India is that property in the goods
cannot pass in law to the holders of the pucca delivery orders till the goods are actually
appropriated to the particular order; therefore, as in this case it is not in dispute that no
goods were actually appropriated towards the pucca delivery orders concerned, the
property in the goods did not pass to the holders thereof but was still in the mills.
Reliance in this connection is placed on S. 18 of the Indian Sale of Goods Act, No III of
1930. That section lays down that "where there is a contract for the sale of
unascertained goods, no property in the goods is transferred to the buyer unless and
until the goods are ascertained." In the present case, as we have already said it is not in
dispute that the goods covered by the pucca delivery orders are not ascertained at the
time such orders are issued and ascertainment takes place in the shape of
appropriation when the goods are actually delivered in compliance therewith. Therefore,
till appropriation takes place and goods are actually delivered, they are not ascertained.
The contract therefore represented by the pucca delivery orders is a contract for the
sale of unascertained goods and no property in the goods is transferred to the buyer in
view of S. 18 of the Indian Sale of Goods Act till the goods are ascertained by
appropriation, which in this case takes place at the time only of actual delivery. The
appeal court in our opinion was therefore right in holding that the property in the goods
included in the pucca delivery orders did not pass to the holders thereof in view of S. 18
of the Sale of Goods Act in spite of the decision in the case of the Anglo-India Jute Mills
Co. [(1910) ILR 38 Cal 127]. What that case decided was that in a suit between a holder
of a pucca delivery order - be he the first holder or a subsequent holder who has
purchased the pucca delivery order in the market - and the mills, there will be an
estoppel and the mill will be estopped from denying that cash had been paid for the
goods to which the delivery order related and that they held the goods for the holder of
the pucca delivery order. That case therefore merely lays down the rule of estoppel as
between the mill and the holder of the pucca delivery order and in a suit between then
the mill will be estopped from denying the title of the holder of pucca delivery orders; but
that does not mean that in law the title passed to the holder of the pucca delivery order
as soon as it was issued even though
@page-SC2887
it is not disputed that there was no ascertainment of goods at that time and that
the ascertainment only takes place when the goods are appropriated to the pucca
delivery orders at the time of actual delivery. The appeal court was in our opinion right in
holding that the effect of the decision in the case of Anglo-India Jute Mills Co. [(1910)
ILR 38 Cal 127], was not that the property in the goods passed by estoppel and that that
case only decided that as between the seller and the holder of the pucca delivery order,
the seller will not be heard to say that there was no title in the holder of the delivery
order. That case was not dealing with the question of title at all as was made clear by
Jenkins C.J. but was merely concerned with estoppel. In the present case the question
whether the Government of India will be estopped is a matter which we shall consider
later; but so far as the question of title is concerned there can be no doubt in view of S.
18 of the Sale of Goods Act that title in these cases had not passed to the holders of the
pucca delivery orders on September 30, 1946, for the goods were not ascertained till
then, whatever may be the position of the holders of the pucca delivery orders in a suit
between them and the mills to enforce them."
13. Under Section 17(iii)(b) the measure of levy of the fee is on the price of the
goods sold. It obviously means that there must be a complete transaction of sale or a
concluded sale. If there is only an agreement and the agreement fails, the remedy for
the aggrieved party is to suit for damages. Obviously, no fee can be charged on
damages. The action for levy of fee can arise only on a concluded sale and as the sale
has not taken place within the market area of Ghaziabad, no mandi fee can be levied.
14. The stand of the appellant is that the market fee is levied on "transaction of
sale" and not on "sale" only and, therefore, what is to be seen is where the transaction
took place and not the situs of the sale. If this argument is accepted then even an
agreement to sale without the presence or existence of the agricultural produce will
come within the ambit of the charging provision. It would also mean that if the
agreement takes place outside the boundaries of State of Uttar Pradesh, the provisions
would still become applicable.
15. It is to be noted that the challenge in the writ petition was essentially to the
revisional order passed by the revisional authority under the Act. The revision was filed
against the order passed by the Mandi Samiti in respect of rice exported. A bare perusal
of the revisional order shows that the Samiti as well as the revisional authority
proceeded on the basis that since the contract for goods was entered into Ghaziabad
and then goods were sent through transport from Punjab, Haryana and Madhya
Pradesh directly through ports, therefore, the market fee was leviable.
16. The High Court rightly noted that the admitted position was that the rice was
never brought or was in existence within the market area, Mandi Samiti, Ghaziabad or
for that matter within the State of Uttar Pradesh. The High Court recorded a categorical
finding that the sale took place only when the rice was loaded on the sea at the port in
terms of the agreement. That being so, there was no transaction of sale within the
market area of the Mandi Samiti, Ghaziabad. Therefore, the High Court rightly held that
the Mandi Samiti was not entitled to levy any market fee. There is no merit in the
appeal, which is accordingly dismissed.
Appeal dismissed. .
AIR 2006 SUPREME COURT 2712 "Falcon Tyres Ltd., M/s. v. State of
Karnataka"
= 2006 AIR SCW 3667
(From : ILR (2001) 1 Kant 3141)
Coram : 2
ASHOK BHAN AND MARKANDEY KATJU, JJ.
Civil Appeal No. 4408 of 2001, D/- 20 -7 -2006.
M/s. Falcon Tyres Ltd. v. State of Karnataka and Ors.
Karnataka Tax on Entry of Goods into Local Areas for Consumption, Use or Sale
Therein Act (27 of 1979), S.2(A)(1), S.3(6), Sch.2, Sl.2 - AGRICULTURAL PRODUCE ENTRY TAX - 'Agricultural produce'/'Horticulture produce' - Will not include rubber Legislative intention will have to be given effect to in consonance with the definition as
contained in statute - Exemption from entry tax cannot be claimed on rubber.
From the reading of the definition under S. 2(A)(1), it unequivocally emerges that
rubber and few other items enumerated therein are excluded from being agricultural
produce or horticulture produce. For all intent and purposes as far as the present Act is
concerned, it is the definition given in the Act which will govern the expression
'agricultural produce'. In the definition clause of S. 2(A)(1) rubber is excluded from the
agricultural produce, sub-sec. (6) of S. 3 provides for exemption in respect of goods
specified in the Second Schedule. At Sl. No. 2 of the Second Schedule, only tea, coffee
and cotton (whether ginned or un-ginned) have been given exemption from payment of
Entry Tax and not other items such as rubber, cashew, cardamom and pepper and such
other agricultural produce which has been subjected to any process for making it fit for
human consumption. Intention of the legislature is that though tea, coffee and
@page-SC2713
cotton have been excluded in the definition clause from the agricultural produce
but for the purposes of the Entry Tax Act tea, coffee and cotton are exempted from
payment of Entry Tax. This is an exception created by the legislature. If the legislature
intended to create exception for rubber also it could have done it but it chose not to do
it. Simply because the legislature has included tea, coffee and cotton in the Second
Schedule exempting it from payment of Entry Tax does not mean that all other
agricultural produce items which have been excluded from the definition of the
agricultural produce would stand included in the Second Schedule to the Act exempting
them from payment of Entry Tax. This would be doing violation to the Act as well as
acting contrary to the intent of the legislature. (Paras 12, 13, 15)
Cases Referred :
Chronological Paras
1994 AIR SCW 1974 : AIR 1994 SC 2218
4, 14Dhruv Mehta, Harshvardhan
Jha and Yashraj Singh Deora (for M/s. K. L. Mehta and Co.), Advs., for Appellant;
Sanjay Hegde, Adv., for Respondents.
Judgement
BHAN, J. :- The appellant is a public limited company and a dealer registered
under the Karnataka Tax on Entry of Goods Act, 1979 (hereinafter referred to as "the
Entry Tax Act"). It is engaged in the manufacture of tyres of two wheeler motor vehicles.
Appellant is located in Metagalli in Mysore and Metagalli is a local area within the
definition of 'Local area' in Section 2(A)(5) of the Entry Tax Act. The main input in the
manufacture of tyres is rubber which the appellant procures from the neighbouring State
of Kerala.
2. Sub-section (1) of section 3 of Entry Tax Act prescribes that there shall be
levied and collected tax on entry of any goods specified in the First Schedule into a local
area for consumption, use or sale therein, at such rates not exceeding 5% of the value
of the goods, as may be specified retrospectively or prospectively, by the State
Government by issuance of Notifications. Section 2 of the Entry Tax Act defines the
various expressions used in the Act. The expression 'Agriculture produce or horticulture
produce' is defined in section 2(A)(1). In substance, it includes all agriculture or
horticulture produce excluding tea, coffee, rubber, cashew, cardamom, pepper and
cotton and such agricultural or horticultural produce which has been subjected to any
physical, chemical or other process for being made fit for consumption except merely
cleaning, grading, sorting or drying.
Sub-section (6) of Section 3 provides for total exemption from entry tax on the
goods specified in the Second Schedule to the Entry Tax Act. The exemption Schedule,
i.e., Second Schedule in Sl. No. 2, specifies agricultural produce including tea, coffee
and cotton (whether ginned or unginned) as exempt from the Entry Tax.
3. Appellant claimed exemption from entry tax before the assessing authority on
the value of rubber brought into the local area for the assessment year 1996-97 in terms
of the definition of agricultural produce or horticultural produce read with Sl. No. 2 of the
Second Schedule to the Entry Tax Act. The assessing authority held that rubber is not
one of the agricultural produce included in Sl. No. 2 in the Second Schedule and
consequently, disallowed the claim. Appellant contested the assessment order before
the first appellate authority, i.e., Joint Commissioner of Commercial Taxes (Appeals)
Bangalore City Division. The first appellate authority held that rubber purchased by the
appellant from outside the State of Karnataka was subjected to treatment by sulphuric
acide and smoke to make it into sheets and therefore such rubber sheets do not fit the
definition of agricultural produce under Section 2(A)(1) of the Entry Tax Act. The first
appellate authority held that Sl. No. 2 of Second Schedule to the Act also clearly
excluded rubber from the purview of agricultural produce. Consequently, the appeal was
dismissed.
4.The appellant being aggrieved carried the matter in second appeal before the
Karnataka Appellate Tribunal (for short "the Tribunal"). The Tribunal applied the
judgment of this Court in the case of M/s. Karnataka Forest Development Corporation
Ltd. v. Cantreads Pvt. Ltd. , 1994 (4) SCC 455, and allowing the appeal held, that latex
is a modern name for caoutchouc. It is nothing but natural rubber. Caoutchouc or latex
means not only the milky substance obtained from the trees but it included all milk
substance processed, till it is made marketable. Since the processing does not result
1994 AIR SCW 1974
@page-SC2714
in bringing out a new commodity but it preserves the same and renders it fit for
being marketed, it does not change its character. It continues to be caoutchouc or latex
when it is treated by sulphuric acid and continued to be so even after it is dried with
smoke to obtain the shape of sheets.
5. State of Karnataka being aggrieved by the judgment of the Tribunal filed
statutory civil revision petition in the High Court of Karnataka. By the impugned
judgment the High Court has allowed the civil revision petition and quashed and set
aside the judgment of the Tribunal. The High Court conceded that raw rubber is an
agricultural produce but held that in view of the definition of 'agricultural produce or
horticultural produce' in section 2(A)(1) of the Entry Tax Act, which clearly excludes
rubber, rubber brought in the local area by the appellant could not be considered as
agricultural produce for the purposes of the Entry Tax Act. That Sl. No. 2 of the Second
Schedule specified agricultural produce, does not exempt rubber from payment of entry
tax and therefore when the definition of agriculture produce in Section 2(A)(1) and
enumeration of agriculture produce in Sl. No. 2 of the Second Schedule are taken
together and construed, there could be no ambiguity that raw rubber is not an
agriculture produce for the purposes of the Act. In repelling this contention, the High
Court held that it will have to be guided by the provisions of the definition under Section
2(A)(1) which clearly excludes rubber and not by the enumeration in Sl. No. 2 of the
Second Schedule.
6. Aggrieved against the aforesaid order the present appeal has been filed. Shri
Dhruv Mehta, learned counsel appearing for the appellant strenuously contended that
the High Court erred in construing the definition of 'agricultural produce or horticultural
produce' in Section 2 (A) (1) of the Entry Tax Act as excluding rubber, whereas the
definition properly construed makes it clear that what is excluded is only such tea,
coffee, rubber etc. which are subjected to any physical, chemical or other process for
making them fit for consumption. It is submitted that the semicolon after the word cotton
does not mean that the first part of the Section is disjunctive from 'such produce' as has
been subjected to any physical, chemical or other process. It is further submitted that
punctuation is not a safe tool in construction of statute and if the first part of the Section
is read as disjunctive from the other part it conflicts with Sl. No. 2 in the Second
Schedule. It is also submitted that definition Section which is the interpretation clause to
the statute begins with the expression "unless the context otherwise requires". That
reading of Section 3 (6) read with Sl. No. 2 in the Second Schedule before and after the
amendment in 1992 would lead to the conclusion that rubber which is an agricultural
produce is exempt from Entry Tax. Assuming for the sake of argument that agricultural
produce excludes rubber which is not subjected to any chemical process, does not
necessarily mean that it is not an agricultural produce if the context requires otherwise.
7. As against this Shri Sanjay Hegde, counsel appearing for the State of
Karnataka submitted that the clear cut decision as emerges in Section 2(A)(1) of the
Entry Tax Act unequivocally excludes rubber from all other items that come under the
head of 'agriculture produce' along with a few of the others that are enumerated therein.
It is his submission that for all intent and purposes as far as the present Act is
concerned, it is this definition that will govern the expression 'agriculture produce'. He,
therefore, contends that while reading Entry No. 2 of the Second Schedule to the Entry
Tax Act there is absolutely no scope to include in the entry 'rubber' which has been
specifically excluded in the defining section. That the Tribunal appears to have been
influenced by some of the earlier judicial decisions which relate to the definition of
'agriculture produce' under the Karnataka Sales Tax Act. It was pointed out by him that
as far as the present Act is concerned, the Legislature has deliberately included and
excluded certain items and therefore while interpreting the provisions of the present Act,
the legislative intention will have to be given effect to in consonance with the definition
as contained in the statute.
8. Definition of the expression 'agricultural produce or horticultural produce' in
Section 2(A)(1), sub-section (6) of Section 3 providing for exemption in respect of goods
specified in the Second Schedule and Sl. No. 2 of Second Schedule specifying
"Agricultural produce including tea, coffee and cotton (whether ginned or unginned)" as
relevant are extracted below:
@page-SC2715
Section 2(A)(1):
" 'agricultural produce or horticultural produce' shall not include tea, coffee,
rubber, cashew, cardamom, pepper and cotton; and such produce as has been
subjected to any physical, chemical or other process for being made fit for consumption,
save mere cleaning, grading, sorting or drying."
Sub-section (6) of Section 3:
"6). No tax shall be levied under this Act on any goods specified in the Second
Schedule on its entry into a local area for consumption, use or sale therein."
Sl. No. 2 of Second Schedule:
"2. agriculture produce including tea, coffee and cotton (whether ginned or unginned).
9. We would have readily accepted the submissions advanced by the learned
counsel for the appellant without any difficulty under normal circumstances but for the
fact that in the present Act as indicated by us earlier, term 'agricultural produce' as
defined by the legislature specifically excludes rubber from agricultural produce. Under
the law governing the principles of interpretation of a statute, this Court is necessarily
restricted while construing the expression 'agricultural produce' in relation to the present
Act by the definition that is incorporated in the Act itself. Under these circumstances it is
not possible to accept the submission of the learned counsel for the appellant. The
expression 'agricultural produce' as it appears in the Second Schedule has to be given
its normal and ordinary interpretation. Sl. No. 2 of the Second Schedule which reads
"Agricultural produce including tea, coffee and cotton is an inclusive definition and not
an exhaustive definition. What is excluded from the definition of the 'agricultural
produce' in the Act cannot be held to be an agricultural produce unless the same find
mentions in the Second Schedule. Since the legislature provided tea, coffee and cotton
in Sl. No. 2 of the Second Schedule and not the rubber, rubber cannot be taken to be
agricultural produce within the meaning of 'agricultural produce' as defined under the
Act.
10. We do not find any substance in the submission of the learned counsel for
the appellant that the semicolon after the word cotton does not mean that the first part
of the Section is disjunctive from 'such produce' as has been subjected to any physical,
chemical or other process. Section 2 (A) (1) is in two parts, it excludes two types of food
from agricultural produce. According to us, the definition of the agriculture and
horticulture produce does not say as to what would be included in the agriculture or
horticulture produce, in substance it includes all agriculture or horticulture produce but
excludes, (1) tea, coffee, rubber, cashew, cardamom, pepper and cotton from the
definition of the agriculture or horticulture produce though all these products as per
dictionary meaning or in common parlance would be understood as agricultural produce
and (2) "such produce as has been subject to any physical, chemical or other process
for being made fit for consumption", meaning thereby that the agricultural produce other
than what has been excluded, which has been subjected to any physical, chemical or
other process for making it fit for consumption would also be excluded from the
definition of the agriculture or horticulture produce except where such agricultural
produce is merely cleaned, graded, sorted or dried. For example, if the potatoes are
cleaned, graded, sorted or dried, they will remain agricultural produce but in case raw
potato is subjected to a process and converted into chips for human consumption it
would cease to be agricultural produce for the purposes of the Entry Tax Act. The words
"such produce" in the second part does not refer to the produce which has already been
excluded from the agricultural or horticulture produce but refers to such other
agricultural produce which has been subjected to any physical, chemical or other
process for being made fit for human consumption.
11. We do not agree with the submission of the learned counsel for the appellant
that what is excluded is only such tea, coffee, rubber etc., which are subjected to any
physical, chemical or other process for making them fit for consumption. In our opinion,
the definition of the agriculture and horticulture produce does not say as to what would
be included in the agriculture or horticulture produce, in substance it includes all
agriculture or horticulture produce but excludes tea, coffee, rubber, cashew, cardamom,
pepper and cotton from the definition of the agriculture or horticulture produce though all
these products as per dictionary meaning or in common parlance would be understood
as agricultural produce.
@page-SC2716
12. From the reading of the definition under Section 2(A)(1), it unequivocally
emerges that rubber and few other items enumerated therein are excluded from being
agricultural produce or horticulture produce. For all intent and purposes as far as the
present Act is concerned, it is the definition given in the Act which will govern the
expression 'agricultural produce'. While reading Entry 2 in the Second Schedule to the
Act there is no scope to include rubber from being exempt from payment of entry tax.
Entry 2 of Second Schedule creates exceptions regarding few of the excluded items
from payment of Entry Tax but not all excluded items. The items for which an exception
has been created in Entry 2 of the Second Schedule would only be exempt from
payment of entry tax and not all the items, which have been excluded from being
agricultural produce in the definition clause. While interpreting the provisions of present
Act the legislative intention will have to be given effect to in consonance with the
definition as contained in the statute.
13. In the definition clause of Section 2(A)(1) rubber is excluded from the
agricultural produce, sub-section (6) of Section 3 provides for exemption in respect of
goods specified in the Second Schedule. At Sl. No. 2 of the Second Schedule, only tea,
coffee and cotton (whether ginned or un-ginned) have been given exemption from
payment of Entry Tax and not other items such as rubber, cashew, cardamom and
pepper and such other agricultural produce which has been subjected to any process
for making it fit for human consumption. Intention of the legislature is that though tea,
coffee and cotton have been excluded in the definition clause from the agricultural
produce but for the purposes of the Entry Tax Act tea, coffee and cotton are exempted
from payment of Entry Tax. This is an exception created by the legislature. If the
legislature intended to create exception for rubber also it could have done it but it chose
not to do it. Simply because the legislature has included tea, coffee and cotton in the
Second Schedule exempting it from payment of Entry Tax does not mean that all other
agricultural produce items which have been excluded from the definition of the
agricultural produce would stand included in the Second Schedule to the Act exempting
them from payment of Entry Tax. This would be doing violation to the Act as well as
acting contrary to the intent of the legislature.
14.Learned counsel for the appellant relied upon Karnataka Forest Development
Corporation Ltd. Vs. Cantreads Private Limited and Others, 1994 (4) SCC 455, to
contend that rubber is an agricultural produce. This was a case under the Karnataka
Forest Act, 1963 for the purposes of levy of the Forest Development Tax. The meaning
assigned to the agricultural produce in the present Act is different from what was
assigned to it in the Karnataka Forest Act, 1963. The same is not relevant. Similarly, he
cited two other judgments which are not germane to the point and need not even be
noticed.
1994 AIR SCW 1974
15. The Legislature has deliberately excluded certain items from being
agricultural produce and therefore while interpreting the provisions of the present Act,
the legislative intention will have to be given effect to in consonance with the definition
as contained in the statute.
16. For the reasons stated above, we do not find any merit in this appeal and
dismiss the same with costs.
Appeal dismissed.
AIR 2005 SUPREME COURT 112 "State of Rajasthan v. Mool Chand"
= 2004 AIR SCW 6350
(From : 1998 AIHC 3071 (Raj))
Coram : 2
A. PASAYAT AND C. K. THAKKER, JJ.
Criminal Appeal No. 667 of 1999 with Cri. Appeal 435 of 2002, D/- 14 -10 -2004.
State of Rajasthan, Appellant v. Mool Chand and another, Respondents.
Rajasthan Agricultural Produce Markets Act (38 of 1961), S.17, S.36 - Rajasthan
Agricultural Produce Market Committee Rules (1963), R.59 - AGRICULTURAL
PRODUCE - Market fee - Liability to pay - Is of licensee and not of purchaser - Acquittal
of licensee for non-payment of market fee on ground that purchaser was liable to pay it Not proper.
Krishi Utpadan
@page-SC113
Mandi Samiti v. Indian Wood Products Ltd., AIR 1996 SC 1251 : 1996 AIR SCW
1323 : 1996 All LJ 676, Distinguished.
Judgment in S. B. Cri. R. P. No. 387 of 1995, D/- 13-1-1998 (Rajasthan),
Reversed. (Paras 10, 11, 12, 13)
Cases Referred :
Chronological Paras
Krishi Utpandan Mandi Samiti, Haldwani v. Indian Wood Products Ltd., AIR 1996
SC 1251 : 1996 AIR SCW 1323 : 1996 All LJ 676 : 1996 (3) SCC 321 : 1996 (2)
Supreme 726 (Dintinguished)
3Ms. Madhurima Tatia and Indra Makwana, for
Appellant; Manish Singhvi, Saurabh Ajay, P. V. Yogeswaran, R. K. Gupta, K. K. Gupta,
Sushil Kr. Jain, A.P. Dhamija, H. D. Thanvi, Sarad Singhania, L. P. Singh, Puneet Jain
and Mrs. Pratibha Jain, for Respondents.
Judgement
ARIJIT PASAYAT, J. - These two appeals involve identical issues and therefore
are taken up for disposal together. The judgment impugned in Criminal Appeal No.435
of 2002 was based on the judgment which is the subject-matter of challenge in Crl. A.
No.667 of 1999.
2. The background facts, so far as Crl. A. No. 667 of 1999 is concerned, are as
follows:
3.The respondent had obtained licence No.55 as trader and commission agent
'A' class from the Krishi Upaj Mandi Samity, Jodhpur (hereinafter referred to as the
'Samity'). On 16-12-1989 records of the respondents were inspected. It was found that
the declaration forms issued were not in terms of the Rajasthan Agricultural Produce
Market Act, 1961 (in short the 'Act') and the Rajasthan Agricultural Produce Market
Rules, 1963 (in short the 'Rules') as they did not contain actual details and disclosed
evasion of payment of market duty amounting to Rs.87,639.90/-. A notice was served
on 9-1-1990 on the respondents to deposit the aforesaid amount. On 11-4-1990 another
notice was served, when there was no response to the first notice. Since there was no
response to the second notice also a complaint being No.115 of 1990 on 16-6-1990 was
filed before the appropriate Court for commission of offence in not complying with the
requirements of Section 17 of the Act, thereby attracting action under Section 28 of the
Act. Learned Additional Chief Judicial Magistrate No. 3 at Jodhpur tried the case and
found the respondents guilty of alleged offence of evasion of mandi fee and sentenced
the respondent No.1 to undergo simple imprisonment for three months and imposed
fine of Rs.1,000/- with default stipulation. Further direction was given to the respondents
to deposit the evaded amount of Rs.87,639.90/- in Court. The respondent questioned
legality of the said judgment in Crl. A. No. 46 of 1995. The appeal was heard and
disposed of by learned Special Judge, SC/ST Act cases, Jodhpur. In the appeal only
the State of Rajasthan was impleaded as a party and not the Samity. However the
appellate Court did not find any merit in the appeal and dismissed the same. However,
the sentence was reduced to imprisonment till rising of the Court. The respondents filed
S.B. Criminal Revision Petition No.387 of 1995 and questioned correctness of the
judgment rendered by the Courts below. The High Court allowed the appeal and set
aside the conviction recorded by the Courts below, and ordered refund of the recovered
amount by judgment dated 13-1-1998. The whole basis of the judgment revolves round
the judgment of the Court in Krishi Utpadan Mandi Samiti, Haldwani and Ors. v. Indian
Wood Products Ltd. and Anr. (1996 (3) SCC 321 : 1996 (2) Supreme 726). It was held
by the High Court, purportedly following the decision of this Court that the liability to pay
the market fee was that of the purchaser and the present respondents had no liability to
pay the market fee. AIR 1996 SC 1251 : 1996 AIR SCW 1323 : 1996 All LJ 676
4. In the connected appeal the said judgment of the High Court was followed in a
petition filed by the respondents.
5. In support of the appeals, learned counsel for the appellant-State and the
Samity submitted that the provisions under the U.P. Krishi Utpadan Mandi Adhiniyam,
1964 (hereinafter referred to as the 'U.P.Act') were different. The liability on the traders
is clearly stipulated in the Rajasthan Act itself. The position was different under the U.P.
Act therefore the decision should not have been relied upon without considering the
distinguishing features.
6. In response learned counsel for the respondents submitted that the decision
inKrishi Utpadan's case (supra) was clearly applicable. The provisions are identical and
therefore the High Court was justified in placing reliance on the said judgment.
7. In order to appreciate the rival submission the corresponding provisions of the
two Acts i.e. Rajasthan Act and the U.P. Act need to be noted.
8. So far as the U.P. Act is concerned Section 17 reads as follows:
"Powers of the Committee - A Committee shall, for the purpose of this Act, have
the power to
(i) issue or renew licences under this Act on such terms and conditions and
subject to such restrictions as may be prescribed, or, after recording reasons therefore,
refuse to issue or renew any such licence;
(ii) suspend or cancel licences issued or renewed under this Act:
Provided that before cancelling a licence except on the ground of conduct which
has led to the conviction of the licensee under Section 37, the Committee shall afford
reasonable opportunity to him to show cause against the action proposed.
(iii) levy and collect (a) such fees as may be prescribed for the issue or renewal of licences; and
(b) market fee which shall be payable on transactions of sale of specified
agricultural produce in the market area at such rates, being not less than one per
centum and not more than two and a half per centum of the price of the agricultural
produce so sold as the State Government may specify by notification, and development
cess which shall be payable on such transactions of sale at the rate of half per centum
of the price of the agricultural produce so sold, and such fee or development cess shall
be realized in the following manner:(1) if the produce is sold through a commission agent, the commission agent may
realize the market fee and the development, cess from the purchaser and shall be liable
to pay the same to the Committee;
(2) if the produce is purchased directly by a trader from a producer, the trader
shall be liable to pay the market fee and development cess to the Committee;
(3) if the produce is purchased by a trader from another trader, the trader selling
the produce may realize it from the purchaser and shall be liable to pay the market fee
and development cess to the Committee;
Provided that notwithstanding anything to the contrary contained in any
judgment, decree or order of any Court, the trader selling the produce shall be liable
and be deemed always to have been liable with effect from June 12, 1973 to pay the
market fee to the Committee and shall not be absolved from such liability on the ground
that he has not realized it from the purchaser;
Provided further that the trader selling the produce shall not be absolved from the
liability to pay the development cess on the ground that he has not realized it from the
purchaser;
(4) in any other case of sale of such produce, the purchaser shall be liable to pay
the market fee and development cess to the Committee."
9. In the Rajasthan Act and Rules Section 17 and Rule 59 are relevant. They
read as follows:
"Section 17 - Power to collect market fees: The market committee shall collect
fee from the licensees in prescribed manner on agricultural produce brought or sold by
them in market area at such rate as may be specified by the State Government by
notification in official Gazette, subject to a maximum of Rs.2/- per rupees one hundred
worth of agricultural produce.
Rule 59 - Recovery of Cess and fees: (1) The cess on agricultural produce shall
be payable as soon as it is brought and sold in the market area as may be specified in
the bye-laws.
(2) The market fee shall be paid by the 'purchaser' in the following manner:(i) if the specified agricultural produce is sold through an "A" class broker the "A"
class broker shall charge market fee from purchaser and deposit the same with the
market committee in accordance with the procedure specified in the bye-laws.
(ii) If the specified agricultural produce is not sold through an "A" class broker,
the seller shall charge market fee from the purchaser and deposit the same with the
market committee in the manner specified in the bye-laws.
(iii) In case the seller is not a licensee, the market fee shall be deposited by the
purchaser in the manner specified in the bye-laws.
Explanation: The word 'purchaser' means and includes a person who as a trader
or broker or any other operator has obtained a license for the purchase of agricultural
produce in the market area."
10. There is a basic distinction between the Rajasthan Act and the U.P. Act so
far as the levy of market fee is concerned. In the U.P. Act there is a specific reference of
fixing the liability on the purchaser and in the Rajasthan Act liability is on the licensee.
11. Section 14 of the Act deals with power of market committee to issue licences.
It, inter alia, provides that market committee may issue and renew licences in
accordance with rules and bye-laws to "traders, brokers, weighmen, measurers,
surveyors, warehousemen and other persons". Section 17 deals with power to collect
market fees. The levy is on the agricultural produce brought or sold by licensees in the
market area. The market committee has the power to collect the market fees from the
licensees. It has to be factually determined that the licensee brought or sold "agricultural
produce" (as defined in Section 2(1) (i) in the "market area" (as defined in Section 2(1)
(viii) i.e. any area declared to be a market area under Section 4). The collection of
market fees from the licensee has to be in the prescribed manner. Prescribed as per
Section 2(1) (xii) means prescribed by rules under Section 36. A bare reading of Section
17 makes the position crystal clear that liability to pay market fees is of the licensee and
the collection has to be in the prescribed manner. There can be no doubt as to who is
liable to pay.
12. The basic distinction has been lost sight of by the High Court. The difference
is terminological i.e. 'purchasers' in the U.P. Act and 'licensees' in the Rajasthan Act
operate in different spheres altogether.
13. The High Court unfortunately did not notice the contextual difference between
Section 17 of the Rajasthan Act vis-a-vis Section 17 of the U.P. Act. The logic applied in
the U.P. case i.e. Krishi Utpadan's case (supra) cannot be pressed into service so far as
the Rajasthan cases are concerned, because the legal position is different.
Unfortunately, the High Court has not given any reason as to why it thought that the
U.P. case was applicable to the present appeals without even comparing the various
provisions. Though learned counsel for the respondents submitted that in-depth
analysis has been done and therefore no further analysis is necessary, on the sole
ground that High Court failed to notice the difference in language of the U.P. Act and the
Act, this matter requires to be remitted to the High Court. We, therefore, set aside the
impugned judgments of the High Court and remit the matter for fresh consideration as in
both cases i.e. Criminal Appeals 667 of 1999 and 435 of 2002 legal position is the
same. The factual position has to be examined by the High Court. We make it clear that
we have not expressed any opinion on the merit of the case.
14. The appeals are allowed.
Appeals allowed.
AIR 2004 SUPREME COURT 682 "Harinagar Sugar Mills Ltd. v. State of
Bihar"
= 2003 AIR SCW 6324
(From : 2000 (3) Patna LJR 419)
Coram : 2
BRIJESH KUMAR AND ARUN KUMAR, JJ.
Civil Appeals Nos. 8274-8292 with 8293-8311 of 2001, D/- 19 -11 -2003.
Harinagar Sugar Mills Ltd., Appellant v. State of Bihar and others, Respondents.
Bihar Agricultural Produce Markets Act (16 of 1960), S.27B - AGRICULTURAL
PRODUCE - Deposit made with market Committee - As pre-condition for entertainment
of appeal - Nature of deposit - Deposit of 1/3rd of market fee assessed required to be
made under S. 27-B - Is nothing else but part of fee assessed and due - Its nature does
not change because it would be refunded if appeal succeeds - Such deposit made
before decision in Belsund Sugar Mills, 1999 AIR SCW 3074 : AIR 1999 SC 3125 is not
required to be refunded as per the S.C. decision - Penalty levied on whole amount due However has to be refunded.
The appellant-sugar mill was assessed as regards market fee payable on the
transactions of purchase of sugarcane and molasses. The market fee due and payable
was determined. The appellant filed an appeal against the assessment. 1/3rd of the
market fee assessed was paid by the appellant as a pre-condition for entertainment of
appeal as provided under S. 27-B. The appeal was dismissed so also the revision. The
appellant then filed a writ petition. During the pendency of revision S.C. passed its order
in Belsund Sugar Mills, 1999 AIR SCW 3074 : AIR 1999 SC 3125 in which the levy of
market fee was held to be invalid. That decision was given prospective effect. It was
ordered that the judgment was prospective in effect without affecting the past
transactions. The amount of the liability of the fee which had already been paid till the
date of the S.C. order was not to be refunded but the balance which remained unpaid
was also not to be recovered. The appellant sought refund of the 1/3rd of fee paid while
filing appeal. The question that arose was therefore whether the amount deposited in
view of S. 27-B of the Act is deposit of the liability of dues of fee assessed or not.
Held, the amount in respect of which the appellate authority is to be satisfied that
it has been so deposited, according to S. 27-B of the Act has to be in certain proportion
of the amount of fee assessed and due. That is to say the liability of the assessee is
already fixed and the amount assessed is treated to be amount due to be paid, it is an
ascertained amount out of dues which must be paid to the Committee. Therefore, there
can hardly be any doubt about the fact that it is a part of the amount out of the total
liability outstanding against the appellant which appellant is required to pay to the party
viz. the Market Committee before filing an appeal. It is not a deposit in Court or with
appellate authority. Merely because liability in certain proportion is ensured to be in
deposit before filing of an appeal, does not change the character of the deposit of a part
of dues which is also specifically described to be fee assessed as due. It is not provided
that the deposit is by way of security which would generally not be required to be paid to
the party. Such deposits like security deposits are of different kind which are sometimes
found provided for without reference to any monetary liability involved in the case, e.g.
in election petition or other proceedings where some amount of security may be
required to be deposited. In the present case, there is no scope to treat the amount
deposited as anything else except
@page-SC683
part of the fee assessed and due. It is to be noted that the provision under S. 27B of the Act is that the appellate authority is to be satisfied that the appellant has
deposited with the Market Committee one-third of the fee assessed before he files an
appeal. It is quite obvious that in case the appeal fails what would be required to be
deposited would only be the balance of the amount of the liability, if that too is not
already paid. In case the appeal succeeds, the amount paid against assessed liability
which is later set aside cannot be retained and in the normal course, it is liable to be
refunded, unless of course for some good reasons, it is ordered otherwise. Therefore,
merely, because the amount deposited may have to be refunded in case appeal
succeeds that alone does not mean that the nature of the deposit is changed or it is
anything else except the amount of levy assessed and due, particularly looking to the
language used and provision made under S. 27-B.
(Para 12)
Where amount of liability has been assessed and fixed and the order exists, preappeal deposit will be nothing else but payment of a part of the liability assessed and
discharged to the extent of the amount of liability paid, subject to the result of the
appeal. Mere filing of the appeal does not absolve the appellant nor suspends the
liability assessed during pendency of the appeal. It continues unless paid or set aside.
Any payment made during that period when liability subsists shall be in discharge of that
liability as fixed.
(Para 13)
In the instant case since the liability has been assessed, Appeal that was filed
with pre-deposit was dismissed. Revision was also dismissed. And subsequently the
S.C. decision in Belsund Sugar Mills, 1999 AIR SCW 3074 : AIR 1999 SC 3125 had
come. The deposit made of 1/3rd amount of fee assessed with appeal was not liable to
be refunded. The two-third of the market fee assessed, realisation of which was stayed,
is not liable to be paid or recovered.
(Para 14)
The penalty has been imposed considering the whole amount of fee assessed,
even the amount which is not recoverable in pursuance of the judgment of S.C. passed.
It would be completely an anomalous situation that the balance unpaid amount of twothird would not be liable to be paid or recovered but 10% of penalty on that amount
which has been deposited, while filing the appeal would not be refunded. (Paras
16,
18)
Cases Referred :
Chronological Paras
Belsund Sugar Co. Ltd. v. State of Bihar, AIR 1999 SC 3125 : 1999 AIR SCW
3074 5, 7, 9, 10, 14, 15, 16
State of M.P. v. Indore Iron and Steel Mills Pvt. Ltd., AIR 1998 SC 3050 : 1998
AIR SCW 2910 : (1998) 6 SCC 416 (Disting.) 9
Voltas Limited v. Union of India, 1999 (112) ELT 34 : 1998 (76) Delhi LT 841
9, 13
Suvidhe Ltd. v. Union of India, 1996 (82) ELT 177 (Bom)
9
State of U.P. v. Committee of Management S.K.M. Inter College, 1995 AIR SCW
3030 : 1995 Supp (2) SCC 535 10
Super Cassettes Industries Ltd. v. Collector of Customs, 1993 (66) ELT 557 (Cal)
9
Chandigarh Administration v. Manpreet Singh, AIR 1992 SC 435 : 1992 AIR
SCW 28 : (1992) 1 SCC 380
10
H. B. Gandhi v. M/s. Gopinath and Sons, 1992 Supp (2) SCC 312
10
Commissioner of Income-tax, Lucknow v. Bazpur Co-operative Sugar Factory
Ltd., AIR 1988 SC 1263 : 1988 Tax LR 1095 : (1988) 3 SCC 553 9
Anant Mills Co. Ltd. v. State of Gujarat, AIR 1975 SC 1234 : (1975) 2 SCC 175
12
J. Dalmia v. C.I.T., New Delhi, AIR 1964 SC 1866 : (1964) 7 SCR 579
9Shanti Bhushan, G. C. Bharuka, Sr. Advocates, Praveen Kumar, H. Devrajan,
Ramesh Agrawal, Ms. D. Chhapgar, Prateek Kumar, Advocates with them, for
Appellant; Salman Khursheed, Sr. Advocate, Sunil Roy, Advocate with him, for
Appellant in C.A. No. 8293/2001; S. B. Sanyal, Sr. Advocate, Sunil Roy, Advocate with
him, for Respondents.
Judgement
BRIJESH KUMAR, J. :- The appellant, in the above noted Civil Appeals Nos.
8274-8292 of 2001 is a 'Company' registered under the Indian Companies Act, 1956
and has a sugar factory situate in Harinagar, District West Champaran in the State of
Bihar. For the purposes of manufacture of sugar, the appellant had been purchasing
sugarcane and the sugar produced would be sold as per provisions under the law. The
molasses collected as one of the by-products was also sold by the appellant. By
@page-SC684
means of a Notification dated 21-7-1976 issued under Bihar Agricultural Produce
Markets Act, 1960 (for short 'the Act'), Ram Nagar Agricultural Produce Market Area
was constituted. A licence under the provisions of the Act was issued by the concerned
Market Committee viz. the Bagha Agricultural Produce Marketing Committee to the
appellant as a result of which the transactions of purchase of sugarcane and sale of
sugar and molasses became subject to payment of market fee. The connected Civil
Appeal Nos. 8293-8311 of 2001 have been filed by the Bagha Agricultural Produce
Marketing Committee aggrieved by the part of the judgment of the High Court holding
that they would not be entitled to recover the balance two-third amount of market fee
which remained unpaid. For the sake of convenience in this judgment wherever we
have referred "the appellant," it is referred for the appellant in Civil Appeals Nos. 82748292 of 2001, namely Harinagar Sugar Mills Ltd.
2. The appellant filed a suit in the Court of the Subordinate Judge, Bettiah
challenging the levy of market fee raising different grounds. By means of an interim
injunction the Market Committee was restrained from realizing the market fee from the
appellant. The suit was ultimately decreed in favour of the appellant in the year 1985.
An appeal was preferred against the decree by the Market Committee, which was
allowed on 28-8-1993 by the 2nd Additional District Judge. The second appeal preferred
by the appellant was admitted and the judgment and order passed by the first appellate
Court was stayed. The second appeal was disposed of in the year 1994 remanding the
matter to the first appellate Court for consideration of the points which remained
undisposed of. The appellant approached this Court by filing a Special Leave Petition in
which leave was granted and it was numbered as Civil Appeal No. 1282 of 1995.
However, in 1996 the learned single Judge dismissed the Second Appeal No. 516 of
1993 which was filed by the appellant in the High Court against which also a special
leave petition was filed (S.L.P. (C) No. 9811 of 1996) in this Court.
3. During the pendency of the above matters before this Court, the Market
Committee issued notices to the appellant for assessment for the years 1977-78 to
1995-96. The appellant was called upon to produce the relevant records before the
Assessment Sub-Committee. In all 19 notices were issued for the period 1977-78 to
1995-96 for each year separately. This Court had also dismissed the S.L.P. (C) No.
9811 of 1996 in limine preferred against the judgment of the High Court dismissing the
Second Appeal No. 516 of 1993. Ultimately market fee was assessed on the basis of
best judgment assessment in respect of the 19 years, namely, from 1977-78 to 199596. Besides the market fee, penalty was also imposed to the tune of Rs. 1,85,51,658/-.
The respondent, after making adjustment of the payments made, issued demand
notices for depositing the market fee and the amount of penalty.
4. Feeling aggrieved by the order of assessment, the appellant filed 19 separate
appeals for each year under S. 27-B of the Act before the Regional Director, Bihar
Agricultural Produce Marketing Board. As per provisions contained under S. 27-B of the
Act, the appellant deposited 1/3rd amount of the tax liability amounting to Rs.
1,84,06,973.20 ps. and the amount of penalty as well, as per requirement. By order
dated 29-5-1998, the appellate authority dismissed all the appeals preferred by the
appellant confirming the levy of market fee and penalty. The appellant filed revisionpetitions before the Managing Director of the Bihar Agricultural Produce Marketing
Board against the order dismissing the appeals. The revisional authority dismissed all
the revisions preferred by the appellant by order dated 23-3-1999. The appellant
thereafter preferred 19 writ petitions before the Patna High Court with a prayer for
quashing of the assessment orders dated 16-5-1997. In the meantime, on 10-8-1999
Civil Appeal No. 1282 of 1995 filed by the appellant along with Civil Appeal No. 398 of
1977 filed by Belsund Sugar Company Ltd. was allowed by a Constitution Bench of this
Court.
5.This Court, by means of the aforesaid judgment reported in AIR 1999 SC 3125,
Belsund Sugar Company Ltd. v. State of Bihar, held that provisions of the Market Act do
not apply to the transactions of purchase of sugarcane and sale of sugar and molasses
by the Sugar Mills situate in the market area of the Market Committee. The judgment of
this Court was however, made prospective
1999 AIR SCW 3074 paras 106 and 107
in application and the relevant part having bearing on the merits of the matter in
hand may be perused which is quoted hereunder:
". . . . . . .keeping in view the peculiar facts and circumstances of these cases, we
deem it fit to direct in exercise of our powers under Art. 142 of the Constitution of India
that the present decision will have only a prospective effect. Meaning thereby that after
the pronouncement of this judgment all future transactions of purchase of sugarcane by
the sugar factories concerned in the market areas, as well as the sale of manufactured
sugar and molasses produced therefrom by utilizing this purchased sugarcane by these
factories will not be subjected to the levy of market fee under S. 27 of the Market Act by
the Market Committees concerned. All past transactions up to the date of this judgment,
which have suffered the levy of market fee will not be covered by this judgment and the
collected market fees on these past transactions prior to this judgment will not be
required to be refunded to any of the sugar mills which might have paid these market
fees.
107. However, one rider has to be added to this direction. If any of the Market
Committees has been restrained from recovering market fee from the writ petitioners in
the High Court or if any of the writ petitions in the High Court has, as an appellant
before this Court, obtained stay of the payment of market fee then for the period during
which such stay has operated and consequently market fee was not paid on the
transactions covered by such stay orders there will remain no occasion for the Market
Committee concerned to recover such market fee from the concerned sugar mill after
the date of this judgment even for such past transactions. In other words, market fees
paid in the past shall not be refunded. Similarly, market fees not collected in past also
shall not be collected hereafter. The impugned judgments of the High Court in this
group of sugar matters will stand set aside as aforesaid. The writ petition directly filed
before this Court also will be required to be allowed in the aforesaid terms."
A perusal of the above judgment indicates that the judgment has been made
prospective in effect and the market fee paid prior to the judgment in respect of past
transactions was not liable to be refunded to the sugar mills. At the same time where
market fee was not paid on past transactions in view of any stay order granted by the
Court those dues would not be recoverable from the sugar mills. The petitioners, while
filing appeals under S. 27-B of the Act, had deposited one-third of the market fee levied
and the required amount of penalty with the Market Committee in view of provision of S.
27-B of the Act, which reads as under :
"27-B. Appeal.- (1) Any person dissatisfied with the order passed on assessment
may appeal to the Regional Director of Agriculture Marketing of the area concerned.
(2) No appeal under sub-section (1) against the order of assessment under subsection (7) or against the order of penalty passed under sub-section (8) of S. 27-A, or
assessment under S. 27-AA shall be entertained unless the appellate authority is
satisfied that the appellant has deposited with the Market Committee :
(a) In case of an appeal against the order of assessment and levy of market fee
under sub-section (7) of S. 27-A or S. 27-AA one-third of the fee assessed as due
against him or the admitted amount of fee whichever is higher.
(b) In case of an appeal against the order passed under sub-section (8) of S. 27A, ten per cent. of the levy of penalty due from him."
6. The above noted provision requires the appellate authority to be satisfied that
the deposit of one-third of the fee assessed as due, against the assessee and ten per
cent. of penalty is also deposited by the assessee with the Market Committee failing
which the appeal would not be entertainable at all.
7.At the time when the judgment was pronounced in Belsund Sugar Mill's case
(supra) on 10-8-1999, the writ petitions preferred by the appellant impugning the
assessment and imposition of fee and fine were pending in the High Court. The Division
Bench disposed of all the 19 pending writ petitions saying that the matter had become
academic only. However, in view of the observations made by this Court in paragraphs
quoted above in Belsund Sugar Mill's case (supra), the appellant made a prayer before
the High Court that the amount which they had deposited before filing of appeals may
be ordered to be
AIR 1999 SC 3125 : 1999 AIR SCW 3074 refunded to the
appellant. The Market Committee on the other hand made a request that they may be
allowed to recover the balance amount of the market fee which remained due against
the appellant. The High Court refused the prayers of both the parties. It was held by the
High Court that since the appellant had already deposited the amount of fee assessed
on filing of the appeal, the said amount was not liable to be refunded in terms of the
order passed in Belsund Sugar Mill's case (supra). As it concerns the refund of the
amount of 10% of the penalty deposited by the appellant, the High Court observed that
it was integral part of the fee as the same was imposed for default on the part of the
petitioner in payment of the market fee. Therefore, it was also not liable to be refunded.
It was also found that, according to the judgment of this court, the balance amount of
the assessed fee was also not liable to be recovered by the Market Committee from the
appellant. This is how both parties have filed appeals against the judgment of the High
Court.
8. The main contention raised by Shri Shanti Bhushan, learned senior counsel
appearing on behalf of the appellant, the sugar mills, is that one-third amount of the
market fee as due, was deposited in compliance of the statutory provisions, according
to which, it was a condition to be complied with before filing an appeal. Therefore, such
a deposit cannot be taken to be payment of amount of market fee. It is submitted that
there is no element of voluntary payment. Hence, it cannot amount to "fee paid" which
may absolve the liability of market fee as assessed and found due against the appellant.
9
.The relevant provision for refund made in the judgment of this Court in the case
of Belsund Sugar Mill's case (supra) is "..... the collected market fees on these past
transactions prior to this judgment will not be required to be refunded to any of the sugar
mills which might have paid these market fees." In the next paragraph again it is
provided "......In other words, market fees paid in past shall not be refunded........". The
question, therefore, which falls for consideration is as to whether the amount deposited
with the market committee in view of the provisions of Section 27-B of the Act, before
filing an appeal, would amount to 'amount of fee paid' by the appellant or not. In support
of the contention that it would not be payment of the amount of fee assessed, reliance
has placed on a decision reported in 1964 (7) SCR 579, J. Dalmia v. Commissioner of
Income Tax, New Delhi, so as to indicate the meaning of the word 'paid'. It is in context
with Section 16(2) of the Income-tax Act, 1922. The appellant before the Court held
some shares in a company which had declared interim dividends in respect of which the
appellant had also received a dividend warrant for a certain amount, as a shareholder in
the company. The said amount of interim dividend was sought to be included in the
income of the appellant in a particular assessment year. It was held that declaration of a
dividend by a company may give rise to a debt it would not be enforceable as the
Directors may rescind the resolution before actual payment of the dividend. It has been
observed that dividend may be said to be paid within the meaning of Section 16(2) of
the Income Tax Act, when the company discharges its liability and makes the amount
unconditionally available to the member entitled thereto. On the basis of the above
observation, it is submitted that the deposit made with the market committee in
pursuance of the provisions contained under Section 27-B of the Act was not
unconditionally available to the market committee. Nor it can be said that on such a
deposit the liability of the appellant stood discharged to the extent of the payment made.
The case referred to by the appellant noted above discussed and related to the
provisions of the Income Tax Act. The interpretation was also made accordingly. In the
case in hand, it was not merely a question of making an assessment and keeping the
demand as due, on the other hand, one third of the amount of the fee assessed was
actually deposited with the market committee, though, of course in pursuance of the
provisions contained under Section 27-B of the Act. It is obvious that ultimately it would
depend upon the result of the appeal as to whether the amount so deposited was liable
to be retained by the market committee or the same was liable to be refunded in the
event appeal succeeded. It can thus be said that at the time of the deposit of the
amount in pursuance of the requirement of Section 27-B of the Act the amount was
actually paid AIR 1999 SC 3125 : 1999 AIR SCW 3074
AIR 1964 SC 1866
AIR 1988 SC 1263 : 1988 Tax LR 1095
AIR 1998 SC 3050 : 1998 AIR SCW 2910
@page-SC687
but it would be subject to result of appeal. Thus the crucial stage which would be
relevant is the stage of decision of the appeal. Yet another case relied upon so as to
ascertain the meaning of the word 'paid' is reported in 1988(3) SCC page 553,
Commissioner of Income Tax, U.P.-II Lucknow v. Bazpur Co-operative Sugar Factory
Ltd., Bazpur, Distt. Nainital. The question for consideration in the above noted case was
as to whether the deductions made from the amount payable to its members on account
of supply of sugarcane could be included in taxable income or not. It was held that it is
immaterial as to under what head the deposits are entered, on the other hand what
would be material is the purpose for which they are to be utilized. The deductions were
for the "Loss Equalisation and Capital Redemption Reserve Fund". But it was first liable
to be used in adjusting the losses of the society and thereafter for payment of initial loan
from Industrial Finance Corporation and then for redeeming the government share and
only in the event of balance being left it was liable to be converted into share capital. So
the primary purpose was to discharge the liability of the society. Hence they were liable
to be included in the taxable income as amount paid. We don't think that the said
decision helps the appellant in any manner. Similarly, a decision referred to in the case
of State of M.P. and Ors v. Indore Iron and Steel Mills Pvt. Ltd. (1998)6 SCC 416 also
has no application to the question involved in the present case. The next case referred
to is reported in 1993 (66) E. L. T. 557 (Cal), Super Cassettes Industries Ltd. v.
Collector of Customs. In this case as a pre-condition for filing an appeal the petitioner
had made deposit of disputed amount as per requirement of Section 129E of the
Customs Act, 1962. The appeal was allowed. The petitioner in that case applied for
refund of the amount deposited as a pre-condition of filing an appeal. The same was not
refunded and an argument seems to have been raised that it was amount of duty
deposited by the petitioner hence, not liable to be refunded. The High Court repelled the
argument and held as follows :
"Such deposit should not be treated as payment of duty. The Section itself
speaks of the payment as "deposit with proper officer". Therefore, provisions of Section
27 cannot stand in the way of refund of deposit made by the petitioner for preferring an
appeal to CEGAT. Section 27 applies only to the case of persons who are claiming
refund of any duty paid in pursuance to an order of assessment or any duty borne by
that person. But when an amount equivalent to duty is deposited with 'proper officer' for
the purpose of preferring an appeal, such deposit cannot be treated as duty paid by the
petitioner in pursuance to an assessment order. The amount deposited remained
merely as deposit till the disposal of the appeal by the tribunal. Now the petitioner has
succeeded in the appeal. The petitioner is entitled to obtain refund of the amount
deposited."
(Emphasis supplied)
It is to be noted that the deposit made as a pre-condition of filing an appeal has
been though held cannot be treated as duty paid by the petitioner in pursuance of the
assessment order and it was held that it remained as a deposit till the disposal of the
appeal. Since the appellant has succeeded in the appeal the amount was liable to be
refunded. Therefore, what has been held is that during the pendency of the appeal such
a deposit equivalent to the duty remains only a deposit and not the duty paid. But as it is
evident the character of the deposit would change on decision of the appeal. Another
case relied upon on behalf of the appellant is reported in 1996(82) E.L.T.177 (Bom),
Suvidhe Ltd. v. Union of India. In this case also it has been held that deposit made as a
pre-condition to avail of the right of appeal is not payment of duty but it is only a deposit
and on the appeal being allowed the same was liable to be refunded. In this case also it
is to be noted that the result of the appeal has an important bearing on the nature of the
deposit. 1999 (112) E. L. T. (Del), Voltas Limited v. Union of India, has also been relied
upon. In this case also deposit was made in terms of Section 35F of the Central Excise
Act, 1944 while filing an appeal. The order under appeal was set aside and while
allowing the appeal the case was remanded. It was held that in such circumstances
there was no reason to retain the deposit which was liable to be refunded. It was
observed that once the order was not found to be
1999 (112) ELT 34
@page-SC688
satisfactory and set aside, a fresh decision on the matter was awaited after
adjudication. There was no such provision providing for deposit during pendency of
adjudication in absence of any order assessing liability, the one which was appealed
against ceased to exist on being set aside in appeal. According to the relevant provision
it was deposit pending appeal. It is thus observed in the judgment as follows.
".......It is clear that the amount so deposited remains a deposit pending appeal
and is thereafter available for appropriation or disbursal consistently with the final order
maintaining or setting aside the order of adjudication."
All the above noted cases of different High Courts are those where the order
fixing the liability has been set aside and the appeal had been allowed. No case has
been cited wherein it may have been held that even though the appeal is dismissed the
amount so deposited would not be treated as a deposit towards the tax liability.
10.On the other hand, Shri S. B. Sanyal, learned senior counsel appearing for
the market committee in these appeals submits that the amount deposited in view of
Section 27-B of the Act before filing an appeal is nothing else but the amount of market
fee as assessed and due against the assessee which is paid. Once it is a payment of
part of the fee, paid before the judgment of this court in the Belsund Sugar Mill's case
(supra) it is not liable to be refunded. It has also been submitted that the amount so
deposited is not from the coffers of the petitioner mill but the amount which was realized
by them from other parties to be passed on to the market committee. He has further
indicated that the revisional Court in its order while dismissing the revisions, directed the
committee to take steps to realize the balance amount of market fee and the penalty
from the appellant. On this basis it is submitted that the amount already deposited,
namely, one third of the amount due on account of fee while filing an appeal was treated
as an amount of fee and by itself liability of the petitioner to that extent was discharged.
He has also drawn our attention to some of the observations made by the appellate
authority to show that amount deposited was treated to have been "paid". In support of
his contention that the amount was not liable to be refunded, he has drawn our attention
to the provisions of the Customs Act and the Central Excise Act that the amount
deposited is amount relating to demand. Section 129E of the Customs Act mentions
deposit of the amount pending appeal, out of the demand or penalty levied. He has also
referred to Section 35F of the Central Excise Act to strengthen the argument. We,
however, do not deem it necessary to refer to the provisions under the other Act, and
may peruse the provisions as contained under the Bihar Agricultural Produce Markets
Act. It has also been submitted on behalf of the respondents that on dismissal of the
appeal there was no occasion to ask for the refund of the amount paid out of the liability
assessed and due. The revision preferred against the order of dismissal of appeal was
already dismissed and the pendency of the writ petitions against the orders passed in
revision would be of no relevance as writ proceedings are not continuation of the suit or
appeal. In support of his contention, he has referred to certain decisions. In 1992 Supp
(2) SCC 312, H. B. Gandhi, Excise and Taxation Officer-cum-Assessing Authority,
Karnal and Ors. v. M/s Gopinath and Sons and Ors. It has been held that judicial review
under Article 226 of the Constitution is not directed against the decision but is confined
to decision making process. In exercise of writ jurisdiction re-appraisal of evidence or
the correctness of the decision is not to be gone into. It is not to be treated as an appeal
against the orders impugned. (1992)1 SCC 380, Chandigarh Administration and Ors. v.
Manpreet Singh and Ors. has been referred to for the proposition that the High Court
cannot assume the appellate jurisdiction while exercising power under Article 226. 1995
Supp (2) SCC 535, State of U.P. and Ors. v. Committee of Management of S. K. M.
Inter College and Ors, has also been referred to for the same proposition that
proceedings under Article 226 of the Constitution are not like appellate proceedings. On
the basis of the above decisions the contention is that the decision of the statutory
authorities on facts had attained finality and the pendency of writ petition cannot be said
to be continuation of those proceedings. Hence
AIR 1999 SC 3125 : 1999 AIR
SCW 3074
AIR 1992 SC 435 : 1992 AIR SCW 28
1995 AIR SCW 3030
@page-SC689
what-ever amount had been deposited as against the fee due would only be
payment towards the discharge of the liability. Our attention has also been drawn by the
learned counsel to some other details regarding the manner in which the demand of the
balance amount has been made and to the fact as to whether the appellants had
realized the amount from others to be passed on to the appellant and that the amount
deposited with market committees had been spent by them. We think these points will
not materially affect the merits of the matter nor we propose to enter into those areas of
factual disputes.
11. The main question, however, that needs to be considered is whether the
amount deposited in view of Section 27-B of the Act is deposit of the liability of dues of
fee assessed or not.
12.The amount in respect of which the appellate authority is to be satisfied that it
has ben so deposited, according to Section 27-B of the Act has to be in certain
proportion of the amount of fee assessed and due. That is to say the liability of the
assessee is already fixed and the amount assessed is treated to be amount due to be
paid, it is an ascertained amount out of dues which must be paid to the committee.
Therefore, there can hardly be any doubt about the fact that it is a part of the amount
out of the total liability outstanding against the appellant which appellant is required to
pay to the party viz. the market committee before filing an appeal. It is not a deposit in
Court or with appellate authority. Merely because liability in certain proportion is
ensured to be in deposit before filing of an appeal, does not change the character of the
deposit of a part of dues which is also specifically described to be fee assessed as due.
It is not provided that the deposit is by way of security which would generally not be
required to be paid to the party. Such deposits like security deposits are of different kind
which are sometimes found provided for without reference to any monetary liability
involved in the case, e.g. in election petition or other proceedings where some amount
of security may be required to be deposited. In the present case, there is no scope to
treat the amount deposited as anything else except part of the fee assessed and due. It
is to be noted that the provision under Section 27-B of the Act is that the appellate
authority is to be satisfied that the appellant has deposited with the market committee
one third of the fee assessed before he files an appeal. It is quite obvious that in case
the appeal fails what would be required to be deposited would only be the balance of
the amount of the liability, if that too is not already paid. In case the appeal succeeds,
the amount paid against assessed liability which is later set aside cannot be retained
and in the normal course, it is liable to be refunded, unless of course for some good
reasons, it is ordered otherwise. For Example, where it may amount to undue
enrichment of the appellant. In the case of the appeal being unsuccessful, in the normal
course, nothing more would be required to be done to the extent of deposit made.
Therefore, merely, because the amount deposited may have to be refunded in case
appeal succeeds that alone does not mean that the nature of the deposit is changed or
it is anything else except the amount of levy assessed and due, particularly looking to
the language used and provision made under Section 27-B of the Act, where the
appellate authority has only to be satisfied about the payment made to the committee.
Some observations relating to deposit of the tax liability while filing an appeal, though in
a slightly different context, throw some light as to the nature of the deposit. In the Anant
Mills Co. Ltd. and Ors. etc. etc. v. State of Gujarat and Ors. etc. etc. (1975)2 SCC 175
at page 202,, this court observed:
AIR 1975 SC 1234 at p. 1249, para 40
"......... In the absence of any special reasons there appears to be no legal or
constitutional impediment to the imposition of such conditions. It is permissible, for
example, to prescribe a condition in criminal cases that unless a convicted person is
released on bail, he must surrender to custody before his appeal against the sentence
of imprisonment would be entertained. Likewise, it is permissible to enact a law that no
appeal shall lie against an order relating to an assessment of tax unless the tax had
been paid. Such a provision was on the statute book in Section 30 of the Indian Incometax Act, 1922. The proviso to that section provided that ".......... no appeal shall lie
against an order under sub-sec. (1) of Section 46 unless the tax had been paid". Such
conditions merely regulate the exercise of the right of appeal so that the same is not
abused by a recalcitrant party and there is
@page-SC690
no difficulty in the enforcement of the order appealed against in case the appeal
is ultimately dismissed. It is open to the Legislature to impose an accompanying liability
upon a party upon whom legal right is conferred or to prescribe conditions for the
exercise of the right. Any requirement for the discharge of that liability of the fulfilment of
that condition in case the party concerned seeks to avail of the said right is a valid piece
of legislation, and we can discern no contravention of Article 14 in it."
(Emphasis supplied by us)
It appears that imposition of a pre-condition of deposit of the liability before filing
an appeal was challenged but it it clearly held that a party while availing of a right to
appeal conferred under a statute can be required to discharge the tax liability. Such a
deposit made is described as discharge of liability. Such a condition imposed, would not
change the nature of the amount paid or deposited out of the amount as assessed and
found due. No doubt it is true that order assessing the liability remains under challenge
but such a deposit made discharges the liability of the payment of the amount assessed
and found due, to the extent of deposit made, subject indeed to the decision of the
appeal.
13. We have already noticed that in all the cases cited by the learned senior
counsel Shri Shanti Bhushan on behalf of the appellant the appeals were allowed and
the amount was held to be refundable. Even in one of the cases, Voltas case (supra),
where after setting aside the order of assessment the matter was remanded, it was held
that there was no good reason or any order against which the amount deposited as a
pre-condition to file an appeal, could be retained. Fresh order was awaited. But where
amount of liability has been assessed and fixed and the order exists, pre-appeal deposit
will be nothing else but payment of the liability assessed and discharged to the extent of
the amount of liability paid, subject to the result of the appeal. We are not concerned
with other kind of cases where there may be different reasons for deposit of security or
any amount of any other nature. Mere filing of the appeal does not absolve the appellant
nor suspends the liability assessed during pendency of the appeal. It continues unless
paid or set aside. Any payment made during that period when liability subsists shall be
in discharge of that liability as fixed. As provided under Section 27-B of the Act the
appellate authority has only to be satisfied that a given part of the fee assessed and due
has been paid to the committee before it entertains the appeal. There is no direction as
such for the appellant to make any payment, under Section 27-B of the Act. It is for the
appellate authority to be satisfied that a part of the liability is in deposit with the
committee.
14.Considering the facts of the present case in the light of what has been
observed by us above, we find that orders of assessment had been made. The liability
had been fixed and the amount was determined. The appellate authority was satisfied
that one third amount of the fee assessed and due was paid to the committee before
filing of appeals. The appeals were dismissed. The revisions preferred thereafter were
also dismissed. All statutory remedies stood exhausted. Writ petitions filed under Article
226 of the Constitution were pending when the order of this Court was rendered in the
case of Belsund Sugar Mills case (supra). The writ petitions were disposed of in the light
of the judgment of this Court without interfering with the orders of assessment and the
appellate and the revisional orders. In the case of Belsund sugar Mills (supra) specific
directions have been issued in exercise of powers under Article 142 of the constitution
as to in what circumstances the amount paid is to be refunded and not to be refunded.
We have already quoted earlier the relevant part of the judgment in the Belsund Sugar
Mills case (supra) according to which the judgment was prospective in effect without
affecting the past transactions and the orders, but the amount of the liability of the fee
which had already been paid till the date of the order was not to be refunded but the
balance which remained unpaid was also not to be recovered. In this case we have
already held that the amount deposited before filing of appeals was a part of the liability
assessed and found due and partly in discharge thereof. It was, therefore, not liable to
be refunded and the High Court has rightly held so. AIR 1999 SC 3125 : 1999 AIR
SCW 3074
15.Similarly, we find no force in the appeal preferred by the market committees
for a direction to the assessees to deposit the balance amount of the fee assessed. It
AIR 1999 SC 3125 : 1999 AIR SCW 3074
cannot be done in view of the judgment of this Court in the case of Belsund
Sugar Mills case (supra).
16.Learned counsel for the appellant has submitted that once it has been found
by this court in the case of Belsund Sugar Mills (supra) that market fee would not be
liable to be paid by the sugar mills, there is no occasion to impose or realize or retain
the amount of penalty collected/deposited on account of delayed payment of the market
fee. It is submitted that as a normal consequence of the judgment in the Belsund sugar
Mill's case (supra), there would be no liability to pay the market fee even though
covered by past transactions and orders or in future. But in exercise of power under
Article 142 of the Constitution of India, this Court provided that the judgment shall have
prospective application and the past transactions and assessments prior to the date of
the judgment shall not be affected, but further provided that the amount already paid
before the date of the judgment shall not be required to be refunded to the sugar mills
and the amount which remained unpaid in view of any order of stay granted by the
Court, shall not be liable to be recovered. Subject to above arrangement, normally, no
amount of fee would have been liable to be paid. That being the position, the question
of penalty on delayed payment does not arise, more particularly, when there is no
provision made in the order that the amount of penalty already paid shall also not be
refunded. It is further submitted that apart from the one third amount of fee which has
been deposited while filing the appeal, the rest of the amount has been held to be not
recoverable by the High Court. That is to say, two third of the market fee assessed,
realization of which was stayed, is not liable to be paid or recovered. But the penalty
has been imposed considering the whole amount of fee assessed, even the amount
which is not recoverable in pursuance of the judgment passed in Belsund Sugar Mill's
case (supra). It would be completely an anomalous situation that the balance unpaid
amount of two third would not be liable to be paid or recovered but 10% of penalty on
that amount which has been deposited, while filing the appeal would not be refunded.
The High Court has brushed aside this claim of the appellant merely by observing that
penalty is an integral part of the tax liability. We, therefore, find that the amount which
was in fact not liable to be paid but a part of it is being retained in pursuance of the
arrangement made in exercise of powers under Article 142 of the Constitution of India
and the remaining part which is not recoverable, no penalty is liable to be recovered and
retained. In our view, that the 10% amount of the penalty as paid by the appellant is
liable to be refunded.
AIR 1999 SC 3125 : 1999 AIR SCW 3074
17. Learned counsel for the appellant made a submission that in case the
question of refund of market fee deposited is not favourably considered, in that event,
the matter may be remanded to the High Court so that the appellant may argue the
matter before the High Court on the merits challenging the orders of assessment and on
the question as to whether there was or not any quid pro quo against the amount paid
by the appellant. We do not think it is possible to accede to the request made. The
whole matter was before the High Court. It was always open to the appellant to have
argued any point it wished to argue while matter was under hearing. Once having not
done so, the matter cannot be remanded to be opened afresh on disputed questions.
18. In the result, the appeals, i.e. Civil Appeal Nos. 8274-8292 of 2001, filed by
the Sugar Mills are dismissed but with a modification to the extent that the respondents
shall refund the amount of penalty which has been paid by the appellants, namely 10%
amount of penalty, within a period of four months from the date of communication of this
judgment. The appeals, i.e. Civil Appeal Nos. 8293-8311 of 2001, filed by the Market
Committees for recovery of the balance of two third amount from the sugar mills, are
also dismissed.
19. The parties to bear their own costs.
Order accordingly.
@page-SC692
AIR 2004 SUPREME COURT 1690 "Seedsman Association v. Principal
Secretary to Govt., A. P."
= 2004 AIR SCW 1099
(From : Andhra Pradesh)*
Coram : 2
S. RAJENDRA BABU AND G. P. MATHUR, JJ.
Civil Appeals Nos. 904 with 905, 906, 907-908, 909 of 2004 (arising out of SLP
(C) Nos. 20787 of 2000 with 10024, 1107, 4252-4253 and 7685 of 2001 and 8499 of
2001), D/- 10 -2 -2004.
Seedsman Association, Hyderabad and others, Appellants v. Principal Secretary
to Govt., A.P. and others, Respondents.
A.P. (Agricultural Produce and Live Stock) Markets Act (16 of 1966), S.7, S.2(i) Seeds Act (54 of 1966), S.7 - AGRICULTURAL PRODUCE - SEEDS - Market fee on
seeds - Levy of - Appellant seedsman Association engaged in processing and
marketing seeds - Nature and variety of seeds allegedly being produced by them and
method or process being adopted in production of seeds not clear - No averment that
seeds have been certified by Seeds Certification Agency of State Government - Who is
producer of seeds and what steps have been taken by such producer to ensure quality
of seeds is not disclosed - No clear averment that on account of application of
insecticides or chemicals and poisonous substances, basic character of article, namely,
its consumption as food by human beings or animals is irretrievably loss - Such a
commodity is not distinct from foodgrans as commonly understood - Seeds so
processed and marketed by appellants are exigible to levy of market fee. (Paras 9, 10)
Cases Referred :
Chronological Paras
Krishi Utpadan Mandi Samiti v. Pillibhit Pantnagar Beej Ltd., 2003 AIR SCW
6696 : 2004 All LJ 1 : (2003) 9 JT (SC) 548
8
State of Rajasthan v. Rajasthan Agricultural Input Dealers Association, AIR 1996
SC 2179 : 1996 AIR SCW 2917 7Harish N. Salve, F.S. Nariman, Sr. Advocates, G.
Ramakrishna Prasad, Mohd. Wasay Khan, Roy Abraham, Ms. Seema Jain, Himinder
Lal, Pallav Sishodia, Ms. Kavita Dahiva, Ms. Shirin Khajuria, Rajan Narain, Ms. Puja
Sharma, Advocates with them, for Appellants; Ms. K. Amaresari, Sr. Advocate, Guntur
Prabhakar, T.V. Ratnam, K. Subba Rao, P.S. Narasimha, P. Sridhar, Ananga
Bhattacharya, . Seshagiri, Advocates, for M/s. P.S.N. and Co., K. Ram Kumar Advocate
with him, for Respondents.
* W. P. No. 28115 of 1997, D/- 27-9-2000(AP).
Judgement
G. P. MATHUR, J. :- Leave granted.
These appeals by special leave have been preferred against the common
judgment and order dated 27-9-2000 of a Division Bencfh of Andhra Pradesh High
Cuort by which a batch of writ petitions were disposed of with certain directions.
2. We will state the facts of Special Leave Petition (Civil) No. 20787 of 2000.
Seedsman Association, Hyderabad and two other seed companies filed writ petition
under Article 226 of the Constitution impleading the Principal Secretary to Government,
Agricultural Department, Director-cum-Commissioner of Agriculture Marketing
Committee, Hyderabad and 16 Agricultural Market Committees of some Districts in the
State of Andhra Pradesh as respondents. The main prayer made in the writ petition is
that the action of the respondents especialy those of respondents Nos. 3 to 18 in
compelling petitioners Nos. 2 and 3 to pay market fee under Section 7 of the Andhra
Pradesh (Agricultural Procedure and Livestock) Markets Act, 1966 be declared as illegal
and arbitrary and the same may be set aside.
3. In the affidavit filed in support of the writ petition, it is averred that Seedsman
Association, Hyderabad is an Association registered under the Scieties Act for looking
after the interest and welfare of the members who are organizing seed production,
processing and marketing seeds under the provisions of Seeds Act, 1966 and the
Seeds (Control) Order, 1983. From the date of sowing the Breeder/Foundation seeds,
the petitioners' responsibility is to procure the seeds produced according to the
procedure laid down in the Indian Minimum Seed Certification Standards, 1988, which
are not meant for human consmption but for the exclusive purpose of sowing only. It is
further averred that the members of the petitioner association procure the special kind
of seeds though they are produced from agricultural land. Since the seeds are not
meant for direct human consumption, they do not fall within the definition of the
"consumer seeds" as notified under the Andhra Pradesh (Agricultural Produce and
Livestock) Markets Act, 1966 (hereinafter referrred to as "the Act"). After exchange of
affidavits, the High Court disposed of a bunch of writ petitions by the common judgment
and order dated 27-9-2000 and the operative portion of the order reads as under :
(1) That all such items like paddy, wheat, maize, bajra, cotton seed, sunflower,
safflower, jowar, etc., covered by this batch of writ petitions which are specified in the
Scheduled-II appended to the A.P. (Agricultural Produce and Livestock) Markets Act,
1966 whether sold in original form i.e. edible or converted form i.e. chemically
processed into non-edible form (seeds for germination purposes), within the precincts of
notified market area/market yard, are exigible to the levy of market fee.
(2) That such seeds like Tomato and castorseeds, which are derivatives of the
main produce, but are sold separately and which are not specified in the Schedule-II
annexed to A.P. (Agricultural Produce and Livestock) Markets Act, 1966, cannot be
made liable to the levy and collection of market fee.
(3) That such items specified in Schedule II referred to above which suffered the
payment of market fee in an Agricultural Market Committee, shall not again be
subjected to payment of market fee in any other Agricultural Market Committee, within
the State of Andhra Pradesh, if the proof of such payment is furnished to the authority
concerned.
(4) That the petitioners shall now submit the accounts to the respective
committees within a period of one month from today, whereupon the respective
Agricultural Market Committees shall make assessment of the market fee payable and
within one month of the service of the said assessment orders, the petitioners shall pay
off the said amounts; and
(5) That henceforth, the petitioners shall be liable to comply the provisions of A.P.
(Agricultural Produce and Livestock) Markets Act, 1966 in their dealings in items
covered by paragraph (1) above, within the market areas/market yards and failure to do
so will render them liable for the consequences under the said Act.
4. Learned counsel for the appellants has submitted that the Parliament has
enacted the Seeds Act, 1966 to provide for regulating the quality of certain seeds for
sale and for matters connected therewith and this Act makes detailed provisions for
regulating sale of seeds of notified kinds and varieties. Besides the aforesaid
enactment, the Central Government has in exercise of power conferred by Section 3 of
the Essential Commodities Act made the Seeds (Control) Order, 1983, which provides
for licensing of dealers in seeds, besides appointment of Inspectors and taking of
samples and analysis of seeds meant for sale or export. These statutory provisions and
Control Order, it is submited, deal with every aspect of the sale and purchase of seeds
and, therefore, the vary same activity cannot come within the purview of Andhra
Pradesh (Agricultural Produce and Livestock) Markets Act, 1966. Learned cousnel for
the respondents has submitted that the aforesaid Act has been eancted to consolidate
and amend the law relating to the regulation of purchase and sale of agricultural
produce, livestock and products of livestock and the establishment of markets in
connection therewith. The Act has been enacted with reference to Entry 28 of State List
of Seventh Schedule of the Constitution, namely, "Markets and Fairs". The purpose and
object of Seeds Act, 1966 enacted by the Parliament and the Seeds (Control) Order,
1983 made by the Central Government is entirely different, namely, to maintain the
quality of seeds meant for sale.
@page-SC1692
The Act, on the other hand, regulates the actual trade in seeds so that the
producer gets the proper price and the grower may get the proper quality of seed having
regard to the price paid by him. Learned counsel has submitted that Section 2(i) defines
"agricultural produce" and it means anything produced from land in the course of
agriculture or horticulture and includes forest produce or any produce of like nature
either processed or unprocessed and declared by the Government by notification to be
agricultural produce for the purposes of the Act and therefore seeds will be fully covered
by the provisions of the Act. It is urged that seeds are produced from land in the course
or agriculture or norticulture and, therefore, the State Government is fully competent to
issue a notification under Section 3 of the Act and the appellants are liable to pay
market fee.
5. The Preamble of the Seeds Act, 1966 shows that it has been enacted to
provide for regulating the quality of certain seeds for sale and for matters connected
therewith. The provisions of the Act show that the Central Government has to constitute
a Central Seed Committee and extablish a Central Seed Laboratory. It can, by
notification in the official gazette, declare notified kinds or varieties of seeds, specify the
minimum limits of germination and purity with respect to any seed of any notified kind or
variety and also the mark or label to indicate that such seed conforms to the minimum
limits of germination and purity specified. This Act enjoins establishment of a Seed
Certification Agency for the State to carry out the functions entrusted to the certification
agency and any person selling, keeping for sale or offering to sell or otherwise
supplying any seed of any notified kind or variety may apply to the certification agency
for the grant of certificate for the purpose. This Act further provides for appointment of
Seed Analysts and Seed Inspectors. Section 7 of this Act enjoins that no person shall
carry on the business of sale, keeping for sale, offering to sell or otherwise supplying
seed of any notified kind or variety unless the same is identifiable as to its kind or
variety, conforms to the minimum limit of germination and period specified under
Section 6 and the container of such seeds bears, in the prescribed manner, the mark or
label containing the correct price thereof and complies with such other requirements as
may be prescribed. The Seeds (Control) Order, 1983 lays down that no person shall
carry on the business of selling, exporting or importing seeds, except and in accordance
with the terms and conditions of licence granted to him under the Order. The dealer of
seeds has to display in his place of business details of opening and closing stock of
different varieties of seeds held by him and also a list indicating the prices thereof. The
Seeds (Control) Order also empowers the State Government to appoint Inspectors who
are authorised to draw samples of seeds meant for sale or export or seeds imported
and send the same to laboratory to ensure that the sample conforms to the standards of
quality claimed.
6. In the counter-affidavit filed on behalf of the respondents, it is asserted that the
plea of the writ pettioners that the seeds produced by them is not an agrcultural produce
since it is not fit for human consumption, is not correct and is specifically denied. It is
averred that the seeds purchased or sold by the writ petitioners do not change their
productivity, originality and characteristics and as they are grown from land in the
course of agriculrure or horticulture, they are fully covered by the provisions of the Act.
7.We have given our careful consideration to the submissions made by learned
counsel for the parties. There are two decisions of this Court touching upon the
controversy in hand. The first one is State of Rajasthan v. Rajasthan Agricultural Input
Dealers Association, AIR 1996 SC 2179. In this case, the High Court took the view that
when foodgrains of particular varieties were treated and subjected to chemical process
for preservation, those grrins become commercially known as "seeds". If, however, a
dealer was found dealing in foodgrains under the garb of seeds, the authorities were not
precluded from prosecuting the offender in a criminal Court. The judgment of the High
Court was upheld on the following premise "
1996 AIR SCW 2797
para 7 of AIR "It is undoubtedly true that foodgrains per se could be used as
seeds for being sown and achieving germination, but in that form they retain the dual
utility of being foodgrains as well as seeds. By process of coating and applying
insecticides, other chemicals and poisonous substance to the foodgrain meant to be
utilised as seeds, one of its basic character, i.e. its consumption as food by human
beings or animals or for extraction for the like purpose, gets irretrievably lost and such
processed seeds become a commodity distinct from foodgrains as commonly
understood. That distinction was borne in mind by the High Court in allowing the writ
petition of the respondents, and in our view rightly."
8 .A Similar controversy has recently been examined again by this Court in Krishi
Utpadan Mandi Samiti v. Pilibhit Pantnagar Beej Ltd. JT 2003 (9) SC 548. The High
Court allowed the writ petition of the respondent-company, namely, Pilibhit Pantnagar
Beej Ltd. and issued a writ of mandamus restraining the Agriculture Market Committee
from interfering in the business of the Company in certified seeds and from demanding
and realizing market fee on the transaction of unprocessed or processed certified
seeds. The case set up by the company was that the business of the company is to
purchase 'breeder seeds' from Agricultural Research Institute and thereafter to produce
'certified seeds'. The first step of production is to distribute this breeder seeds to the
listed and scheduled farmers. The breeder seeds are sown and are germnated under
strict supervision of the statutory Seeds Certification Agency, set up under the Seeds
Act, 1966. The harvest is selected carefully under supervision of the Agency. The lots
which do not conform to specifications are rejected. The standardized seeds so
obtained are called 'Foundation Seeds'. These foundation seeds are thereafter again
supplied to the listed farmers variety-wise with inimation to the Agency. The farmers
sow these foundation seeds which are also supervised by the Agency. This crop is thus
germinated under strict supervision of the Agency and the lots rejected are not taken
back by farmers. After harvesting the approved standardized certified seeds, the lots
are fumigated for preservation and the samples of each lot is tested in the laboratories
of Seeds Certification Agency. The rejected lots and losses at processing are returned
to farmers only after the foundation seeds are certified as conforming to specifications,
the lots are subjected to treatment with insecticides (Cell phose, Quick phose) and
pesticides (thiram and barastin) at the time of packing. The company had filed
certficates issued by the Seeds Certification Agency and other relevant documents to
show that they are not dealing in sale and purchase of foodgrains or wheat but only in
certified seeds and that the stock stored by them were not of wheat but of certified
seeds of wheat under the supervision of the U.P. Seeds Certification Agency. Having
regard to the material produced by the company it was held that as the wheat seed
converted into certified seeds unfit for human consumption, the levy of market fee is not
permissible. 2003 AIR SCW 6696 : 2004 All LJ 1
9. The writ petitioner No. 1 in the writ petition filed before the High Court
(Appellant No. 1 in this Civil Appeal) is Seedsman Association, Hyderabad. No details
regarding the members of the Association have been given. The only fact stated in the
affidavit is that the petitioner association is a society registered under the Societies Act
formed for looking after the interests and welfare of the members who are organizing
seed production and processing and marketing the seeds. No details of the activity
being carried on by the members of the association have been given. The writ petition
and the affidavit filed in support thereof is conspicuously silent about the nature and
variety of the seeds allegedly being produced by them and the method or process being
adopted in production of seeds. There is no averment that the seeds in which the
members of the petitioner association are dealing have been certified by the Seeds
Certification Agency of the State Government. The averment in the affidavit filed in
support of the writ petition that "it is from the date of sowing, the Breeder/Foundation
seeds, the petitioner's responsibility is to procure the seeds produced according to the
procedure laid down in the Indian Minimum Seed Certification Standards, 1988,
............" is not only vague but also shows that the petitioners themselves do not
produce seeds but they in fact procure seeds produced by someone else. Who is the
producer of seeds and what steps have been taken by such producer to ensure the
quality of the seeds is not disclosed. Similarly, there is no clear averment that on
account of application of insecticides or chemicals and poisonous substances, the basic
character of the article, namely, its consumption as food by
@page-SC1694
human beings or animals is irretrievably lost and that such commodity is distinct
from foodgrains.
10. In view of the fact that the writ petition is very vague and necessary details of
the commodity and the manner of its production in which the members of the writ
petitioner No. 1 (Association) claim to be dealing have not been given, it is not possible
to arrive at the necessary factual finding that the foodgrains meant to be utilised as
seeds has irretrievably lost its basic character i.e. its consumption as food by human
beings or animals or for extraction for the like purpose and that such processed seeds
have become a commodity distinct from foodgrains as commonly understood. Similar is
the case of the other connected appeals. It is, therefore, not possible to give any relief
to the appellants in the present appeals.
11. For the reasons mentioned above, the appeals are dismissed. It is, however,
made clear that this order will not preclude the members of the appellant No. 1
(Association) or other appellants from seeking appropriate relief in fresh proceedings,
which may be instituted in accordance with law.
Appeals dismissed.
AIR 2004 SUPREME COURT 1796 "I. T. C. Ltd. v. Person Incharge, A.M.C.,
Kakinada"
= 2004 AIR SCW 792
(From : Andhra Pradesh)*
Coram : 2
S. RAJENDRA BABU AND G. P. MATHUR, JJ.
Civil Appeal No. 5321 of 1997 with C. A. Nos. 5204 of 1997 and 4803 of 1999,
D/- 30 -1 -2004.
I. T. C. Ltd., Appellant v. Person Incharge, A. M. C., Kakinada and others,
Respondents.
(A) Maritime Zones of India (Regulation of Fishing by Foreign Vessels) Act (42 of
1981), S.2(b) - MARITIME ZONES - Fish - Definition of - Includes Prawns.
(Para
6)
(B) A.P. (Agricultural Produce and Live Stock) Markets Act (16 of 1966), S.3,
S.12 - AGRICULTURAL PRODUCE - Livestock - Includes animals and animals include
Prawn which is fish - Government Notification - Including prawns with or without life in
any form in livestock - Is valid - Dead prawns purchased and after processing exported
to various countries - Are covered by said notification - Consequently Market Committee
is empowered to levy fees on the prawns.
(Para 4)
(C) Evidence Act (1 of 1872), S.115 - ESTOPPEL - Estoppel - Finding of Court in
another case that dry fish cannot fall within definition of "livestock" - No appeal against
filed by Government in that case @page-SC1797
Notification in said case not relating to prawns with or without life - Notification in
present case covering prawns with or without life and High Court holding in favour of
Government - Appeal against order of High Court filed by opposite party - Opposite
party cannot raise plea that Government having accepted decision in other case cannot
contend that prawn with or without life is livestock - Non-filing of appeal in one matter
would not act as a bar against State in filing appeal in another matter involving similar
point - Moreso appeal in present case was filed by opposite party and not by
Government.
(Paras 8, 9)
Cases Referred :
Chronological Paras
Commissioner of Income-tax v. Narendra Doshi, 2002 (254) ITR 606 : 2002 (174)
Cur Tax Rep 411 (Supreme Court)
8
Union of India v. Kaumudini Narayan Dalal, 2001 AIR SCW 4757 : 249 ITR 219
8
State of Maharashtra v. Digambar, AIR 1995 SC 1991 : 1995 AIR SCW 3116 :
(1995) 4 SCC 683 9
Royal Hatcheries Pvt. Ltd. v. State of A. P., AIR 1994 SC 666 : 1993 AIR SCW
4083 : 1994 Supp (1) SCC 429 7
Sri Lashmi Dry Fish Traders v. State of A.P., AIR 1986 Andh Pra 330
8, 9
Peterborough Royal Foxhound Show Society v. I.R.C., (1936) 1 All ER 813 : 155
LT 134 : 52 TLR 391
7S. Ganesh, Sr. Advocate, C. R. Sridharan, Rajan Narain,
Shirin Khajuria, Ms. Puja Sharma, Rajib Sankar Roy, Abhijit Sengupta, K. Ram Kumar,
B. Sridhar, Advocates with him for the Appearing parties.
* W.P.No. 24276 of 1995, D/-18-2-1997 (A.P.),
Judgement
G. P. MATHUR, J. :- The controversy raised in all these appeals is similar and,
therefore, they are being disposed of by a common judgment. We will state the facts of
Civil Appeal No. 13217 of 1997. The appellant is a public limited company within the
meaning of the Companies Act, 1956 having its registered office at Calcutta. It is
engaged in the business of processing and exporting of marine products and for that
purpose it has established a branch office at Kakinada in the State of Andhra Pradesh,
from where it carries on the business activities in respect of prawns. The appellant
purchases dead prawns from various locations like Bhimili, Vizag, Vakapadu,
Bhimavaram, Kakinada, Narsapur, Kodur, Nagayalanka, Machikipatnam, Repalla,
Amalapuram in the State of Andhra Pradesh and after getting them processed, exports
the same to various countries. The appellant had obtained licences from the
respondents under the Andhra Pradesh (Agricultural Produce and Livestock) Markets
Act, 1966 (hereinafter referred to as 'the Act') for carrying on its business activity in the
aforesaid places. A demand notice dated 26th September, 1995 was served upon the
appellant demanding payment of market fee wherein it was mentioned that if the market
fee was not paid, interest at the rate of 12 per cent per annum shall be charged, apart
from prosecution being launched for violation of Sections 12(1) and 12(a) and (3) of the
Act, which entails punishment up to one year R.I. and a fine of Rs. 5,000/-. The
appellant challenged the notice demanding market fee by filing writ petition in the
Andhra Pradesh High Court which dismissed the same by the order dated 18-2-1997
relying upon an earlier detailed judgment dated 17-4-1996 of a Division Bench of the
same Court given in a batch of writ petitions and writ appeals
2. Shri S. Ganesh, learned Senior Counsel for the appellant, has submitted that
the activities carried on by the appellant were not covered by the provisions of the Act
inasmuch as dead and dried prawns purchased by the appellant could not be
considered to be 'livestock' within the meaning of Section 2(v) of the Act. The word
'livestock' meant and implied the continued existence of life and that once life ceased,
the thing could no longer be considered to be 'livestock' and consequently could not, in
law, be notified as 'livestock' under Section 2(v) of the Act. At any rate, the Government
could declare animals alone as livestock for the purpose of the Act and as live or dead
or dried prawns were not animals within the meaning of Section 2(v) of the Act, it is
urged, they could not be notified as 'livestock' under the aforesaid provision. Learned
Counsel has submitted that the inclusion of prawns in the Schedule to the Act as
'livestock' was illegal and ultra vires and, therefore, no market fee could be demanded
from the appellant.
3. In order to examine the contention raised by learned Counsel for the appellant,
it is necessary to refer to the relevant provisions of the Andhra Pradesh (Agricultural
@page-SC1798
Produce and Livestock) Markets Act, 1966 and the notification issued
thereunder. As the Preamble shows, the Act has been enacted to consolidate and
amend the law relating to the regulation of purchase and sale of agricultural produce,
livestock and products of livestock and the establishment of markets in connection
therewith. Section 2 of the Act gives the definitions and sub-sections (v), (ix), (x) and
(xv) thereof read as under :
(v) 'Livestock' means cows, buffaloes, bullocks, bulls, goats and sheep, and
includes poultry, fish and such other animals as may be declared by the Government by
notification to be livestock for the purpose of this Act;
(ix) 'notification' means a notification published in the Andhra Pradesh Gazette,
and the word 'notified' shall be construed accordingly;
(x) 'notified agricultural produce, livestock or products of livestock' means
agricultural produce, livestock or products of livestock specified in the notification under
Section 3;
(xv) 'products of livestock' means such products of livestock as may be declared
by the Government by notification, to be products of livestock for the purposes of this
Act.
Sub-section (1) of Section 3 provides that the Government may publish in such
manner, as may be prescribed, a draft notification declaring their intention of regulating
the purchase and sale of such agricultural produce, livestock or products of livestock in
such area as may be specified in such notification. Sub-section (3) of Section 3 provides
that after the expiry of the period specified in the draft notification and after considering
such objections and suggestions as may be received before such expiration, the
Government may publish in such manner as may be prescribed a final notification
declaring the area specified in the draft notification or any portion thereof, to be a
notified area for the purposes of this Act in respect of any agricultural produce, livestock
and products of livestock specified in the draft notification. Sub-section (4) of Section 4
lays down that as soon as may be after the establishment of a market under sub-section
(3), the Government shall declare by notification the market area and such other area
adjoining thereto as may be specified in the notification, to be a notified market area for
the purposes of this Act in respect of any notified agricultural produce, livestock or
products of livestock.
4. The State Government has issued notifications declaring their intention of
regulating the purchase and sale of different kinds of agricultural produce, livestock and
products of Livestock which have been broadly classified as agricultural group, fruit
group, vegetable group, fish group, livestock group, poultry group etc. The notification
regarding the Fish Group includes the following items :
1. Live fish including fish with or without life in any form.
2. Dry Fish.
3. Live prawn including prawn with or without life in any form.
4. Dry Prawn.
Section 3 of the Act confers power upon the Government to issue notification
declaring their intention of regulating the purchase and sale of such agricultural
produce, livestock or products of livestock in such area as may be specified in such
notification. The Andhra Pradesh Government has issued notification, whereunder live
prawns including prawns with or without life in any form has been notified. The
commodity which the appellant purchases namely dead prawns, which after processing
is exported to various countries are clearly included in the notification issued by the
State Government. In view of Section 12 of the Act which is the charging section and
empowers the Market Committee to levy fees on any notified agricultural produce,
livestock or products of livestock purchased or sold in the notified market area, the
appellant is liable to pay market fee.
5. Learned Counsel has next submitted that the State Government can issue a
notification under Section 3 of the Act only with regard to livestock or products of
livestock. In common parlance prawn with or without life is not treated as 'livestock' and,
therefore the State Government, it is submitted could not have issued any notification
for the same. According to learned Counsel the normal meaning of the word 'livestock'
is as under :
"Animals of any kind kept or raised for use or pleasure; especially : meat and
dairy
@page-SC1799
cattle and draft animals - opposed to dead stock."
Learned Counsel has also submitted that animal is always a quadruped and
therefore prawn is not an animal and consequently it is not a livestock regarding which a
notification could be issued by the State Government under Section 3 of the Act.
6. To test the argument it will be convenient to reproduce the meaning of the
word animal, prawn and fish given in some standard dictionaries which is as under :
Animal : An organised being having life, sensation and voluntary motion; typically distinguished from a plant, which is organised and has life, but apparently not
sensation or voluntary motion.
Prawn : 1. A small long-tailed decapod marine crustacean (palxmon senatus),
larger than a shrimp, common off the coast of Britain and used as food.
2. Any of numerous decapod crustaceans that have slender legs, long antennae,
a large strong compressed abdomen, and a prominent serrated rostrum, are widely
distributed in fresh and salt waters in warm and temperate regions and highly esteemed
as food, and vary in size from an inch or so to the size of lobster.
Fish : A vertebrate cold-blooded animal with gills and fins living wholly in water.
An animal living wholly in water e.g. cuttlefish, shellfish, jelly fish.
Section 2(b) of The Maritime Zones of India (Regulation of Fishing by Foreign
Vessels) Act, 1981 also defines fish, which is as under :
"2(b) "Fish" means any aquatic animal, whether piscine or not, and includes shell
fish, crustacean, molluses, turtle (chelonia), aquatic mammal (the young, fry, eggs and
spawn thereof), holothurians, coelenterates, sea weed, coral (Porifera) and any other
aquatic life."
Normally, in common parlance animal is understood as a quadruped creature but
fish is also an animal but of different kind. Prawn is included in the definition of fish as
given in the Maritime Zones of India (Regulation of Fishing by Foreign Vessels) Act and
has all the essential attributes of an animal, viz., life, sensation and voluntary motion. It
is therefore not possible to accept the contention that prawn is not a livestock. The State
Government is thus fully competent to issue a notification regarding prawns under
Section 3 of the Act.
7.Shri Ganesh has also referred to a decision of this Court in Royal Hatcheries
Pvt. Ltd. v. State of A. P., 1994 Supp (1) SCC 429 in support of his submission that
prawns with or without life cannot be treated as livestock. The case turned on the
interpretation of Rule 5(2)(xxvi) of A. P. General Sales Tax Rules, 1957 which used the
expression "livestock, that is to say, all domestic animals such as, oxen, bulls, cows,
buffaloes, goats, sheep, horses etc.". This Court held that the words "that is to say" are
words of limitation and, therefore, the livestock contemplated by the said clause
becomes confined to the domestic animals referred to in the said clause and would not
include day-old chicks sold by the hatcheries. In fact after referring to Peterborough
Royal Foxhound Show Society v. I.R.C., 1936 (1) All ER 813, wherein it was held that
the word 'livestock' takes within its fold animals of any description, it was observed that
ordinarily speaking 'livestock' is not confined to domestic animals. Therefore, the
authority cited by the learned Counsel does not support his contention in any manner.
AIR 1994 SC 666 : 1993 AIR SCW 4083
8.Learned Counsel has lastly submitted that in Sri Lashmi Dry Fish Traders v.
State of A. P., AIR 1986 AP 330, a Division Bench of Andhra Pradesh High Court had
held that even if fish is considered to be an animal, dry fish cannot fall within the sweep
of the definition of 'livestock' and, therefore, 'dry fish' could not be included in Schedule
II thereof. Learned Counsel has urged that the State of Andhra Pradesh accepted the
verdict of the High Court and did not choose to file an appeal against the said decision
and, therefore, it is not open to the State Government to contend now that prawn with or
without life is livestock. In support of this submission, reliance is placed upon Union of
India v. Kaumudini Narayan Dalal, 249 ITR 219 and Commissioner of Income-tax v.
Narendra Doshi, 254 ITR 606. In these cases, it was 2001 AIR SCW 4757
@page-SC1800
held that where the High Court decides the matter on the basis of an earlier
judgment, which decision had not been challenged by the Revenue by filing an appeal,
the Revenue must, therefore, be bound by the principle laid down therein and it is not
open to the Revenue to accept that judgment in the case of the assessee in that case
and challenge its correctness in the case of other assessees without just cause. On the
aforesaid principle this Court declined to consider the correctness of the decision of the
High Court in the matter before it.
9 .In our opinion, the principle laid down in the aforesaid decisions has no
application here. Firstly, in Sri Lashmi Dry Fish Traders (supra) the challenge was to the
notification by which dry fish was included in the Schedule and did not relate to prawns
with or without life. Secondly, the High Court in the present case has considered this
contention and has expressly rejected it holding in favour of State Government and it is
the appellant which is coming up in appeal to this Court. In State of Maharashtra v.
Digambar, 1995 (4) SCC 683, a three-Judge Bench had expressly repelled such a
contention and had held that non-filing of an appeal in one matter would not act as a bar
against the State in filing appeal in another matter where similar point may be involved.
The Court ruled as under : AIR 1986 Andh Pra 330
AIR 1995 SC 1991 : 1995 AIR SCW 3116, Para 14
"The circumstances of the non-filing of the appeals by the State in some similar
matters or the rejection of some SLPs in limine by the Supreme Court in some other
similar matters by itself, cannot be held as a bar against the State in filing an SLP or
SLPs in other similar matter/s where it is considered on behalf of the State that nonfiling of such SLP or SLPs and pursuing them is likely to seriously jeopardise the
interest of the State or public interest."
Therefore, the contention raised has absolutely no substance.
For the reasons discussed above, the appeals lack merits and are hereby
dismissed.
Appeals dismissed.
AIR 2004 SUPREME COURT 1989 "P. Varadarajulu v. Agricultural Produce
Market Committee"
= 2004 AIR SCW 2189
(From : Karnataka)*
Coram : 2
DORAISWAMY RAJU AND A. PASAYAT, JJ.
Civil Appeal Nos. 1959-1960 of 2004 (arising out of SLP (Civil) Nos. 2306823069 of 2002), D/- 1 -4 -2004.
P. Varadarajulu,
Respondent.
Appellant
v.
Agricultural
Produce
Market
Committee,
Civil P.C. (5 of 1908), S.47 - EXECUTION - DECREE - AGRICULTURAL
PRODUCE - Execution of decree - Suit seeking direction to Agricultural Produce Market
Committee for renewal of licence and allotment of vacant site - Decree passed for
allotment of vacant site in between sites 10/C and 11/2 - Sketch map annexed to report
of Advocate Commissioner showed that there was drain of about 2 ft. width between the
two sites and there existed sufficient space and extent excluding the drainage portion
for satisfying decree - High Court misreading report and misconstruing physical features
as disclosed by report and concluding decree as not executable - Order of High Court
set aside - Market Committee directed to allot space between site Nos. 11/2 and 10/C
which is vacant - Preventive steps to be taken to avoid seepage of drain water, and
non-creation of unhygienic condition directed to be incorporated in an undertaking along
with the agreement. (Paras 6, 7)
M. S. Ganesh, Sr. Advocate, Nikhil Nayyar, Advocate with him, for Appellant; F.
C. Vidya Sagar, Advocate, for Respondent.
* C. R. P. No. 3268 of 1994, D/- 26-5-2000 and R. P. No. 750 of 2000, D/- 22-32002(Kant.).
Judgement
ARIJIT PASAYAT, J. :-Leave granted.
2. A small matter which could have been sorted out at the trial Court level has
unnecessarily been dragged through the corridors of several Courts. The challenge in
the present appeal is to the order passed by a learned single Judge of the Karnataka
High Court which has been disposed of under Section 115 of the Code of Civil
Procedure, 1908 (in short the 'CPC'). The respondent is an Agricultural Produce Market
Committee (hereinafter referred to as the "Market Committee"). The appellant had filed
a suit seeking direction for renewal of the licence in his favour and allotment of the
vacant site. The same was the subject-matter of dispute in OS No. 1015 of 1987 in the
file of the Additional City Civil Judge, Bangalore. Decree passed in the said case reads
as follows :
"It is ordered and decreed that the defendant is directed to allot a vacant site in
between site No. 10-C and 11/2 situtated at 2nd main of AMPC Yard to the plaintiff.
It is further decreed that the defendant is directed to renew the licence in favour
of the plaintiff to carry on business.
It is further decreed that the defendant is further directed that if any building or
maliges are constructed in vacant site in between sites 10-C and 11/2, the same shall
be allotted to the plaintiff."
3. An application for execution was filed, and the Executing Court also took
action against Market Committee for disobedience. The stand of the Market Committee
before and/or subsequent to the decree, and in the execution proceedings was that the
decree was not executable. It appears that the High Court appointed an Advocate
Commissioner to report about the physical position of the space between site Nos. 10/C
and 11/2. The High Court after receipt of the Advocate Commissioner's report and
looking at the photographs found that the decree was not executable as in its view, it
refers to a space not in existence on account of the drainage on the spot. Accordingly
the Civil Revision was allowed.
4. Learned counsel for appellant submitted that after having lost not only in the
suit but the subsequent applications filed before the Executing Court, a frivolous and
non-maintainable petition was filed before the High Court. Unfortunately, the High Court
did not take note of the actual state of affairs and proceeded as if the decree was not
executable. With reference to the sketch map annexed to the report of Advocate
Commissioner, it was submitted that the space was still available and only on the
ground that a drain existed, the High Court should not have interfered. It was submitted
that if the space as directed in the decree is allowed even over the drain, the appellant
is willing to accept it and he will ensure that there is no seepage of drain water and no
@page-SC1990
inconvenience will be caused and no unhygienic condition shall be created. It is
further submitted that if any unhygienic condition is created, then the appellant is willing
to accept the alternative suggestion given by the Market Committee before the High
Court regarding allotment of equally spacious area in nearby available area.
5. In response learned counsel for the Market Committee submitted that the High
Court has rightly concluded that the decree was not executable as no space was
available. It was submitted that if the appellant is allowed to put up any structure over
the drain it would lead to insanitary conditions and rain water may overflow to the
various shops.
6. We find that the basic issues have been lost sight by the High Court. The
sketch map annexed to the report of the Advocate Commissioner shows that there is a
drain which is of about two feet width and partially lies between site Nos. 11/2 and 10/C,
and that there exist sufficient space and extent of land, even excluding the drainage
portion, for satisfying the decree. The High Court seems to have misread the report and
misconstrued the physical features as disclosed by the report and plan submitted by the
Commissioner.
7. We feel that the proper solution to the controversy will be to direct Market
Committee to allot the space between site Nos. 11/2 and 10/C which is vacant, in terms
of the decree and if necessary it can even be over the drain as indicated in the sketch
map appended to the Advocate Commissioner's report. The statement of learned
counsel for the appellant regarding preventive steps to be taken to avoid seepage of
drain water, and non-creation of unhygienic condition shall be incorporated in an
undertaking along with the agreement expressed in such circumstances to accept
alternative allotment as indicated above and it would be one of the conditions for the
allotment, directed to be made.
8. Necessary action be taken within six weeks.
9. Appeals are allowed and accordingly finally disposed of.
Appeals allowed.
AIR 2004 SUPREME COURT 3954 "Talcher Municipality v. Talcher
Regulated Mkt. Committee"
= 2004 AIR SCW 4407
(From : 1998 AIHC 3208 (Orissa))
Coram : 2
S. B. SINHA AND S. H. KAPADIA, JJ.
Civil Appeal No. 2150 of 1998, D/- 28 -7 -2004.
Talcher Municipality, Appellant v. Talcher Regulated Mkt. Committee and
another, Respondents.
Orissa Agricultural Produce Market Act (3 of 1957), S.4(4) - Orissa Municipal Act
(23 of 1950), S.295, S.296 - AGRICULTURAL PRODUCE - SUPREME COURT Weekly market - Constructed, owned and controlled by Municipal Council - Notified
agricultural produces being sold there along with non-agricultural produces - Transfer of
market to Market Committee under S. 4(4) - Not without jurisdiction - Contention that
dominant object of Municipality in establishing said market and effect of sale of nonagricultural produces, not found out by concerned Authorities - Not raised before High
Court - Validity or legality of provision under S. 4(4) was also not questioned - Appellant
cannot be permitted to urge the same for first time at this stage.
Constitution of India, Sch.7, List 2, Entry 28.
Cases Referred :
(Paras 20, 21)
Chronological Paras
Engineering Kamgar Union v. M/s. Electro Steels Castings Ltd., AIR 2004 SC
2401 : 2004 AIR SCW 2918 : 2004 All LJ 1859 : 2004 Suppl (1) JT 78
12
M. P. Vidyut Karamchari Sangh v. M. P. Electricity Board, 2004 AIR SCW 1810 :
2004 Lab IC 1703 : 2004 (3) JT (SC) 423
18
D. R. Yadav v. R. K. Singh, AIR 2003 SC 3935 : 2003 AIR SCW 3475 : 2003 All
LJ 1901 : 2003 (7) SCC 110
18
Indian Handicrafts Emporium v. Union of India, AIR 2003 SC 3240 : 2003 AIR
SCW 4617 : 2003 (7) SCC 589 18
I.T.C. Ltd. v. Agricultural Produce Market Committee, AIR 2002 SC 852 : 2002
AIR SCW 523 : 2002 AIR - Jhar HCR 216 : 2002 (9) SCC 232
12
Belsund Sugar Co. Ltd. v. State of Bihar, AIR 1999 SC 3125 : 1999 AIR SCW
3074 : 1999 (9) SCC 620 5
M.C.V. S. Arunachala Nadar v. State of Madras, AIR 1959 SC 300 : 1959 Suppl
(1) SCR 92 5, 12P. N. Misra, Sr. Advocate, S. Misra, R. M. Patnaik and Ms. Kumud
Lata Das, Advocates with him, for Appellant; Janaranjan Das, Swetaketu Mishra, Ms.
Moushumi Gahlot and Radha Shyam Jena, Advocates, for Respondents.
Judgement
S. B. SINHA, J. :- The Appellant-Talcher Municipality constructed a market
purported to be in exercise of its power conferred upon it under Section 295 of the
Orissa Municipal Act, 1950. The control of the said market is vested in the Municipal
Council in terms of Section 296 thereof. Agricultural produces within the meaning of
provisions of the Orissa Agricultural Produce Markets Act, 1956 (for short "the Act") are
brought and sold in the said market.
2. The respondent-Market Committee sent a requisition dated 13-2-1996 to the
Executive Officer of the appellant stating therein that as it was in possession of the said
market where agricultural produces were being bought and sold it was liable to transfer
the same in terms of sub-section (4) of Section 4 of the Act. A similar request was made
to hand over the Hat and the land situated at Angarua in terms of a letter dated 19-71996.
3. The appellant having failed and/or neglected to comply with the said statutory
requisition, the respondent herein filed a writ petition before the High Court of Orissa
praying for a direction upon the appellant for transferring its weekly market popularly
known as Jajangi Weekly Market. By reason of the impugned judgment, the said writ
@page-SC3955
petition has been allowed.
4. The core question which falls for consideration is as to whether the land and
building of a daily market owned by a Municipality or a Gram Panchayat where notified
agricultural produces are bought and sold is liable to be transferred to the Market
Committee, if requisition therefor is made.
5.Submission of Mr. P. N. Misra, learned Senior Counsel appearing on behalf of
the appellant is that the said Act which was enacted by the State of Orissa in exercise of
its legislative competence contained in Entries 26, 27 and 28 of List II of the Seventh
Schedule of the Constitution of India; the object whereof being to protect the producers
of agricultural produce from being exploited by the middlemen and profiteers and enable
the agriculturists to secure a fair return for their produce, the market where predominantly non-agricultural produces are brought and sold. Sub-section (4) of Section 4
of the Act would not apply. Strong reliance in this behalf has been placed on M.C.V. S.
Arunachala Nadar etc. v. The State of Madras and others ((1959) Supp 1 SCR 92) and
Belsund Sugar Co. Ltd. v. State of Bihar and others ((1999) 9 SCC 620). AIR 1959 SC
300
AIR 1999 SC 3125 : 1999 AIR SCW 3074
6. Submission of Mr. Das, learned counsel appearing on behalf of the
respondent, on the other hand, is that the language used in Section 4(4) of the Act
being clear and explicit, the judgment of the High Court must be held to have correctly
rendered. The learned counsel pointed out that the vires of Section 4(4) of the Act has
not been questioned.
7. The Act has been enacted to provide for better regulation of buying and selling
of agricultural produce and the establishment of markets for agricultural produce in the
State.
8. The Co-operation Department of the Government of Orissa issued notifications
dated 2-8-1993 and 19-11-1994 whereby and whereunder various cereals, oilseeds, gur
and sugarcane, fruits, vegetable items and animal husbandry products were notified as
agricultural produces.
9. By reason of the provisions of the Act not only wholesale but also retail sale of
the agricultural produces as also the market wherein the buying and selling of the
agricultural produces are carried on is sought to be regulated and controlled. A "market
area" and the "market" as defined in Section 2(vii) and 2(vi) respectively are required to
be declared as such in terms of sub-section (1) of Section 4 and sub-section (5) of
Section 4 respectively.
10. Once the market area is declared, the rights of those dealing in agricultural
produces would be governed by the provisions of the said Act.
11. The legislative competence of the State to enact such enactment in exercise
of its power under Entries 26, 27 and 28 of List II of the Seventh Schedule of the
Constitution of India is not in dispute. The Act deals with the supply and distribution of
goods as well as the trade and commerce therein as it seeks to regulate the sale and
purchase of goods carried on in the specified markets.
12.Entry 5 of List II of the Seventh Schedule of the Constitution of India
whereunder the Orissa Municipal Act has been enacted would be subject to the
provisions of Entry 28 as the power to establish a market is a separate and distinct one.
It is true that the primary object of the Act as has been held in M.C.V. S. Arunachala
Nadar (supra) and Belsund Sugar Co. Ltd. (supra), is to protect the producers inter alia
from being exploited from the middlemen but the State has the requisite legislature
competence to establish a market and in that view of the matter the said Act falls within
the ambit of markets and covered by Entry 28. (See ITC Ltd. v. Agricultural Produce
Market Committee and others, (2002) 9 SCC 232). The said decision has recently been
followed in Engineering Kamgar Union v. M/s. Electro Steels Castings Ltd. and another
(2004 (Suppl) 1 JT (SC) 78).
AIR 2002 SC 852 : 2002 AIR SCW 523 : 2002 AIR Jhar HCR 216
AIR 2004 SC 2401 : 2004 AIR SCW 2918 : 2004 All LJ 1859
13. The said Act as noticed hereinbefore was enacted for better regulation of
buying and selling of agricultural produce.
14. The power to regulate buying and selling of agricultural produce must be
interpreted in the context in which the same has been used. Each person whoever is
engaged in buying and selling of the agricultural produce in the market shall be subject
to the regulation for which the same has
@page-SC3956
been enacted. The expression "regulation" is a term which is capable of
interpreted broadly. It may in a given case amount to prohibition.
15. Section 4(4) of the Act must be construed in that context.
Section 4(4) of the Act reads thus :
"Notwithstanding anything to the contrary contained in any law for the time being
in force, the market committee may, after a notification issued under sub-section (1), by
requisition, require any Municipality or Grama Panchayat to transfer to it any land or
building in possession of such Municipality of Grama Panchayat wholly or partly situated
within the concerned market area which immediately before the establishment of the
market was being used by such Municipality or Grama Panchayat for similar purpose,
and the Municipality or Grama Panchayat, as the case may be, shall within one month
from the date of receipt of the requisition, transfer the land or building or both, as
specified in the requisition to the market committee and the net income derived
therefrom by the market committee under Section 11 shall be shared equally by the
market committee and the concerned Municipality or Grama Panchayat, every year :
Provided that the share of the Municipality or Grama Panchayat in any one year
shall not be less than eighty per cent. of the average net income derived by it from land
or building or both so transferred during the three years immediately preceding the
transfer."
16. A market may be belonging to a Municipality or Gram Panchayat but once a
market area has been declared the provisions of the said Act will bring within its sweep
even such markets. Sub-section (4) of Section 4 clearly mandates that even the market
of a Municipality or a Gram Panchayat falling within the market area will have to be
transferred if requisitioned therefor. In the event of such transfer, the net income derived
therefrom by the Market Committee under Section 11 shall be shared equally by the
Market Committee and the concerned Municipality or Gram Panchayat every year. The
proviso appended to sub-section (4) of Section 4 furthermore stipulates that the share of
the Municipality or Gram Panchayat in any one year shall not be less than eighty per
cent. of the average net income derived by it from land or building or both so transferred
during the three years immediately preceding the transfer.
17. It is true that the appellant-Municipality is a local authority. It is furthermore
true that in terms of Section 295 of the Orissa Municipal Act the appellant was entitled
to provide places for use as public markets, the control of which, as noticed
hereinbefore, is to be exercised by the Municipal Council.
18.The Act, however, contains special provisions. The provision of Section 4(4)
of the said Act operates notwithstanding anything to the contrary contained in any other
law for the time being in force. The provisions of the said Act, therefore, would prevail
over the provisions of the Orissa Municipality Act. The maxim 'generalia specialibus non
derogant' would, thus, be applicable in this case. (See D. R. Yadav and another v. R. K.
Singh and another, (2003) 7 SCC 110; Indian Handicrafts Emporium and others v.
Union of India and others ((2003) 7 SCC 589) and M.P. Vidyut Karamchari Sangh v.
M.P. Electricity Board (2004 (3) JT (SC) 423). AIR 2003 SC 3935 : 2003 AIR SCW
3475 : 2003 All LJ 1901
AIR 2003 SC 3240 : 2003 AIR SCW 4617
2004 AIR SCW 1810 : 2004 Lab IC 1703
19. If in a market where together with agricultural produces some non-agricultural
produces are also sold, the same by itself would not disentitle the respondent to
exercise its statutory power contained in Section 4(4) of the Act. Once, the respondent
has the requisite jurisdiction in terms of provisions of the said Act to notify the market
area within which there may exist a market owned by and/or belonging to a Municipality
or a Gram Panchayat, power under sub-section (4) of Section 4 can, in our opinion be
exercised by the respondent-Committee.
20. Contention of Mr. Misra to the effect that in the market in question apart from
agricultural produces, non-agricultural produces are also bought and sold and, thus, it
was obligatory on the part of the authorities concerned to find out the dominant object of
the Municipality in establishing the said market cannot be gone into by this Court for the
first time as such a contention has not been raised before the High Court.
@page-SC3957
21. The appellant furthermore did not raise any contention before the High Court
as regard the effect of sale of non-agricultural produces in the said market. Such a
contention which would involve investigation into questions of fact cannot be allowed to
be raised for the first time before this Court; moreso when even before us no factual
foundation has been laid down in the Special Leave Petition.
22. Furthermore, the validity or legality of the said provision having not been
questioned, the appellant at this stage cannot be permitted to urge that the same will
have no application in the case of this nature.
23. For the reasons aforementioned, there is no merit in this appeal which is
accordingly dismissed. No costs.
Appeal dismissed.
AIR 2003 SUPREME COURT 1742 "Agriculture Market Committee, Rajam v.
Rajam Jute and Oil Millers Association, Rajam"
= 2003 AIR SCW 1169
(From : Andhra Pradesh)*
Coram : 2
M. B. SHAH AND ARUN KUMAR, JJ.
Civil Appeal No. 1495 of 1993, D/- 25 -2 -2003.
Agriculture Market Committee, Rajam and others, Appellants v. Rajam Jute and
Oil Millers Association, Rajam, Respondent.
A.P. (Agricultural Produce and Live Stock) Markets Act (16 of 1966), S.12, S.14 Constitution of India, Art.265 - AGRICULTURAL PRODUCE - Levy of market fee - Quid
pro quo element for services rendered by Market Committee whether exists - Facilities
and amenities provided by Market Committee in market area not totally absent on date
of suit - And all the steps for providing all requisite facilities came to be completed
during pendency of suit - In fact plaintiffs Jute and Oil Millers Association started paying
market fee after all the facilities were provided in market - Sufficient element of quid pro
quo, held, exists for levy of market fee - Extent of services/amenities cannot have
correlation with the fee levied - Mathematical proportions are not possible in such
matters.
W. A. No. 517 of 1993, D/- 27-8-1993 (Andh. Pra.), Reversed.
While quid pro quo between levy of fee and facilities provided in the notified
market area is necessary, exactitude in such matters is neither required nor possible.
The traditional view about actual quid pro quo has undergone a sea change. The extent
of service/amenities cannot have correlation with the fee levied. Secondly, the Market
Committees can continue their efforts for providing the amenities depending on
availability of funds with them. It is not that all the required services must be in place
before a fee can be levied.
(Para 19)
In the instant case, the levy of market fee by the Market Committee was
challenged only on the ground that no basic amenities or services were provided in the
notified market area and therefore the Market Committee had no right to levy, demand
and collect the market fee. The instant is not a case of total absence of facilities and
amenities in the market area. It has come in evidence that steps are being taken to
improve and extend the services and the work was actually in progress in that behalf. In
fact here is an admission on the part of the plaintiffs-Jute and Oil Millers Associations
that after all the facilities were provided in the market they had started paying the
market fee as levied by the Market Committee. Whether particular services and
amenities are available at a given place and the extent thereof are questions of fact
which require to be proved or demolished on basis of evidence to be led by the parties
concerned. Since the plaintiff has not led any evidence whether oral or documentary in
support of its case, the Court is left with no option but to accept the evidence of
defendant Market Committee which shows that some services and facilities in the
notified market area were already available while arrangements were being made for
various other facilities and services. The foundation for the case set up by the plaintiff is
not available on record. The law is well settled that though quid pro quo is required in
relation to a fee which is charged and collected by a Market Committee, the quid pro
quo cannot be in exact proportion to the fee levied. Mathematical proportions are not
possible in such matters. Therefore, Market Committee is entitled to levy and collect
market fee.
@page-SC1743
W. A. No. 517 of 1993, D/- 27-8-1993 (Andh. Pra.), Reversed.
(Paras 13, 21)
Cases Referred :
Chronological Paras
Sreenivasa General Traders v. State of Andhra Pradesh, AIR 1983 SC 1246:
(1983) 4 SCC 353 14, 19, 20
Ramesh Chandra Kachardas Porwal v. State of Maharashtra, (1981) 2 SCC 722
: (1981) 2 SCR 866 13
Kewal Krishan Puri v. State of Punjab, AIR 1980 SC 1008 : (1980) 1 SCC 416
12, 15, 20
Lakhan Lal v. State of Bihar, AIR 1968 SC 1408 : (1968) 3 SCR 534
11
Commr., Hindu Religious Endowments, Madras v. Lakshmindra Thirtha Swamiar
of Sri Shirur Mutt, AIR 1954 SC 282
16Ms. K. Amreswari and R. F. Nariman, Sr.
Advocates, T. V. Ratnam, K. Subba Rao, Ms. Anjani Aiyagiri, A. V. Rangam, A.
Ranganadhan, Buddy A. Ranganadhan, Y. Prabhakara Rao, N. Sreedhar, K. Ram
Kumar, Advocates with them, for Appearing Parties.
* W. A. No. 517 of 1993, D/- 27-8-1993 (Andh. Pra.)
Judgement
ARUN KUMAR, J. :- This appeal is directed against the judgment dated 20th
February, 1992 passed by the Andhra Pradesh High Court allowing the second appeal
and decreeing the suit filed by the plaintiff-Association, respondent herein. Briefly, the
facts are that respondent filed a suit for declaration and injunction in the Court of
Subordinate Judge, Rajam, District Srikakulam, Andhra Pradesh. The plaintiff sought a
declaration to the effect that the defendant-Market Committee had no right to levy,
demand and collect any market fee from the members of the plaintiff-Association. An
injunction was also sought to restrain the defendant-Committee from collecting market
fee from the members of the plaintiff-Association. The case set up by the plaintiff as per
the plaint was that Ranjam Sub-Taluk was under the jurisdiction of the Ponduru
Agricultural Market Committee. On Rajam Sub-Taluk being upgraded as a Taluk, a
separate Agricultural Market Committee was constituted for the Rajam Taluk with effect
from 24th December, 1979. The Market Committee was constituted under the Andhra
Pradesh Agricultural (Produce and Livestock) Markets Act, 1966 (hereinafter referred to
as the 'Act'). The primary object of the Act is to establish a market within a notified area.
The Market Committees which are constituted under the Act have to provide facilities
like sheds, storage, accommodation, platforms, facilities for weighing and grading of the
agricultural produce etc. The Committee has also to engage staff to supervise
operations of the traders in the market area. The Market Committee is to ensure that
transactions in the specified commodities are for the benefit of purchases and sellers of
such commodities. In the process the committees are supposed to regulate the
purchase and sale of agricultural produce by providing a market place and all the
facilities necessary for proper conduct of the trade in agricultural produce in the market
place so as to eliminate the middleman and to ensure healthy trade practices. By
eliminating the middleman the committee tries to protect the purchasers of such
agricultural produce, live stock etc. from exploitation and to ensure to them a fair price
for their produce.
2. According to the plaintiff, the Market Committee had failed to provide any
facilities in the market area so much so even a market yard had not been set up, no
services or amenities were being provided to the traders in the market area and
therefore the Market Committee was not entitled to levy, demand and collect the market
fee or cess from the members of the plaintiffs. In the written statement filed on behalf of
the Market Committee, it was pointed out that the Market Committee was in its nascent
stage, it had come into existence on the declaration of Rajam as separate Taluk only on
24th December, 1979. It had already taken possession of the site comprising 8.50 acres
on 28th November, 1981 for establishment of a market yard at Rajam by incurring an
expenditure of about Rs. 28,000/-. The process was on for construction of godowns,
weighing sheds, platforms etc. The Market Committee had appointed corporates to
attend to the work of grading of the market produce. Supervising staff had been
appointed to inspect the premises of the traders to ensure proper weighment. Thirteen
persons had been licensed for the weighment job. Thus, according to the Market
Committee, it had already started various services in the market area and the process
for providing further services was already on. The levy, demand and collection of market
fee by the defendant was sought to be justified
@page-SC1744
on his basis. The defendant also raised a plea that the plaintiff - Association had
filed a Writ Petition in the High Court challenging increase in the market fee. The writ
petition had been dismissed. In view of the dismissal of the writ petition, an argument
was raised by the learned counsel for the Market Committee that the suit was barred by
the principles of res judicata. Although the issue raised in the writ petition was only with
respect to enhancement of the market fee, yet it was submitted that the plaintiff could
have agitated the question of levy of market fee in the said petition and since it failed to
do so, the principle of constructive res judicata would come into play. It would be
deemed that the point which was available to the plaintiff-Association for being raised at
that stage, was given up. The said question therefore, could not be agitated in the
present suit. The learned counsel for the plaintiff did not have any convincing reply to
this argument. However, while going through the record, we find that the earlier writ
petition being W.P. No. 1184/78 was filed when Rajam was under the erstwhile Ponduru
Agricultural Market Committee. It is possible that the argument regarding nonavailability of facilities and amenities in the market area was not available then because
Ponduru Agricultural Market Committee which had jurisdiction over Rajam Sub-Taluk,
might have been in existence since long and the requisite facilities in the notified market
area were possibly available. Since there is no material on record, in this connection,
we are not inclined to non-suit the plaintiff on this ground. The only question left for
decision in the present appeal is as to whether there has to be a quid quo for the levy of
fee in the sense that services and facilities ought to be available in the market area
before a fee can be levied and if so the extent to which such services and amenities be
available. In other words, it is to be decided as to whether the fee levied by a Market
Committee in pursuance of power conferred on it under the relevant statute i.e., A.P.
Agricultural (Produce and Livestock) Markets Act, 1966, is to commensurate with or in
proportion to the services and facilities provided by the Market Committee to the traders
and purchasers in the market area. To facilitate consideration of this question, it will be
appropriate to notice relevant provisions of the Act.
3. Section 2(vi) defines market to be a market established under sub-section (3)
of Section 4 and includes market yard and any building therein.
4. Sub-section (vii) defines a Market Committee as a Committee constituted or
reconstituted under the provisions of the Act. Notified market area according to sub-
section (xii) of Section 2 means any area declared to be a market area by notification
under Section 4.
5. Section 4 of the Act contains provision for constitution of a Market Committee
and for declaration of a notified market area. The Government is required to constitute
by a notification a Market Committee for every notified area. The Market Committee so
constituted shall be a body corporate having perpetual succession and a common seal
with power to acquire, hold and dispose of property. It is the duty of the Market
Committee to enforce the provisions of the Act and the rules and the bye-laws
thereunder in the notified area. A Market Committee under sub-section (iii) is required to
establish such number of markets as the Government may from time to time direct for
the purchase and sale of any notified agricultural produce, livestock or products of
livestock. The Market Committee is required to provide such facilities in the market as
may be specified by the Government from time to time by a general or special order.
6. Section 12 contains provision regarding levy of fee by the Market Committee.
It is reproduced as under :
"12(1) : The market committee shall levy fees on any notified agricultural
produce, livestock or products of livestock purchased or sold in notified market area (at
such rate, not exceeding (two rupees) as may be specified in the bye-laws) for every
hundred rupees of the aggregate amount for which the notified agricultural produce,
livestock or products of livestock is purchased or sold, whether for cash or deferred
payment or other valuable consideration."
Section 14(1) provides for Market Committee Fund :
"All moneys received by a Market Committee shall be paid into a fund to be
called 'The Market Committee Fund' and the said Fund shall be deposited, in a single
banking
@page-SC1745
account with the nearest Government treasury, or with the sanction of the
Government, in a Bank. All expenditure incurred by the Market Committee under or for
the purpose of this Act shall be defrayed out of the said Fund; and any surplus
remaining after such expenditure shall be invested in such manner as may be
prescribed."
Section 15 enumerates the purposes for which the Market Committee Funds may
be expended which are as under :
"Section 15 :
Subject to the provisions of Section 14, the Market Committee Fund shall be
expended for all or any of the following purposes, namely :(i) the acquisition of site for the market;
(ii) the establishment, maintenance and improvement of the market;
(iii) the construction and maintenance of buildings necessary for the market and
for the health, convenience and safety of the persons using the market and
maintenance of buildings under the control of the Market Committee;
(iv) the provision and maintenance of standard weights and measures;
(v) the pay, pensions, leave allowances, gratuities compassionate allowances
and contribution towards leave allowances, pensions or provident fund of officers and
servants employed by the Market Committee;
(vi) the payment of interest on loans that may be raised for purposes of the
market and the provisions of a sinking fund in respect of such loans;
(vii) the collection and dissemination of information regarding all matters relating
to crop statistics and marketing in respect of notified agricultural produce, livestock and
products of livestock;
(viii) schemes for the extension of cultural improvement of notified agricultural
produce, livestock and products of livestock within the notified area, including the grant,
subject to the approval of the Government, of financial aid to the schemes for such
extension or improvement within such area, undertaken by other bodies or individuals;
(ix) propaganda for the improvement of agriculture, livestock and products of
livestock and thrift;
(x) . . . . . . . . . . . . . . . . . . . . . . . .
(xi) The promotion of grading services;
(xii) Measures for the preservation of foodgrains;
(xii)-a . . . . . . . . . . . . . . . . . . . . . .
(xiii) such other purposes as may be specified by the Government by general of
special order."
7. It is the case of the plaintiff that the Market Committee had failed to establish a
market yard within the notified market area. The Committee had also to provide facilities
like weighing of market produce/commodities, laying roads, providing storage space,
platforms for grading and displaying of the products, in spite of passage of considerable
time after its constitution, the defendant-Committee had not made provision for these
facilities and amenities in the market area. On account of these failures, the Market
Committee was not entitled to levy any fee or cess on the members of the plaintiffAssociation. A fee or cess has an element of quid pro quo which was missing in the
present case. Therefore, the levy of fee was illegal according to the plaintiff. The
immediate provocation for filing of the suit was the two notices dated 25th May, 1982
and 8th December, 1982 issued by the Market Committee to the members of the
plaintiff-Association demanding market fee from the members. As already noted, the
trial Court accepted the case set up by the plaintiff. However, on appeal the learned
District Judge, Srikakulam allowed the appeal and dismissed the suit filed by the
plaintiff-Association vide his judgment dated 9th October, 1990. The plaintiff preferred a
Second Appeal against the judgment of the District Judge. The High Court vide its
impugned judgment dated 20th February, 1992 accepted the appeal and decreed the
suit of the plaintiff upholding the allegation of the plaintiff that the Market Committee had
failed to provide necessary services and amenities in the notified market area and
therefore it was not entitled to levy and collect the market fee.
8. So far as the factual aspect of availability of facilities and amenities in the
market is concerned, the plaintiff did not lead any evidence at all. We are left with only
the averments in the plaint about the absence of facilities and amenities in the notified
@page-SC1746
market area. There is nothing on record to support the plaint averments. On the
other hand, apart from controverting the plea of the plaintiff regarding absence of
facilities and amenities in the market area in the written statement and stating the
necessary facts therein, the defendant led oral evidence on the point by examining a
witness who was an employee of the Market Committee. The witness stated that after
formation of the Market Committee. Government notified the market area as per Section
4(4) of the Act. He produced a copy of the notification as Exh. B.2. According to the
witness, the members of the plaintiff-Association made applications regarding business
in their premises. The Committee issued licences to all the traders to carry on business
in their respective produce. All the traders were sending monthly statements of the
business carried on by them from their respective premises. The traders had to pay a
market fee at the rate of 1% on the basis of their turnover in the market. The Market
Committee had taken possession of a site comprising an area of 8.50 acres on 28th
November, 1981 for establishment of regulated market yard at Rajam. Tenders had
been called for construction of the market yard. The godowns, grain platforms, weighing
sheds, grading platforms were in operation. Wide publicity was being given about the
benefit of grading. The Market Committee also appointed supervisory staff to inspect
the premises and to ensure that there was proper weighment of the commodities being
traded in the market. The supervisors were, besides ensuring proper weights, verifying
the proper payment to the ryots by the traders in respect of the goods sold by the ryots
to the traders. The Market Committee was exhibiting price list in respect of notified
agricultural produce on the notice board. He stated in the cross-examination that the
market yard was already under construction. The witness was cross-examined at length
but nothing could emerge to show that his statement about the services provided in the
market was not correct.
9. Though according to the trial Court and the High Court, the above facilities or
amenities available in the notified market area were not sufficient so as to hold that
facilities and amenities had been made available by the Market Committee in the
notified market area, the learned District Judge, who ordered dismissal of the suit,
accepted that such facilities had been made available in the notified market area and
this entitled the committee to levy market fee in terms of Section 12 of the Act. The
learned District Judge noted from the evidence of DW 1 that no suggestion has been
put to him in the cross-examination that by 1982 the market yard was not having all the
basic amenities. According to the learned District Judge, it was clear from the evidence
of the said witness that amenities were being provided in the notified market area and
the construction of building was in progress. Another fact which emerged from the
evidence of DW 1 was that Market Committee was giving loans to the growers or ryots
by way of cash, loans or by way of supply of manures on credit. Thus the Market
Committee was discharging its functions.
10. The question is whether the Market Committee was not entitled to levy,
demand and collect market fee till all the facilities and amenities are fully and completely
in place. The facilities already provided for in the notified market area in the present
case have been enumerated hereinbefore. What remains to be considered is the extent
to which services, facilities and amenities ought to be available in the market area
before the market fee can be levied.
11
.The validity of notifications declaring the market area and establishing the
market for notified agricultural produce and the legality of the levy of market fee came
up for consideration before a Constitution Bench of this Court in Lakhan Lal and others
etc. v. State of Bihar and others etc., (1968) 3 SCR 534. This was a case under the
Bihar Agricultural Produce Markets Act, 1960. On the question of levy and collection of
the market fee, this Court observed that the fee collected by the Market Committee was
not excessive and it formed part of the Market Committee fund which was set apart and
earmarked for the purposes of the Act such as elimination of unhealthy market
practices, ensuring the correct weight and
AIR 1968 SC 1408
@page-SC1747
grading, dissemination of information regarding prices of agricultural produce etc.
It was observed that there was sufficient quid pro quo for the levy.
12
.Another Constitution Bench judgment of this Court in Kewal Krishan Puri and
another v. State of Punjab and others, (1980) 1 SCC 416 while dealing with provisions
of the Punjab Agricultural Produce Markets Act, 1961, held that element of quid pro quo
must exist for the prayer of the fee for the special services rendered. The Bench noted
the well recognized distinction between tax and fee. A fee is a charge for special service
rendered to individuals by the governmental agency and therefore for levy of fee an
element of quid pro quo for the services rendered was necessary. Service rendered did
not mean any personal or domestic service. It meant service in relation to the
transaction, property or the institution in respect of which the fee is paid. The Court
noted the literal meaning of the phrase quid pro quo as "one for the other" meaning
thereby "you charge fee for the service". A significant observation contained in the said
judgment which is relevant for our purposes is : "the element of quid pro quo may not be
possible, or even necessary, to be established with arithmetical exactitude but even
broadly and evenly it must be established, with some amount of certainty,
reasonableness or preponderance of probability that quite a substantial portion of the
amount of fee realized is spent for the special benefit of its payers. Each case has to be
judged from a reasonable and practical point of view for finding an element of quid pro
quo". AIR 1980 SC 1008
13. In Rameshchandra Kachardas Porwal and others v. State of Maharashtra
and others, (1981) 2 SCC 722, this Court observed that a place ought not be notified as
a market unless it is ready for use as a market with all reasonable facilities and
conveniences. A view was expressed that a notification may be quashed if nothing had
been done beyond publishing a notification. In cases where some facilities and
conveniences have been provided for while some other remain to be provided, the
Court may instead of quashing the notification give appropriate time bound directions for
providing necessary facilities and conveniences. The present is not a case of total
absence of facilities and amenities in the market area. It has come in evidence that
steps are being taken to improve and extend the services and the work was actually in
progress in that behalf. In fact there is an admission on the part of the plaintiffsassociation that after all the facilities were provided in the market they had started
paying the market fee as levied by the Market Committee. This is an admission of the
fact that the steps for providing all the requisite facilities which were on when the suit
was filed, came to be completed during the pendency of the suit. Therefore, so far as
the present case is concerned, the challenge to levy and collection of market fee does
not appear to be having any force.
14
.In Sreenivasa General Traders and others v. State of Andhra Pradesh and
others, (1983) 4 SCC 353), the challenge was to the constitutional validity of the
increase in the rate of market fee levied by the Market Committees in the State of
Andhra Pradesh under sub-section (1) of Section 12 of the Act. There was no challenge
to levy of market fee, only the increase in rate of the fee was under challenge. The
challenge was based on the argument that there was no quid pro quo for the increase in
rate. We must note here that levy of market fee under Section 12(1) is correlated to the
purposes mentioned in Section 15 for which the proceeds of the Market Committee
Fund are to be expended. All the purposes are beneficial to the growers and the
traders. There was no material to show that the Market Committees were rendering no
service or
AIR 1983 SC 1246
@page-SC1748
were incurring unauthorized expenditure. The Court also referred to earlier
decisions and discussed the same.
15
. Regarding Kewal Krishan Puri's case (supra), it was observed that the case did
not lay down any legal principle of general applicability. The fact was that the Market
Committees in Punjab were making money by way of collection of market fee and had
huge surplus funds. The surplus funds were being diverted by the State Government to
purposes other than those under the statute. Though the funds were being utilized for
laudable public purposes, yet the utilization was outside the purpose spelled out in the
statute. It was observed : AIR 1980 SC 1008
"The traditional view that there must be actual quid pro quo for a fee has
undergone a sea change in the subsequent decisions. The distinction between a tax
and a fee lies primarily in the fact that a tax is levied as part of a common burden, while
a fee is of payment of a specific benefit or privilege although the special advantage is
secondary to the primary motive of regulation in public interest. If the element of
revenue for general purpose of the State predominates, the levy becomes a tax. In
regard to fees there is, and must always be, correlation between the fee collected and
the service intended to be rendered. In determining whether a levy is a fee, the true test
must be whether its primary and essential purpose is to render specific services to a
specified area or class; it may be of no consequence that the State may ultimately and
indirectly be benefited by it. The power of any legislature to levy a fee is conditioned by
the fact that it must be "by and large" a quid pro quo for the services rendered.
However, correlationship between the levy and the services rendered (sic or) expected
is of general character and not of mathematical exactitude. All that is necessary is that
there should be a "reasonable relationship" between the levy of the fee and the services
rendered." AIR 1983 SC 1246, Para 30
16
. While dealing with the question of difference between a tax and a fee, the Court
observed:
AIR 1983 SC 1246, Para 31)
"There is no generic difference between a tax and a fee. Both are compulsory
exactions of money by public authorities. Compulsion lies in the fact that payment is
enforceable by law against a person in spite of his unwillingness or want of consent. A
levy in the nature of a fee does not cease to be of that character merely because there
is an element of compulsion or coerciveness present in it, nor is it a postulate of a fee
that it must have direct relation to the actual service rendered by the authority to each
individual who obtains the benefit of the service. It is now increasingly realized that
merely because the collections for the services rendered or grant of a privilege or
licence are taken to the consolidated fund of the State and not separately appropriated
towards the expenditure for rendering the service is not by itself decisive. Presumably,
the attention of the Court in the Shirur Mutt case was not drawn to Article 226 of the
Constitution. The Constitution nowhere contemplates it to be an essential element of fee
that it should be credited to a separate fund and not the consolidated fund. It is also
increasingly realized that the element of quid pro quo in the strict sense is not always a
sine qua non for a fee."
AIR 1954 SC 282
17
.On the question of increase in market fee, the Court had to say :
1246, Paras 34 and 35
AIR 1983 SC
"In the present case, there is no allegation anywhere by any of the petitioners,
nor was any contention advanced that there was
@page-SC1749
any unauthorized expenditure by any of the Market Committees for purposes not
authorized by the Act. There is only a bare assertion on their part that there are surplus
funds available with the Market Committees and therefore the increase in the rate of
market fee from 50 paise per hundred rupees to rupee one was without lawful
justification. From the material on record it is quite apparent that the income from the
market fee derived by some of the Market Committees is not sufficient to meet the
expenditure incurred by them. That apart, when the petitioners concede that they do not
challenge the levy of market fee at 50 paise per hundred rupees in the year 1972, there
can be no basis for challenging the increase in the rate of market fee from 50 paise to
rupee one in 1978. Surely the cost of rendering services has correspondingly increased
with the fall in the value of rupees. In the economic sense, 50 paise of 1972 is certainly
equivalent to at least rupee one of today, if not more."
There is no material placed on record by the petitioners to show that the Market
Committees are rendering no service. Under the scheme of the Act, there are certain
obligatory duties of a Market Committee. Sub-section (3) of Section 4 provides that
every Market Committee shall establish in the notified area such number of markets as
the Government may, from time to time, direct for the purchase and sale of any notified
agricultural produce, livestock or products of livestock and shall provide, such facilities
in the market as may be specified by the Government from time to time by a general or
special order. Chapter V provides for various regulatory measures in Rules 54 to 73 for
the control of a market in that correct weighments would be secured, storage facilities
provided and equal powers of bargaining assured so that the growers may bring their
agricultural produce, livestock and products of livestock to the market and sell them at a
reasonable price. There was not a whisper during the course of the arguments that the
Market Committees were not providing the services as enjoined by Rules 54 to 73."
18. Another important aspect dealt with in this case is about when the services
are to be completed. The following observations are pertinent :
"It will be noticed that these facilities are to be provided by the Market
Committees in course of time 'as and when funds permit'. It is needless to stress that
the question of providing these facilities would depend on the financial capacity of each
Market Committee. That would depend on whether there are sufficient funds available
at its disposal in the Market Committee Fund."
19
.The observations noted above in Sreenivasa's case have simplified our task to a
great extent. It follows that while quid pro quo between levy of fee and facilities provided
in the notified market area is necessary, exactitude in such matters is neither required
nor possible. The traditional view about actual quid pro quo has undergone a sea
change. The extent of service/amenities cannot have correlation with the fee levied.
Secondly, the Market Committees can continue their efforts for providing the amenities
depending on availability of funds with them. It is not that all the required services must
be in place before a fee can be levied. AIR 1983 SC 1246
20
.It was in the case of Kewal Krishan Puri (supra) that this Court said that for a
valid levy of market fee on the agricultural produce bought or sold by the licensees in a
notified market area, the amount of fee realized must be earmarked for rendering
services to the licensees in the notified market area and a good and substantial portion
of it must be shown to be expended for this purpose. However, gradually the concept of
expending a good and substantial portion of the market fee collected by the Market
Committee has been toned down. Most of the relevant statutes have provision for
creation of Market Committee Funds. All market fee which is collected goes into the
Fund. The statutes also contain provisions as to how the Fund is to be utilized. The
powers of Market Committees to utilize the Funds are thus circumscribed by
AIR
1980 SC 1008
@page-SC1750
the statutes. The Funds are utilized only for the facilities in the markets and for
the benefit of the members, producers, growers and traders. When the Funds are in any
case to be utilized for specified purposes, the observation in Puri's case to the effect
that a good and substantial portion of it must be shown to be expended, does not have
much significance. In Sreenivasa Traders and other later cases, it has been accepted
that the Market Committees may keep on extending the services and facilities in the
notified market area as per availability of funds with them.
21. In the case in hand, the levy of market fee by the Market Committee was
challenged only on the ground that no basic amenities or services were provided in the
notified market area and therefore the Market Committee had no right to levy, demand
and collect the market fee. We have noted from the evidence on record that the Market
Committee had made provision for certain services and facilities in the notified market
area and efforts were being made for extending the services. The Market Committee
had recently come into existence and completion of all the intended services and
facilities takes time. It has clearly emerged from the evidence of DW 1 that steps were
being taken for extending the services and facilities in the market area. The plaintiff has
led no evidence to contradict the defendant's evidence. Whether particular services and
amenities are available at a given place and the extent thereof are questions of fact
which require to be proved or demolished on basis of evidence to be led by the parties
concerned. Since the plaintiff has not led any evidence whether oral or documentary in
support of its case, the Court is left with no option but to accept the evidence of
defendant which shows that some services and facilities in the notified market area
were already available while arrangements were being made for various other facilities
and services. The foundation for the case set up by the plaintiff is not available on
record. The law is well settled that though quid pro quo is required in relation to a fee
which is charged and collected by a Market Committee, the quid pro quo cannot be in
exact proportion to the fee levied. Mathematical proportions are not possible in such
matters. We have accepted that some services and amenities were already provided for
in the notified market area which fully justified the levy of market fee. We are thus
unable to agree with the finding of the High Court that the Market Committee had failed
to provide any services or amenities in the notified market area. The findings of the High
Court are accordingly set aside. The appeal is allowed. As a result of this, the suit filed
by the plaintiff, respondent herein, shall stand dismissed. There will be no order as to
costs.
Appeal allowed.
AIR 2002 SUPREME COURT 506 "Sasa Musa Sugar Works (Pvt.) Ltd., M/s. v.
State of Bihar"
= 2002 AIR SCW 42
Coram : 2
V. N. KHARE AND DORAISWAMY RAJU, JJ.
Civil Appeals Nos. 4769 with 4770, 5461 of 1998, 629-630 of 2001 and I.A. Nos.
7-8 in C.A. No. 2110 of 1989, D/- 14 -2 -2001.
M/s. Sasa Musa Sugar Works (Pvt.) Ltd., Petitioner v. State of Bihar and others,
Respondents.
Bihar Agricultural Produce Markets Act (16 of 1960), S.27 - AGRICULTURAL
PRODUCE - Market fee - Levy of - On purchase of sugarcane by sugar factories and
also demand of fee said to be collected on sales of sugar from Food Corporation of
India and other buyers of sugar - Is illegal and unauthorised - Permanent injunction
granted restraining market committee from realising such fee - Is proper - Plea that
injunction be modified and sugar factories be directed to pay to market committee fee
already collected by sugar factories from purchasers of sugar - Not liable to be allowed.
(Para 4)
Cases Referred :
Chronological Paras
Belsund Sugar Co. Ltd. v. State of Bihar, AIR 1999 SC 3125 : 1999 AIR SCW
3074 : (1999) 9 SCC 620 2, 3, 4, 5
Mahalaxmi Rice Mills v. State of U. P., AIR 1999 SC 147 : 1998 AIR SCW 3504 :
(1998) 6 SCC 590 4
Mafatlal Industries Ltd. v. Union of India, (1997) 5 SCC 536 : (1996) 11 JT 283
4
M/s. Amar Nath Om Prakash v. State of Punjab, AIR 1985 SC 218 : (1985) 1
SCC 345
4
Judgement
ORDER :- This group of appeals arise out of challenge to the levy of market fee
on purchase of sugarcane by the sugar factories from the sugarcane growers and also
on sales of sugar by the sugar factories to the Food Corporation of India and other
purchasers of sugar.
2
.Civil Appeals Nos. 629, 630 and 631/2001 arise out of the suits filed by the
sugar factories challenging the levy of market fee on purchase of sugarcane by them
and also demand of fee said to be collected on the sales of sugar from the Food
Corporation of India and other buyers of sugar. In suits, applications were moved for
grant of interim injunction which was allowed by the trial Court. Ultimately, the suit was
decreed by AIR 1999 SC 3125 : 1999 AIR SCW 3074
@page-SC507
the trial Court and a permanent injunction was issued restraining the deft market
committees from realising the market fee as prayed for in the suit. Aggrieved, the
market committees preferred first appeals before the High Court. The High Court
allowed the appeals and reversed the decree of the trial Court. However, Letters Patent
Appeals preferred by the respondent-sugar factories were allowed following the
Constitution Bench's decision of this Court in Belsund Sugar Co. Ltd. v. State of Bihar
and others, reported in (1999) 9 SCC 620. It is against the said decision, the present
appeals have been filed.
3
.C.A. Nos. 4769, 4770 and 5461/1998 arise out of the writ petitions filed by the
appellant-sugar factories challenging the aforesaid levy. The writ petitions were
dismissed. It is against the said judgment, the present appeals have been filed. It is not
disputed that all these appeals stand concluded by the judgment of this Court in
Belsund Sugar Co. (supra).
AIR 1999 SC 3125 : 1999 AIR SCW 3074
4
.Mr. K. K. Venugopal, learned senior counsel appearing for the appellants in C.A.
Nos. 629/2001 and Mr. Krishnan Venu-gopal, learned counsel appearing for the
appellants in C.A. Nos. 630 and 631/2001, however, argued that the blanket injunction
granted by the High Court was totally unwarranted and illegal. Their case is that despite
injunction granted by the trial Court, the sugar factories have collected market fee from
the Food Corporation and other purchasers of sugar but failed to transmit the said
amount to the market committee. Therefore, injunction granted by the High Court has to
be modified and the sugar factories may be directed to pay to the market committee, the
fee collected by them on the sale of sugar. Their case is that where the levy has already
suffered and the amount of fee was collected by the sugar factories, the same is
payable to the market committee. Learned counsel relied upon paragraphs 111, 112,
113 and 114 of the judgment of this Court in Belsund Sugar Co. Ltd.'s (supra) and also
the decisions of this Court in Mahaluxmi Rice Mills and others v. State of U. P. and
others, reported in (1998) 6 SCC 590, M/s. Amar Nath Om Prakash and Others v. State
of Punjab and Others, reported in (1985) 1 SCC 345 and Mafatlal Industries Ltd. and
Others v. Union of India and Others, reported in (1997) 5 SCC 536. We find that the
aforesaid cases have no relevance to the subject matter of the dispute. In the present
case, it has been held that the levy is illegal and unauthorised. Therefore, the appeals
have to be dismissed. However, dismissal of these appeals shall not stand in the way of
the appellants (Market Committee) in taking such proceedings for recovery of fee if
permissible in law. With the aforesaid directions, C.A. Nos. 629, 630 and 631/2001 are
dismissed. There shall be no order as to costs. AIR 1999 SC 3125 : 1999 AIR SCW
3074
AIR 1999 SC 147 : 1998 AIR SCW 3504
AIR 1985 SC 218
5
.C.A. Nos. 4769, 4770 and 5461/1998 stand concluded by the decision of this
Court in Belsund Sugar Co. Ltd. v. State of Bihar and Others (supra) and, therefore,
these appeals deserve to be allowed. The judgment under challenge is set aside. AIR
1999 SC 3125 : 1999 AIR SCW 3074
6. The appeals are allowed. There shall be no order as to costs.
I.A. No. 8 in C.A. No. 2110/1989
7. After the matter was heard at length, Mr. S. B. Sanyal, learned senior counsel
representing the Bihar State Agricultural Marketing Board prays for withdrawal of the
application. The application is dismissed as withdrawn.
I.A. No. 7 in C.A. No. 2110/1989
8. The application is allowed and the Bank Guarantee shall be released in favour
of the Food Corporation of India.
Order accordingly.
@page-SC508
AIR 2002 SUPREME COURT 852 "I.T.C. Ltd. v. Agricultural Produce Market
Committee"
= 2002 AIR SCW 523
(From : Patna)*
Coram : 5 S. P. BHARUCHA, C.J.I., G. B. PATTANAIK, Y. K. SABHARWAL,
Mrs. RUMA PAL AND BRIJESH KUMAR, JJ.**
Civil Appeal No. 6453 of 2001 [with C. A. Nos. 540, 541 of 1987, 3872 of 1990;
3024, 1194, 1536, 3715 and 2464 etc. of 1988; 6619 of 1997; 2088-89 of 1999; 671,
673 and 675 of 2002, (arising out of SLP (C) Nos. 892 of 1983, 27368-27570 of 1995)
and Writ Petn. (C) No. 8614 of 1982], D/- 24 -1 -2002.
I.T.C. Ltd., Appellant v. Agricultural Produce Market Committee and others,
Respondents.
(A) Tobacco Board Act (4 of 1975), S.13, S.32 - Bihar Agricultural Produce
Markets Act (16 of 1960), S.4, S.15 - Karnataka Agricultural Produce Marketing
(Regulation) Act (27 of 1966), S.65, Sch., Item 12 - AGRICULTURAL PRODUCE Tobacco - Sale of - Provisions of State Agricultural Produce Market Acts and Tobacco
Board Act - Cannot co-exist and former prevail over the latter.
Per Court - The State legislations and the Tobacco Board Act to the extent they
relate to the sale of tobacco in market areas, cannot co-exist and the former prevails
over the latter.
(Para 193)
Per Pattanaik, J. (for himself and on behalf of S. P. Bharucha, C.J.I.) - Tobacco
Board and Bihar Agricultural Produce Markets Act come in direct collision with each
other and it is difficult to reconcile the provisions of both the Acts. (Para 26)
Per Y. K. Sabharwal, J. (Brijesh Kumar, J. agreeing) - The provisions of State
Agricultural Produce Marketing Acts and the Tobacco Board Act in respect of sale of
Tobacco cannot operate and co-exist simultaneously. The State legislations and
parliamentary legislations cannot co-exist is apparent from various provisions of the two
legislations. To illustrate in this regard, reference may be made on one hand to S. 4(2)
of Bihar Act and similar provision in other State legislations and on the other to the
provisions of S. 13 of the Tobacco Board Act in States wherein this section has been
enforced and also to S. 8(2)(cc). Reference can also be made to R. 32 of the Tobacco
Board Rules, 1976 framed under S. 32 of the Tobacco Board Act regarding purchase of
Virginia tobacco in comparison to S. 15 of Bihar Act requiring the agricultural produce,
which tobacco, is, to be brought to the market yard and sold by means of an auction or
tender to the highest bidder. The power of the Tobacco Board to purchase from growers
as provided in R. 32 cannot co-exist with sale by auction or tender. Even in regard the
price and manner of payment, licencing and auction procedure under two legislations
and Rules made thereunder show that they cannot co-exist. In this regard reference can
also be made to the Tobacco Board (Auction) Rules, 1984 and Tobacco Board
(Auction) Regulation, 1984. It is evident that the compliance with the provisions of one
would involve non-compliance of the provisions of the other. (Para 43)
Per Ruma Pal, J. - The right to levy fees under the two Acts may not necessarily
conflict, the levy not being the alternative but additional. Assuming this is not possible
and there is any conflict, the provisions of the Markets Act and not the Tobacco Act
would prevail.
(Para 177)
Therefore, even if one were to concede that there is a conflict between the
provision in the Markets Act prohibiting sale of tobacco otherwise than in a market area
and the setting up of auction platforms under the Tobacco Act, and between the States
power to levy market fee under the Markets Act and the levy of fee on the sale of
tobacco under the Tobacco Act at least in those States where Ss. 13, 13-A and 14-A of
the Tobacco Act are not operative, the provisions of the Markets Act must prevail.
(Paras 180, 182, 185)
(B) Constitution of India, Art.246, Sch.7, List 1, Entry 52, List 2, Entry 27, Entry
28, Entry 66 - WORDS AND PHRASES - INDUSTRY - Expression 'industries' in Entry
52 - Does not include all aspects of industry
@page-SC853
commencing from procurement of raw material up to final disposal of final
product - Meaning confined to process of manufacture or production only.
Majority view - (Per Y. K. Sabharwal, J.) (Ruma Pal and Brijesh Kumar, JJ.
concurring) - The expression "industries" in Entry 52 of the Union List does not
comprises in it all its aspects commencing from procurement of raw material and up to
disposal of final product of that industry and not only the process of manufacture or
production. Accepting any other interpretation would mean denuding the State
Legislature the power to legislate in respect of fields covered under various entries
under the State List which are not made subject to any other entry. The intention of the
Constitution makers was not to make Entries 14, 27, 28 and 66 subject to Entry 52 of
the Union List. The acceptance of other view point will have that effect. True, the
parliamentary legislation has supremacy as provided under Art. 246(1) and (2). This is
of relevance when field of legislation is on concurrent list. While maintaining
parliamentary supremacy, one cannot give go by to the federalism which has been held
to be a basic feature of the Constitution. (Paras 92, 93, 94, 126)
Under the Govt. of India Act, 1935 both production, supply and distribution of
goods as well as development of industries were subject to the provisions of List I as
provided in Entry 29 of State List. Our Constitution makers, however, bifurcated Entry
29 into two parts. Industries were put in Entry 24 of List II subject to the provisions of
Entries 7 and 52 of List I. The production, supply and distribution of goods was put in
Entry 27 of List II and made subject to Entry 33 of List III. The acceptance of wider
meaning of industry would mean that no object was sought to be achieved by such a
bifurcation. It is clear that two entries have been separated. One made subject to the
provisions of Entry 33 of List III and the other subject to the provisions of Entries 7 and
52 of List I. Therefore, to interpret the expression "industry" to include in it the aspect of
raw material would mean that by the same analogy the subject-matter of production,
supply and distribution of goods should also be included therein. The acceptance of that
argument would negate the will of the Constitution makers. The expression "industries"
in Entry 24, List II or Entry 52, List I, cannot be interpreted in a manner that would make
other Entries of List II of the Seventh Schedule subject to Union control, which in fact
they are not. Wherever it was intended to be made subject to such control, whether of
List I or that of List III, it was said so. A perusal of List II shows that whenever a
particular entry was intended to be made subject to an Entry in List I or III, it has been
so stated specifically. Therefore, an interpretation which tends to have the effect of
making a particular entry subject to any other entry, though not so stated in the entry,
deserves to be avoided unless that be the only possible interpretation. Entry 52 in List I
of the Seventh Schedule requires the Parliament to make a declaration by law
identifying an industry, the control of which by the Union is expedient in the public
interest. Under the said entry only an 'industry' can be declared as an industry, the
control whereof by the Union is regarded as expedient in public interest. It is, therefore,
implicit that if an activity cannot be regarded as industry, Entry 52 will have no
applicability to that activity. The meaning of the word 'industry' in various dictionaries is
not of any assistance while considering the constitutional meaning of the said term.
There may not be any embargo or limitation on the power of the Parliament to enact the
law in respect of activities other than manufacturing activities but that power is nonexistent in Entry 52 of List I.
(Paras 96, 98)
Per Ruma Pal, J. (concurring) - The word 'Industry' for the purposes of Entry 52
of List I has been firmly confined by 1956 SCR 393 to the process of manufacture or
production only. The word 'industry to mean the process of manufacture or production
and that it does not include the raw materials used in the industry or the distribution of
the products of the industry. Given the constitutional frame work, and the weight of
judicial authority it is not possible to accept an argument canvassing a wider meaning of
the word "industry". Whatever the word may mean in any other context, it may be
understood in the Constitutional context as meaning 'manufacture or production'
Applying the negative test as evolved in 1956 SCR 393 in this case it would
follow that the word 'industry' in Entry 24 of List II and consequently Entry 52 of List I
does
@page-SC854
not and cannot be read to include Entries 28 and 66 of List II which have been
expressly marked out as fields within the State's exclusive legislative powers. As noted
earlier Entry 28 deals with markets and fairs and Entry 66 with the right to levy fees in
respect of, in the present context, markets and fairs. Entry 52 of List I does not override
Entry 28 in List II nor has Entry 28 in List II been made subject to Entry 52 unlike Entry
24 of List II. (Paras 162, 163)
Minority view (Per Pattanaik, J. for himself and on behalf of S. P. Bharucha, C. J.
I.) - Tobacco Board Act enacted by the Parliament under Entry 52 of List I is
constitutionally valid and all the provisions therein, including the provisions relating to
growing of Tobacco and sale and purchase of tobacco are within the legislative
competence of the Parliament. The word 'industry' in Entry 52 of List I cannot be given a
restricted meaning because the Entries in the List should be given liberal and generous
construction and it is well accepted cardinal rule of interpretation that the words in
constitutional document, conferring legislative powers should be construed most
liberally and in their widest amplitude. The word "industry" in Entry 52 of List I should be
interpreted in a manner so as to be enabling the Parliament to make law in relation to
subject-matter which is declared and whose control has been taken over to bring within
its sweep any ancillary matter, which can be said to be reasonably included within the
power and which may be incidental to the subject of legislation, so that the Parliament
would be able to make an effective law. (Paras 22, 27)
(C) Bihar Agricultural Produce Markets Act (16 of 1960), S.15, S.27 AGRICULTURAL PRODUCE - Karnataka Agricultural Produce Marketing (Regulation)
Act (27 of 1966), S. 75 - Market fee - Levy of, on tobacco - Legislative competence State has the legislative competence - Parliament cannot legislate in respect of sale of
raw tobacco in market area.
I.T.C. v. State, 1985 Supp SCC 476, Overruled.
Constitution of India, Art.246, Sch.7, List 1, Entry 52, List 2, Entry 27.
Majority view (Per Y. K. Sabharwal, Ruma Pal and Brijesh Kumar, JJ) - The State
legislatures are competent to enact legislation providing for the levy and collection of a
market fee on the sale of Tobacco in a market area, consequently the Market Acts
enacted by the States are valid.
I.T.C. v. State, 1985 Supp SCC 476, Overruled.
(Para 193)
Per Y. K. Sabharwal, J. (Brijesh Kumar, J. agreeing) - The State Legislatures are
competent to enact legislations providing for sale of agricultural produce of tobacco in
market area and for levy and collection of market fee on that produce. The Parliament is
not competent to pass legislation thereon while legislating in the field of legislation
covered by Entry 52 of the Union List under which the Parliament can legislate only in
respect of industries, namely, 'the process of manufacture or production'. The activity
regarding sale of raw tobacco as provided in the Tobacco Board Act cannot be
regarded as 'industry'.
(Para 126)
Per Ruma Pal, J. - The setting up of market areas, market yards and regulating
use of the facilities within such area or yards by levy of market fee is a matter of local
interest and would be covered by Entry 28 of List II and thus within the legislative
competence of the State. If any portion of the market area or the market yards is used
for the sale or purchase of tobacco, that too will be within the State's competence. To
hold to the contrary would be to ignore the exclusive powers of the States to legislate in
respect of Markets and fairs under Entries 28 and 66 of List II. The Markets Act does
not seek to regulate either the 'manufacture or production' of tobacco (assuming that
agricultural produce can be manufactured) and thus does not impinge upon the
Tobacco Act in so far as it is at all relatable to Entry 52 of List I. All the provisions of the
Markets Act, are clearly relatable to Entry 28 of List II given the scope of the entry.
Therefore Ss. 15 and 27 of the Markets Act in pith and substance are relatable to
Entries 28 and 66 of List II and have been competently enacted by the State.
Incidentally it is nobody's case that the fee charged under S. 27 does not represent a
quid pro quo for the services rendered and facilities afforded in the market area. It
follows that Parliament is incompetent to legislate for the setting up
@page-SC855
or regulation of 'markets and fairs' within the meaning of the phrase in Entry 28 of
List II, even in respect of tobacco. It may of course incidentally trespass into the State
legislative field, provided (1) the trespass is an inseparable part of the provisions validly
passed (2) the State has not already fully occupied its field with conflicting statutory
provisions. (Para 169)
Since States are exclusively competent to decide on the location of markets, the
authorities under the Tobacco Act would have to comply with the municipal laws and set
up the auction platforms only within the permissible areas. If the facilities afforded under
the Market Act are utilised, the facilities will have to be paid for and the authorities
appointed to levy and collect fees for the purpose under the Markets Act would be
competent to do so. If further facilities are offered at the Auction Platforms under the
Tobacco Act, fees may be levied under S. 14-A of that Act. (Para 177)
Even if Ss. 15 and 27 of the Markets Act are not referable to Entries 28 and 66 of
List II and are referable to Entries 26 and 27 of List II - nevertheless these sections of
the Markets Act do not trespass on turf reserved by Parliament under Entry 52 of List I ?
State legislation on the supply and distribution of goods as well as trade and commerce
therein which are relatable to Entries 26 and 27, is only subject to the Central
enactment if any under Entry 33 of the Concurrent List and not Entry 52 of List I,
Furthermore, whether or not any portion of the Tobacco Act relates to an 'industry'
within the meaning of entry 52, List I, following the logic of 1956 SCR 393 at least those
provisions relating to the disposal of tobacco are not so relatable. The declaration under
Entry 52, List I does not cover these provisions and the States were free to legislate
under Entries 26 and 27 of List II on tobacco. (Para 178)
Assuming that Chapter III of the Tobacco Act are covered by Entry 52 of List I,
nevertheless the Parliament did not intend to invalidate any portion of the Markets Act. It
has consciously clarified by S. 31 that it does not intend to occupy the entire field and
has 'made space' for the State legislation and made it clear that the provisions of the
Central Act shall be in addition to and not in derogation of any other Law. The section
assumes greater significance since most of the Markets Acts were in place when the
Tobacco Act was enacted. There are two ways in which such a saving clause as is
contained in S. 31 of the Tobacco Act may be understood. Either way, the express
words in S. 31 coupled with the duty of Courts to reconcile and uphold legislation, if
possible, can only result in upholding the constitutional validity of the Market fee
imposed by the State.
(Para 179)
A further compelling circumstance to uphold the levy of market fee is the fact that
several provisions of Chapter II of the Tobacco Act particularly those dealing with the
setting up of auction platforms namely Ss. 13 and 13-A and S. 14-A relating to the levy
of fees on the sale of tobacco have not been brought into operation in any State in India
except for the State of Karnataka. It is difficult to adopt an interpretation which would
debar the States from the right to provide for the sale of tobacco only within market
Areas and levy market fees although Parliament does not now and may never seek to
bring Ss. 13, 13-A and 14-A into operation in those States. (Para 180)
Minority view (Per Pattanaik, J. for himself and on behalf of S. P. Bharucha, C. J.
I.) - Tobacco Board Act and Bihar Agricultural Produce Market Act come in direct
collision with each other and it is difficult to reconcile the provisions of both the Acts.
Tobacco Board Act having been enacted by the Parliament and making all provisions in
relation to the tobacco industry including the provisions for growing of tobacco as well
as sale and purchase of raw tobacco, in accordance with the procedure prescribed
under the said Act, the provisions of the Agricultural Produce Markets Act, entitling the
Market Committee to levy fee for sale and purchase of raw tobacco within the market
area will not be operative, so far as the produce 'tobacco' is concerned. In other words,
Central Act would prevail and would govern the entire gamut of tobacco industry. It is
also important to bear in mind that when Parliament decides to take over the control of a
particular industry in the interest of the said industry as well as in the national interest,
the control should be effective and
@page-SC856
should be in such a manner that the desired object can be achieved. Necessarily
therefore, legislation ought to be made providing control over the growing of tobacco as
well as on its sale and purchase, which alone would subserve the very purpose for
which the control of the industry has been taken over by the Parliament. (Paras
28,
30, 32)
The power of the State Legislature gets denuded to the extent the Central
Legislation occupies the field in respect of the controlled industry, the control of which
has been taken over by the Parliament on a declaration being made. If after taking over
the control of the industry in exercise of its legislative competence under Entry 52 of List
I, the Parliament while making a law did not make any provision in relation to the supply
of raw material, then merely because the control of the industry has been taken over,
the State's power to make legislation in relation to the supply of raw-material would not
get denuded. But that does not mean that the Parliament cannot make any law in
relation to any other aspect other than the aspect of production and manufacture of the
industry.
(Para 25)
It cannot be said in such a case that Entries 14 and 28 of List II not being subject
to any Entry under List I and the Market Committee Act being relatable to Entries 14
and 28 of List II the same should be allowed to operate notwithstanding the wide
meaning to the word 'industry' in Entry 52 of List I and the Parliament has already taken
over the control of the industry and has made law in that respect. (Para 26)
Further, it cannot also be said that the Market Committee Act can still be
operative and the Market fee could be levied by the Market Committee under the State
Act for services provided by it on the principle of quid pro quo.
(Para 26)
(D) Constitution of India, Art.246 - SEPARATION OF POWERS - Separation of
powers between States and union - Entries in State and Union lists - Ambit and scope
of an entry cannot be determined with reference to parliamentary enactment.
Per Y. K. Sabharwal, J. - The fields are demarcated in the various entries. On
reading both, it has to be decided whether the concerned legislature is competent to
legislate when its validity is questioned. The ambit and scope of an entry cannot be
determined with reference to a parliamentary enactment.
(Para 67)
(E) Constitution of India, Art.246, Pre. - LEGISLATURE - Constitution Interpretation - To be in such manner that it does not whittle down the powers of State
Legislature and preserves the federalism while also upholding the central supremacy as
contemplated by some of its articles.
(Per Y. K. Sabharwal, J.)
(Para 94)
(F) Constitution of India, Art.246 - LEGISLATIVE COMPETENCE INTERPRETATION OF STATUTES - Entries in Sch. 7 - Interpretation - Entries do not
provide competence to legislate - They only demarcate the legislative field.
Per Y. K. Sabharwal, J. - The entries in the lists in the Seventh Schedule do not
provide competence or power to legislate on the legislature for which the source of
power is contained in Art. 246 of the Constitution. In deciding question of legislative
competence, it has to be kept in view that the Constitution is not required to be
considered with a narrow or pedantic approach. It is not to be construed as a mere law
but as a machinery by which laws are made. The interpretation should be broad and
liberal. The entries only demarcate the legislative field of respective legislature and do
not confer legislative power as such and if it is found that some of the entries overlap or
in conflict with the other, an attempt to reconcile such entries and bring about a
harmonious construction is the duty of the Court. When, however, reconciliation is not
possible, then the Court will have to examine the entries in relation to legislative power
in the Constitution. (Para 97)
Cases Referred :
Chronological Paras
State Bank of India v. Yasangi Venkateswara Rao, AIR 1999 SC 896 : 1999 AIR
SCW 568 : (1999) 2 SCC 375
9, 107
Belsund Sugar Co. Ltd. v. State of Bihar, AIR 1999 SC 3125 : 1999 AIR SCW
3074 : (1999) 9 SCC 620 10, 12, 13, 16, 25, 28, 120, 121, 123, 124, 134, 155, 163,
181
Siel Ltd. v. Union of India, AIR 1998 SC 3076 : 1998 AIR SCW 2984 : 1998 All LJ
2239 : (1998) 7 SCC 26 12, 119, 123, 124
@page-SC857
Bihar Distillery v. Union of India, AIR 1997 SC 1208 : 1997 AIR SCW 1240 :
(1997) 2 SCC 727 13
R. S. Rekhchand Mohota Spng. and Wvg. Mills Ltd. v. State of Maharashtra, AIR
1997 SC 2591 : 1997 AIR SCW 2546 : (1997) 6 SCC 12
16
Indian Aluminium Co. v. State of Kerala, AIR 1996 SC 1431 : 1996 AIR SCW
1051 : (1996) 7 SCC 637 16
McDowell and Co. v. State of Andh Pra, AIR 1996 SC 1627 : 1996 AIR SCW
1679 : (1996) 3 SCC 709 9, 12, 13, 67, 151
Shriram Industrial Enterprises Ltd. v. Union of India, AIR 1996 All 135 : 1996 All
LJ 468 (FB) 12, 26, 117, 124
Dalmia Industry Ltd. v. State of U.P., AIR 1994 SC 2117 : 1994 AIR SCW 1872 :
(1994) 2 SCC 583 13
S. R. Bommai v. Union of India, AIR 1994 SC 1918 : 1994 AIR SCW 2946 :
(1994) 3 SCC 1
12, 13, 93, 129
Indian Aluminium Co. v. Karnataka Electricity Board, AIR 1992 SC 2169 : 1992
AIR SCW 2551 : (1992) 3 SCC 580
12, 115
B. Viswanathaiah and Co. v. State of Karnataka, 1991 AIR SCW 455 : (1991) 3
SCC 358
11, 15, 25, 99, 113, 150
Orissa Cement Ltd. v. State of Orissa, AIR 1991 SC 1676 : 1991 AIR SCW 1375
: 1991 Supp (1) SCC 430 15, 26
India Cement Ltd. v. State of Tamil Nadu, AIR 1990 SC 85 : (1990) 1 SCC 12
15, 26
Synthetics and Chemicals Ltd. v. State of U.P., AIR 1990 SC 1927 : (1989) 4 JT
(SC) 267
13, 22
744
Bharat Cooking Coal Ltd. v. State of Bihar, (1990) 4 SCC 557 : (1990) 3 SCR
183
677
Express Hotels Pvt. Ltd. v. State of Gujarat, AIR 1989 SC 1949 : (1989) 3 SCC
22
Accountant and Secretarial Services Pvt. Ltd. v. Union of India, AIR 1988 SC
1708 143
I.T.C. Ltd. v. State of Karnataka, 1985 Supp (1) SCR 145 : 1985 Supp SCC 476
(Overruled) 2, 4, 9, 10, 12, 13, 14, 16, 17, 18, 19, 22, 23, 27, 29, 32, 40, 44, 51, 52,
54, 55, 122, 126, 141, 183, 185, 187, 189, 191, 193
Hoechst Pharmaceuticals Ltd. v. State of Bihar, AIR 1983 SC 1019 : (1983) 4
SCC 45
12, 15, 132, 144
Western Coalfields Ltd. v. Special Area Development Authority, AIR 1982 SC
697 : (1982) 1 SCC 125 13
223
Ganga Sugar Corporation Ltd. v. State of U.P., AIR 1980 SC 286 : (1980) 1 SCC
12, 15, 23, 108, 109, 110, 111, 113, 153, 169
136
Ishwari Khetan Sugar Mills v. State of U.P., AIR 1980 SC 1955 : (1980) 4 SCC
10, 12, 24, 59, 65, 66, 130, 180
M. Karunanidhi v. Union of India, AIR 1979 SC 898 : 1979 Cri LJ 773 : (1979) 3
SCC 431
10, 12, 179
Fateh Chand v. State of Maharashtra, AIR 1977 SC 1825 : (1977) 2 SCC 670
13, 143, 154, 160
Kerala State Electricity Board v. Indian Aluminium Co., AIR 1976 SC 1031 :
(1976) 1 SCC 466 15
(Harakchand) Union of India v. Harbhajan Singh, AIR 1972 SC 1061 : 1972 Tax
LR 449 : (1971) 2 SCC 779
17
Kannan Devan Hills Produce Co. Ltd. v. State of Kerala, AIR 1972 SC 2301 :
(1972) 2 SCC 218 12, 15, 23, 109, 110, 112, 113, 144, 152
Baij Nath Kedia v. State of Bihar, AIR 1970 SC 1436 : (1969) 3 SCC 838 3, 10,
12, 15, 23, 24, 26, 52, 57, 58, 59, 62, 64, 66, 122, 183, 187, 191
Harakchand Ratanchand Banthia v. Union of India, AIR 1970 SC 1453 : (1970) 1
SCR 479
9, 12, 16, 17, 20, 100, 101, 102, 103, 113, 138, 155, 156, 158, 159, 160
Chaturbhai M. Patel v. Union of India, AIR 1960 SC 424 : (1960) 2 SCR 362
9, 12, 104, 105, 130
State of Orissa v. M. A. Tulloch and Co., AIR 1964 SC 1284 : (1964) 4 SCR 461
3, 10, 12, 15, 25, 26, 52, 57, 58, 59, 63, 64, 183, 187, 191
Waverly Jute Mills Co. Ltd. v. Raymon and Co. (India) Pvt. Ltd., AIR 1963 SC 90
: (1963) 3 SCR 209 9, 165
State of West Bengal v. Union of India, AIR 1963 SC 1241 : (1964) 1 SCR 371
12
Rai Ramkrishna v. State of Bihar, AIR 1963 SC 1667 : (1964) 1 SCR 897 16
First Additional Income-tax Officer v. H. N. S. Iyengar, AIR 1962 SC 478 : 1962
Supp (1) SCR 1
16
@page-SC858
Calcutta Gas Co. v. State of West Bengal, AIR 1962 SC 1044 : 1962 Supp (3)
SCR 1 9, 12, 15, 23, 90, 91, 129, 143, 146, 149, 156
Hinger Rampur Coal Co. Ltd. v. State of Orissa, AIR 1961 SC 459 : (1961) 2
SCR 537
25, 59, 63, 64, 121, 122, 123, 183
Chaturbhai M. Patel v. Union of India, AIR 1960 SC 424 : (1960) 2 SCR 362
16
State of Rajasthan v. G. Chawla, AIR 1959 SC 544 : 1959 Cri LJ 660
105, 130
9, 22,
Deep Chand v. State of U.P., AIR 1959 SC 648 : 1959 Supp (2) SCR 8
15, 132
12,
MPV Sundararamier and Co. v. State of Andh Pra, AIR 1958 SC 468 : 1958 SCR
1422 129
399
A. S. Krishna v. State of Madras, AIR 1957 SC 297 : 1957 Cri LJ 409 : 1957 SCR
12, 130
Tika Ramji v. State of U.P., AIR 1956 SC 676 : 1956 SCR 393
8,9, 12, 15,
17, 19, 23, 58, 60, 64, 66, 68, 78, 81, 82, 84, 85, 87, 91, 102, 103, 108, 109, 112, 113,
116, 124, 125, 139, 147, 148, 150, 153, 156, 157, 158, 159, 162, 163, 190
829
Navinchandra Mafatlal v. Commissioner of I.-T., AIR 1955 SC 58 : (1955) 1 SCR
16, 19
Zaverbhai Amaida v. State of Bombay, AIR 1954 SC 752 : 1954 Cri LJ 1822 :
(1955) 1 SCR 799 16
State of Bombay v. F. N. Balsara, AIR 1951 SC 318
143
Governor General in Council v. Province of Madras, AIR 1945 PC 98
Smith v. Allwright, (1944) 321 US 649 : 88 Law Ed 1594
143
108
United Provinces v. Mst. Atiqa Begum, AIR 1941 FC 16 : 1940 FCR 110
16
188
Subramanyam Chettiar v. Muttuswamy Gounder, AIR 1941 FC 47 : 1940 FCR
15, 22, 104
Central Provinces and Berar Sales of Motor Spirit and Lubricants Taxation Act, In
re, AIR 1939 FC 1 143R. N. Trivedi, Addl. Solicitor General, Shanti Bhushan, S.
Ganesh, Ms. Shobha Dikshit, L. Nageswara Rao, G. L. Sanghi, S. K. Gambhir, A. K.
Ganguli, Dr. A. M. Singhvi, S. B. Sanyal, Rakesh Dwivedi, P. P. Malhotra, V. A. Bobde,
Sr. Advs., Nillay Dutta, Advocate General for Assam, Beeran, Addl. Advocate General
for Kerala, Pallav Shishodia, Sanjay R. Pathak, Buddy A. Ranganadhan, Pradeep
Misra, Ms. Indu Misra, R. P. Gupta, Ms. Rashmi Jain, Shushendra Chauhan, S. K.
Agnihotri, Anil K. Pandey, Sakesh Kumar, Ms. Vibha Datta Makhija, Rohit K. Singh, H.
K. Puri, Awanish Sinha, S. K. Puri, Rajesh Srivastava, Ujjawal Banerjee, Ms. Anindita
Gupta, Vikas Singh, Yunus Malik, Sunil Roy, A. Subba Rao, S. B. Upadhyay, G.
Umapathy, Krishnamurthi Swami, P. K. Bansal, Rajan Narain, Ashok Mathu, Ms.
Krishna Sarma, Ms. Asha G. Nair, V. K. Sidharthan, Mahabir Singh, S. P. Singh
Chauhan, Saket Singh, Ms. Niranjana Singh, B. B. Singh, Ms. Indu Sharma, Ms.
Rachana Srivastava, Manoj Prasad, Promod Swarup, Praveen Swarup, Ms. Pareena
Swarup, L. K. Pandey, S. V. Deshpande, Ms. Anuradha Rastogi, Pramit Saxena,
Manish Singhvi, Ramesh Singh, Ms. Bina Gupta, Ms. Divya Roy, Vivek Gambhir, B. G.
Sridharan, G. C. Chandrashekhar, P. P. Singh, Sanjay R. Hegde, Satya Mitra, Prakash
Shrivastava, A. Mariarputham, Ms. Aruna Mathur, Anurag D. Mathur, T. Raja, Hemant
Sharma, S. N. Terdol, Kh. Nobin Singh, Ms. A. Subhashini, Ramesh Babu M. R., Anil
Shrivastava, T. V. Ratnam, K. Subba Rao, S. K. Dwivedi, Advocates with them, for
appearing parties.
* CWJC No. 3248 of 1979, D/ - 16- 8- 1984 (Patna).
** Note :- In this case the judges of the Supreme Court differ in their views. The
majopity view is taken by Y. K. Sabharwal, Mrs. Ruma Pal and Brijesh Kumar, JJ. and
the minority view by S. P. Bharucha, C. J. I. and G. B. Pattanaik, J.
Judgement
PATTANAIK, J. (for himself and on behalf of S. P. Bharucha, C. J. I.) :- Leave
granted in all the Special Leave Petitions.
2. I.T.C. Limited filed a writ petition under Articles 226 and 227 of the Constitution
of India before the Patna High Court against an order of assessment passed by the
Agricultural Produce Market Committee, Monghyr, demanding a sum of Rs. 35,87,072/-,
inter alia on the ground that the purchase of unprocessed tobacco leaves from the
growers, being the subject-matter of the levy, the Market Committee has no power to
levy and collect fee. The stand taken before the High Court was that tobacco leaves
neither having been bought or sold within the market area and the power to levy and
collect market fee under Section 27 of the Bihar Agricultural Produce Markets Act, being
on the Agricultural produce bought or sold in the market area, the Market Committee
was not entitled to levy market fee. The Division Bench however without entering into
the aforesaid controversy, came to the conclusion that no clear notice appears
@page-SC859
to have been given to the company to produce the records for the purpose of
satisfying the Market Committee that the tobacco leaves in question were either not
processed or exported from the market area and, therefore, the company must be given
a fresh opportunity of adducing all the relevant documents before the Market Committee
to escape the presumption arising out of proviso to Section 27 of the Act. The High
Court having remitted the matter to the Market Committee for passing a fresh
assessment order, the company has approached this Court, which is the subject-matter
in Civil Appeal No. 6453 of 2001 arising out of SLP (Civil) No. 12374/84. When the
Special Leave Petition was listed before a Bench of this Court in February, 1987, the
judgment of this Court in I.T.C. Ltd. v. State of Karnataka, reported in 1985 Supp (1)
SCR 145 had been placed. The Bench tentatively being of the view that the decision of
this Court requires reconsideration directed that the matter be placed before a
Constitution Bench of five Judges and that is how the matter has been placed before
the Constitution Bench. Subsequent to the Bihar case, similar cases arising out of
judgment of other High Courts on being assailed before this Court, those cases also
have been tagged on to this case. When this batch of cases had been earlier listed
before a Constitution Bench and arguments had been advanced on behalf of company,
the Court felt that it would be appropriate to issue notice to the Attorney General and the
Advocate Generals of all the States, as most of the States have their State Act called
the Agricultural Produce Market Act and pursuant to the order of this Court dated 10th
of April, 2001, notices were issued to Advocate Generals of all the States as well as to
the Ld. Attorney General, whereafter this case has been heard by this Bench.
3
.Different State Legislatures have enacted Agricultural Produce and Markets Act
for regulating sale and purchase of the agricultural produce within the market area and
for levy and collection of market-fee. Parliament having declared that it is expedient in
the public interest that Union should take under its control the tobacco industry, enacted
the Tobacco Board Act, 1975 which is an Act to provide for the development of tobacco
industry under the control of the Union Government. Under the Agricultural Produce
Markets Act, the State Government having notified 'tobacco' as an agricultural produce,
the purchase and sale of tobacco is to be regulated under the provisions of the State
Act and the Market Committee has the right to levy and collect market-fee on such sale
and purchase of the notified agricultural produce viz. the tobacco. In a case arising from
the State of Karnataka, this Court by a majority of 2 : 1, came to hold that the tobacco
industry having been taken over by the Central Government under Entry 52 of List I and
having passed the Tobacco Board Act, the State Legislature ceases to have any
jurisdiction to legislate in that field and, therefore, the provisions contained in the
Karnataka Act, entitling the Market Committee to levy market-fee in respect of sale and
purchase of tobacco within the market area directly, collides with the Tobacco Board
Act, 1975 and as such the State Act so far as it relates to tobacco was struck down. The
minority view expressed by Justice Mukherjee was however to the effect that both Acts
can operate in their respective fields and there is no repugnancy if both the Acts are
considered in the light of their respective true nature and character. The majority view
relied upon the decisions of this Court in State of Orissa v. M. A. Tulloch and Co., 1964
(4) SCR 461 and Baij Nath Kedia v. State of Bihar and Ors., 1969 (3) SCC 838. AIR
1964 SC 1284
AIR 1970 SC 1436
4
.The other matter, arising out of the judgment of Patna High Court is one filed by
Agricultural Produce Market Committee, against a similar order as in Civil Appeal No.
6453 of 2001, remanding the matter for making a fresh assessment order, after issuing
notice to the ITC. So far as Civil Appeals arising out of the judgment of Allahabad High
Court is concerned, the Division Bench of Allahabad High Court followed the judgment
of this Court in ITC v. The State of Karnataka, 1985 (Suppl) Supreme Court Cases 476,
1985 Supp SCC 145
@page-SC860
and held that Mandi Samiti cannot charge a market fee on sale and purchase of
Tobacco, and consequently Krishi Utpadan Mandi Samiti has preferred the appeals in
question. Civil Appeal No. 3872 of 1990 also arises out of a judgment of Allahabad High
Court and the Tobacco Merchants' Association and Ors., are the appellants. The Full
Bench of Allahabad High Court considered the constitutional validity of U. P. Krishi
Utpadan Mandi Adhiniyam, 1964, and came to hold, that the Adhiniyam permitting levy
and collection of fee under Section 17(iii), in so far as it applies to tobacco, is not
repugnant to the provisions of Tobacco Board Act and further held that the decision of
the Supreme Court in Ram Chander Kailash Kumar v. State of U. P. is binding,
notwithstanding the subsequent decision of the Supreme Court in the case of ITC v.
State of Karnataka (supra), and therefore, the Tobacco Merchants' Association has
assailed the legality of the aforesaid Full Bench decision. So far as the State of Tamil
Nadu is concerned, the Tamil Nadu Agricultural Marketing Board has assailed the
judgment of the Division Bench of the High Court as the High Court followed the
judgment of this Court in the ITC case and held that the State Legislature has no
legislative power or competence to notify tobacco for the purpose of control and
regulation and levy market fee under the provisions of Tamil Nadu Regulation Act,
1959. In fact the High Court held that the ratio of majority opinion in ITC case squarely
applies and, therefore, the State Legislature of Tamil Nadu has no legislative power to
notify or provide for notifying tobacco for the purpose of control, regulation and levy of
fee or other charges under the provisions of Tamil Nadu Agricultural Produce Markets
Act, 1959.
5. Jayalakshmi Tobacco Company filed a Civil Writ Petition No. 8614 of 1982
under Article 32, challenging the constitutional validity of certain provisions of Karnataka
Agricultural Produce Marketing (Regulation) Act, 1966, on the ground that in view of
Tobacco Board Act, 1975 and Tobacco Association Act, 1975, the entire field regarding
the development of tobacco industry including the marketing of tobacco was occupied
and the State legislation is repugnant to the Central Act.
6. So far as 12 appeals arising out of the judgments of Madhya Pradesh High
Court are concerned, the High Court of Madhya Pradesh followed the judgment of this
Court in the ITC case and held that the Market Committee will not be entitled to realise
any market fee in relation to the trade with regard to tobacco since the Market
Committee Act is repugnant to the Tobacco Board Act. It may be stated that though the
Writ Petition had been filed challenging the constitutional validity of the State Act, the
High Court held the M. P. Krishi Utpadan Mandi Adhiniyam, 1972 as amended by M. P.
Krishi Utpadan Mandi Sanshodhan Adhiniyam, 1986 to be valid.
7. Mr. Shanti Bhushan, learned senior counsel appeared for ITC, and argued,
that the majority view in the decision of ITC case is correct and once Parliament has
made a law relating to tobacco industry, which provides for the manner and place of
sale as well as levy of fee on the sale, the Market Committee Act enacted by the State
Legislature, providing levy of fee for sale of the tobacco within the market area will be
repugnant to the Central law, and therefore, the State Act, so far as it deals with
tobacco, must be held to be ultra vires.
8
.Mr. Rakesh Dwivedi, the learned senior counsel, appearing for the State of
Bihar, on the other hand contended, that the majority decision in the case must be held
to be contrary to several Constitution Bench decisions of this Court starting from Tika
Ramji v. State of U. P., (1956) SCR 393, and the word AIR 1956 SC 676
@page-SC861
'industry' in Entry 52 of List I must be given a limited meaning. So construed,
according to Mr. Dwivedi, the Parliament cannot be said to have legislative competence
to make law in relation to growing of raw tobacco, or even sale thereof, and to that
extent the Tobacco Board Act must be held to be invalid. According to him the State
Legislature was fully competent to enact the Agricultural Market Committee Act and
providing therein for levy or fee for sale and purchase of agricultural produce including
tobacco. Apart from the main arguments, advanced by these two learned senior
counsel, several other counsel appearing for Market Committee, namely, Mr. Ashok
Ganguli, appearing in Tamil Nadu case, Dr. A. M. Singhvi, appearing for Market
Committee, Monghyr, Mrs. Shobha Dikshit, appearing for Krishi Mandi of Farukkabad,
Mr. Pramod Swarup appearing in the case arising out of the judgment of Allahabad High
Court, Mr. G. L. Sanghi appearing for Krishi Mandi in the Madhya Pradesh batch of
appeals, supported the arguments advanced by Mr. Dwivedi. Mr. G. L. Sanghi, the
learned senior counsel appearing for Madhya Pradesh Krishi Mandi, in M. P. batch of
appeals submitted for re-conciliation of both the Acts, and contended that there exists
no repugnancy and both Acts can be allowed to operate. Mr. Trivedi, the learned
Additional Solicitor General, appearing for the Attorney General of India, however,
contended, that the constitutionality of Tobacco Act, not having been assailed in any of
these cases, the Court need not embark upon an enquiry with regard to the competence
of Parliament to enact the Tobacco Board Act under Entry 52 List I of the VIIth
Schedule. He also further contended, that the tobacco industry having been notified, as
an industry, the control of which the Parliament thought it expedient to be taken over in
the public interest, and the Tobacco Board Act having been enacted, there cannot be
any limitation for exercise of power of the Parliament even in relation to the growing of
tobacco or sale of tobacco at specified place as well as levy of fee for such sale, and in
that view of the matter, the Market Committee Act providing levy of market fee on sale
and purchase of tobacco within the Market area must be struck down. It is true, as
contended by the learned Additional Solicitor General that the constitutional validity of
the Tobacco Board Act had not been assailed in any of these cases, and only in this
Court, Mr. Rakesh Dwivedi, the learned senior counsel, appearing for the State of Bihar
raised the contention in view of the judgment of this Court in ITC case. Ordinarily, this
Court does not embark upon an enquiry on the constitutionality of the legislation if that
had not been assailed. But taking into account the procedure, that had already been
adopted, and noticing all the Advocate Generals and the Attorney General, in view of
the amplitude of arguments advanced by the counsel for the parties, we do not think it
appropriate to dispose of this batch of cases without examining the constitutional validity
of the Tobacco Board Act, enacted by the Parliament under Entry 52 of List I. In fact the
main thrust of the rival contention centers round the same.
9
.Mr. Shanti Bhushan, learned senior counsel appearing for the ITC Ltd.
contended, that Entry 52 of List I of the VIIth Schedule of the Constitution requires the
parliament to make a declaration by law identifying an industry, the control of which is
expedient to be taken over by the Union in the public interest. Once such a declaration
is made by the Parliament, the entire gamut would be within the legislative competence
of Parliament to make law, and the very industry having been made the subject of
legislation, the Parliament gets exclusive power under Article 246(1) of the Constitution.
Article 246(1) itself being, notwithstanding anything in Clauses 2 and 3 of such Article,
once Parliament makes a law in relation to control of an industry in respect of which a
declaration has been made, the State Legislature will be denuded of its power to make
any law in respect of that industry. Mr. Shanti Bhushan contends, that every Entry in the
Legislative List has to be construed in its widest sense, as was held by this Court in
AIR 1970 SC 1453
AIR 1970 SC 1453
AIR 1970 SC 1453
AIR 1970 SC 1453
1985 Supp (1) SCR 145
AIR 1956 SC 676
AIR 1956 SC 676
AIR 1960 SC 424
@page-SC862
Harakchand Ratanchand Banthia Ors. etc. v. Union of India Ors., (1970) 1
SCR 479, and even Privy Council has also laid down the said proposition. There is,
therefore, no rational to give restrictive meaning to the expression 'industry' in Entry 52
of List I of the VIIth Schedule. The learned counsel placed reliance on the meaning of
the word 'industry' contained in Encyclopedia of Britannica, which indeed is too wide
and submitted, the Court cannot and ought not give a restricted meaning to the
expression so as to denude the legislative authority to make law on the subject. The
learned counsel made a reference to laws made by the Parliament, on a declaration
being made in terms of Entry 52 of List I, namely, the Cardomom Act, 1965; The Central
Silk Board Act, 1958; The Coffee Act, 1942; The Rubber Act, 1947; The Tea Act, 1953;
The Coir Industry Act, 1953; The Coconut Development Board Act, 1979 and The
Tobacco Board Act, 1975. The learned Counsel urged that the Industries (Development
and Regulation) Act, 1951, had declared only certain manufacturing industries, but that
by itself will not denude the Parliament of its legislative competence to make law over
any industry once a declaration, in terms of Entry 52 of List I is made, vesting the entire
control over the industry with the Union Government. According to Mr. Shanti Bhushan,
the Constitution Bench decision in Harakchand's case (1970) 1 SCR 479, fully answers
this question. The learned counsel contends that the Entries in the three lists are only
the heads or fields of legislation demarcating the area over which the appropriate
legislature can operate. The legislative entries must be given a large and liberal
interpretation, reason being that the allocation of subjects to the lists is not by way of
scientific or logical definition but is a mere enumeration of broad and comprehensive
categories. According to Mr. Shanti Bhushan, in the Constitution Bench decision of this
Court in Harakchand (supra) while construing the expression 'industry' in Entry 52 of
List I the wider definition of the Industry in the Webster's Dictionary has been approved
and, therefore, there is no justification in giving the expression any restrictive meaning.
The learned counsel also urged that in the very same case, construing Entry 27 of List
II, the Court observed that the Entry Industry is a special Entry while Entry 27 dealing
with production, supply and distribution of goods is a general Entry. Mr. Shanti Bhushan
contends that the word 'industry', if has been held to be a special Entry, whether in
Entry 24 of the List II or Entry 7 and Entry 52 of List I, law made under that Entry must
prevail over any law which could be referable to a general Entry. According to Mr.
Shanti Bhushan, applying the ratio in Harakchand (supra), it must be held that the
majority view in the ITC case is correct. Mr. Shanti Bhushan further urged, a particular
industry, in respect of which a declaration is made by the Parliament in terms of Entry
52 of List I, the industry itself having become a subject of Parliamentary Legislation, any
provision contained therein, which have a reasonable nexus would be within the
legislative competence of the Parliament under Article 246(1) of the Constitution and
would be valid. According to the learned counsel, a law dealing with the raw-material of
a declared industry cannot be held to be having no nexus with the industry itself and if
the Parliament would be denuded of its power to make law, dealing with raw-material of
the
@page-SC863
declared industry then the very purpose of making a declaration and taking over
the control of the industry in the interest of the public would be frustrated. If the
Parliament does not choose to cover all aspects of that industry and may confine the
regulation of that industry only with regard to the manufacturing part, as was done in the
Industries (Development and Regulation) Act, 1951, then certainly there would be no
repugnancy even if the State Legislature makes a law dealing with the raw materials of
the notified industry, provided the State law is referable to any of the Entries in List II.
So far as the observations made by the Constitution Bench in Tikaramji's case (supra),
Mr. Shanti Bhushan contends that the articles relatable to the scheduled industry were
finished products and not raw materials and therefore the Industries (Development and
Regulation) Act, 1961 did not at all purport to cover or have any provisions therein
relating to sugarcane. It was in this context the observations came to be made by this
Court in Tikaramji's case (supra) that the expression 'Industry' will have a limited
meaning. Mr. Shanti Bhushan also placed reliance on the Constitution Bench decision
in Chaturbhai M. Patel v. Union of India, 1960 (2) SCR 362 which dealt with the
legislative competence under the Government of India Act, 1935. The Court was, in that
case examining the question, whether the Central Excise Act was beyond the legislative
competence under the Government of India Act, 1935. On examining Entry 45 of the
Union List and Entries 27, 29 and 31 of the State List, the Court held that the
examination should be as to whether the Act in question, is a law with respect to
matters enumerated in Item 45 of List I, or to the matters enumerated in Items 27 and
29 of List II. Quoting the observations of Federal Court to the effect :
"It must inevitably happen from time to time that legislation, though purporting to
deal with a subject in one list, touches also on a subject in another list, and the different
provisions of the enactment may be so closely intertwined that blind adherence to a
strictly verbal interpretation would result in a large number of statutes being declared
invalid because the legislature enacting them may appear to have legislated in a
forbidden sphere"
approved the same and held that it was a correct method of interpreting the
various items in different lists. Mr. Shanti Bhushan also pointed out that in the aforesaid
judgment the Constitution Bench followed the earlier observation of Hon'ble
Hidayatullah, J. in the case of State of Rajasthan v. G. Chawla, (AIR 1959 SC 544) to
the effect : 1959 CriLJ 660
"It is equally well settled that the power to legislate on a topic of legislation carries
with it the power to legislate on an ancillary matter which can be said to be reasonably
included in the power given".
According to the learned counsel, it would be within the competence of the
Central Legislature to provide for matters which may otherwise fall within the
competence of the State legislature if they are necessarily incidental to effective
legislation by the Central legislation on a subject of legislation expressly within its
power. According to Mr. Shanti Bhushan, if the expression 'industry' is construed in the
wide sense, in which it was construed by this Court in the Constitution Bench judgment
of Harakchand (supra) then the provisions of Tobacco Board Act of 1975 would
certainly be within the legislative competence of Parliament, notwithstanding the fact
that some of those provisions may touch upon subjects
@page-SC864
contained in the State Lists. The learned counsel, in this connection also placed
reliance on a recent decision of this Court in the case of State Bank of India v. Yasangi
Venkateswara Rao, (1999) 2 SCC 375. With reference to the decisions of this Court in
Calcutta Gas, (1962) Supp SCR 1, the Mcdowell, (1996) 3 SCC 709 and Tikkaramji
(supra), the learned counsel contended, that in none of these cases, the competence of
Parliament to make any law was under consideration. On the other hand, both in
Calcutta Gas (supra) case and in Mcdowell (supra) case, what was under consideration
is as between the two entries, if one is general and the other is special then which law
would prevail, and the Court held that the special law would prevail over the general
law. In Calcutta Gas case the word 'industry' in Entry 24 was held to be a general entry,
whereas word 'gas and gas works' in Entry 27 was held to be special entry and applying
the principle of harmonious interpretation the Court held that the expression 'industry'
will be given a limited scope so as to exclude from its ambit gas and gas works, and it is
in this sense, it was held that from the expression 'industry' in Entry 24 in List II the gas
and gas works must be excluded. In Mcdowell's case (supra) also the Court applied the
same principle of special excluding general and held that the production and
manufacturing of liquor would not fall under Entry 24 of List II but under Entry 8 of List II,
which relates to intoxicating liquor that is to say that the production, manufacture,
possession, transport, purchase and sale of intoxicating liquors. According to the
learned counsel, these decisions will have no relevance in the context of the present
case, where the competence of the Parliament to make any law within the ambit of entry
52 of List I is the subject-matter of scrutiny. Mr. Shanti Bhushan also urged, that Entry
27 of the State List relating to production, supply and distribution of goods cannot be
held to be a special Entry so as to be excluded from the purview of Entry 52 of List I.
According to him the two entries do not form the part of the same genus so as to apply
in the same field, and if the ratio in the judgment in Harakchand (supra) case is applied
then Entry 27 cannot be held to be a special Entry. He also relied upon the Constitution
Bench judgment in Waverly Jute Mills case (1963) 3 SCR 209, where the Court was
required to examine the competence of the Parliament to enact Forward Contract
Regulation Act, 1952, and whether it encroached upon the subject-matter falling under
Entry 26 and Entry 28 of List II. The Court upheld the validity of the law by holding that
the Parliament has legislative competence under Entry 48 of List I relating to stock
exchanges and future markets, and in fact it has the exclusive competence. Mr. Shanti
Bhushan contended, that apart from the fact that in Tikaramji (supra), in Calcutta Gas
(supra), in Mcdowell (supra) the competence of the Parliament to make law had not
been assailed, and on the other hand, what was under consideration is whether the
Central Act and the State Act could be held to cover different fields so that there was no
repugnancy between the two. It was further contended that the State Acts would be
ultra vires as they related to subject which were brought to the Union List by a
declaration in terms of Entry 52. Mr. Shanti Bhushan contends, that all the decisions in
which constitutional validity of Parliamentary enactment was questioned on the ground
of ambit of Entry 52 of List I, the
@page-SC865
Court has upheld the validity of the same as in Harakchand (supra). Any
incidental observation where the competence of Parliament to make law was not under
assail cannot be relied upon for the proposition that the expression 'industry' in Entry 52
of List I must have a restricted meaning. With special reference to Tikaramji's case
(supra) the learned counsel contended that the Court was not examining the scope of
word 'industry', as contained in Entry 52 of List I, as is apparent from the discussions at
page 414 of the SCR, but was examining the question, whether raw-materials of an
industry which form an integral part of the process are within the topic of 'industry' which
forms the subject-matter of Item 52 of List I as ancillary or subsidiary matters which can
fairly or reasonably be said to be comprehended in that topic and whether the Central
Legislature while legislating upon sugarcane industry could act within the scope of Entry
52 of List I, and would as well legislate upon sugarcane. The observations of the
learned Judges at page 420 of the report, according to Mr. Shanti Bhushan, are only in
that context and when the Court did not go into the question as to whether the word
'industry' could or could not have a wide meaning which could be applied when
Parliament purported to cover other aspects apart from the manufacturing processes, it
would not be appropriate to hold that the word 'industry' in Entry 52 of List I must be
given a restricted meaning. According to the learned counsel in Tikaramjis (supra) the
Court was considering the question of repugnancy and it answered by comparing the
provisions of Industries (Development and Regulation) Act with the provisions of UP
Regulation of Sugarcane Act and found that there was no repugnancy and two were
covering two different fields and could therefore co-exist. It is urged that a restricted
meaning, being given to the expression 'industry' in Entry 7 and 52 of List I or Entry 24
of List I will have disastrous consequences, inasmuch as the Parliament would declare
by law a particular industry to be necessary for the purposes of defence or for the
prosecution of war under Entry 7, and yet in such law, cannot make any provision in
respect of raw-materials or growth of any item, which may be absolutely necessary for
the industry in question.
10
.According to Mr. Shanti Bhushan, the learned senior counsel, the majority
judgment in ITC case, no doubt, relied upon the decisions of this Court in State of
Orissa v. M. A. Tulloch, (1964) 4 SCR 461 and Baijnath Kedia v. State of Bihar, (1969)
3 SCC 838, for the proposition that, when the Central Government takes over an
industry under Entry 52 of List I and passes an Act to regulate the legislation, the State
Legislature ceases to have the jurisdiction to legislate in that field, and if it does so, then
it would be ultra vires of the powers of the State Legislature as the entire field is
occupied by the Central Legislation. The case of Tulloch (supra) as well as the case of
Baijnath (supra) deal with the laws made by the Parliament under Entry 54 of List I of
the VIIth Schedule and the Court was examining those laws and the legislative
competence vis-a-vis Entry 23 of List II, but those principles laid down in Tulloch's case
(supra) as well as in Baijnath's case (supra) would equally apply to the legislation made
under Entry 52 of List I, as has been held by this Court in paragraph 11 of Ishwari
Khetan Sugar Mills v. State of U. P., (1980) 4 SCC 136 judgment. The learned counsel
stated that what has been stated therein, that on a law being made by the Parliament in
respect of a particular industry the State's legislative power AIR 1964 SC 1284
AIR 1970 SC 1436
AIR 1964 SC 1284
AIR 1970 SC 1436
AIR 1980 SC 1955
AIR 1979 SC 898 : 1979 CriLJ 773
1999 AIR SCW 3074 : AIR 1999 SC 3125
1985 Supp (1) SCR 145
@page-SC866
would stand denuded only to the extent that any aspect related to that industry is
actually covered by the Parliamentary legislation. In other words, it is necessary to
examine the extent of coverage by the Parliament enactment, as has been held in
Ganga Sugar, and the extreme argument advanced in the case that the industry as a
subject by itself goes out of the competence of the State Legislature, was not accepted.
According to Mr. Shanti Bhushan, it is a well settled principle, once a Parliamentary
Legislation is enacted, whether in exercise of its competence under Entry in List I or List
III, or there is an incidental or anciliary coverage over some Entries in the State List, and
there is any repugnancy between the law made by the Parliament and law made by the
State Legislature, then it is only the Parliamentary law to the extent of repugnancy
which has to prevail and not the State legislation. On the question of the re-conciliation
between the Tobacco Board Act and the Agricultural Market Committee Act, and in
relation to the provisions contained in Section 31 of the Tobacco Board Act to the effect,
- "provisions of this Act shall be in addition to, and not in derogation of, the provisions of
any other law for the time being in force", the learned counsel contends, the aforesaid
provision by no stretch of imagination can be construed to mean, that notwithstanding
the State Legislation being repugnant to the Parliamentary law, yet the State legislation
will be permitted to operate. According to the learned counsel, Section 31 of the
Tobacco Board Act purports to declare that if a law which was consistent with the
Tobacco Board Act and made additional requirement of some kind, laid down under any
other Act, it should not be taken as if in respect of any matter relating to Tobacco, all
other acts whether consistent or inconsistent with the Tobacco Act will cease to prevail.
In other words, if there is any field which is not covered by the Tobacco Board Act, and
if there was some other valid provision, then the Tobacco Board Act would not come in
the way. In support of this contention Mr. Shanti Bhushan relied upon the decision in M.
Karunanidhi v. Union of India, (1979) 3 SCC 431, wherein in paragraph 57 this Court in
unequivocal terms expressed the intention that the State Act which was undoubtedly the
dominant legislation would only be in addition to and not in derogation of any other law
for the time being in force, which manifestly includes the Central Acts, namely the Indian
Penal Code, the Corruption Act and the Criminal Law (Amendment) Act. In analysing
the provisions of the Tobacco Board Act, the counsel contends, that the intention of the
Parliament is to cover the field of trade in Tobacco. Relying upon the Constitution Bench
decision in Belsund Sugar Company, (1999) 9 SCC 620, the learned counsel contends
that if a special Act deals with regulating trade in an Article, it has to go out of the sweep
of the Agricultural Markets Act. In this view of the matter, the Tobacco Board Act having
been a special Act regulating the sale and purchase of the agricultural produce, namely,
Tobacco and the Marketing Act, being of a general nature, the Marketing Act will cease
to operate in respect of Tobacco. Analysing different provisions of the Tobacco Board
Act, 1975 and the Bihar Agricultural Produce Marketing Act the counsel urged, that the
provisions cannot co-exist and, therefore, the majority view in ITC case rightly held that
the Agricultural Market Committee Act, framed by the State Legislature is ultra vires.
11. Mr. Nageshwar Rao, learned senior counsel appearing for the Tobacco
Merchants' Association, reiterated all that had been argued by Mr. Shanti Bhushan, and
placing reliance upon several authorities submitted, that the Tobacco Board Act being a
special Act, enacted by Parliament for
@page-SC867
controlling the tobacco industry and making provision therein, relating to growing
of tobacco and purchase or sale of tobacco, which have direct nexus with the tobacco
industry, the general provisions of the Agricultural Produce Market Act will have to give
way to the Tobacco Board Act, and therefore, the Market Committee would have no
power to levy market fee by taking recourse to the provisions of the Market Committee
Act on the purchase and sale of tobacco within a market area.
12
.Mr. Rakesh Dwivedi, learned senior counsel, who led the main argument by
contending that the Parliament had no competence to make the Tobacco Board Act in
its entirety, particularly in relation to growing and raw-materials of the tobacco industry,
appearing for the State of Bihar contended, that the subject-matter 'industry' in Entry 52
of List 1 of the VIIth Schedule cannot be construed to be all pervasive and the
Constitution Bench of this Court in Tikaramji (supra) conclusively held that the rawmaterials which are integral part of the industrial process cannot be included in the
process of manufacture or production. According to Mr. Dwivedi, the Court should
construe a particular entry in the Schedule in a manner so that the other Entries in the
Schedule will not be otiose. Consequently, the raw-materials would be goods which
would comprised in Entry 27 of List II and the manufacturing process or production
would come within the ambit of expression 'industry' in Entry 24 of List II, Entry 24 of
List II being subject to Entry 52 of List I, when parliament makes a law in respect of an
industry in exercise of its power referable to Entry 52 of List I then that expression
cannot be wider than the word 'industry' in Entry 24 of List 2. It would, therefore, be
given a restricted meaning to the expression 'industry', as was done by this Court in
Tikaramji's case, which was followed in Calcutta Gas, Kannan Devan Hills and Ganga
Sugar Corporation. According to Mr. Dwivedi, even in the case of B. Viswanathaiah and
Co. v. State of Karnataka, (1991) 3 SCC 358, a three Judge Bench of this Court
construed the declaration made in terms of Entry 52 of List I in relation to silk industry
and held that taking over the control of raw silk industry must be restricted to the aspect
of production and manufacture of silk yarn or silk and did not take in the earlier stages
of the industry, namely the supply of raw-materials. According to Mr. Dwivedi, in the
aforesaid case the Court unequivocally held that the declaration in Section 2, which is
under Entry 52 of List I, do not in any way, limit the powers of the State Legislature to
legislate in respect of goods produced by the silk industry. The Court so held being of
the opinion that any wider interpretation to the expression 'industry' in Entry 52 of List 1
would render Entry 33 in List 3 to be otiose and meaningless. Mr. Dwivedi also further
contended that both in Indian Aluminium Company, (1992) 3 SCC 580 as well as Siel
Ltd. and others v. Union of India and others, (1998) 7 SCC 26, Tikaramji and Calcutta
Gas have been followed and it has been held that the term 'industry' in Entry 24 of List II
and Entry 52 of List 1 could have the same meaning and it would not take within its
ambit Trade and Commerce or production, supply and distribution of goods coming
within the province of Entries 26 and 27 of List II. Referring to the Constitution Bench
decision of this Court in Belsund Sugar Mills, (1999) 9 SCC 620, Mr. Dwivedi submits
that in the aforesaid case the Court was construing the provisions in Entry 28 of List II
as well as Entry 33 of List III and sugar and sugar cane having been held as food stuff
coming within the
@page-SC868
ambit of Entry 33 of List III, the Market Committee Act referable to Entries 26, 27
and 28 of List II was held to be subject to the Sugar Cane Act. Thus industry in Entry 24
of List II and Entry 52 of List I would not cover the subject-matter coming within the
ambit of Entries 26 and 27 of List II or Entry 33 of List III. It is therefore urged, that the
raw tobacco which would be a produce of agriculture and thus the raw-material for the
tobacco industry, which required to be cured and processed and for such a raw-material
for the tobacco industry, the Parliament cannot make any legislation by making a
declaration and taking over the control of tobacco industry under Entry 52 of List I.
Tobacco, not being a food stuff, the same will also not come within the ambit of Entry 33
of List III, and therefore, the raw-tobacco would continue to be within the exclusive
domain of the State Legislature and State Legislature would have power to make law in
relation to the raw-tobacco which would be referable to Entry 14 (Agriculture), Entries
26, 27 and 28 of List II, as has been held by this Court in the Constitution Bench
decision in the case of Belsund Sugar (supra). Mr. Dwivedi contends that judged from
this angle to the extent the Tobacco Board Act seeks to regulate the market by
providing for auction platform and by seeking to regulate growing of raw-tobacco, must
be held to be beyond the competence of Parliament, and on the other hand, is within
the exclusive domain of the State Legislature. State Legislature having provided for a
market where alone the trade and commerce in and the production supply and
distribution of tobacco can take place, the Tobacco Board Act would cease to operate
and it is the State law which would prevail. With reference to the judgments in M. A.
Tulloch and Baij Nath Kedia, relied upon in the majority judgment of ITC's case, Mr.
Dwivedi contends that those decisions will have no application, inasmuch as a
comparison of Entry 23 of List II and Entry 54 of List I would indicate that the head of
the Legislation is one and the same, and Entry 23 of List II itself is subject to Entry 54 of
List I. Necessarily, therefore, the entire field, which was there available for the State
Legislature to make law under Entry 23 of List II, once assumed by the Parliament
under Entry 54 of List I, then the State Legislature is denuded of its power. Question of
givng narrow meaning or wider meaning to the legislative Entry does not arise for
consideration in those cases. Accordingly the majority judgment of this Court committed
error in construing the meaning to be given to the word 'industry' under Entry 52 of List I
by relying upon the decision under Mining Legislation, which was wholly unwarranted.
Mr. Dwivedi urged that even the Tobacco Board Act has not been made operative in the
State of Bihar and several other States, for instance, Sections 13, 13-A and 14-A. This
being the position, in the State where aforesaid provision had not been brought into
force, there cannot be any difficulty in allowing the State Act, namely, the Agricultural
Market Committee Act to operate. With reference to legislative history for the expression
'industry' in Entry 52 of List I, Mr. Dwivedi contends that the fact that a separate entry
was made for regulating trade and commerce, production, supply and distribution of the
products of controlled industry would suggest that the expression 'industry' in Entry 52
of List I will have a restricted meaning. Mr. Dwivedi urged that if the contention of the
appellant, that the word 'industry'
@page-SC869
in Entry 52 of List I should be given a wider interpretation is correct, then the
same would be destructive of the scheme pertaining to distribution of powers. Mr.
Dwivedi refers to the judgment of this Court in Tikaramji as well as the judgment of Full
Bench of Allahabad High Court in SIEL case and points out as to how the law relating to
trade and commerce and production, supply and distribution of goods has been traced
in these two cases and how after the end of the second world war when emergency was
lifted, the power to enact on the subject was given to the Central Legislature by India
(Central Government Legislature) Act, 1946. Mr. Dwivedi urged, even though under
Government of India Act, 1935, the subject of trade, commerce, production, supply and
distribution of goods was within the competence of the provincial legislature, the law
was made temporarily by the Central Legislature. Under the Constitution of India, Article
369 was included which empowers the Parliament to make laws for 5 years with respect
to trade and commerce in and the production, supply and distribution of certain
specified products. That very Article 369 shows that the subject matters of raw-jute,
cotton seed etc. would be covered by the Entries in List II and even the marginal note of
Article 369 throws sufficient light on the subject. By referring to Articles 249, 250, 252
and 253, the learned Counsel urged that they are special provisions which provide that
in the national interest, during proclamation of emergency with the consent of two or
more States Parliament can make law with respect of any of the matters coming within
the State List. In fact in the Constituent Assembly there was a heated debate in relation
to Article 249 and there was a strong objection to wide power being given by that Article
for legislation in the national interest with respect to the State List. The Founding
Fathers apprehended that in the name of national interest the federal character of the
Indian polity could be completely destroyed and India could be converted into a unitary
State, therefore, Article 249 was re-tailored and was provided for a shorter duration of
operation of Parliamentary law so made. Mr. Dwivedi urged that the term 'industry' in
Entry 7 of List I as well as Entry 52 of List I should be confined to the process of
manufacture of the industries which are declared to be necessary for the purposes of
defence or for prosecution of war. According to Mr. Dwivedi there is no necessity or
compulsion to give this entry a wider meaning merely because the war situation is being
dealt with in the State Entry. In such a situation Entry 33 of List III is always available to
Parliament for controlling products and Article 250 gives overriding power to the
Parliament to legislate with respect to any matter enumerated in the State List during
the period of proclamation of emergency. Even Articles 352 to 354 also confer sufficient
power on the President to declare by proclamation that a grave emergency exists which
can be kept alive as long as the war situation or need of defence is required. By virtue
of Article 353 the power of Parliament would extend to making of laws with respect to a
matter not enumerated in the Union List, therefore the Constitution makers have well
thought of and designed the Constitution in such a manner in the matter of distribution
of power that there would be no difficulty at all for the Parliament to enact any law when
the country is in war, and therefore, in normal times there should be no justification to
give the expression 'industry' a wider meaning and thereby denuding the State
Legislatures to make law on several heads of legislation enumerated in List II.
According to Mr. Dwivedi, reference to Entry 5 of List I, in this context was wholly
misconceived as that is a specific Entry in List I with regard to arms, and as such, would
not be covered under Entry 27 of List II and Entry 33 of List III. Mr. Dwivedi also
contended that reference to Article 254(1), in this context is misconcieved as the said
Article can be invoked both by the Parliament and the State Legislatures to make law
with respect to one
@page-SC870
of the matters enumerated in the Concurrent List. The expression 'repugnant' in
Article 254(1) refers to matter only in the Concurrent List, and it is in this connection, he
placed reliance on the decision of this Court in the case Deep Chand, (1959) Suppl (2)
SCR 8 and Hoechst Chemicals, (1983) 4 SCC 45. According to Mr. Dwivedi Federalism
having been accepted as one of the basic features of our Constitution, as was held by
this Court in S. R. Bommai, (1994) 3 SCC 1. a construction of a paticular legislature
Entry which would denude another legislative body from exercising its power in respect
of several heads of legislation could be held to be contrary to the basic feature of the
Constitution, and therefore, the Court should avoid giving a wider meaning to the
expression 'industry' Entry 7 and Entry 52 of List I as well as Entry 24 of List II. With
reference to different Articles of the Constitution, Mr. Dwivedi contends that the State
Legislatures have exclusive power to make laws with respect to Entries in the State List
and only as specified contingencies Parliament can legislate with respect to them. In
this view of thee matter counsel contends, entries in List I ought not to be construed
very widely as construed by this Court in ITC case. The counsel says that in the State of
Bihar, Market Act in relation to tobacco is relatable to Entries 26 and 27 of List II
whereas Tobacco Board Act, enacted by the Parliament includes within its fold the
entire process of growing, curing and marketing of tobacco and unlike the sugar
industry and purchase of sugar came by it which was dealt with by the Constitution
Bench in the case of Tika Ramjo, the tobacco industry cannot be split up with reference
to the raw-material. According to learned Counsel growing of tobacco, its curing and
marketing being one integrated industrial process the same would be embedded into
Tobacco Industry. The very object of the Tobacco Board Act, being to encourage export
of good quality tobacco and to augment the foreign exchange reserves, the same does
not seek to regulate and control the sale and purchase of tobacco in normal markets in
different States. Therefore trade and commerce, production, supply and distribution of
tobacco in different markets in India could not be regulated by the Tobacco Board Act.
He also urged that the Act in question may not be solely to the field of Legislation in
Entry 52 of List I inasmuch as foreign exchange comes within Entry 36 of List I, whereas
law ensuring fai_is not possible to define the 'industry' in its widest form. Further the
Tobacco Board Act being an Act to regulate the sale of tobacco at auction platform, the
raw-material which is produced by the growers insofar as the growing of raw-material is
concerned, the same would be the matter pertaining to exclusive domain of 'agriculture'
covered by Entry 14 of List II and the Parliament cannot be permitted to encroach upon
the domain of the State Legislature. The learned Counsel places reliance on the
question of this Court in A. S. Krishna, (1957) SCR 399. Mr. Dwivedi does not agree
with the submission of the counsel appearing for the company that the tobacco industry
is one comprehensive integrated industry covering within its expanse the growing of
tobacco, curing, marketing and export. According to him, growing of tobacco is pure and
simple agriculture and the industrial aspect begins after the
@page-SC871
industries purchase raw tobacco from the growers and begin curing the same.
Consequently the Market Acts enacted by the State Legislature would be fully
competent, legal and valid governing the sale and purchase of tobacco within the local
market area. Referring to the provisions of the Bihar Act, the counsel urged that the
same had been enacted by the State Legislature under Entry 28 of List II, the object
being to provide for better regulation of buying and selling of agricultural product and the
establishment of markets for agricultural produce. The comparison of the provisions of
the Market Act and the Tobacco Board Act would show that both the Acts can operate,
particularly when the Tobacco Board has not set up any auction platform or any kind of
market centre in Bihar and in fact several relevant provisions like Sections 13, 13A and
14 have not been enforced in the State of Bihar. If the provision of the Tobacco Board
Act is construed in its wide meaning then the Parliament must be held to have no
competence to make laws in respect of anything prior to the curing of tobacco.
According to the learned Counsel, when this Court in ITC case held the State Act to be
invalid, it so held on the conclusion that the entire field is covered by the Central
Legislation. But no steps having been taken by the Tobacco Board in the State of Bihar
under Sections 8, 20 and 20A and other provisions not having been applied, it is difficult
to subscribe that the entire field is covered by the Tobacco Act. Mr. Dwivedi also very
seriously contended that the Parliament by enacting the law under Entry 52 of List I in
relation to the Tobacco Industry and having enacted Tobacco Board Act included the
provisions of Section 31, which unequivocally indicates that the Act is in addition and
not in derogation of any other law for the time being in force. This being the position, the
Market Act must be allowed to operate. Therefore, the Market Committee would be
entitled to levy market fee on the sale and purchase of Tobacco within the market area.
Reliance was placed on the decisions of this Court in M. Karunanidhi, (1979) 3 SCC
431; Chanan Mal, (1977) 1 SCC 340 and Ishwari Khaitan, (1980) 4 SCC 136. With
special reference to the majority judgment of this Court in ITC's case, the counsel urged
that the aforesaid decision has not noticed several decisions of this Court starting from
Tikaramji, Calcutta Gas etc. Mr. Dwivedi also contended that, as has been held by this
Court in several decisions, in the event of any conflict between the law made by the
Parliament with reference to some Entry in List I and the law made by the State
Legislature with reference to any Entry in List II, the Courts must try to harmonise and
reconcile, which is well known method of construction. The majority view, however, did
not examine the provisions of two Acts for its conclusion as to whether both Acts could
be allowed to operate, whereas the judgment of Hon'ble Mukherjee, J. proceeds on the
basis that both the Acts could operate in its own field. According to Mr. Dwivedi, the
principle of occupation of field by a particular legislature is a concept relevant for
interpreting an entry in the Concurrent List and it will have no application when the
legislation in question is under a particular Entry in List I. According to Mr. Dwivedi,
where a particular legislation made by the Parliament is found to be occupying the
entire field then the extent of occupation of the field would have to be examined with
reference to Entry 33 of List III to find out which field remains available to the State
Legislature, and
@page-SC872
if, there is any repugnancy then same has to be dealt with, with reference to
Article 254. But the Act in question not having been made (Tobacco Board Act) with
reference to Entry 33 of List III, conclusion with reference to Article 254 was wholly
erroneous. It is lastly urged, that the majority view in ITC case not having noticed the
earlier Constitution Bench decisions in Tikaramji, Calcutta Gas as well as other cases
following the same, the conclusion is unsustainable in law, and therefore, this
Constitution Bench must hold that the ITC case has not been correctly decided. While
interpreting and considering the word 'industry' occurring in different Entries of List I and
List II, it would be wholly inappropriate to refer to the meaning of the word given in
Encyclopaedia of Britannica, as was held by this Court in Tikaramji. It is also urged that
the scope of Constitutional Entry in the 7th Schedule can never be left to be determined
on a case to case basis depending upon how much field the Parliament deems fit to
cover. The scope of the word 'industry' in Entry 52 of List I will not expand or restrict
depending upon what the Parliament does in its legislation. The competence of
Parliamentary law can never be adjudged with reference to the nature of the law which
is being enacted. The scope of the Entries in List II also cannot be determined with
respect to Parliamentary enactment made from time to time. On the other hand, the
scope of entries have to be determined by reference to each other and by modifying
one with respect to the other on the basis of the context without making any of the
entries otiose. It was so held by this Court in the case of McDowell, (1996) 3 SCC 709.
Since a law made by a legislature, be it Parliament or be it the State, has to be tested
on the anvil of the entries in the 7th Schedule of the Constitution when a question of
legislative competence arises, the head of the Legislation in any entry cannot be
differently construed. In other words, the word 'industry' occurring in Entry 24 of List II
as well as Entry 7 and Entry 52 of List I must have the same meaning. That being the
position, Parliament cannot be permitted to amend Industry Development Regulation
Act by including Sugarcane, as has been held by this Court in Belsund Sugar. Mr.
Dwivedi repelled the argument of Mr. Shanti Bhushan that the observations in Tikaramji
must be confined to the fact from that case on the ground that, it is no doubt true, that in
Tikaramji the validity of the Parliamentary enactment had not been questioned, and on
the other hand, it is the power of the State Legislature to enact the Sugarcane Act, was
the subject matter of consideration. But the Court did examine the provisions of the
State Act to find out whether it encroached upon Entry 52 of List I as sugar industry was
a controlled industry under the provisions of IDR Act, 1951. That apart, the Constitution
Bench having thoroughly gone into the constitutional history including the corresponding
entries in the Government of India Act, and then considering a particular provision, and
ultimately holding that it would not bring within its sweep the raw-materials which is the
stage prior to the manufacture of industry, it is not permissible for another Constitution
Bench to bypass the earlier Constitution Bench decision by limiting the ratio therein to
the fact of that case, more so when the said decision had been followed later on in
several other Constitution Bench decisions and has stood the test for last two decades.
With reference to Banthia's case, Mr. Dwivedi contends that in the very same judgment
the only question that cropped up for
@page-SC873
consideration is whether the Goldsmith's work was a handi-craft requiring
application of skill and the art of making gold ornaments and was not an 'industry',
within the meaning of Entry 52 of List I or Entry 33 of List III of the 7th Schedule, the
Court never examined with reference to Entry 14 dealing with agricultural raw-material
and in fact the Court observed that it is not necessary for the purposes of this case to
attempt to define the expression 'industry' precisely or to state exhaustively all the
different aspects. The Court was however, satisfied that the manufacture of gold
ornaments by the Goldsmith is a process of systematic production for trade or
manufacture and, would therefore fall within the connotation of the word 'industry' in the
appropriate legislative entries. Thus Harakchand also follows the ratio in Tikaramji and
not departed from the view taken in Tikaramji. In HR Banthia, the Supreme Court
rejected the submission to adopt the definition of 'industry', as given in the Industrial
Disputes Act. According to Mr. Dwivedi, the observations of this Court in Harakchand
and Banthia cannot be utilised for the purposes of the agricultural raw-material and its
production within the word 'industry' in Entry 52 of List I, howsoever wide the same word
may be construed. With reference to the judgment of this Court in Ishwari Khaitan, Mr.
Dwivedi contends that the enunciation of law made therein would indicate that the Court
was examining to find out by virtue of law made under Entry 52 of List I to what extent
there has been denudation of the State Legislature's power to legislate under Entry 24
of List II. The Court did find that the extent of erosion is not absolute but only to the
extent the control is spelled out by the Parliamentary legislation. The extent of
Parliamentary legislation is seen only to determine how much is taken out from Entry 24
of List II and nothing more. Though in this case the Court relied upon the earlier
decisions of this Court in State of West Bengal v. Union of India, (1964) 1 SCC 371, but
unfortunately in the West Bengal case the scope of 'industry' did not fall for
consideration, and that is why even Tikaramji had not been referred to. But it cannot be
concluded that the Constitution Bench was departing from Tikaramji and laying down
some new principles without even discussing Tikaramji. Mr. Dwivedi submitted that in
Ishwari Khaitan, no doubt the judgment of this Court in Baijnath has been relied upon
but the said reference and reliance was for a different purpose and not to equate the
structure of Entry 52 of List I with Entry 54 of List I. The Court referred Baijnath Kedia
for the limited purpose as in both cases the denudation of States' power is only to the
extent of control, while Baijnath dealt with Entry 23 of List II, Ishwari Khaitan dealt with
Entry 24 of List II. The subject matter of other entries was not in issue. It would,
therefore, be a fallacy to contend that Ishwari K_occupied by the Central Legislation
though the majority view in ITC case holds so, and that must be held to be not correctly
decided in view of the series of decisions starting from Tikaramji, already referred to.
Mr. Dwivedi, in this connection relied upon the Constitution Bench decision in Belsund
Sugar company, (1999) 9 SCC 620 wherein in paragraphs 117 and 118 the cases
under Mines and Minerals Regulation and Development Act had been noticed and the
Court ultimately held that this scheme of the legislative entries
@page-SC874
is entirely different from the scheme of Entry 52 of List I read with Entry 24 of List
II with which the Court was concerned in Belsund Sugar. According to Mr. Dwivedi the
ratio in Belsund Sugar would support the contention on the question of competence of
Parliament to enact Tobacco Board Act covering the field of growing and raw-mateial
prior to any manufacturing process. Mr. Dwivedi strongly relied upon the Full Bench
decision of Allahabad High Court in SIEL's case (AIR 1996 All 135) and submitted that
the Full Bench had considered all the relevant decisions and has come to the right
conclusion. According to Mr. Dwivedi, Tikaramji principles enunciated therein having
been approved in the subsequent cases, and even in Ganga Sugar case Hon'ble
Krishna Iyer, J. having negatived a similar contention, as was urged in the present
appeal as a desperate plea and Belsund's case have approved Tikaramji, irresistible
conclusion would be that the majority view in ITC judgment is incorrect and necessarily,
therefore, the Parliament did not have the legislative competence while enacting the
Tobacco Board Act after declaring Tobacco industry to be taken over as a controlled
industry to make any provision therein relating to growing of tobacco or sale of tobacco
within the market area prior to its curing or any subsequent process of manufacturing.
13
.Dr. A. M. Singhvi, appearing for the Agricultural Produce Market Committee,
Munger, on an analysis of different entries made in List I, List II and List III of the
Seventh Schedule submitted that there are as many as nine entries in List II out of 66
entries which are specifically made subject to List I. 3 of the entries in List II are subject
to List III. Entry 24 of List II however is subject to Entry 52 of List I. According to the
learned Counsel, wherever the Constitution intended that the entries in List II were to be
made subject to entries in List I, it was specifically and clearly so provided. Where
however an entry in List II is not subject to List I or List III, then the power of the State
Legislature to legislate with regard to that matter is supreme. The Bihar Agriculture
Markets Act, being relatable to Entries 14 and 28 of List II, which is not subject to any
entry either in List I or List III, the same must be held to be supreme and there would be
no fetter on the power of the State Legislature to make the Agricultural Produce Markets
Act. With reference to the expression "subject to List I" in McDowell's case, 1996 (3)
SCC 709 Supreme Court had itself observed that the power to make a law with respect
to 'industries' lies with the States under Entry 24 of List II but the said entry is made
expressly subject to the provisions of Entries 7 and 52 in List I. If the Parliament
declares by law that it is expedient in the public interest to take over the control of a
particular industry, then such industry gets transplanted to List I. According to the
learned Counsel, the industry in respect of which Parliament makes a declaration
contemplated under Entry 52 of List I, the States are denuded of the power to make any
law with respect to them under Entry 24 of List II. But making of a declaration by
Parliament does not have the effect of transplanting the industry from the State List to
the Union List. Entry 52 of List I since governs only Entry 24 of List II but not other Entry
like Entry 8, as was the case for discussion in Mc.Dowell's case, the power of the State
Legislature cannot be denuded to make a law referable to Entry 8. This being the
correct position, as enunciated by this Court and the founding fathers of the Constitution
having taken due care by expressly stating, when a particular Entry in List II is subject to
an Entry in List I or List III, thereby demarcation AIR 1996 SC 1627 : 1996 AIR SCW
1679
AIR 1994 SC 1918 : 1994 AIR SCW 2946
AIR 1997 SC 1208 : 1997 AIR SCW 1240
AIR 1999 SC 3125 : 1999 AIR SCW 3074
AIR 1999 SC 3125 : 1999 AIR SCW 3074
AIR 1982 SC 697
1985 Supp (1) SCR 145
AIR 1990 SC 1927
1985 Supp (1) SCR 145
@page-SC875
being made, in respect of other entries in List II, the power of the State
Legislature is exclusive and, therefore, it would be prohibited field for the Union to make
any law. Reiterating the argument advanced by Mr. Dwivedi, Dr. Singhvi also contends
that the question of occupied field is only relevant in the case of laws made with
reference to entries in List III. Consequently, neither Entry 14 nor Entry 28 being subject
to any of the entries in List I, the Bihar Legislature was fully competent to enact the
Agriculture Produce Markets Act and once in exercise of the provisions contained in the
Act, tobacco is notified to be one of the agricultural produce, then the power to levy fee
for sale or purchase of tobacco within the market area cannot be whittled down by the
Central Legislation. According to Dr. Singhvi, the Central Legislation to that extent must
be held to be invalid. The learned Counsel further urged that in case of a seeming
conflict of entries of two lists, the entries should be read together without giving a
narrow or restrictive sense to either of them and every attempt should be made to see
whether the two entries can be reconciled or harmonized. This approach to the
interpretation is necessary to uphold and promote the "Federal Structure" of the
Constitution which is a basic structure, as held by this Court in S. R. Bommai v. Union of
India, 1994 (3) SCC 1. The Fundamental feature of federalism being that within each list
each legislature is supreme. There can be no repugnancy between the matters in List I
and List II and repugnancy can only be a concept peculiar to List III. It is no doubt true
that Entry 52 of List I overrides only Entry 24 of List II and no other entry under List II. It
has been held by this Court in Bihar Distillery, 1999 (2) SCC 727and Dalmia Industry,
1994 (2) SCC 583 that Trade, Commerce, production, distribution of products of alcohol
industry can be regulated both by the Centre and the State. Bihar Agriculture Produce
Markets Act being relatable to Entry 14 and 28 of List II, that Act must operate on its
own and not being affected by law made by Parliament under Entry 52 of List I. In this
connection, the learned Counsel refers to the judgment of this Court in Belsund, 1999
(9) SCC 620, para 70 . According to Dr. Singhvi, the Tobacco Act by providing Section
31 indicates the intention of the Parliament that the Act would not govern the entire field
in exclusion to all other Acts in existence. In this view of the matter, there cannot be any
justification in denying the Market Committee to levy market fee in respect of the sale
and purchase of tobacco within the market area as the Market Committee Act is a duly
enacted law by the State Legislature within its competence to legislate under Entry 14
and 28. Dr. Singhvi also urged that mere declaration under Entry 52 is not enough but
the law in question must be found which actually occupied the field. Dr. Singhvi urged
that mere existence of power is not enough but the power must be exercised and on
account of such exercise, the field must be occupied so as to hold that the Central law
would collide with the State law. It was so held in Belsund, 1999 (9) SCC 620 with
regard to tea. To the same effect is the ratio in the case of Western Coal Fields, 1982
(1) SCC 125 and Fateh Chand, 1977 (2) SCC 677. According to the learned Counsel in
the case in hand, there is no question of conflict or repugnancy between the Tobacco
Act and the Bihar Act since both Acts operate in mutually
@page-SC876
exclusive and different field and therefore, the majority judgment in ITC case
would not apply to the Bihar Agricultural Produce Markets Act. Dr. Singhvi also made an
extreme argument to the effect that even if the Central legislation is construed to occupy
the entire field under List I, yet the State Act can still be operative and market fee could
be levied by the Market Committee under the State Act for services provided by it on the
principle of quid pro quo. It is in this connection, he placed reliance on the decision in
Synthetics and Chemicals, JT 1989 (4) SC 467. According to Dr. Sighvi, the expression
"industry" both under Entry 24 of List II and Entry 52 of List I would not cover subject
matters which are mentioned sui generis in different entries and separately from Entry
24 of List II. If a wide meaning to the expression is given, it would run counter to the
scheme of distribution of powers and the structural inter-relationship between Entry 52
of List I and Entries 24, 26 and 27 of List II and Entry 33 of List III and would make the
State List redundant qua that industry. In this view of the matter, the counsel urged that
the decisions relating to mines and minerals would not be relevant because of interrelationship of Entry 23 of List II and Entry 54 of List I. Once the declaration is made by
Parliament in terms of Entry 54 of List I, then both mines and its product minerals get
extracted from the State list and get submerged in the Entry 54 of List I but that would
not be the case when the power under Entry 52 of List I and Entry 24 of List II as well as
other relevant entry in List II are considered. Consequently, the majority view in ITC
case must be overruled.
14
.Mr. G. L. Sanghi, the learned Senior Counsel, appearing for Mandi Samiti in
Madhya Pradesh batch of appeals, submitted that in the case in hand, relevant enquiry
should be whether the State Act is within the exclusive subject matter of the State
Legislature under Enry 28 of List II. According to him, there is no irreconcilable clash
between the two Acts, which is also apparent from the mandate of Section 31 of the
Central Act. The object and purpose of the State Act being establishment of market
places and the same object having been achieved by the various provisions providing
for large scale infrastructural establishment and provision of a large variety of services,
the State Act rightly requires those who avail these services to pay the requisite market
fee and also in order to provide for appropriate control, to take licenses wherever a
market functionary desires to function within the market yard or market area. The
provisions of Tobacco Board Act, more specifically Section 8 however mandates that
the Board has to apply its mind to provide appropriate measures including the measure
of setting up an auction platform and since the auction platform has to have a location,
the Board cannot but think it fit to establish such platform within the market area. Such a
step will be consistent with the mandate of Section 31 and, therefore, it will not be in
derogation of the State Act. The amendment introduced in Tobacco Board Act,
according to Mr. Sanghi is achieved by the enforcement of the amending Act which
exhausts itself by merely introducing the amending provisions into the parent Act so that
the requirement of sub-section (1) of Section 3 of the Parent Act, namely bringing into
force the newly added Sections will have to be complied with. Thus the amended
sections as well as Section 13 of the Act having not been enforced within the State of
Madhya Pradesh, there cannot be any inconsistency or repugnancy between the two
Acts assuming that bringing into force all the said Sections may create some
inconsistency. According to Mr. Sanghi, the objects of the Tobacco Board Act being
development of Tobacco Industry, more particularly in respect of virginia tobacco, is not
in any manner defeated by the provisions of the State Act and the object of the State
Act are not defeated by the existing or even non-enforced provisions of the Tobacco
Board Act. In this view of the matter, according to
1985 Supp (1) SCR 145
@page-SC877
Mr. Sanghi, the minority view in ITC case must be held to be correct and both the
Central Act and the State Act should be permitted to operate in their own sphere.
15
.Mr. A. K. Ganguli, the learned Senior Counsel, appearing for the Tamil Nadu
Agricultural Marketing Board, analysed the provisions of Article 246(3) of the
Constitution and contended that the expression "subject to" appearing in Article 246(3)
has reference to those entries in List II which provides that the subject matter of said
entries are subject to the provisions contained in certain specified entries appearing in
either List I or List III as for example Entry 2 in List II provides Police (including railways
and village police) subject to the provisions of Entry 2A of List I. Similar provisions are
found in several entries. In List II like Entries 17, 22, 24, 26, 27, 32, 33, 37, 54, 57 and
63 but only three entries in List II namely Entries 13, 23 and 50 do not specify any entry
in List I or List III subject to which the said entries would remain operative but restrict the
scope of these entries by a general reference to the provisions contained in List I or List
III. Therefore, in respect of all other entries in List II, the State Legislature enjoys the
exclusive power to enact laws and consequently, if the State Act has been enacted
under Entry 28 of List II, the State Act must be allowed to operate. The contention that
Parliament enjoys superior legislative powers with regard to subject matters
enumerated in List II, according to Mr. Ganguli, would hold good only in respect of those
entries in List II which expressly provide that the subject matter thereof are subject to
the matters dealt with in various entries in List I. But that principle cannot be extended to
the subject matters covered by other entries in List II. Placing reliance on the provision
of Section 100 of the Government of India Act, 1935 which corrresponds to Article 246
of the Constitution which was interpreted by Sulaiman, J. in Subrahmanyam Chettiyar v.
Muttuswamy Gounder, reported in 1940 FCR 188, which has been approved by the
Constitution Bench in the case of KSEB v. Indal, 1976 (1) SCC 466 the counsel urged
that the State Legislature enjoys exclusive legislative power under Article 246(3) to
make laws with respect to the subject matter enumerated in Entry 28 of List II i.e.
"Market and Fairs". This power has not been conditioned by any restrictions insofar as
the distribution of legislative power between the Parliament and the State Legislature is
concerned and consequently, this power cannot be curtailed or restricted by the
exercise of legislative power of the Parliament with reference to any of the entries either
in List I or List III. Mr. Ganguli further contends that the entry in three lists of the
Constitution are not powers but fields of legislation. The power to legislate is given by
Article 246. The entries in different lists demarcate the area over which the appropriate
legislature can operate. According ot him, the concept of federal supremacy cannot be
invoked to deny the State legislature the power to make laws with respect to such
subject matters, which are exclusively assigned to it under the State list. If a law made
by the State Legislature is impugned on the ground of incompetency and on
examination of the law, it is found that the law in substance is with respect to a matter in
List II, then the law would be valid in its entirety. It is only in case of a seeming conflict
between the law made under any of the entries in
@page-SC878
List I and II, then the principle of federal supremacy could be invoked in view of
the opening words in Article 246(1). So far as the meaning of the expression "industry"
in Entry 52 of List I, the counsel urged that the said word must have the same meaning
as would be ascribed to the word in Entry 24 of List II. So far as the raw materials are
concerned, it has been held to be goods and would fall within the subject matter
comprised in Entry 27 of List II. The products of the industry would also be comprised in
Entry 27 of List II except that in the case of controlled industry, they would fall under
Entry 33 of List III and only the process of manufacture and production would fall under
Entry 24 of List II and if the concerned industry is a declared industry, then the process
of manufacture and production would fall under Entry 52 of List I. It is, therefore, logical
to hold that the activities relating to production and manufacture which would otherwise
come within the purview of the expression "industry" in Entry 24 of List II becomes a
subject matter of legislation under Entry 52 of List I, where the industry is a declared
industry. Therefore, such legislative competence of the Parliament would not confer
power in relation to raw materials which may be an integral part of the industrial process
and thereby denuding the State Legislature of its power to make laws with respect to
subject matters covered by either entries in List II. Mr. Ganguli contends that this Court
has consistently taken the view that the subject matter of Entry 52 of List I pertains to
manufacture and production activities and therefore, it would not be appropriate that the
word "industry" should have a wider meaning so as to include also the raw materials
within the same. With reference to the decisions of this Court in relation to law made by
the Parliament, regulating the Mines and Minerals Development, Mr. Ganguli contends
that the subject matter of Entry 54 of List I is the same as in Entry 23 of List II and Entry
23 of List II further provides that it should be further subject to the provisions of List I
with respect to regulation and development under the control of the Union. In such a
case, therefore, once the Parliament makes a declaration in Section 2 of the Mines and
Minerals Development and Regulation Act, then all aspects of Regulations and Minerals
Development even including taxes on minerals are covered by the said declaration and,
therefore, the State Legislature is denuded of its power to make laws with reference to
the subject matter. This has been so held in Baij Nath Kedia v. State of Bihar, 1969 (3)
SCC 838; State of Orissa v. M. A. Tulloch, 1964 (4) SCR 461; India Cement v. State of
Tamil Nadu, 1990 (1) SCC 12 and Orissa Cement Ltd. v. State of Orissa and others,
1991 Supp (1) SCC 430 1991. But the subject matter of Entry 52 of List I and the
subject matter comprised in Entry 24 of List II both relate to Industry and Entry 24 of List
II is subject to Entry 7 and 52 of List I. The State Legislature could not have made a law
in exercise of power under Entry 24 of List II so as to make other entries redundant.
According to Mr. Ganguli, the expression "Industry" cannot have a wider meaning. On
the question of repugnancy, Mr. Ganguli contends that the said question arises only
when both legislatures are competent to enact the respective laws and the two laws
cover the same field. If the two laws are found to be operating in the same field and are
also found to be inconsistent with each other, only then the law made by the Parliament
would prevail. But that would apply only when the law made by the Parliament and
State Legislature are both in respect of the same subject matter, enumerated in the
concurrent list, as was held in Hoechest Pharmaceuticals, 1983 (4) SCC 45. Even in
Deep Chand's case, the two sets of laws made by the State Legislature and the
Parliament with respect to the same subject matter enumerated in Entry 35 of List III,
was under consideration and the Court was examining the question of repugnancy. But
that will have no application to the question involved
@page-SC879
in the present case inasmuch as the State Act falls within the subject matter
comprised under Entry 28 of List II in respect of which the State Legislature enjoys the
exclusive power to make laws. On an analysis of the provisions of Tobacco Board Act
and Section 31 thereof, Mr. Ganguli contends that the provisions of Tobacco Act would
operate only in addition to other laws and, therefore that Act cannot be pressed into
service to give an overriding effect over other legislation including the Agricultural
Produce Markets Act, which has been enacted by the competent State Legislature.
According to the learned Counsel the two Act overlap only as regards sale and
purchase of Tobacco within the notified area and if auction platform registered with
Board are held within the market area, then the so-called conflict in the two Acts can be
easily avoided and both Acts would be allowed to operate. While Market Committee
would be entitled to levy fees in respect of sale and purchase of tobacco in the market
area for the services rendered including the entire infrastructure, the Tobacco Board Act
can yet levy fee as provided under Tobacco Board Act, which would be a separate fee
for special services rendered by it, as determined by the Central Government under
Section 14-A and according to the learned Counsel, this is the only harmonious
construction which should be and ought to be made of the two provisions. According to
Mr. Ganguli, the majority decisions in ITC case are in conflictt with Tika Ram v. State of
U.P., 1956 SCR 393; Calcutta Gas, 1962 Supp SCR 1; Kannan Devan Hills, 1972 (2)
SCC 218; Ganga Sugar, 1980 (1) SCC 223; B. Viswanathan, 1991 (3) SCC 358, and
therefore, the said decisions must be held to be erroneous. In fact the minority view
expressed by Justice Mukherjee, looking at the object of two Act, allowing both the Act
to operate in their respective fields should be upheld. Mr. Ganguli contended that
though the competence of the Parliament to make Tobacco Board Act covering the field
exclusively within the competence of the State Legislature, had not been assailed in any
of these writ petitions, but in view of the nature of controversy that has arisen and the
arguments advanced in the case leaves no room for doubt that each of the parties
including the Central Government as well as the Tobacco Board had the opportunity of
placing its case and, therefore there should be no fetter on the power of the Court to
decide the legislative competence of the Parliament in the case in hand.
16
.Mr. Malhotra, the learned Senior Counsel, appearing for the Tobacco Board
though initially proceeded with the arguments that both Acts could be reconciled but
later on categorically submitted that the Central Legislation must prevail. According to
him the Tobacco Industry got lifted from Entry 24 of List II to Entry 52 of List I and the
same must be held to be a special Act dealing with tobacco industry right from the stage
of growing till it is exported. This being a special Act and the Market and Fairs under
Entry 28 being a general entry and Agriculture under Entry 14 of List II being a general
entry, the special Act enacted by the Parliament must prevail and there is no question of
lack of competence of the Parliament to enact the law. In support of this contention
reliance was placed on the Constitution Bench decision of this Court in Belsund Sugar
Company Limited, 1999 (9) SCC 620. Mr. Malhotra relied upon several decisions of the
Federal Court and this Court and contended that entries in the schedule must be given
its widest meaning and it would not be a correct approach to give a restricted meaning
to the subject matter of legislation described in an Entry. In
AIR SCW 3074
AIR 1999 SC 3125 : 1999
AIR 1941 FC 16
AIR 1962 SC 478
AIR 1960 SC 424
AIR 1955 SC 58
AIR 1954 SC 752 : 1954 CriLJ 1822
AIR 1997 SC 2591 : 1997 AIR SCW 2546
AIR 1963 SC 1667
AIR 1996 SC 1431 : 1996 AIR SCW 1051
AIR 1970 SC 1453
1985 Supp (1) SCR 145
@page-SC880
support of this contention, he placed reliance on the decision of the Federal
Court in The United Provinces v. Mst. Atiqa Begum and others, 1940 (2) Federal Court
Reports 110; The First Additional Income-Tax Officer, Mysore v. H.N.S.Iyengar, 1962
Supp SCR 1; Chaturbhai M. Patel v. The Union of India and others, 1960 (2) SCR 362;
Navinchandra Mafatlal v. The Commissioner of Income-tax, Bombay City, 1955 (1) SCR
829 and Zaverbhai Amaidas v. The State of Bombay, 1955 (1) SCR 799. The learned
Counsel also contended that it is a cardinal rule of interpretation that words in an entry
should be given their ordinary, natural and grammatical meaning subject to the rider that
legislative entries are required to be interpreted broadly and widely so as to give powers
to the legislatures to enact the law with respect to the matters enumerated in the
legislative entries. He places reliance on the decision of this Court in R..S. Rekhchand
Mohota, 1997 (6) SCC 12, Raj Ramkrishna and others v. The State of Bihar, 1964 (1)
SCR 987 and Indian Alumninim Company and others v. State of Kerala and others,
1996 (7) SCC 637. He also referred to the case of Harakchand Ratanchand Banthia,
1969 (2) SCC 166, which had been relied upon by Mr. Shanti Bhushan in his
arguments. Mr. Moalhotra contends that the majority decision in ITC case therefore,
must be held to be correct.
17
.The learned Additional Solicitor General Mr. Trivedi appearing for the Attorney
General of India place before us the process of manufacture of tobaco and indicated
how tobacco is grown commercially. To emphasise on the issue he contended that the
tobacco industry having been notified to be a'controlled industry' it will be a disaster if
the Parliament is held to have no competence to make law in relation to growing of
tobacco or processing of raw tobacco. According to the learned Additional Solicitor
General the trade and commerce in product of controlled industry being covered by
Entry 33 of List I, the legislative power of the State is subordinate to the power of the
Parlaiment in respect of List III. He further contended that the Constitution itself has
specifically put down entries in List II in which the power is expressed in general terms
but is made subject to the provisions of entries in either List I or List III. Consequently,
no anomaly will arise in holding exclusive power with the Parliament in respect of the
subject coming under any entry in List I. He further contended that Tobacco Board Act
covers the entire field of tobacco industry and is within the competence of Parliament
under Entry 52 of List I. Tikaramji was a case which concerned only with a part of the
industry namely manufacture of sugar. The observations made in Tikaramji, 1956 SCR
393 were in the background of that case, as in that case the Court was never concerned
with the entire process as in the present case. According to the learned Additional
Solicitor General, it was not necessary for the Court to examine the ambit of the
expression "industry" in Entry 52 of List I. If the ordinary principle of construction of an
entry in the legislative list is that the entry should be given wide meaning as has been
held in several cases of this Court, there is no reason why on the basis of the said
observations made in Tikaramji, the Court would give a limited meaning to the
expression "industry" in Entry 24 of List II and Entry 52 of List I. With reference to the
judgment of this Court in H.R.Banthia, 1996 (2) SCC 166 the learned Additional Solicitor
General stated that for the purpose of that case, it was not necessary for the Court to
make an attempt to define the expression "industry". The Court was merely
AIR
1956 SC 676
AIR 1970 SC 1453
AIR 1972 SC 1061 : 1972 Tax LR 449
@page-SC881
concerned with the question whether manufacture of gold ornaments would be a
process of systematic product, so as to fall within the expression "industry" in the
appropriate legislative entry. The Court did come to that conclusion. The learned
Additional Solicitor General also contended the case of Harakchand, 1971 (2) SC 779 is
in consonance with the principle of interpretation of an entry and should be applied to
the case in hand. The learned Addl. Solicitor General contends that the Constitution
being an organic document, has to be interpreted in its widest amplitude. According to
the learned Addl. Solicitor General the majority decision in ITC case must be held to be
the correct law. The counsel states that the validity of the Tobacco Board Act was also
not under challenge in the ITC case which stood disposed of by the judgment of this
Court since reported in 1985 (Supp) SCC 476 and, therefore, it would not be
appropriate for this Court to examine the legislative competence of the Parliament in
relation to the enactment of the Tobacco Board Act.
18. Though several counsel have raised contentions in different form as indicated
earlier, but essentially the following questions arise for our determination :1. Whether, the Tobaccco Board Act enacted by the Parliament under Entry 52 of
List I can be held to be constitutionally valid and within the legislative competence of the
Parliament, so far as the provisions contained in the same in relation to the growing of
tobacco and sale of raw materials, and this in turn would depend upon the question
whether the word "industry" used in Entry 52 of List I should be given a restricted
meaning.
2. Even if the Tabacco Board Act is held to be constitutionally valid and the
Agricultural Produce Market Act is also held to be constitutionally valid and within the
powers of the State Legislature, so far as purchase and sale of tobacco within the
market area is concerned, whether both the Acts can be allowed to operate, as was
held by the minority judgment in ITC case;
3. If there is a repugnancy between the two then whether the Central Act would
prevail, as was held by the majority judgment in ITC case. 1985 Supp SCC 476
But before considering several elaborate arguments advanced on these issues, it
may be noticed that the Constitution of India itself defines the political authority locates
the sources of political power and also indicates how the power has to be exercised
setting out the limits on its own use.The rules relating to the distribution of legislative
power by providing the legislative heads for the Parliament to make law in respect of
subjects enumerated in List I, and similarly enumerating the subjects in List II with
respect to which the State Legislature can frame law, in fact constitutes the heart of the
federal scheme of the Constitution. But the Constitution Makers having found that the
need for power sharing devices between the Central and the State must be
subordinated to the imperatives of the State's security and stability propelled the thrust
towards centralisation and by using non obstante clause under Art. 246 the federal
supremacy is achieved. Article 246 of the Constitution deals with the distribution of
legislative powers as between the Union and the State Legislature, with reference to the
different Lists in the 7th Schedule. The various entries in 3 Lists of the 7th Schedule are
not powers of legislation but the fields of legislation. The entry in the List are legislative
heads and are of enabling character. They are designed to define and limit the
respective areas of legislative competence of the Union and the State Legislature. It is a
well recognised principle that the language of Entry should be gvien a widest scope and
each general word should be interpreted to extend to all ancillary or subsidiary matters
which can fairly and reasonably be comprehended in it. The Entries in the Lists should
be read together without giving a narrow or restricted meaning to any of them. Powers
of the Union and the State Legislatures are both expressed in precise and in definite
terms and, therefore, there can be no reason in such a case in giving broader
interpretation to one rather than to the other. It is only when an apparent overlapping
@page-SC882
occurs the doctrine of 'pith and substance' has to be applied to find out the true
nature of legislation and the Entry within which it would fall. When different entries in the
same List crop up for consideration the usual principle followed is that each particular
entry should relate to a separate subject or group of subjects and every attempt should
be made to harmonise different entries and to discard a construction which will render
any of the entries ineffective.
19. Coming to the case in hand, the relevant entries whch arise for our
consideration are entries 52 of List I, Entry 24 of List II and Entry 28 of List 2. Under
Entry 52 of List I Tobacco Board Act has been enacted by Parliament and under Entry
28 of List II the Agricultural Produce Market Act has been framed by the State
Legislature. Incidentally, also Entry 7 of List I and Entries 14 and 27 of List 2 crop up for
consideration. It would, therefore, be appropriate to indicate those Entries hereunder :
"LIST - I
Entry -7 - Industries declared by Parliament by law to be necessary for the
purpose of defence or for the prosecution of war.
Entry 52 - Industries, the contorl of which by the Union is declared by Parliament
by law to be expedient in the public interest.
LIST - II
Entry 24 - Industries subject to the provisions of (entries 7 and 52) of List I.
Entry 27 - Production, supply and distribution of goods subject to the provisions
of Entry 33 of List III, and
Entry 28 - Markets and fairs."
Though the State Legislature has power to make law in relation to any industry
under Entry 24 of List II , but the said Entry itself being subject to the provisions of
Entries 7 and 52 of List I, once Parliament makes a declaration by law identifying an
industry, the control of which is taken over by the Union in the public interest, then the
State Legislature is denuded of its competence to make any law in respect of that
industry, notwithstanding its competence under Entry 24 of List II. The industry in
question having been identified and necessary declaration to that effect being made in
terms of Entry 52 of List I then over that subject the Parliament gets exclusive power to
make laws under Art. 246(1) of the Constitution. The Tobacco Board Act having been
enacted by the Parliament under Art. 246(1) of the Constitution and the law in question
being referable to Entry 52 of List I, the moot question that arises for adjudication is,
what is the extent and ambit of the expression 'industry' used in Entry 52. As has been
stated earlier, the expression "industry" has been used in Entry 24 of List II and Entry 7
and Entry 52 of List I. In deciding the legislative competence of the Parliament in
enacting Tobacco Board Act and in making provision therein in relation to the growing of
tobacco as well as sale of tobacco in the places specified therein, and on terms and
conditions mentioned therein, the moot question is whether the word "industry" would
be given a wide meaning so as to bring within its ambit all that is necessary for the
industry, including the raw material as well as the growing of the raw material, as
contended by Mr. Shanti Bhushan, or a restricted meaning would be given to the same
on the basis of the observations made by this Court in Tikaramji's, case and followed in
several other authorities, as contended by Mr. Dwivedi. In the majority judgment of this
Court in ITC case (1985) Suppl 1 SCR 145, the majority view expressed by Hon'ble
Fazal Ali, J. came to hold that the Centre having taken over an industry under Entry 52
of List I and having passed the Act to regulate the legislation, and the said legislation
having covered the entire field, the State Legislatures ceases to have any jurisdiction to
legislate in that field, and if it does so, then the State Legislation would be ultra vires of
the powers of the State Legislature. Even the minority view expressed by the Hon'ble
Justice Sabyasachi Mukherjee also accepts the
AIR 1956 SC 676
AIR 1955 SC 58
@page-SC883
recognised principle of Parliamentary supremacy in the field of legislation
engrafted in Art. 246. The learned Judge also held that the words in a constitutional
document conferring legislative powers should be construed most liberally and in their
widest amplitude, following the judgment of this Court in Navin Chandra v. CIT,
Bombay, (1955) 1 SCR 829. The minority view also was not to the effect that the
Tobacco Board Act was beyond the legislative competence of the Parliament. On the
other hand having held the Tobacco Board Act to be constitutionally valid and the
Agricultural Market Act enacted by the State Legislature to be a valid piece of
legislation, the learned Judge came to hold that the said Act essentially dealing with the
object to regulate marketing of agricultural produce and the control of coffee (for
tobacco) industry would not be defeated if the marketing of coffee (for tobacco) is done
within the provisions of Marketing Act, the State Legislatures power to make Markekting
Act ought not to be denuded and one must avoid corroding the State's ambit of power of
legislation which will ultimately lead to erosion of India being a Union of States. The
minority view appears to have been influenced by the fact that the States must have the
power to raise and mobilise resources in their exclusive fields. Thus all the three
learned judges did not doubt the competence of the Parliament to enact Tobacco Board
Act. While the majority view was to the effect that the Marketing Act will not operate so
far as dealing with the sale and purchase of tobacco within the market area, as the field
is fully occupied by the Central Act, namely, the Tobacco Board Act, the minority view
proceeded on finding that both Acts can be permitted to operate in their respective
sphere.
20
.In the Constitution Bench decision of this Court in Harakchand Ratanchand
Banthia and others etc. v. Union of India and others, 1970 (1) SCR 479, the legislative
competence of the Parliament under Entry 52 of List I came up for consideration, while
dealing with validity of the provisions of the Gold Control Act, which Act included within
its ambit the gold ornaments. One of the contentions that had been advanced was that
the goldsmith's work was handicraft, requiring application of skills and the art of making
gold ornaments was not an "industry" within the meaning of Entry 52 of List I. It had
been contended on behalf of the Union Government that the legislative entry must be
construed in a large and liberal sense and goldsmith's craft was an industry within the
meaning of Entry 24 of List II as well as Entry 52 of List I and therefore, Parliament was
competent to legislate in regard to the manufacture of gold ornaments. Having
considered the relevant entries namely Entry 52 of List I and Entry 24 and 27 of List II,
the Constitution Bench had observed that - "It is well established that the widest
amplitude should be given to the language of the entries." The Court in that case did not
think it necessary to attempt to define the expression "industry" precisely or to state
exhaustively of its different aspects but considered the question whether the
manufacture of gold ornaments by goldsmith in India falls within the connotation of the
word "industry" in the appropriate legislative Entries. The Court unequivocally rejected
the contention raised by Mr. Daphtary that if the process of production was to constitute
"industry" a process of machinery or mechanical contrivance was essential, as in the
opinion of the Court there is no reason why such a
AIR 1970 SC 1453
at : pp. 1459 - 60 of AIR 1970 SC 1353
@page-SC884
limitation should be imposed on the meaning of the word "industry" in the
legislative lists. The Court also rejected the argument advanced on behalf of Mr.
Palkhivala that manufacture of gold ornaments was not an industry because it required
application of individual art and craftsmanship, as in the opinion of the Court mere use
of the skill or art is not a decisive factor and it was held that the said factor will not take
the manufacture of gold ornaments out of the ambit of the relevant legislative entries. It
is in this connection, the Court observed :
"It is well settled that the entries in the three lists are only legislative heads or
fields of legislation and they demarcated the area over which the appropriate legislature
can operate. The legislative entries must be given a large and liberal interpretation, the
reason being that the allocation of subjects to the lists is not by way of scientific or
logical definition but is a mere enumeration of broad and comprehensive categories."
The Court ultimately came to the conclusion that the manufacture of gold
ornaments by goldsmith in India is a process of systematic production for trade or
manufacture and so falls within the connotation of the word "industry" in the appropriate
legislative Entries. At Page 490 of the aforesaid Judgment, while construing as to what
is the meaning of the word "Industry" in Entry 52 of List I and Entry 24 of List II it
referred to the definition of "industry" in Shorter Oxford English Dictionary as well as the
meaning of the said word in Webster's Third New International Dictionary and the
contention raised on behalf of the applicant that if the word "industry" is construed in this
wide sense, then Entry 27 of List II will lose all meanings and contents, was not
accepted by the Court. It is, thus clear that the Court did apply the theory that widest
amplitude and meaning should be given to the entries in the legislative lists. Further the
contention of the applicant that the legislation in fact is a legislation under Entry 27 of
List II, dealing with "Production, supply and distribution of goods " and being a special
entry, the contents of Entry should be excluded from the expression "industry" in Entry
52, was not accepted and rejected.
21
.In Chaturbhai M. Patel v. Union of India, 1960 (2) SCR 362, a Constitution
Bench of this Court was construing the Entries under the Government of India Act, 1935
and one of the contention raised in that was Sections 6 and 8 of the Central Excises
and Salt Act, 1944 and the Rules made thereunder were beyond the legislative
competence of the central legislature. The relevant entries which came up for
consideration in that case where Entry 45 of List I and Entries 27 and 29 of the State
List, which are as under :- AIR 1969 SC 424
"45. Duties of Excise on Tobacco and other goods manufactured or produced in
India except :- (a) alcoholic liquors for human consumption; (b) opium, Indian hemp and
other narcotic drugs and narcotics, non narcotic drugs ; (c) medical and toilet
preparations containing alcohol or any substance included in sub-paragraph (b) of this
entry.
Item 27. Trade and commerce within the province, markets and fairs, money
lending and money lenders."
Item 29. Production, supply and distribution of goods development of industries,
subject to the provisions in List I with respect to the development of certain industries
under Federal control."
22
.A bare look at those Entries and on being compared with the Entries in List II of
the Seventh Schedule of the Constitution of India, it appears that Entry 27 of the State
List under the Government of India Act now comprises of Entries 26 and 28 of List II of
the Seventh Schedule and Entry 29 of the State List in the Government of India Act is
now combined in Entry 27 of the State List relating to production, supply and distribution
of goods and also Entry 24 of List II namely development of Industries. In the aforesaid
Constitution Bench decision a passage from the judgment of the Federal Court reported
in (1940) FCR 188, 201 was quoted, which may be extracted hereunder : AIR 1941 FC
47 at P. 51
@page-SC885
"It must inevitably happen from time to time that legislation, though purporting to
deal with a subject in one list, touches also on a subject in another list, and the different
provisions of the enactment may be so closely intertwined that blind adherence to a
strictly verbal interpretation would result in a large number of statutes being declared
invalid because the legislature enacting them may appears to have legislated in a
forbidden sphere".
The Constitution Bench approved the aforesaid Judgment of the Federal Court
and referring to the judgment of this Court in the State of Rajasthan v. G. Chawla, (AIR
1959 SC 544), the Court held:
1959 CriLJ 660, para 8
"It is equally well settled that the power to legislate on a topic of legislation carries
with it the power to legislate on an ancillary matter which can be said to be reasonably
included in the power given."
The Court ultimately held that the Federal Legislature did have the competence
to make provisions in Sections 6 and 8 of the Central Excises and Salt Act under Entry
45 of List 1 of the Government of India Act, 1935 and observed thus :
"It is within the competence of the Central legislation to provide for matters which
may otherwise fall within the competence of the Provincial legislature if they are
necessarily incidental to effective legislation by the Central legislature on a subject of
legislation expressly within its power."
This indicates that the Court has all along been construing a particular legislative
Entry to give wide connotation possible and in that case, it was held while legislating
upon an industry, Parliament would be entitled to legislate also on the raw materials of
that industry which is an ancillary to the industry and there should not be any limitation
in interpreting the expression "industry" to denude the power of the Parliament and
thereby make the law ineffective. In the aforesaid judgment of this Court, it has been
held :
"Looking at the scheme of the Act, its object and purpose, its true nature and
character and the pith and substance the conclusion is inevitable that the Act was within
the legislative competence of the Central legislature and although there may be certain
matters otherwise within the legislative competence of the provincial legislature they are
necessarily incidental to effective legislation by the Central legislature. The various
provisions of the Act and the Rules made thereunder were, in our opinion, essentially
connected with the levying and collection of excise duty and in its true nature and
character the Act remains one that falls under Item 45 of List I and the incidental
trenching upon the provincial field on items 27 or 29 would not affect its constitionality
because the extent of invasion of the provincial field may be a circumstance to
determine the true pith and substance but once that question is determined the Act, in
our opinion, would fall on the side of the Central field and not that of the provincial field."
In Synthetics and Chemicals Ltd. and others v. State of U.P. and others 1990 (1)
SCC 109, it was held that the Constitution must not be construed in any narrow or
pedantic sense and that construction which is most beneficial to the widest possible
amplitude of its power must be adopted. In the said case, after noticing the principle of
construction in relation to a constitutional provision, providing division of power and
jurisdiction in a federal constitutional scheme, it was held : AIR 1990 SC 1927
"It is well settled that widest amplitude should be given to the language of the
entries in three Lists but some of these entries in different lists or in the same list may
override and sometimes may appear to be in direct conflict with each other, then and
then only comes the duty of the Court to find the true intent and purpose and to examine
the particular legislation in question. Each general word should be held to extend to all
ancillary or subsidiary matters which can fairly and reasonably be comprehended in it.
In interpreting an entry it would not be reasonable to import any limitation by comparing
or constrasting that entry with any other in the same list."
In Express Hotels Private Ltd. v. State of Gujarat and another, 1989 (3) SCC
677, para 6 the Court was no doubt interpreting AIR 1989 SC 1949, para 6
@page-SC886
some entries providing for taxes on luxuries but dealing with the general
principles of an Entry in a legislative list, the Court held :
"We are dealing with an entry in a Legislative List. The entries should not be read
in a narrow or pedantic sense but must be given their fullest meaning and the widest
amplitude and be held to extend to all ancillary and subsidiary matters, which can fairly
and reasonably be said to be comprehended in them."
As has been stated earlier, even in his minority judgment in ITC case Justice
Mukherjee had observed : 1985 Supp (1) SCR 145
"It is well settled that the cardinal rule of interpretation is that the words should be
read in their ordinary natural and grammatical meaning. But words in a constitutional
document conferring legislative powers should be construed most liberally and in their
widest amplitude."
In view of the aforesaid rules of interpretation as well as the Constitution Bench
referred to above, it is difficult for us to accept the contention of Mr. Dwivedi that the
word "industry" in Entry 52 of List I should be given a restricted meaning, so as to
exclude from its purview the subject of legislation coming with Entry 27 or Entry 14 of
List II. Bearing in mind the constitutional scheme of supremacy of Parliament, the
normal rule of interpretation of an Entry in any of the list in the Seventh Schedule of the
Constitution, the object of taking over the control of the tobacco industry by the
Parliament, on making a declaration as required under Entry 52 of List I and on
examining the different provisions of the Tobacco Board Act, we see no justification for
giving a restricted meaning to the expression "industry" in Entry 52 of List I, nor do we
find any justification in the contention of the counsel appearing for the States and also
different Market Committees that the provisions contained in Tobacco Board Act dealing
with the growing of tobacco as well as making provision for sale and purchase of
tobacco, must he held to be beyond the legislative competence of the Parliament, as it
does not come within the so called narrow meaning of the expression "industry" on the
ground that otherwise it would denude the State Legislature of its power to make law
dealing with market under Entry 28, dealing with agriculture under Entry 14 and dealing
with goods under Entry 27 of List II. Such an approach of interpretation, in our
considered opinion would be against the very scheme of the Constitution and
supremacy of the Parliament and such an approach towards interpreting the power
sharing devices in relation to entries in List I and List II would be against the thrust
towards centralisation. In our considered opinion, therefore, the word "industry" in Entry
52 of List I should not be given any restricted meaning and should be interpreted in a
manner so as to enabling the Parliament to make law in relation to subject matter which
is declared and whose control has been taken over to bring within its sweep any
ancillary matter, which can be said to be reasonably included within the power and
which may be incidental to the subject of legislation, so that the Parliament would be
able to make an effective law. So construed and on examining different provisions of the
Tobacco Board Act, we do not find any lack of legislative competence with the
Parliament so as to enact any of the provisions contained in the said Act, the Act in
question having been enacted by the Parliament on a declaration being made of taking
over of the control of the Tobacco industry by the Union and the Act being intended for
the development of the said industry.
23
.The main prop of the argument advanced by Mr. Dwivedi is the decision of this
Court in Tikaramji, which was followed in Calcutta Gas, Kanandevan and Ganga Sugar
Corporation, all of which are Constitution Bench decisions. In Tikaramji, no doubt the
Constitution Bench of this Court held that the raw materials which are integral part of the
industrial process, cannot be included in the process of manufacture or production and
thus "industry" within the meaning of Entry 52 of List I under which the Parliament
makes a law, would not bring within its sweep the raw materials. The aforesaid
observations had been made in connection with sugar industry
AIR 1956 SC 676
AIR 1972 SC 2301, AIR 1962 SC 1044 and AIR 1980 SC 286
1985 Supp (1)SCR 145
AIR 1986 SC 676
@page-SC887
and sugarcane. According to Mr. Dwivedi, the majority decision in ITC case
cannot be sustained, since the earlier constitution Bench decision of this Court in
Tikaramji, Calcutta Gas, Kanandevan and Ganga Sugar Corporation have not been
noticed. Mr. Dwivedi's further contention is that a legislative Entry in any List should be
so interpreted so as not to denude another entry in the same list or in any other list and,
therefore, it is necessary to give a restricted meaning to the expression "industry"
occurring in Entry 24 of List 2 as well as Entry 52 of List 1. According to Mr. Dwivedi,
while examining the constitutionality of the Market Committee Act referable to Entries
26, 27 and 28 of List II vis-a-vis the Sugarcane Act referable to Entry 33 of List III in
Belsund Sugar, this Court has held that the Market Committee Act should be subject to
Sugarcane Act. Applying the same principle, it would be logical to hold that the raw
tobacco, which would be a producue of agriculture and consequently a raw material for
the tobacco industry would continue to be within the exclusive domain of the State
legislature and the Parliament is incompetent to make any legislation in relation to either
growing of tobacco or sale and purchase of tobacco. It would, therefore, be necessary
to examine what really this Court in Tikaramji has held. At the outset, it may be noticed
that in none of these cases, relied upon by Mr. Dwivedi, namely Tikaramji, Calcutta
Gas, Kanandevan and Ganga Sugar, the competence of Parliament to make any law
referable to Entry 52 of List I had not been questioned. In Tikaramji, the question for
consideration was whether the Act passed by the State Legislature and notification
issued thereunder is repugnant to the Parliament Act and notification issued thereunder.
On examining the provisions of the State Act namely the Sugarcane Act, the Court held
that the said law concerns solely with the regulation of supply and purchase of
sugarcane and in no way trenched upon the jurisdiction of the Centre with regard to
sugar and on scrutiny of Section 18-G of the Industries (Development and Regulation)
Act, the Court held that the Act, more specifically Section 18-G did not cover sugarcane
nor even the Parliaments intention to cover the entire field could be inferred. The Court
was required to find out the meaning of the expression "any article or class of articles
relatable to any schedule industry" used in Section 18G and it held that it did not refer to
the raw material but only to the finished products. The Court went into the object of the
Central Act which was equitable distribution and availability of manufactured articles at
fair prices. The argument that had been advanced in that case was that the Sugarcane
Act enacted by the State Legislature though appears to be a legislation in regard to
sugarcane required for use in sugar factory but in pith and substance and its true nature
is a legislation in regard to sugar industry which had been declared under the Industries
(Development and Regulation) Act and control of the industry has been taken over by
the Union. Negativing that contention and on examining the contents of Entry 24 of List
II and Entry 27 of the said List II, the Court observed that the controlled industries were
relegated to Entry 52 of List I which was the exclusive province of Parliament leaving
the other industries within Entry 24 of List II. In that case, the Court was not required to
examine the content and scope of the expression "industry" in Entry 52 of List I and in
fact the Court observed that it was concerned with as to whether the raw materials of an
industry which form an integral part of the process are within the topic of "industry"
which form the subject matter of Item 52 of List I. The Central legislation which was
under consideration in that case as well as the notifications issued by the Central
Government were held to have been enacted by the Parliament in exercise of the
legislative power conferred upon it by Entry 33 of List III and was an exercise of
concurrent
@page-SC888
jurisdiction and once the law is made by the Parliament in exercise of its
concurrent jurisdiciton, then it would not deprive the Provincial Legislatures of similar
powers which they had under the Provincial Legislative List. It is important to notice the
findings of the Court in that case :
"It follows as a necessary corollary that even though sugar industry was a
controlled industry, none of these Acts enacted by the Centre was in exercise of its
jurisdiction under Entry 52 of List I."
Whatever observations the Court made on which Mr. Dwivedi placed strong
reliance, therefore, cannot be made use of indicating the ambit and contents of the
express "industry" under Entry 52 of List I. When the Court observed that the term
"industry" which would be capable of comprising three different aspects; (i) raw material
which are an integral part of the industrial process, (ii) the process of manufacture or
production and (ii) the distribution of the products of the industry, and held that raw
materials should be goods which would be comprised of Entry 27 of List II and the
process of manufacture or production would be compromised in Entry 24 of List II,
except where the industry was a controlled industry when it would fall under Entry 52 of
List I, the Court was obviously not examining the contents of the expression "industry"
under the Entry 52 of List I and that is why the Court observed that the legislation which
was enacted by the Centre in regard to sugar and sugarcane could fall within Entry 52
of List I. When the legislation in question that was under consideration was held not to
be legislation under Entry 52 of List I, the question of applying the ratio in the case of
Tikaramji, in the context of Parliament's power to make a law under Entry 52 of List I
and the content and scope of such law or the scope and content of the expression
"industry" under Entry 52 of List I cannot have any application and consequently, on the
basis of the judgment of this Court in Tikaramji, it cannot be contended that the
expression "industry" in Entry 52 of list I must have a restricted meaning. It is further
apparent from the conclusion of the Court in that case when it refused to import the pith
and substance argument, holding that the same cannot be imported for the simple
reason that boh the centre as well as the State Legislature were operating in the
concurrent field and, therefore there was no question of any trespass upon the
exclusive jurisdiction vested in the Centre under Entry 52 of List I. In other words in
Tikaramji, neither this Court was called upon to examine the content of the expression
"industry" under Entry 52 of List I nor the relevant Central law which under consideration
had been enacted with reference to power under Entry 52 of List I. this being the
position, we do not find much force in the submission of Mr. Dwivedi that the conclusion
recorded by the majority view in ITC, case is vitiated, as it has not noticed observations
of the Constitution Bench decision in Tikaramji. In our opinion, it would be wholly
inappropriate for this Court to apply the observations made in Tikaramji's case with
regard to raw materials of "Industry". The Court in Tikaramji's case having not been
called upon to determine the question whether the expression "industry" in Entry 52 of
List I should be given a restricted meaning at all is contended by Mr. Dwivedi, it would
be wholly inappropriate to import the observations in Tikaramji, for construing the ambit
and content of the subject head of legislation "industry" under Entry 52 of List I. Since
the Court was examining the provisions of Industries (Development and Regulation)
Act, which regulated the manufacturing process until Section 18-G was brought in
amendment in the year 1953 and the Industries (Development and Regulation) Act
@page-SC889
did not purport to regulate the trade and commerce in the raw materials namely
sugarcane and the Court in fact was scrutinizing whether the State Act enacted by the
State Legislature could be held to be repugnant to the Central Legislation it found that
there exist no repugnancy and the two Acts cover two different fields and would coexist. In this view of the matter any observations or conclusion of the Court in Tikaramji,
will be of no assistance to us for arriving at a decision as to whether the term "industry"
in Entry 52 of List I would have a restricted meaning or would have a wide meaning,
which is the normal interpretation of every entry in the respective lists. In Calcutta Gas
case, no doubt Tikaramji, had been followed and the Court was examining the two
competing entries in List II itself of the Seventh Schedule of the Constitution namely
Entries 24 and 25. While Entry 24 of List II is "industry", Entry 25 is 'Gas and Gas
works" and the question, therefore was whether law made by the State Legislature on
the subject head 'Gas and gas works' would prevail over a law made by the State
Legislature over the subject "industry" and the Court held that 'Gas and gas works'
being a special subject head, law made thereunder would prevail over any law made
under the general head "industries". It may be observed that in the Calcutta Gas case
(1962 Supp SCR 1) at p. at page 17, it has been held "It is not necessary in this case to
attempt to define the expression "industry" precisely or to state exhaustively all its
ingredients." In view of the aforesaid observations, we fail to understand how this
decision can be pressed into service for ascertaining the true import and content of the
expression "industry" which is the subject head under consideration in the case in hand.
Coming to the decision of this Court in Kanandevan Hills Produce v. State of Kerala,
1972 (2) SCC 218 as has been stated earlier, it is the validity of State legislation namely
Resumption of Lands Act, 1971, which was under challenge on the ground of lack of
legislative competence of the State Legislature. The validity of the Act was upheld on a
conclusion that the law was referable to the legislative head under Entry 18 of List II
relating to land and legislative Entry 42 of List III relating to acquisition and
requisitioning of property. It is in that context, it was observed that the power of the
State legislature to make the law under the aforesaid two entries could not be denied
merely on the ground that it had some effect on the industry, the control of which has
been taken over under Entry 52 of List I. But the Court was careful to hold that the effect
was not the same thing as subject matter. In other words, the subject matter of "
industry" under Entry 52 of List I really was not under consideration. In paragraph 29 of
the said judgment, referring to the case of Baijnath Kedia v. State of Bihar, where the
Court had construed Entry 23 of List I and Entry 52 of List I, it was observed that the
scope of Entry 52 of the Union List is slightly different and once it is declared by
Parliament by law to be expedient in public interest to control an industry, Parliament
can legislate on that particular industry and the States would lose their power to
legislate on that industry. Necessarily, therefore, if the law made by the Parliament in
relation to a controlled industry, the control of which has been taken over by a
declaration in the law, then there cannot be any limitation on the power of the
Parliament to make any provision having a reasonable and direct nexus with the
industry. But at
@page-SC890
the same time, the Parliament cannot make a law which would have no
connection at all with the concerned industry. This, in our opinion is what has been
expressed in paragraph 29 of the aforesaid judgment, but by no stretch of imagination,
the aforesaid judgment of the Court in Kanan Devan, can be construed to be an
authority for interpreting the expression "industry" in Entry 52 of List I by giving it a
restricted meaning, as contended by Mr. Dwivedi. In Kanan Devan, the petitioner
therein had assailed the competence of the State Legislature to enact the legislation in
question and had relied upon Tikaramji, which has been referred to in paragraph 30 of
the judgment. But the Court in paragraph 33 holds that none of these cases assist the
petitioners. In the aforesaid premises, we fail to understand how the decision in Kanan
Devan will be of any assistance to the respondent-State of Bihar in support of the
contention that the Parliament had no legislative competence to enact the Tobacco
Board Act under Entry 52 of List I, so as to include within the same the provisions
relating to growth of tobacco as well as sale and purchase of raw tobacco within the
market area. The observations of this Court in the Constitution Bench decision of Ganga
Sugar Corpn. case, 1980 (1) SCC 223, on which Mr. Dwivedi strongly relied upon,
though ex facie appears to be supporting the contention of the learned counsel for the
State of Bihar, but a deeper scrutiny of the same would make it crystal clear that the
said observation is of no consequence either in the matter of deciding the ambit of the
expression "industry" in Entry 52 of List I or in deciding the legislative competence of
Parliament to make law like the Tobacco Board Act in relation to a controlled industry
and making provision therein in respect of the growing of tobacco and purchase and
sale of raw tobacco. In Ganga Sugar's case, the levy of purchase tax on sugar-cane
purchased by a factory owner under Section 3 of the U. P. Sugarcane (Purchase Tax)
Act, 1961, was under challenge on the ground that the legislation in question being in
respect of a controlled industry, the power belongs exclusively to Parliament under
Entry 52 of List I. The Court repelled this contention on the ground that Entry 54 in List II
of the Seventh Schedule empowers the State to legislate for taxes on purchase of
goods and therefore, it cannot be said to have invaded Entry 52 of List I. The Court
posed the question as to whether the Purchase Tax Act is bad because it is a legislation
with respect to a controlled industry namely the Sugar industry and answered the same
in the negative, following the observations of the earlier Constitution Bench decision in
Tikaramji's case. Thus the extreme argument that the State Legislature is incompetent
to make any law with regard to a controlled industry, the control of which has been
taken over by the Union Government by making a declaration, was negatived and it is in
that context, the observations on which Mr. Dwivedi relied upon had been made. We
are unable to accept the submission of Mr. Dwivedi to hold that the decision of this
Court in Ganga Sugar, can be pressed into service for a contention that the Parliament
had no legislative competence to make a legislation in respect of a controlled industry
like tobacco and enacting the Tobacco Act and making provision therein in relation to
growing of tobacco as well as sale and purchase of raw tobacco. In our considered
opinion, this decision is of no assistance to support the contention
@page-SC891
of Mr. Dwivedi, appearing for the State of Bihar that the expression "industry" in
Entry 52 of List I must be given a narrow meaning so as to include only the process of
manufacture or production and nothing further. We also reiterate that in none of these
aforesaid Constitution Bench decision of this Court relied upon by Mr. Dwivedi,
appearing for the State of Bihar, the true import and meaning of the expresssion
"industry" under Entry 52 of List I was for consideration, nor the competence of the
Parliament to make a legislation in respect of a controlled industry, so as to include
within itself the provisions relating to the stage prior to manufacture or production was
an issue and consequently these decisions will be of no assistance so as to strike down
the provisions of the Tobacco Board Act, so far as the provisions contained threin
relating to growing of tobacco/or sale and purchase of raw tobacco.
24
.It is no doubt true that in Ishwari Khetan's case (1980 (4) SCC 136) while
construing Entry 52 of List I and the effect of the declaration made thereunder by the
Parliament, the Court has relied upon also the legislation made under Entry 54 of List I,
which was held to be in pari materia with Entry 52 of List I and the earlier decision of
this Court in Baij Nath Kedia's, case, has been followed, as contended by Mr. Shanti
Bhushan, but we need not embark upon an inquiry in that respect, in view of our
conclusion on the question as to what would be the ambit and extent of the expression
"industry" occurring in Entry 52 of List I. In Ishwari Khetan's case, the Court was
construing the scope and ambit of Entry 54 of List II and Entry 52 of List I and had
observed that the State's power under Entry 24 of List II would get eroded only to the
extent the control is assumed by the Union pursuant to a declaration made by the
Parliament in respect of declared industry as spelt out by legislative enactment and the
field occupied by such enactment is the measure of erosion and subject to such
erosion, on the remainder the State legislature will have power to legislate in respect of
declared industry without in any way trenching upon the occupied field. Applying the
aforesaid ratio to the case in hand and having examined the provisions of the Tobacco
Board Act, the answer is irresistible that the State legislature is denuded of its power to
make any law in relation to growing of tobacco or sale and purchase of raw tobacco
when such a provision has already been made in the Tobacco Board Act. AIR 1980 SC
1955
AIR 1970 SC 1436
25
.The two other decisions which require to be noticed by us are the case of
Viswanathiah and Co. v. State of Karnataka, (1991) 3 SCC 358 and Belsund Sugar,
(1999) 9 SCC 620. So far as Viswanathiah's case is concerned, Mr. Dwivedi relied upon
the observations made in paragraph 8 of the said judgment wherein the Court had
observed :- 1991 AIR SCW 455
AIR 1999 SC 3125 : 1999 AIR SCW 3074
"It is true that the Silk Board Act purports to control the raw silk industry in the
territory of India. But, as pointed out by the High Court in the light of the earlier
decisions of this Court therein referred to, the control of the industry vested in
Parliament was only restricted to the aspect of production and manufacture of silk yarn
or silk. It did not obviously take in the earlier stages of the industry, namely, the supply
of raw materials."
According to Mr. Dwivedi this decision lends support to his contention that the
Industry in Entry 52 of List I will have to be given a restricted meaning, and as such, it
would not cover either the growing of tobacco or dealing with sale and purchase of raw
tobacco. As has been held by us earlier, the power of the State Legislature gets
denuded to the extent the Central Legislation occupies the field in respect of the
controlled industry, the control of which has been taken over by the Parliament on a
declaration being made. If after taking over the control of the industry in exercise of its
legislative competence under Entry 52 of List I, the Parliament while making a law did
not make any provision in relation to the supply of raw material, then merely because
the control of the industry has been taken over, the State's power to make legislation in
relation
AIR 1999 SC 3125 : 1999 AIR SCW 3074
AIR 1999 SC 3125 : 1999 AIR SCW 3074
AIR 1961 SC 459
AIR 1964 SC 1284
@page-SC892
to the supply of raw-material would not get denuded. But that does not mean that
the Parliament cannot make any law in relation to any other aspect other than the
aspect of production and manufacture of the industry. In other words, the contention of
Mr. Dwivedi that the Parliament's competence to make any law in respect of the
legislative head 'industry' in Entry 52 of List I would entitle the Parliament to make a law
only with respect to the production and manufacture and not any earlier stage cannot be
accepted to be correct, and the aforesaid decision of this Court cannot be held to have
laid down the law in that way. So far as Belsund Sugar Company's case is concerned,
the question for consideration was, whether the provisions of the Bihar Agricultural
Produce Markets Act would at all be applicable for levy of market fee in respect of sale
and purchase of sugarcane, in view of the special provisions contained in the Bihar
Sugar cane Regulation of Supply and Purchase Act, 1981. The Market Committee Act
was also a State Legislation purported to have been enacted under Entries 26, 27 and
28 of List II. The Sugarcane Regulation of Supply and Purchase Act purported to be a
legislation enacted in Entry 33 of List III. The Court held that in view of the special Act
dealing with sale and purchase of sugar cane the general Act, namely, the Market
Committee Act will have no application at all, and therefore, the levy of market fee by
the Market Committee was held to be invalid. On examining different provisions of the
two Acts the Court also held that there consists direct conflict between the two Acts and
that conflict could be avoided only if it is held that the Market Act being a general Act
covering all types of the agricultural produce and the Sugar Cane Act, which also deals
with an agricultural produce like sugar, being a special enactment laying down an
independent exclusive machinery for regulating sale, purchase and storage of such a
commodity under a special Act, then the special Act would prevail over the general Act
for that commodity and by necessary implication will take the said commodity out of the
sweep of the general Act. This decision, in our considered opinion is not an authority for
the proposition that the expression 'industry' in Entry 52 of List I should be given a
restricted meaning, as contended by Mr. Dwivedi. In that case also the extreme
contention that there exists possibility of issuance of control order by the Central
Government would denude the State Legislature of its authority to make a law in
respect of any matter coming under any of the Entries in List II was not accepted. But at
the same time it is difficult for us to construe the aforesaid decision of having laid down
a ratio that in dealing with a Central Legislation in relation to a controlled industry, the
control of which has been taken over by a declaration made by law, enacted by
Parliament would not clothe the Central Legislature to make any law other than
production or manufacture of the industry in question. Belsund Sugar, (supra) by no
stretch of imagination can be construed to have even remotely held that the word
'industry' ought to receive a restricted meaning. The said decision, therefore does not
support the contention of Mr. Dwivedi, appearing for the State of Bihar as well as for the
State of Karnataka. Mr. Shanti Bhushan, learned senior counsel, no doubt argued with
vehemence that the principle enunciated in Hingir-Rampur Coal Co. Ltd. v. The State of
Orissa, (1961 2 SCR 537, Belsund Sugar, (1970) 2 SCR 100 and State of Orissa v.
M.A. Tulloch, (1964) 4 SCR 461,
@page-SC893
should equally apply to the case in hand while interpreting the scope and extent
of the legislative competence of the Parliament under Entry 52 of List I, but we do not
think it necessary to apply the ratio in the aforesaid three cases, inasmuch as in all
those cases the Court was considering the competing power of the State legislature
under Entry 23 of List II and the power of the Central legislature under Entry 54 of List I.
Both the Entries are on the subject 'Regulation of Mines of Minerals Development'.
Entry 23 of List 2 itself is subject to the provisions of List I with respect to the Regulation
and Development under control of the Union, and necessarily therefore, when Union
takes over the control of the Mines and Minerals Development by legislation under Entry
54 of List I the State Legislature would be denuded to make any law in relation to the
Mines and Minerals Development under Entry 23 of List II. But in the case in hand, we
are concerned with the legislation made by the Parliament under Entry 52 of List I which
is the Tobacco Board Act and the legislation made by the State Legislature under Entry
28 or any other ancillary Entry like Entry 14 or Entry 27 of List II, namely the Bihar
Agricultural Produce Market Act. In such a case the focus for consideration of the Court
would be as to what is the scope and content of Entry 52 of List I and once it is held that
the expression 'industry' cannot be given any restricted meaning and the law enacted by
the Parliament, the Tobacco Board Act, is held to be intra vires then the State
legislation, namely, the Bihar Agricultural Produce Market Act, so far as it deals with the
commodity tobacco will go out of the general sweep of all agricultural produce notified
under the State Act, as the provisions in respect thereof have been made by the Central
legislation and by application of Article 246 of the Constitution the Central Act would
prevail.
26
.Mr. Dwivedi placed reliance on the Full Bench decision of Allahabad High Court
in SIEL's case (supra), but in view of our conclusions already arrived at, the aforesaid
Full Bench decision must be held not to have been correctly decided. It is also difficult
for us to accept the submission of Dr. Singhvi, learned senior counsel appearing for the
Market Committee of Monghyr, that if the subject head of legislation in List II is not
subject to the corresponding Entry in List I then the power of State Legislature to
legislate with regard to that matter is paramount and supreme, and therefore, the
Market Committee Act being relatable to Entries 14 and 28 of List II, which are not
subject to any of the Entries of List I, the Market Committee Act must be allowed to
prevail. In our considered opinion, the aforesaid approach to consider the validity of a
law made by the Parliament or a law made by the State legislature is not a correct
approach. The Entries merely being the subject head of the legislation and the power to
make law having emanated from Article 246, if a particular law made by Parliament
comes within the legislative competence of the Parliament with reference to any of the
Entries in List I then the State legislature would not have the competence to make law
with respect to that subject with reference to some other Entries in List II. It is of course
true, that Courts while examining the competing legislations would make an attempt and
see whether both the legislations could operate, and that question we will deal later. But
the contention that Entries 14 and 28 of List II not being subject to any Entry under List I
and the Market Committee Act being relatable to Entries 14 and 28 of List II the same
should be allowed to operate notwithstanding the wide meaning to the word 'industry' in
Entry 52 of List I and the Parliament has already taken over the control of the industry
and has made law in that respect. In the context of our conclusions on the question of
the import and extent of expression 'industry' in Entry 52 of List I it is not necessary to
examine the other contentions of Dr. Singhvi that whether the theory of occupied field is
relevant only in case of law made with reference to Entries in List III. We are also not
persuaded to agree with the submission of Dr. Singhvi that the Market Committee Act
can still be operative and the Market fee could be levied by the Market Committee under
the State Act for services provided by it on the principle of quid pro quo even if the Court
comes to the conclusion that the Tobacco Board Act is a valid piece of legislation
enacted by the Parliament and that Act also has made necessary provision for growing
of tobacco as well as purchase and sale of tobacco. We are also unable to AIR 1996 All
135 : 1996 All LJ 468
AIR 1970 SC 1436, AIR 1964 SC 1284, AIR 1990 SC 85 and 1991 AIR SCW
1375 : AIR 1991 SC 1676
@page-SC894
sustain the argument of Mr. Sanghi, learned senior counsel appearing for Krishi
Mandi in the Madhya Pradesh batch of appeals, that the enquiry in the case should be
whether the State legislature had the legislative competence to enact the Market
Committee Act under 28 of List II. His other submission on the question that there is no
irreconciable clash between the two Acts and the meaning of Section 31 of Tobacco
Board Act will be considered while considering the different provisions of the two Acts.
Mr. Ganguli, learned senior counsel appearing for the Tamil Nadu Agricultural Marketing
Board also submitted in the same manner as Dr. Singhvi and relied upon Article 246(3)
of the Constitution. But in our considered opinion Article 246(1) itself being
notwithstanding anything in clauses 2 and 3 of the said Article the submission of Mr.
Ganguli is devoid of any force. The elaborate submissions of Mr. Ganguli in relation to
the decisions of this Court in Baij Nath Kedia, M. A. Tulloch, India Cement and Orissa
Cement, all of which dealt with mining legislations are not necessary to be dealt with
inasmuch as we have not relied upon the principles enunciated in those decisions, even
though Mr. Shanti Bhushan pressed those decisions in support of his contention.
27
.In the aforesaid premises, we are of the considered opinion that the Tobacco
Board Act enacted by the Parliament under Entry 52 of List I is constitutionally valid and
all the provisions therein, including the provisions relating to growing of Tobacco and
sale and purchase of tobacco are within the legislative competence of the Parliament.
We are also further of the opinion that the word 'industry' in Entry 52 of List I cannot be
given a restricted meaning, particularly when a conspectus of all the decisions
interpreting Entry in any of the Lists of the Constitution including the minority view of
Mukherjee, J. in ITC case, is to the effect that the Entries in the List should be given
liberal and generous construction and it is well accepted cardinal rule of interpretation
that the words in constitutional document, conferring legislative powers should be
construed most liberally and in their widest amplitude. 1985 Supp (1) SCR 145
28
.Coming to the second question, it is no doubt true as a matter of principle of
construction that in the event there are two competing legislations, one by the
Parliament and one by the State, the Court would make an endeavour if both the
legislations could be allowed to be operated upon. But on examining the provisions of
the two Acts, if it is found that the Central legislation and the State legislation come in
collision with each, then question of allowing both of them to operate would not arise. In
such an event, the Central legislation would prevail, provided the said legislation is
otherwise constitutionally valid namely the Parliament had the legislative competence to
enact the legislation in question. From the aforesaid stand point, if we examine the
different provisions of the Tobacco Board Act, more particularly Sections 3, 8 and 32
and the provisions of the Agricultural Produce Markets Act, more particularly Section
4(2) thereof as well as Section 15, which is said to be the heart and soul of the Markets
Act in Belsund's case, the conclusion is irresistible that the two Acts come in direct
collision with each other and it is difficult to reconcile the provisions of both the Acts.
Necessarily, therefore, the Tobacco Board Act having been enacted by the Parliament
and making all provisions in relation to the tobacco industry including the provisions for
growing of tobacco as well as sale and purchase of raw tobacco, in accordance with the
procedure AIR 1999 SC 3125 : 1999 AIR SCW 3074
@page-SC895
prescribed under the said Act, the provisions of the Agricultural Produce Markets
Act, entitling the Market Committee to levy fee for sale and purchase of raw tobacco
within the market area will not be operative, so far as the produce 'tobacco' is
concerned. In other words, Central Act would prevail and would govern the entire gamut
of tobacco industry. It is also important to bear in mind that when parliament decides to
take over the control of a particular industry in the interest of the said industry as well as
in the national interest, the control should be effective and should be in such a manner
that the desired object can be achieved. Necessarily therefore, legislation ought to be
made providing control over the growing of tobacco as well as on its sale and purchase,
which alone would subserve the very purpose for which the control of the industry has
been taken over by the Parliament. In this view of the matter, we hold that the Tobacco
Board Act and the Agricultural Produce Markets Act, collide with each other and cannot
be allowed to be operated simultaneously. Necessarily, therefore, the Tobacco Board
Act would prevail and the Agricultural Produce Markets Act, so far as it relates to levy of
fee for sale and purchase of tobacco within the market area must be held to go out of
the purview of the said Act.
29
.Coming to the third question posed by us in view of the inconsistency and
repugnancy between the two Acts, as already stated, it is the Central Act that would
prevail and in our opinion, the majority judgment in the ITC case has been correctly
decided, though the reasons for the same given by us may be slightly different than the
reasons which persuaded the learned Judges to have the conclusion in the ITC case.
1985 Supp (1) SCR 145
30. In view of our conclusion on the three issues, the impugned judgment of the
Patna High Court, remitting the matter to the Market Committee for passing a fresh
assessment order is set aside and it is held that the sale and purchase of tobacco within
the market area of any Market Commitee would not be subjected to the provisions of
the Bihar Agricultural Produce Markets Act. Civil Appeal No. 6453 of 2001 is accordingly
allowed.
31. Civil Appeal No. 3872 of 1990, filed by the Krishi Utpadan Mandi Samiti
against the Division Bench Judgment of Allahabad High Court stands dismissed.
32
.We also set aside the Full Bench decision of the Allahabad High Court and the
appeal filed by the Tobacco Merchants' Association, assailing the legality of the Full
Bench decision of the Allahabad High Court is allowed. Similarly, the Judgment of the
Division Bench of the High Court of Madras, which follows the majority view of this
Court in ITC case, is upheld and the appeals filed by the State of Tamil Nadu as well as
the Tamil Nadu Agricultural Marketing Board are dismissed. 1985 Supp (1) SCR 145
33. Civil Writ Petition filed by the Jayalakshmi Tobacco Company under Article
32, registered as Civil Writ Petition No. 8614 of 1982, challenging the validity of the
provisions of Karnataka Agricultural Produce Marketing (Regulation) Act, stands
disposed of and the said Act enacted by the State legislation of Karnataka must be held
to be invalid, so far as the provisions authorising levy of fee on sale and purchase of
tobacco within the market area is concerned.
34. The twelve appeals filed against the Judgment of Madhya Pradesh High
Court are dismissed and the Judgment of the Division Bench of Madhya Pradesh High
Court is upheld.
35. In different appeals arising out of the judgment of the Madhya Pradesh Hgh
Court, interim stay had been granted by different Benches on 27-4-88, 2-5-88, 17-8-88
and 5-10-88. By these orders, the Court had stayed the operation of the judgment,
without any condition. All these orders stood modified by order dated 27-2-89, when the
Court passed the following order:
"....................There will be no recovery of arrears due. There will also be no stay
of the refund collected if any. The amount collected may be refunded within four months
from this date. In future there will be no stay of recovery of market-fee found due and
payable from the date of the High Court's judgment. It is, however, made clear that if the
parties have filed objection against the levy, the objection shall be disposed of in
@page-SC896
accordance with law before the recovery is restored. In case, ultimately if the
respondents succeed then the amount collected will be refunded by the appellants
along with the interest @ 12% per annum. In case the appellants succeed then the
respondents undertake to pay the arrears of market-fee along with the interest @ 12%
per annum from the date of the payment."
Now that the judgment of the High Court is being upheld and the appeals are
being dismissed, the question for consideration would be as to whether the said order of
stay dated 27-2-1989 should be modified or the order should be allowed to operate and
the collected market-fee would be liable to be refunded with interest @ 12% per annum
in accordance with the order dated 27-2-1989. Having regard to the facts and
circumstances and the resources of the Market Committee, we think it appropriate to
modify the said order dated 27-2-1989 and direct that the Market-fee already collected
from the sale and purchase of tobacco within the Market area by the Mandi Samiti, need
not be refunded. But at the same time, the Market Committee will not be entitled to
collect the same, even for any past period, if the same has not already been collected.
36. PER Y. K. SABHARWAL, J. :- The issue in these matters is about the validity
and applicability of Bihar Agricultural Produce Markets Act, 1960 and the Karnataka
Agricultural Produce Marketing (Regulation) Act, 1966, to the extent these State
legislations deal with sale of tobacco in market areas with particular reference to the
levy thereupon of market fee, after enactment of Tobacco Board Act, 1975 - a
parliamentary legislation. The same is the issue in respect of similar State Legislations
passed by State Legislatures of Uttar Pradesh and Madhya Pradesh. These issues
were subject matter of decision in ITC Ltd. v. State of Karnataka, (1985 Supp SCC 476).
37. We are required to determine whether ITC's case is correctly decided or not.
That is a decision rendered by a three Judge Bench. The majority decided in favour of
ITC. Later a Bench of two Judges expressed tentative view that the decision in ITC's
case requires reconsideration. Thus, these matters are before this Bench.
38. The arguments on behalf of the appellants contending that ITC has been
correctly decided have been led by Mr. Shanti Bhushan followed and supported by
other learned counsel appearing for Union of India and the Tobacco Board. On behalf of
the State of Bihar and other parties contending that ITC has not been correctly decided,
the arguments were led by Mr. R. K. Dwivedi followed and supported by other learned
counsel appearing for other States and Market Committees.
39. The answer to the question - Whether ITC is correctly decided or not
depends upon the scope of Entry 52 in Union List of the Seventh Schedule of the
Constitution of India with particular reference to the meaning of the expression
'Industries' in the said entry as also in Entry 24 of the State List of the Seventh Schedule
of the Constitution.
40
.In ITC's case, the majority held that the provisions of the Karnataka Agricultural
Produce Marketing (Regulation) Act, 1966 are repugnant to the parliamentary
legislation, the Tobacco Board Act, 1975 and, therefore, is liable to be removed from the
Schedule of that enactment. Expressing the minority view, Sabyasachi Mukharji, J held
that the State legislation and the Tobacco Board Act, 1975 can co-exist. 1985 Supp
(1) SCR 145
41. The first question to be determined is can State legislation and Tobacco
Board Act co-exist in respect of sale of tobacco in the market areas within the
framework of Agricultural Produce Marketing Acts - the State Legislations under
consideration? If our answer to this question is that the two legislations can co-exist, in
that event it may not be necessary to go into the aspect of legislative competence. If,
however, our answer is that the State legislations and the Parliamentary legislation are
incapable of reconciliation and the two cannot co-exist, in that case, the next question
that would require determination will be about the validity of the State legislations.
42. In the proposed judgment, Hon'ble Mr. Justice Pattanaik has come to the
conclusion that the Agricultural Produce Markets Act and the Tobacco Board Act are in
direct collision with each other and cannot be allowed to be operated simultaneously.
@page-SC897
43. The State legislations and parliamentary legislations cannot co-exist is
apparent from various provisions of the two legislations. To illustrate in this regard,
reference may be made on one hand to Section 4(2) of Bihar Act and similar provision
in other State legislations and on the other to the provisions of Section 13 of the
Tobacco Board Act in States wherein this section has been enforced and also to
Section 8(2)(cc). Reference can also be made to Rule 32 of the Tobacco Board Rules,
1976 framed in exercise of the powers conferred by Section 32 of the Tobacco Board
Act regarding purchase of Virginia tobacco in comparison to Section 15 of Bihar Act
requiring the agricultural produce, which tobacco is, to be brought to the market yard
and sold by means of an auction or tender to the highest bidder. The power of the
Tobacco Board to purchase from growers as provided in Rule 32 cannot co-exist with
sale by auction or tender. Even in regard the price and manner of payment, licencing
and auction procedure under two legislations and Rules made thereunder show that
they cannot co-exist. In this regard reference can also be made to the Tobacco Board
(Auction) Rules, 1984 and Tobacco Board (Auction) Regulation, 1984. It is evident that
the compliance with the provisions of one would involve non-compliance of the
provisions of the other. The provisions of the two legislations have been referred to in
the judgment of Brother Pattanaik, J. I am in respectful agreement with the opinion of
Justice Pattanaik that the two cannot operate and co-exist simultaneously. In this view,
the question about the legislative competence of the State Legislature will have to be
examined.
44
.In ITC's case, two learned judges have held the State legislation to be invalid.
The power of State Legislature per se to legislate in respect of sale of tobacco in market
areas and levy of market fee, in view of Article 246 (3) read with Entries 14, 28 and 66
of the State List, is not in dispute. The dispute has, however, arisen as according to ITC,
on declaration as contemplated by Entry 52 of the Union List having been made by the
Parliament in Section 2 of the Tobacco Board Act, 1975, and as a result of various
provisions in that Act, the field of sale of tobacco which is said to be integral part of
tobacco industry has been transferred from Entry 24 of the State List to Entry 52 of the
Union List - Entry 24 being subject to the provisions of Entries 7 and 52 of the Union
List. The contention is that in this view, the State Legislature is deprived of competence
to legislate in the field of sale of tobacco in market area and levy market fee. Under
these circumstances, the competence of the State Legislature to legislate in regard to
sale of tobacco would depend upon the answer to the question whether under Entry 52
of the Union List, the Parliament is competent or not to legislate in respect of sale of raw
tobacco. If the answer to the question is that the Parliament is competent, in that
eventuality, the State legislation will have to be invalidated for want of legislative
competence. The answer to the question would, however, depend upon the scope of
the expression 'Industries' as deployed in Entry 52 of the Union List and Entry 24 of the
State List. If we find that the expression 'Industries' is wide enough to include the raw
material of the industry and the Parliament is, thus, competent to enact law under Entry
52 of the Union List, in respect of raw material, the parliament having supremacy as
provided in Article 246(1), the parliamentary legislation, namely, the Tobacco Board Act
would hold the field and the State legislation invalidated. The dispute in this case is not
about parliamentary supremacy as none has doubted it in view of Article 246(1) of the
Constitution but is whether Parliament has competence at all to legislate in respect of
raw tobacco or it falls within the competence of State. If we hold that while legislating in
the field of industry as provided in Entry 52 of the Union List, the Parliament is not
competent to legislate in respect of the field anterior to industry, i.e. its raw material and
can legislate only in respect of the process of manufacture or production, in that
eventuality, the State legislation will have to be held to be constitutional, intra vires and
applicable. 1985 Supp (1) SCR 145
45. In the proposed judgment, Justice Pattanaik has held that the word 'industry'
in Entry 52 of the Union List cannot be given restricted meaning so as to exclude from
its purview the subject of legislation coming within Entry 27 or Entry 14 of List II and,
@page-SC898
thus, the parliamentary legislation, namely, the Tobacco Board Act, 1975 is
constitutionally valid and, consequently, the State legislations entitling the Market
Committee to levy fee for sale and purchase of raw tobacco within the market area will
not be operative so far as the produce of tobacco is concerned and that the majority
judgment in the ITC's case is correctly decided. I express my respectful dissent with the
view expressed by Justice Pattanaik on this aspect and thus this separate judgment.
46. The Parliament and Assemblies draw power to legislate from the provisions
of the Constitution of India. We are concerned here with Article 246. Article 246(1) of the
Constitution provides that notwithstanding anything in clauses (2) and (3), Parliament
has exclusive power to make laws with respect to any of the matters enumerated in List
I in the Seventh Schedule. The said List is referred to in the Constitution as the 'Union
List'.
47. Entry 52 in the Union List is 'Industries, the control of which by the Union is
declared by Parliament by law to be expedient in the public interest'. In respect of field
covered by this Entry, the Parliament has enacted the Tobacco Board Act, 1975.
Section 2 of the Tobacco Board Act contains the declaration that it is expedient in the
public interest that the Union should take under its control the Tobacco industry.
48. Article 246(2) provides that notwithstanding anything in clause (3), Parliament
and, subject to clause (1), the Legislature of any State also, have power to make laws
with respect to any of the matters enumerated in List III in the Seventh Schedule. The
said List is referred to in the Constitution as the "Concurrent List".
49. Article 246(3) provides that subject to clauses (1) and (2), the Legislature of
any State has exclusive power to make laws for such State or any part thereof with
respect to any of the matters enumerated in List II in the Seventh Schedule. The said
List is referred to in the Constitution as the "State List".
50. In exercise of power under Article 246(3), various State Legislatures have
enacted Agricultural Produce Marketing Acts for regulating sale and purchase of the
agricultural produce and levying market fee within the framework of those Acts which,
inter alia, permit levy and collection of market fee. The tobacco under the Acts in
question has been notified as an agricultural produce.
51
.In ITC's case, by majority, it was held that the Tobacco industry having been
taken over by the Central Government under Entry 52 of the Union List by enactment of
Tobacco Board Act, the State Legislature ceases to have any jurisdiction to legislate for
that field and, therefore, the provisions of the Karnataka Agricultural Produce and
Marketing Act entitling the market committee to levy market fee in respect of sale and
purchase of Tobacco within the market area collide with Tobacco Board Act. Thus, the
State Act so far as it relates to Tobacco was struck down. The minority view was that
both the State and the Central Act can operate in their respective fields and there is no
repugnancy if both the Acts are considered in the light of their respective true nature
and character.
1985 Supp (1) SCR 145
52
.The majority judgment in ITC's case for the view that it took principally relied
upon the two Constitution Bench decisions of this Court in State of Orissa v. M.
A.Tulloch Co., ((1964) 4 SCR 461) and Baijnath Kadio v. State of Bihar, ((1969) 3 SCC
838). Referring to these two decisions, the opinion expressed was that these cases are
direct authority on the question at issue, viz., if the Central Act and the State Act collide,
the inevitable consequence would have to be that the Central Act will prevail over the
State Act and later will have to yield and that the provisions of the Karnataka
Agricultural Produce Marketing (Regulation) Act, 1966 are repugnant to the tobacco
Board Act, 1975 and, therefore, tobacco is liable to be removed from the schedule of
the said Act. 1985 Supp (1) SCR 145
AIR 1964 SC 1284
AIR 1970 SC 1436
53. The minority view, however, was that there is nothing in the State Act or in
the Rules which indicate that it is inconsistent
@page-SC899
with or cannot be operated along with the marketing regulations and both the
Acts can operate in their respective fields and there is no repugnancy if both the Acts
are considered in the light of their true nature and character.
54
.In ITC's case the challenge was to the constitutional validity of the Karnataka
Agricultural Produce Marketing (Regulation) (Amendment) Act, 1980. By the amending
Act, tobacco was enumerated as an agricultural produce for the purposes of the
Karnataka Agricultural Produce Marketing (Regulation) Act, 1966. The High Court was
of the view that the Tobacco Board Act did not cover the marketing of tobacco in its
entirety but only covered a part of the area of the topic of marketing of tobacco and that
the two legislations, namely, the Tobacco Board Act, 1975 and the Karnataka
Agricultural Produce Marketing (Regulation) Act, can co-exist and operate cumulatively.
The further view expressed by the High Court was that any intention of the superior
legislature to cover the whole field to ake a comprehensive law with regard to marketing
of tobacco was not manifest in the legislation. 1985 Supp (1) SCR 145
55
.The contention canvassed before this Court in ITC's case was that in view of the
Central Act, the State Legislature was not competent to bring into fold of the State Act,
the tobacco, the matter being covered by Entry 52 of the Union List of the Seventh
Schedule of the Constitution of India. The precise question in ITC's case was as to
whether in respect of marketing of tobacco, the State Government was entitled to
legislate or whether in view of the fact that there was a declaration under Entry 52 of the
Union List, the State Legislature had no competence to legislate on tobacco and as
such the impugned legislation was ultra vires. 1985 Supp (1) SCR 145
56. In the minority opinion, Mukharji, J. noticed that the Karnataka Agricultural
Produce Marketing (Regulation) Act, 1966 deals with the subject of market in Entry 28
read with Entry 66 of List II and that it had to be borne in mind that Entry 28 is not
subject to withdrawal to List I by Parliament. The State Act is not on a subject in List III
nor is the Central Act a law relating to any subject in List III. It was concluded that,
therefore, there cannot be any question of repugnancy. The nature and character of the
Acts, namely, Karnataka Agricultural Produce Marketing (Regulation) Act, 1966 and the
Central Act was noticed and it was held that it is fully manifest that both the Acts can
operate in their respective fields. Further in the minority opinion it was observed that
while giving due weight to Centre's supremacy in the matter of legislation, the States'
legitimate sphere of legislation should not be unnecessarily whittled down because that
would be unwarranted by the spirit and basic purpose of the constitutional division of
powers - not merely allocation of power by the Constitution but invasion by
parliamentary legislations. While it is true that in the spheres very carefully delineated
the Parliament has supremacy over State Legislatures, supremacy in the sense that in
those fields, parliamentary legislation would hold the field and not the State legislation but to denude the State Legislature of its power to legislate where the legislation in
question in pith and substance i.e. in its true nature and character, belongs to the State
field, one should be chary to denude the State of its powers to legislate and mobilize
resources - because that would be destructive of the spirit and purpose of India being a
Union of States. States must have power to raise and mobilize resources in their
exclusive fields. The Marketing Act is essentially an Act to regulate the marketing of
agricultural produce. Justice Mukharji said that "it must, therefore, be held that the State
Act should prevail. One should avoid corroding the State's ambit of powers of legislation
which will ultimately lead to erosion of India being a Union of States.".
57
.The majority opinion was expressed by Justice S. Murtaza Fazal Ali with whom
Justice A. Varadarajan concurred. In the majority opinion after noticing the crucial point
for determination i.e. whether the Karnataka State had any jurisdiction to AIR 1964 SC
1284 : AIR 1970 SC 1436
AIR 1970 SC 1436, para 14
@page-SC900
encroach upon the limits of Entry 52 of the Union List, relying inter alia upon the
decisions in the cases of Tulloch, Baijnath Kadio, it was concluded that once the Centre
takes over an industry under Entry 52 of List I of the Seventh Schedule and passes an
Act to regulate the legislation, the State Legislature ceases to have any jurisdiction to
legislate in that field and if it does so, that legislation would be ultra vires the powers of
the State Legislature. It was further observed that acceptance of the minority opinion
would rob the Central Act of its entire content and essential import by handing over the
power of legislation to the State Government which per se had been taken over by the
Parliament under Article 246 by enacting the Tobacco Board Act, 1975. In the majority
opinion reliance was placed on the following passage of Baijnath Kadio's case as
extracted at page 174 as under :
"It is open to Parliament to declare that it is expedient in the public interest that
the control should rest in Central Government. To what extent such a declaration can go
is for Parliament to determine and this must be commensurate with public interest.
Once this declaration is made and the extent laid down, the subject of legislation to the
extent laid down becomes an exclusive subject for legislation by Parliament. Any
legislation by the State after such declaration and trenching upon the field disclosed in
the declaration must necessary be unconstitutional because that field is abstracted from
the legislative competence of the State Legislature. This proposition is also self-evident
that no attempt was rightly made to contradict it."
58
.The majority opinion has not noticed the Constitution Bench's decision in the
case of Ch. Tika Ramji etc. v. The State of Uttar Pradesh, ((1956) SCR 393) and other
decisions on the scope of Entry 52 but relying upon M.A. Tulloch and Baijnath Kadio
held that when declaration under Entry 52 of List I in respect of Public interest is made
and the extent laid down the subject of legislation to the extent laid down becomes an
exclusive subject of legislation by the Parliament and any legislation by the State after
such declaration trenching upon the field disclosed in the declaration must necessarily
be unconstitutional because that field is abstracted from the legislative competence of
the State Legislature. Thus it was held that the Government of Karnataka had no
jurisdiction to levy any market fee on tobacco because the State Act to that extent
collides with the Central Act of 1975.
AIR 1956 SC 676
AIR 1964 SC 1284 and AIR 1970 SC 1436
59
.The decisions in the cases of Baijnath Kadio and Tulloch have also been relied
upon by Mr. Shanti Bhushan. Reliance has also been placed by learned counsel on The
Hingir-Rampur Coal Co. Ltd. v. State of Orissa, ((1961) 2 SCR 537). It was contended
by Mr. Shanti Bhushan that in law and in principle there would be no difference in
respect of a case dealing with the scope of Entry 52 of the Union List or a case dealing
with the scope of Entry 54 of that List. The submission of learned counsel is that for the
purpose of interpretation both these entries have been equated by this Court and
reliance in this regard is placed on Ishwari Khetan Sugar Mills (P) Ltd. v. State of Uttar
Pradesh, ((1980) 4 SCC 136).
AIR 1961 SC 459
AIR 1980 SC 1955
60
.On behalf of the State Governments and the Agricultural Produce Marketing
Committees strong reliance has been placed on Tika Ramji case. What is the ratio of
these decisions, we will now examine. AIR 1956 SC 676
61. Before considering the aforenoted decisions, it would be appropriate to make
it clear that in these matters it has to be kept in view that this Court is not examining a
case where the field of legislation is on concurrent list to which Article 246(2) applies.
This Court is also not considering the case of an incidental trenching of field by one or
the other legislature. The Court is concerned with the question of legislative
competence. We are examining a case where what has been questioned is the legality
of
@page-SC901
legislation in respect of a field on the State List to which Article 246(3) applies.
The validity and applicability of the State legislations in respect of a field of legislation on
State List has come under a cloud on account of a legislation passed by the Parliament
in respect of field of legislation under Entry 52 of the Union List, namely, the Tobacco
Board Act, 1975. It is on account of this legislation containing declaration as
contemplated by Entry 52 of the Union List that doubts have arisen about the validity
and applicability of State legislation about the sale of agricultural produce of tobacco in
market areas and levy thereupon of market fee which aspects are on field of legislation
on the State List (Entries 14, 27, 28 and 66). Entry 24 of the State List is subject to
Entries 7 and 52 of List I. We are not concerned in these matters with Entry 7. The
question here is as to the effect of transfer of field of legislation under Entry 24 of the
State List to the Union List (Entry 52), on other fields in the State List, namely, fields of
legislation under Entries 14, 27, 28 and 66 and what in fact can be transferred.
62
.Baijnath Kadio was a case which considered the validity of the State legislation
on the ground of being beyond the State legislative power in view of the declaration by
the Parliament in Mines and Minerals (Regulation and Development) Act, 1957 as
contemplated by Entry 54 of List 1 of the Seventh Schedule to the Constitution. Section
2 of the Central legislation declared that it is expedient in the public interest that the
Union should take under its control the Regulation of mines and the development of
minerals to the extent provided therein. AIR 1970 SC 1436
63
.Entry 54 of the Union List speaks both of regulation of mines and minerals
development and Entry 23 of the State List is subject to Entry 54. It was held that it was
open to the Parliament to declare that it is expedient in the public interest that the
control should rest with the Central Government. To what extent such a declaration can
go is for the Parliament to determine and this must be commensurate with public
interest. Once the declaration is made and that extent laid down the subject of
legislation to the extent laid down becomes an exclusive subject for the legislation by
the Parliament. Any legislation by the State after such declaration trenching upon the
field disclosed in the declaration must necessarily be unconstitutional because that field
is abstracted from the legislative competence of the State Legislature. For its view the
Constitution Bench followed earlier Constitution Bench decisions in the cases of Hingir
and Tulloch . These two cases also dealt with the scope of Entry 54 of List 1 vis-a-vis
Entry 23 of List II. The majority opinion in ITC as already noticed, followed Baijnath
Kadio and extracted in its judgment the passage as aforesaid.
AIR 1961 SC 459
and AIR 1964 SC 1284
64
.A significant aspect to take note of is that Tika Ramji's case has not been
considered in Hingir's case. The reason for it seems to be that one set of cases
consider the scope of Entry 54 vis-a-vis Entry 23 and to that category belong the cases
of Hingir, Tulloch and Baijnath Kadio. The other set of cases consider the scope of
Entry 52 of Union List vis-a-vis Entry 24 of the State List and to that category belong the
cases of Tika Ramji and other cases following Tika Ramji. AIR 1956 SC 676
AIR 1961 SC 459
AIR 1961 SC 1459, AIR 1964 SC 1284
AIR 1970 SC 1436
AIR 19780 SC 1955
65
.Relying upon Ishwari Khetan's case Mr. Shanti Bhushan contends that Entry 52
has been equated with Entry 54 of the Union List.
AIR 1980 SC 1955
66
.Both sides have relied upon the case of Ishwari Khetan. Let us examine that
case. In Ishwari Khetan's case the contention urged was that the Parliament has made
the Industrial (Development and Regulation) Act, 1951 (for short, 'the IDR Act') in Entry
52, List 1 declaring control of sugar industry and that industry goes out of Entry 24 of
List 11 and, therefore, State Legislature is denuded of legislative powers in respect of
sugar industry and impugned legislation was with respect to acquisition of sugar
undertaking in sugar industry. The Attorney General had contended that the power to
acquire property was derived from
AIR 1980 SC 1955
AIR 1956 SC 676
AIR 190 SC 1436
AIR 1980 SC 1955
@page-SC902
Entry 42 of List III. Ishwari Khetan's case involved the determination or scope of
Entry 52 of List I and Entry 24 of List II only. The scope of these entries with respect to
Entries 26 and 27 of List II and Entry 33 of List III did not fall for consideration. Further in
paragraphs 7, 8 and 11 of Ishwari Khetan's case the Constitution Bench repeatedly
pointed out that a declaration in Entry 52 of List I denudes the power of State
Legislature to legislate under Entry 24, List II only. It was noticed that the sugar was a
declared industry. The question posed was that "is it, however, correct to say that once
a declaration is made as envisaged by Entry 52, List I, that industry as a whole is taken
out of Entry 24 of List II"? The answer given by the Constitutional Bench was that it is
not correct to say that once a declaration is made in respect of an industry that industry
as a whole is taken out of Entry 24, List II. It was said that the industry as a legislative
head is found itself placed in Entry 24 of List II. The State Legislature can be denied
legislative power under Entry 24 to the extent Parliament makes declaration under Entry
52 and by such declaration, Parliament acquired power to legislate only in respect of
those industries in respect of which declaration is made and to that extent as
manifested by legislation incorporating the declaration and not more. The Bench further
said that the legislative power of the State under Entry 24, List II is eroded only to the
extent the control is assumed by the Union pursuant to the declaration and the State
Legislature which is otherwise competent to deal with industry under Entry 24, List II
can deal with that industry in exercise of other powers enabling it to legislate under
different heads set out in List II and List III and this power cannot be denied to the State.
The extent of Parliamentary legislation was seen only to determine how much is taken
out from Entry 24, List II and not for the purposes of laying down any principle that the
Parliamentary legislation has to be seen to determine the extent of control and the
denudation of the power of the State Legislature to the extent the control is laid down by
the Parliament. Further it was held that despite the Parliamentary legislation the State
Legislature can deal with industry in exercise of other powers in different entries in List II
and List III and that power cannot be denied to the State. In this case the Court was
examining whether the law of acquisition of sugar undertaking was referable to Entry
24, List II or Entry 42, List III. It was concluded that the acquisition of the property was
referable to Entry 42, List III. The scope of the industry did not fall for examination in
Ishwari Khetan's case. There is no discussion on the interpretation of expression
'industry' and that probably is the reason why Tika Ramji's case has not been referred
to. The reliance on Baijnath Kadio's case in Ishwari Khetan's case, was to show the
denudation of States' power being limited to the extent of control. While Baijnath Kadio's
case, dealt with Entry 23, List II, Ishwari Khetan's case, dealt with Entry 24, List II. The
subject-matter of the other entries was not in issue in this decision. The structure in
Entry 54 of List I was not equated with that of Entry 52, List I as contended by Mr.
Shanti Bhushan. This decision does not adopt the mines and minerals cases for the
purposes of considering the scope of Entry 52 of List I. In our view, the cases of mines
and minerals are not of much assistance while examining the scope of Entry 52 of List I.
@page-SC903
67
.In State of A. P. and others v. Mcdowell and Co. and others, (1996) 3 SCC 709
also it was held that the ambit and scope of a constitutional entry cannot be determined
with reference to a Parliamentary enactment. If it is otherwise, it would result in the
Parliament enacting and/or amending an enactment thereby controlling the ambit and
scope of the constitutional provision. That cannot be the law. The power to legislate with
which we are concerned is contained in Article 246. The fields are demarcated in the
various entries. On reading both, it has to be decided whether the concerned legislature
is competent to legislate when its validity is questioned. The ambit and scope of an
entry cannot be determined with reference to a Parliamentary enactment. AIR 1996 SC
1627 : 1996 AIR SCW 1679
68
.Tika Ramji's case is required to be examined in some detail since that has been
a bone of serious and elaborate submissions. In that case, the challenge by the
Sugarcane growers hailing from several Villages of State of U. P. was to the validity of
the U. P. Sugarcane (Regulation of Supply and Purchase) Act, 1953 and notification
issued thereunder. A short history of legislation enacted by the Centre as well as the
province of U. P. in regard to Sugar and Sugarcane was noticed. AIR 1956 SC 676
69. It was noticed that on 8th April, 1932, the Central Legislature passed the
Sugarcane Industry (Protection) Act, 1932. As a result of this Act there was a rapid rise
in number of sugar factories as also a large expansion in the cultivation of sugarcane.
To regulate the price at which sugarcane intended to be used in the manufacture of
sugar might be purchased by or for the factories, the Central Legislature enacted on 1st
May, 1934 the Sugarcane Act, 1934.The fixing of minimum price for the purchase of
sugarcane intended for use in any factory in any controlled area was left to the
Provincial Governments which were empowered to make rules for the purpose of
carrying into effect the objects of the Act including the organisation of growers of
sugarcane into Co-operative Societies for the sale of sugarcane to factories.
70. With the coming into operation of the Government of India Act, 1935, there
was distribution of legislative power between the Dominion Legislature and the
Provincial Legislatures and agriculture (Entry No. 20), trade and commerce within the
Province (Entry No. 27) and production, supply and distribution of goods, development
of industries subject to the provision in List I with respect to development of certain
industries under Dominion control (Entry No. 29) were included in List II, namely, the
Provincial Legislative List, Entry No. 34 in List I was "Development of industries where
development under Dominion control is declared to be in the public interest."
71. The result of above distribution of legislative power was that the entire
subject-matter of the Sugarcane Act, 1934 was left with the Provincial legislative list. It
was felt that this Act was not sufficiently comprehensive for dealing with the problems of
sugar industry. Therefore, it was found necessary to replace it so as to provide for better
organisation of cane supplies to sugar factories. The U. P. Legislature accordingly
enacted on 10th February, 1938, the U. P. Sugar Factories Control Act, 1938 to provide
for licensing of the sugar factories and for regulating the supply of sugarcane intended
for use in such factories and the price at which it may be purchased and for other
incidental matters and repealed the Sugarcane Act, 1934. The 1938 Act was to remain
in force initially up to 30th June, 1947 but the period was extended to 30th June, 1950
and then to 30th June, 1952.
72. On intervention of Second World War, a proclamation of emergency was
issued by the Governor General under Section 102 of the Government of India Act,
1935. The Dominion Legislature acquired the power to make laws for the Provinces with
respect to any of the matters enumerated in the Provincial Legislative List. The
proclamation of emergency was to operate until revoked by a subsequent proclamation
and the laws made by the Dominion Legislature were to have effect until the expiration
of period of
@page-SC904
six months after the proclamation had ceased to operate. The Defence of India
Act and the Rules made thereunder occupied the field. Sugar was made a controlled
commodity in the year 1942 and its production and distribution as well as the fixation of
sugar prices were regulated by the Sugar Controller thereafter. The proclamation of
emergency was revoked on 1st April, 1946 and the laws made by the Dominion
Legislature in the field of the Provincial Legislative List were to cease to have effect
after 30th September, 1946. On 26th March, 1946, the British Parliament enacted the
India (Central Government and Legislature) Act, 1946, Section 2(1)(a) whereof provided
that notwithstanding anything in the Government of India Act, 1935, the Indian
Legislature shall during the period mentioned in Section 4 thereof have powers to make
laws with respect to the following matters :
"(a) trade and commerce (whether or not within a Province) in, and the
production, supply and distribution of, cotton and wooden textiles, paper (including
newsprint), foodstuffs (including edible oil seeds and oils), petroleum and petroleum
products, spare parts of mechanically propelled vehicles, coal, iron, steel and mica;..."
73. Acting under the power reserved to it under the aforesaid Section 2(1)(a), the
Central Legislature enacted on 19th November, 1946, the Essential Supplies
(Temporary Powers) Act, 1946 to provide for the continuance during the limited period
of powers to control production, supply and distribution of, and trade and commerce in,
certain commodities. The Governor General issued a Notification on 3rd March, 1947
the effect whereof was to continue the Act till 31st March, 1948. On 18th July, 1947,
however, Indian Independence Act was passed under which the Governor General
passed an order which substituted the words "Dominion Legislature" for "Both Houses
of Parliament" in the proviso to Section 4 of India (Central Government and Legislature)
Act, 1946 and also introduced a new Section 4(a) by way of adoption providing that the
powers of the Dominion Legislature shall be exercised by the Constituent Assembly. By
passing of the Resolution by the Constituent Assembly, the life of the Act was extended
and later on Constitution coming into force, the Parliament was invested with power
under Article 369 for a period of five years to make laws with respect to the following
matters as if they were enumerated in the Concurrent List:
"(a) trade and commerce within a State in, and the production, supply and
distribution of,....... foodstuffs (including edible oil seeds and oil), ...... The life of the Act
was accordingly extended from time to time up to 26th January, 1955 by Acts passed by
Parliament."
Food crops under the aforesaid 1946 Act were defined as including crops of
sugarcane.
74. The Central Government in exercise of powers conferred upon it by Section 3
of the 1946 Act, promulgated the Sugar and Gur Control Order, 1950, inter alia,
empowering it to prohibit or restrict the export of sugarcane from any area; to direct that
no gur or sugar shall be manufactured from sugarcane except under and in accordance
with the conditions specified in the licence issued in this behalf. There was also power
to fix minimum price in exercise whereof the Central Government from time to time
issued notifications fixing the minimum price to be paid by the producers of sugar for
sugarcane purchased by them.
75. On 31st October, 1951, Parliament enacted the Industries (Development and
Regulation) Act, 1951 to provide for the development and regulation of certain
industries. By Section 2 of the Act, it was declared that it was expedient in the public
interest that the Union should take in its control the industries specified in the First
Schedule. That Schedule included the industry engaged in the manufacture or
production of Sugar.
76. The U. P. Legislature enacted the impugned Act. The object of this
enactment was stated to be as follows :
"With the promulgation of the industries (Development and Regulation) Act, 1951
with effect from 8th May, 1952, the regulation of the sugar industry has become
exclusively a Central subject. The State Governments are now only concerned with the
supply of sugarcane to the sugar factories. The Bill is being introduced in order to
provide for a rational distribution of sugarcane to factories, for its development on
organized scientific lines to protect the interests
@page-SC905
of the cane growers and of the industry and to put the new Act permanently on
the Statute Book."
77. In exercise of the rule making power conferred by the impugned Act, the U.
P. Government made rules and also promulgated the U. P. Sugarcane Supply and
Purchase Order, 1954. All these related to the supplies and purchase of sugarcane in
U. P.
78
.Challenging vires of the State Act one of the submissions made in Tika Ramji's
case before the Constitution Bench was :
AIR 1956 SC 676 at p. 688
"(I) That the State of U. P. had no power to enact the impugned Act as the Act is
with respect to the subject of industries the control of which by the Union is declared by
Parliament by law to be expedient in the public interest within the meaning of Entry 52
of List I and is, therefore, within the exclusive province of Parliament. The impugned Act
is, therefore, ultra vires the powers of the State Legislature and is a colourable exercise
of legislative power by the State."
79. It was urged that the word 'industry' was a word of very wide import and
included not only the process of manufacture or production but also of things which
were necessarily incidental to it, viz., the raw materials for the industry as also the
products of that industry and would, therefore, include within its connotation the
production, the supply and distribution of raw materials for that industry which meant
sugarcane in relation to sugar industry and, therefore, insofar as the impugned Act
purported to legislate in regard to sugarcane which was a necessary ingredient in the
production of sugar, it was a colourable exercise of legislative power by the State,
ostensibly operating in its own field within Entry 27 of List II but really trespassing upon
the field of Entry 52 of List I.
80. True, the challenge was to the vires of the State legislation and not to the
Parliamentary legislation but at the same time the entire basis of challenge was that in
respect of the sugarcane, only Parliament had the power to legislate on account of the
field being covered under Entry 52 of List I, the Sugar industry having been included in
that Entry and the connotation of industry being very wide to include in it raw material,
i.e., sugarcane as well. Thus, the exclusive power of Parliament to legislate was urged
as the main ground to seek invalidation of the State legislation - the field of sugarcane
not being available to the State Legislature to legislate.
81
.In view of the controversy as aforesaid, the fact that the validity of the
Parliamentary legislation was not in issue in Tika Ramji's case, does not in any manner,
affect the ratio of that decision. The point for determination in that case was
substantially the same as in the present case, namely, the scope of the expression
'industries' in Entry 52 of List I and Entry 24 of List II. There also the point was to adopt
a narrow or wide interpretation of the expression 'industry'. Further, the fact that it was a
case of a manufacturing industry under IDR Act also does not affect the ratio of the
case. The interpretation placed in Tika Ramji's case cannot be confined to industry
falling under IDR Act alone. There is neither any express or implied indication in that
decision to limit the interpretation nor there is any valid reason to so limit it.
AIR
1956 SC 676
AIR 1956 SC 676
82
.Like Tika Ramji's case, in these matters, the challenge is to the State legislations
on the ground that in view of Entry 52 of List I, on enactment of Tobacco Board Act,
1975, the State Legislature loses competence to legislate in respect of sale of tobacco
and, therefore, the existing State legislations will have no applicability and thus, the
legislations in respect of marketing under Entry 28 of List II would have no applicability
insofar as it concerns the agricultural produce 'tobacco'.
AIR 1956 SC 676
83. The opposite contention is that under Entry 14 of the State List the State is
competent to legislate in respect of agricultural produce and tobacco is an agricultural
produce, setting up of markets in respect of this produce under Entry 28 and levying
thereupon the fee under Entry 66 and subject to Entry 33 of List III production, supply
and distribution of goods (Entry 27) are
@page-SC906
all State subjects and that under Entry 52 of List I, the Parliament's competence
is only to legislate in respect of industry which would not include in its ambit the raw
material of the industry and that the process of sale of agricultural produce of tobacco in
markets and levying thereupon market fee can never be part of industrial process which
is only manufacture and production. The contention of Mr. Dwivedi is that State's activity
in question is not an industrial activity and, therefore, it is outside the ambit of Entry 24
of State List and Entry 52 of the Union List.
84
.In Tika Ramji's case, the precise argument to challenge the State enactment
was that the expression 'industries' should be construed as including not only the
process of manufacture or production but also activities antecedents thereto such as
acquisition of raw material and subsequent thereto such as disposal of the finished
products of that industry. It was urged in that case that the process of acquiring raw
materials was an integral part of the industrial process and was, therefore, included in
the connotation of the word 'industry' and when the Central Legislature was invested
with the power to legislate in regard to sugar industry on account of declaration as
postulated by Entry 52 of List I, that legislative power included also the power to
legislate in regard to the raw material of the sugar industry, that is sugarcane, and the
production, supply and distribution of sugarcane was, by reason of its being the
necessary ingredient in the process of manufacture or production of sugar, within the
legislative competence of the Central Legislature.
AIR 1956 SC 676
85
.The petitioners in Tika Ramji's case, in support of the wide construction to be
placed upon the expression 'industry' also relied upon various decisions interpreting the
said term in relation to the Industrial Disputes Act. Dealing with those cases in Tika
Ramji's case this Court said :
AIR 1956 SC 676 at p. 692
"What we are concerned with here is not the wide construction to be put on the
term 'industry' as such but whether the raw materials of an industry which form an
integral part of the process are within the topic of 'industry' which forms the subject
matter of Item 52 of List I as ancillary or subsidiary matters which can fairly or
reasonably be said to be comprehended in that topic and whether the Central
Legislature while legislating upon sugar industry could, acting within the sphere of Entry
52 of List I, as well legislate upon sugarcane."
86
.This Court said that if the legislation with regard to sugarcane came within the
exclusive province of the Central Legislature under Entry 52 of List I, the enactment
passed by the Provincial Legislature would be ultra vires, it was said :
AIR 1956 SC
676, Para 21
"If both the Central Legislature and the Provincial Legislatures were entitled to
legislate in regard to this subject of production, supply and distribution of sugarcane,
there would arise no question of legislative competence of the Provincial Legislature in
the matter of having enacted the impugned Act. The conflict, if any, arose by reason of
the interpretation which was sought to be put on the two Entries, Entry 52 of List I and
Entry 27 of List II put in juxtaposition with each other. It was suggested that item 52 of
List I comprised not only legislation in regard to sugar industry but also in regard to
sugarcane which was an essential ingredient of the industrial process of the
manufacture or production of sugar and was, therefore, ancillary to it and was covered
within the topic. If legislation with regard to sugarcane thus came within the exclusive
province of the Central Legislature, the Provincial Legislature was not entitled to
legislate upon the same by having resort to Entry 27 of List II and the impugned Act."
87
.Dealing with the argument of wide import of the expression 'industries' in Tika
Ramji's case it was held that 'industry' in its wide sense of the term would be capable of
AIR 1956 SC 676
at p. 696, Para 24 of AIR
@page-SC907
comprising three different aspects: (1) raw materials which are an integral part of
the industrial process; (2) the process of manufacture or production, and (3) the
distribution of the products of the industry. After noticing these different aspects of the
term 'industry', it was held that "the raw materials would be goods which would be
comprised in Entry 27 of List II". In respect of the second category of process of
manufacture or production and the third aspect of distribution of the product of the
industry, the Court held :
"The process of manufacture or production would be comprised in Entry 24 of
List II except where the industry was a controlled industry when it would fall within Entry
52 of List I and the products of the industry would also be comprised in Entry 27 of List
II except where they were the products of the controlled industries when they would fall
within Entry 33 of List III."
88. The Court further held that "in no event could the legislation in regard to
sugar and sugarcane be thus included within Entry 52 of List I".
89. Thus, rejecting the contention that the expression 'industries' in Entry 52 of
List I is wide enough to take into its compass the power to legislate in respect of raw
material said to be an integral part of the industrial process, the Court repelled the plea
of the State Act being ultra vires, the same being covered by the subject of sugar
industry control whereof have been declared by the Parliament by law to be expedient
in the public interest under the exclusive domain of Parliament.
90
.In The Calcutta Gas Company (Proprietary) Ltd. v. The State of West Bengal
and others, [1962 Suppl (3) SCR 1], the challenge was to the constitutional validity of
the Oriental Gas Company Act, 1960. One of the ground of challenge was that the West
Bengal Legislature was not competent to make a law regulating the gas industry in view
of declaration as contemplated by Entry 52 of List I having being made by the
Parliament in IDR Act - Entry 24 being subject to the provisions of Entry 52 of List I. It
was contended that Entry 25 of List II (Gas and Gas Works) must be confined to
matters other than those covered by Entry 24 of the same List.
AIR 1962 SC 1044
91
.On the facts of the case and in view of the conclusions of the Constitution Bench
on other aspect, it was not considered necessary to attempt to define the expression
'industry' precisely or the State exhaustively all its ingredients but following Tika Ramji's
case, it was assumed that the expression 'industry' means only production or
manufacture. In Calcutta Gas, which considers Entry 52 of List I and Entry 24 of List II,
the Bench said that ordinarily 'industry' is in the field of the State legislation and in all the
entries it must be given the same meaning and cited with approval Tika Ramji's case in
the following words :
AIR 1956 SC 676
AIR 1962 SC 1044 at p. 1061
"In Ch. Tika Ramji v. State of Uttar Pradesh, the expression 'industries' is defined
to mean the process of manufacture or production and does not include the raw
materials used in the industry or the distribution of the products of the industry. It was
contended that the word 'industry' was a word of wide import and should be construed
as including not only the process of manufacture or production but also activities
antecedent thereto such as acquisition of raw materials and subsequent thereto such as
disposal of the finished products of that industry. But that contention was not accepted."
AIR 1956 SC 676
92. Mr. Shanti Bhushan, however, contends that once field is covered by Entry
52 by issue of requisite declaration and the Parliament has actually covered the field by
enacting a legislation, with regard to that extent the industry including all facets of such
an industry - whether it is the raw materials
@page-SC908
or the products of that industry, the State Legislature will have no power to
legislate. The contention is that the expression 'industries' in Entry 52 of the Union List
comprises in it all its aspects commencing from procurement of raw material and upto
disposal of final product of that industry and not only the process of manufacture or
production. The submission of learned counsel is that if the expression 'industries' in the
entries under consideration is not given such interpretation, it would denude the
Parliament of real object of control of such industry in public interest which is of
paramount importance. As against this, the contention of the other side is that the
acceptance of the view point propounded by Mr. Shanti Bhushan would mean denuding
the State Legislature the power to legislate in respect of fields covered under various
entries under the State List which are not made subject to any other entry and that the
acceptance of contention of Mr. Shanti Bhushan would have the effect of rewriting the
Constitution. I agree . The intention of the Constitution makers was not to make Entries
14, 27, 28 and 66 subject to Entry 52 of the Union List. The acceptance of viewpoint
propounded by Mr. Shanti Bhushan will have that effect. Therefore, the expression
'industries' cannot be interpreted in the manner suggested.
93
.True, the Parliamentary legislation has supremacy as provided under Article
246(1) and (2). This is of relevance when field of legislation is on concurrent list. While
maintaining Parliamentary supremacy, one cannot give go by to the federalism which
has been held to be a basic feature of the Constitution. See S. R. Bommai v. Union of
India, (1994) 3 SCC 1.
AIR 1994 SC 1918 : 1994 AIR SCW 2946
94. The Constitution of India deserves to be interpreted, language permitting, in a
manner that it does not whittle down the powers of State Legislature and preserves the
federation while also upholding the central supremacy as contemplated by some of its
articles.
95. In this background, let us also briefly notice the constitutional history and
structural inter-relationship in respect of relevant entries as they existed in Government
of India Act, 1935 and as they now exist in the Seventh Schedule. Entries 27 and 29 on
the State List in the Government of India Act, 1935 were as under :
"Item 27. Trade and commerce within the province, markets and fairs, money
lending and money lenders.
Item 29. Production, supply and distribution of goods, development of industries,
subject to the provisions in List I with respect to the development of certain industries
under Federal Control."
96. Now, in Seventh Schedule part of Entry 27 is in Entry 26 of the State List,
Markets and fairs is Entry 28 of List II; Money lending and money lenders (Entry 30, List
II); Production, supply and distribution of goods subject to the provisions to Entry 33 of
List III (Entry 27, List II), Industries subject to the provisions of Entries 7 and 52 of List I
(Entry 24, List II). It would, thus, be seen that under 1935 Act, both production, supply
and distribution of goods as well as development of industries were subject to the
provisions of List I as provided in Entry 29. Our Constitution makers, however,
bifurcated Entry 29 into two parts. Industries were put in Entry 24 of List II subject to the
provisions of Entries 7 and 52 of List I. The production, supply and distribution of goods
was put in Entry 27 of List II and made subject to Entry 33 of List III. The acceptance of
the argument of Mr. Shanti Bhushan would mean that no object was sought to be
achieved by such a bifurcation. It is clear that two entries have been separated. One
made subject to the provisions of Entry 33 of List III and the other subject to the
provisions of Entries 7 and 52 of List I. Therefore, to interpret the expression 'industry' to
include in it the aspect of raw material would mean that by the same analogy the subject
matter of production, supply and distribution of goods should also be included therein
and in fact that was the argument of Mr. Shanti Bhushan. Would the acceptance of that
argument not negate the will of the Constitution makers. I think it would. Therefore, the
argument cannot be accepted. The same argument would equally apply to Entry 14 of
List II in respect of agriculture which is not subject to any List. It would so become if we
accept the contention of Mr. Shanti Bhushan. Further, earlier when the
@page-SC909
Parliament felt the need to control raw material, it included "raw jute and raw
cotton" in Entry 33, List III by Constitution Third Amendment Act, 1954. Even Art. 369
indicates that agricultural raw material is in the State List for it refers to raw cotton,
cotton seed and edible oil seeds and seeks to temporarily place it, by fiction, in the
concurrent list to enable Parliament to make laws. The expression 'industries' in Entry
24, List II or Entry 52, List I, cannot be interpreted in a manner that would make other
entries of List II of the Seventh Schedule subject to Union control, which in fact they are
not. Wherever it was intended to be made subject to such control, whether of List I or
that of List III, it was said so. A perusal of List II shows that whenever a particular entry
was intended to be made subject to an entry in List I or III, it has been so stated
specifically. Therefore, an interpretation which tends to have the effect of making a
particular entry subject to any other entry, though not so stated in the entry, deserves to
be avoided unless that be the only possible interpretation. We do not think that such an
interpretation on the entries in question, namely, Entry 52 of the Union List Entry 24 of
the State List deserves to be placed.
97. The principles of interpretation are well settled. There is no doubt that the
entries in the lists in the Seventh Schedule do not provide competence or power to
legislate on the legislature for which the source of power is contained in Art. 246 of the
Constitution. In deciding question of legislative competence, it has to be kept in view
that the Constitution is not required to be considered with a narrow or pedantic
approach. It is not to be construed as a mere law but as a machinery by which laws are
made. The interpretation should be broad and liberal. The entries only demarcate the
legislative field of respective legislature and do not confer legislative power as such and
if it is found that some of the entries overlap or in conflict with the other, an attempt to
reconcile such entries and bring about a harmonious construction is the duty of the
Court. When, however, reconciliation is not possible, as here, then the Court will have to
examine the entries in relation to legislative power in the Constitution.
98. The subject matter of the issue here is about the interpretation of Entry 52 in
List I of the Seventh Schedule. It requires the Parliament to make a declaration by law
identifying an industry, the control of which by the Union is expedient in the public
interest. Under the said entry only an 'industry' can be declared as an industry, the
control whereof by the Union is regarded as expedient in public interest. It is, therefore,
implicit that if an activity cannot be regarded as industry, Entry 52 will have no
applicability to that activity. The question is about the concept of industry' in Entry 52 of
List I. As already stated, the entries in the Legislative List have to be construed in the
widest sense cannot be disputed but it has also to be borne in mind that such
construction should not make other entries totally redundant. The meaning of the word
'industry' in various dictionaries reliance on which was placed by Mr. Shanti Bhushan, is
not of any assistance while considering the constitutional meaning of the said term.
There may not be any embargo or limitation on the power of the Parliament to enact the
law in respect of activities other than manufacturing activities but that power is nonexistent in Entry 52 of List I. It may be elsewhere. Reference in this regard can be made
to Entry 33 of List III including in its ambit food stuff and certain raw materials. Tobacco,
however, is admittedly not a food stuff.
99
.The validity of certain other Acts such as the Cardomom Act, 1965. The Central
Silk Board Act, 1958, The Coffee Act, 1942, The Rubber Act, 1947, The Tea Act, 1953,
The Coir Industry Act, 1953 and The Coconut Development Board Act, 1979 reference
whereof was made by Mr. Shanti Bhushan need not be examined for purposes of
considering the legislative competence of the impugned State legislations. The
legislative competence of Parliament to legislate these statutes is not in issue before
this Court and, therefore, we do not think it necessary to examine the question of
legislative competence only from academic view point insofar as these legislations are
concerned. However, prima facie there is no substance in the apprehension expressed
by Mr. Shanti Bhushan that narrow approach of the concept of 'industry' would make
these acts beyond the legislative competence of the Parliament and make them ultra
vires. As,
1991 AIR SCW 433
@page-SC910
when and if these Acts are challenged, the question of legislative competence
would be examined. Further, it may be noted that two out of the aforesaid legislations,
namely, the Coffee Act, 1942 and The Rubber Act, 1947 are pre-Constitution
enactments made under the Government of India Act, 1935 where the entries were
different. Item 29 of List II of the said Act has already been reproduced above. In
respect of the Coir Industry Act, on examination of the provisions contained therein, it
may be possible to urge that the statute deals with the process of manufacturing and
does not seek to control plantation and preservation of the coconut trees or the
production of the coconut. The Central Silk Board Act has been dealt with by this Court
in the case of B. Vishwanathiah and Co. and others v. State of Karnataka and others
((1991) 3 SCC 358 and I fail to appreciate how upholding the validity of the Agricultural
Produce Marketing Acts would effect the validity of this enactment. In respect of
Cardomom Act, it appears that the said Act is being applied for export purposes and it
does not cover soil preparation of seed-lings. Regarding Coconut Development Act, it
does not envisage setting up of auction platform and controlling marketing as in the
present case. That enactment primarily deals with the field pertaining to
recommendation for improving marketing, providing financial assistance for adoption of
modern technology and for assisting growers to get incentive prices. This Court,
however, need not examine in detail the aspect of legislative competence in regard to
these enactments since, as already said, that is not the matter in issue here and it
would suffice to indicate, as above, only the prima facie view to dispel the apprehension
expressed by Mr. Shanti Bhushan.
100
.Harakchand Ratan-chand Banthia and others v. Union of India and others
((1970) 1 SCR 479) has been strongly relied upon by Mr. Shanti Bhushan to support the
contention of wide interpretation of the expression 'industry'. The main question therein
was about the legislative competence of the Parliament to enact the Gold (Control) Act,
1968. The said Act defines Gold to mean Gold, including its alloy (whether virgine,
melted or remelted, wrought or unwrought) in any shape or form, of a purity of not less
than the nine carats and including primary gold, article and ornament (Section 2(i)).
Clause (r) of Section 2 defines primary gold' to mean gold in any unfinished or semifinished form and includes ingots bars, blocks, slabs, billets, shots, pellets, rods, sheets,
foils and wires. Challenging the constitutional validity of the Gold (Control) Act, the
contention urged was that the goldsmiths was a handicraft requiring application of skill
and the art of making ornament was not an industry within the meaning of Entry 52 of
List I of the Seventh Schedule of the Constitution. The Constitution Bench noticed the
established principles that the widest aptitude should be taken of all the entries and the
duty of the Court to reconcile the entries and bring about a harmonious construction in
case some entries in different list or in the same list may overlap or may appear to be in
direct conflict with each other. In the present case, however, there is no question of any
overlapping and in regard to conflict and harmonious construction, it is Mr. Shanti
Bhushan's own submission that the two legislations to the extent this Court is concerned
cannot be co-exist. AIR 1970 SC 1453
101
.Reliance has been placed by Mr. Shanti Bhushan on the following passage from
AIR 1970 SC 1453 at p. 1460, para 7
@page-SC911
Banthia's case :
"But we are satisfied in the present case that the manufacture of gold ornaments
by goldsmiths in India is a process of systematic production' for trade or manufacture
and so falls within the connotation of the word 'industry' in the appropriate legislative
entries. It follows, therefore, that in enacting the impugned Act Parliament was validly
exercising its legislative power in respect of matters covered by Entry 52 of List I and
Entry 33 of List III."
102
.The contention of learned counsel is that in Harakchand Ratanchand Banathia's
case, the process of systematic production for trade or manufacture has been held to
fall within the connotation of the word 'industry' in the appropriate Legislative Entry and
the argument that if the word 'industry' is construed in the wide sense, Entry 27 of List II
will lose all meaning and content was rejected. The submission is that the same
approach deserves to be adopted in the present case as well. The above approach was
adopted after finding the activity to be manufacture or production and, therefore, falling
within the connotation of 'industry' in Banthia's case, Constitution Bench, in fact, cited
with the approval Tika Ramji's case and referred thereto as under : AIR 1970 SC 1453
AIR 1970 SC 1453 at p. 1459, para 7
"In Tika Ramji v. State of Uttar Pradesh the expression 'industry' was defined to
mean the process of manufacture or production and did not include raw materials used
in the industry or the distribution of the products of the industry."
AIR 1956 SC 676
103
.In Banthia's case the Court was considering the validity of the Act, the object
whereof was to control production, manufacture, supply, distribution, use and
possession of, and business in, gold, ornaments and articles of gold and for matters
connected therewith or incidental thereto. There is no provision in the Gold (Control)
Act, 1968 regulating the manner in which the primary gold would be extracted from the
earth. The Act does not concern itself with the extraction of primary gold. The question
therein was to whether the work of goldsmiths was a handicraft requiring application of
skill and whether the art of making gold ornaments was not an 'industry' within the
meaning of Entry 52, List I. In that case, the question was not whether dealing with the
raw material of industry would come or not, within the concept of'industry'. Further, the
Court observed that it is not necessary to attempt to define the expression 'industry'
preciously or to state exhaustively all its different aspects. On the facts of the case, the
Constitution Bench held that the process or systematic production of gold ornament by
goldsmiths for trade or manufacture falls within the connotation of the word 'industry' in
the appropriate Legislative Entry. The decision in Tika Ramji's case was not departed
from. In fact it was referred to. An attempt to adopt the definition of the word 'industry' in
the Industrial Disputes Act was repelled. The contention accepted was that the
manufacture of gold ornament was an 'industry' within the meaning of Entry 52, List I.
This decision is not of any for determining whether sale of tobacco process can come
within the of the tobacco industry so as to fall within the ambit of the word 'industry' in
Entry 52 of List I and Entry 24 of List II. The observation in Banthia's case that Entry 27
of List II was a general entry was made in the context of manufacture of gold ornaments
by goldsmiths falling within the ambit of the word 'industry' as contained in Entry 24 of
List II and Entry 52 of List I. Banthia's case does not express any opinion on the scope
of the word 'industry' in Entry 52 of List I and Tika Ramji's case still holds the field when
it says that the expression AIR 1956 SC 676
AIR 1970 SC 1453
@page-SC912
'industry' would mean the process of manufacture or production and would not
include any raw material used in an industry or the distribution of the products of
industry.
104
.Mr. Shanti Bhushan has also placed reliance on another decision of the
Constitution Bench in the case of Chaturbhai M. Patel v. The Union of India and others
((1960) 2 SCR 362) in particular to the observations made therein by Sir Maurice
Gwyer, Chief Justice in Subramanyan Chettiar v. Muthuswamy Goundan (1940
FCR188) which have been cited in Patel's case. The said observations read thus :
AIR 1969 SC 424
AIR 1941 FC 47
"It must inevitably happen from time to time that legislation, though purporting to
deal with a subject in one list touches also on a subject in another list and the different
provisions of the enactment may be so closely intertwined that blind adherence to a
strictly verbal interpretation would result in a large number of statutes being declared
invalid because the Legislature enacting them may appear to have legislated in a
forbidden sphere."
105
.Reliance was also placed on the observations of Justice Hidayatullah in State of
Rajasthan v. G. Chawla and another, (AIR 1959 SC 544) as cited with approval in the
case of Chaturbhai M. Patel. Those observations are : AIR 1969 SC 424
"It is equally well-settled that the power to legislate on a topic of legislation
carries with it the power to legislate on an ancillary matter which can be said to be
reasonably included in the power given."
106. We have no difficulty in accepting the aforesaid observations made by Sir
Maurice Gwyer, Chief Justice and Hidayatullah, J. (as he then was) but it has to be
borne in mind that the question for determination in Chaturbhai M. Patel's case was
regarding true nature and character or the pith and substance of the impugned Act,
namely, Sections 6, 8, 9 and 10 of the Central Excises and Salt Act, 1944 and Rules
140 to 148, 150, 171 to 181, 215 and 226 of the Central Excise Rules, the constitutional
validity whereof was under challenge. The Constitution Bench was considering the
constitutional validity of a fiscal measure to levy and realise duty on tobacco. The
contention was that Sections 6 and 8 of the impugned Act and rules made thereunder
were beyond the legislative competence of the Central Legislature under the
Government of India Act, 1935. The Court was examining the question whether the
impugned Act is a law with respect to matters enumerated in Item 45 of List I under the
1936 Act or to the matters enumerated in Items 27 and 29 of List II. Entries 27 and 29
have already been reproduced above. They dealt with the power of the State to legislate
in respect of trade and commerce, markets and fairs, money lending and moneylenders. Item 29 dealt with power to legislate in respect of production, supply and
distribution of goods, development of industries, subject to the provisions in List I with
respect to the development of certain industries under the Federal control. The question
was whether the impugned Act in pith and substance relate to duties of excise on
tobacco as contained in Item 45 or it falls within the boundaries of Items 27 and 29 of
the Provincial List. Referring to the decision of the Federal Court, it was held that in the
interpretation of the scope of these items, widest possible amplitude must be given to
the words used and each general word must be held to extend to ancillary or subsidiary
matters which can be fairly said to be comprehended in it. On examination of the
provisions of the Central Excise Act, the Court came to the conclusion that various
provisions of the Act and the Rules were essentially connected with the levying and
collection of the excise duty and in its true nature and character the Act remains one
that falls under Item 45 of List I and the incidental trenching upon the provisional field of
Items 27 or 29 would not affect the constitutionality because the extent of invasion of
the provisional field may be a circumstance to determine the true pith and substance but
once that question is determined, the Act would fall on the side of central field and not
that of the Provincial field. It is, thus evident that since in pith and substance the matter
pertained to excise duty, it fell under Item 45 of List I and the non-tax entries in Item 27
or 29
@page-SC913
could not be invoked. In the Constitution also, Entry 84 relates to duty of excise
on tobacco and other goods manufactured or produced in India.
107
.Referring to the argument of the petitioner based on Rule 181 which dealt with
revocation and suspension of licenses and empowered the licencing department to
revoke or suspend a licence under certain circumstances and the argument that it was
the field under the province of the provincial legislature, the Court said that this rule may
have an indirect effect of depriving an owner of a bonded warehouse from the privilege
of keeping such a warehouse but that does not mean that the object of the Act is not
imposition, collection or realisation of duty of excise. The rule was held to be "a mean of
making the realisation of duty effective and necessarily incidental to effectual legislation
for collection of duties". In the present case, there is no question of any incidental
trenching. It cannot be said that the law relating to sale of tobacco in market area is
incidental to law regarding tobacco as enacted by Tobacco Board Act . The decision in
Chaturbhai M. Patel's case, in our opinion, has no relevance for the present purpose
and so also the decision in the case of State Bank of India v. Yasangi Venkateshwara
Rao ((1999) 2 SCC 375 ). The question squarely involved here is about the
interpretation of the expression 'industry' within the meaning of Entry 52 of List I and
Entry 24 of List II. AIR 1969 SC 424
AIR 1999 SC 896 : 1999 AIR SCW 568
108
.In Ganga Sugar Corporation Ltd. v. State of U.P. and others, ((1980) 1 SCC
223) the constitutional validity of U.P. Sugarcane Purchase Act was challenged on the
ground that it invades Entry 52 of List I with respect to sugar industry which is a
controlled industry under the IDR Act, 1951. The question raised therein was this ; "Is
the legislation ultra vires because the State enters the forbidden ground by enacting on
controlled industry"? It was undisputed that sugar industry was a controlled industry
within the meaning of Entry 52 of List I of the Seventh Schedule and, therefore, the
legislative power of Parliament covered enactments with respect of industries having
regard to Art. 246(1) of the Constitution. The Court said that if the impugned Act invades
Entry 52, it must be repulsed by the Court. The Court, however, expressed surprise at
the argument of invalidity of the Act despite the decision of the Constitution Bench in
Tika Ramji's case. The Court said that the Constitution Bench decision must be
accepted as final unless the subject be of such fundamental importance to national life
or the reasoning is so plainly erroneous in the light of later thought that it is wiser to be
ultimately right rather than to be consistently wrong. It said that the pronouncement by
the Constitution Benches should not be treated so cavalierly as to be revised frequently.
Recalling the words of Chief Justice Roberts of the U.S. Supreme Court in Smith v.
Alwright (321 US 649 at 669) "that adjudications of the Court were rapidly gravitating
into the same class as a restricted railroad ticket, good for this day and train only." That
part of Tika Ramji's case was referred which dealt with the contention regarding the
word 'industry' being of wide import and included not merely manufacture but also the
raw material for the industry and rejection of this contention. Paragraphs 31 and 31A
and 32 deal with Tika Rajmi's case and rejection of the argument as to whether raw
material of an industry which form an integral part of the process are within the topic of
'industry' which forms
AIR 1980 SC 286
AIR 1956 SC 676
@page-SC914
the subject matter of Item 52 of List I. The Bench said :
"The edifice of exclusive parliamentary jurisdiction so built stood on shifting
sands. The semantic sweep of Entry 52 did not come in the way of the State legislature
making laws on subjects within its sphere and not directly going to the heart of the
industry itself."
109
.The submission of Mr. Shanti Bhushan, who appeared in Ganga Sugar
Corporations case also, to reconsider Tika Ramji's case was rejected. The Court said :
AIR 1980 SC 286, para 38
"Tika Ramji notwithstanding, the contention was advanced by Shri Shanti
Bhushan that 'industry' was a pervasive expression, ambient enough to embrace raw
materials used for the industry and so, sugar industry, as a topic of legislation, vested in
Parliament exclusive power to legislate on sugar-cane supplies to sugar factories, and,
pursuing this expansionist logic, any taxation, on supplies of cane to mills would be
legislation on sugar industry. Ergo the Purchase Tax Act was a usurpation by the U.P.
Legislature breaching the dykes of Art. 246(1) read with Entry 52 of List I. He expanded
on theme by urging that any legislation which affected the sugar industry by taxing its
raw materials was one with respect to that industry. The Tika Ramji ratio is diametrically
opposed to this reasoning and a ruling which has stood the field so long has been
followed by another Constitution Bench as late as 1973 in the Kannan Devan Hills Co.
v. State of Kerala ((1973) 1 SCR 356) and its force of logic has our deferential assent
and cannot be brushed aside by a mere appeal for reconsideration. Shri Shanti
Bhushan candidly conceded that if Tika Ramji were good law, his submission was stillborn. We agree." AIR 1956 SC 676
AIR 1972 SC 2301
110
.The Court further held that :
para 39 of AIR 1980 SC 286
" 'Industry' as a legislative topic is of large and liberal import, true. But what
peripherally affects cannot be confused with what goes to the heart. An acquisition of
land for sugar mills or of sugar mills may affect the industry but is not an action in the
legislative field forbidden for the States (See the Kannan Devan Hills Produce Company
Ltd. case). Sales Tax on raw materials going to a factory may affect the costing process
of the manufacture but is not legislation on industrial process or allied matters affect
topics reserved for Parliament a situation of reductio ad absurdem may be reached."
AIR 1972 SC 2301
(Emphasis supplied is ours)
111
.The effect of acceptance of the submission of Mr. Shanti Bhushan may also
denude the State of its power to legislate even in respect of sales tax on tobacco. Such
a contention was specifically rejected in Ganga Sugar Corporation's case. AIR 1980 SC
286
112
.In The Kannan Devan Hills Produce v. The State of Kerala and another ((1972)
2 SCC 218) challenge was laid to the constitutional validity of Kannan Devan Hills
(Resumption of Lands) Act, 1971 for want of legislative competence of the State. The
contention urged was that Sections 4 and 5 of the impugned Act are a law with respect
to Entry 52 of List I of the Seventh Schedule as these provisions regulate the carrying
on a tea industry, within the competence of the Parliament, by controlling the land for
tea plantation. It was urged that if the effect of legislation is to control the working of the
tea plantation, the legislation must be regarded as legislation with respect to Entry 52,
List I. Tika Ramji's case was cited with approval. Repelling the contention, AIR 1972 SC
2301
AIR 1956 SC 676
@page-SC915
it was held that the State had legislative competence to legislate on Entry 18, List
II and Entry 42, List III and this power cannot be denied on the ground that it has some
effect on industry controlled under Entry 52, List I. The Constitution Bench further said
that if a State Act, otherwise valid, has effect on a matter in List I, it does not cease to
be a legislation with respect to an Entry in List II or List III. It said that effect is not the
same thing as subject matter. The object of Sections 4 and 5 seems to be to enable the
State to acquire all lands which do not fall within the categories (a), (b) and (c) of
Section 4(1). These provisions are really incidental to the exercise of the power of
acquisition. The State cannot be denied the power to ascertain what land should be
acquired by it in the public interest.
113
.In B. Viswanathiah Co. v. State of Karnataka and others ((1991) 3 SCC 358)
the challenge was to the validity of the provisions of Mysore Silkworm Seed and Cocoon
(Regulation of Production, Supply and Distribution) Act, 1959 (Act 5 of 1960). The
contention urged on behalf of the petitioners in that case was that any legislation in
respect of silk industry can be enacted only by the Parliament and the State Legislature
is incompetent to legislate on the matter because Section 2 of the Central Silk Board
Act enacted a declaration in terms of Entry 52, List I. The effect of it was to remove the
silk industry from the purview of the State Legislature powers thus, rendering the State
Legislature incompetent to legislate on that topic. The High Court repelled the challenge
relying upon the decision of this Court in Tika Ramji, Ganga Sugar Corporation Ltd.,
Harakchand Ratanchand Banthia and Kannan Devan Hills Produce Company's case.
After noticing that the High Court on the basis of series of decisions of the this Court
regarding scope of Entry 52 of List I in the Seventh Schedule of the Constitution had
repelled the challenge, this Court expressed full agreement with the views of the High
Court. It was held that the control of industry vested in Parliament was restricted to the
aspect of production and manufacture of silk yarn or silk. It did not obviously taken in
the earlier stage of industry, namely, the supply of raw materials. For instance, even in
regard to the silk industry, the reeling, production, development and distribution of
silkworm seeds and cocoons was regulated by the State Act. These items can be
perhaps legitimately described as raw materials of the silk industry. The control being
vested in Parliament under Entry 52 of silk industry did not affect the control over these
raw materials. It was held that the control, supply and distribution of the goods produced
by the industry was the third aspect of industry which falls outside the purview of the
control postulated under Entry 52. In other words, though the production and
manufacture of raw silk cannot be legislated upon by the State Legislature in view of the
provisions of the Central Act and the declaration in Section 2 thereof, that declaration
does not in any way limit the powers of the State Legislature to legislate in respect of
goods produced by the silk industry. This Court said that "To interpret Entry 52
otherwise would render Entry 33 in List III of the Seventh Schedule to the Constitution
otiose and meaningless." The same would be the position in the present case. 1991
AIR SCW 455
AIR 1956 SC 676
AIR 1980 SC 286
AIR 1970 SC 1453
AIR 1972 SC 2301
114. The acceptance of the argument of Mr. Shanti Bhushan would make various
Entries in the State List otiose and meaningless and subject to Entry 52 of List I despite
the fact that the entries are not so worded.
115
.In Indian Aluminium Company Ltd. and another v. Karnataka Electricity Board
and others ((1992) 3 SCC 580) challenging the amending Act by the State, the
contention urged before the High Court was that :
AIR 1992 SC 2169 : 1992 AIR
SCW 2551 Para 11
"Aluminium industry is scheduled industry under the control of the Government of
India as declared by Industries Development and Regulation Act and hence falls under
Entry 52 of List I of VIIth Schedule of the Constitution. Therefore, the policy of
Government of India amounts to direction issued to the State Government which they
@page-SC916
are bound to obey. Consequently the agreement of 1976 is an agreement
protected by a law coming under Entry 52 of List I, terms of which cannot be varied by a
law enacted by a State by virtue of the power conferred by the Concurrent List (List III of
VIIth Schedule). The amending Act should be construed in such a way as not to
impinge on or detract from the law, statutory order or constitutional direction of the
Central Government, otherwise the said amending Act will lack legislative competence."
116
.The High Court relying upon the decision in Tika Ramji's case, where the
concept of industry as a topic of legislation was explained, repelled the aforesaid
contention. The decision and reasoning given by the High Court upholding the vires of
the amending Act relating to the concept of industry in Tika Ramji's case were upheld by
this Court. AIR 1956 SC 676
117
.In M/s. Shriram Industrial Enterprises Ltd. v. Union of India and others (AIR 1996
All 135) a Full Bench of Allahabad High Court examined the validity of U.P. Sheera
Niyantran Adhiniyam, 1964 (U.P. Act No. XXIV of 1964) on the question of the
competence of the State Legislature. Its validity had been challenged by the Sugar
Industry. It was urged that by virtue of Section 18G of the IDR Act, the State Legislature
stood denuded of power to legislate regulating supply, distribution and supplies of
molasses - a product of sugar industry and was consequently incompetent to enact
Sections 7, 8 and 10 of the aforersaid State Act. The Full Bench tracing the history of
legislation leading to framing of the Constitution held that if the argument about
denuding of power of State Legislature is accepted, most of the entries in Lists II and III
would be meaningless. Once the Parliament makes a declaration under Entry 52 of List
I, for instance, Entries 20, 21, 22, 23 and 24 would be redundant. The High Court said
that neither it was the intention of the framers of the Constitution nor the said contention
is born out from the perusal of Entry 52 and the other Entries of Lists II and III of the
Seventh Schedule. Noticing various decisions of the Court, the High Court concluded as
under :
1996 All LJ 468
"Applying the principles propounded by the apex Court in the cases mentioned
above, it is apparent that the State Legislature is competent to make law in respect of
the subject industries under Entry 24 of the List II subject to Entries 7 and 52 of List I of
the Seventh Schedule and is further competent to enact law on the subject "trade and
commerce within the State and Production, supply and distribution of goods", under
Entry 26 and Entry 27 of List II subject to Entry 33 of List III of Seventh Schedule of the
Constitution. But on declaration under Entry 52 of List I by Parliament in respect of the
industries the control of which by the Union is by law held to be expedient in the public
interest, three consequences flow. Firstly, on declaration by Parliament in respect of
controlled industries the power of State Legislature to legislate under Entry 24 of List II
shifts to Entry 52 of List 1 to the extent of control provided in the Act. The second result
which follows upon declaration is that the power to enact law by State Legislature under
Entry 26 and Entry 27 of the List II of Seventh Schedule becomes part of Entry 33 of
List III which is a concurrent list. Third consequence that follows on declaration is that
the products of the controlled industries would fell within Entry 33 of List III.
Para
32 of AIR and All LJ
The controversy before me if examined seeing the constitutional debate, history
of legislation, structure and design of the relevant, entries and also keeping in view the
basic structure of the Constitution, the only irresistible conclusion is that
@page-SC917
Section 18G of the IDR Act is referable to Entry 33 of List III of the Seventh
Schedule. Since the power to enact in respect of production, supply and distribution of
the products of the controlled industries being a concurrent subject, the U.P. Legislature
is competent to enact the Adhiniyam of 1964."
118. The structure and scope of Entry 54 of the Union List and Entry 23 of the
State List and their inter-relationshp is substantially different from the scope and
structure of Entry 24 of the State List and Entry 52 of the Union List. The Entry relating
to of mines and minerals has in it both the industry of mines and its product minerals
and, therefore, on a declaration both mines and minerals get embedded in Entry 54 of
the Union List. Therefore, it has been consistently held by this Court, that by declaration
under Entry 54, the Parliament evinces an intention to occupy the whole field.
119
.In my view the Full Bench rightly held that the cases relating to mines and
minerals relied upon in support of the challenge to the State legislation were of no
assistance. The Full Bench decision was approved by this Court in SIEl Ltd. and others
v. Union of India and others ((1998 ) 7 SCC 26).
AIR 1998 SC 3076 : 1998 AIR
SCW 2983 : 1998 All LJ 2239
120
.In Belsund Sugar Co. Ltd. v. State of Bihar and others ((1999) 9 SCC 620), the
Constitution Bench examined the question regarding the legality of levy of market fee
under the provisions of Bihar Agricultural Produce Markets Act, 1960 pertaining to
various commodities including sugarcane, sugar and molasses, wheat and tea. The
Court first dealt with the transaction of purchase of sugarcane by the sugar factories
functioning in the market areas falling within the jurisdiction of respective market
committees constituted under the Market Act. It noticed that the Market Act had been
enacted by the Bihar Legislature as per the legislative power vested in it by Entries 26,
27 and 28 of List II of the Seventh Schedule of the Constitution. The Court, however,
noticed that the Market Act dealt with supply and distribution of the goods as well as the
trade and commerce therein as it seeks to regulate the sale and purchase of agricultural
produce to be carried on in the specified markets under the Act. To that extent, the
Court said, the provisions of Entry 33 of List III override the legislative powers of the
State Legislature in connection with legislations dealing with trade and commerce in,
and the production, supply and distribution of goods. Thus, to the extent to which the
Market Act seeks to regulate the transactions of sale and purchase of sugarcane and
sugar which are foodstuffs and trade and commerce therein, the Constitution Bench
said that it has to be held that the Market Act being enacted under the topics of
legislative powers under Entries 26, 27 and 28 of List II will be subject to any other
legislation under Entry 33 of the Concurrent List. The contention of Mr. Dwivedi being
that as admittedly the tobacco is not foodstuff and does not fall under Entry 33 of List III,
like the amendment to the Constitution made in 1953, the Parliament by further
amendment of the Constitution can, if so advised, place tobacco - raw material of the
industry - in Entry 33 of List III and, thus, confer on itself the competence to legislate in
respect to tobacco, need not be examined by this Court as being unnecessary. We
may, however, note that the Constitution Bench, after noticing various provisions of the
Act and the Rules, came to the conclusion that the need for regulating the purchase,
sales, storage and processing of sugarcane, being an agricultural produce, is
completely met by the comprehensive machinery provided by the Sugarcane Act
enacted by the same very legislature which enacted the general Act being the Market
Act. AIR 1999 : SC 3125 : 1999 AIR SCW 3074
121
.In Belsund Sugar Co. Ltd. one of the contentions urged was that under the IDR
Act, in public interest, Union of India had taken over the control of the wheat industry as
specified in the First Schedule to the Act and consequently any transaction of purchase
and sale of the product of that industry cannot be regulate by the State Act. The
Constitution Bench noticed that AIR 1999 SC 3125 : 1999 AIR SCW 3074
AIR 1961 SC 459
@page-SC918
the Parliament in exercise of its legislative power under Entry 52 of List I of the
Seventh Schedule had enacted the IDR Act and flour industry is listed as one of the
schduled industries under the caption "Food processing Industries". The Bench said
that the production of wheat as a raw material or its sale is not covered by the said Act
and, consequently, so far as wheat as 'agricultural produce' is concerned, it is outside
the sweep of the IDR Act. The question still remained whether the sale of flour or any
other product out of wheat can be said to be covered by the sweep of the IDR Act. It
was noticed that the Central Government had not promulgated any statutory order
under Section 18G covering the field. The Court rejected the contention that mere
existence of a statutory provision in the Act enabling the Central Government to issue
such order would be sufficient to occupy the field contemplated by the provision. While
examining the decision in Hingir Rampur Coal Company's case on which reliance was
placed by the appellants, the Constitution Bench, held that it has to be kept in view that
any legislation in exercise of legislative power under Entry 54 of List I would enable the
Parliament to regulate mines and the minerals development by taking them under the
control of the Union in public interest. Thus, all aspects of the minng industry would be
covered by the general sweep of such a declaration. But it was noticed that the IDR Act
was enacted under Entry 52. It was held that the scheme of Entry 54 of the Union List
read with Entry 23 of the State List was entirely different from the scheme of Entry 52 of
List I read with Entry 24 of List II with which the Court was concerned in that case. On
conjoint reading of these two entries, the ratio of the decision in Hingir Rampur Coal
Company's case, it was held, cannot be effectively pressed into service.
122
.As already noticed, the majority decision in ITC case for the view it took had
placed reliance on Baijnath Kadio which followed Hingir Rampur Coal Company's case.
1985 Supp (1) SCR 145
123
.Further in Belsund Sugar Company, the Constitution Bench cited with approval
the decision in SEIl case and reiterated that merely because industry is controlled by a
declaration under Section 2 of the IDR Act enacted by Entry 52 of the Union List, the
State Legislature would not be denied of its power to regulate the products of such an
industry by exercise of its legislative power under the State List. It would be useful to
extract para 119 of Belsund Sugar Company's case as under :
AIR 1970 SC 1436
AIR 1961 SC 459
AIR 1999 SC 3125 : 1999 AIR SCW 3074
AIR 1998 SC 3076 : 1998 AIR SCW 2985
(of SCC) : Para 113 of AIR
"However, so far as the IDR Act is concerned, it is enacted under Entry 52 of the
First Schedule whcih deals with industries in general. Simultaneously in the State List
itself there is Entry 24 which deals with industries subject to the provisions of Entries 7
and 52 of List I. Consequently the products of such controlled industries would
necessarily not be governed by the sweep of the general legislation pertaining to such
industries as per Entry 52 of the Union List . The aforesaid Constitution Bench judgment
was not concerned with any State legislation enacted under Entry 24. On the contrary, it
dealt with legislation of the Union Parliament under Entry 54 of the Union List read with
Entry 23 of the State List. The scheme of the aforesaid legislative entries is entirely
different from the scheme of Entry 52 of List I read with Entry 24 of List II with which we
are concerned. On a conjoint reading of the aforesaid two entries, therefore, the ratio of
the decision of the Constitution Bench in the aforesaid case cannot be effectively
pressed into service by Shri Ranjit Kumar for supporting his contention. In this
contention, we may usefully refer to a decision of this Court in SIEl Ltd.
AIR 1998 SC
3076 : 1998 AIR SCW 2985 : 1998 All LJ 2239
AIR 1916 SC 459
@page-SC919
where one of us, Sujata V. Manohar, J. was a member. It has rightly
distinguished the ratio of the Constitution Bench decision in the case of Hingir Rampur
Coal Co. Ltd. and taken the view that merely because an industry is controlled by a
declaration under Section 2 of the IDR Act enacted by Entry 52 of the Union List, the
State Legislature would not be denied of its powers to regulate the products of such an
industry by exercise of its legislative powers under Entry 24 of the State List. In that
case the question was whether the U.P. Sheera Niyantran Adhiniyam, 1964 could be
said to be repugnant to the Molasses (Control) Order issued by the Central Government
under Section 18-G of the IDR Act imposing restrictions on the sale of molasses and
fixing the maximum price of molasses. Answering the question in the negative, it was
held that the term 'industry' in Entry 24 would not take within its ambit trade and
commerce of production, supply and distribution of goods which are within the province
of Entries 26 and 27 of List II. Similarly, Entry 52 of List I which deals with industry also
would not cover trade and commerce in, or production, supply and distribution of the
products of those industries which fall under Entry 52 of List I. For the industries falling
in Entry 52 of List I, these subjects are carved out and expressely put in Entry 33 of List
III. It was also held that since the Molasses (Control) Order of 1961 passed by the
Central Government in exercise of powers conferred by Section 18-G was not extended
at any point of time to the State of U.P. or the State of Bihar,the question of repugnancy
between the Molasses Control Order, 1961 and the U.P. Sheera Niyantran Adhiniyam,
1964 does not arise. Consequently, it must be held that in the absence of a statutory
order promulgated under Section 18G of the IDR Act, it cannot be said that the field for
regulation of sale and purchase of products of the flour industry like atta, maida, suji,
bran, etc. would remain outside the domain of the State Legislature."
(Emphasis supplied is ours)
124
.The principles aforesaid would equally apply to Entries 14, 27, 28 and 66 of List
II. It may further be noticed that in para 170 of Belsund Sugar Company's case, the
Constitution Bench reiterates the view expressed in Tika Ramjis case as also in SIEL's
case affirming Full Bench of the Allahabad High Court in M/s. Shriram Industrial
Enterprises (supra). of 1999 (9) SCC 620 : Para 161 of AIR 1999 SC 3125 : 1999 AIR
SCW 3074
125
.In view of the above, I see no compelling reason either on account of any
binding precedent in the form of a earlier Constitution Bench judgment, history and
background of the framing of the Constitution or the words used in various Entries or the
language of any Article in the Constitution of India, to take a view which will result in
denuding the power of State Legislatures to legislate not in respect of field of legislation
under Entry 24 but field of legislation covered by other entries on State List on making
of declaration under Entry 52 of the Union List. The Constitution Bench judgment in the
case of Tika Ramji and other decisions following it confine the field of legislation of
industries to the process of manufacture or production and not to 'raw materials' which
may be integral part of industrial process or to the distribution of the product of the
industry.'
AIR 1998 SC 3076 : 1998 AIR SCW 2985 : 1998 All LJ 2239
AIR 1996 All 135 : 1996 All LJ 468
126. In view of the aforesaid, I conclude as under :
1. The State legislations and the Tobacco Board Act, 1975 to the extent of sale of
tobacco in market area cannot co-exist.
2. The State Legislatures are competent to enact legislations providing for the
sale of agricultural produce of tobacco in market
@page-SC920
area and for levy and collection of market fee on that produce.
3. The Parliament is not competent to pass legislation in respect of goods
enumerated in aforesaid conclusion No. 2 while legislating in the field of legislation
covered by Entry 52 of the Union List under which the Parliament can legislate only in
respect of industries, namely the process of manufacture or production as held in Tika
Ramji's case. The activity regarding sale of law tobacco as provided in the Tobacco
Board Act cannot be regarded as 'industry'.
4. ITC's case (1985 Supp SCC 476) is not correctly decided.
127. Leave in special leave petitions granted. For the aforesaid reasons, the
State legislations are held to be valid pieces of legislation. The appeals and the writ
petition are disposed of accordingly. Parties to bear their own costs.
128. RUMA PAL, J. :- I regret my inability to concur with the conclusion reached
by my learned Brother, Pattanaik J, that because of the enactment of the Tobacco
Board Act, 1975 by Parliament, the State Act viz., the Bihar Agricultural Produce
Markets Act, 1960 in so far as it relates to levy of fee on the sale and purchase of
tobacco, is invalid.
129. That the legislative power of Parliament in certain areas is paramount under
the Constitution is not in dispute. What is in dispute is the limits of those areas as
judicially defined. Broadly speaking Parliamentary paramountcy is provided for under
Articles 246 and 254 of the Constitution. The first three clauses of Article 246 of the
Constitition relate to the demarcation of legislative powers between the Parliament and
the State Legislatures. Under clause (1), notwithstanding anything contained in clauses
(2) and (3), Parliament has been given the exclusive power to make laws with respect to
any of the matters enumerated in List I or the Union List in the Seventh Schedule.
Clause (2) empowers the Parliament, and State Legislatures subject to the power of
Parliament under sub-clause (1), to make laws with respect to any of the matters
enumerated in List III in the Seventh Schedule described in the Constitution as the
'Concurrent List' notwithstanding anything contained in sub-clause (3). Under clause (3)
the State Legislatures have been given exclusive powers in respect of matter
enumerated in List 2 in the 7th Schedule described as the 'State List' but subject to
clauses (1) and (2). The three lists while enumerating in detail the legislative subjects
carefully distribute the areas of legislative authority between Parliament (List I) and the
State (List II). The supremacy of Parliament has been provided for by the non obstante
clause in Article 246 (1) and the words 'subject to' in Art. 246(2) and (3). Therefore,
under Article 246(1) if any of the entries in the three Lists overlap, the entry in List I will
prevail1. Additionally some of the entries in the State List have been made expressly
subject to the power of Parliament to legislate either under List I or under List III. Entries
in the Lists of the Seventh Schedule have been liberally interpreted, nevertheless
Courts have been wary of upsetting this balance by a process of interpretation so as to
deprive any entry of its content and reduce it to 'useless lumber'2. The use of the word
'exclusive' in Clause (3) denotes that within the legislative fields contained in List II, the
State Legislatures exercise authority as plenary and ample as Parliament. The fact that
under the scheme of our Constitution, greater power is conferred upon the Centre vis-avis the States does not mean that States are mere appendages of the Centre. Within
the sphere allotted to them, States are Supreme. The Centre cannot tamper with their
powers. More particularly, the Courts should not adopt an approach, an interpretation,
which has the effect of or tends to have the effect of whittling down the powers reserved
to the States"3.
1 . M.P.V. Sundararamier and Co. v. State of Andhra Pradesh (1958) SCR 1422,
1480-82).
AIR 1958 SC 468
2. The Calcutta Gas Company (Prop) Ltd., v. the State of West Bengal, 1962 (3)
SCR 1).
AIR 1962 SC 1044
3. S R Bommai and others v. Union of India and others, (1994) 3 SCC 1 at 216.
AIR 1994 SC 1918 at p. 2068 : 1994 AIR SCW 2946 at p. 3155
130. Although Parliament cannot legislate on any of the entries in the State List,
it may do so incidentally while essentially legislating within the entries under the Union
List. Conversely, the State Legislatures may encroach on the Union List, when such an
@page-SC921
encroachment is merely ancillary to an exercise of powers intrinsically under the
State List. The fact of encroachment does not affect the vires of the law even as regards
the area of encroachment4. This principle commonly known as the doctrine of pith and
substance, does not amount to an extension of the legislative fields. Therefore, such
incidental encroachment in either event does not deprive the State Legislature in the
first case or Parliament in the second, of their exclusive powers under the entry so
encroached upon. In the event the incidental encroachment conflicts with legislation
actually enacted by the dominant power, the dominant legislation will prevail.
4. A.S. Krishna v. State of Madras 1957 SCR 399; Chaturbhai M Patel v. Union
of India and others ; (1960) 2 SCR 362, 373; State of Rajasthan v. G Chawla; AIR
(1959) SC 544 Iswari Khetan Sugar Mills (P) Ltd. v. State of UP (1980) (4) SCC 136,
146-147).
AIR 1957 SC 297 : 1957 CriLJ 409
__________________
AIR 1960 SC 424 at p. 429
__________________
AIR 1980 SC 1955 at p. 1964
131. To return to subject of Parliamentary supremacy. The second facet of the
supremacy of Parliament is to be found in Article 254(1) which provides :
Article 254 : "Inconsistency between laws made by Parliament and laws made by
the Legislatures of States- (1) If any provision of a law made by the Legislature of a
State is repugnant to any provision of a law made by Parliament which Parliament is
competent to enact, or to any provision of an existing law with respect to one of the
matters enumerated in the Concurrent List, then, subject to the provisions fo clause (2),
the law made by Parliament, whether passed before or after the law made by the
Legislature of such State, or, as the case may be, the existing law, shall prevail and the
law made by the Legislature of the State shall to the extent of the repugnancy, be void."
132
.In other words where in due exercise of legislative powers in the Concurrent List
there is an irreconcilable conflict in the legislations enacted, the Central Legislation will
prevail. The doctrine of repugnancy has been developed in this context. [See : M/s.
Hoechst Pharmaceuticals Ltd. v. State of Bihar 1983 (4) SCC 45, 89; Deep Chand v.
The State of Uttar Pradesh (1959) Supp SCR 8]. The controversy, in this case, is to be
resolved keeping these broad principles in mind.
AIR 1983 SC 1019 at p. 1042
AIR 1959 SC 648
133. The immediate question before us is whether the Tobacco Board Act, 1975
debars the States from levying market fee in respect of tobacco. In the several matters
argued and heard, the main protagonists were the tobacco traders and dealers on the
one hand who argue that the States cannot levy market fee on tobacco, and the Market
Committees on the other who contend to the contrary. The Union of India and the
Tobacco Board have supported the former while the State Governments the latter. The
details of the several matters which were heard by us have been noted in the opinion of
Pattanaik, J. A galaxy of counsel have made submissions in support of the opposing
camps. For the purpose of convenience and coherence, the diverse arguments have
been clubbed together and those contending against the States competence are
referred to compendiously as the appellants and their opponents as 'the respondents'.
One further clarification is necessary. As the order referring the issue to this Court was
passed in an appeal relating to the Bihar Agricultural Markets Act, 1960, although
several other states have enacted substantially similar statutes, I will treat the Bihar
Statute as representative and refer to the provisions of that Act for deciding the issues.
134. The Bihar Agricultural Produce Markets Act, 1960 (referred to hereafter as
the Markets Act) was enacted by the State of Bihar and is ostensibly referable to Entry
28 of List II which gives the State Legislature the exclusive power to legislate on
"Markets and Fairs" read with Entry 66 of List II according to which the State Legislature
may also levy fees in respect of any matter in List II except Court fees. It is true that in
Belsund Sugar Company v. State of Bihar5 the Court proceeded on the basis that
@page-SC922
the Markets Act had been enacted by the Bihar Legislature not only under the
legislative power vested in it by Entry 28 but also under Entries 26 and 27 of List II of
the Seventh Schedule of the Constitution but in that case, there does not appear to
have been any controversy raised on this point. Entries 26 and 27 of List II read as
under :
5. 1999 9 SC 620
AIR 1999 SC 3125 : 1999 AIR SCW 3074
26. Trade and commerce within the State subject to the provisions of Entry 33 of
List III.
27. Production, supply and distribution of goods subject to the provisions of Entry
33 of List III."
135. It has also been argued by the respondents that the State Act is also
referable to Entry 14 of List II which describes the permissible subject-matter of
legislation by States as :
14 : Agriculture, including agricultural education and research, protection against
pests and prevention of plant diseases.
136. Except for Entries 26 and 27 of List II, each of the other entries comes
within the exclusive legislative domain of the States.
137. The Tobacco Board Act, 1975, on the other hand, is claimed by the
appellants to be relatable solely to Entry 52 of List I which enables Parliament to
legislate on industries, the control of which by the Union is declared by Parliament by
law to be expedient in the public interest". According to the appellants, the Markets Act
seeks to regulate, inter alia, the sale of various kinds of agricultural produce including
tobacco. They contend that the provisions of the Markets Act could not be applied to
tobacco because the Tobacco Act was enacted by Parliament under Entry 52 of List I to
control and regulate everything relating to the tobacco industry from the growth of
tobacco to its processing, storing, sale, manufacture, export and import.
138
.It had been initially argued by the appellants that once a declaration is made in
terms of Entry 52 of the Union List, the industry in respect of which the declaration is
made and the entire process relating thereto becomes part of the legislative head itself
and within the exclusive domain of the Parliament and the State legislature becomes
incompetent to enact any provision with regard to that industry. The submission was
somewhat watered down in the reply. It was conceded that the argument was an
extreme one and that the true principle was that one has to examine the actual extent of
coverage by the Central enactment. The next submission was that the word 'industry' in
Entry 52 of List 1 will have to be given a wide meaning : Passages from the
Encyclopaedia Britannica were referred to, to contend that an 'industry' could be
primary, secondary or tertiary. Primary industries would include agriculture, forestry,
fishing, mining and the extraction of minerals etc. A secondary industry would be a
manufacturing industry where raw materials supplied by primary industries are
proceessed to manufacture consumer and non-consumer goods. A tertiary industry
would be one where services were rendered such as banking, insurance, transportation
information etc. This was contrasted with the meaning of the word as defined in the
Industries, Development and Regulation Act, 1951 which only deals with manufacturing
industries. According to the appellants, this Court in Harakchand Ratan-chand Banthia
and others v. Union of India, 1970 (1) SCR 479 1971 SC 479 not only accepted the
wide definition of industries but also specifically held that the word 'industry' in Entry 52
would also comprise production, supply and distribution of goods referred to in Entry 27
of List II. It was, therefore, contended that the provisions of the Tobacco Act were
clearly within the exclusive competence of Parliament and within the field covered in
Entry 52 of List I. As a corollary to this argument, it was contended that Parliament
could also legislate with regard to the raw materials supplied to a declared industry in
keeping with the principle of 'pith and substance'. The next submission was that even if
the
AIR 1970 SC 1453
@page-SC923
State Government retained the competence to legislate on tobacco, it could not
enact any statutory provisions which would be repugnant to the Central Act. The
provisions of the Tobacco Act and the Markets Act were referred to in some detail to
contend that they could not possibly co-exist and therefore the Central Act would have
to prevail. It was submitted that in the circumstances the provisions of the Markets Act
with respect to tobacco were repugnant to the provisions of the Tobacco Act and that by
virtue of the provisions of Article 254(1) of the Constitution, the law made by Parliament
was to prevail and the law made by the Legislatures of the State to the extent of the
repugnancy with the Central Act, is void.
139
.The respondents on the other hand contended that the Tobacco Act did not and
could not occupy the entire legislative field relating to tobacco. According to them,
despite the declaration in Section 2 of the Tobacco Act under Entry 52 of List I, the word
'industry' in the context of the Tobacco Act could not include anything more than
processing and manufacturing of tobacco. Reliance was placed primarily on the
decision of the Constitution Bench in Tika Ramji and others v. State of U.P. and others,
1956 SCR 393.
AIR 1956 SC 676
140. It was further submitted on behalf of the respondents that the question of
repugnancy between the Markets Act and the Tobacco Act would not arise since
Parliament was not competent to enact provisions in respect of a legislative field
specifically provided for in List II. It was submitted that the legislative field under Entry
52 of List I was derived from Entry 24 of List II and Entry 24 did not cover the legislative
fields otherwise specially provided for in List II. It was stated that Entry 28 could not be
rendered redundant by the Central Government's legislation on commodities sold at
markets and fairs by issuing a declaration under Entry 52 of List I. It was also submitted
that there may be provisions in the Tobacco Act which may incidentally trench on the
State's competence and as long as States have not legislated on that topic, the
Tobacco Act may prevail. It was submitted that even if the Markets Act were enacted
under Entries 26 and 27 of List II nevertheless this would not make the Market Act
invalid as far as tobacco was concerned. It was further submitted that although Entries
26 and 27 in the State List were subject to the provisions of Entry 33 of the Concurrent
List there was no provision in Entry 33 of the Concurrent List which covered tobacco. It
was submitted that the issue of repugnancy did not arise because Article 254(1) only
relates to repugnancy in actual legislations in respect of entries in the Concurrent List.
According to the respondents, assuming that Parliament was competent to legislate in
respect of tobacco, there was in fact no repugnancy between the Markets Act and the
Tobacco Act as the Tobacco Act did not cover post auction sales. In any event, there
could be no conflict between the Markets Act and the Central Act in Bihar particularly
having regard to the fact that Sections 13, 13A and 14A of the Tobacco Act had not
been made operative in Bihar. Reliance has been placed upon the absence of a nonobstante clause in the Tobacco Act and the presence of Section 31 in that Act which,
according to the respondents, makes it clear that the Tobacco Act was to be read as
being in addition to and not in derogation of any other law. Therefore according to the
respodnents, even if tobacco were solely within the exclusive field of legislation by
Parliament, the State Legislature could recover fees for services rendered in respect of
markets where tobacco may be sold.
141. To begin with, I do not think that this Bench should at all go into the question
of the validity of the Tobacco Board Act, 1975 (referred to briefly hereafter as the
'Tobacco Act" even though the issue was argued at some length by the main
protagonists before us. The dispute which originally gave rise to this set of appeals is
limited to the question whether the Market Committees have the authority to levy market
fee under the Markets Act on the sale of tobacco and whether the provisions in the
Markets Act granting Market Committees such right are repugnant to the provisions of
the Tobacco Act and are therefore, unconstitutional. What has been placed before this
Bench for its consideration is the correctness of the earlier decision in ITC Ltd. and
others v. State of Karnataka 1985 (Supp) SCC 476. The question raised in that case
@page-SC924
was whether the provisions of the Karnataka Agricultural Produce Marketing
(Regulation) Act, 1966 relating to the levy of market fee on tobacco were repugnant to
the Tobacco Act. The majority held that it was. The minority view was that both Acts
could co-exist. But the validity of the Tobacco Act itself was never in dispute.
142. No doubt, the States have been given notice but the focus of the arguments
have been on the levy of fees on the marketing of tobacco. As the Tobacco Act covers a
much larger field, a pronouncement on the validity of all the provisions dealing with a
variety of activities under the Act would not be appropriate as it would perhaps pre-empt
a decision on aspects other than the marketing of tobacco without hearing those who
might be interested in the outcome of a decision on those provisions.
143. The starting point in any controversy dealing with the apparently conflicting
legislative jurisdictions is to see whether the conflict can be fairly reconciled by reading
the entries to which the legislations are referable, together and "by interpreting and,
where necessary, modifying the language of the one by that of the other". It is only
when such resolution is not possible that the Courts should be called upon to decide the
question of legislative competence. This principle has been stressed in a number of
cases by the Privy Council, the Federal Court and more recently by this Court. (See :
The Central Provinces and Berar Sales of Motor Spirit
Lubricants Taxation Act,
1938",6 'Governor-General in Council v. Province of Madras'7, State of Bombay v. F. N.
Balsara AIR 1951 SC 818, 822, Accountant Secretarial Services Pvt. Ltd. v. Union of
India, AIR 1988 SC 1708; Fatechand v. State of Maharashtra; AIR 1977 SC 1825, 1827;
Calcutta Gas Company (Proprietary) Ltd. v. State of West Bengal AIR 1962 SC 1044).
6 AIR 1939 FC 1.
7 AIR 1945 PC 98, 100.
144
.Similarly, when there is an apparent conflict between two statutes enacted in
valid exercise of legislative powers under the Concurrent List, reconciliation must be
attempted. Only when the differences are irreconcilable should the Courts resort to
striking down a piece of legislation. (See : The Kannan Devan Hills Produce v. The
State of Kerala; (1972) 2 SCC 218'; M/s. Hoechst Pharmaceuticals Ltd. v. State of
Bihar, (1983) 4 SCC 45). AIR 1972 SC 2301
AIR 1983 SC 1019
145. In my view, if therefore, the issue raised in this case can be resolved by
limiting our consideration to the question of conflict, if any, between the two entries in
the seventh schedule of the Constitution to which the Tobacco Act and the Market Act
are respectively relatable and between the provisions of the two statutes which have a
bearing on the marketing of tobacco, it is unnecessary to stray into those areas which
may not be necessary for the disposal of these appeals. The discussion in this opinion
is therefore limited to the scope of the two entries and the allegedly conflicting
provisions of the two Acts with which we are concerned.
146
.The controversy in this case to a large extent turns on the meaning of the word
"industry" as used in the three legislative lists. Now the power to legislate in respect of
all industries has been given under Entry 24 of List II to the State Legislatures subject to
Entries 7 and 52 of List I. Entries 7 and 52 of List I allow Parliament to legislate in
respect of particular 'industries' - namely such industries which are declared by
Parliament by law to be necessary for the defence or for the prosecution of war (Entry
7) and industries the control of which by the Union is declared by Parliament by law to
be expedient in the public interest (Entry 52). Trade and commerce in, and the
production, supply and distribution of the products of such controlled industry have been
provided for in Entry 33 of the Concurrent List wherein both Parliament and the State
Legislatures are competent to legislate. A Constitution Bench of this Court in The
Calcutta Gas Company (Prop.) Ltd. v. the State of West Bengal8 has held that the
AIR 1962 SC 1044
@page-SC925
expression 'industry' in all the three lists must be given the same meaning and
that since ordinarily industry is in the field of State Legislation the word must be
construed in the context of the other entries in List II in such a manner so that no entry
in List II is deprived of its content. In other words, the meaning of the word 'industry' is to
be determined with reference to Entry 24 of List II where the power to legislate generally
in respect of industries has been provided. Entries 7 and 52 are entries which specify
particular industries out of this general pool. The meaning of the word 'industry' in these
two entries, therefore, must necessarily be derived from the meaning which may be
ascribed to the word in Entry 24 of List II.
8 1962 (3) SCR 1.
147
.The seminal decision on this process of interpretation for arriving at the definition
of 'industry' is Ch. Tika Ramji and others v. State of Uttar Pradesh and others,9 in which
a Constitution Bench unanimously held : AIR 1956 SC 676 at PP. 695 - 96
9. 1956 SCR 393.
"Industry in the wide sense of the term would be capable of comprising three
different aspects : (1) raw materials which are an integral part of the industrial process,
(2) the process of manufacture or production and (3) the distribution of the products of
the industry. The raw materials would be goods which would be comprised in Entry 26
of List II. The process of manufacture or production would be comprised in Entry 24 of
List II except where the industry was a controlled industry when it would fall within Entry
52 of List I and the products of the industry would also be comprised in Entry 27 of List
II except where they were the products of the controlled industries when they would fall
within Entry 33 of List III."
148. The underlying rationale of Tika Ramji's definition of the word 'industry' is
that the Constitution having expressly provided for particular fields of legislation in the
three Lists, each field must be given a meaning. Entry 24 of List II cannot be read so as
to subsume within itself the other entries in List II. It must be given a meaning which
allows the other entries to survive and be defined to that extent with reference to what it
is not.
149
.Thus in Calcutta Gas it was held that the word 'industry' in Entry 24 of List II and
7 and 52 of List I did not include gas and gas works which was in terms provided for in
Entry 25. The argument in that case was that the State was incompetent to enact the
Oriental Gas Company Act, 1960 under Entry 25 of List II because Parliament had
passed the Industries (Development Regulation) Act, 1951 by virtue of Entry 52 of List
I. The Central Act in that case had under Section 2 declared that it was expedient in the
public interest that the Union should take under its control inter-alia industries of " 'fuel
gas' (coal gas, natural gas and the like)". For the purpose of promoting and regulating
these industries, the Central Act enabled the Central Government to investigate into the
affairs of an undertaking, to regulate its production, supply and distribution, and, if
necessary to take over the management of the undertaking. The Court said that if the
word 'industry' in Entry 24 of List II and, therefore, 52 of List I were interpreted to include
'gas and gas works' which were expressly covered by Entry 25 List II, Entry 25 may
become redundant and it would amount to attributing to the authors of the Constitution
"ineptitude, want of precision and tautology". As a result, the challenge to the State Act
was negatived and the Central Act, insofar as it purported to deal with the gas industry,
was held to be beyond the legislative competence of Parliament.
AIR 1962 SC 1044
150
.Again in B. Viswanathiah and Company and others v. State of Karnataka, 1991
(3) SCC 358 writ petitions were filed challenging the validity of the provisions of the
Mysore Silkworm Seed and Cocoon (Regulation of Production, Supply and Distribution)
Act, 1959 (Act 5 of 1960). 1991 AIR SCW 455
AIR 1956 SC 676
@page-SC926
It was contended that the impugned provisions lacked legislative competence
after the enactment by Parliament of the Central Silk Boards Act (Act 61 of 1948) which
contained a declaration as contemplated under Entry 52 of List I. The Court held,
following Tika Ramji, that the "control of the industry vested in Parliament was only
restricted to the aspect of production and manufacture of silk yarn or silk. It did not
obviously take in the earlier stages of the industry, namely, the supply of raw materials".
It was also held :
"though the production and manufacture of raw silk cannot be legislated upon by
the State legislature in view of the provisions of the Central Act and the declaration in
Section 2 thereof, that declaration and Entry 52 does not in any way limit the powers of
the State legislature to legislate in respect of the goods produced by the silk industry. To
interpret Entry 52 otherwise would render Entry 33 in List III of the Seventh Schedule to
the Constitution otiose and meaningless".
151
.This process of defining 'industry' in Entry 24 of List II and consequently Entry 52
of List I, by eliminating from its scope the fields specifically provided for in List II or List
III has been consistently followed. For example in State of A. P. v. Mc Dowell Co.,
1996 3 SCC 709 it was said :
AIR 1996 SC 1627 : 1996 AIR SCW 1679
"Parliament cannot take over the control of industries engaged in the production
and manufacture of intoxicating liquors by making a declaration under Entry 52 of List I,
since the said Entry governs only Entry 24 in List II but not Entry 8 in List II."
152
.In Kannan Devan Hill Produce v. State of Kerala, 1972 (2) SCC 218, it was held
that a declaration under Entry 52 of the Union List in respect of the tea industry did not
debar the States from legislating to acquire land under tea cultivation under Entry 18 of
List II and Entry 42 of List III.
AIR 1972 SC 2301
153
.A Constitution Bench in Ganga Sugar Corporation Ltd. v. State of Uttar Pradesh
and others, 1980 (1) SCC 223 upheld the power of States to impose purchase tax on
sugarcane under Item 54 in the State List despite central legislation under Entry 52 of
List 1 in respect of the sugar industry. AIR 1980 SC 286
154. Another Costitution Bench in Fateh Chand v. State of Maharashtra, AIR
1997 SC 1825, had to decide the constitutional tug-of-war between the Maharashtra
Debt Relief Act, 1976 on the one hand and the Gold Control Act on the other. It was
contended that the Debt Act was void insofar as it dealt with gold loans" because
Parliament had occupied the field under Entry 52 of List I. It was also urged that there
was inconsistency between the Debt Act and the Gold Control Act and the Debt Act
could not be given effect to the extent of such inconsistency. The Court noted that the
Debt Act came squarely within Entry 33 of List II namely "money-lending and moneylenders; relief of agricultural indebtedness" and it was held that despite the fact that the
Gold Act was referable to Entry 52 of List I :
"............This does not mean that other entries in the State List become impotent
even regarding 'gold'. The State Legislature can make laws regarding money-lending
even where gold is involved under Entry 30, List II, even as it can regulate 'gambling in
gold' under Entry 34, impose sales tax on gold sales under Entry 54 regulate by
municipal laws under Entry 5 and by trade restrictions under Entry 16, the type of
buildings for gold shops and the kind of receipts for purchase or sale of precious metal.
To multiply instances is easy, but the core of the matter is that where under its power
Parliament has made a law which overrides an entry in the State List, that area is
abstracted from the State List. Nothing more."
155
.It is unnecesssary to multiply instances of the numerous decisions which have
followed the logic of Tika Ramji, and accepted its conclusion that for the purposes of
Entry 24 of List II and consequently Entry 52 of List I, 'industry' means "manufacture or
production" and nothing AIR 1956 SC 676
AIR 1999 SC 3125 : 1999 AIR SCW 3074
AIR 1970 SC 1453
@page-SC927
more. It is sufficient to note that Tika Ramji's definition of industry has been
affirmed and applied recently by Constitution Bench in Belsund Sugar Company v. State
of Bihar (supra), and is still good law, Harak Chand Banthia's, case does not strike a
discordant note.
156
.Harakchand Ratan-chand Banthia and others v. Union of India, 1970 1 SCR
479, has been cited by the appellants in support of the proposition that the negative test
laid down in Tika Ramji, and developed in Calcutta Gas, does not apply to define the
scope of Entry 52 of List I vis-a-vis Entry 27 of List II. The submission is unacceptable.
In Banthia's case, the constitution validity of the Gold (Control) Act, 1968 enacted by
Parliament was questioned. Gold had been declared to be a 'controlled' industry under
Entry 52 of List I by the Industries (Development Regulation) Act, 1951. One of the
challenges raised was that the activity sought to be controlled by the Gold Act, was not
an industry and did not come within the purview of Parliament under Entry 52 of List I.
The passage particularly relied upon by the appellants is quoted : AIR 1970 SC 1453
AIR 1956 SC 676
AIR 1962 SC 1044
AIR 1970 SC 1453
Para 7 of AIR 1970 SC 1453
"The question to be considered is what is the meaning of the word "industry" in
Entry 52 of List I, Entry 24 of List II and Entry 33 of List III. Whatever may be its
connotation it must bear the same meaning in all these entries which are so
interconnected that conflicting or different meanings given to them would snap the
connection. In the Shorter Oxford English Dictionary the word "industry" is defined as "a
particular branch of productive labour; a trade or manufacture." According to Webster's
Third New International Dictionary (1961 edn.) the word "industry" means "(a)
systematic labour especially for the creation of value; (b) a department or branch of a
craft, art, business or manufacture, a division of productive and profit making labour
especially one that employs a large personnel and capital especially in manufacturing;
(c) a group of productive or profit making enterprises or organisations that have a
similar technological structure of production and that produce or supply technically
substitutable goods, services or sources of income." It was said that if the word
"industries" is construed in this wide sense, Entry 27 of List II will lose all meaning and
content. It is not possible to accept this contention for, Entry 27 is a general Entry and it
is a well-recognised canon of construction that a general power should not be so
interpreted as to nullify a particular power conferred by by the same instrument. In Tika
Ramji v. State of Uttar Pradesh, 1956 SCR 393 the expression "industry" was defined to
mean the process of manufacture or production and did not include raw materials used
in the industry or the distribution of the products of the industry. It was contended that
the word "industry" was a word of wide import and should be construed as including not
only the process of manufacture or production but also activities antecedent thereto
such as acquisition of raw materials and subsequent thereto such as disposal of the
finished products of that industry. But this contention was not accepted. It was
contended by Mr. Daphtary that if the process of production was to constitute "industry"
a process of machinery or mechanical contrivance was essential. But we see no reason
why such a limitation should be imposed on the meaning of the word "industry" in the
legislative lists. Similarly it was argued by Mr. Palkhivala that the manufacture of gold
ornaments was not an industry because it required application of individual art and
craftsmanship and aesthetic skill. But mere use of skill or art is not a decisive factor and
will not take the
AIR 1956 SC 676
@page-SC928
manufacture of gold ornaments out of the ambit of the relevant legislative entries.
It is well settled that the entries in the three lists are only legislative heads or fields of
legislation and they demarcate the area over which the appropriate legislature can
operate. The legislative entries must be given a large and liberal interpretation, the
reason being that the allocation of subjects to the lists is not by way of scientific or
logical definition but is a mere enumeration of broad and comprehensive categories. It is
not however necessary for the purpose of this case to attempt to define the expression
"industry" precisely or to state exhaustively all its different aspects. But we are satisfied
in the present case that the manufacture of gold ornaments by goldsmiths in India is a
"process of systematic production" for trade or manufacture and so falls within the
connotation of the word "industry" in the appropriate legislative entries. It follows
therefore that in enacting the impugned Act Parliament was validly exercising its
legislative power in respect of matters covered by Entry 52 of List I and Entry 33 of List
III." (Emphasis mine)
157
.The decision cannot be read as whittling down or deviating from the reasoning
or the definition of the word industry in Tika Ramji. It does not seek to do so. Indeed the
Court re-affirmed the definition of industry in Tika Ramji. The observation relating to
Entry 27 of List II must be understood in relation to the language of the entry which
reads :
AIR 1956 SC 676
"Production, supply and distribution of goods subject to the provisions of Entry 33
of List III."
158
.This provides for States to generally legislate on production, supply and
distribution of goods. Entry 33 of List III deals particularly with the production, supply
and distribution of the products of industries where the control of such industry by the
Union is declared by law to be expedient in the public interest under Entries 7 or 52 of
List I. It would not have been necessary to have especially provided for trade and
commerce in, and the production, supply and distribution of the products of a controlled
industry in Entry 33 of List III, had the word 'industry' in Entries 7 and 52 of List I
covered the field. Similarly had the word 'industry' in Entry 24 of List II been sufficient,
why have a separate head under Entry 27 of the same list dealing with the production,
supply and distribution of goods unless we concede that the framers of the Constitution
were guilty of 'ineptitude, want of precision and tautology'? The concept of a 'general'
and 'particular' term is necessarily relative depending upon the context in which the term
is considered. Entry 27 of List II is certainly a general entry but only in relation to Entry
33 of List III which deals with trade, commerce etc. in particular kinds of products
namely the products of a controlled industry. Finally, it is clear from the passage quoted,
that Banthia, held that the Gold Act was legislatively competent under Entry 52 of List I
because it dealt with the process of manufacture or production of gold i.e., it was within
the sweep of industry as defined in Tika Ramji. AIR 1970 SC 1453
AIR 1956 SC 676
159
.The appellants' submission that Tika Ramji narrowly construed the word
because the decision was rendered in the context of the Industrial (Development
Regulation) Act, 1951 proceeds on a mis-appreciation of the decision. Merely because
Tika Ramji found that the particular Central enactment under consideration was under
Entry 33 of List III and not Entry 52 of List I does not limit or detract from its authoritative
pronouncement on the scope of Entry 52 of List I. The finding in fact formed the basis of
the conclusion that the provisions of the Central Act in question did not fall within Entry
52 of List I. What was construed was the ambit of Entry 52 of List I and the range of a
declaration under that entry. That the declaration was contained in the Industries
(Development and Regulation) Act, 1951 was AIR 1970 SC 1453
@page-SC929
inconsequential and could not colour the scope of the entry itself. It is significant
that Banthia's case, which according to the appellants accepted a wider meaning of
'industry', was also a case in which the relevant declaration under Entry 52 of List I was
under the Industries (Development and Regulation) Act.
160
.Banthia's case has been considered and explained in the subsequent decision
of the Constitution Bench in M/s. Fatehchand Himmatlal and others v. State of
Maharashtra, 1977 (2) SCC 670. With specific reference to Banthia's case, the Court
held : AIR 1970 SC 1453
AIR 1977 SC 1825 at p. 1846, para 60
"....We see nothing in that decision which contradicts the position that while the
Gold Control Act fell within Entry 52 of List I the State List was not totally suspended for
that reason for purposes of legislating on subjects which fell within that List, but
incidentally referred also to gold transactions."
161. To add to the persuasive force of their arguments, the appellants then put
forward what can only be described an argument of alarm. It was contended that if a
narrow view of industry were taken, then despite a declaration by Parliament under
Entry 7 of List I that an industry was necessary for the purpose of defence of the country
or for the prosecution of war, Parliament would not be cmpetent to legislate on the
supply of raw materials or distribution of the finished product. Such an argument is
hardly relevant to a question of construction. In any case it overlooks the superior
powers of Parliament under Entry 33 of List III and the overriding powers of Parliament
during a national emergency including those under Articles 249, 250, 251 and 252.
162
.To sum up the word 'Industry' for the purposes of Entry 52 of List I has been
firmly confined by Tika Ramji to the process of manufacture or production only.
Subsequent decisions including those of other Constitution Benches have re-affirmed
that Tika Ramji's case authoritatively defined the word 'industry' to mean the process of
manufacture or production and that it does not include the raw materials used in the
industry or the distribution of the products of the industry. Given the constitutional
framework, and the weight of judicial authority it is not possible to accept an argument
canvassing a wider meaning of the word 'industry'. Whatever the word may mean in any
other context, it must be understood in the Constitutional context as meaning
'manufacture or production'.
AIR 1956 SC 676
163
.Applying the negative test as evolved in Tika Ramji in this case it would follow
that the word 'industry' in Entry 24 of List II and consequently Entry 52 of List I does not
and cannot be read to include Entries 28 and 66 of List II which have been expressly
marked out as fields within the State's exclusive legislative powers. As noted earlier
Entry 28 deals with markets and fairs and Entry 66 with the right to levy fees in respect
of, in the present context, markets and fairs. Entry 52 of List I does not override Entry 28
in List II nor has Entry 28 in List II been made subject to Entry 52 unlike Entry 24 of List
II. This Court in Belsund Sugar (supra) has also accepted the argument that Entry 28 of
List II operated in its own and cannot be affected by any legislation pertaining to
industry as found in Entry 52 of List I.
AIR 1999 SC 3125 : 1999 AIR SCW 3074
164. If 'industry' does not include 'markets and fairs' it is important to define what
markets and fairs connote. 'Market' may strictly be defined as "the meaning or
congregating together of people for the purchase and sale of provisions or livestock,
publicly exposed, at a fixed time and place"10. A 'fair' has been judicially defined as
meaning 'a periodical concourse of buyers and sellers in a place generally for sale and
purchase..............at times or on occasion ordained by custom11. The distinction
between markets and fair appears to lie in the periodicity viz. while a market may be a
@page-SC930
regular or permanent place of business, a fair is an intermittent one. At common
law, fairs and markets were also franchises or rights to hold a concourse of buyers and
sellers to dispose of the commodities in respect of which the franchise is given.12 This
included the right to levy a toll or sum payable by the buyer upon sales of articles in a
market.13 The sense in which the word has been used in Entry 28 appears to cover not
only such right but the market place itself including the 'concourse of buyers and sellers'
and the regulation of all these.
10. Oxford English Dictionary.
11. Amritsar Muncipality v. State of Punjab, AIR 1969 SC 1100, 1104.
12. Halsbury's Law of England (4th Edn.) Vol. 29 para 601.
13. Ibid, para 629.
165
.The word "Markets" has also found place in Entry 48 of List I which reads "Stock
Exchanges and future markets". A Constitution Bench of this Court in Waverly Jute Mills
Co. Ltd. v. Raymon Co. (India) Private Ltd., (1963) 3 SCR 209 rejected the submission
that the word "markets" must be restricted to "a place set apart for the meeting of the
general public of buyers and sellers, freely open to any such to assemble together,
where any seller may expose his goods for sale and any buyer may purchase". AIR
1963 SC 90
It was held that :
"Market no doubt ordinarily means a place where business is being transacted.
That was probably all that it meant at a time when trade was not developed and when
transactions took place at specified places. But with the development of commerce,
bargains came to be concluded more often than not through correspondence and the
connotation of the word 'market' underwent a corresponding expansion. In modern
parlance the word 'market' has come to mean business as well as the place where
business is carried on."
166. The question then is, does the Markets Act fall within this definition of the
word 'markets'? The establishment of regulated markets had long been recognized as
an imperative requirement of any ordered plan of agricultural development in this
country.14 The objects and reasons for enacting the Bihar Markets Act, 1960 has been
stated as : properly organising markets of agricultural and allied commodities to ensure
that the agriculturist gets a fair share of the price paid by the consumer for his produce
by attempting to do away or rigidly controlling the middle man. What was originally a
source of private profit in common law, has by virtue of the Markets Act become a
matter of Municipal concern namely, setting up of regulated markets for the marketing of
agricultural produce.
14 (Vide Report of the Royal Commission on Agriculture in India (1928)
167. The provisions of the Markets Act are briefly noted. The Markets Act
provides for the issuance of a notification under Section 3 by the State Government
declaring its intention of regulating the purchase, sale, storage, processing of specified
agricultural produce in that area. "Agricultural produce" has been defined in Section 2(6)
as :
"all produce whether processed or non-processed, manufactured or not, of
Agriculture, Horticulture, Plantation, Animal Husbandry, Forest, Sericulture, Pisciculture,
and includes livestocks or poultry as specified in the Schedule."
168. Tobacco has been mentioned at Item XI in the Schedule. Under Section 4
the State Government declares the area specified as a market area for the purpose of
the Markets Act. From the date of the declaration, under Section 4 no person or
authority can establish or continue or be allowed to set up any place for the purchase,
sale, stores or processing of any notified agricultural produce except in accordance with
the provisions of the Markets Act. Under Section 5 the State Government may declare
by notification any building or locality in any market area to be the principal market yard.
Sections 6 to 15 and 17 to 27-A deal with the setting up of Market Committees, their
constitution and functions. These Market Committees are subject to the
superintendence and control of the Bihar Agricultural Marketing Board set up under
Section 33A of the Markets Act.
@page-SC931
169. Section 1515 prohibits notified agricultural produce from being bought or
sold by any person at any place in the market area other than the relevant principal
market yard or sub-market yard or yards established therein unless it is for retail sale,
personal consumption or exempted by the Marketing Board under Section 15(1) or (2).
The mode of purchase and sale specified under Section 15(2) is by means of open
auction or tender system. Sub-section (2) of Section 18 specifically authorises the
Market Committee to issue licences to persons engaged in the processing, storage or
processing of agricultural produce to operate in the market area and also to control and
regulate the admission of persons into the market yard or the sub-market yards and to
prosecute persons trading without a valid licence. Section 27 empowers the Market
Committee to levy and collect market fee from the buyer on the agricultural produce
bought or sold in the market area at specified rates. The remaining sections of the
Markets Act are omitted from consideration as they are not at all relevant. We are really
concerned with Section 15 and more particularly Section 27. The setting up of markets
areas, markets yards and regulating use of the facilities within such area or yards by
levy or market fee is a matter of local interest and would be covered by Entry 28 of List
II and thus within the legislative competence of the State. If any portion of the market
area or the market yards is used for the sale or purchase of tobacco, that too will be
within the State's competence. To hold to the contrary would be to ignore the exclusive
powers of the States to legislate in respect of markets and fairs under Entries 28 and 66
of List II. The Markets Act does not seek to regulate either the "manufacture or
production" of tobacco (assuming that agricultural produce can be manufactured) and
thus does not impinge upon the Tobacco Act insofar as it is at all relatable to Entry 52 of
List I. All the provisions of the Markets Act, in my view, are clearly relatable to Entry 28
of List II given the scope of the entry as discussed earlier. The State in the
circumstances, was not incompetent to incidentally also legislate with regard to tobacco
and "the semantic sweep of Entry 52 did not come in the way of the State Legislature
makng laws on subjects within its spehere and not directly going to the heart of the
industry itself".16In my opinion therefore Sections 15 and 27 of the Markets Act in pith
and substance are relatable to Entries 28 and 66 of List II and have been competently
enacted by the State. Incidentally it is nobody's case that the fee charged under Section
27 does not represent a quid pro quo for the services rendered and facilities afforded in
the market area. It follows that Parliament is incompetent to legislate for the setting up
or regulation of 'markets and fairs' within the meaning of the phrase in entry 28 of List II,
even in respect of tobacco. It may of course incidentally trespass into the States
Legislative field, provided (1) the trespass is an inseparable part of the provisions validly
passed and (2) the State has not already fully occupied its field with conflicting statutory
provisions.
15 Sale of Agricultural produce(1) No agricultural produce, specified in notification under sub-section (1) of
Section 4 shall be brought or sold by any person at any place in the market area other
than the relevant principal market yard or sub-market yard or yards established therein
except such quantity as may on this behalf be prescribed for retail or sale or personal
consumption.
(2) The sale and purchase of such agricultural produce in such area not
withstanding anything contained in any law be made by means of open auction or
tender system except in cases of such class or description of produce as may be
exempted by the Board.
16. Ganga Sagar Corporation Ltd., v. State of Uttar Pradesh, 1980 -1 SCC 223.
AIR 1980 SC 286
170. Let us consider the scope of the Tobacco Act. The Statement of Objects
and Reasons of the Tobacco Act shows that the enactment was necessary in view of
the fact that India is the third largest producer of tobacco in the world, the sixth largest
among the tobacco exporting countries and the second largest exporter of virginia
tobacco. The manifest intention of Parliament was to take measures to ensure that the
tobacco particularly virginia tobacco met the demands of the markets in India and
abroad both qualitatively and quantitatively. The Act
@page-SC932
which extends to the whole of India has however not been brought entirely into
force in all the States. Chapter I contains the first three Sections. Section 1, sub-section
(3) provides for the Act coming into force on such dates as the Central Government
may, by notification in the Official Gazette,appoint; provided that different dates may be
appointed for different provisions for the Act and for different States or different parts
thereof. Section 2 contains the necessary declaration in terms of Entry 52 List I in
relation to the tobacco industry.
171. Chapter II of the Act consists of Sections 4 to 8 and deals with the
establishment and functions of the Tobacco Board. Section 8 (1) casts a 'duty on the
Board to promote the development of the tobacco industry'. Sub-section (2) prescribes
some specific measures which may be taken by the Board. Those which are of
relevance are noted :
"(8)(2)(a). . . . . . . . . . . . . .
(b) keeping a constant watch on the virginia tobacco market both in India and
abroad, and ensuring that the growers get a fair and remunerative price for the same
and that these are no wide fluctuations in the prices of the commodity;
(c) maintenance and improvement of existing markets, and development of new
markets outside India for Indian virginia tobacco and its products and devising of
marketing strategy in consonance with demand for the commodity outside India,
including group marketing under limited brand names;
(cc) establishment by the Board of auction platform with the previous approval of
the Central Government for the sale of virginia tobacco by registered grower or curers
and functioning of the Board as an auctioneer at auction platform established by or
registered with it subject to such conditions as may be specified by the Central
Government.
.....................
(e) regulating in other respects virginia tobacco marketing in India and export of
virginia tobacco having due regard to the interests of growers, manufacturers and
dealers and the nation;
.....................
(g) purchasing virginia tobacco from growers when the same is considered
necessary or expedient for protecting the interests of the growers and disposal of the
same in India or abroad as and when considered appropriate;
. . . . . . . . . . . . . . . . . . . ."
172. Sections 10 to 15 are in Chapter III which deals with Regulation of
Production and Disposal of Tobacco, for registration/licensing not only of the growers
including nursery growers (Sections 10,10-A) but also curers (Section 11), processors
and manufacturers (Section 11-A) graders and storers (11-B), and exporters, dealers,
packers or auctioneers (Section 12).
173. Of particular relevance are Sections 13 and 13A which provide for virginia
tobacco to be sold at registered auction platforms or auction platforms established by
the Board, and places a duty on registered dealers and exporters to purchase tobacco
only at such auction platforms. However in those States in which Section 13 is not in
force, under Section 13B dealers purchasing virginia tobacco must pay the full price for
the whole quantity and are restricted from taking recourse to any such practice which
may be specified as unfair by the Board.
174. Section 14 deals with the forms for registration and Section 15 with the
power of inspection to ascertain whether the particulars in the forms are correct. Apart
from these sections, according to the appellants, Section 14-A in particular occupies the
field with respect to levy of fees on the sale of tobacco. It reads :
"14-A(1). Where virginia tobacco is sold at any auction platform established by
the Board under this Act it shall be competent for the Board or for any officer of the
Board authorised by it in this behalf to levy fees, for the services rendered by the Board
in relation to such sale,at such rate not exceeding two per cent of the value of such
tobacco as the Central Government may from time to time, by notification in the Official
Gazette, specify;
(2) The fees levied under sub-section (1) shall be collected by the Board or such
officer equally from the seller of the Virginia tobacco and the purchaser of such tobacco,
in such manner as may be prescribed."
175. The contentions of Chapters IV and
@page-SC933
V of the Act need not detain us as they deal with aspects far removed from the
Markets Act. Of the last Chapter viz. Chapter VI, two Sections are noteworthy viz.
Seciton 30(1) which allows the Central Government to suspend provisions of the Act in
respect of certain territories and Section 31 which reads :
31. The provisions of this Act shall be in addition to, and not in derogation of, the
provisions of any other law for the time being in force."
176. The object of the Tobacco Act is to keep a control on the quality and
quantity of tobacco grown in the country with an eye on the international markets. The
location of domestic markets for sale of tobacco can hardly be described as a
necessary concomitant to the achievement of this object. Assuming it is, fairly read, it is
possible to reconcile the allegedly conflicting provisions of the two statutes by a
reasonable and practical construction of their provisions. The use of the word "markets"
and marketing in the Tobacco Act, including Section 8 does not mean a market in the
sense the word has been used in the Markets Act. It is obvious from phrases such as
'the Virginia Tobacco market", 'development of new markets outside India' etc. that the
word has been used in the sense of 'sale as controlled by supply and demand,
especially a demand for a commodity or service"17 in this case tobacco. The Tobacco
Act is not concerned so much with the 'where' but with the 'how', the tobacco is
disposed of. Even when the Tobacco Act speaks of setting up of auction platforms it
does not indeed it could not say where the auction platforms are to be set up.
17. The New Shorter Oxford English Dictionary.
177. Since States are exclusively competent to decide on the location of markets,
the authorities under the Tobacco Act would have to comply with the municipal laws and
set up the auction platforms only within the permissible areas. If the facilities afforded
under the Market Act are utilised, the facilities will have to be paid for and the authorities
appointed to levy and collect fees for the purpose under the Markets Act would be
competent to do so. If further facilities are offered at the Auction Platforms under the
Tobacco Act, fees may be levied under S.14-A of that Act. The right to levy under the
two Acts therefore may not necessarily conflict, the levy not being in the alternative but
additional. Assuming this is not possible and there is any conflict, the provisions of the
Markets Act and not the Tobacco Act would prevail.
178. Even if Ss. 15 and 27 of the Markets Act are not referable to Entries 28 and
66 of List II and are referable to Entries 26 and 27 of List II- nevertheless these Sections
of the Markets Act do not trespass on turf reserved by Parliament under Entry 52 of List
I ? State legislation on the supply and distribution of goods as well as trade and
commerce therein which are relatable to Entries 26 and 27, is only subject to the
Central enactment if any under Entry 33 of the Concurrent List and not Entry 52 of List I.
Furthermore, whether or not any portion of the Tobacco Act relates to an "industry'
within the meaning of Entry 52 List I, following the logic of Tika Ramji at least those
provisions relating to the disposal of tobacco are not so relatable. The declaration under
Entry 52 List I does not cover these provisions and the States were free to legislate
under Entries 26 and 27 of List II on tobacco. I do not propose to decide whether the
provisions of the Tobacco Act dealing with the sale of tobacco may be sustained with
reference to Entry 33 of List III. It is an unnecessary exercise because the appellants
did not argue this, and also because, as I have said earlier, the Constitutional validity of
the provisions of the Tobacco Act has not been referred to this Bench for scrutiny.
179
.Assuming that Chapter III of the Tobacco Act are covered by Entry 52 of List I,
nevertheless the Parliament did not intend to invalidate any portion of the Markets Act. It
has consciously clarified by S. 31 that it does not intend to occupy the entire field and
has 'made space' for the State legislation and made it clear that the provisions of the
Central Act shall be in addition to and not in derogation of any other law. The Section
assumes greater significance since most of the Markets Acts were in place when the
Tobacco Act was enacted. There are two ways in which such a saving clause as is
contained in S. 31 of the Tobacco Act may be understood. There is the way which
AIR 1979 SC 898 : 1979 CriLJ 773
@page-SC934
found favour with this Court in M. Karunanidhi v. Union of India : 1979 (3) SCC
431 which held that such a section clearly evinced the intention of the dominant
legislature leaving "no room for any argument that the State Act was in any way
repugnant to the Central Act." There is the other way of reading such a section in the
dominant legislation as incorporating or taking under its legislative umbrella the
allegedly conflicting provisions of the subservient statute. Either way, the express words
in S. 31 coupled with the duty of Courts to reconcile and uphold legislation, if possible,
can only result in upholding the constitutional validity of the Market fee imposed by the
State.
180
.A further compelling circumstance to uphold the levy of market fee is the fact
that several provisions of Chapter III of the Tobacco Act particularly those dealing with
the setting up of auction platforms namely Ss. 13 and 13A, and S. 14A relating to the
levy of fees on the sale of tobacco have not been brought into operation in any State in
India except for the State of Karnataka. I have already stated the reasons why the
provisions relating to sale of tobacco in the Tobacco Act do not come within the
definition of 'industry' and are not covered by the declaration under Entry 52 of List I.
But granting for the sake of argument that the sale of tobacco comes within the
definition of industry until the Central Government chooses to actually occupy the field
by effective legislation, it would remain open for the State Legislature to cover that field
under Entry 24 of List II. It is difficult to adopt an interpretation which would debar the
States from the right to provide for the sale of tobacco only within market Areas and levy
market fees although Parliament does not now and may never seek to bring Ss. 13, 13A
and 14A into operation in those States. This view finds support in the pronouncement of
a Constitution Bench in Ishwari Khetan Sugar Mills (P) Ltd. v. State of Uttar Pradesh
(supra) when it was construing the impact of a declaration under Entry 52 of List I, it
was said that legislation for assuming control containing the declaration under Entry 52
of List I must spell out the limit of control so assumed by the declaration. Therefore, the
degree and extent of control that would be acquired by Parliament pursuant to the
declaration would necessarily depend upon the legislation enacted spelling out the
degree of control assumed.
AIR 1980 SC 1955
181
.In Belsund Sugar (supra), one of the controversies raised related to a conflict
between the provisions of the Markets Act and the Tea Act, 1953. There too, the Tea
Act envisaged that an order might be passed under S. 30 relating to the sale and
purchase of tea. The contention that the mere possibility of issuance of such a control
order under S. 30 of the Tea Act sufficient to oust the State Legislature from the field,
was negatived in the following words : AIR 1999 SC 3125 : 1999 AIR SCW 3074
"...mere possibility of issuance of any future order under S. 30(1) of the Tea Act
by the Central Government in the absence of any existing express order to that effect,
cannot be said to have occupied the field regarding purchase and sale of manufactured
tea and fixation of maximum or minimm price thereof, or the location of such sales.
These topics cannot be said to be legitimately covered by the Tea Act. Hence, the field
is wide open for the State Legislature to exercise its concurrent legislative power under
Entry 33 of List III for effectively dealing with these matters."
182. Therefore, even if one were to concede that there is a conlict between the
provision in the Markets Act prohibiting sale of tobacco otherwise than in a market area
and the setting up of auction platforms under the Tobacco Act, and between the States
power to levy market fee under the Markets Act and the levy of fee on the sale of
tobacco under the Tobacco Act, at least in those States where Ss. 13, 13A and 14A of
the Tobacco Act are not operative, the provisions of the Markets Act must prevail.
183
.It now remains for me to answer the question which was referred to this Bench,
namely whether ITC Ltd. v. State of Karnataka (supra) has been
1985 Supp (1) SCR
145
@page-SC935
rightly decided. The majority opinion on the issue of legislative competence of the
State Legislature was delivered by Fazal Ali, J. In striking down that part of the
Karnataka Markets Act which provided for the power to levy market fee on tobacco and
its products, the opinion was based on six premises, each of which do not appeal to be
in consonance with the law.
First - The Court proceeded on the basis that the Tobacco Act wholly and solely
relatable to Entry 52 of List 1. I have already given my reasons for holding that the
Tobacco Act insofar as it deals with the disposal of tobacco is not within Entry 52 of List
I.
Second - Article 246(4) was relied on to hold that Parliament had overriding
power "to legislate in exceptional cases in matters appearing in the State List". Article
246(4) has no manner of application to the present dispute. It reads :
"(4) Parliament has power to make laws with respect to make any matter for any
part of the territory of India not included in a State notwithstanding that such matter is a
matter enumerated in the State List."
The Sub-Article only deals with the power of Parliament to make laws in respect
of Union Territories even in respect of matters enumerated in the State List.
Third- It was held to be "well settled that where two Acts, one passed by the
Parliament and the other by State Legislature collide and there was no question of
harmonizing them, then the Central Legislation must prevail". What is well settled is that
if the Parliament and the State legislature enact confliciting legislation in respect of the
same subject-matter under an Entry in the Concurrent List then only will the Central
Legislation prevail. In other cases it will be a question of whether the conflicting
legislation is referable to an exclusive entry under the State List or the Union List, after
the determination of which, the dominant legislation will prevail.
Fourth - It was said that if the minority view (expressed by Mukharji-J) were
accepted, it would "amount to robbing the 1975 Act of its entire content and essential
import by the handing over the power of legislation to the State Government which per
se has been taken over by the Parliament under Article 246 by the 1975 Act". MukharjiJ had in fact followed Tika Ramji and held correctly that the Tobacco Act and Markets
Act operated in their respective fields and that there was no repugnancy if both the Acts
were considered in the light of their respective true nature and character. Tika Ramji
and the other Constitution Bench decisions following it were not even referred to by the
majority.
Fifth- In determining the impact of Entry 52 of List I vis a viz entry 28 of List II, the
majority relied on decisions dealing with Entry 54 of List I, and Entry 23 of List II. The
scope of the entries are different and I agree with the view expressed in the opinion of
my learned Brother Pattanaik, J. that the decisions relied upon by the majority viz the
Hingir Rampur Coal Co. Ltd. v. State of Orissa; AIR 1961 SC 459, Baijnath Kedia v.
State of Bihar : 1969 (3) SCC 838; Bharat Cooking Coal Ltd. v. State of Bihar 1990 (4)
SCC 557 and State of Orissa v. M.A. Tullock Co. : 1964 (4) SCR 461 are inapposite.
AIR 1970 SC 1436
AIR 1964 SC 1284
The final premise on which the majority based their view that the States could not
levy any market fee on Tobacco, was that since the assent of the President was not
taken, the Karnataka Markets Act 1980, was wholly incompetent. The view proceeds on
a misinterpretation of Article 254(2), which in any event has no application to this case.
Article 254(2) provides :
"(2) Where a law made by the Legislature of a State with respect to one of the
matters enumerated in the Concurrent List contains any provision repugnant to the
provisions of an earlier law made by Parliament or an existing law with respect to that
matter, then, the law so made by the Legislature of such State shall, if it has been
reserved for the consideration of the President and has received his assent, prevail in
that State."
184. The language is clear. It only deals with the question of supremacy and not
competence. In respect of conflicting legislation under the Concurrent List, if the State
Legislation has received the assent of the President, it will prevail over the Central
Legislation in that State. The Article does not
@page-SC936
provide that State Legislation without the assent of the President is incompetent.
185
.In the circumstances I would hold that ITC v. State of Karnataka (Supra) was
wrongly decided and would for the reasons discussed uphold the competence of the
State Legislatures to levy market fee on tobacco.
1985 Supp (1) SCR 145
186. BRIJESH KUMAR, J. :- I have the privilege of going through the judgments,
separately prepared by my esteemed colleagues Brother G.B. Pattanaik, Brother Y.K.
Sabharwal, and Mrs. Ruma Pal, JJ.
187
.In all the three judgments, the facts as well as the relevant provisions of the law
and the decisions on the subject have been very elaborately and lucidly discussed.
Hence, it would not be necessary to go into those matters all again. The main question,
however, which has been considered is as to whether the case ITC Ltd. v. State of
Karnataka 1985 Supp. 1 SCR 145 has been correctly decided or not. In the above cited
case, it has been held that once Tobacco Industry, in the public interest, was declared
as such under Entry 52 of List 1 of VIIth Schedule of the Constitution, the State
Legislatures ceased to be competent to legislate on the subject viz. Tobacco Industry, in
conflict with the laws made by the Parliament, namely, the Tobacco Board Act 1975.
The State Act of Karnataka levying market fee on sale of tobacco in the market area
was thus held to be invalid. The whole legislative field in relation to the subject of
tobacco including its sale as an agricultural produce was held to have vested in the
Parliament. While holding so reliance was placed on the decisions of this Court reported
in State of Orissa v. M.A. Tullock Co. 1964 (4) SCR 461 and Baij Nath Kedia v. State
of Bihar and others 1969 (3) : AIR 1970 SCC 838. Mr. Justice Mukherjee, however took
a different view holding that both Acts namely the Tobacco Board Act 1975 and the
Karnataka Agricultural Produce Market Act could operate together without offending
each other. Therefore, the other question for consideration before this Bench has been
as to whether provisions of the two Acts viz. Tobacco Board Act and State Act could
operate together or not.
AIR 1964 SC 1284
AIR 1970 SC 1436
188. Different States namely Bihar, U.P., Tamil Nadu and others have similar
State Legislations levying market fee on sale of agricultural produce including Tobacco.
The same question arose for consideration in respect of these States as well, in one
way or the other.
189
.Borther Pattanaik, in his judgment has found that the ITC case (supra) correctly
decided, though reasons for holding so were slightly different than the reasons on the
basis of which the judgment was rendered in the ITC case. It has been further held that
once Parliament takes over the control of a particular industry in the interest of the said
industry as well as in the national interest, the control should be effective and should be
in such a manner that the desired object can be achieved. Therefore, whole legislative
field was open to the Parliament to legislate on the subject of tobacco industry including
growing of tobacco as well as its sale and purchase. It has also been held that in any
case, entrenching into the legislative field of an entry in the other list on a matter which
may be ancillary or incidental thereto, would not invalidate the legislation. On the other
question it has been found that the two Acts namely Tobacco Board Act 1975 and the
State Agricultural Produce Marketing Act cannot operate simultaneously. 1985 Supp
(1) SCR 145
190
.Brother Sabharwal, J., has broadly held that the decision in Tikka Ramji v. State
of UP (1956) SCR 393 holds good for the purposes of meaning to be assigned to the
expression 'industry'occurring in Entry 52 of List I.
AIR 1956 SC 676
@page-SC937
The pre-manufacture activity relating to growing and sale of tobacco cannot be
subject matter of legislation by the Parliament by virtue of declaration of tobacco
industry under Entry 52 of List I of the VIIth Schedule. The power of State legislation to
legislate on the subject in the List II of the VIIth Schedule e.g. Entries 14, 28 etc.
remains unaffected. It has also been held that the State Act and the Central Act cannot
operate simultaneously whereas Hon'ble Ruma Pal J. has also found that power of the
State Legislature to make laws relating to tobacco as asgricultural produce, its sale and
levy of market fee was not affected since it cannot be said to be covered by the
expression"industry" in Entry 52 of List-I of the VIIth Schedule. The I.T.C. case (supra)
has been held to be wrongly decided. It has however been held that the tobacco Board
Act 1975 and the State Act can simultaneously operate without offending each other. In
case it may not be possible, the provisions of Markets Act and not the Tobacco Act
would prevail.
191
.As noticed earlier the majority view in the ITC case (supra), has been upheld in
the judgment of Brother Pattanaik, on slightly different reasoning and the decisions of
this Court in M.A. Tullock and Baij Nath Kedia (supra), dealing with legislation on Mining
and relied upon in the majority judgment of ITC case (supra) have been found to be not
relevant for the decision. It is true, while legislating on any subject covered under an
entry of any list, there can always be a possibility of entrenching upon or touching the
field of legislation of another entry of the same List or another List for matters which
may be incidental or ancillary thereto. In such eventuality, inter alia, broad and liberal
interpretation of an entry in the list may certainly be required. An absolute or watertight
compart-mentalization of heads of subject for legislation may not be possible but at the
same time entrenching into the field of another entry cannot mean its total sweeping off
even though it may be in the exclusive List of heads of subjects for legislation by the
other Legislature. As in the present case the relevant heads of subject in List II, other
than entry 24, cannot be made to practically disappear from List II and assumed to have
crossed over in totality to List I by virtue of declaration of Tobacco Industry under Entry
52 of List I, in guise of touching or entrenching upon the subjects of the List II.
1985
Supp (1) SCR 145
AIR 1964 SC 1284 and AIR 1970 SC 1436
192. I therefore, append my full agreement with the conclusions and judgment of
Brother Sabharwal J. on all points.
BY THE COURT
193. In keeping with the conclusions of the majority, expressed in the judgments
of Sabharwal, Ruma Pal and Brijesh Kumar, JJ., it is held that:
(1) ITC's case [1985 Supp. (1) SCC 476] was not correctly decided.
(2) The State legislatures are competent to enact legislation providing for the levy
and collection of a market fee on the sale of tobacco in a market area. Consequently,
the Market Acts enacted by the States are valid.
(3) The State legislations and the Tobacco Board Act, 1975, to the extent that
they relate to the sale of tobacco in market areas, cannot co-exist and the former prevail
over the latter.
194. The appeals and the writ petition are disposed of accordingly. No order as
to costs.
Order accordingly.
AIR 2001 SUPREME COURT 931 "Park Leather Industry (P) Ltd., M/s. v. State
of U. P."
= 2001 AIR SCW 757
(From : Allahabad)*
Coram : 2
V. N. KHARE AND S. N. VARIAVA, JJ.
Civil Appeal No. 11768 of 1996, D/- 14 -2 -2001.
M/s. Park Leather Industry (P) Ltd. and another, Appellants v. State of U. P. and
others, Respondents.
(A) U.P. Krishi Utpadan Mandi Adhiniyam (25 of 1964), S.2(a) - AGRICULTURAL
PRODUCE - 'Agricultural Produce' - Definition includes different commodity from one
which is included in schedule - Different commodity may come into existence by virtue
of admixture of two or more items specified in Schedule.
A perusal of S. 2(a) of the Act makes it clear that an agricultural product would be
a product which is specified in the Schedule or one which is admixture of two or more
items and would also include any such item in a processed form. It makes no difference,
for the purposes of the Act, that the concerned item is a different commodity from the
one which is included in the Schedule. It is possible that by virtue of an admixture of two
or more items or by virtue of processing a different commodity or item may come into
existence. Even though a different commodity may come into existence, it would still be
an 'Agricultural produce'. (Para 19)
(B) U.P. Krishi Utpadan Mandi Adhiniyam (25 of 1964), S.2(a), Sch.G AGRICULTURAL PRODUCE - Tanned leather - Is covered by term "hides" and "skins"
since it is derived by processing 'hide' and 'skin' - Even otherwise tanned leather is
covered by Hindi version of item 'chamra' - Tanned leather though commercially
different still remains a "hide" or a "skin" - Tanned leather is thus covered by definition of
item 'agricultural produce and can be subjected to Uttar Pradesh Mandi fee.
(Paras
20, 22)
Cases Referred :
Chronological Paras
Edward Keventer Pvt. Ltd. v. Bihar State Agricultural Marketing Board, 2000 AIR
SCW 1278 : AIR 2000 SC 1796 : (2000) 6 SCC 264 8
T.V.L.K.A.K. Anwar and Co. v. State of Tamil Nadu, 1998 AIR SCW 106 : AIR
1998 SC 518 : (1998) 1 SCC 437
6
Rajasthan Roller Flour Mills Association v. State of Rajasthan, 1993 AIR SCW
3118 : AIR 1994 SC 64
7
Krishi Utpadan Mandi Samiti v. Shankar Industries, 1993 AIR SCW 762 : 1993
Supp (3) SCC 361 (2)
15, 22
Saraswati Sugar Mills v. Haryana State Board, 1991 AIR SCW 2949 : AIR 1992
SC 224
9
State of Tamil Nadu v. Mahi Traders, AIR 1989 SC 1167 : (1989) 1 SCC 724
16, 20
Rathi Khandsari Udyog v. State of U. P., (1985) 2 SCC 485 : (1985) 2 SCR 966
14
Krishi Utpadan Mandi Samiti, Kanpur v. Ganga Dal Mill and Co., AIR 1984 SC
1870 : (1984) 4 SCC 516 13
A. Hajee Abdul Shakoor and Co. v. State of Madras, AIR 1964 SC 1729 : (1964)
8 SCR 217 5, 6
Union of India v. Delhi Cloth and General Mills Co. Ltd., AIR 1963 SC 791
10Sudhir Chandra, Sr. Advocate, A. P. Sinha, Achintya Dwivedi, P. Niroop, Ms.
Nandini Gore, Advocates, with him for, Appellants; Pradeep Misra, Advocate, for
Respondents.
* C.M.W.P. No. 18535 of 1987, D/- 10-7-1996 (All).
Judgement
S. N. VARIAVA, J. :- This Appeal is against a judgment dated 10th July, 1996. By
this judgment a number of writ petitions filed before the Allahabad High Court have
been dismissed.
2. The petitioners in all the writ petitions were doing the business of preparing
tanned and finished leather. The question involved in all the four petitions was whether
'tanned leather' can be subjected to Uttar Pradesh Mandi Fee payable under the
provisions of U. P. Krishi Utpadan Mandi Adhiniyam, 1964 (hereinafter for the sake of
convenience called the said Act).
3. For an understanding of this question it is necessary to see Section 2 (a) of the
said Act which reads as follows :
"'Agricultural produce' means such items of produce of agriculture, horticulture,
viticulture, apiculture, sericulture, pisciculture, animal husbandry or forest as are
specified in the Schedule, and includes admixture of
@page-SC932
two or more of such items, and also includes any such item in processed form,
and further includes Gur, Rab, Shakkar, Kandsari and jaggery".
3A. Schedule G of the said Act deals with "Animal Husbandry". Serial No. 11
thereunder includes 'hides and skins'.
4. The question which had been raised in the writ petitions and which is raised
here is whether the term 'hides and skins' includes 'tanned leather'. Mr. Sudhir Chandra
has submitted that admittedly the term 'tanned leather' has not been used either in the
Act or in the Schedule. He admits that under Section 2(a), not just the items which have
been specified in the Schedule but also an admixture of two or more such items or any
of those items in a processed form, would also be included. He, however, submits that
tanned leather is not 'hide or skin' and is not derived by processing 'hide' or 'skin'. He
submits that 'tanned leather' is a manufactured commodity. He submits that "tanned
leather" is an entirely different commodity from 'hide' or 'skin'.
5. In support of his contention that 'tanned leather' is a different commodity from
'hide' and 'skin' he relies upon a judgment of the Constitution Bench of this Court in the
case of A Hajee Abdul Shakoor and Company v. State of Madras, reported in (1964) 8
SCR 217 : (AIR 1964 SC 1729). In this case the petitioners were dealers in skins in the
State of Madras. They purchased raw skins from places both within and outside the
State of Madras, tanned those skins and sold them through their agents in Madras.
They were assessed to sales tax under the provisions of the Madras General Sales Tax
Act, 1939 and under Rules 16(2)(ii) of the Madras General Sales Tax (Turnover and
Assessment) Rules. They filed the Petition under Article 32 contending that Section 2 of
the Madras General Sales Tax (Special Provisions) Act, 1963 was ultra vires the
Constitution. That challenge was upheld on the ground that Section 2(1) discriminated
against imported hides and skins and local hides and skins. It was however held that
Rule 16(1) did not become invalid because Rule 16(2) had been held to be invalid.
Under the Rules tax was levied on sale of hides and skins in raw condition but no tax
levied on sale of hides and skins in tanned condition. Therefore, the Rules themselves
made a distinction between hides and skins in raw condition and hides and skins in
tanned condition. It was contended that hides and skins whether tanned or untanned
constituted one commodity and, therefore, there could be no tax on sales of hides and
skins in raw condition when there was no tax on sale of hides and skins in tanned
condition. It was held that they were two different commodities and constituted two
separate categories for purposes of taxation. It was so held because the two were
treated differently in the Rules.
6. Reliance was also placed upon the authority in the case of TVL K.A.K. Anwar
and Co. v. State of T. N., reported in (1998) 1 SCC 437 : (1998 AIR SCW 106 : AIR
1998 SC 518). This again was a case under the T.N. General Sales Tax Act, 1959. The
question here was whether raw hides and skins and dressed hides and skins were
different commodities. The Court following the decision in A. Hajee Abdul Shukoor and
Co. (AIR 1964 SC 1729) (supra) held that dressed hides and skins were different goods
from raw hides and skins. It may be noted that it was so held in the context of the
definition as given in Item 7 of the Second Schedule of the said Act, which provided
both for raw hides and skins as well as dressed hides and skins. Thus the Act itself
made a distinction between raw hides and skins and dressed hides and skins. It is on
that basis that the Court held that they were not the same commodity.
7. Mr. Sudhir Chandra also placed reliance in the case of Rajasthan Roller Flour
Mills Association v. State of Rajasthan, reported in AIR 1994 SC 64 : (1993 AIR SCW
3118). This was a case under the Central Sales Tax Act and the question for
consideration was whether the term "Wheat", within the meaning of Section 14(i)(iii) of
that Act, included "flour, maida and suji" which were derived from Wheat. It was held
that flour, maida and suji are different and distinct goods from wheat. It was held that
flour, maida or suji were not included in the Act and they would not fall within the term
"Wheat" as defined in the Act. It must immediately be noted that the Act only contained
the term "Wheat". That Act did not cover "Wheat" in its processed form. It is because
the Act did not cover "Wheat in a processed form" that the Court held that flour, maida
and suji were not wheat.
8. Reliance was also placed upon the
@page-SC933
judgment of this Court in the case of Edward Keventer Pvt. Ltd. v. Bihar State
Agricultural Marketing Board, reported in (2000) 6 SCC 264 : (2000 AIR SCW 1278 :
AIR 2000 SC 1796). In this case the question was whether fruit drinks "Frooti" and
"Appy" fell within the term agricultural produce under the Bihar Agricultural Produce
Markets Act, 1960. This Court held that even though these "Frooti" and "Appy" were
manufactured out of mango pulp and apple concentrate but after the mango pulp and
apple concentrates were processed and beverages were manufactured, the products
becomes entirely different from the fruits that is the mango and apple. It was held that
even though the basic character of the mango pulp and apple concentrate may be
present in beverages, but the end products were not fruits which were specified in the
Schedule. On this basis it was held that the products like "Frooti" and "Appy" were not
covered by the Item Agricultural produce as defined in Section 2(i)(a) of that Act.
9. Mr. Sudhir Chandra also relied upon the case of M/s. Saraswati Sugar Mills v.
Haryana State Board, reported in AIR 1992 SC 224 : (1991 AIR SCW 2949), for the
proposition that there is a difference between 'manufacture' and 'processing'. In this
case the question was whether an industry which manufactures sugar from sugar cane
was covered by Entry 15 of Schedule I to the Water (Prevention and Control of
Pollution) Cess Act, 1977. The relevant Entry under which the industry was sought to be
brought in was Item 15 of Schedule I which reads as "processing of animal or vegetable
products industry". This Court held, in para 13, that the term 'processing' as normally
understood would mean that even after processing the product would retain its
character. The Court held that 'processing' essentially effectuates a change in form,
contour, physical appearance or chemical combination or otherwise by artificial or
natural means. The Court held that a 'manufacture' implies a change but that every
change was not 'manufacture'. The Court held that for 'manufacture' something more
was necessary and that there must be a transformation and a new and distinct article
must emerge having a distinctive name, character or use. Based on this authority it was
submitted that tanned leather was a different article and a distinctive commodity having
a distinctive name, character and use and that tanned leather was a manufactured item.
In our view the authority would, if anything be against the appellants. Tanned leather
retains its basic character namely, it remains hide or skin, though there is some change
in form and physical appearance.
10. Lastly reliance was placed upon the case of Union of India v. Delhi Cloth and
General Mills Co. Ltd., reported in AIR 1963 SC 791. This was a case under the Central
Excises and Salt Act and the question was whether the Raw oils which were purified but
not deodorised in the process of manufacture of Vanaspati was covered by the
expression "non-essential vegetable oils" in Item 12 of Schedule I of that Act. In this
case it was held that processing cannot be equated to manufacture. It was held that the
word "manufacture" is generally understood to mean as "bringing into existence a new
substance" and does not mean merely "to produce some change in a substance". In our
view this authority would also show that in fact there is no manufacture but mere
processing of hides and skins to bring them into a tanned state.
11. Based upon the above authorities Mr. Sudhir Chandra submitted that 'tanned
leather' was not an 'agricultural produce' inasmuch as it is a different item or commodity
from hide and skin and it is an item which is not a processed form of hide or skin but an
item which is manufactured. He submits that for the above reasons the judgment of the
High Court cannot be sustained and requires to be set aside.
12. As against this Mr. Pradeep Misra submitted that definitions and meanings
given in other Acts or in the context of other Acts can be of no assistance. He submits
that one has to look at the provisions of the said Act itself. He submitted that the term
'agricultural produce' had been given a wide meaning in Section 2 (a) of the said Act.
He points out that it is a definition which is not an exhaustive definition but is an
inclusive definition. He submits that any item would be an 'agricultural produce' if it is
specified in the Schedule or if it is an admixture of two or more item specified in the
Schedule or if it is a processed form of any of the items specified in the Schedule. He
points out that in U. P. all Acts are enacted in Hindi even though an equivalent English
version is printed. He points out that in the Hindi
@page-SC934
version the terms used are 'Khal Va Chamra'. He submits that a dictionary
meaning of the term 'Chamra' is leather and therefore the Hindi version clearly shows
that leather was meant to be included. He admits that if there was a conflict between an
Hindi version and an English version then by virtue of Article 384 of the Constitution of
India the English version would prevail. He submits that if there is no conflict, then the
Hindi version can be looked at in order to determine any ambiguity or to find out if any
item is included or not.
13. In support of his submission he relies upon the case of Krishi Utpadan Mandi
Samiti, Kanpur v. Ganga Dal Mill and Co., reported in (1984) 4 SCC 516 : (AIR 1984 SC
1870). This was a case under the said Act. The question was whether 'Dal' of legume is
an agricultural produce and therefore eligible to market fee. In that case it had been
argued, as in the present case, that as 'Dal' has not been specified in the Schedule and
it was a distinct commodity no market fee could be levied. This Court held that to
resolve a controversy of this nature one has to seek light from the definition of
expression 'agricultural produce' as set out in Section 2(a) of the Act. This Court held
that no resort can be taken to decisions under entirely different statutes, such as the
sales tax laws, to find out whether the product were same or two different and
independent products commercially so recognised. It was held that it was an
indisputable canon of construction that where an expression is defined in the statute,
unless there is anything repugnant in the subject or context, the expression had to be
construed as having the same meaning assigned to it in the dictionary clause of the
statute. It was held that 'Dal' was nothing else but a whole grain split into two folds in its
processed form acquired by manufacturing process and that was therefore an
agricultural produce. After so holding this Court held as follows :
"14. This very conclusion can be reached by a slightly different route. As is wellknown, the legislative enactments in the State of U. P. are enacted primarily in Hindi
language and its official and authentic translation in English is simultaneously published.
Bearing this in mind, we turn to the notification dated April 11, 1978 specifying legumes
therein enumerated as specified agricultural produce for various Market Areas. The
heading under which various legumes are enumerated is 'Dwi Daliya Utpadan'. This
tongue twister was explained to us to mean that legume itself is Dwi Daliya Utpadan i.e.,
the whole grain is made of two folds. Ek daliya grain is without a fold. Dwi Daliya is a
grain composed of two folds and certainly not many folds. Concise Oxford Dictionary
specifies the meaning of legume to be "fruit, edible part, pod, of leguminous plant;
vegetable used for food," and 'leguminous' to mean "like of the botanical family of
pulse". And in common parlance 'pulse' connotes legume and denotes dal of legume.
Reverting however, to the heading under which legumes are enumerated in 1978
notification, it must be confessed that it clearly connotes the meaning to be given to the
whole grain and denotes dal i.e. split folds as specified agricultural produce. The Hindi
protagonists used the expression 'Dwi Daliya Utpadan' meaning thereby double folded
grain called Gram, Peas, Arhar, Moong etc. on a strict construction, the two dals i.e. two
parts forming the whole grain both are comprehended in the expression 'Dwi Daliya
Utpadan'. Therefore, it is crystal clear that while enumerating legumes in the Schedule
and reproduced in the 1978 notification to make them specified agricultural produce, the
framers intended to include both the grain as a whole and its split parts the dal. And
when the agricultural produce enumerated in the Schedule such as Gram including its
processed part is reproduced in the notification as Dwi Daliya Utpadan, the dal of each
of the legumes therein mentioned became specified agricultural produce."
It is thus to be seen that the Court derived support for its conclusion by looking at
the Hindi version of the said Act on the ground that it was well known that in the State of
U. P. enactments were in Hindi language.
14. Reliance was also placed upon the case of Rathi Khandsari Udyog v. State of
Uttar Pradesh, reported in (1985) 2 SCC 485. This was also a case under the said Act.
The question before the Court was whether 'Khandsari sugar' manufactured by an open
pan process was an agricultural produce within the meaning of the said Act. In this case
also based upon a Sugarcane (Control) Order, 1966 and U. P. Khandsari Sugar
Manufacturer's Licensing Order, 1967, both of which define 'khandsari sugar' it had
been contended that 'khandsari sugar' was a distinct
@page-SC935
and a separate commodity from 'khandsari' as defined in Section 2(a) of the said
Act and therefore no market fee could be levied on 'khandsari sugar'. This contention
was negatived and it was held that 'khandsari' was a genuis and 'khandsari sugar' was
a species and in the market both were merely known as 'khandsari'. It was held that the
word 'khandsari' was wide enough to cover 'khandsari' produced by any process
regardless of its quality or variety. It may be mentioned that a challenge to Section 2(a)
on the ground that it was discriminatory and violative of Article 14 was also repelled.
15. Reliance was also placed upon the case of Krishi Utpadan Mandi Samiti v.
M/s. Shankar Industries, reported in 1993 Supp (3) SCC 361 (2) : (1993 AIR SCW 762).
This again was a case under the said Act. The question was whether 'gur-lauta',
'raskat', 'rab-galawat' and 'rab-salawat' were 'agricultural produce' under the said Act. In
this case it was noted that sugarcane was an agricultural produce out of which juice was
extracted. The juice was then thickened by dehydration and when it reached a particular
pigment it took the form of 'rab' which is a semi-solid form of the sugarcane juice. After
boiling this 'rab' was put in a crystalliser where it was allowed to get cooled and crystals
were formed which were then rotated in the crystalliser. The crystallised rab was then
put into centrifugal machines in which through the process of infusion of sulphur, the
sugarcane juice was cleaned and whitened. The 'rab' which was not put into the
centrifugal machine but which was dehydrated and allowed to be hardened by the open
pan process became 'gur', which was sold for home consumption. The 'rab' which was
not allowed to be hardened was also sold in semi-solid form but certain persons who
wanted to make further profits put this 'rab' into centrifugal machines and by the process
of infusion of sulphur they obtained 'khandsari' in the dry powder/crystallised form and
the waste of 'rab' which was obtained in the liquid form known as 'molasses'. 'Molasses'
was further utilised by many people by boiling in the open pans and the same was again
re-processed by cleaning and dehydrating and later by sulphitation was taken in powder
form. This then was also sold in the market as inferior quality called 'rab-galawat'. It was
held that there was a further inferior quality of rab called 'rab-salawat'. The contention
was that 'gur-lauta', 'raskat', 'rab-galawat' and 'rab-salawat' were all different
commodities which were not the same as 'gur' or 'rab' and that therefore no market fee
could be levied on those commodities. This Court held that a wide interpretation had to
be given to Section 2(a) of the said Act as the meaning was exhaustive and not
restricted to the items included in the Schedule. It was held that items which came into
being in a processed form would be included. It was held that these items were
'agricultural produce' and market fee could be levied on these items.
16. Mr. Pradeep Misra then relied upon the case of State of Tamil Nadu v. Mahi
Traders, reported in (1989) 1 SCC 724 : (AIR 1989 SC 1167). He clarified that this was
a case under the Central Sales Tax Act and that he was not saying that this would
therefore be an authority for considering the definition of the term "agricultural produce"
under the said Act. He submitted that in this case certain opinions of the Ministry of
Commerce and Industry as well as glossary of terms published by the Council of
Scientific and Industrial Research had been reproduced. He stated that he was merely
bringing those portions of the judgment to the attention of the Court. In this behalf he
showed to the Court the paragraphs 6, 9, 10, 11 and 13, which read as follows :
"6. Turning to coloured leather, we may, at the outset, refer to a very important
circumstance referred to by the respondent. When the CST Act came into force on April
1, 1957, a question was raised regarding the meaning of the expression 'hides and
skins in dressed state' used in Section 14.
The matter was referred to the leather development wing of the Ministry of
Commerce and Industry which gave the following opinion :
Hides and skins are obtained from either slaughtered or dead animals. The raw
hides and skins thus obtained are known to be in the Green State. These are easily
putrescible; if proper precautions are not taken they would easily rot and decay. Since
tanneries are not always located very near the source of raw hides and skins, the
question of preserving them for a temporary period till they reach a tanning centre
assumes importance. Raw hides and skins are 'cured' by either wet salting, dry salting
or drying. In the 'cured state' the raw materials can be
@page-SC936
preserved for a temporary period. In the third stage of temporary preservation,
the hides and skins are 'pickled'. During the next stage they are tanned in which state
they can be preserved almost indefinitely. These tanned hides and skins are processed
further to yield Dressed Hides and Skins which are ready for use. 'Dressed' or finished
material could also be preserved almost indefinitely.
From the above, it will be seen that the expressing 'Hides and skins in the raw or
dressed state' refers at one end to the raw material obtained from the slaughtered or
dead animals and at the other to the tanned and finished material; the expression,
therefore, seems to include the other intermediate stages indicated in the previous
paragraphs. Dressing, according to the authoritative interpretations, would mean the
conversion of tanned hides and skins by further suitable processing into leathers of
different types which are ready for use (vide SBT/18(495)/14) of November 11, 1957).
9. Can it then be said that the view expressed above is clearly wrong? We think
not; on the contrary, it is seen to be quite correct. The statutory expression refers to
"hides and skins in a dressed state". The guidelines issued for identification of 'finished'
leather for exports by the Indian Standards Institution (ISI) refer to as many as 19
operations or processes undergone during manufacture of 'finished leather' but
'dressing' is not one of them. A glossary of terms relating to hides, skins and leather
published by the ISI in 1960 contains the following definitions :
CRUSTS : (Crust Leather) - Tanned hides and skins without any finish.
CURRYING : A series of dressing and finishing processes applied to leather after
tanning in the course of which appropriate amounts of oils and greases are incorporated
in the leather to give it increased tensile strength, flexibility and water resisting
properties.
DRESSED HIDES : Tanned hides, curried or otherwise finished, for various
purposes, such as belting, harness and saddlery, travel goods and for upholstery.
DRESSING LEATHER : Vegetable tanned hides which may be dressed to suit
the purpose for which they are to be used, such as for harness, saddlery and other
mechanical purposes.
LEATHER : The skin or hide of animals prepared by tanning, which still retains its
original fibrous structure more or less intact, but from which hair or wool may or may not
have been removed and which has been treated so as to be imputrescible even after
treatment with water.
10. The earlier glossary of such terms published by the British Standard
Institution defines 'dressing' as a "general term for the series of processes employed to
convert certain rough tanned hides and skins and/or crust leather into leather ready for
use". Also, "Leather" is defined as "a general term for hide or skin which still retain its
original fibrous structure more or less intact, and which has been treated so as to be
imputrescible even after treatment with water". The hair or wool may or may not have
been removed. Certain skins, similarly treated or dressed, and without the hair
removed, are termed 'fur'. The Dictionary of Leather Terminology published by the
Tanners' Council of America, describes leather as "the hide and skin of any animal or
any portion of such skin, when tanned, tawed or otherwise dressed for use."
11. The above definitions show that hides and skins acquire the name of
'leather', even if the hair or wool has not been removed therefrom, as soon as they
receive some treatment which prevents them from putrefaction after treatment with
water. Dressing is a stage much later than tanning. Indeed, from the definitions quoted
above, it will be seen that it is practically the same as giving finishing touches to the
leather and making it suitable for the manufacture of particular types of goods.
13. The same conclusion is further borne out by the literature referred to before
us by Sri Ramachandran. Volume 7 of the Encyclopaedia Britannica, under the word
"dress", explains that the verb has various applications which can be deduced from its
original meaning and that "it is thus used not only of the putting on of the clothing but of
the preparing and finishing of leather...". Volume 17, under the head "leather" details the
various processes applied in the treatment of hides and skins at all stages, pre-tanning,
tanning and post-tanning. Dyeing or colouring is a process which follows tanning but
precedes "finishing : (i.e. dressing) in order to make it suitable for the purpose which it
@page-SC937
is required in commercial usage. Part V of the "Wealth of India", a publication of
the Council of Scientific and Industrial Research (1966), dealing with leather under
"Industrial Products" explains that "hides and skins and liable to putrefaction and loss
unless suitably treated and converted into leather". Structurally, hides and skins have a
thick middle layer called corium, which is converted to leather by tanning. The
operations involved in leather manufacture however fall into three groups. Pretanning
operations includes soaking, liming, deliming, bating and pickling, and post-tanning
operations are splitting and shaving, neutralising, bleaching, dyeing, fat-liquoring and
stuffing, setting out, samming, drying, staking and finishing. These operations bring
about Chemical changes in the leather substance and influence the physical
characteristics of the leather, and different varieties of commercial leather are obtained
by suitably adjusting the manufacturing operations. These process need not be gone
into in detail but the passages relied upon clearly show that hides and skins are termed
'leather' even as soon as the process of tanning is over and the danger of their
putrefaction is put an end to. The entry in the CST Act, however, includes within its
scope hides and skins until they are 'dressed'. This, as we have seen, represents the
stage when they undergo the process of finishing and assume a form in which they can
be readily utilised for manufacture of various commercial articles. In this view, it is
hardly material that coloured leather may be a form of leather or may even be said to
represent a different commercial commodity. The statutory entry is comprehensive
enough to include the products emerging from hides and skins until the process of
dressing or finishing is done."
17. Mr. Pradeep Misra submitted that tanned leather would be covered by the
definition of the term "Agricultural produce" as defined in Section 2(a) of the Act. He
submitted that it was merely a processed form of "hide and skin". He submitted that
cases relied upon by the appellants were of no help as all of them were under taxing
statutes and were merely interpreting terms in the context of the definitions given in
those statutes.
18. We have considered the arguments of both the parties. In our view it is clear
that the interpretation has to be on the basis of the expression 'Agricultural produce' as
set out in Section 2(a) of the said Act. In so determining decisions based on different
statutes such as Sales Tax Laws can be of no assistance. All the cases relied upon by
Mr. Sudhir Chandra are cases under the taxing statutes where the interpretation has
been given on the basis of the terms as defined in those statutes.
19. A perusal of Section 2(a) of the said Act makes it clear that an agricultural
product would be a product which is specified in the Schedule or one which is admixture
of two or more items and would also include any such item in a processed form. In our
view it makes no difference, for the purposes of the said Act, that the concerned item is
a different commodity from the one which is included in the Schedule. It is possible that
by virtue of an admixture of two or more items or by virtue of processing a different
commodity or item may come into existence. Even though a different commodity may
come into existence, it would still be an 'Agricultural produce'. This is best illustrated by
Sugarcane which is in Schedule A, Item VIII at Serial No. 14. From Sugarcane, "rab"
and "gur" are manufactured. They are already different commodities or items. Yet they
are all included. The specific inclusion of items like "gur, rab, shakkar, khandsari and
jaggery" is to make it clear that merely because it becomes a different item or
commodity it is not excluded.
20. We see no reason to go into the difference between 'manufacturing' and
'processing'. In the strict sense of the terms there may be a difference. However, we are
not required to go into these differences as, in our view, it is very clear, from what has
been set out by the appellants themselves in their affidavit that for hide and skin to be
converted into leather or tanned leather all that is required is a process. It is a process
of cleaning, curing and adding preservatives. That it is a process has been held by this
Court in the case of State of Tamil Nadu v. Mahi Traders (AIR 1989 SC 1167) (supra).
We are also of the view that the finished product i.e. 'tanned leather' even though it may
have changed in physical appearance or chemical combination and even though it may
commercially be a different item still remains a 'hide' or a 'skin'.
21. For this reason we are of the opinion
@page-SC938
that there is no illegality or infirmity in the judgment of the High Court.
22. Even otherwise our above view is supported by the Hindi version of the
definition. As has been set out in the case of Krishi Utpadan Mandi Samiti (1993 AIR
SCW 762) (supra), it is well known in U. P. all legislations are in Hindi. Of course an
English version simultaneously published. Undoubtedly if there is conflict between the
two than the English versions would prevail. However, if there is no conflict then one
can always have assistance of the Hindi version in order to find out whether the word
used in English includes a particular item or not. In the Hindi version the word used is
'Chamra'. There can be no dispute that the term 'Chamra' would include 'leather' in all
its forms.
23. In this view of the matter the appeal stands dismissed. There will, however,
be no order as to costs.
Appeal dismissed.
AIR 2001 SUPREME COURT 1363 "G. Giridhar Prabhu v. Agricultural Produce
Market Committee"
= 2001 AIR SCW 1087
(From : Karnataka)*
Coram : 2
V. N. KHARE AND S. N. VARIAVA, JJ.
Civil Appeals Nos. 3982-3984 of 1999, D/- 2 -3 -2001.
G. Giridhar Prabhu and others, Appellants v. Agricultural Produce Market
Committee, Respondent.
Karnataka Agricultural Produce Marketing (Regulation) Act (27 of 1966), S.65(2A)(iii), S.65(2A)(ii), S.2(34), S.2(48) - AGRICULTURAL PRODUCE - Realisation of
market fee - Producer or Trader - Appellant purchases cashew nuts and by process of
manufacture extracting cashew kernel - Cashew kernel is then sold by them in market Appellants are not 'producers' of cashew kernel but are 'Traders' - Liable to collect
market fee from their buyers and pay same to the Market Committee.
The Appellants purchase raw cashew nut and after subjecting the same to
process of manufacture extract cashew kernel. The cashew kernel is then sold by them
all over India as well as in International markets. Both cashew nut and cashew kernel
are notified Agricultural Produce under the Schedule to the Karnataka Agricultural
Produce Marketing (Regulation) Act, 1966. The Appellants claimed that they were
"producers" of cashew kernel and, therefore, were not liable to collect the market fee
from their purchasers and pay the same to the Committee. They also sought a
declaration that as producers of cashew kernal they did not even require a license. The
Appellants sought directions from the Court to quash the Notices issued by the Market
Committee and to restrain the Market Committee from recovering market fee from them.
The Court negatived their claim by holding that a person producing a specified
agricultural produce by processing a natural product does not fulfil the requirement of
being producer/grower. And merely because a distinct and separate Notified Agricultural
Produce comes into existence does not mean that the person who bought, processed
and sold ceases to be a Trader. The term "Trader" encumbrances not just the purchase
transaction but the entire transaction of purchase, processing, manufacturing and
selling. The Appellants are Traders, they squarely fall within Section 65 (2-A) (iii). In
fact, they may also fall within Section 65 (2-A) (ia). As they fall within these two clauses
there is no question of the residuary clause applying. The Market Committee can insist
that the Appellants realize the market fee from their purchasers and pay it to the Market
Committee in respect of transactions of sales of cashew kernel.
(Paras 16, 17, 18)
Cases Referred :
Chronological Paras
Himachal Pradesh Marketing Board v. Shankar Trading Co. Pvt. Ltd., (1997) 2
SCC 496 : (1996) 8 JT (SC) 321 17
Vijayalaxmi Cashew Company v. Dy. Commercial Tax Officer, 1996 AIR SCW
1519 : (1996) 1 SCC 468 12
Sita Devi v. State of Bihar, 1995 AIR SCW 115 : 1995 Supp (1) SCC 670 13
Commissioner of Income-tax v. N. C. Budhiraja, 1993 AIR SCW 3317 : AIR 1993
SC 2529 : 1993 Tax LR 1117 : (1993) 204 ITR 413
15
State of Tamil Nadu v. Nellai Cotton Mills Ltd., (1990) 2 SCC 518 : (1990) 2 JT
(SC) 19
14G. Sarangan, Joseph Vellapally, Sr. Advocate, Dhruv Mehta, Ms.
Shobha S. Ghosh, S. K. Mehta, B. G. Sridharan, G. V. Chandrasekhar, P.P. Singh,
Advocates, for the appearing parties.
* Writ Appeals Nos. 9965, 9966 and 9985 of 1996, D/- 2-4-1998.
Judgement
S. N. VARIAVA, J. :- These Appeals are against a Judgment dated 2nd April,
1998.
2. Briefly stated the facts are as follows :
The Appellants purchase raw cashew nut and after subjecting the same to
process of manufacture extract cashew kernel. The cashew kernel is then sold by them
all over India as well as in International markets. Both cashew nut and cashew kernel
are Notified Agricultural Produce under the Schedule to the Karnataka Agricultural
Produce Marketing (Regulation) Act, 1966 (hereinafter called the said Act). The
Appellants have licences under the said Act as Importers, Traders, Exporters and
Producers from the Market Committee. The Appellants are paying market fee as per the
provisions of Section 65 (2A) when they purchase cashew nut.
3. The Market Committee issued Notices to the Appellants directing them to
collect market fee from their buyers and pay the
@page-SC1364
same to the Committee in respect of transactions of sales of cashew kernel.
These Notices were issued under the provisions of Section 65 (2A) (iii) of the said Act.
4. The Appellants filed a Writ Petition in the High Court of Kerala praying for
declaration that they were "Producers" of cashew kernel and, therefore, were not liable
to collect the market fee from their purchasers and pay the same to the Committee.
They also sought a declaration that as producers of cashew kernel they did not even
require a license. The Appellants sought directions from the Court to quash the Notices
issued by the Market Committee and to restrain the Market Committee from recovering
market fee from them. This Writ Petition came to be dismissed by a single Judge of the
High Court on 21st August, 1996. The Appellants then filed a Writ Appeal which also
came to be dismissed by the impugned Judgment dated 2nd April, 1998.
5. The controversy in these Appeals is very limited. There is no dispute that the
Appellants are purchasing cashew nut and by a process of manufacture extracting
cashew kernel. There is no controversy and no dispute that on the purchase
transactions the Appellants are paying market fee. There is also no dispute that on the
sale transactions, of cashew kernel, market fee is payable. The only dispute is whether
the Market Committee can insist that the Appellants realize the market fee from their
purchasers and pay it to the Market Committee or whether the Market Committee has to
collect the market fee directly from the purchasers of cashew kernel.
6. For an understanding of this question certain provisions of the said Act require
to be looked at. The Preamble to the said Act lays down that it is an Act to provide for
the better regulation of marketing of agricultural produce and the establishment and
administration of markets for agricultural produce in the State of Karnataka. Section 2
(1) of the said Act defines "Agricultural Produce" as follows :
"2 (1). "Agricultural Produce" means the produce or goods specified in the
Schedule."
7. It is an admitted position that initially under Item 8 of the Schedule only
cashew nut was included as an Item. Market fee was sought to be levied on cashew
kernel. The Mangalore Cashew Manufacturing Association challenged this levy in the
High Court of Kerala. The High Court held that cashew kernel was not included in the
Schedule to the said Act and it was thus not a Notified Agricultural Produce. Pursuant to
this decision the State Government issued a Notification under Section 5 read with
Section 3 of the Act and included cashew kernel also in the Schedule. Thus, now both
cashew nut and cashew kernel are two separate items in the Schedule to the said Act.
8. Sections 2 (5), 2 (13), 2 (14), 2 (14A), 2 (18A), 2 (21), 2 (28), 2 (32), 2 (33), 2
(34) and 2 (48) of the said Act are relevant. They read as follows :
"2(5). "Buyer" or "purchaser" means a person who buys or agrees to buy goods;
2(13). "Exporter" means a person other than a producer who exports goods or
causes goods to be exported on one's own account or as agent of another person, from
the market area outside such area for the purpose of selling, processing, manufacturing
or for any other purpose except for the purpose of one's own domestic consumption, but
shall not include a public carrier.
2 (14). "Goods" means any kind of notified agricultural produce.
2 (14A). "Importer" means a person who imports of causes goods to be imported
on his own account or as an agent for another person from outside the market area into
a market area for the purpose of selling, processing, manufacturing or for any other
purpose except for one's own domestic consumption, but shall not include a public
carrier.
2 (18A) "Marketing" means buying and selling of agricultural produce and
includes grading, processing, storage, transport, packaging, market information and
channels of distribution.
2 (21). "Market functionary" or "functionary" includes a broker, a commission
agent, an exporter, a ginner, an importer, a presser, a processor, a stockist, a trader,
and such other person as may be declared under the rules or the bye-laws to be a
market functionary.
2 (28). "Notified agricultural produce" means any agricultural produce which the
State Government has by notification issued under Sections 4 and 5 declared as an
agricultural produce the marketing of which shall be regulated in the market area.
@page-SC1365
2 (32). "Process" means any one of the serious of treatments to which raw
agricultural produce is subjected to make it fit to use or consumption.
2 (33). "Processor" means a person who processes notified agricultural produce
by mechanical means.
2 (34). "Producer" means a person who produces notified agricultural produce on
one's own account.(i) by one's own labour; or
(ii) by the labour of any member of one's family; or
(iii) under the personal supervision of oneself or any member of one's family by
hired labour or by servants on wages payable in cash or kind but not in share of the
produce.
2 (48). "Trader" means a person who buys notified agricultural produce either for
himself or as agent of one or more persons for the purpose of selling, processing,
manufacturing or for any other purpose, except for the purpose of domestic
consumption."
9. The levy is under Section 65 (1) of the Act. The mode of collection is provided
under Section 65 (2-A) of the said Act. It reads as follows :
"65 (2-A). The market fee payable under this section shall be realised as follows,
namely :(i) if the produce is sold through a commission agent, the commission agent shall
realise the market fee from the purchaser and shall be liable to pay the same to the
committee;
(ia) if the produce is sold by an importer to the purchaser, the importer shall
realise the market fee from the purchaser and shall be liable to pay the same to the
committee;
(ii) if the produce is purchased directly by a trader from a producer, the trader
shall be liable to pay the market fee to the committee;
(iii) if the produce is purchased by a trader from another trader, the trader selling
the produce shall realise it from the purchaser and shall be liable to pay the market fee
to the committee; and
(iv) in any other case of sale of such produce, the purchaser shall be liable to pay
the market fee to the committee."
The Market Committee called upon the Appellants to collect and pay the market
fee on the footing that the Appellants are traders who were selling the produce to other
traders. The Appellants claim that they are producers of cashew kernel and, therefore,
sub-clause (ii) would apply. The Appellants claim that if sub-clause (ii) does not apply
then sub-clause (iv) would apply. The question therefore is whether the Appellants are
producers or whether they are traders.
10. As is seen from the definition under Section 2 (48) a trader is any person,
who (a) buys Notified Agricultural Produce, (b) either for himself or as agent of one or
more persons, (c) for the purpose of selling, processing, manufacturing or any other
purpose and (d) except for the purpose of domestic consumption. There is no dispute
that the Appellants are traders when they purchase cashew nut, which is a Notified
Agricultural Produce. In such purchase transaction they are also importers. As such
traders and importers they have obtained a licence and are paying market fee. It is,
however, submitted that even though they may be traders/importers in the purchase
transactions, they are not traders or exporters when they sell cashew kernel. It is
submitted that they are Producers of cashew kernel. It is submitted that in the Schedule
to the said Act cashew nut and cashew kernel are shown as two separate and distinct
commodities. It is submitted that the State Government accepted the Judgment of the
High Court of Kerala as correct and implemented the Judgment by incorporating the
term "cashew kernel" as a separate items in the Schedule. It is submitted that the
Appellants are Producers under Section 2 (34) as the Appellants produce a Notified
Agricultural Produce, i.e. cashew kernel on their own account, under their personal
supervision and by hired labour or servants on wages paid in cash. It is submitted that
they fall within the definition of the term "Producer" and are, therefore, governed by subclause (ii) of Section 65 (2-A). It is submitted that in any event their sale of cashew
kernel would not be a sale from a trader to a trader. It is submitted that if sub-clause (ii)
did not apply, they would fall under sub-clause (iv) of Section 65 (2-A).
11. Initially, Mr. Sarangan submitted that the term "Trader" under Section 2 (48)
can only refer to a person who buys. He initially submitted that the term "Trader" cannot
apply to a person who sells a
@page-SC1366
Notified Agriculture Produce. However to be noted that under the definition mere
buying was not enough. The buying had to be for the purpose of selling or processing or
manufacturing or for any other purpose. The buying had to be for a purpose other than
domestic consumption. When this was pointed out to him the answer sought to be given
was that if a person bought and sold the same Notified Agricultural Produce, then he
may be a trader, but if he bought one Notified Agricultural Produce and sold another
Notified Agricultural produce, then in the sale transaction he would not be a trader. It
was submitted that cashew nut and cashew kernel were two separate and distinct
Notified Agricultural Produce. It was submitted that the Appellants bought cashew nut. It
was submitted that they produced cashew kernel and were only selling cashew kernel.
It was submitted that as they were not selling the Notified Agricultural Produce which
had been bought they could not be termed as a "Trader".
12. In support of the submission that cashew nut and cashew kernel are two
separate and distinct commodities, reliance was placed upon the case of Vijayalaxmi
Cashew Company v. Dy. Commercial Tax Officer reported in (1996) 1 SCC 468 : (1996
AIR SCW 1519). In this case, the Appellant therein was purchasing cashew nut,
extracting cashew kernel and exporting cashew kernel to foreign countries. The
question was whether they were liable to sales tax under Section 5 (3) of the Central
Sales Tax Act, 1956. This Court negatived an argument that the purchase was of the
same goods which were exported. This Court held that cashew nut and cashew kernel
were two separate and distinct commodities.
13. Reliance was also placed upon the case of Sita Devi v. State of Bihar
reported in 1995 Supp (1) SCC 670 : (1995 AIR SCW 115). In this case the question
was whether cattle could be termed as Agricultural Produce. This Court held that even
though in common parlance cattle may not be considered to be an agricultural produce
but as it had been included in the Schedule, under "Animal Husbandry", for the
purposes of this Act it became an agricultural produce. This Court held that, therefore,
market fee could be levied on cattle bought and sold in an market area. Relying on this
authority it was submitted that to ascertain what was an agricultural produce one had to
look to the items specified in the Schedule to the Act. It was submitted that if two
separate items were specified in the Schedule to the Act, then those two had to be
treated as two separate and distinct items. However, it may be noted that this case also
lays down that if an item, after it is taxed, is subjected to a process and changes its
form, then it can again be subjected to market fee in the different form. The examples
given in this case are that even though market fee is levied on cattle, subsequently milk,
Ghee, butter which are obtained from the cattle could also be exigible to levy of market
fee. This case, therefore, shows that by means of a process the very nature of the item
may change.
14. Reliance was also placed upon the case of State of Tamil Nadu v. Nellai
Cotton Mills Ltd. reported in (1990) 2 SCC 518. In this case it has been held that when
an Act has been judicially interpreted, Courts may study the subsequent action or
inaction of the legislature for clues as to legislative approval or disapproval of judicial
interpretation. It has been held that if the legislature by taking note of the judgment
amends the statute appropriately by not giving any different meaning from the view
taken by the Court, with some justification, it can be said that the legislature had
accepted expressly or by implication the judicial interpretation. It was submitted that by
amending the Schedule to include cashew kernel the State Government had accepted
the fact that cashew nut and cashew kernel were two separate and distinct commodities
and now they would be precluded from contending that these were not two separate
and distinct commodities.
15. Reliance was next placed upon the case of Commissioner of Income Tax v.
N. C. Budharaja and Co. reported in (1993) 204 ITR 413 : (1993 AIR SCW 3317 : AIR
1993 SC 2529 : 1993 Tax LR 1117). It was submitted that the word "production" has a
wider connotation than the word "manufacture". In this case it is held that every
manufacture would be characterised as production but every production would not
amount to manufacture. It is held that when the word "production" or "produce" are used
in juxtaposition with the word "manufacture", they may bringing into existence new
goods by a process which may or may not amount to
@page-SC1367
manufacture. It is held that these words also take in all the by-products,
intermediate products and residual products which emerge in the course of manufacture
of goods.
16. Respondents do not dispute that cashew nut and cashew kernel are two
separate and distinct items/commodities. The Respondent's submission is that the
Appellants continue to be a trader even in the sale transaction as they had
bought/imported for purpose of processing and then selling. Respondents contend that
merely because, by a process or by manufacture, a different item comes into being
does not make the processor or manufacturer a Producer. They contend that a
"Producer" is one who produces the initial Notified Agricultural Produce.
We are unable to agree with the submissions of Mr. Sarangan. As can be seen
from the Preamble the Act is to provide for better regulation of marketing of agricultural
produce. In the Act certain exemptions have been given to Producer which exemptions
have not been given either to Importer or an Exporter or a Trader. These exemptions,
therefore, have been given to Producer because the Producer is the person who
produces the main agricultural produce. The main agricultural produce, which may be a
Notified Agricultural Produce, could then be converted into various other Notified
Agricultural Produce/s by subjecting the same to a process or manufacture. The person
who so processes or manufactures a different Notified Agricultural Produce would not
be a Producer. To be noted that an importer imports or causes goods to be imported
into the market area for the purpose or selling, processing, manufacturing or for any
other purpose, except for one's own domestic consumption. Thus, it is clear that a
person, who imports would not be a Producer. The import would be for purpose of
selling or processing or manufacturing or for any other purpose except for one's own
domestic consumption. Similarly, the term "Exporter' makes it clear that an exporter is
not a Producer. A trader is also a person who buys Notified Agricultural Produe for the
purpose of selling or processing or manufacturing or for any other purpose except for
the purpose of domestic consumption. The definition of the term "Trader" is not a
restrictive definition. It is not restricted to a person who only buys. If a person buys for
domestic or personal consumption, then he would not be a trader. It is only when a
person buys for the purpose of selling or processing or manufacturing that he would
become a trader. Thus a person may buy, process or manufacture and then sell. When
he processes or manufactures Notified Agricultural Produce which he had bought, it
may change its character and become another Notified Agricultural Produce. Thus, by
way of examples, a person may buy milk and through processes makes it into butter
and/or cheese or a person may buy hides and skins and by a process make it into
leather. However, merely because a distinct and separate Notified Agricultural Produce
comes into existence does not mean that the person who bought, processed and sold
ceases to be a Trader. The term "Trader" encumbrances not just the purchase
transaction but the entire transaction of purchase, processing, manufacturing and
selling.
17. In this behalf the case of Himachal Pradesh Marketing Board v. Shankar
Trading Co. Pvt. Ltd. reported in (1997) 2 SCC 496, is relevant. Under the Himachal
Pradesh Agricultural Produce Markets Act, 1969, licences were required to be taken for
purchase, sale, storage or processing of agricultural produce and market fee was also
payable. Producers or growers however did not require a licence and did not have to
pay market fees. The Respondent Company (therein) was producing "katha", a
specified agricultural produce. They did this by processing Khairwood. They claimed
(like the Appellants in this case) that as producers they did not need a licence and
market fees were not payable by them. This Court negatived this contention by holding
that a person producing a specified agricultural produce by processing a natural product
does not fulfil the requirement of being producer/grower. It was held that the clause of
the Act made it clear that only the actual grower/producer of the natural agricultural
produce were to be befitted. Of course the definition of the terms in that Act are
different. However in our view the basic principle is the same. It applies to this case
also.
18. We also see no substance in the submission that if Section 65 (2-A) (ii) did
not apply, then Section 65 (2-A) (iv) would apply. Section 65 (2-A) (iv) is residuary
clause. It would only apply if none of the other clauses applies. As it is clear that the
Appellants are Traders they squarely fall within Section 65 (2-A) (iii). In fact, they may
also fall within Section 65 (2-A) (ia). As they fall within these two clauses there is no
question of the residuary clause applying.
@page-SC1368
19. Under these circumstances, we see no infirmity in the Judgment of the High
Court. We see no reason to interfere. The Appeals stand dismissed. There will,
however, be no Order as to costs.
Appeals dismissed.
AIR 2000 SUPREME COURT 1053 "Mumbai Agrl. Produce Market Committee v.
Sharafatullah Hafiz Inayatulla"
= 2000 AIR SCW 564
(From : Bombay)*
Coram : 2
AJAY PRAKASH MISRA AND N. SANTOSH HEGDE, JJ.
Civil Appeal No. 1081 of 2000 (arising out of S.L.P. (C) No. 2816 of 2000 (C. C.
No. 3870 of 1999) with (S.L.P. (C) No. 10733 of 1999), D/- 15 -2 -2000.
Mumbai Agricultural Produce Market Committee and another, Appellants v.
Sharafatullah Hafiz Inayatulla and another, Respondents.
Maharashtra Agricultural Produce Markets (Regulation) Act (20 of 1964), S.5 AGRICULTURAL PRODUCE - Shifting of market - Allotment of galas/shops to existing
vendors in new market - Condition precedent - Claimant had to establish that he was
doing concerned business for 5 years within particular block period which should be
reflected by way of payment of market fee irrespective quantum and further show that
he held an APMC licence for a period of at least 2 years during said block period Petitioner doing business for number of years including block period fixed - But did not
pay market fee pending suit challenging authority of Market Committee to levy fee Market Committee subsequently accepted arrears of market fee after correspondence
with petitioner - Amounts to deemed acceptance of business done by him during that
period to be legitimate and there would be no question of issuing licence for period
which has already expired - Petitioner could be said to have fulfilled the condition for
allotment.
(Para 10)
K. Rajendra Chowdhary, V. N. Ganpule, Sr. Advocates, Rakesh K. Sharma, A.
M. Khanwilkar, Mrs. V. D. Khanna, Abhinav Vasisht, R. Kathpalia, Pradeep Bakshi, (S.
S. Shinde), for G. B. Sathe, Y. R. Naik, A. M. Khanwilkar, Ashwin Vasisht, with them, for
appearing parties.
* W.P. No. 4248 of 1998, D/- 8-9-1998 (Bom).
Judgement
SANTOSH HEGDE, J. :- C. A. 1081/2000 [@ SLP(C) 2816/2000 (CC 3870/99)]
Delay condoned.
2. Leave granted.
3. In this appeal, the appellant has challenged the order made by the Division
Bench of the Bombay High Court dated 8th September, 1998 whereby the High Court
held that the respondent had substantially complied with the norms fixed for allotting
galas for trading in wholesale fruits in the market presently situated at Navi, Mumbai.
4. Consequent to the decision of the appellant to shift wholesale markets
including the fruit market from Bombay Municipal Corporation Area to Navi Mumbai,
disputes arose as to the allotment of galas to the vendors which dispute was challenged
before the High Court of Bombay in various writ petitions and the High Court, with a
view to avoid arbitrariness in the allotment
@page-SC1054
of galas, had appointed Mr. Justice Daud (Retired) to formulate the norms based
on which the gala would be allotted to various claimants. Justice Daud had submitted
various reports. Ultimately, the report dated 6th July, 1999 came to be accepted. As per
this report, the basic requirement needed for the allotment of a gala was that the
claimant had to establish that he was doing the concerned business for 5 years within a
block period of 1985-86 to 1994-95 which should be reflected by way of payment of
market fee irrespective of the quantum and further show that he held an APMC licence
for a period of at least 2 years during the said block period.
5. Since the respondent was not allotted a gala in spite of his claim that he was
qualified to be allotted a gala within the norms referred to above, he filed Writ Petition
No. 4248 of 1998 before the High Court of Bombay which having been allowed, the
Market Committee has preferred the above noted appeal.
6. Before the High Court, the respondent contended that he had been doing
business as a fruit vendor for many years in the Subsidiary Market at Mahatma Jyotiba
Phule Mandai, Bombay. A dispute had arisen between him and the appellant herein
consequent to which the appellant had filed a suit in the City Civil Court at Bombay
wherein the appellant had sought for an injunction against the respondent restraining
him from doing business in the market without obtaining necessary licence from the
appellant and paying the required market fee. It was the contention of the respondent
before the High Court that during the pendency of the said suit there was certain
correspondences between him and the appellant-Committee consequent to which he
had paid all the arrears of market fee due from him which was accepted by the
appellant and he had also accepted the authority of the appellant to insist on taking out
a licence. Therefore, his activity as a trader being accepted by the Market Committee
for the relevant period fixed by Justice Daud, he was entitled to be granted a gala.
7. The claim of the respondent before the High Court was opposed by the
appellant primarily on the ground that though appellant did carry on business, he did not
hold a licence during the relevant period i.e. 1985-86 to 1994-1995. Therefore, he was
not entitled for the grant of a gala since the condition precedent for the allotment of a
gala being the payment of the market fee and having held licence during the relevant
period which conditions the respondent did not satisfy.
8. The High Court having considered the facts of the case came to the
conclusion that there was a dispute between the appellant and the respondent in regard
to the authority of the Market Committee to levy fee and taking of a licence. Still, the fact
remained that the writ petitioner was doing business for a number of years including the
block period fixed by Justice Daud and subsequently the writ petitioner had paid all the
arrears of market fee which was accepted by the Market Committee. Therefore, there
was substantial compliance of the norms fixed by Justice Daud and the fact that the writ
petitioner had not taken out a licence, was due to the pending dispute which did not
exist any more in view of the fact the writ petitioner had accepted the authority of Market
Committee and the two norms fixed by Justice Daud was more in the nature to establish
the fact that a claimant was doing business for at least 5 years during the block period
which fact not being in dispute, the writ petitioner was entitled for the allotment of a gala.
9. Challenging the above order of the High Court, it was contended before us that
the High Court committed a factual error in coming to the conclusion that the suit which
was filed by the Market Committee had since been compromised and because of this
basic error the Court came to the conclusion that the respondent had established his
right for the allotment of a gala, which finding of the High Court, according to the
appellant, is erroneous because, as a matter of fact, the suit was never compromised
and the respondent had also not taken a licence. It is also further contended by the
appellant that if allotments are to be made on the basis of the finding of the High Court
then all the persons similarly situated as the respondent will also be entitled to similar
allotment which would create practical difficulties inasmuch as the number of galas
available will not be sufficient to accommodate all such claimants. The appellant also
pointed out before us that some more writ petitions are still pending in the High Court
making similar claims.
@page-SC1055
10. Before we proceed to examine the correctness of the order impugned before
us, we should bear in mind the fact that the High Court appointed a Commission
presided over by Justice Daud only for the purpose of finding out norms by which
allotment could be made avoiding the allegation of arbitrariness. Justice Daud, as could
be seen from the records available before us, had elaborately considered the factual
situation and had fixed certain norms. We have already referred to some of the relevant
norms applicable to the facts of the case, i.e., that a person staking a claim for the
allotment of a gala must establish that he was doing business in the original place at
least for a period of 5 years during the block period viz., 1985-86 to 1994-1995. Of
course in addition it is also necessary that the claimant should establish that he had a
licence from the APMC for a period of at least 2 years during that block period. In the
instant case, the High Court noticed that there was no dispute in regard to the factum
that the respondent was doing business for at least 5 years during the block period, if
not more, but the contention is that he had not paid the market fee and had not obtained
the licence. This lacuna, the High Court felt, was due to genuine dispute between the
parties and now that the appellant had accepted all the arrears of market fee, the High
Court came to the conclusion that the dispute does not exist any more and that his not
obtaining the licence by itself, did not detract from the fact that the writ petitioner had in
fact done business during the relevant block period. Having come to this conclusion, the
High Court held that there was substantial compliance of the norms. It is true in the
course of the discussion of the facts of the case, the High Court referred to a
compromise which, in our opinion, is obviously an error and this error in fact did not
vitiate its finding. Therefore, we are in agreement with the finding of the High Court that
when the respondent had established that he was doing business during the relevant
period, non-payment of market fee because of the pendency of the dispute in a
competent Court of law and subsequent acceptance of the arrears of market fee would
justify the claim of the respondent for the allotment of a gala. In regard to the absence of
a licence, it must be held on the basis of the facts of this case that when the Market
Committee accepted the arrears of market fee for a past period, it should be deemed
that it accepted the business done by the respondent during that period to be legitimate
and there is no question of issuing a licence for a period which has already expired.
That apart, Justice Daud norms were meant to establish the fact that a claimant to a
gala had in fact done legitimate business in the market for a period of at least five years
during the block period which we have held the respondent had done. Therefore, we do
not find any reason to differ with the conclusion arrived at by the High Court.
11. However, we must deal with the next contention raised on behalf of the
appellant in regard to the possible difficulty that may be faced by the Market Committee
arising from the claims of similarly situated persons as the respondents before us. First
of all, no material has been placed before us to show that there are claimants who had
regularly done business during the relevant period and who like the writ petitioner had
not paid the market fee and obtained a licence because of any genuine dispute with the
Market Committee which dispute culminated in legal proceedings. Assuming that there
are such further claimants then their conduct will have to be judged with reference to
laches as and when they stake their claims. Further assuming that in the pending cases
the claims of the writ petitioners are similar to that of the respondents herein even then,
in our opinion, no problem can be envisaged because Justice Daud had taken note of
this fact and had recommended a norm which he termed as: "Early Bird Norm" which in
principle means that the allotment will be made between the similarly-situated persons
on the basis of the date of application which, in our opinion, is a fair method to be
adopted in the event of there being more eligible claimants than the available number of
galas.
12. For these reasons, this appeal fails and the same is dismissed.
SLP(C) No. 10733/99 :
13. In view of the judgment of this Court in C.A. No. 1081/2000 (arising out of
SLP(C) 2816/2000 (CC No. 3870/99), this petition is also dismissed.
Order accordingly.
@page-SC1056
AIR 2000 SUPREME COURT 1796 "Edward Keventer Pvt. Ltd. v. Bihar State
Agricultural Marketing Board"
= 2000 AIR SCW 1278
(From : Patna)*
Coram : 2
V. N. KHARE AND DORAISWAMY RAJU, JJ.
Civil Appeal No. 2503 of 1998, D/- 11 -4 -2000.
Edward Keventer Pvt. Ltd., Appellant v. Bihar State Agricultural Marketing Board
and others, Respondents.
Bihar Agricultural Produce Markets Act (16 of 1960), S.2(1)(a), Sch.1, Item 13 'AGRICULTURAL PRODUCE - Mango' and 'Apple' specified in Schedule under caption
'fruits' - Do not cover beverages under brand "frooti" and "Appy' - Market fee is not
required to be paid on said products.
L.P.A. No. 778 of 1997, D/- 20-1-1998 (Patna), Reversed.
The products which are ready to serve beverages under the brand name 'Frooti'
and 'Appy' do not fall under the description of 'mango' and 'apple', specified in the
Schedule. It is true that 'Frooti' and 'Appy' are manufactured out of mango pulp and
apple concentrate, but after the mango pulp and apple concentrate are processed and
beverages are manufactured, the products become entirely different items and the fruits
mango and apple loose their identity. In common parlance, these beverages are no
longer known as mango and apple as fruits.
@page-SC1797
In other words, after processing mango pulp and apple concentrate, although the
basic character of the mango pulp and apple concentrate may be present in beverages,
but the end products are not fruits i.e. mango and apple which are specified in the
Schedule. Therefore products like 'Frooti' and 'Appy' which are ready to serve
beverages not being specified in the Schedule are not covered by the term agricultural
produce, as defined in Section 2(1)(a) of the Act.
L.P.A. No. 778 of 1997, D/- 20-1-1998 (Patna), Reversed.
Krishi Utpadan Mandi v. Shankar Industries, 1993 AIR SCW 762, Disting. (Paras
3, 5)
Cases Referred :
Chronological Paras
Belsund Sugar Co. Ltd. v. State of Bihar, 1999 AIR SCW 3074 : AIR 1999 SC
3125 : (1999) 9 SCC 620 5
Krishi Utpadan Mandi Samiti v. M/s. Shankar Industries, 1993 AIR SCW 762 :
1993 Supp (3) SCC 361 (2) (Disting)
6, 7Utpal Mazumdar, Raja Chatterjee, Mrs.
Sarla Chandra, Advocates, for Appellant; Mukul Rohtagi, Sr. Advocate, Irshad Ahmad,
Rashid Saeed, Advocates with him, for Respondents.
* L. P. A. No. 778 of 1997, D/- 20-1-1998 (Patna)
Judgement
V. N. KHARE, J. :- The appellant herein is a company registered under the Indian
Companies' Act and has its head office and factory outside the State of Bihar. The
company manufactures fruit drinks and markets it under the brand name of 'Frooti' and
'Appy' in the State of Bihar through its agents. The Bihar Legislature has enacted an Act
known as 'Bihar Agricultural Produce Market Act, 1960' (hereinafter referred to as the
Act). The object of the Act is to provide better regulation of buying and selling of
agricultural produce and the arrangement of market for agricultural produce in the State
of Bihar. Under Section 27 of the Act, the Market Committee set up under the Act has
power to levy and collect market fee on the agricultural produce, which are specified in
the Schedule and are bought or sold in the market area. It is not disputed that the entire
district of Patna is declared as a market area. Section 2(1)(a) of the Act defines
agricultural produce which runs as under :
" 'Agricultural produce' means all produce whether processed or non-processed,
manufactured or not, of Agriculture, Horticulture, Plantation, animal Husbandry, Forest,
Sericulture, Pisciculture, and includes livestock or poultry as specified in the Schedule".
2. Under Section 39 of the Act, the State Government by a notification is
empowered to add, amend, or cancel any of the items of the agricultural produce in the
Schedule as required by Section 2(1)(a) of the Act. In the Schedule, as contemplated
under Section 2(1)(a), mango and apple are specified under the caption 'fruits' as items
Nos. 1 and 13 respectively. The respondents treating 'Frooti' and 'Appy' as mango and
apple products issued a notice dated 28-3-89, requiring the appellant to pay market fee
on the products marketed under the brand name 'Frooti' and 'Appy', failing which action
under the Act would be taken. Under such circumstances, the appellant challenged the
aforesaid demand by means of a writ petition under Article 226 of the Constitution.
However, the said writ petition was dismissed and Letters Patent Appeal filed against
the judgment of the learned single Judge was also dismissed. It is in this way the
appellant is in appeal before us.
3. The short question that arises for consideration in this case is, whether the
products which are ready to serve beverages under the brand name 'Frooti' and 'Appy'
fall under the description of mango and apple, specified in the Schedule. The contention
of the learned counsel for the appellant is that, both the fruit drinks are not covered by
the Schedule, whereas the contention of the respondents' counsel is that the products
being the mango and apple juices are covered under the item 'mango' and 'apple', as
specified in the Schedule.
4. The appellant has described the manufacturing process of beverages 'Frooti'
and 'Appy' as under :
"Frooti and Appy are fruit drinks and manufacturing process of both are
cumbersome. It is alleged that one of the ingredients of Frooti is mango pulp and not
mango which is procured by the appellant as raw material from outside agencies.
Similarly, one of the ingredients of Appy is apple concentrate and not apple. The pulp is
first passed through a filter and stored in beverage tank. Similarly sugar in proportionate
quantity is processed in the form of syrup after heating it to a certain temperature and
then cooling it. Demineralised water is then
@page-SC1798
added to the sugar syrup to the extent that it attains a certain 'brix' content.
Meanwhile in the beverage tank requisite amount of citric acid, non alcoholic beverage
base (NABB), other permitted additives, sodium citrate, vitamin C are added. Thereafter
the sugar syrup and the mixture in the beverage tank are mixed in proportionate
quantity. Thereafter the said mixture is passed through homogeniser and crushed at a
very high pressure to disintegrate all the fibres, which are present in the beverage
mixture. After homogenisation, the mixture is then required to be passed through
pasteuriser where it is heated to a temperature between 95 to 100 degrees centigrade
for killing all the bacteria and micro organism, if there be any. Subsequently, the said
mixture is passed through a cooling channel for cooling down to the room temperature
and passed through pipe lines into the steriliser of the tetra brik aseptic packaging
machine for packing the beverage in tetra brik packs of 200 ml size which requires high
technical expertise. The paper which is used for the packaging, consists of seven layers
of materials which include aluminium foil, laminated polythene etc. for taking care of
asepticity ensuring high safety and required life for the produce. The 200 ml pack is
then packed in the packaging machine and which passes through the conveyor system
on way to the tray packing machine, where it is accumulated in trays. The said tray
containing the fruit drink pack is then shrink wrapped by means of the shrink wrapper
machine. After everything is completed, the fruit drink packs are kept under incubation
for a period of seven days for detection of growth of any microorganism through a
microbiological analysis . Simultaneously, organoliptic test is also conducted for testing
the colour and taste of the beverage. After all that the 'Frooti' and 'Appy' are ready for
being delivered in the market.
5. A perusal of Section 2(1)(a) unambiguously shows that the agricultural
produce which are to be covered by the sweep of the Act necessarily has to be
specified in the Schedule. If any agricultural produce is not specified in the Schedule, it
goes beyond the purview of the Act and respondent has no power to levy fee on such
produce. In the Schedule under caption 'fruits' mango and apple have been specified as
agricultural produce. We further find in the Schedule that under caption 'cereals' wheat
is specified at item No. 3, whereas 'wheat atta' 'sujji' and 'maida' which are the products
of wheat are separately specified at item Nos. 14, 15 and 16, respectively. This shows
that the agricultural produce 'wheat' has been treated as a separate agricultural produce
as compared to its own product manufactured out of 'wheat' namely, 'atta', 'sujji' and
'maida'. 'Atta', 'sujji' and 'maida' are basically the agricultural products of 'wheat'.
Similarly, the Schedule shows that under the caption 'Animal Husbandry Product', milk
excluding liquid milk is specified at Item No. 19 whereas 'butter', 'ghee', 'cream' 'chena'
and 'khoya' which are manufactured out of milk are separately specified at items Nos. 7,
8, 16, 17 and 19 respectively. Under caption 'miscellaneous', 'mango pickles' is
specified at item No. 18. 'Mango pickles' is a product of mango, which is a fruit; and
specified in Schedule but 'mango pickles' have been specified separately. This shows
basic ingredients may be the same but the end product which is known differently is
treated as a separate item. It is true that 'Frooti' and 'Appy' are manufactured out of
mango pulp and apple concentrate, but after the mango pulp and apple concentrate are
processed and beverages are manufactured, the products become entirely different
items and the fruits mango and apple loose their identity. In common parlance, these
beverages are no longer known as mango and apple as fruits. In other words, after
processing mango pulp and apple concentrate, although the basic character of the
mango pulp and apple concentrate may be present in beverages, but the end products
are not fruits i.e. mango and apple which are specified in the Schedule. Our views also
find support from a Constitution Bench decision of this Court in the case of Belsund
Sugar Co. Ltd. v. State of Bihar, (1999) 9 SCC 620 : (1999 AIR SCW 3074 : AIR 1999
SC 3125) wherein it was held that Lactodex and and Raptakos which are baby foods do
fall under the description milk, specified in the Schedule of the Act. Under such
circumstances, we find that the products like 'Frooti' and 'Appy' which are ready to serve
beverages not being specified in the Schedule are not covered by the term agricultural
produce, as defined in Section 2(1)(a) of the Act.
6. Learned Additional Solicitor General then cited a decision of this Court in the
case
@page-SC1799
of Krishi Utpadan Mandi Samiti v. M/s. Shankar Industries, 1993 Supp (3) SCC
361 (2) : (1993 AIR SCW 762) for the proposition that the meaning of 'agriculture
produce' in the definition is not restricted to any products of agriculture specified in the
Schedule, but also include such items which come into being in the processed form,
and has strongly relied para 12 (of Supp SCC) : (Para 9 of AIR) of the said decision,
which reads as under :
"We have considered the arguments advanced on behalf of the parties and have
perused the record. A perusal of the definition of agriculture produce under Section 2(a)
of the Act shows that apart from items of produce of agriculture, horticulture, viticul-ture,
apiculture, sericulture, pisciculture, animal husbandry or forest as are specified in the
Schedule, the definition further 'includes admixture of two or more such items'and
thereafter it further includes taking any such item in processed form' and again for the
third time the words used are 'and further includes gur, rab, shakkar, khandsari and
jaggery'. It is a well settled rule of interpretation that where the legislature uses the
words 'means' and 'includes' such definition is to be given a wider meaning and is not
exhaustive or restricted to the items contained or included in such definition. Thus the
meaning of 'agricultural produce' in the above definition is not restricted to any products
of agriculture as specified in the Schedule but also includes such items which come into
being in processed form and further includes such items which are called as gur, rab,
shakkar, khandsari and jaggery."
We are of the view that the said decision is wholly inapplicable to the present
controversy. In the Uttar Pradesh Act, the agricultural produce is defined as under :
"Section 2(a) 'agricultural produce' means such items of produce of agriculture,
horticulture, viticulture, apiculture, sericulture, pisciculture, animal husbandry or forest
as are specified in the Schedule, and includes admixture of two or more of such items,
and also includes any such item in processed form, and further includes gur, rab,
shakkar, khandsari and jaggery."
7. The controversy in the case of Krishi Utpadan Samiti (1993 AIR SCW 762)
(supra), was whether gur-lauta and raskat and rabgolawat and salawat, which are
products of molasses, are agricultural produce. This Court while interpreting words
'means' and 'includes' used in the definition, was of the view that these words have to
be given wider meaning and processed item of a goods specified in Schedule would be
agricultural produce. In U. P. Act, the definition of 'agricultural produce' provided that
any processed item of a specified goods is an agricultural produce. Such is not the
definition of 'agricultural produce' in the Bihar Act with which we are concerned in the
present case.
8. For the reasons aforestated, we are of the view that the product 'Frooti' and
'Appy' not being specified in the Schedule, the respondent had no authority to demand
any fee from the appellant on marketing the said products. Consequently, the order and
judgment of the High Court is set aside and the appeal is allowed. There shall be no
order as to costs.
Appeal allowed.
AIR 2000 SUPREME COURT 3116 "Agricultural Produce Market Committee v.
Ashok Harikuni"
= 2000 AIR SCW 3442
(From : 1999 Lab IC 798 (Kant))
Coram : 2
AJAY PRAKASH MISRA AND Y. K. SABHARWAL, JJ.
Civil Appeal Nos. 5235-5241 of 2000 (arising out of S. L. P. (C) Nos. 54-60 of
1999), D/- 22 -9 -2000.
Agricultural Produce Market Committee, Appellant v. Ashok Harikuni and another
etc., Respondents.
(A) Industrial Disputes Act (14 of 1947), S.2(j) - INDUSTRIAL DISPUTE Industry - Exclusion of sovereign functions - Sovereign functions are primarily
inalienable functions which only State could exercise - Welfare activity of
@page-SC3117
State - Not sovereign function - Absence of profit motive or fact that there is State
Monopoly - Does not make such enterprise soveriegn.
Sovereign function in the new sense may have very wide ramification but
essentially sovereign functions are primary inalienable functions which only State could
exercise. Thus, various functions of the State, may be ramifications of 'sovereignty' but
they all cannot be construed as primary inalienable functions. Broadly it is taxation,
eminent domain and police power which covers its field. It may cover its legislative
functions, administration of law, eminent domain, maintenance of law and order, internal
and external security, grant of pardon. So, the dichotomy between sovereign and nonsovereign function could be found by finding which of the functions of the State could be
undertaken by any private person or body. The one which could be undertaken cannot
be sovereign function. In a given case even in subject on which the State has the
monopoly may also be non-sovereign in nature. Mere dealing in subject of monopoly of
the State would not make any such enterprise sovereign in nature. Absence of profit
making or mere quid pro would also not make such enterprise to be outside the ambit of
"industry".
(Para 33)
The question whether a function is sovereign or non-sovereign depends on the
nature of power and the manner of its exercise. What is approved to be "Sovereign" is
defence of the country, raising armed forces, making peace or war, foreign affairs,
power to acquire and retain territory. These are not amenable to the jurisdiction of
ordinary civil Courts. The other functions of the State including welfare activity of State
could not be construed as "sovereign" exercise of power. Hence, every governmental
function need not be "sovereign". State activities are multifarious. From the primal
sovereign power, which exclusively inalienably could be exercised by the Sovereign
alone, which is not subject to challenge in any civil Court to all the welfare activities,
which would be undertaken by any private person. So merely one is employee of
statutory bodies would not take it outside the Industrial Disputes Act. If that be then
Section 2(a) of the I.D. Act read with Schedule I gives large number of statutory bodies
should have been excluded, which is not. Even if a statute confers on any statutory
body, any function which could be construed to be "sovereign" in nature would not
mean every other functions under the same statute to be also sovereign. The Court
should examine the statute to serve one from the other by comprehensively examining
various provisions of that statute. In interpreting any statute to find it is "industry" or not
the Court has to find its pith and substance. The Industrial Disputes Act is enacted to
maintain harmony between employer and employee which brings peace and amity in its
functioning. This peace and amity should be the objective in the functioning of all
enterprises. This is to the benefit of both, employer and employee. Misuse of rights and
obligations by either or stretching it beyond permissible limits have to be dealt with
within the framework of the law but endeavour should not be in all circumstances to
exclude any enterprise from its ambit. That is why Courts have been defining "industry"
in the widest permissible limits and "sovereign" functioning within its limited orbit. (Para
22)
(B) Industrial Disputes Act (14 of 1947), S.2(j) - Karnataka Agricultural Produce
Marketing (Regulation) Act (27 of 1966), Pre., S.9 - INDUSTRIAL DISPUTE AGRICULTURAL PRODUCE - Industry - Agriculture produce market committee - Does
not perform sovereign function - Falls within definition industry - Being creature of
statute - Does not by itself make its functions sovereign functions.
From the preamble, statement of objects and reasons and the provisions of the
State Act it is clear that this Act deals with various facets of regulating activities within
the market area with respect to the trading in agricultural produce. It includes
establishment of various committees including charging of fees for service rendered to
the traders of agricultural producers. Any enactment scheme or project which sponsors
helps in the trading activity is one of the State's essential functions towards welfare
activities for the benefit of its subject. Such activities can be undertaken even by any
non-governmental organisation or a private person, corporate or company. In fact, prior
to the abolition of Zamindari, the Hats and Bazars (Markets) held on Zamindars
(Landowner) land, the Zamindar used to charge fees for rendering service for holding
such market by providing land and facilities to the participants of such market. By this it
helped
@page-SC3118
producers, sellers and public at large through such trading. This is similar, in a
nature and form to what is being done now under the State Act through statutory
functionaries. Thus none of these functions could be construed to be sovereign in
nature or inalienable in character. (Para 27)
It is true various functionaries under State Act are creature of statute. But
creation as such, by itself, cannot confer it the status of performing inalienable functions
of the State. The main controlling functions and power is conferred on the market
committee whose constitution itself reveals, except one or two rests are all are elected
members representing some one or other class from the public. In fact, all governmental
functions cannot be construed either primary or inalienable sovereign function. Hence
even if some of the functionaries under the State Act could be said to be performing
sovereign functions of the State Government that by itself would not make the dominant
object to be sovereign in nature or take the aforesaid Act out of the purview of the
Industrial Disputes Act. The mere fact that some employees of the market committee
are Government servants would make no difference as the true test to find - has to be
gathered from the dominant object for which functionaries are working. It cannot be
doubted that the market committee is an undertaking performing its duties in a
systematic and organised manner, regulating the marketing and trading of agricultural
produce, rendering services to the community. Testing the dominant object the
inescapable conclusion is that none of the activities of the Agriculture Produce Market
Committee could be construed to be sovereign in nature. Hence the corporation falls
within the definition of "industry" under Section 2(j) of the Central Act.
(Paras
28,
29, 36)
It is not correct to say that S. 59 (3) excludes the application of the Industrial
Disputes Act to the employee under the State Act. The non-substance clause in S.
59(3) on the contrary indicates that exclusion of the Central Act is limited to the sphere
as specified under this sub-section, namely, payment of compensation to the officers or
servants of the transferred employees. Thus by necessary implication, other field under
the Central Act is made applicable.
(Paras 34, 35)
(C) Industrial Disputes Act (14 of 1947), S.2(j) - INDUSTRIAL DISPUTE Industry - Sovereign functions - Curtailment of right of individual - Not essentially an
exercise of sovereign power - Corporations and statutory bodies exercising such
powers do not cease to be industry, thereby several corporations conferred with
statutory powers also curtails individual rights like, through levy of demurrages,
detention charges in the warehousing corporation under the Warehouse Corporation
Act; Regulation of entry into airport, ATC, levy and regulation of taxes and fees by the
international Airport authority. Assessment and levy of damages as well as penalties by
authorities under the Employees' State Insurance Act and Employees' Provident Funds
Act. Though each of the aforesaid corporations and statutory bodies are "industry". The
submission that curtailment of right of an individual could only be by the exercise of
sovereign power has therefore no merit. (Para 30)
Cases Referred :
Chronological Paras
Chief Conservator of Forest v. Jagannath Maruti Kondhare, 1996 AIR SCW 735 :
AIR 1996 SC 2898 : 1996 Lab IC 967 : (1996) 2 SCC 293
11, 21
N. Nagendra Rao and Co. v. State of A. P., 1994 AIR SCW 3753 : AIR 1994 SC
2663 : (1994) 6 SCC 205 23
Des Raj v. State of Punjab, AIR 1988 SC 1182 : 1988 Lab IC 1713 : (1988) 2
SCC 537
24
Bangalore Water Supply and Sewerage Board v. R. Rajappa, AIR 1978 SC 548 :
1978 Lab IC 467 : (1978) 3 SCR 207
2, 10, 11, 17, 19, 21, 24, 29
866
State of Bombay v. Hospital Mazdoor Sabha, AIR 1960 SC 610 : (1960) 2 SCR
14, 33
Corporation of the City of Nagpur v. Its Employees, AIR 1960 SC 675 : (1960) 2
SCR 942
13, 18
D. N. Banerji v. P. R. Mukherjee, AIR 1953 SC 58 : 1953 SCR 302 13
Federal State School Teachers Association of Australia v. State of Victoria,
(1928-29) 41 CLR 569
15
Federal Municipal and Shire Council Employees Union of Australia v. Melbourn
Corporation, (1918-19) 26 CLR 508
15
Verisimo Vasquez Vilas v. City of Manila, (1910) 220 US 345 : 55 Law Ed 491
15
Coomber v. Justice of Berks, (1883) 9 AC 61 : 53 LJQB 329 15
Boogs v. Merce Min Co., 14 Cal 279
32
@page-SC3119
United State v. Douglas Willian Sartoris Co. 22 P. 92 : 3 Wyo 287 32G.
V.
Chandrasekhar and P. P. Singh, Advocates, for Appellant; S. R. Bhat, Mrs. K. Sarada
Devi, Advocates, for Respondents.
Judgement
MISRA, J. :- Leave granted.
2. The question raised in this appeal is drawing attention of this Court since very
inception when Industrial Disputes Act, 1947 was enacted and even after the passage
of more than 50 years, issue remains in the fertile field of it yielding fresh crops time and
again because of wide vaporous definition of the word "industry" under the said Act. We
shall be referring about some of these cases in the later part of our judgment. This wide
definition has given an opportunity to both employer and employee for raising issues,
one trying to pull out of this definition, to be out of the clutches of the said Act, other
bringing within it, to receive benefit under it. Because of width of the periphery of the
word "industry" there is tug of war repeatedly between the two, in spite of various
decisions of this Court. This situation has led this Court, in Bangalore Water-Supply and
Sewerage Board v. R. Rajappa, (1978) 3 SCR 207 : (AIR 1978 SC 548 : 1978 Lab IC
467) to record with anxiety and suggesting Legislature for bringing a comprehensive Bill
to clear the fog. It records :
"In view of the difficulty experienced by all of us in defining the true denotation of
the term "industry" and divergence of opinion in regard thereto-as has been the case
with this Bench also we think, it is high time that the Legislature steps in with a
comprehensive bill to clear up the fog and remove the doubts and set at rest once for all
the controversy which crops up from time to time in relation to the meaning of the
aforesaid term rendering it necessary for larger Benches of this Court to be constituted
which are driven to the necessity of evolving a working formula to cover particulars
cases."
3. This led the Legislature to amend the definition of the word "industry" in
Section 2(j) of the aforesaid Act, though amending Act in 1982 but left the said
amendment to be given effect from the date to be notified by the Government. Since
thereafter with the passage of 18 years in spite of observations of this Court in some
cases during this inter magnum, the said amendment has not seen the light of the day
leaving the situation in doldrum for the Courts to continue to give its shape. Inter-linked
with it is also the word "sovereign" which is equally fluid as the word "industry". The
word "sovereign" changes its complexion with the type of sovereignty a country is
structured also with the change of political structure in view of changing socio-cultural
heritage of any country. So defining what is sovereign, the Courts not only of this
country but other countries as well have been battling to comprehend it since 19th
century. This has gained importance in the industrial law as what constitute to be a
sovereign function excludes within its ambit "industry" hence industrial law would have
no application over it.
4. The question raised in this Appeal is :
a) Whether the appellant, an Agricultural Produce Market Committee (hereinafter
referred to as "the Market Committee"), established under the Karnataka Agricultural
Produce Marketing (Regulation) Act, 1966 (hereinafter referred to as "the State Act") is
an "industry" as contemplated under the Industrial Disputes Act, 1947 (hereinafter
referred to as "the Central Act") ? If yes, Will not employee under the State Act would be
governed by the Central Act?
b) Will not the State Act override the Central Act for the reason, the State Act
received the assent of the President of India, hence the Central Act would be
inapplicable to the employees governed by the State Act ?
5. To properly appreciate the controversy, it is necessary to give short essential
matrix of facts. The appellant is an Agricultural Produce Market Committee established
under the State Act. It regulates the marketing of agricultural produce for the benefit of
the agriculturist. This market committee is not intended to make any profit and the whole
object is only to regulate the agricultural produce both for protecting the interest of
agriculturist and interest of public at large. The submission for the appellant is, this
committee is not an "industry" as contemplated under the Central Act. It exercises
sovereign function under the Act. It is a body corporate which has perpetual succession
and a common seal. The committee has no power either to appoint or regularise the
services of its employees which vests with the State Government. Its employees are
civil servants and provisions of the Karnataka Civil Service (Conduct Rules), 1966 and
the Karnataka Civil Services
@page-SC3120
(Classification, Control and Appeal) Rules, 1957 are applicable. This committee
is established under Section 9 of the Act and is subject to the restrictions imposed
under it and is competent to contract, to acquire, hold, lease, sell or otherwise transfer
any property and do all other things necessary for the purpose for which it is
established. Section 58 confers power to appoint Secretary and technical staff to the
market committee. It stipulates, every such committee shall have a Government servant
as the Secretary and also an Additional Secretary or Assistant Secretary who will also
be a Government servant. Under sub-section (1) of Section 59 the officers and servants
of market committee holding the classes of posts specified in sub-sections (1), (2) and
(3) of Section 58, on the date immediately prior to the date of commencement of that
Act, shall, with effect from the date of such commencement become officers and
servants of the State Government. Sub-section (1-A) provides, notwithstanding anything
contained in this Act or in any other law for the time being in force, officers and servants
of the market committee holding such classes of posts on such dates as may be
specified by the State Government become officers and servants of the State
Government with effect from the date so notified. Sub-section (2) confers rights on the
officers and servants of the market committee after becoming servants of the State
Government under sub-section (1) or sub-section (1-A) to have the same tenure, the
same remuneration, same terms and conditions of service, with the same rights and
privileges as to pension, gratuity, provident fund etc. as they would have received the
same under the market committee concerned and shall continue to receive so until their
remuneration, terms and conditions of service including the privileges are altered by
rules or other provisions made under Article 309 of the Constitution. Sub-section (3)
starts with non obstante clause, notwithstanding anything contained in the Industrial
Disputes Act, 1947 or in any other law for the time being in force or in any contract, in
case of transfer of any officer or servant of a market committee by virtue of sub-sections
(1) and (1-A) shall not entitle any such officer or such servant to any compensation or
payment under that Act or other law or contract. Learned counsel for the appellant
strongly relies on this sub-section to interpret that the Central Act is excluded from the
purview of employees under the State Act.
6. Section 59 of the State Act is reproduced below :
"Absorption of staff of market committees in Government service - (1) Officers
and servants of market committees (by whatever name called) holding the classes of
posts specified in sub-sections (1), (2) and (3) of Section 58 on the date immediately
prior to the date of commencement of that Act, shall, with effect from the date of such
commencement become officers and servants of the State Government.
Explanation - The State Government shall determine the designations of the
officers and servants of the market committees who shall become officers and servants
of the State Government under this sub-section.
((1-A) Notwithstanding anything contained in this Act or in any other law for the
time being in force, officers and servants of market committees holding such classes of
posts on such dates as may be specified by the State Government shall, with effect
from such date become officers and servants of the State Government and they shall
draw their salary and allowances from the Consolidated Fund of the State.
(2) The officers and servants of market committees who become officers and
servants of the State Government under sub-section (1) (or sub-section (1-A)) shall hold
their office by the same tenure, at the same remuneration and upon the same terms and
conditions of service and with the same rights and privileges as to pension, gratuity,
provident fund and such matters as they would have held the same under the market
committee concerned and shall continue to do so until their remuneration, terms and
conditions of service including the privileges as to pension, provident fund and gratuity
are altered by rules or other provisions made (under the Karnataka State Civil Services
Act, 1978), and any such alteration shall have effect, notwithstanding anything
contained in any contract or law for the time being in force.
(3) Notwithstanding anything contained in the Industrial Disputes Act, 1947
(Central Act 14 of 1947), or in any other law for the time being in force or in any contract
the transfer of the services of any officer or servant of a market committee by virtue of
sub-section (1) (or sub-section (1-A)) shall
@page-SC3121
not entitle any such officer or servant to any compensation or payment under that
Act or other law or contract, and no such claim shall be entertained by any Court,
Tribunal or other authority."
7. Section 61 refers to the appointment of other staff, other than those who falls
under Section 58. Section 62 refers to the Karnataka State Marketing Service. The
State Government is empowered to constitute any class of officers or servants to bring it
into marketing service to be designated as the Karnataka State Marketing Service
through issue of notification. Under its proviso, the State Government could carve out
and constitute the officers and servants falling under sub-section (1-A) of Section 59
into a separate service for the State to be designated as Karnataka State Market
Committee Services. Under sub-section (2) the State Government could amalgamate
both the Karnataka State Marketing Service and the Karnataka State Market Committee
Services into one single service.
8. The submission for the appellant is that market committee is not conferred with
the power of appointment, though under Section 61(3) it could create temporary posts
and appoint temporary employees for not more than 180 days with the prior approval of
the Director of Agricultural Marketing. Learned counsel for the appellant, Mr.
Chandrasekhar has taken us to the various provisions of the Act, namely, Sections 9
(3), 58, 59, 63, 65, 66, 67, 69, 72, 73 and 83 of the State Act to show that the scheme of
the Act is to provide for the better regulation of marketing of agricultural produce and
establishment and control of market for agricultural produce within the State. He
emphasised, these provisions indicate that the function of the market committee is
sovereign in nature hence it could not constitute to be an industry to make its
employees as workmen under the Central Act. Section 9(3) confers status on every
market committee to be a local authority. Section 61 deals with appointments from
among the officers and servants of the Karnataka State Market Committee Service or
Karnataka State Market Service other officers, servants of a market committee. Section
63 deals with the powers and duties of the market committee. Section 65 authorises the
market committee to levy market fees. Section 66 empowers any officers or servant of
the State Government to require any person carrying on business of agricultural
produce to produce before him the accounts, other documents, furnish any information
relating to the stock of such agricultural produce, or purchases, sales, deliveries of such
produce and is also empowered to seize the accounts, register or documents. Section
67 authorises such authorities to stop any vehicle, vessel or other conveyance which is
shown to be taking out of the market committee or moving in the market area for
examining the contents in the vehicle, vessel or other conveyance. Section 69 confers
power to acquire the land and hold it. Section 71 confers right on the market committee
to issue licence for the regulation of trading under Section 72 and Section 73 confers
right of such authority to cancel or suspend such licence. Section 83 deals with the
production of account books etc. The question raised is that these functions are
sovereign in nature.
9. Seven persons serving under the market committee raised dispute, following,
termination of their services before the Labour Court. First is Shri A. G. Harakuni, who
was appointed as an Assistant Engineer on 3rd March, 1987 on daily wage for looking
after the construction work and he worked as such till 16th May, 1989 when his services
were terminated. Next is Shri G. Nagaraj, who was appointed on 27th April, 1978 as a
market fee Collector on temporary basis and his services were terminated on 31st
March, 1982. Third is Shri Shivakumar, who was appointed as maistry on 25th
November, 1981 on daily wages though he was paid salary once in a month and his
services were terminated on 31st October, 1986. Next is Shri Nirvanappa. He was
appointed as a peon on 18th March, 1964 whose appointment was approved on 26th
March, 1969. His service was terminated on 3rd August, 1971. Next is Umesh Hegde.
He was appointed as work inspector on daily wages vide appointment order dated 28th
December, 1984 and his service was terminated on 3rd April, 1987. Next is Siddappa
Rudrappa Chickamani who was appointed as watchman on 8th April, 1982 and his
service was terminated on 13th September, 1989 and finally Shri M. M. Satyannavar.
He was appointed as an Assistant Engineer on 25th May, 1984 on daily wage basis for
looking after development work and his service was terminated on 15th May, 1989.
Each of these seven persons are respondents in this case. The Labour
@page-SC3122
Court allowed their applications by setting aside their order of termination and
directed their reinstatement. The appellant aggrieved filed writ petition challenging these
orders, among other grounds, one is challenge to the jurisdiction of the Labour Courts to
try the cases of these seven respondents as the appellant is not an "industry" within the
meaning of the Central Act, hence the Labour Courts have no jurisdiction to try their
claims. Learned single Judge of the High Court dismissed the writ petition, holding that
the appellant-market committee is an "industry" and hence Labour Courts, have the
jurisdiction to decide their cases. Feeling aggrieved the appellants preferred writ appeal
and the Division Bench similarly dismissed the same upholding that appellantcommittee is an "industry" within the meaning of the Central Act.
10. Learned counsel for the appellant challenges these concurrent findings by
submitting that functions of the appellant committee being sovereign in nature and
inalienable in character cannot be construed an "industry". The power of appointment of
the various employees under the Act is only with the State Government, only limited
power vests on the appellant-committee, to appoint person temporarily for a period not
exceeding 180 days. Under Section 61(3) such person cannot get any lien over any
post. He has no right to seek regularisation. Once a person is appointed under the State
Act his services would not be governed by the Central Act. The claimants being
appointed under the State Act which received assent of the President of India on 19th
August, 1966 it will prevail over the Central Act. The functions of market committee are
for the regulation of trade in notified agricultural produces in order to safeguard the
interest of the agriculturist and public at large. This was to ensure legitimate price of the
agricultural produce to be sold in the market area. This committee is not constituted for
making any profit but only to service the cause of the agriculturist so that they may
receive fair price of their produce. The submission is, persons appointed to work under
this market committee are Government servants, and they are appointed in accordance
with the cadre and their wages are paid out of the consolidated fund. The temporary
employees appointed by the market committee are paid salaries out of the fund known
as market fund. Hence there is no relationship of employer and employee of those
serving under it. It may be stated here, in the present case the subject-matter relates
only of those employees who were temporarily appointed and have yet not become
Government servant. Another submission is that the High Court erred in not bringing the
market committee within the exception clause referred in the decision of Bangalore
Water-Supply case (AIR 1978 SC 548 : 1978 Lab IC 467) (supra).
11. On the other hand, learned counsel Shri Ravindra Bhat appearing on behalf
of the respondents, submits that in view of the decisions of this Court, especially with
reference to Bangalore Water-Supply case (AIR 1978 SC 548 : 1978 Lab IC 467)
(supra), the market committee is an "industry" within the meaning of the Central Act.
The submission is, only strictly "sovereign functions" as held in Bangalore Water-Supply
case (supra) which is explained in Chief Conservator of Forests v. Jagannath Maruti
Kondhare, (1996) 2 SCC 293 : (1996 AIR SCW 735 : AIR 1996 SC 2898 : 1996 Lab IC
967), could be exempted from the provisions of the Central Act. Hence, neither all
governmental functions could be construed to be sovereign nor all statutory services
could either be termed as sovereign or to exclude it from the purview of the Central Act.
12. The main thrust of submission for either side is, one trying to bring the
functions of the appellant-committee within sovereign functions and the other stretching
it out of it. The submission for the appellant is the power of the Government and
functions of the committee, namely, notifying the intention of the Government to
regulate the marketing of specified agricultural produce within specified area under
Section 3, declaration of market area under Section 4, establishment of market under
Section 7, payment of Secretary and technical staff under Section 58, absorption of staff
of market committee in Government services under Section 59, appointment of other
staff under Section 61, levy of market fees under Section 65, grant of license under
Section 72, de-notification of market area under Section 143, and amalgamation of
market committees under Section 144 are all sovereign in nature and hence it could not
be construed to be an industry. On the other hand, learned counsel for the respondent
submits sovereign functions are restricted to legislative, maintenance of law
@page-SC3123
and order, administration of law and legal system. Hence, other functions, to
which the appellant case falls, cannot be construed to be a sovereign function.
13. We now proceed to consider as to what would be the test to find an
enterprise to be an "industry". As we have said, the matter has been under
consideration by various Courts in various parts of this country, including this Court.
Some of which we are proceeding to refer hereunder. In The Corporation of the City of
Nagpur v. Its Employees, (1960) 2 SCR 942 : (AIR 1960 SC 675), the question raised
was, whether and to what extent the municipal activities of the Corporation of Nagpur
City fell within the term "industry" as defined by Section 2 (14) of the C. P. and Berar
Industrial Disputes Settlement Act, 1947. Applying the decision of this Court in D. N.
Banerji v. P. R. Mukherjee, 1953 SCR 302 : (AIR 1953 SC 58) this Court held :
"It is not necessary that an activity of the Corporation must share the common
characteristics of an industry before it can come within the section. The words of S.
2(14) of the Act are clear and unambiguous and the maxim noscitur a socii can have no
application. The history of industrial disputes and the legislation, however, recognises
the basic concept that the activity must be an organised one and not one that pertains
to private or personal employment."
14. With reference to State of Bombay v. The Hospital Mazdoor Sabha, (1960) 2
SCR 866 : (AIR 1960 SC 610) this Court held :
"But the definition, however, wide, cannot include the regal primary and
inalienable functions of the State, though statutory delegated to a Corporation and the
ambit of such functions cannot be extended so as to include the activities of a modern
State and must be confined to legislative power, administration of law and judicial
power."
15. This case further records (AIR 1960 SC 610, Paras 10 and 11) :
"Before considering the positive aspects of the definition, what is not an industry
may be considered. However, wide the definition of "industry" may be, it cannot include
the regal or sovereign functions of State. This is the agreed basis of the arguments at
the Bar. though the learned counsel differed on the ambit of such functions. While the
learned counsel for the Corporation would like to enlarge the scope of these functions
so as to comprehend all the welfare activities of a modern State, the learned counsel for
the respondents would seek to confine them to what are aptly termed "the primary and
inalienable functions of a constitutional Government...... Lord Waston, in Coomber v.
Justices of Berks (1983 (9) AC 61), describes the functions such as administration of
justice, maintenance of order and repression of crime, as among the primary and
inalienable functions of a constitutional Government. Isaacs, J. in his dissenting
judgment in The Federal State School Teachers' Association of Australia v. The State of
Victoria (1928-29 (41) CLR 569) concisely states thus at p. 584 :
"Regal functions are inescapable and inalienable. Such are the legislative power,
the administration of laws, the exercise of the judicial power. Non-regal functions may
be assumed by means of the legislative power. But when they are assumed the State
acts simply as a huge corporation, with its legislation as the charter. Its action under the
legislation, so far as it is not regal execution of the law is merely analogous to what of a
private company similarly authorised.
Supreme Court of America in Verisimo Vasquez Vilas v. City of Manila (1910
(220) US 345) expounded the dual character of a municipal corporation thus :
"They exercise powers which the governmental and powers which are of a
private or business character. In the one character a municipal corporation is a
Governmental sub-division, and for that purpose exercises by delegation a part of the
sovereignty of the State. In the other character it is a mere legal entity or juristic person.
In the latter character it stands for the community in the administration of local affairs
wholly beyond the sphere of the public purposes for which its governmental powers are
conferred.
Isaacs and Rich, JJ., in The Federated Municipal and Shire Council Employees'
Union of Australia v. Melborune Corporation (1918-19 (26) CLR 508) in the context of
the dual functions of State say much to the same effect at p. 530 :
"Here we have the decrement of Crown exemption. If a municipality either (1) is
legally empowered to perform and does perform any function whatever for the Crown,
or (2) is lawfully empowered to perform and does perform any function which
constitutionally is inalienable a Crown function - as,
@page-SC3124
for instance, the administration of justice - the municipality is in law presumed to
represent the Crown, and the exemption applies. Otherwise, it is outside that
exemption, and, if impliedly exempted at all, some other principle must be resorted to.
The making and maintenance of streets in the municipality is not within either
proposition."
A corporation may, therefore, discharge a dual function; it may be statutorily
entrusted with regal functions strictly so-called, such as making of laws, disposal of
certain cases judicially etc., and also with other welfare activities. The former, being
delegated regal functions, must be excluded from the ambit of the definition of
"industry". Finally the definition of "industry" is summarised :
"The result of the discussion may be summarised thus : (1) The definition of
"industry" in the Act is very comprehensive. It is in two parts: one part defines it from the
standpoint of the employer and the other from the standpoint of the employee. If an
activity falls under either part of the definition, it will be an industry within the meaning of
the Act. (2) The history of industrial disputes and the legislation recognizes the basic
concept that the activity shall be an organized one and not that which pertains to private
or personal employment. (3) The regal functions described as primary and inalienable
functions of State though statutorily delegated to a corporation are necessarily excluded
from the purview of the definition. Such regal functions shall be confined to legislative
power, administration of law and judicial power. (4) If a service rendered by an
individual or a private person would be an industry, it would equally be an industry in the
hands of a corporation. (5) If a service rendered by a corporation is an industry, the
employees in the departments connected with that service, whether financial,
administrative or executive, would be entitled to the benefits of the Act. (6) If a
department of a municipality discharges many functions, some pertaining to industry as
defined in the Act and other non-industrial activities, the predominant functions of the
department shall be the criterion for the purposes of the Act.
16. Within this premises this Court considered various departments of the
corporation as to whether employees of such department would be covered by the
Central Act. This Court holds various departments of the corporation including tax
department, assessment department, marketing department to be an "industry".
17. This Court in Bangalore Water-Supply and Sewerage Board v. R. Rajappa,
(1978) 3 SCR 207 : (AIR 1978 SC 548 : 1978 Lab IC 467) (Constitution Bench),
considered the definition of "industry" as defined under Section 2(j) of the Central Act.
This Court held :
"Although we are not concerned in this case with those categories of employees
who particularly come under departments charged with the responsibility for essential
constitutional functions of Government, it is appropriate to state that if there are
industrial units severable from the essential functions and possess an entity of their own
it may be plausible to hold that the employees of those units are workmen and those
undertakings are industries. A blanket exclusion of every one of the host of employees
engaged by Government in departments falling under general rubrics like, justice,
defence, taxation, legislature, may not necessarily be thrown out of the umbrella of the
Act. We say no more except to observe that closer exploration, not summary rejection,
is necessary."
18. This decision also records Corporation of Nagpur City case (AIR 1960 SC
675) (supra) as to how in that case various departments of the corporation were held to
be an "industry". This Court considered the submission, as in the present case that
functions of the various department are only out of statutory sanction and no private
individual can discharge those statutory functions. Corporation of Nagpur City case
(supra) considered this aspect and records to the following effect (at p. 689 of AIR) :
"It is said that the functions of this department are statutory and no private
individual can discharge those statutory functions. The question is not whether the
discharge of certain functions by Corporation have statutory backing, but whether those
functions can equally be performed by private individuals."
19. Strong reliance is placed by learned counsel for the appellant to the following
observations of this Court in Bangalore Water-Supply case (AIR 1978 SC 548 : 1978
Lab IC 467) (supra) which is an exception which excludes it from the operation of the
Central Act :
"In any case, it is open to Parliament to
@page-SC3125
make law which governs the State's relations with its employees. Articles 309 to
311 of the Constitution of India, the enactments dealing with the Defence Forces and
other legislation dealing with the employment under statutory bodies may, expressly or
by necessary implication, exclude the operation of the Industrial Disputes Act, 1947."
20. The submission is, this observation excludes implicitly services under the
statutory bodies from the operation of the Industrial Disputes Act. This submission is
misconceived. This observation merely records what Parliament can make law in
relation to the employees of statutory bodies etc. In other words, if it so desires may
exclude the employees of any statutory bodies expressly or by necessary implication
from the purview of Industrial Disputes Act. This decision does not carve out any
exception to exclude employees of all the statutory bodies. It merely indicates power of
the Parliament, to place any class of employees outside the purview of the Central Act.
The question is, whether there is any such provision under the State Act or the Central
Act, which excludes these employees from the operation of the Central Act. In fact,
Section 2(a) of the Central Act itself reveals large number of statutory corporations
falling within the rubric of "industry".
21. In relation to what are "sovereign" and what are "non-sovereign" functions,
this Court in Chief Conservator of Forests v. Jagannath Maruti Kondhare, (1996) 2 SCC
293 : (1996 AIR SCW 735 : AIR 1996 SC 2898 : 1996 Lab IC 967) holds (Paras 12 and
13) :
"We may not go by the labels. Let us reach the hub. And the same is that the
dichotomy of sovereign and non-sovereign functions does not really exist - it would all
depend on the nature of the power and manner of its exercise, as observed in para 23
of Nagendra Rao case (1994 AIR SCW 3753 : AIR 1994 SC 2663). As per the decision
in this case, one of the tests to determine whether the executive function is sovereign in
nature is to find out whether the State is answerable for such action in Courts of law. It
was stated by Sahai, J. that acts like defence of the country, raising armed forces and
maintaining it, making peace or war, foreign affairs, power to acquire and retain territory,
are functions which are indicative of external sovereignty and are political in nature.
They are, therefore, not amenable to the jurisdiction of ordinary civil Court inasmuch as
the State is immune from being sued in such matters. But then, according to this
decision the immunity ends there. It was then observed that in a welfare State, functions
of the State are not only the defence of the country or administration of justice or
maintaining law and order but extends to regulating and controlling the activities of
people in almost every sphere, educational, commercial, social, economic, political and
even martial. Because of this the demarcating line between sovereign and nonsovereign powers has largely disappeard.
The aforesaid shows that if we were to extend the concept of sovereign function
to include all welfare activities as contended on behalf of the appellants, the ratio in
Bangalore Water Supply case (AIR 1978 SC 548 : 1978 Lab IC 467) would get eroded,
and substantially. We would demur to do so on the face of what was stated in the
aforesaid case according to which except the strictly understood sovereign function.
welfare activities of the State would come within the purview of the definition of industry;
and, not only this, even within the wider circle of sovereign function, there may be an
inner circle encompassing some units which could be considered as industry if
substantially severable."
22. In other words, it all depends on the nature of power and the manner of its
exercise. What is approved to be "Sovereign" is defence of the country, raising armed
forces, making peace or war, foreign affairs, power to acquire and retain territory. These
are not amenable to the jurisdiction of ordinary civil Courts. The other functions of the
State including welfare activity of State could not be construed as "sovereign" exercise
of power. Hence, every governmental function need not be "sovereign". State activities
are multifarious. From the primal sovereign power, which exclusively inalienably could
be exercised by the Sovereign alone, which is not subject to challenge in any civil Court
to all the welfare activities, which would be undertaken by any private person. So merely
one is employee of statutory bodies would not take it outside the Central Act. If that be
then Section 2(a) of the Central Act read with Schedule I gives large number of statutory
bodies should have been excluded, which is not. Even if a statute confers on any
statutory body, any function which could be construed to be "sovereign" in nature would
not mean
@page-SC3126
every other functions under the same statute to be also sovereign. The Court
should examine the statute to severe one from the other by comprehensively examining
various provisions of that statute. In interpreting any statute to find it is "industry" or not
we have to find its pith and substance. The Central Act is enacted to maintain harmony
between employer and employee which brings peace and amity in its functioning. This
peace and amity should be the objective in the functioning of all enterprises. This is to
the benefit of both, employer and employee. Misuse of rights and obligations by either
or stretching it beyond permissible limits have to be dealt with within the framework of
the law but endeavor should not be in all circumstances to exclude any enterprise from
its ambit. That is why Courts have been defining "industry" in the widest permissible
limits and "sovereign" functioning within its limited orbit.
23. In N. Negendra Rao and Co. v. State of A. P., (1994) 6 SCC 205 : (1994 AIR
SCW 3753 : AIR 1994 SC 2663), the question raised was about the liability of the State
to pay compensation for the negligence or misfeasance on the part of its officers in
discharge of their public duties under a statute, which are incidental or ancillary and not
primary or inalienable function of the State. This decision holds that the State is
immuned only in cases where its officers perform primary or inalienable functions such
as defence of the country, administration of justice, maintenance of law and order. This
Court held :
"A search or seizure effected under such law could be taken to be an exercise of
power which may be in domain of inalienable function. Whether the authority to whom
this power is delegated is liable for negligence in discharge of duties while performing
such functions is a different matter. But when similar powers are conferred under other
statute as incidental or ancillary power to carry out the purpose and objective of the Act,
then it being an exercise of such State function which is not primary or inalienable, an
officer acting negligently is liable personally and the State vicariously.
In the modern sense the distinction between sovereign or non-sovereign power
thus does not exist. It all depends on the nature of power and manner of its exercise.
................ One of the tests to determine if the legislative or executive function is
sovereign in nature is whether the State is answerable for such actions in Courts of law.
For instance, acts such as defence of the country, raising armed forces and maintaining
it, making peace or war, foreign affairs, power to acquire and retain territory, are
functions which are indicative of external sovereignty and are political in nature.
Therefore, they are not amenable to jurisdiction of ordinary civil Court."
24. With reference to irrigation department of the State of Punjab this Court
considered the question whether it is an "industry" within the meaning of Section 2(j) of
the Central Act. The function of this department is for the development of agriculture. It
undertakes harness of the surface and ground water resources of the State, the
equitable distribution. It involves construction of major, medium and minor irrigation
projects, maintenance of network of channels, regulation of canal supplies, enforcement
of water laws etc. It is also responsible to provide protection to the valuable irrigated
lands and public property from flooding, river action and waterlogging. This requires
construction of flood protection, river training, drainage and anti-waterlogging works and
their maintenance. Its functions includes plan for irrigation development in the State.
Each of these functions overall are inherently of the State. With reference to this
irrigation department in Des Raj v. State of Punjab, (1988) 2 SCC 537 : (AIR 1988 SC
1182 : 1988 Lab IC 1713) this Court held :"With regard to the activities of the irrigation department and as also the tests laid
down in various decisions of this Court particularly applying the Dominant Nature test in
Bangalore Water Supply and Sewerage Board case (AIR 1978 SC 548 : 1978 Lab IC
467) (supra), it was held to be an 'industry'".
25. In this background we may proceed to examine the present State Act. The
preamble of this Act records :
"An Act to provide for the better regulation of marketing and agricultural produce
and the establishment and administration of markets for agricultural produce in the
State of Karnataka".
26. We may also usefully produce the Statement of Objects and Reasons of the
State Act :
"STATEMENT OF OBJECTS AND REASONS :
Among other things, provision is made in
@page-SC3127
this Bill for (i) defining 'agricultural produce' to include all produce of agriculture, animal
husbandry, apiculture, horticulture, forest produce and any other produce, live-stock and
poultry;
(ii) notifying the intention of Government to regulate the purchase and sale of
agricultural produce in specified area and declaration of market area and of market
yards;
(iii) Establishment of market committees for trading in specified kinds of
agricultural produce and also separate market committees within the same market area
for trading in any particular kind of agricultural produce;
(iv) representation on the market committee to purchasers of agricultural
produce, representatives of the purchasers' co-operative societies, representatives of
co-operative marketing and processing societies, municipalities, taluk boards and the
Central Warehousing Corporation or State Warehousing Corporation;
(v) levy and collection of market fees by the market committee;
(vi) constitution of market committee funds and Central Market Fund;
(vii) conferring borrowing powers on market committee;
(viii) appointment of Government servants as Secretaries, Assistant Secretaries,
Technical Accounts and Audit Staff of market committees to ensure efficient
administration and control of markets;
(ix) inquiry or inspection by the Chief Marketing Officer;
(x) supersession of market committee for failure to perform duties."
27. The aforesaid preamble and Statement of Objects and Reasons clearly
disclose the sphere of this Act to be for the regulation of marketing of agricultural
produce, establishment of market committee for controlling, trading in specified kind of
agricultural produce. It provides for levying of market fees by the market committee. It
confers power on the market committee to borrow money. The appointment of
Government servants as Secretaries, Assistant Secretaries, Technical Accounts and
Audit Staff is to ensure efficient administration and control of markets. In order to
strengthen the said objectives Chapter II deals with the establishment of markets,
Chapter III with constitution of market committees including provisions for election of its
members. The constitution of the committee under Section 11 consists of 11 members
out of which one has to be a woman, two persons belonging to Scheduled Castes and
Scheduled Tribes elected by the agriculturists in the market area, one member to be
person other than retail traders, one member to be a representative of co-operative
marketing society carrying on business in notified agricultural produce, one member to
be representative of agricultural co-operative processing society, one to be an officer
not below the rank of Secretary of the concerned market committee nominated by the
Director of Agricultural Marketing who has no right to vote and three members to be
nominated by the State Government who have right to vote. Chapter IV deals with
conduct of business of the market committee, Chapter V refers to staff of the market
committee, Chapter VI deals with the powers and duties of market committee. It
indicates it is for regulating the trading of agriculture produce within the market area,
Chapter VII directly deals with regulation of trading which includes grant of licences,
power to cancel and suspend it, Chapter VIII pertains to market fund, Chapter IX refers
to special commodities market, Chapter X deals with Mandal Panchayats as agents of
market committee, Chapter XI deals with establishment of independent markets and
market committees for special commodities. Chapter XII is about penalties, Chapter XIII
controls the functioning of the various officers and members including that of market
committee and Chapter XIV is miscellaneous which includes provisions for recovering of
sums due to the market committee or board etc. After scanning the whole Act and
perusing the preamble and Statement of Objects and Reasons of the Act, it reveals that
this Act deals with various facets of regulating activities within the market area with
respect to the trading in agricultural produce. It includes establishment of various
committees including charging of fees for service rendered to the traders of agricultural
producers. Any enactment, scheme or project which sponsors helps in the trading
activity is one of the State's essential functions towards welfare activities for the benefit
of its subject. Such activities can be undertaken even by any non-governmental
organisation or a private person, corporate or company. In fact, prior to the
@page-SC3128
abolition of Zamindari, the Hats and Bazars (Markets) held on Zamindar's
(Landowner) land, the Zamindar used to charge fees for rendering service for holding
such market, by providing land and facilities to the participants of such market. By this it
helped producers, sellers and public at large through such trading. This is similar, in a
nature and form to what is being done now under the State Act through statutory
functionaries. Thus none of these functions could be construed to be sovereign in
nature or inalienable in character.
28. It is true various functionaries under this Act are creature of statute. But
creation as such, by itself, cannot confer it the status of performing inalienable functions
of the State. The main controlling functions and power is conferred on the market
committee whose constitution itself reveals, except one or two rests are all are elected
members representing some on other class from the public. In fact, all governmental
functions cannot be construed either primary or inalienable sovereign function. Hence
even if some of the functionaries under the State Act could be said to be performing
sovereign functions of the State Government that by itself would not make the dominant
object to be sovereign in nature or take the aforesaid Act out of the purview of the
Central Act.
29. Thus merely an enterprise being statutory corporation, creature under a
statute, would not take it outside the ambit of "industry" as defined under the Central
Act. We do not find the present case falling under any exception laid down in the
Bangalore Sewerage Board case (AIR 1978 SC 548 : 1978 Lab IC 467) (supra). The
mere fact that some employees of the appellant are Government servants would make
no difference as the true test to find has to be gathered from the dominant object for
which functionaries are working. It cannot be doubted that the appellant is an
undertaking performance its duties in a systematic and organised manner, regulating
the marketing and trading of agricultural produce, rendering services to the community.
In the present case, as we have recorded earlier, we are concerned only with those
employees who are not Government servants. Testing the dominant object as laid down
in Bangalore Sewerage Board case (supra), we reach to inescapable conclusion that
none of the activities of the Agriculture Produce Market Committee could be construed
to be sovereign in nature. Hence we have no hesitation to hold that this corporation falls
within the definition of "industry" under Section 2(j) of the Central Act.
30. Section 2(a) of the Central Act defines 'Appropriate Government' in relation to
any industrial disputes concerning any industry carried on by or under the authority of
Central Government, or railway company etc. and refers to large number of
corporations and corporate bodies which falls in the category of "industry". This
indicates even Legislature's intends a very large arms of "industry", to include large
number of enterprises to be industry to confer benefit to the employees working under it.
In fact, several corporations conferred with statutory powers also curtails individual
rights like, through levy of demurrages, detention charges in the warehousing
corporation under the Ware-house Corporation Act; Regulation of entry into airport,
ATC, levy and regulation of taxes and fees by the international airport authority.
Assessment and levy of damages as well as penalties by authorities under the
Employees State Insurance Act and Employees Provident Fund Act. Though each of
the aforesaid corporations and statutory bodies are "industry". So one of the feeble
submission that curtailment of right of an individual could only be by the exercise of
sovereign power has also no merit.
31. From the aforesaid catena of authorities, inalienability is one of the basic
character of sovereignty. The Encyclopedia of the American Constitution with reference
to "sovereignty" attempts to define sovereignty.It records :
"Within the American regime the ultimate power and authority to alter or a abolish
the constitutions of Government of state and Union resides only and inalienably with the
people. If it be necessary or useful to use the term "sovereignty" in the sense of ultimate
political power, then there is no sovereign in America but the people.
DENNIS J. MAHONEY"
32. Words and Phrases, Permanent Edition, Volume 39-A with reference to
"sovereign power" records :
"The "sovereign powers" of a Government include all the powers necessary to
accomplish its legitimate ends and purposes. Such powers must exist in all practical
Governments. They are the incidents of sovereignty,
@page-SC3129
of which a state cannot devest itself. Boggs v. Meree Min. Co., 14 Cal, 279, 309
............. In all Governments of constitutional limitations "sovereign power" manifests
itself in but three ways. By exercising the right of taxation; by the right of eminent
domain; and through its police power. United States v. Douglas-Willan Sartoris Co., 22
p. 92, 96, 3 Wyo. 287."
33. So, sovereign function in the new sense may have very wide ramification but
essentially sovereign functions are primary inalienable functions which only State could
exercise. Thus, various functions of the State, may be ramifications of 'sovereignty' but
they all cannot be construed as primary inalienable functions. Broadly it is taxation,
eminent domain and police power which covers its field. It may cover its legislative
functions, administration of law, eminent domain, maintenance of law and order, internal
and external security, grant of pardon. So, the dichotomy between sovereign and nonsovereign function could be found by finding which of the functions of the State could be
undertaken by any private person or body. The one which could be undertaken cannot
be sovereign function. In a given case even in subject on which the State has the
monopoly may also be non-sovereign in nature. Mere dealing in subject of monopoly of
the State would not make any such enterprise sovereign in nature. Absence of profit
making or mere quid pro would also not make such enterprise to be outside the ambit of
"industry" as also in State of Bombay case (AIR 1960 SC 610) (supra).
34. The last submission for the appellant is with reference to sub-section (3) of
Section 59 of the said Act. The submission is, this excludes the application of the
Central Act to the employees under the State Act. The reliance is placed on the
following opening words of this sub-section (3) namely :
"Notwithstanding anything contained in the Industrial Disputes Act, 1947."
35. On the contrary this indicates that exclusion of the Central Act is limited to the
sphere as specified under this sub-section, namely, payment of compensation to the
officers or servants of the transferred employees. Thus by necessary implication, other
field under the Central Act is made applicable. Hence this submission has no merit.
36. In view of the aforesaid settled legal principle the width of "industry" being of
widest amplitude and testing it in the present case, in view of the preamble, Objects and
Reasons and the scheme of the Act, the pre-dominant object clearly being regulation
and control of trading of agricultural produce, the appellant-committee including its
functionaries cannot be said to be performing functions which are sovereign in
character. Most of its functions could be undertaken even by private persons. Thus the
appellant would fall within the definition of "industry" under Section 2(j) of the Central
Act. In view of this, we uphold that respondent employees are 'workman' under the
Central Act as held by the Labour Court and confirmed by the High Court. The Labour
Court has dealt with each individuals cases and came to the conclusion in favour of
respondent-employees which has also been confirmed by learned single Judge and
Division Bench of the High Court, which does not call for any interference. Accordingly,
the present appeals have no merit and are dismissed. Costs on the parties.
Appeal dismissed.
AIR 2000 SUPREME COURT 3493 "Food Corporation of India v. Bihar State
Agricultural Market Board"
= 2000 AIR SCW 2329
Coram : 2
B. N. KIRPAL AND M. B. SHAH, JJ.
Civil Appeal No. 2110 of 1989 (Cri. Appeal Nos. - of 2000) (arising out of S.L.P.
(Cri.) Nos. 934 of 1993, 2883 of 1994 and -- of 2000; Cri. M. P. No. 1564 of 1993), D/20 -1 -2000.
Food Corporation of India, Appellant v. Bihar State Agricultural Market Board and
others, Respondents.
Bihar Agricultural Produce Markets Act (16 of 1960), S.27 - AGRICULTURAL
PRODUCE - Market fee - Leviability - Levy sugar sold by Food Corporation of India Excluded from levy as held in 1999 AIR SCW 3074 - Prosecution launched against FCI
also liable to be quashed.
Belsund Sugar Co. Ltd. v. State of Bihar, 1999 AIR SCW 3074, Foll.
(Paras
1, 5)
Cases Referred :
Chronological Paras
Belsund Sugar Co. Ltd. v. State of Bihar, 1999 AIR SCW 3074 : AIR 1999 SC
3125 : 1999 (4) Scale 516 (Foll.) 1, 2, 5
Judgement
JUDGMENT :-The question involved in this case is whether on levy sugar which
is sold by the appellant market fee is payable or not. This matter stands concluded in
favour of the appellant by a Constitution Bench judgment of this Court in Belsund Sugar
Co. Ltd. v. State of Bihar, 1999 (4) Scale 516 : (1999 AIR SCW 3074 : AIR 1999 SC
3125). The appeal is, accordingly, allowed. No costs.
2. This order, as it had been done in Belsund Sugar Co. Ltd. (supra), will be
effective prospectively and no refund of fee would be payable by the respondents to the
appellant nor any further fee will be payable to the respondents by the appellant.
3. Delay condoned.
4. Special leave granted.
5. The prosecution which has been initiated against the appellants is quashed in
view of the decision of a Constitution Bench in Belsund Sugar Co. Ltd. v. State of Bihar,
1999 (4) Scale 516 : (1999 AIR SCW 3074 : AIR 1999 SC 3125).
6. The appeals are, accordingly, allowed.
7. No costs.
Appeals allowed.
@page-SC3494
AIR 1999 SUPREME COURT 147 "Mahaluxmi Rice Mills, M/s. v. State of U.P."
= 1998 AIR SCW 3504
(From : Allahabad)
Coram : 3
M. M. PUNCHHI, C.J.I., K. T. THOMAS AND S. S. M. QUADRI, JJ.
Civil Appeal No. 555-557 WITH 558 to 563 of 1997, D/- 19 -8 -1998.
M/s. Mahaluxmi Rice Mills and others, Appellants v. State of U.P. and others,
Respondents.
(A) U.P. Krishi Utpadan Mandi Adhiniyam (25 of 1964), S.17 - AGRICULTURAL
PRODUCE - Levy of market fee - Transaction of sale for that purpose - What is - Selling
of rice to Government under the levy order - Is a transaction of sale.
1997 AIR SCW 1298, Rel. on.
(Para 6)
(B) U.P. Krishi Utpadan Mandi Adhiniyam (25 of 1964), S.17(iii)(b)(3) AGRICULTURAL PRODUCE - Market committee - Powers to levy market fee - Sale
transaction falling within purview of S. 17 (iii) (b) (3) - Market committee is entitled to
collect market fee from seller irrespective of fact whether seller has realised it from
purchaser or not - It is for seller to pass the burden on purchaser if he so chooses.
The word used for the seller to realise market fee from his purchaser is "may"
while the word used as for the seller to pay the market fee to the Committee is "shall".
Employment of the said two monosyllables of great jurisprudential import in the same
clause dealing with two rights regarding the same burden must have two different
imports. The legislative intendment can easily be discerned from the frame of the subclause that what is conferred on the seller is only an option to collect market fee from
his purchaser, but the seller has no such option and it is imperative for him to remit the
fee to the Committee. In other words, the Market Committee is entitled to collect market
fee from the seller irrespective of whether the seller has realised it from the purchaser or
not. (Para 9, 10, 13)
Cases Referred :
Chronological Paras
1997 AIR SCW 1298 : (1997) 3 SCC 410 : AIR 1997 SC 1252 (Rel. on)
1, 6
1996 AIR SCW 1323 : (1996) 3 SCC 321 : 1996 All LJ 676 : AIR 1996 SC 1251
7, 11
1994 AIR SCW 5156 : (1995) 1 SCC 655
11
AIR 1980 SC 1124 : (1980) 3 SCR 104 : 1980 All LJ 490
12B. D. Agarwal, O.
P. Rana, Sr. Advocates, Joseph Pocckkatt, Prashant Kumar, Anis Dayal, Sunil
Ambwani, R. C.Verma, Dr. I. P. Singh, (A. K. Srivastava) Advocate for R. B. Misra, T.
Mahipal, Pradeep Misra, Y. P. Rao, Irshad Ahmad, Advocates with them for appearing
parties.
Judgement
THOMAS, J. :- The area of dispute, in this appeal, has now been considerably
narrowed down with the decision of a three Judge Bench of this Court in Food
Corporation of India v. State of Kerala, (1997) 3 SCC 410, (1997 AIR SCW 1298). The
short question now remains is whether the market fee payable to the Market Committee
constituted under the U. P. Krishi Utpadan Mandi Adhiniyam, 1964 (for short "the Act")
shall be paid by the seller or purchaser when agricultural produce is sold by a trader to
the Government. The aforesaid question arose under the following facts :
2. Appellants are traders carrying on business in rice milling within certain areas
constituted in the State of U. P. Such areas have been notified as market areas under
Section 6 of the Act. Among the business activities carried on by the appellants they
purchased paddy from cultivators or sellers outside the market area and the paddy so
purchased is hulled to make it rice for sale. They are under a duty to sell rice to the
State Government as levy by virtue of Clause (3) of the U. P. Rice and Paddy (Levy and
Regulation of Trade) Order, 1985, which was issued under the Essential Commodities
Act, It will hereinafter be referred to as the "Levy Order".
3. Provisions of the Act envisage the formation of a Market Committee for each
market area and the said Committee is empowered to levy and collect fee called
"market fee" on transactions of sale of agricultural produce which take place within the
market area, at such rates as the State Government may specify by notification. Section
17(iii) of the Act reads thus :
"17. Powers of the Committee.- A Committee shall, for the purpose of this Act,
have the power toxxxxxx
xxx
xxx
xxx
(iii) levy and collect :
@page-SC148
xxxxxx
xxx
xxx
xxx
(b) market fee, which shall be payable on transactions of sale of specified
agricultural produce in the market area at such rates, being not less than one per
centum and not more than two percentum of the price of the agricultural produce so
sold, as the State Government may specify by notification, and such fee shall be
realised in the following manner(1) if the produce is sold through a commission agent, the commission agent may
realise the market fee from the purchaser and shall be liable to pay the same to the
Committee;
(2) if the produce is purchased directly by a trader from a producer the trader
shall be liable to pay the market fee to the Committee;
(3) if the produce is purchased by a trader from another trader, the trader selling
the produce may realise it from the purchaser and shall be liable to pay the market fee
to the Committee; and
(4) in any other case of sale of such produce, the purchaser shall be liable to pay
the market fee to the Committee."
4. The Market Committee concerned made demands on the appellants to remit
the market fee as indicated in Section 17 (iii) (b) (3) of the Act. Appellants challenged
the said demand before the Allahabad High Court on different grounds. First ground is
that when a rice miller gives rice to the Government as levy under the Levy Order it
does not amount to a "transaction of sale" and hence no market fee can be collected
thereon. Second ground is that the State Government is not a "trader" as contemplated
in the sub-clause and hence there is no liability to pay market fee. Third ground is that,
even if it was a sale to a trader the liability to pay market fee is on the purchaser i.e.
Government and not the miller who sells it to the Government.
5. High Court did not accept any of the aforesaid contentions and hence the
reliefs prayed for by the appellants in the writ petitions were disallowed. Against the
judgment repelling those contentions Special Leave Petitions have been filed by the
appellants and hence these appeals.
6. In the present appeals, appellants did not contend that Government is not a
trader as envisaged in sub-clause (3) of Section 17(iii) (b) of the Act. However,
appellants persisted with the third contention that the Act of selling rice to the
Government under the Levy Order is not a transaction of sale. That contention was
heard by a three Judge Bench of this Court along with some other appeals wherein
similar question was involved. It was held by the Bench that the disputed transactions
are sales and thus the said contention is put to rest. (vide paragraph 35 of Food
Corporation of India v. State of Kerala (1997 AIR SCW 1298) (supra)).
7. However, these appeals were not disposed of by the said Bench since the first
ground mentioned above has not been heard. Hence these appeals were delinked from
the rest of appeals and they were posted before a Bench of two Judges of this Court.
When the appeals were heard on 22-4-1998, the Bench deemed it necessary to have
these appeals heard by a larger Bench due to the following reasons : Before the said
Bench counsel for the appellants relied on the decision of another two Judge Bench of
this Court in Krishi Utpadan Mandi Samiti, Haldwani v.Indian Wood Products Ltd.,
(1996) 3 SCC 321 : (1996 AIR SCW 1323) in which this Court held thus :
"In a case where the trader selling the produce has realised the market fee from
the trader, the seller shall be bound to pay the market fee to the Committee. However,
where the selling trader does not realise it from the purchaser he is under no obligation
to pay the market fee to the Committee."
On behalf of the Market Committee it was submitted then that an earlier decision
of a Constitution Bench of this Court was not taken note of by the learned Judges in
Krishi Utpadan Mandi Samiti Ltd. v. Indian Wood Products Ltd. (1996 AIR SCW 1323)
(supra). In view of the aforesaid contentions learned Judges felt the need that these
appeals should be heard by a larger Bench regarding the remaining question. Thus the
limited question mentioned in the first paragraph alone needs answer for the final
disposal of these appeals.
8. Shri O. P. Rana, learned senior counsel who argued for the Market Committee
contended that the provisions of the Act are intended to make it feasible and practical
for the Market Committee to realise market fee; the Committee looks to the licenced
traders doing business within the limits of the market area for realisation of the market
@page-SC149
fee; if the primary liability to pay market fee is that of purchaser and not a seller
the market committee would find it very difficult to collect the fee from the purchaser
who might leave the market area after purchasing the agricultural produce. Mr. B. D.
Agrawal, learned senior counsel for the appellants argued that since sub-clause (3)
allows the seller to collect fee from the purchaser, trader's liability must be fastened with
the purchaser and when the purchaser is Government the market fee is very often not
paid by the Government to the seller and in such a contingency it would be unjust for
the Market Committee to realise the fee from the seller.
9. Sub-clause (3) of Section 17 (iii) (b) of the Act which has been extracted above
contains the following limbs :
(1) The right of the Market Committee to collect market fee would arise under the
sub-clause only "if the produce is purchased by a trader from another trader."
(2) In such a case it is open to the seller to realise the market fee from the
purchaser.
(3) But it is the duty of the seller to pay the fee to the Committee.
10. It is significant to note that the word used for the seller to realise market fee
from his purchaser is "may" while the word used as for the seller to pay the market fee
to the Committee is "shall". Employment of the said two monosyllables of great
jurisprudential import in the same clause dealing with two rights regarding the same
burden must have two different imports. The legislative intendment can easily be
discerned from the frame of the sub-clause that what is conferred on the seller is only
an option to collect market fee from his purchaser, but the seller has no such option and
it is imperative for him to remit the fee to the Committee. In other words, the Market
Committee is entitled to collect market fee from the seller irrespective of whether the
seller has realised it from the purchaser or not.
11. In Krishi Utpadan Mandi Samiti v. Indian Wood Products Ltd., (1996 AIR
SCW 1323) (supra) the learned Judge were persuaded by the ratio laid down by this
Court in Krishi Upaj Mandi Samity v. Orient Paper and Industries Ltd., (1995) 1 SCC
655 : (1994 AIR SCW 5156), wherein provisions of a similar Act which is in force in the
State of Madhya Pradesh were considered and held that the primary liability to pay the
fee is placed upon the buyer. But the corresponding provision in the Madhya Pradesh
Act is differently worded and hence the question of the liability to pay market fee as per
sub-clause (3) of Section 17(iii) of the Act could not have been solely based on the ratio
in the said decision. It is difficult for us to agree with the reasoning that "the use of the
word 'shall' in the said clause means that where the selling trader collects fees from a
purchasing trader he is under an obligation to make over the fee to the Market
Committee and where the selling trader does not collect the fee from the purchasing
trader the liability to pay the market fee remains to be that of the purchaser."
12. The Constitution Bench in Ram Chandra v. State of U. P, (1980) 3 SCR 104 :
(AIR 1980 SC 1124) considered the provisions of the Act though in a different context.
Their Lordships, while dealing with Section 17(iii) (b) of the Act looked at the distinction
between sub-clause (2) and sub-clause (3) and observed that if paddy is purchased in a
particular market area by a rice miller and the same paddy is converted into rice and
then sold, the rice miller will be liable to pay market fee on his purchase of paddy from
the agriculturist-producer, but he cannot be asked to pay market fee over again under
sub-clause (3) in relation to the transaction of rice. The Bench then added (At p. 1137,
Para 20 of AIR) :
"If, however, paddy is brought by the rice-miller from another market area, then
the Market Committee of the area where paddy is converted into rice and sold will be
entitled to charge market fee on the transaction of sale in accordance with sub-clause
(3)."
The Constitution Bench then referred to a transaction of sale of Ghee and
pointed out two types of dealers in such transaction - (1) a dealer who purchases milk or
cream from the villagers and others and manufactures Ghee in his plant, and (2) a
dealer who purchases such Ghee from the manufacturer of Ghee and sells it to another
trader in the same market area. It is held that when the first dealer sells Ghee to another
dealer then under sub-clause (3) the manufacturing dealer will be liable to pay market
fee to the Market
@page-SC150
Committee on the transaction of Ghee, but he will be entitled to pass on the
burden to his purchaser. In that context learned Judges stated thus :
"Apropos the Market Committee, however, the liability will be of the
manufacturing dealer."
13. The aforesaid observations of the Constitution Bench makes the position
clear that the Market Committee is fully entitled to collect the market fee from the seller
and it is for the seller to pass the burden on the purchaser if he so chooses. It is not the
look out of the Market Committee to see that seller gets the amount of fee paid by the
purchaser. Thus the appellants cannot shirk the responsibility to pay the market fee to
the Market Committee when the transaction falls within the purview of sub-clause (3) of
Section 17 (iii) (b) of the Act and then it would be open to them to recover the same
from the purchaser - Government.
14. For the above reasons we dismiss these appeals.
Appeals dismissed.
AIR 1999 SUPREME COURT 378 "Haryana State Agriculture Mktg. Boards v.
Sh. Ganesh Rice and General Mills"
= 1999 AIR SCW 32
(From : Punjab and Haryana)*
Coram : 2
S. SAGHIR AHMAD AND M. SRINIVASAN, JJ.
Civil Appeal No. 6081 of 1998 (arising out of S. L. P. (Civil) No. 7980 of 1998),
D/- 4 -12 -1998.
Haryana State Agriculture Marketing Boards and others, Appellants v. Sh.
Ganesh Rice and General Mills and another, Respondents.
Punjab Agricultural Produce Markets Act (23 of 1961), S.23 - Punjab Agricultural
Produce Markets (General) Rules (1962), R.29, R.30 - AGRICULTURAL PRODUCE Levy of market fee - Exemption to agricultural produce on which fee has been paid in
other market area - Dealer claiming such exemption has to make declaration and give
certificate in Form LL - Compliance with these requirements is not mere technical
formality.
R. 30 of the Rules provides that no market fee shall be levied on the sale of
purchase of any agricultural produce in respect of which such fee is already paid in the
notified market area in which the said produce was manufactured or extracted. Under
the above rule, three conditions are required to be satisfied for the purpose of claiming
exemption by a dealer: (A) The dealer should have paid the market fee already in a
market area. (B) The dealer shall make a declaration and give certificate to the
Committee in Form LL where the fee has already been paid. (C) Such Form shall be
filed within 20 days of the date of bringing the agricultural produce within the notified
market area. Unless all the above conditions are fulfilled it is not possible for the Market
Committee to accept a mere statement that market fee had already been paid and the
dealer was not liable to pay it again. Compliance with the rule is not a mere technical
formality.
In the present case, the dealer did not admittedly file Form LL with the Market
Committee. It filed Form M only after the prescribed time limit. Even in that Form Col. 7
was not filled up. In such circumstances the stand taken by the Market Committee that
the dealer was liable to pay market fee was correct. However as in the memo issued to
the dealer by the Market Committee it was not pointed out that the dealer ought to file
Form LL containing declaration and certificate. Nor was the attention of the dealer
drawn to Rule 30 and the dealer was willing to file the requisite documents, the market
committee was directed to consider the documents and thereupon grant exemption to
the dealer. (Paras 7, 8)
K. T. S. Tulsi, Sr. Advocate and Prem Malhotra Advocate, with him, for
Appellants; M. K. Dua, Advocate, for Respondents.
* C.W.P. No. 10984 of 1997, D/- 18-12-1997 (Punj and Har.)
Judgement
SRINIVASAN, J. :- Leave granted.
The first respondent, a dealer under the Punjab Agricultural Produce Market Act,
1961 (hereinafter referred to as 'the Act') purchased paddy from areas outside the
jurisdiction of the Market Committee, Karnal between 8-12-96 and 1-1-97 amounting to
Rs. 5,94,630.35 for processing. It submitted a return in Form M under Rule 31 of the
Punjab Agricultural Produce Markets (General) Rules, 1962 (hereinafter referred to as
'the Rules') on 17-3-97 setting out the details of the purchases. Column 7 in the form
provides for stating whether fee was leviable and if not, why. It the return filed by the
first respondent as aforesaid in Form M the said column was left blank.
@page-SC379
The Market Committee, Karnal issued Memo No. 241 dated 18-3-97 to the first
respondent, pointing out the delay in filing the report and informing it that a fee of Rs.
11,892.60 was payable on the purchase and the same may be deposited within a week
and in case of default action will be taken. On 27-3-97, another memo was issued along
with a certified copy of rule 30(5) of the Rules, pointing out that the first respondent had
not given necessary information and declaration in time and as such liable to pay the
fee claimed already.
2. The first respondent sent a reply on 4-4-97 claiming exemption from payment
on the ground that the fee had been paid at the place of purchase and it was not
payable second time. The Market Committee sent notices on 8-4-97 and 28-4-97
rejecting the stand of the first respondent and reiterating that the relevant Rules were
not complied with and the requisite forms were not filed. The Market Committee
forwarded the papers to the Assistant Collector, Grade II, Karnal (the 4th petitioner
herein) for recovery of the fee as arrears of land revenue and the latter issued notice
dated 10-6-97 to the first respondent treating it as a 'defaulter'.
3. The first respondent filed a writ petition in the High Court for quashing
proceedings including the levy of market fee. The High Court proceeded on the footing
that the first respondent had paid the fee at the place where the purchase was made
and there was only a delay in complying with the Rules. The High Court held that mere
delay will not enable the Market Committee to levy fee for second time even though it
may be entitled to levy a penalty. Consequently, the High Court allowed the writ petition
holding that the levy of market fee was without jurisdiction. Aggrieved by the said
judgment, the appellants have preferred this appeal by Special Leave.
4. Rule 30 of the Rules provides that no market fee shall be levied on the sale or
purchase of any agricultural produce in respect of which such fee is already paid in the
notified market area in which the said produce was manufactured or extracted. Subrules (3) to (5) are relevant in this case. They read as follows :
"(3) The dealer who claims exemption from the payment of market fee leviable on
any agricultural produce manufactured or extracted from the agricultural produce in
respect of which the market fee has already been paid in another notified market area,
shall make declaration and give certificate to the committee in Form LL, where the fee
has already been paid within twenty days of the day of bringing of agricultural produce
within the notified market area. Form LL shall be prepared in quadruplicate form the
booklets duly attested and issued by the Secretary of the Committee against the
payment fixed by the Committee. It will be the duty of the dealer claiming exemption
from the market fee under this sub-rule to send the original copy of Form LL to the
Committee within whose market area the agricultural produce is brought. The second
copy shall be sent to the office of the committee within whose market area such
agricultural produce was bought, and the third and fourth copies shall be retained by the
dealer-purchaser and the dealer-seller, respectively and the same shall be kept as a
part of their accounts maintained in respect of market fees."
"(4) It shall be the duty of the dealer claiming exemption from market fee under
sub-rules (3) and (5) to produce a copy of the R/R, forwarding note, bilty or challan, as
the case may be, duly signed by him or his authorised agent in the office of the
committee from whose market area the agricultural produce is brought before it is
unloaded, the second copy in the office of the committee within whose market area the
agricultural produce is brought before it is unloaded and the third copy to be retained by
him :
Provided that if no such copy of R/R, forwarding note, bilty or challan is produced
in the office of the concerned Committee, no claim for exemption shall be entertained."
"(5) The agricultural produce brought for processing from within the State 'or from
out- side the State' and for which market fee has already been paid in any market in the
State 'or outside the State', shall be exempted from payment of market fee second time.
Provided that the dealer who claims exemption under sub-rule (5) from the
payment of fee leviable on any agricultural produce brought for processing shall make
declaration and give certificate to the committee in Form LL duly attested by the
Secretary of the Committee where fee has already been paid, within twenty days of the
bringing agricultural produce within the notified market area and complies with the
provisions
@page-SC380
of sub-rule (2)".
5. Under the above rule, three conditions are required to be satisfied for the
purpose of claiming exemption by a dealer :
A. The dealer should have paid the market fee already in a market area.
B. The dealer shall make a declaration and give certificate to the Committee in
Form LL where the fee has already been paid.
C. Such Form shall be filed within 20 days of the date of bringing the agricultural
produce within the notified market area.
6. Unless all the above conditions are fulfilled it is not possible for the Market
Committee to accept a mere statement that market fee had already been paid and the
dealer was not liable to pay it again. Compliance with the rule is not a mere technical
formality. In the present case, first respondent did not admittedly file Form LL with the
Market Committee. It filed Form M only after the prescribed time limit. Even in that
Form, as pointed out already, Col. 7 was not filled up. In such circumstances the stand
taken by the Market Committee that the first respondent was liable to pay market fee
was correct.
7. The High Court has unfortunately overlooked the fact that the first respondent
had not filed Form LL and make a declaration or give a certificate as required by the
Rule, but instead filed only Form M and that too leaving column 7 blank. The High Court
has proceeded on the footing that there was only a delay in filing the required
declaration. Hence the judgment of the High Court is not sustainable and the appeal is
to be allowed. But learned counsel for the first respondent points out rightly that in the
memo issued by the Market Committee on 18-3-97, it was not pointed out that the first
respondent ought to file Form LL containing declaration and certificate. Nor was the
attention of the first respondent drawn to Rule 30. It is also submitted by learned
counsel that the market fee was actually paid when the produce was purchased.
According to him all the relevant receipts for payment of market fee in the area are
readily available with the first respondent.
8. In the circumstances we are of the opinion that the first respondent's right to
claim exemption from payment of market fee in Karnal shall not be defeated as it is
stated to have been paid already actually in the area where the produce was
purchased. The first respondent is also willing to file the declaration and certificate in
Form LL. Mr. K.T.S. Tulsi, learned senior counsel for the appellants has submitted that if
the declaration and certificate in Form LL are filed within 2 weeks from this date the
Market Committee would not insist upon compliance with the period of limitation
prescribed in the Rule in view of the defect in the memo dated 18-3-97 and consider the
question whether the fee had been paid already and the first respondent is entitled to
exemption.
9. Hence, we direct the first respondent to file the declaration and certificate in
Form LL with the Marketing Committee, Karnal within a period of two weeks from this
date and the latter shall on such filing of the declaration and certificate grant the
exemption to the first respondent from payment of market fee if the other conditions in
the rule are satisfied irrespective of the period of limitation prescribed in the rule. This
appeal is disposed of with the above directions.
Order accordingly.
AIR 1999 SUPREME COURT 3125 "Belsund Sugar Co. Ltd. v. State of Bihar"
= 1999 AIR SCW 3074
(From : AIR 1977 Patna 136)
Coram : 5
Dr. A. S. ANAND, C.J.I., S. B. MAJMUDAR, Mrs. SUJATA V.
MANOHAR, K. VENKATASWAMI AND V. N. KHARE, JJ.
Civil Appeal No. 398 of 1977 [with C.A. Nos. 399 of 1977, 3505, 3506 of 1992,
1880 of 1988, W.P. (C) No. 1250 of 1986, C.A.Nos. 4500-05 of 1992, 234 of 1995,
8163, 7432 of 1994, C.A.Nos. 4374-75 of 1999 @ SLP (C) Nos. 3159-60 of 1994,
C.A.Nos. 2632-33 of 1982, C.A.No. 2532 of 1980, C.A.Nos. 2951, 2952 and 2953 of
1992, C.A.No. 829 of 1993, C.A.No. 4376 of 1999 @ SLP (C) No. 9684 of 1992,
C.A.Nos. 1282 of 1995, 1427 of 1979], D/- 10 -8 -1999.
Belsund Sugar Co. Ltd., Appellant v. The State of Bihar and others etc.,
Respondents.
Sugar Matters
(A) Bihar Agricultural Produce Markets Act (16 of 1960), S.27 - Bihar Agricultural
Produce Markets Rules (1975), R.82(iii) - AGRICULTURAL PRODUCE - Market fee Levy of, on transactions of sale of sugar and molasses - Locus standi of sugar factories
to challenge levy - Sugar factories purchased raw material i.e. sugarcane Manufactured sugar and molasse