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PETITIONER: I.T.C. LTD. ETC.

       Vs.

RESPONDENT: STATE OF KARNATAKA & ORS.

DATE OF JUDGMENT03/05/1985

BENCH: FAZALALI, SYED MURTAZA BENCH: FAZALALI, SYED MURTAZA VARADARAJAN, A. (J) MUKHARJI, SABYASACHI (J)

CITATION:  1985 SCR  Supl. (1) 145  1985 SCALE  (2)515

ACT:      Constitution of  India, Seventh  Schedule. Entry  52 of List I,  and Entries  22 and  66  of  List  II-"Industries"- Tobacco  Board   Act  1975  (Central  Act)  passed  for  the development  of   tobacco  industry-State  Act  subsequently included tobacco  in its  Schedule and  levied market fee on tobacco or  its products-Whether the provisions of the State Act repugnant to the Central Act on this point.      Karnataka Agricultural  Produce Marketing  (Regulation) (Amendment) Act  1966, Section 65 Enhancement and collection of market  fee-Whether it  should have  direct nexus between services randered  and the  amount collected-Levy  of market fee found  to be  bad in law-Fee collected-Whether it should be  refunded-Whether  the  State  legislature  competent  to validate levy declared by Court as bad in law.

HEADNOTE:      On 19th  May, 1975,  the State Government amended s. 65 of the Karnataka Agricultural Produce Marketing (Regulation) Act, 1966  by the  Karnataka Agricultural  Produce Marketing (Regulation) (Amendment)  Act 24 of 1975. Sub-Section (1) of S. 65  as it  stood after  the amendment  provided that  the Market Committee  shall levy  and collect  market  fee  from every seller in respect of agricultural produce sold by such seller in  the market  area at  the rate  of one  rupee  per hundred rupees  of the  price  of  such  produce  sold.  Sub Section (2)  laid down  that the market Committee shall levy and collect  market fee  from  every  buyer  in  respect  of agricultural produce bought by such buyer in the market area at such  rate as  may be  specified in  the  bye-laws.  Sub- Section (3)  stated that every market committee shall credit to the  Karnataka Motor  Vehicles Taxation  Act,  1957,  the market fee  collected under  sub-section (1) for being spent for the  purpose of  construction, repair,  improvement  and maintenance of  rural roads  in the State. On 2th September, 1978, the  High Court  struck down the amended section 65(1) and (3) of the Act and upheld the levy on buyers at the rate of one  rupee per  one hundred  rupees under s. 65(2) of the Act in  Rajasekhariah’s case  (ILR (1978)  Karnataka  1939). Thereafter,  the   Karnataka  Ordinance   2  of   1979   was promulgated amending  ss. 63  and 65  of the Act. Section 63 was amended  with retrospective  effect  from  19.5.1975  by

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substituting in  clause (ii) of sub-section (1) of S. 63 the words "transport  and marketing"  for the  word "marketing". The  amended  S.  65(a)  validated  market  fee  levied  and collected under  sub-section (1)  of S.  65 for  the  period 19.5.1975 to  28.9.1978; (b) omitted the amended sub-section (1) of  S. 65  with effect  from 28.9.1978; (c) enhanced the maximum permissible limit of market fee levied and 146 and collected  from buyers of specified agricultural produce under sub-section  (2) of S. 65 from one per cent to two per cent; and  (d) omitted  sub-section (3)  of S.  65 as  if it never existed  in  the  Statute.  The  Ordinance  was  later replaced by  the Karnataka  Agricultural  Produce  Marketing (Regulation) (Amendment) Act 17 of 1980 which also numerated for the  first time  cardamom and tobacco as an agricultural produce for  the purpose  of the  Act. The Tobacco Board Act 1975 (Act  No. 4  of 1975)  which had  been passed  for  the development of the tobacco industry under the control of the Union was  already in  existence before tobacco was included in the Schedule to the Act, Section 42 of that Amendment Act validated the  levy and  collection of market fee during the period 19.5.1975  to 28.9.1978.  Pursuant to  the  amendment made to  sub-section 2  of S.  65 of the Act, all the Market Committees in  the State  of Karnataka  except the Mangalore Market Committee  amended the  bye-law by enhancing the levy under S.  65(2) of the Act from one per cent to two per cent on the directions of the Chief Marketing Officer and without following the procedure laid down in S. 148 of the Act.      The appellants/traders filed writ petitions in the High Court challenging  the enhancement  of the levy from one per cent to two per cent as well as the collection of market fee from sellers  during the  period 19.5.1975 to 28.9.1978. The High Court  directed the  Chief Marketing Officer to furnish in  respect   of  each   market  committee  a  comprehensive statement in  a tabulated  form setting  out certain factors which may  be  relevant  for  considering  the  question  of enhancement of  market fee.  During the  hearing of the writ petitions,  the   respondent  State   promulgated  Karnataka Ordinance No.  22 of 1981 dispensing with the requirement of the previous  publication contemplated  in S. 148 of the Act in relation  to making  of bye-laws  and amendments  thereof with retrospective effect.      The High Court held (1) that s. 65(1) as substituted by the Act  17 of  1980 and  S. 42  of the  Amendment Act  were unconstitutional and liable to be struck down on the grounds (1) that  before S.  65(3) was  struck down,  the  levy  and collection of  market fee  under S.  65(1), as it then stood were for the benefit of the Karnataka Roads and Bridges Fund constituted under the Karnataka Motor Vehicles Taxation Act, 1957, and  that event  which had happened, namely, crediting of the  market fee  to that  Fund cannot  be reversed by the subsequent amendment  of S.  65(1) and introduction of S. 42 in the  Amendment Act  17 of  1980; (ii)  that  as  per  the decision of  the Supreme  Court in Kewal Krishan Puri’s case rural roads  are primarily  and essentially intended for the benefit of  the public  and the  class of  market fee payers are, as  part of the general public, entitled to the benefit of their  user and  the market  fees cannot be levied on and collected from  them for  that purpose,  more so because the rural roads  constructed, improved,  repaired and maintained with the market fee collected did not become the property of the market  committees or  shed their  character  as  public roads;  (2)   that  sub-section   65(2)  does   not   confer uncanalised and  excessive power on market committees in the matter of  fixing the  rate of market fee and that there are

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adequate statutory  guidelines and  safeguards; (3)  that on the materials placed, the levy ought nor to fail for want of quid pro  quo. However,  having regard  to  the  infirmities noticed in  the estimates  the High  Court is  unable to say with any confidence that the enhancement of fee was 147 totally justified;  (4) that  S. 3 of the amending Ordinance 22 of  1981 validated  the bye-law, notwithstanding the fact that the  affected interests  were not  heard  because  that right has  been taken  away by  s.3 and  5 of  the  amending Ordinance 22  of 1981. However the Chief Marketing Officer’s direction can  be regarded  as  his  previous  sanction  for amending the  bye-laws; (5)  the question  whether S.  65(2) must be  held to  imply an  obligation on  the part  of  the market  committees  to  hear  affected  interested  parties, before the  rate of  fee was  fixed was  left  open  in  the judgment; (6)  that the  provisions of  the Act in so far as marketing of  cardamom is  concerned, are  repugnant to  the provisions of the Cardamom Act (Central Act 42 of 1965) but, so far  as the  provisions of  the Tobacco  Board Act,  1975 (Central Act)  are concerned  it makes  provisions  only  in relation to Virginia tobacco and not all varities of tobacco and the  Act is  not repugnant  to  the  provisions  of  the Tobacco Board  Act, and all that is necessary for the Market Committee  is  to  obtain  auctioneer’s  licence  under  the provisions of the Tobacco Board Act.      In the  appeals and  writ petitions  to this  Court the appellants  and   petitioners/traders  contended   that  the enhancement of  the market  fee from one per cent to two per cent of  the price  of the specified agricultural produce is invalid on  two grounds  : (1)  that the  item  of  expenses envisaged for  the rural  roads has  gone with  the striking down of  s.65(1) and  (3) of  the Act  and the  omission  of clause (3)  of s.65  from the Act by the Amendment Act 17 of 1980. However,  the amount  collected under that sub-section will take  care of the proposed expenditure envisaged in the estimates  and   projections  for  the  improvement  of  the services in  the regulated  markets; and (ii) that reduction of the  enhanced levy  from two  per cent  to one  per  cent subsequently by the State Government shows that there was no justification for the enhancement of the market fee from one per cent to two per cent; (2) that the amendment of the bye- laws made  for enhancement  of the  market fee  from one per cent to  two  per  cent  was  not  in  accordance  with  the procedure laid down by s. 148 of the Act and ss. 3, 5(a) and 5(b) of Ordinance 22 of 1981 promulgated during the pendency of the  writ petitions  in the High Court would not cure the defect; (3)  that S.65(1)  as substituted by Act 17 of 1980, read with  s.42 of the Amending Act, seeking to validate the collection of  market fee  on "sellers"  made under  the old s.65(1) of  the Act is constitutionally invalid, and (4) the High Court erred in holding that the Tobacco Board Act, 1975 covers only  Virginia tobacco  and is  not repugnant  to the provisions of  ss.8(2)(a), 8(3)  and 12 of the Tobacco Board Act and r.35 of the Rules made under that Act.      On behalf of the respondents it was contended that quid pro quo  was established  in respect  of 73 out of 93 market committees falling  in categories  ‘A’, ‘B’, ‘C’ and ‘D’ for enhancement of  the market  fee from one per cent to two per cent and  no further  enquiry was  needed in  view of  Kewal Krishan Puri’s case. (2) that there is no repugnancy between the Act  and the  Tobacco Board  Act, 1975,  (3) that  after s.65(3) has  been omitted from the Act there was no question of striking down S.65(1) as substituted by the Amendment Act 17 of 1980 and since S.42 of the Amendment Act has validated

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the levy,  there is  no question of refund of the market fee collected under S.65(1). 148      Dismissing  all   the  civil   appeals,  special  leave petitions and  the writ  petitions except  C.A. No.  629  of 1983.      (Per majority; Fazal Ali and Vardarajan, JJ.-Sabyasachi Mukharji, J. dissenting) ^      HELD :  1 (i)  A close and careful analysis of Articles 245 and  246 shows  that the  Constitution  strikes  a  just balance between  the powers  of the Parliament and the State Legislatures but  reserves to  itself the right to legislate in exceptional  cases even in matters appearing in the State List.  This   is  the   logical  result  and  the  necessary concomitant of clause (4) of Art. 246. [168 E]      (1)(ii)  The   cardinal   principles   justifying   the competency of  the respective  legislatures with  respect to the entries concerned are : (a) Entries in each of the Lists must  be   given  the   most  liberal  and  widest  possible interpretation and  no attempt  should be  made to narrow or whittle down  the scope  of the entries; (b) the application of the  doctrine of  pith and  substance really  means  that where a  legislation falls  entirely within  the scope of an entry within the competence of a State legislature then this doctrine will apply and the Act will not be struck down; (c) the consideration  of encroachment  or entrenchment  of  one List  in  another  and  the  extent  thereof  is  also  well established. If  entrenchment is minimal and does not affect the dominant  part of  some other entry, which is not within the competence  of the  State Legislature,  the Act  may  be upheld  as   constitutionally  valid;  (d)  the  nature  and character of  the scope  of the entries having regard to the touch stone  of the provisions of Arts. 245 and 246; and (e) the doctrine  of occupied  field has  a great  place in  the interpretation as to whether or not a particular legislature is competent  to legislate on a particular entry. This means that when  the field  is completely occupied by List I, then the State legislature is wholly incompetent to legislate and no entrenchment  or encroachment, minimal or otherwise, by a State legislature  is permitted.  In other words, where, the field  is   not  wholly   occupied,  then   a  mere  minimal encroachment or  entrenchment would  not affect the validity of the State legislation. [168 F-H; 169 B-C; F-H]      The five  principles have  to  be  read  and  construed together and  not in  isolation-where, however,  the Central and the  State legislation  cover the  same field  then  the central legislation  would prevail.  It is also well settled that where  two Acts,  one passed  by the Parliament and the other by  a  State  legislature  collide  and  there  is  no question of  harmonising them,  then the Central legislation must prevail. There may also be cases where despite an entry being in List II, the Parliament may under the provisions of Art. 246(3) take over that particular field and legislate on that subject  which will  debar the  State legislature  from adding or  passing any such legislation which has been taken over under Art. 246(3). [170 B-D]      S.P. Mittal  v. Union  of India & Ors. [1985] 1 SCC 51; Delhi Cloth  & General  Mills Co.  Ltd. v.  Union of India & Ors. [1983]  4 SCC  167; Subrahmanyan Chettiar v. Muttuswami Goundan AIR  [1941] F.C.  47: Zaverbhai  Amaidas v. State of Bombay [1955] 1 SCR 799; Deep Chand v. State of U.P. 149 JUDGMENT: (Proprietary) Ltd.  v. State  of West  Bengal &  Ors. [1962]

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Supp. 3  SCR 1; State of Orissa v. M.A. Tulloch & Co. [1964] 4 SCR  461; Sudhir  Chandra  Nawn  v.  Wealth  Tax  Officer, Calcutta & Ors. [1969] 1 SCR 108; Baijnath Kedia v. State of Bihar & Ors. [1970] 2 SCR 100, relied upon.      (2) Once  the Centre takes over an industry under Entry 52 of  List 1 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 of the powers of the State legislature. [174 H]      (3)(i) In  the instant  case, by virtue of Notification No.  374(3)   dated  31.5.80  the  Central  Government  made applicable ss.  10 and  11 of  the 1975  Act to the State of Maharashtra, West  Bengal, Gujarat,  Tamil  Nadu  and  Uttar Pradesh. By  making Rule 35 in the Tobacco Board Rules, 1976 (enacted under  s. 12 of the 1975 Act) the Market Committees were debarred  from auctioning  or dealing in tobacco or its products  unless   they  were  registered  with  the  Board. Admittedly the  market Committees  of the State of Karnataka had not  been registered  with the  Tobacco Board  under the 1975 Act  and were,  therefore, incapable  of rendering  any service at  all. By a letter dated 15.9.83 the Tobacco Board rejected the  application made  by the  Karnataka  State  to allow it  to participate in auctioning the tobacco products. It is  manifest, therefore,  that by virtue of the aforesaid steps taken  by the central legislation the field of tobacco stood  completely   occupied  and  there  was  no  room  for application of  the doctrine of pith and substance nor would the question of incidental entrenchment arise in such cases. [165 F-H; 167 C-D]      (3)(ii) Even  if the President’s assent would have been taken it would not validate the Karnataka Act of 1980 so far as the  Tobacco Industry  is concerned  because Art.  254(2) applies only to matters contained in the Concurrent List and has nothing  to do with matters enumerated in List I or List II. Thus, the Karnataka Act of 1980 would have absolutely no application to  entry 52  of List I which are fully occupied by the Central Act of 1975. [175 C]      This being  the position,  this Court strikes down that part of the Karnataka Act which takes in itself the power to levy market  fee on  tobaco or  its products.  Even  if  the products may  be sold  in the  markets in  Karnataka or near about the  same place  situated in that States, the power to levy fee  will not belong to that State; it will remain with the Centre  which would  regulate the  sale and  purchase of tobacco. [175 F] Per Mukharji, J. (dissenting) :      1. The  provisions of  the Karnataka  Marketing Act and Tobacco Board  Act and  the Rules  are not inconsistent. 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  also be construed most liberally and in their widest amplitude.  On the  construction of  the Central  Act read with the rules it is clear that the Central Act and the declaration made  by section 2 of the Act cover all kinds of tobac- 150 cos. Whether a particular legislation or enactment is within the competence  of particular  legislature  must  be  judged after finding  out the  pith and  substance, in other words, the  true  nature  and  character,  of  the  legislation  in question and  secondly the  entries in  the list  should  be given liberal  and generous  construction. All  the  entries should be  construed in  harmonious manner  so as  to  avoid

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conflict. In  case  of  conflict,  however,  in  respect  of entries where  both the  State and the Centre can legislate, the  Central   legislation  would  prevail  over  the  State Legislation in view of the provisions of Articles 245 to 254 of the Constitution. [278 B; 271 E; 272 C; 271 C-D]      Navinchandra Mafatlal  v. C  I.T. Bombay,  [1955] 1 SCR 829 at  page 836-37, Baijnath v. Bihar State [1970] 2 S.C.R. 100 at  113, Kannan  Devan Hills Co. v. Kerala, [1973] 1 SCR 356 at  369, Ganga  Sugar Co. Ltd. v. State of U.P, [1980] 1 SCR 769 at 781, referred to.      2. (i)  It is  well-settled principle  that Article 246 recognised the  principle of  Parliamentary supremacy in the field of  legislation in  case where  both legislatures have competence   to    legislate   (emphasis    supplied).   The constitutional  scheme  is  that  Parliament  has  full  and exclusive power to legislate with respect to matters in List I and has also power to legislate with respect to matters in List  III.  A  State  Legislature  has  exclusive  power  to legislate with  respect to matters in List II, excluding the matters falling  in List  I and has also concurrent power to legislate with  respect  to  matters  falling  in  List  III excluding the  matters  falling  in  List  I.  The  dominant position of  the Central  Legislature with regard to matters in List I and List III is established. [272 F-G]      2.  (ii)   The  principles   of  repugnancy  in  Indian Constitution are well-settled. These are as follows :-      (a) A  legislation, which  in its  pith and  substance, falls within  any of  the entries  of List  I of the Seventh Schedule to  the Constitution,  would be  exclusively within the competence of the Parliament. [276 B]      (b) A  legislation falling exclusively, in its pith and substance, within  any of  the entries  in List  II  of  the Seventh Schedule,  would be  within the exclusive competence of the State Legislature; [276 B]      (c) A  Central law  which in  its pith  and  substance, falls within  any entry in List I would be valid even though it might  contain incidental provisions in List II which may contain ancillary  provisions which might touch on any entry of List I incidentally; [276 C]      (d) A  State law  which, in  its pith and substance, is within any  entry in  List II  would be valid even though it might incidentally  touch upon a subject falling within List I; [276 D]      (e) A  Central law,  which in  its pith  and substance, dealt with a subject falling within List II would be bad and ultra vires  the Constitution.  Similarly, a State law which in its pith and substance dealt with a matter falling within List I  would be  invalid and  ultra vires the Constitution; and [276 E-F] 151      (f) The  concept of  repugnancy arises only with regard to laws dealing with subjects covered by the entries falling in List  III, in  respect of which both Parliament and State Legislature are competent to legislate. Under Article 254 of the Constitution, a State law passed in respect of a subject matter comprised  in  List  III  would  be  invalid  if  its provisions were  repugnant to  a  law  passed  on  the  same subject by  Parliament. The  repugnancy would  arise only if both the  laws cannot  exist together.  Repugnancy does  not arise simply  because Parliament  and the States pass law on the same subject. There can not be any repugnancy in respect of State  laws passed  in respect of matters falling in pith and substance  in List  II or  in respect  of  Central  laws passed on  subjects falling  in List  I.  Parliament  cannot legislate on a State subject and State cannot legislate on a

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Central subject.  If either  trenches upon  the field of the other, the law will be ultra vires. [276 G-H; 277 A]      Subramanyam v.  Muthuswamy, [1940] 45 C.W.N. (FC) 1=AIR 1941 FC  47 at  58, Sudhir  Chand  v.  Wealth  Tax  Officer, Calcutta, [1969]  1 SCR  108 at  113 Ch. rika Ramji & Others Etc. v.  State of  Uttar Pradesh  & Others,  [1956] SCR 393, State of Orissa v. M.A. Tulloch Co. [1964] 4 SCR 461 at 477, M/s. Rochst  Pharmaceuticals Ltd.  & Others Etc. v. State of Bihar and  Others etc,  Ramesh Chandra Etc. v. State of U.P. Etc.,  [1983]   4  SCC  45  and  The  Calcutta  Gas  Company (Proprietary) Ltd.  v. The  State of West Bengal and Others, [1962] 3 Supp. SCR 1 referred to.      3. 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  power to  legislate and  mobilise 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 mobilise resources in their exclusive fields. [280 B-C]      4. (i)  In the instant case the Karnataka Marketing Act deals with the subject of market in entry 28 read with entry 66 of  List II. Such Acts are covered by entry 28 of List II exclusively  unlike  entries  23,  24,  26  and  27.  It  is important to  bear in  mind that  entry 28 is not subject to withdrawal into list I by Parliament as under entries 52 and 54 of  List I and entry 33 of List III. 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. Therefore, there cannot be any question of repugnancy. Section 31 of the Central Act makes it  clear that  it does  not derogate from any law but enacts something  in addition.  Essentially the  Central Act was for  the development  of the  industry of  tobacco  and, incidentally, certain  provisions for better sale of tobacco through certain  auction platforms  had been  made. There is nothing in the Act or in the Rules which indicate that it is inconsistent with  or cannot  be  operated  along  with  the marketing regulations. [277 F-G; 279 B-C]      4. (ii)  It is fully manifest that both Act can operate in their  respective fields  and there  is no  repugnancy if both the Acts are considered in the light 152 of their  respective true nature and character. While giving due  weight   to  Centre’s   supremacy  in  the  matters  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. By  complying with  the State Act, the Central Act can  function to  serve the  purpose and  object of  the Central Act, but if only the Central Act was to prevail, the State Act  of marketing  for coffee  would become  non  est- wholly unnecessary  and undesirable.  The Marketing  Act  is essentially an Act to regulate the marketing of agricultural produce; control of coffee industry would not be defeated if the marketing of coffee is done within the provisions of the Marketing Act.  It must therefore be held that the State Act should prevail. One should avoid corroding the State’s ambit of powers  of legislations  which will  ultimately  lead  to erosion of India being a Union of States. [279 F-G; 280 D-E]

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    The Calcutta  Gas Company  (Proprietary)  Ltd.  v.  The State of  West Bengal  and Others,  [1962] 3  Supp.  SCR  1, followed.      Per majority,  Fazal Ali and Mukharji, JJ.-Varadarajan, J. dissenting. Per Fazal Ali, J.      1. (i)  The levying  of market  fee  on  the  sale  and purchase of  agricultural products  in the  markets is not a static event  but is  an ever changing concept. It has to be medulated and adapted to the requirements and necessities of the society,  the expanding needs of the nation and the ever increasing trends  of the  rise in  prices. In  other words, this is  a dynamic  concept which keeps on changing. Thus it is impossible  to lay  down a hard and fast rule which would apply for  all times  to come.  Therefore, the  decision  in Kewal Krishan  Puri’s case  cannot be held to be law for all times to  come irrespective  of  the  period  nor  was  this decision meant  to lay  down any such principle. [161 H; 162 B]      (ii) The  one cardinal principle which flows from Kewal Krishan Puri’s case is that any fee or money realised should not be  diverted to any other purpose except for the benefit of the  purchaser/seller. What  would be  the nature  of the service, when  and how  it should  be rendered  and in  what measure is  entirely a  matter for  the market committees to decide or  determine. So long as the money is realised, even though on the higher side, but in spent on the extention and expansion of  the markets,  market yards, market facilities, godowns, rest  houses, buildings,  even roads  leading up to the markets, that would be fully within the concept of a fee and could  not be labelled as a tax on the purchasers at the auction of goods or articles in the market. [161 H; 159 E]      In the  instant case,  though the  fee appears to be on the higher  side but there is unimpeachable evidence to show that the  entire amount  realised has not been spent on some other object  or purpose  but has  been kept  in reserve for developing the markets during the course of the coming 10-12 years. Though  this period  is large  but it  cannot be said that there is no nexus between the services rendered and the fee realised. Whether the development 153 takes place  immediately or in the course of a few years, so long as  it is  done within a reasonable period it cannot be said that  the fee amounts to a tax and is, therefore, ultra vires. [161 B-C]      Kewal Krishan  Puri &  Anr. v.  State of  Punjab & Ors. [1979] 3  SCR 1217,  Southern Pharmaceuticals  &  Chemicals, Trichur &  Ors. etc. v. State of Kerala & Ors. etc. [1982] 1 SCR 519  and Sreenivasa  General Traders  & Ors. v. State of Andhra Pradesh, [1983] 3 SCC 353 referred to. Per Mukharji, J.      1. Section 65(2) did not confer any arbitrary power and there was  no excessive  delegation of  legislative power to the market  committees and  therefore not  vitiated on  that account. The  question whether  on a  proper construction of section 65(2)  there was  any obligation  on the part of the marketing committee  to hear  the parties  was rightly  left upon  by  the  High  Court  with  certain  observations  and directions contained  in its  judgment. So  far as  the High Court held  against the  contentions of  the appellants that bye-laws were  invalid for  want of  previous publication or for want  of consulting the interests affected, I am also in respectful agreement  for the  reasons discussed by the High Court which  need not  be reiterated again. The principle of audi alteram partem has application only to judicial, quasi-

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judicial  and   administrative  functions  and  not  to  any legislative functions. [270 A-D]      The Tulsipur  Sugar  Co.  Ltd.  v.  The  Notified  Area Committee, Tulsipur,  [1980] 2  SCR 1111  at pages  1118  to 1121, Avinder  Singh etc.  v. State  of Punjab  & Anr. Etc., [1979] 1 SCR 845, referred to.      2. (i)  It is  well-settled that  though there  must be some special  services to the payers of the fees to be a fee it is  not necessary  that all  the services  must be to the payers of  the fees  nor can the correlation between payment of  fee   and  services   rendered   be   established   with mathematical exactitude. It is permissible in the modern set up to take into account projections into future and not only the present  services can  be utilised  for  justifying  the imposition of  fee. All  planning, projects  into the future for its  existence and  survival. Any  incidental benefit to those other  than the  payers of  the fee is not decisive of the fact  whether it  is a ‘tax’ or a ‘fee’. It is necessary to find  out the primary object and essential purpose of the imposition (emphasis  supplied). If  the primary  object and essential purpose  of the  imposition  be  service  of  some special kind  to the  users of  the market  or payers of fee other consequences or other benefits to others do not in the least affect  the position.  The concept  of benefit  to the users of  market must be looked at from a broad common sense point  of  view,  taking  an  integrated  view.  The  proper principles are  : (1)  that  there  should  be  relationship between service  and  fee,  (2)  that  the  relationship  is reasonable   cannot   be   established   with   mathematical exactitude in  the sense  that both  sides must  be  equally balanced; (3)  in the  course of  rendering such services to the payers of the fee if some other benefits accrue or arise to others  quid-pro-quo is  not destroyed.  The  concept  of quid-pro-quo should  be judged in the context of the present days-concept of markets which are expected to render various services and provide various amenities 154 and these  benefits cannot  be divorced  from  the  benefits accruing incidentally  to  others;  (4)  that  a  reasonable projection for  the future  years  of  practical  scheme  is permissible; (5)  services rendered  must be to the users of those markets or to the subsequent users of those markets as a class. Though fee is not levied as a part of common burden yet service  and payment cannot exactly be balanced; and (6) the  primary   object  and  the  essential  purpose  of  the imposition must be looked into. [256 B-E; 260 F-H]      Kewal Krishan  Puri v.  State of  Punjab, AIR 1980 S.C. 1008, H.  H. Shri  Swamiji of  Shri Admar  Mutt, etc. v. the Commissioner,  Hindu   Religious  &   Charitable  Endowments Department &  Ors. [1980]  1 SCR  368; Ramesh Chandra etc v. State of  U.P. etc.  [1980] 3 SCR 104; Municipal Corporation of Delhi  and Others  v. Mohd.  Yasin,  [1983]  3  SCC  229; Southern Pharmaceuticals  & Chemicals Trichur & Ors. Etc. v. State of  Kerala &  Ors. Etc.  [1982] 1 SCR - 19; Sreenivasa General Traders  and Others  v. State  of Andhra Pradesh and Others, [1983]  4 SCC  353; Amar Nath Om Parkash & Ors. etc. v. State of Punjab & Ors. Civil Appeal Nos. 4500 and 4501 of 1984 (decided on 19.11.1984), relied upon.      In the  instant case,  having regard  to  the  detailed analysis  of   the  expenditure   of  the   various   market committees, it  could not  be said  that the expenditure and appropriation of fee was so disproportionate to the projects actual and  projected that  it could  be said  that the levy lost the character of fee. [261 B]      2. (ii)  Construction of  rural roads giving facilities

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for going  to the  market is a special service primarily and directly intended  for the  benefit of  the users of market. If, without  rural roads,  markets could  not be reached and the  functions   for  which   the  market   committees  were constituted could  not be performed, if it is of fundamental importance that  there should  be a  net work of roadways if effective aid  is to be given to buyers and sellers of goods for marketing  their products, then the fact that the public streets and  roads as trustees would be of no consequence in considering such realisation as fee. [267 B; 268 B-C]      In the  instant case,  the  High  Court  was  error  in holding that  the second  major defect  noticed in  the  law authorising the  levy on  the sellers in Rajasekhariahs case namely construction  of rural  roads would not qualify being reckoned as a special service to the class of persons paying the fee,  had not  been cured  or removed  by the  law which sought to  validate  the  levy.  The  Act  which  sought  to validate the  levy contributed  to the  ‘Karnataka Roads and Bridges Fund"  was for  the maintenance of rural roads which forms an  integral part  of the  facilities for marketing of the goods.  Therefore this  court is  unable to  sustain the findings of  the High  Court of Karnataka that section 65(1) as substituted  by Section  20 of the Act 17 of 1980 as well as section  42 of  the Amending Act was not constitutionally valid and  was liable  to be struck down. These sections are constitutionally valid  in view  of the perspective in which the concept of fee has to be judged. [268 D-G]      Amar Nath  Om Parkash  & Ors.  etc. State  of Punjab  & Ors., Civil  Appeal No.  4500 and  4501 of  1984 (decided on 19.11.1984), followed. 155      Municipal Corporation  of Delhi  and  Others  v.  Mohd. Yasin, [1983] 3 SCC 229, relied upon.      3. The  validity of  a validating  law has to be judged mainly be  judging, firstly  whether a legislature possesses competence  over   the  subject   matter  i.e.,  whether  by validation, the  legislature exercises  competence over  the subject  matter  and  secondly  whether  by  validation  the legislature has removed the defect which the court had found in the  previous law  and thirdly  whether it  is consistent with the provisions of part III of the Constitution. Section 42 of  the Amending  Act is  valid and by virtue of the said section, there cannot be any order for refund in the instant case. [266 G; 269 F]      Misrilal  Jain   etc.  etc.  v.  State  of  Orissa  and Another., AIR  1977 SC  1686-[1977] 3  SCR 714: Shri Prithvi Cotton Mills  Ltd. Anr.  v. Broach  Borough  Municipality  & Ors.,  AIR   1970  SC   192=[1970]  1   SCR  388;  Municipal Corporation of  City of Ahmedabad, etc. v. New Shorock Spg & Wvg. Co.  Ltd. etc., AIR 1970 SC 1292=[1971] 1 SCR 288; I.N. Sakeena v.  The State  of Madhya  Pradesh, AIR  1976 SC 2650 [1976] 3 SCR 237; relied upon.      4. Section  42 of  the Amending  Act  has  specifically provided against  refund of  levy of fees already collected. At no  stage was  it claimed  or stated that the traders had paid market  fees themselves.  The  appellants  before  this Court are  buyers in  the market  but  they  themselves  are trading in  the commodities  purchased by  them. On  further sale of  the commodities  as traders they have recovered the fees from their purchasers. Therefore, in view of section 42 of the Amending Act which provided for the validation of the levy of  market fee  and which  provided further  by section 42(1)(b) and  (c) that  no proceedings for refund would lie, there cannot  be any  order of  refund in  the instant case. [269 A-B; D]

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    5. (i)  The High Court was competent to give directions and the  same were  within the  competence of the High Court while dealing  with grievances made under Article 226 of the Constitution to ensure that appropriate statuary authorities acted according to law after properly ascertaining the facts and for the purpose of rending fully justice to the parties. [261 H; 262 A]      5. (ii)  Courts of  today cannot  and do not any longer remain passive  with the  negative attitude, merely striking down a  law or preventing something, being done. While it is true that if a law is bad, the Court must strike it down, if the law  by and  large and  in its  true perspective is of a social purpose  if implemented  in a particular manner could be  valid,  then  the  Court  can  and  should  ensure  that implementation should  be done in such particular manner and give directions to that effect. [263 A-B]      In the  instant case, the High Court having found, that basically and  essentially the  fee  was  justified  on  the theory of  quid pro  quo, the  Court was  entitled  to  give positive directions  regards the  manner the money should be spent. [263 C] 156      Per Varadarajan, J. (dissenting)      1. There  is no  correlation between the enhancement of the rate  of the market fee leviable under s. 65(2) from one per cent  to two  per cent  and  the  services  rendered  or proposed to  be  rendered  by  the  Market  Committees  and, therefore, the  enhancement is  invalid in  law, It  is  not necessary to establish the element of quid pro quo in regard to market  fees with  arithmetical exactitude, but an amount of fee  must be  earmarked for  rendering  services  to  the buyers  in   the  notified   market  area  and  a  good  and substantial portion  of it  must be shown to be expended for those purposes.  The good  and substantial portion earmarked for rendering  services may  be in  the neighbourhood of two thirds or three-fourths and it must be shown with reasonable certainty as  being spent for rendering services of the kind mentioned in Kewal Krishan Puri’s case. [213 F; 213 B-C]      In facts  and circumstances of the case, the High Court should have held that there is no correlation and that there is no  justification for  enhancement of  the  rate  of  the market fee. The learned judges of the High Court have failed to exercise  the jurisdiction  vested in  them by law by not recording any  finding one  way or the other on the question of correlation,  and  that  they  have  clothed  the  Market Committees  and  the  Chief  Marketing  Officer  with  their jurisdiction to  decide the question whether the enhancement is justified  and if  not justified  to effect  a  down-ward revision wherever necessary. [220 A-B]      Kewal Krishan  Puri v.  State of  Punjab, [1973]  3 SCR 1217, followed.      2(i) Enhancement  of the  rate of  market fee  leviable under s. 65(2) of the Act by Amendments of the bye-laws from one per  cent to  two per  cent of the price of the notified agricultural produce  is invalid  in law  for non-compliance with the  law laid down in Kewal Krishan Puri’s case. If the market  fee   is  sought   to  be  raised,  proper  budgets, estimates, balance-sheets  showing the  money in hand and in deposit, expenditure  on  projects  to  be  undertaken  etc. should be  carefully prepared.  Then and only then there may be a  legal justification for raising the rate of the market fee further  to a  reasonable  extent,  for  only  then  the authorities will be able to know the correct position and to decide reasonably  as to  what extent  the  raising  of  the market fee  can be justified, taking an over-all view of the

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matter. [228 C; 213 C-D]      2 (ii) Admittedly, there was no previous publication as required by  s. 148(1) as it stood at the relevant time, and that requirement  is purported  to have  been dispensed with retrospectively by  s 3  of Ordinance 22 of 1981. Market fee is not a tax which is imposed by law passed by a Legislature where the  interests affected  are or  are  supposed  to  be represented unlike the market fee the enhancement whereof is made by  subordinate legislation  by way of amendment of the relevant by-laws  by the  Market Committees. That is why the provision for  previous publication was made in s. 148(1) of the Act  as it stood at the relevant time. Previous approval can only be of some 157 proposal or  resolution of  the Market Committees for during one or the other of the things required to be done under the provisions of  the Act.  When undisputably there was no such resolution  or   proposal  by   the  Market  Committees  for enhancement of  the rate  of the market fee, it is difficult to see  how the  direction of  the Chief  Marketing  Officer given to  the Market  Committees to  amend the  bye-laws for raising the  rate of the market fee from one per cent to two per cent  can be considered to be his approval. The right of the affected  interests of  being heard  before  the  Market Committees could  raise the  rate of  the market fee being a right available  to them  under the  principles  of  natural justice cannot  be denied  to them  even by  omitting in  s. 148(1) the  clause relating  to previous  publication of the proposal to  make or  amend any  bye-law under s. 148 of the Act. In  any event  the amendment  has not  taken  away  the requirement of  previous approval  of  the  Chief  Marketing Officer, and  since there  was no  resolution or proposal of the Market  Committees to enhance the rate of the market fee before the Chief Marketing Officer gave the direction to the Market Committees  to amend  the bye-laws  for  ralsing  the market  fee  the  direction  cannot  be  taken  as  previous approval of  something which  was not  in existence  at that time. Therefore,  the amendment  of the  bye-laws  made  for enhancement of  the rate of the market fee from one per cent to two  per cent  is invalid  in law notwithstanding s. 3 of Ordinance 22 of 1981 and s. 12 of Karnataka Act 4 of 1982. [222 E; G-H; D-E ; 223 D-F]      In the  present cases,  none of  these requirements was satisfied before  the market  fee  was  raised.  The  Market Committees had  no such  material before  them  before  they raised the  rate  of  the  market  fee  from  one  per  cent uniformly to two per cent by amendment of the bye-law on the more direction of the Chief Marketing Officer. Therefore the enhancement of  the market  fee from one per cent to two per cent by amendment of the bye-law under the directions of the Chief  Marketing   Officer  without   complying   with   the principles of  law laid down in Kewal Krishan Puri’s case is bad in  law The  same would  be the  position  even  if  the amendment to  the bye-law was made in accordance with s. 148 of the Act as it stood before the amendment by the Ordinance 22 of 1981. [213 E; 214 G-H]      3. The  High Court  has erred  in giving  the direction dated  30.11.1981   to  the   Chief  Marketing  Officer  for furnishing a  comprehensive statement  in respect of each of the Market Committees in a tabular form. The High Court has, thus, given  an opportunity to the Market Committees to fill up the lacuna since the materials supplied thereafter by way of Ex.  R-1 to  R-111 and  similar statements perused by the High Court  were not  available either  on the  date of  the amendment of  the bye-law  enhancing the  rate of the market

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fee from  one per  cent to two per cent or even on the dates on which  the Writ  Petitions were  filed in the High Court. [215 D-E]      4. S.  65(1) of the Act as substituted by the Amendment Act 24  of 1975  and Act  17 of 1980, and s. 42 of Amendment Act 17  of 1980  in so far as it seeks to save what has been done under  s. 65  (1) of  the Act  are unconstitutional and have been  rightly struck  down by  the High Court; the quid pro quo  for the levy under substituted s. 65 (1) on sellers was the construction, repair, improve- 158 ment and  maintenance of  rural roads  which  is  no  longer permissible to  be done  out of  moneys collected  as market fees There  is thus  no quid  pro quo  to any extent for the levy under  the  substituted  s.  65  (1)  of  the  Act  and therefore, it  fails, and  it is not protected even by s. 42 of the  Amendment Act 17 of 1980 and has been rightly struck down by the High Court. S 42 of the Amendment Act 17 of 1980 in so  far as  it seeks  to save  the levy and collection of market fee on sellers under the substituted s. 65 (1) cannot also stand. [226 H; 227 A-B      5.  There  shall  be  no  refund  of  the  market  fees collected under  the substituted  s. 65  (1) or  excess  fee collected under  s. 65 (2) either by the State Government or by any of the Market Committees. [227 H]      The  market   fee  collected  from  sellers  under  the substituted s.  65  (1)  must  have  been  credited  to  the Karnataka Roads and Bridges Fund and used for the purpose of construction, repair,  improvement and  maintenance of rural roads which  are undoubtedly  for the benefit of the general public. The  excess fee collected under s. 65 (2) of the Act also must  have been  utilised for the purposes contemplated by the  Act. The persons from whom they have been collected, sellers and  buyers, would naturally have passed on the levy to those  who purchased  the agricultural  produce from them and  the  levy  must  have  ultimately  been  borne  by  the consumers of  the produce.  Any refund  would go  to  unjust enrichment  of   the  persons   from  whom  they  have  been collected. In these circumstances no order for refund of the market fee collected under the substituted s. 65 (1) and the excess market fee collected under s. 65 (2) of the Act could be made in these cases. [227 F-H]      M/s. Amarnath  Om Prakash  & Ors.  v. State  of  Punjab [1975] 3 SCR 475 followed.      Southern Pharmaceuticals  and  Chemicals  v.  State  of Kerala &  Ors. etc.  [1982] 1  SCR 519, Mahant Sri Jagannath v. State  of Orissa,  [1954] SCR  1046, Rathilal Param Chand Gandhi v.  State of  Bombay,  [1954]  SCR  1055,  Sreenivasa General Traders  & Ors. v. State of Andhra Pradesh, [1983] 3 SCR 843  and Municipal  Corporation of Delhi v. Mohd. Yasin, [1983] 3 SCR 229, referred to.

&      CIVIL APPELLATE  JURISDICTION :Civil  Appeal Nos.  605- 2526, 3528-3632, 4356-5278, 6977-7173, 7514-8199, 8921-9939, of 1983  and Special  Leave Petitions Nos. 3419-20 and 7087- 7111 of 1983 and Writ Petition No. 6859 of 1982.      From the  Judgment and  Order dated  25.1.1982  of  the Karnataka High  Court in  Civil Writ  Petition No.  12133 of 1979.      Soli J. Sorabjee, Dr. Y.S. Chitale, V.M. Tarkunde, S.N. Kacker, S.N.  Haksar, Mrs.  A.K. Verma,  Aditya Narain, D.N. Misra, E.R. Inder Kumar, Mukul Mudgal, Mrs. S. Ramachandran,

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P.H. Parekh,  Mrs. Manju  Sharma, Ms.  Divya K. Bhalla, S.S. Javali, B.P.  Singh, and  Ranjit  Kumar  for  the  appearing Appellants. 159      P.R. Mridul,  S.T. Desai,  H.B. Datar, R.P. Bhatt, K.L. Sharma, A.K.  Sen, B.G. Sridharan, Devendra Singh, Mrs. Bina Tamta, R.B.  Datar, Swaraj Kaushal, V.C. Brahmraijappa, K.N. Madhysoodhnan, E.C.  Vidyasagar, M.  Veerappa, Ashok  Kumar, B.G. Shreedharan and R.B. Datar for the Respondents.      The following Judgments were delivered      FAZAL  ALI,  J.  I  have  carefully  gone  through  the judgment  of  my  learned  Brother,  Mukharji,  J.,  on  the question of  fee  levied  by  the  Karnataka  State  on  the agricultural produce  brought to the market for sale in that State. The  theory of  nexus between  the fee levied and the services rendered cannot be reduced to a ritualistic formula so as to close it in a straitjacket nor can it be weighed in golden scales  All that is necessary is that there should be a direct  nexus between realisation of fees and the services rendered. What would be the nature of the services, when and how it  should be rendered and in what measure is entirely a matter for  the market committees to decide or determine. So long as  the money  is realised,  even though  on the higher side, but  is spent  on the  extention and  expansion of the markets, market  yards,  market  facilities,  godowns,  rest houses, buildings,  even roads  leading up  to the  markets, that would  be fully  within the  concept of a fee and could not be  labelled as a tax on the purchasers at the action of goods or  articles in  the market. It is, however, difficult to lay  down any  hard and  fast rule  for  determining  the extent and  contours of the services that should be rendered by the  Government while  imposing a  fee. All  that the law requires is  that  the  amount  of  fee  realised  from  the purchasers should  be spent  for the purposes of the market. For instance,  if the  fee is  on the  higher side  but  the excess  amount   is  reserved  for  the  present  or  future expansion of  the market,  the provision  for making further facilities, the  building up  of roads  upto  the  point  of markets so  as to benefit the purchasers and make there task easier to  collect all  their goods at one place or to build rest houses  for their stay while transacting their business in which  case any  reasonable  fee  levied  by  the  market committees would  be justifiable.  It may  be that sometimes there may  be a  huge rush  of arrivals  of  goods  and  the purchasers/sellers may have to wait for a day or two or even a week  to buy  or sell  the goods  in such cases it will be sufficient if  the fee realised, even if it is in excess, is reserved  exclusively  for  the  purpose  of  expansion  and development of  the markets  or market  buildings  or  roads leading up to the markets. 160      I am  not persuaded  to accept  the argument  that  the facts of  the present case are fully covered by the decision of this  Court in  Kewal Krishan  Puri &  Anr. v.  State  of Punjab &  Ors.(1) That case must be read in the light of the peculiar facts  before the  Court. I do not consider this to be an  authority for all times to levy a fee of Rs. 2 or Re. 1 per  100 in  all cases  irrespective of  the merits of the case. The  problem of marketing in a developing country like ours has  assumed very large proportions and the market fees are required  to provide excellent facilities for extension, expansion and  development of  markets.  In  doing  so,  the Government can  construct roads  by converting  rural  roads into  tarred   ones  in   order  to   provide  all  possible convenience to  the purchasers  and boost up the sales. What

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Kewal Krishan  Puri’s case  decided was that in the facts of that case  there was  no clear nexus between the fee and the services rendered.  In Southern Pharmaceuticals & Chemicals, Trichur &  Ors. etc. v. State of Kerala & Ors. etc.,(2) A.P. Sen, J. speaking for the Court observed thus :           "the Constitution  did not contemplate it to be an      essential element  of a  fee that it should be credited      to a separate fund and not the consolidated fund. It is      also increasingly realised that the element of quid pro      quo stricto  senso is  not always  a sine  qua non of a      fee.           ...            ...            ...      Our attention  has been  drawn to  the observations  in      Kewal Krishan  Puri &  Anr. v. State of Punjab & Ors. 1      (1979 (3) SCR 1217 at 1230) :           The element  of quid  pro quo  must be established      between the payer of the fee and the authority charging      it. It  may not  be exact  equivalent of  the fee  by a      mathematical  precision,   yet,  by   and   large,   or      predominantly, the  authority collecting  the fee  must      show that  the service which they are rendering in lieu      of fee  is for some special benefit of the payer of the      fee.           To our  mind, these  observations are not intended      and  meant   as  laying   down  a   rule  of  universal      application." 161      The one  cardinal  principle  which  flows  from  Kewal Krishan Puri’s  case  (supra)  is  that  any  fee  or  money realised should  not be diverted to any other purpose except for the  benefit of  the purchaser/seller.  In  the  instant case, though  the fee  appears to  be on the higher side but there is  unimpeachable evidence  to show  that  the  entire amount realised  has not  been spent on some other object or purpose but  has been  kept in  reserve for  developing  the markets during  the course of the coming 10-12 years. Though this period  is large but it cannot be said that there is no nexus between  the fee  realised.  Whether  the  development takes place  immediately or in the course of a few years, so long as it is done with in a reasonable period, it cannot be said that  the fee amounts to a tax and is, therefore, ultra vires.      In Sreenivasa General Traders & Ors. v. State of Andhra Pradesh,(1) this Court observed as follows:           "With greatest  respect,  the  decision  in  Kewal      Krishan   Puri’s case  does  not  lay  down  any  legal      principle of general applicability.      ...                     ...                       ...           The traditional  view that  there must  be  actual      quid pro  quo for  a fee  has undergone a sea change in      the subsequent  decisions.. 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...    However,      correlationship  between  the  levy  and  the  services      rendered (sic  or) expected is one of general character      and not of mathematical exactitude."      I might  observe here that the levying of market fee on the sale  and  purchase  of  agricultural  products  in  the markets is  not a  static event  but  is  an  ever  changing concept.  It   has  to  be  modulated  and  adapted  to  the requirements and  necessities of  the society, the expanding needs of  the nation  and the every increasing trends sf the

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rise in  prices. In  other words,  this is a dynamic concept which      (1) [1983] 3 S.C.R. 353. 162 keeps on changing. For instance, it cannot be said that what is good  for the  70 crores  people of  today will also hold good when  the population jumps to 75 crores or even more in the course  of another 5-10 years. Thus, it is impossible to lay down  a hard  and fast  rule which  wôõld apply  for all times to  come. Therefore,  the decision  in  Kewal  Krishan Puri’s case  cannot be  held to be law for all times to come irrespective of  the period  nor was  this decision meant to lay down any such principle. I, therefore, with due respect, agree with  the observations  made and  the detailed  survey done by Brother Mukharji, J. This disposes of the first limb of the  question of  levy of  fee so far as the agricultural produce in Karnataka State is concerned.                 Civil Appeal No. 629 of 1983      This now  brings me  to the  second important question, viz., whether  the Karnataka Government was entitled to levy fee on the goods or the various products and sub-products of tobacco. The  question is  not free  from doubt.  Since  the inception of  this Court,  which was  the precursor  of  the Federal Court,  it has  been  laid  down  that  the  various entries found  in the three Lists of the Seventh Schedule of the  Constitution   of  India   are  demarcated   fields  of legislation  and   their  contours   and  limits  have  been expressely described  in the  entries mentioned  in the said three Lists. each State is free and independent to legislate on the field which is covered by the State List (List II) or the Concurrent  List  (List  III).  So  far  as  List  I  is concerned that  is reserved  purely for  Parliament for  any legistation to  be made. So far so good. The most knotty and difficult problem  arises when  we find  that there  is some sort of an inconsistency or convict or collision between the two Lists  (List I  and II)  whether the  State List  or the Union List  should prevail.  the instant  case we are really concerned with the question of tobacco industry. Entry 52 of List I  (Union List)  which lays down and fixes the subjects of legislation  to   be made  by Parliament may be extracted thus:           "52. Industries, the control of which by the Union      is declared by Parliament by law to be expedient in the      public interest."      Two problems, however, may arise. The word ’Industries’ is very  wide and has been used in the other two Lists also. Where a  particular industry  falls clearly  within the four corners of entry 163 No. 52  then the  State has  no jurisdiction to legislate on that particular  field if  that field  is occupied  and  the doctrine of  occupied field A would apply. Difficulty arises in borderline  cases where  an industry has been declared by the Centre under entry 52 of List I and this entry overlaps, to a  great extent,  the corresponding entry in List II. The question arises as to whether the Central List would prevail or the State List.      In the  instant case what has happened is that although the tobacco  industry has been notified as having been taken over under  entry 52  of List  I  yet  the  Karnataka  State started levying fee on the tobacco or its products. In order to appreciate  whether or  not the  field was fully occupied and there  could not  be encroachment  on this  fee  by  the Karnataka State  a brief  history of the Central legislation may be given.

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    As already mentioned, entry 52 of List I authorises the Central legislature  (Parliament) to  take over any industry it likes,  tobacco  being  no  exception.  It  is  also  not disputed that by virtue of the Tobacco Board Act, 1975, (for short, referred  as ’1975  Act’). The  Parliament  chose  to occupy the  entire field tobacco industry which includes all kinds of tobacco and its by-products and not merely Virginia tobacco. It  may be  necessary to  extract  a  few  relevant portions from the Act:-           "2.It is  hereby declared  that it is expendent in      the public  interest that  the Union  should take under      its control the tobacco industry.           3.(a)     "Board"   means    the   Tobacco   Board      established under section 4;           (d)"dealer" means a dealer in tobacco;           (f)  "export"  and  "import"  mean,  respectively,      taking out of, or bringing into, India, by land, sea or      air;           4.(3)     The head office of the Board shall be at      Guntur in  the State  of Andhra  Pradesh and  the Board      may,  with   the  previous   approval  of  the  Central      Government, establish  offices  or  agencies  at  other      places in or outside India. 164           7. (1)  The Board may appoint such committees as A      may be  necessary for  the efficient  discharge of  its      duties and performance of its functions under this Act.           8. (1)  It shall  be the  duty  of  the  Board  to      promote,  by  such  measures  as  it  thinks  fit,  the      development under the control of the Central Government      of the tobacco industry.           (2) Without  prejudice to  the generality  of  the      provisions of sub-section (1), the measures referred to      therein may provide for-           (a)  regulating   the  production  and  curing  of      virginia tobacco  having regard to the demand therefore      in India and abroad;           (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      platforms, 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   auctioner   at   auction   planteforms      established by  or registered  withit subject  to  such      conditions  as   may  be   specifited  by  the  Central      Government;           (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;           (i)   sponsoring,   assisting,   coordinating   or      encouraging  scientific,   technological  and  economic      research for the promotion of tobacco industry,           (i) Such other matters as may be prescribed. 165           14 A  (1). Where  Virginia tobacco  is sold at any      auction platform  established by  the Board  under this      Act, A  it shall  be competent for the Board or for any      officer of the Board authorised by it in this behalf to

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    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.           20. (1)  The  Central  Government  may,  by  order      published in  the Official  Gazette, make provision for      prohibiting, restricting  or otherwise  controlling the      import or  export of tobacco products, either generally      or in specified classes of cases.           (2) All  tobacco and tobacco products to which any      order under sub-section (1) applies, shall be deemed to      be goods  of  which  the  import  or  export  has  been      prohibited under  section 11  of the  Customs Act, 1962      and all  the provisions  of that  Act shall have effect      accordingly."      By virtue  of Notification  No 374(3) dated 31.5.80 the Central Government made applicable ss. 10 and 11 of the 1975 Act to  tho States  of Maharashtra,  West  Bengal,  Gujarat, Tamil Nadu  & Uttar  Pradesh. It  may, however, be mentioned that by  making Rule  35 in  the Tobacco  Board Rules,  1976 (enacted under  s. 12 of the 1975 Act) the Market Committees were debarred  from auctioning  or dealing in tobacco or its products unless  they were  registered with the Board. It is also admitted  that the  Market Committees  of the  State of Karnataka had  not been  registered with  the Tobacco  Board under  the  1975  Act  and  were,  therefore,  incapable  of rendering any  service  at  all.  Though  some  Markets  are situated in  Karnataka State  but that, to my kind, makes no difference because  the Central  legislation applies  to the whole country.  This appears to be the constitutional scheme of the  three Lists  which separately demarcate their fileds and 166 it is  now well  settled that  one cannot  encroach  on  the other. For  A instance,  take the  case of Railways which is mentioned in  List I  and is  fully covered  by the entry in that List.  Though the  railways may  pass  through  various States it  can neither  be contended  nor imagined that each State would be competent to legislate by passing regulations or Acts  for the  working of  the railways  with respect  to areas through  which they  pass. This  is exactly  the  case here. When  the Parliament  took over  the tobacco  industry without any  preconditions or  permutations and combinations and established  a Tobacco Board for regulating the sale and purchase of  tobacco under  entry 52  of List  I the  entire field of  tobacco industry  was fully  occupied and  nothing remained for the States to do, and thus neither the doctrine of entrenchment  nor that  of pith  and substance would have any application.      The crucial  point for  determination in  this cases is whether the Karnataka State had any jurisdiction to encroach upon the  limits of  entry 52  of List  I and the court will have to closely examine the encroachment or entrenchment and the extent  of the  same. Where  the court is of the opinion that the  encroachment or  entrenchment amounts to defeating the very  object sought  to  be  subserved  by  the  Central legislation then the Central legislation must prevail. Where it is  a borderline case and covered almost fully by List II but in  the course  of the implemention of the same there is an entrenchment  or encroachment  which is only minimal, the

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question of  the doctrine of pith and substance will come in to play  and the State will be justified in legislating over the subject concerned.      In the  instant case  we are concerned only with List I (Union List)  and List  II (State List) of Seventh Schedule. The matter in dispute falls within the four corners of entry 52 of  List I  and entries  28 and  66 of  List II. It h not disputed as  discussed above that by virture of the 1975 Act the central  legislation had  taken  within  its  ambit  the entire tobacco  industry. The  matter  does  not  rest  here alone. It  appears  that  the  central  legislation  made  a provision for  sale and  distribution  of  tobacco  products through the  Tobacco Board  and sellers  were directed to be registered with the Board. Clause (cc) of sub-s. (2) of s. 8 of the  1975 Act  enjoins establishment of auction platforms with the  approval of  the Central  Government for  sale  of tobacco products.  Section 12  of the  1975 Act  deals  with registration of  Exporters, packers, auctioneers and dealers of tobacco and may be reproduced thus: 167           "12. No person shall export tobacco or any tobacco      products or  function as  a packer,  auctioneer of,  or      dealer A  in, tobacco  unless he registers himself with      the Board  in accordance with the rules made under this      Act."      Section 13  states that  virginia tobacco shall be sold only at  in auction  platform registered  with the Board and runs thus:           "13. No  registered grower  or curer shall sell or      cause to  be sold virginia tobacco elsewhere than at an      auction  platform   registered  with   the   Board   in      accordance  with   rules  made   under  this   Act,  or      established by the Board under this Act."      By a  letter dated  15.9.83 the  Tobacco Board rejected the application  made by  the Karnataka State to allow it to participate  in  auctioning  the  tobacco  products.  It  is manifest therefore  that by  virtue of  the aforesaid  steps taken by  the central legislation the field of tobacco stood completely occupied and there was no room for application of the doctrine of pith and substance nor would the question of the incidental entrenchment arise in such cases.      I shall  now discuss  the law  on the subject which has been well  settled by  a long  course  of  decision  of  the Federal Court,  the Privy  Council, House  of Lords and this Court. Before doing that it may be necessary to extract the. relevant provisions of Arts. 245 and 246 of the Constitution which may be extracted thus:           "245. Extent of laws made by Parliament and by the      Legislatures of State           (1)   Subject    to   the   provisions   of   this      Constitution, Parliament may make laws for the whole or      any part of the territory of India, and the Legislature      of a  State may  make laws for the whole or any part of      the State.           (2) No  law made  by Parliament shall be deemed to      be invalid  on the  ground that  it  would  have  extra      territorial operation-           246. Subject-matter of laws made by Parliament and      by the Legislatures of States 168           (1) 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      Seventh Schedule  (in this  Constitution referred to as      the "Union List).

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         (3)  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 (in  this  Constitution  referred  to  as  the      "State List").           (4) Parliament has power to make laws with respect      to any  matter for  any part  of the territory of India      not included  (in a  State) not with standing that such      matter is a matter enumerated in the State List."      A close  and careful  analysis of  these  two  Articles shows that  the Constitution  strikes a just balance between the powers  of the Parliament and the State Legislatures but reserves to  itself the  right to  legislate in  exceptional cases even  in matters  appearing in the State List. This in fine is  the logical result and the necessary concomitant sf cl. (4) of Art. 246.      It is also not disputed that under s. 2 of the 1975 Act the entire  tobacco industry  was taken  over by the Central Government. Having  thus narrated the admitted facts I would now proceed  to the  merits of the appeals. To begin with, I might  indicate   the  cardinal  principles  justifying  the competency of  the respective  legislatures with  respect to the entries concerned:-      (1)  Entries in  each of  the Lists  must be  given the           most liberal  and widest  possible  interpretation           and no attempt should be made to narrow or whittle           down the  scope of  the entries.  This is  a  well           settled principle  of law  and was reiterated in a           recent decision  of this  Court in  S.P. Mittal v.           Union of  India Ors.(l)  where this Court observed           thus:-      (1) [1983]1 S.C.R. 51. 169           "It may be pointed out at the very outset that the      A function  of the  Lists is not to confer powers. They      merely demarcate the legislative fields. The entries in      the three Lists are only legislative heads or fields or      legislation and  the power  to legislate  is  given  to      appropriate legislature  by Articles  245 and  248 (sic      246) of the Constitution.      (2) The  application of  the  doctrine  o  f  pith  and substance  really  means  that  where  a  legislation  falls entirely within  the scope of an entry within the competence of a State legislature then this doctrine will apply and the Act will  not be  struck down,  the  doctrine  of  pith  and substance has  been summarised  in the  case of  Delhi Cloth General Mills  Co. Ltd.  v. Union  of India  & Ors.(1) where Desai,  J.   speaking  for  the  Court  made  the  following observations:           "To  resolve   the  controversy   if  it   becomes      necessary to  ascertain to  which entry  in  the  three      Lists, the  legislation is  referable,  the  Court  has      evolved the  doctrine of pith and substance. If in pith      and substance,  the legislation  falls within one entry      or the  other but some portion of the subject-matter of      the legislation  incidentally trenches  upon and  might      enter a  field under another List, then it must be held      to be  valid in  its entirety,  even  though  it  might      incidentally trench  on matters  which are  beyond  its      competence."      (3) The  consideration of  encroachment or entrenchment of one  List in  another and the extent thereof is also well established. If  the entrenchment  is minimal  and does  not affect the  dominant part  of some other entry, which is not

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within the  competence of the State Legislature, the Act may be upheld as constitutionally valid.      (4) The  nature and  character  of  the  scope  of  the entries having  regard to  the touch stone of the provisions of Arts. 245 and 246.      (5) The doctrine of occupied field has a great place in the  interpretation  as  to  whether  or  not  a  particular legislature is competent to legislate on a particular entry. This means  that when  the field  is completely  occupied by List I, as in this case, then the State      (1) [1931] 4 S.C.C. 167. 170 legislature  is  wholly  incompetent  to  legislate  and  no entrenchment or  A encroachment,  minimal or otherwise, by a State legislature  is permitted.  In other  words, where the field  is   not  wholly   occupied,  than   a  mere  minimal encroachment would  not affect  the validity  of  the  State legislation.      Thus, in  my opinion,  the five  principles have  to be read and  construed  together  and  not  in  isolation-where however, the  Central and  the State  legislation cover  the same field then the central legislation would prevail. it is also well  settled that  where two  Acts, one  passed by the Parliament and the other by a State legislature, collide and there is  no question  of harmonising them, then the Central legislation must prevail.      There may also be cases where despite an entry being in List II,  the Parliament  may under  the provisions  of Art. 246(3) take over that particular field and legislate on that subject which will debar the late legislative from adding or passing any such legislation which has been taken over under Act. 246(3).      Now to  the authorities.  As  far  back  as  1941,  the Federal Court,  while interpreting  the ideal  provisions of the Government of India Act of 1935 in Subrahmanyan Chettiar v. Muttuswami Goundan( observed thus.           "In [1921]  2 A.C.  91, Lord Haldane after stating      ’the rule  of exception’ applicable to the heads of ss.      91 and 92, added:             Neither   the  Parliament   of  Canada  nor  the      Provincial Legislature  have authority under the Act to      nullify,  by   implication  any  more  then  expressly,      statutes which they could not enact.      ...           While the  Federal Legislature  is given power, it      is expressly  provided that  "a Provincial  Legislature      has not  power to  make laws with respect to any of the      matters  enumerated  in  List  I..  On  a  very  strict      interpretation of  s. 100,  it would necessarily follow      that from all matters in      (1) A.l.R. 1941 F.C. 47. 171      List II  which are  exclusively assigned  to Provincial      Legislatures, all  portions, which  fall in List I or A      List III  must be excluded. Similarly, from all matters      falling in  List III, all portions which fall in List I      must be  excluded. The section would then mean that the      Federal Legislature  has full  and exclusive  power  to      legislate with  respect to  matters in  List I, and has      also power  to legis-  late with  respect to matters in      List III.  A Provincial Legislature has exclusive power      to legislate  with respect  to List  II, minus  matters      falling in List I, or List III; has concurrent power to      legislate with  respect to  matters in  List III, minus      matters falling in List I. In its fullest scope, S. 100

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    would then  mean that  if it  happens that there is any      subject in  List II  which also falls in List I or List      III, it  must be  taken as  cut out from List II.. If a      subject falls exclusively in List 11 and no other list,      then  the  power  of  the  Provincial  Legislatures  is      supreme. But  it does also fall with in List I, then it      must be  deemed as  if it is not included in List II at      all. Similarly,  if it  also falls in List III, it must      be deemed  to have  been excluded  from List II But the      rigour of  the literal interpretation is relaxed by the      use of  the words  "with respect  to" which  as already      pointed out  only signify  "path and substance," and do      not forbid a mere incidental encroachment. But, even if      such  an  incidental  encroachment  may  be  ordinarily      permissible, the  field may  not be clear. There may be      competency and yet repugnancy also. The question is how      to prevent  a clash  if the  trespass  is  on  a  field      already occupied by a Central Legislation."      In the above case their Lordships relied on the leading case reported  in [1921] 2 A. C. 91. To the same effect is a decision of this Court in Zaverbhai Amaidas v. State Bank of Bombay(l) where the following observations were made:           "The principle  embodied in  section 107  (2)  and      article 254  (2) is  that  when  there  is  legislation      covering the same ground both by the Central and by the      Province both  of them  being competent  to  enact  the      same, the  la v  of the Centre should prevail over That      of the State."      (1) [1955] 1 S.C.R 799. 172      In Deep  Chand  v.  State  of  U.P.  &  Ors.  (1)  same principles of  repugnancy have been reiterated and the three principles laid  down by  Nicholas were  fully  approved  by Subba Rao, J. thus:           "Nicholas  in  his  Australian  Constitution,  2nd      Edition,  page   303,  refers   to   three   tests   of      inconsistency or repugnancy      "(1) There may  be inconsistency in the actual terms of           the competing statutes;      (2)  Though there  may be  no direct  conflict, a State           law may  be inoperative  because the  Commonwealth           law, or  the award  of the  Commonwealth Court, is           intended to be complete exhaustive code; and      (3)  Even in  the absence  of intention, a conflict may           arise when  both State  and Commonwealth  seek  to           exercise  their   powers  over  the  same  subject           matter."           Repugnancy  between   two  statutes  may  thus  be      ascertained  on   the  bases  of  the  following  three      principles:      (1)  Whether there  is direct  conflict between the two           provisions;      (2)  Whether  Parliament   intended  to   lay  down  an           exhaustive code  in respect  of the subject matter           replacing the Act of the State Legislature, and      (3)  Whether the  law made  by Parliament  and the  law           made by  the State  Legislature  occupy  the  same           field."      In The Calcutta Gas Company (Proprietary) Ltd. v. State of West  Bengal &  Ors.(2) the  same view seems to have been taken where the following observations were made:      (1) [1959] Supp. 2 S.C.R. 8.      (2) [19621 Supp. 3 S.C.R. 1. 173           "It may,  therefore, be  taken as  a well  settled

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    rule of  construction that every attempt should be made      to harmonize the apparently convicting entries not only      of different  Lists but  also of  the same  List and to      reject that  construction which  will rob  one  of  the      entries of its entire centre and make it nugatory."                                              (Emphasis ours)      Thus, indeed  if I accept the agrument of the Karnataka Government, which  seems to  have found  favour with Brother Mukharji, J.  I would  really be robbing the 1975 Act of its entire content  and essential  import by  handing  over  the power of  legislation to  the State  Government which per se has been  taken over  by Parliament  under Art.  246 by  the 1975, Act.      The case  of State  of Orissa  v. M.A. Tulloch & Co.(l) appears to  be a  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 the latter will have to yield. In this connection, this Court observed thus:           "Repugnancy  arises   when  two  enanctments  both      within the  competence of  the two Legislatures collide      and when  the Constitution  expressly or  by  necessary      implication  provides   that  the   enanctment  of  one      Legislature has   superiority  over the  other then to      the extent  of the  repugnancy the  one supersedes  the      other..  The   best  of   two  legislation   containing      contradictory provisions  is  not,  however,  the  only      criterion of repugnancy, for if a competent legislature      with a superior efficacy expressly or impliedly evinces      by its  legislation an  intention to  cover  the  whole      filed, the  enactments of the other legislature whether      passed before or after would be overborne on the ground      of repugnance."                                          (Emphasis supplied)      To the same effect is another decision Or this Court in Sudhir Chandra  Nawn  v.  Wealth  Tax  Officer,  Calcutta  & Ors.(2) when Shah, J. Observed thus:           "Exclusive  power   to  legislate  conferred  upon      Parliament is  exercisable, not  with standing anything      contained      (1) [1964] 4 S.C.R. 461.      (2) [1969] 1 S.C.R. 108. 174      in cls.  (2) &  (3), that  is  made  more  emphatic  by      providing A  in cl.  (3) that  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,  but      subject to  cls. (1)  and (2).  Exclusive power  of the      State Legislature has therefore to be exercised subject      to cl.  (1)  i.  e.,  the  exclusive  power  which  the      Parliament has  in respect of the matters enumerated in      List I. Assuming that there is a conflict between entry      86 List I and entry 49 List II, which is not capable of      reconciliation, the power of Parliament to legislate in      respect of  a matter  which is exclusively entrusted to      it must  supersede pro  tanto the  exercise of power of      the State Legislatere."                                          (Emphasis supplied)      Practically the  same view  has been  taken in Baijnath Kedia v.  State of  Bihar  &  Ors.(1)  where  the  following observations were made :-           "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

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    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 necessarily be unconstitutional because that filed      is abstracted  from the  legislative competence  Or the      State  Legislature.  This  proposition  is  also  self-      evident that  no attempt was rightly made to contradict      it."                                          (Emphasis supplied)      Thus, it  would appear  that  in  view  of  the  recent decisions, once  the Centre  takes over  an  industry  under entry No.  52 of  List I  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 (1) [1970] 2 S.C.R. 100, 175 so, that  legislation would  be ultra vires of the powers of the State legislature.      I might  mention  here  a  reference  made  by  Brother Mukharji J. to the fact that the Karnataka State Legislature passed an  Act of  1980 by  which the  Tobacco Industry  was taken within  its ambit but, the assent of the President was not taken  as required  by Article 254 (2). This takes us no where because  in the  first place  as  the  assent  of  the President was  not taken,  the Karnataka  Act  of  1980  was wholly incompetent.  Moreover even if the President’s assent would have  been taken  it would  not validate the Karnataka Act of  1980 so  far as  the Tobacco  Industry is  concerned because Article  254(2) applies only to matters contained in the Concurrent  List and  has nothing  to  do  with  matters enumerated in  List I or List II. Thus, the Karnataka Act of 1980 would  have absolutely  no application  to entry  52 of List I  which was  fully occupied by the Central Act of 1975 as referred to above. This circumstance, therefore, is of no consequence.      On a careful consideration, therefore, of the facts and circumstances of  this case  I express my respectful dissent with the  view taken  by Brother Mukbarji, J., on this point and hold that so far as the case of the I.T.C. (C.A. No. 629 of 1983)  is concerned,  the Government  of Karnataka had no jurisdiction to  levy any  market fee  because that directly collides with the 1975 Act as indicated above.      This being the position, 1, therefore, strike down that part of the Karnataka Act which takes in itself the power to levy market  fee on  tobacco or  its products.  Even if  the products may  be sold  in the p markets in Karnataka or near about the  same place  situated in  the State,  the power to levy fees will not belong to that State: it will remain with Centre  which  would  regulate  the  sale  and  purchase  of tobacco. It may be reiterated at the risk of repetition than an application  for registration  with the Tobacco Board was made  by   the  Karnataka  Government  which  was,  however, rejected by  the  Board.  This  indirectly  shows  that  the Government of Karnataka was aware that it could not encroach on the   field which  was fully  occupied by  tho Centre  by virtue of the 1975 Act.      Before closing  the judgment  I would  like to  give  a rough and  ready example  to  illustrate  my  constitutional point of  view in  t figurative sense. Suppose there are two fields belonging to A and B. 176

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The area  of A’s  field is  500x200 metres. There is another adjacent A field belonging to comprising 400xl00 metres. A’s possession covers  every nook and corner of the entire field leaving nothing  vacant. It is manifest that cannot encroach or entrench  on the  field of  A. Conversely,  if  A  is  in possession of  the entire  field leaving,  however, a  small portion  (30x20)   metres  vacant,  would  be  justified  in encroaching on  that particular  part of  the vacant  field. This is  how we  have to  construe  the  provisions  of  the Central  and  State  entries  in  List  I  and  List  II  in accordance with  the provisions  of Arts. 245 and 246 of the Constitution.      Having regard to these circumstances I allow the appeal of the I.T.C.. (C.A. No. 629 of 1983) and quesh the order of the Market  Committees of  Karnataka levying  fee on tobacco and its  products. To this extent, therefore, I dissent from the view  taken by  Brother Mukharji, J. for whom I have the greatest respect.  There will,  however, be  no order  as to costs and  any fee realised will not be refunded and it will be for  the Centre  and the State to adjust and work out the equities of adjustment.      VARADARAJAN,  J.   The  Mysore   Agricultural   Produce Marketing (Regulation)  Act. 1966  came into  force on  1-5- 1968.  Now  known  as  the  Karnataka  Agricultural  Produce Marketing (Regulation)  Act, 1966  it  will  be  hereinafter referred to  as ’the  Act’.  S.  65(1)  of  the  Act  as  it originally stood  directed Market Committees in the State to levy and  collect market  fee  from  buyers  in  respect  of specified agricultural produce at rate which may not be more than thirty paise per one hundred rupees of the price of the agricultural produce in such manner and at such times as may be specified.  Clause (2)  of S.  65  stated  that  for  the purpose of  clause (1)  all  notified  agricultural  produce leaving a  yard shall,  unless the  contrary  is  proved  be presumed to  have been  brought  within  such  yard  by  the persons in possession of such produce. Pursuant to S. 65 {1) the market  fee appears to have been fixed by all the market committees in the State of Karnataka at thirty paise per one hundred rupees of the price paid to the buyers.      S. 2  of the  Karnataka Agricultural  Produce Marketing (Regulation) Amendment Act. 20 of 1973 which came into force on 23-10-1973  amended S.  65 of the Act by substituting the words "thirty paise". in sub-section (1) of S. 65 of the Act by the  words "one  rupee". That Amendment Act was passed in replacement of 177 the Karnataka Ordinance 5 of 1973 which was repealed by S. 4 of that  Act with  the necessary saving clause by way of the proviso. The market Committees accordingly raised the market fee to  the maximum  limit of one per cent of the sale price by amendment  of the  byelaws. The enhancement of the market fee from thirty paise to one rupee per one hundred rupees of the price paid to buyers was upheld by the High Court in the decision rendered  on 17.12.1974  in W.  P- No.  537 of 1974 (Vaman Rao v. Agricultural Produce market Committee, Sagar). Subsequently the  Act was  further amended  by the Karnataka Agricultural Produce Marketing (Regulation) Amendment Act 24 of 1975  which came  into force  on 19.5.1975.  S 2  of that Amendment Act  substituted S.65 of the Act by a new section, which read:           "65. Levy of market fees-           (1) The  market committee  shall levy  and collect      market  fees   from  every   seller   in   respect   of      agricultural produce  sold by such seller in the market      at the  rate of  one rupee  per hundred  rupees of  the

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    price of such produce sold;           (2) The  Market Committee  shall levy  and collect      market fees from every buyer in respect of agricultural      produce bought  by such buyer in the market area as may      be specified  in the  bye-laws (which shall not be more      than one  rupee per  one hundred rupees of such produce      bought) in  such manner  and at  such times  as may  be      specified in the bye-laws;           (3) Every  Market Committee  shall notwithstanding      anything contained in this Act, credit to the Karnataka      Roads and Bridges Fund. constituted under the Karnataka      Motor Vehicles  Taxation Act,  1957.  the  market  fees      collected under sub-section (1) for being spent for the      the purpose  of construction,  repairs improvement  and      maintenance of rural roads in the State."      This amendment  provided for the levy and collection of market fees  by market  committees on and from the seller of specified agricultural  produce sold  in the  market area at one rupee  per one  hundred rupees  of  the  price  of  such produce sold and for crediting 178 the market  fees so  collected to the Roads and Bridges Fund constituted under the Karnataka Motor Vehicles Taxation Act, 1957  for   being  spent   for  the   construction,  repair, improvement and maintenance of rural roads in the State.      The  levy  of  market  fees  on  sellers  of  specified agricultural produce by the amendment of S 65 of the Act and the appropriation  of the  market fee  collected under  that sub-section from  sellers to  the credit  of the  Roads  and Bridges  Fund   under  sub-section  (3)  was  challenged  in Rajasekhriah’s case(1)  In that  case the  High Court struck down the  amended s. 65(1) and (3) of the Act and upheld the levy on  buyers under  S.65 (2)  of the  Act in the judgment delivered  on   28.9.1978  following   the  decision   dated 17.12.1974 rendred in Vaman Rao’s case (supra) so for as the lavy in buyers is concerned.      On  30   6.1968  Karnataka  Ordinance  2  of  1979  was promulgated making  some amendments  to ss. 63 and 65 of the Act. S.  63 which deals with the powers and duties of market Committees  was   amended  with  retrospective  effect  from 19.5.1975 so  as to substitute in clause (ii) of sub-section (1) of  S.63 the  words "transport  and marketing"  for  the word,  marketing"   In  Sub-section   (2)(a)  of  S.63  with reference to  the duties, of the Marketing Committees, after item (1) the amendment stated:           "provide either  independently or  along with some      other authority  necessary facilities for the transport      of notified  agricultural produce  to the  yard in such      manner as may be prescribed."      S.65 was ammended (i) validating market fees levied and collected under sub-section (1) of S. 65 for the period from 19.5.1975 to  28.9.1978;  (ii)  omitting  the  amended  sub- section (1)  of S.  65 with  effect  from  28.9.1978;  (iii) enhancing the maximum permissible limit of market fee levied and collected  from buyers of specified agricultural produce under sub-section  (2) of S. 65 from one per cent to two per cent, and  (iv) omitting  sub-section (3)  of S. 65 as if it never existed in the Statute.      The    Karnataka    Agriculture    Produce    Marketing (Regulation) Amendment  Act 17 of 1980 which came into force on 9.5.1980 seems      (1) I.L.R. [1978] Karnataka 1939, 179 to have  been passed  in replacement of Ordinance 16 of 1979 which in  turn was promulgated in replacement of Ordinance 2

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of 1979.  S. A  42 of that Amendment Act validating the levy and  collection   of  market  fee  during  the  period  from 19.5.1975  to   28.9.1978   which   was   struck   down   in Rajasekhariah’s case (supra) reads:           "42.Validati on  of levy  of market  fee  etc.-(1)      Not- withstanding  anything contained  in  any  decree,      order or  judgment of any court, or other authority any      levy or  collection of  market fee made or purported to      have been  made, any  action taken  or  thing  done  in      relation  to   such  levy   or  collection   under  the      provisions of the principal Act before the commencement      of this  section shall  be deemed  to be  as valid  and      effective as  if such  levy or  collection or action or      thing had  been made, taken or done under the principal      Act as amended by this Act and accordingly-           (a) all acts, proceedings or things done or action      taken by  any market  committee in  connection with the      levy and  collection of  such market fee shall, for all      purposes be  deemed to  be or to have always been made,      done or taken in accordance with law;           (b)  no   suit  or   other  proceedings  shall  be      maintained E  or continued  in any  court or before any      authority for the refund to any such market fee; and           (c) no  court shall  enforce any  decree or  order      directing the refund of any such fee.           (2)  (a)   The  Karnataka   Agricultural   Produce      Marketing (Regulation)  (Second  Amendment)  Ordinance,      1979 (Karnataka  Ordinance No  16 of  1979)  is  hereby      repealed.           (b) Notwithstanding  such repeal, any action taken      or any  appointment, notification, order, scheme, rule,      form or bye-law made or issued from deemed to have been      taken, made  or issued under the Karnataka Agricultural      Produce Marketing  (Regulation)( Amendment)  Ordinance,      1979 shall be deemed to have been taken, made or issued      under this  Act as  if this  Act were  in force  at all      relevant times  and any  reference therein  to the said      Ordinance 180      shall be  deemed to be a reference to this Act and they      A shall  continue in force accordingly unless and until      superseded by  any action  taken  or  any  appointment,      notification, order, scheme, rule, form or bye-law made      or issued under this Act or any other law."      Section 20 of the Amendment Act 17 of 1980 amended S.65 of the Act thus -           "In S.65 of Principal Act, (1) for sub-section (1)      the following  sub-section shall be deemed to have been      substituted with  effect from  19th  day  of  May  1975      namely:-           (1) In respect of agricultural produce sold in the      market area  there shall be levied and collected by the      Market Committee thereof, from every seller market fees      at the rate of one per cent of the sale proceeds of the      produce so sold;           (2) Sub-section (1) as so substituted shall be and      shall deemed  to have been omitted with effect from the      29th day of September, 1978;           (3) In  Sub-section (2)  for the words "one rupee"      the words "two rupees" shall be substituted;           (4) Sub-section  (3) shall  and  shall  be  deemed      always to have been omitted."      Thus the levy of market fee subject to a maximum of one per cent of the sale price of specified agricultural produce on sellers  for the period from 19.5.1975 has been done away

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with effect  from 28.9.1978  and sub-section  (3) of  s.  65 which provided  for crediting  the  market  fee  levied  and collected from  sellers of specified agricultural produce to the Roads  and Bridges  Fund has been omitted as if it never existed in S. 65 of the Act by the Amendment Act 17 of 1980.      Pursuant to the amendment made to sub-section (2) of S. 65 of the Act enhancing the maximum limit of the market fees leviable on  buyers under  the station  from one per cent to two per cent, all the 181 Market Committees  in the  State  of  Karnataka  except  the Mangalore  Market   Committee  amended   the  bye-laws   for enhancing the levy A under s. 65 (2) of the Act from one per cent to two per cent.      The traders  filed writ  petitions in  the  High  Court challenging the enhancement of the levy from one per cent to two per  cent as  well as  the collection  of the market fee from sellers  during the period from 19.5.1975 to 28.9.1978. After the  hearing of  the writ  petitions commenced  in the High Court  in October-November, 1981, Ordinance of 1981 was promulgated dispensing  with the requirement of the previous publication contemplated in S. 148 of the Act in relation to making of bye-laws and amendments thereof with retrospective effect. After  the High  Court delivered the judgment in the Writ Petitions on 25.1.1982 upholding the enhancement of the market fee  on buyers  from one  per cent to two percent the market fee  leviable under  S. 65  (2) on  buyers  has  been reduced by  all the  Market Committees  by the  Circular No. SMD-268/PGN-83 dated  27.2.1982 to  one per cent pursuant to the declaration of the policy of the Government.      The principal  challenge before  the High  Court was as to: (i) the constitutional validity of Sec 65 (1) of the Act as substituted  by the Amendment Act 17 of 1980 which sought to validate  the levy  and collection  of market  fees  from sellers of  specified agricultural produce during the period of  its  operation  between  19.5.1975  when  S.  65(1)  was introduced in  the place of the old S. 65 by sub-section (2) of the  Amendment Act 24 of 1975 and when it was struck down by the  High Court  in Rajasekhariah’s  case  (supra);  (ii) enhancement of  the market  fee from one per cent to two per cent of  the price  of the specified agricultural produce by amendment of  the bye-law  pursuant to  the raising  of  the maximum limit  from one  per cent  to two  per cent  by  the Amendment Act  17 of  1980 on  two grounds,  namely, want of sufficient quid  pro quo and violation of the requirement of prior publication  and subsequent  sanction of the amendment to the  bye-law by  the Chief Marketing Officer contemplated in S.  148 of  the Act, and (iii) inclusion of certain items of agricultural  produce such as cardamom and tobacco in the schedule to  the Act. The levy and collection of market fees from sellers  during the  period from 19.5.1975 to 28.9.1978 was sought  to  be  validated  by  the  aforesaid  amendment because by  reason of  the judgment  of the  High  Court  in Rajasekhariah’s case  (supra) the  State was  exposed to the liability to  refund the  market fees  collected during that period. The  High Court  found that S. 65 (1) as substituted by the Amendment Act 17 182 of 1980  and even  S. 42  of  that  Amendment  Act  was  not constitutionally valid and are liable to be struck down. The reason is that before S. 65 (3) was struck down the levy and collection of market fees under S. 65 (1), as it stood then, were for the benefit of the Karnataka Roads and Bridges Fund constituted under the Karnataka Motor Vehicles Taxation Act, 1957 and that the event which had happened, namely crediting

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of the  market fees  to that  Fund cannot be reversed by the subsequent amendment of S. 65 (1) and the introduction of S. 42 in  the Amendment Act 17 of 1980. The High Court rejected the submission  of the learned Advocate General that several crores of  rupees collected under S. 65 (1) from sellers had actually  been  spent  for  the  construction,  improvement, repair and  maintenance of rural roads, culverts and bridges and therefore,  the Government  was obliged to have recourse to the  amendment  and  also  to  introduce  S.  42  in  the Amendment Act  17 of  1980 as not acceptable, and relying on the decision  of this  Court in Kewal Krishan Puri’s case(l) the High  Court held  that rural  roads  are  primarily  and essentially intended  for the  benefit of the public and the class of  market fee  payers are,  as part  of  the  general public, entitled  to benefit  of their  user and  the market fees cannot  be levied  on and  collected from them for that purpose,  more  so  because  the  rural  roads  constructed, improved, repaired  and  maintained  with  the  market  fees collected  did   not  become  the  property  of  the  market committees or  shed their  character as  public roads.  This appears to  be the  main reason  for the High Court striking down S.  65 (1) as substituted by S. 20 of the Amendment Act 17 of  1980 and  also the validating S. 42 of that Amendment Act.      As regards  S. 65 (2) relating to market fees on buyers the High  Court rejected the contention that the sub-section confers uncanalised and excessive power on market committees in the  matter of  fixing the  rate of  market fees and held that there are adequate statutory guidelines and safeguards.      On the  question of  the validity  of the  bye-law  for enhancing the  market fees from one per cent to two per cent the High  Court found  that after  the  maximum  permissible limit of  the market  fee was  raised under S. 65 (1) by the Amendment Act  17 of  1980 from one per cent to two per cent from  19.1.1980   the   Chief   Marketing   Officer   issued instructions to the market committees for amending          (1) [1973] 3 S.C.R. 1217. 183 the bye-laws  in order  to raise the market fee from one per cent to  two per  cent and  he  subseqently  sanctioned  the enhancement after A the bye-laws were accordingly amended by the market committees.      The learned  counsel for  the petitioners  invited  the attention  of  the  High  Court  to  the  following  passage occurring at  page 952  of volume  24 of  Halsbury’s Laws of England, Third Edition: B           "The bye-law  to  be  valid  must  be  reasonable.      Unless it  is manifestly unjust, capricious, or partial      in the  operation or  involves  oppressive,  gratuitous      inferences with  the rights  of those subject to it the      question of  its reasonableness is one to be decided by      the authority making it."      It was  contended before  the High  Court that the very process by  which the amendment to the bye-law for enhancing the market fee from one per cent to two per cent was made is without any application of the mind of the market committees to the relevant criteria and it should, therefore, be struck down on  that ground. It was contended that the amendment of S.  65   (2)  providing   for  enhancement  of  the  maximum permissible limit of the market fee from one per cent to two per cent became effective from 30.6.1979 and that the Market Committees lost  no time  in mechanically raising the market fee  from   one  per  cent  to  two  per  cent  without  any application  of  the  mind  to  the  question  whether  such enhancement was  justified having  regard to  the  financial

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resources available  and the  funds  required  to  meet  the outlay on  the services  proposed to be provided in the near future  and  without  preparing  any  budget  estimates  and balance sheet  and considering them before deciding upon the quantum of  enhancement and without giving an opportunity of being heard  about the  matter to the affected interests. On the other  hand, for  the Market Committees it was contended that the  right to  be heard was a creature of S. 148 (1) of the Act  and not  in recognition  of  or  corollary  to  any obligation which  could be said to be inherent in or implied from S.  65 (2)  and that  what was given by the Statute was taken away by the Stature and the Court not go against it.      It was  also contended  for the writ petitioners before the High Court that in S. 148 as it originally stood then it was provided  that subject  to the provisions of the Act and the Rules  made under  S. 146 and with the previous sanction of the Chief Marketing Officer a 184 Market Committee  may, after  previous  publication  in  the prescribed A manner, make bye-laws for the regulation of the business and  the conditions  of trading  in the market area and that  every bye-law  made under  that section  shall  be published in the prescribed manner. The question of increase in the  rate of the market fee would perhaps fall under item XXXIII of S. 148 (2) which reads as:           "Any other  matter in respect of which by-laws are      required to be made or may be made under the Act." It was  submitted before  the High  Court that  there was no compliance with  the requirement  of previous  sanction  add previous publication  in the  prescribed manner in regard to the amendment  of the  bye-law for  enhancing  the  rate  of market fee leviable under s. 65 (2) from one per cent to two per cent.  The High  Court has  observed that  there was  no answer to  that criticism  in regard  to the validity of the amendment to the bye-law for raising the market fee from one per cent  to two per cent and therefore the State Government promulgated Ordinance  22 of  1981 when arguments before the High Court  were coming  to a  close amending S. 148 as also ss. 134 and 158 of the act. The amendment introduced by that Ordinance omitted  the words  "after previous publication in the prescribed  manner" which  occurred in  S.148 of the Act with retrospective  effect from  the date of commencement of the Act.  Sec. 3  of  the  amending  Ordinance  22  of  1981 validated the  bye-law notwithstanding  the  fact  that  the affected interest  were not  heard in  any manner.  The High Court  has  observed  that  this  amendment  took  away  the obligation of prior hearing of the affected interests on the ground that  the persons  affected have no right to be heard before statutory rules or bye-laws are made unless the right is conferred  by the  Statute and  that the  right has  been taken away  by ss.  3 and  5 of the amending Ordinance 22 of 1981. The  High Court  found that  in this  case  the  Chief marketing Officer  himself  has  issued  directions  to  the market Committees  to amend  the bye-laws  for enhancing the market fee  from one  per cent  to two per cent and the bye- laws were  accordingly amended  by the market committees and the Chief  Marketing Officer  thereafter accorded  sanction. The High  Court has  held that the Chief marketing Officer’s direction can  be regarded  as  his  previous  sanction  for amending the bye-laws. 185      However, the learned Judges themselves do not appear to have been quite happy about what had happened, for they have observed A para 61 of their judgment thus:                "The  question might,  however, become a live

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    issue if  the Market  Committees were to amend the bye-      laws made  under s.  65(2) of the Act in future without      such an opportunity of hearing effected interests."      Even the  learned Advocate  General appearing  for  the State and  the learned  Counsel  appearing  for  the  market Committees stated before the High Court, though according to them no  obligation of  hearing the  affected interests  was implicit in  s. 65(2),  that it would be eminently desirable that the  Market Committees  adopt some reasonable procedure in that  behalf and that the amendment to s. 148 made by the Ordinance was only intended to cure the defect in making the impugned bye-laws and avoid great public inconvenience which may result  from the  invalidation of  the bye-laws and that there was  no intention  to make  the deletion  a  permanent feature. They  submitted that any reasonable procedure which may be  suggested by  the High  Court would  be  adopted  in practice even if there was no such legal compulsion. In view of that  request by the learned Advocate General and learned Counsel for the Market Committee the High Court has observed in its judgment thus:             "It appears to us that before a Market Committee      proposes to  amend a bye-law to make an upward revision      of the  rate of  fee, in  future, the Market Committees      must, first  follow the directions of the Supreme Court      at para  55 in  KEWAL KRISHAN  PURI’S case  (supra). It      would also  be proper  for the  Market   to  prepare  a      statement containing the particulars of the development      works and services intended to be undertaken out of the      market  fee  receipts  together  with  cost-projections      thereof,  also   setting  out   the  likely  period  of      execution.  The  plans  and  estimates  for  all  civil      engineering works  should be prepared and sanctioned as      prescribed in Rules 70 and 71 of the Rules framed under      the Act.  Then the  Market Committees should notify the      proposals calling  for objections  and suggestions from      the affected interests with in a stipulated period, not      being  less  then  one  month.  The  mode  of  inviting      objections and suggestions may be, 186      in addition  to the  publication on the Notice Board of      the  A   Market  Committee’s   Office,  by  appropriate      publication in  a daily  news-paper, having circulation      in the area. Those who wish to file objections or offer      suggestions shall  be entitled  to  inspection  of  the      statements containing  the estimates,  costs and  other      financial projections. The Market-Committees shall take      into consideration  the objections  and suggestions  so      offered and  here the interest affected before amending      the bye-laws  revising the  fee. This appears to be the      minimal requirement  of  a  hearing  of  the  interests      affected. The Market-Committees shall, of course, be at      liberty to  adopt a  more comprehensive  procedure. The      C.M.O.  should   also  look  into  the  objections  and      suggestions before  according his sanction. All that we      need say  at this  stage is  that following  of such  a      procedure would  help the  market committees  to render      better and  efficient service,  and the bye-laws framed      after  following  such  a  procedure  would  be  beyond      reproach on  procedural grounds, obviating needless and      avoidable litigation."      Point No.  12 framed  in para  7 of the judgment of the High Court  relates to  the question  of  justification  for enhancement of  the market fee payable under s. 65(2) of the Act from one per cent to two per cent and roads thus:             "Whether the enhancement of market fees leviable

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    under s.  65(2) of the Act from one per cent to two per      cent brought  about by amendment of the bye-laws of the      Market Committees in unsupportable in law and fails for      want of correlation with the value of services rendered      to the payers of the fees." The High Court has observed:           "In 1974  when the  levy had come to be challenged      in  Vaman   Rao’s  case,  (supra)  the  several  market      committees had  filed financial  projections for  a I S      year period  ll from  1974-75  to  show  the  estimated      income and  expenditure. Just  about that  time all the      market committees  had occasion  to prepare and furnish      similar financial  proposals  to  the  Chief  Marketing      Officer in connection 187      with certain  proposals for development with the aid of      a loan from the World Bank. As learned counsel wanted A      the Court to examine these proposals also having regard      to the  principles and  guide lines  laid down  by  the      Supreme Court  in Kewa1 Krishan Puri’s case (supra). we      directed by  over order  dated  30.11.1981,  the  Chief      Marketing  Officer   to  furnish  in  respect  of  each      respondent Market  Committee, a comprehensive statement      in a  tabular from,  setting out  the following amongst      other particulars:      1.   The year of establishment of the Market-Committee.      2.   Amount actually spent for capital or developmental           works from the beginning till 30.6:1974.      3.   The particulars  (in metric  tonnes) of  the total           annual  arrivals   of  all  notified  agricultural           commodities for  the three  years 1978-79, 1979-80           and 1980-81.      4.   Average daily  arrivals (in metric tonnes) for the           years 1978-79, 1979-80 and 1980-81.      5.   Total amount of market-fee collected for the years           1978-79, 1979-80 and 1980-81.      6.   Revenue expenditure  incurred for  the years 1978-           79, 1979-80 and 1980-81.      7.   Cash on hand or in banks or in the form of invest-           ment as on 1-7-1981.      8.   Items of  developmental works originally envisaged           (for a  period of 15 years during  174-75 to 1988-           89)  together   with  item-vise   estimated   cost           thereof;  revised  estimates,  if  any,  itemwise;           progress inexecution in terms of financial outlays           of work,  itemwise in  respect of  each item up to           1.7.1981; balance  remaining to  be  executed  (in           terms of money) with break up for the future years           upto 1988-89  if  the  work  to  be  completed  in           instalments  in   future;  any   deletion  of   or           alteration in  the items of work envisaged in 1974           75; and  any other  additional developmental works           proposed after 1974-75." 188           In response  to this  order, the  Chief  Marketing      Officer  has filed the statements which are at Exhibits      R-l to  R-111, In  addition, several of the respondent-      Market Committee have filed statements which though not      in the same form also contain similar information."      The petitioners  before the  High Court  made  fourfold submissions regarding those statements. they are:      (1) Exs. R-1 to R-l 11 are totally at variance with the corresponding estimates  furnished for  the same  period  in 1974-75 and  they have been prepared only in order to supply an artificial  quid pro  quo for enhancement of the levy and

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are merely  show-pieces on  paper to  get over  the  present challenge;      (2) the  vagaries and  disparities in the proportion of the pro  posed development of market yard to market yard are so glaring  that no  authority in  the position of the Chief Marketing  Officer   would  reasonably  approve  such  unco- ordinated and  disproportionate development of the regulated markets;      (3) many  of  the  items  of  works  envisaged  in  the development such as constructions of shops, godowns and like are unrelated  to the  concept of  special  service  to  the buyers and cannot be reckoned as qualifying for correlation. If these impermissible items are deleted from the estimates, the  Market  Committees  would  not  be  in  a  position  to establish the requisite quid pro quo; and      (4)  a  substantial  part  of  the  proposed  financial outlays relates to what are called rural markets the outlays on which  could not  be reckoned  as for  rendering  special service to the buyers.      After considering  the above proposals and estimate and the arguments advanced at length about them and after taking into consideration  the proceedings  of the National Seminar on Rural  Markets  Development  held  in  New  Delhi  during December 1979  in which  it is  stated that in Karnataka the Panchayats manage  the rural markets as agents of the Market Committees and  75 per  cent of the revenues is given to the Panchayats for managing the markets and the remaining 25 per cent is  taken by  the Market Committees, the High Court has held that  the outlays on the establishment of rural markets cannot be  held to  be  impermissible  for  the  purpose  of reckoning correlation. 189 The High Court has observed:             "Indeed, in the proposals for the development of      the Market-Committees,  it is  legitimate to  expect  a      scientific consistency  and  adherence  to  some  broad      norms  of   development.  Under  the  ’Act’  the  Chief      Marketing Officer  is required  to sanction the budgets      of these Market Committees. Any project for development      must take  into account,  and be reasonably related to,      factors such  as the  quantum of  notified agricultural      produce handled  annually at  the markets; the increase      thereof expected  in the  reasonable near  future;  the      market-fee and other annual incomes; the potentialities      for expansion  and the  like. Any  proposals for growth      and development  are to be scientific, they ought to be      sensible. In  quite a few cases they prima facie appear      to be  neither. There  ought  to  be  some  broad-norms      reconciling the  actualities and  potentialities of the      markets  on   the  one   -hand  and  the  ambitions  of      development of  the Market Committees and the financial      outlays proposed  thereon on  the other.  The criticism      that  the   proposals  for   development  disclose   no      uniformity or consistency with any norms cannot be said      to be  without justification.  In several cases markets      with decidedly lesser potentialiaties for expansion and      handling lesser  quantum than  other markets propose to      spend sums  on  development  which  are  several  times      higher than those proposed by those other markets.                It  is no  doubt true that uniform standards,      though desirable, may not be practical in all cases and      the requirement  of a  market which  handles,  say  ten      thousand tonnes  of cotton every year might differ very      widely from those of a market which may handle the same      tonnage of  some other notified produce which though in

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    terms of  weight may  be equivalent  but  in  terms  of      volume be  very  much  lesser.  A  market  which  deals      prodominantly with  some seasonal  commodities may have      its own  special problems and requirements. But in some      cases before  us even  where there  are similarities in      the nature  of the  produce and in other circumstances,      the  ambitions   for  development   are  irreconcilably      disparate. Even  amongst markets  which  are  similarly      situate from the point of view 190      of the  market fee income, quantum of produce handled A      and transacted; potentialities for expansion and levels      of development XX already reached, the proposals reveal      a wide divergence. There is admittedly no uniformity or      standardisation of  norms for  growth even  broadly and      each Market-Committee  has  its  own  plans  of  growth      adhoc.           Indeed  the   Indian  Standards   Institution  has      standardised   the   pattern   of   regulated   markets      classifying them  into ’A’,  ’B’,  ’C’,  ’D’,  and  ’E’      classes  based   on  the   quantum  of   the   notified      agricultural  produce  handled  therein  annually.  The      assessment of  the marketing projects in Karnataka made      by  experts   of   the   Inter   national   Development      Association in  connection with  the World Bank aid for      development of  the markets  has classified  and graded      the markets  based on  certain  well  accepted  common-      criteria. The  cost-projections for  various classes of      markets are  also made  therein. The  present proposals      have obviously  not kept  any  of  them  in  view.  One      explanation was  that the whole concept of marketing is      expanding  and   these  precipitious   7  are  not  now      apposite. However, the wide divergence in the plans for      development lends some credence to the criticism of the      petitioners that the estimates were not taken seriously      even by the Market-Committees or the C.M.O.     .....       ........         ...........   ............     .....       ........         ...........   ............           But apart  from such  basic infrastructures  which      stand  on   a  different   footing,  the   benefit   of      utilitarian projects  relatable to  and developed  from      fee resources  must be  available to  the payers of the      fee for  at least  a considerable  part of  the  period      covered by the financial estimates and projections. The      logic of  some of the Market-Committees in this behalf,      if pushed  to its  logical  or  illogical  conclusions,      would mean  that the  present generation  of fee-payers      would pay for services which would only be available to      the next-generation.  In our opinion levy of fee cannot      be justified on such wholly prospective services " 191      After considering  in some  detail  the  proposals  and estimates on  the  assumption  that  they  are  correct  the learned Judges of the High A Court have observed:           "The upshot of the above discussion is that though      we are unable to hold, on the material placed before us      by the  petitioners, that  the levy  ought to  fail for      want of  quid pro  quo however,  having regard  to  the      infirmities noticed  in the estimates and the financial      projections of  the proposed developmental works on the      basis  of   which  the  enhancement  is  sought  to  be      justified,  we   are  also   unable  to  say  with  any      confidence   and    without   reservations   that   the      enhancement of  fee, depending  as  it  does  on  those      estimates  is   totally  justified.   Some   time-bound

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    directions to  which we  will refere  presently  for  a      second  look   at  the   estimates  by   the  statutory      authorities are required to be issued in this behalf.           Indeed, having  regard to  the wide  range of  the      apparently   inexplicable    disproportions   in    the      developmental projects of the various Market-Committees      both  the  learned  Advocate-General  and  the  Learned      counsel for  the Market-Committees,  stated that  there      was obvious scope-in our opinion an imperative need-for      some rationalisation  of the  pattern of development of      market-yards based  upon and  related to  the  relevant      factors such  as quantum  and  nature  of  agricultural      produced handled  by  the  markets;  potentialities  of      development of the market in reasonably near future and      the like.  It is  neither possible nor advisable to lay      down exhaustively  all the  criteria  that  may  become      relevant to  the task.  However, the  need for  such an      exercise to  regulate the  development to these market-      yards on  a scientific,  rational and uniform basis was      accepted by all the parties."           A time-bound schedule has to be prescribed for the      Chief Marketing  Officer, as  the authority  under  the      ’Act’, approving the budgets, to evolve and standardise      broad  and  general  norms,  taking  into  account  the      observations made in the course of this order, both for      infra-structural and  developmental works and services,      on as  uniform a  basis as  may reasonably be feasible,      for  the   various   markets   depending   upon   their      classification to be made 192      by the  C.M.O on the basis of such criteria as he A may      deem relevant  and also  to evolve  corresponding  cost      patterns of  the projects with suitable unbuilt indicia      for escalation  of cost-structures,  from time to time,      proportional to  the rise  in the  price  of  material.      These norms  shall operate  as broad and general guide-      lines for  the development  of  regulated  markets  and      shall be  kept in  view  of  the  market-committees  in      planning developmental  projects. Departure  from these      norms and standards shall, of course, be permissible on      grounds of special requirements of individual regulated      markets  depending   upon  their   specific  individual      problems and  requirements. At  the time of sanction of      the budgets  of the Market Committees the C.M.O. should      scrutinise the  budgets with  reference to and applying      the broad-norms and criteria evolved and adopted by him      so that  the programme  and the projects of development      for the  next 8  years are need based and are as far as      may be on a uniform and rational basis.           The  learned   Advocate-General  and  the  learned      counsel for  the Market-Committees  concede  that  this      exercise is  necessary and  beneficial  as  indeed  the      matter involved  an outlay  of  nearly  145  crores  of      rupees in the next 8 years on the regulated markets.           Accordingly, the C.M.O. shall within 4 months from      now   evolve    and   standardise   these   norms   and      specifications and  circulate the  same to  the Market-      Committees. Respondent  Market-Committees in categories      ’C’, ’D’ and ’E’ in Para-80 supra will, within 3 months      there from,  revise their  proposals for development in      accordance  with   these  norms   and   specifications,      departures   from    standard    specification    being      permissible if  the special  conditions peculiar to the      particular markets  so require  and compel.  The C.M.O.      will again scrutinise these revised proposals and their

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    cost projections  and if,  upon such  scrutiny,  is  of      opinion that  the present  2% market-fee  of any Market      Committee in  the category  ’C’, ’D’  and ’E’  supra is      unjustified, the  C.M.O. will  make appropriate  orders      under S.  150 of the Act directing the Market-Committee      or Committees concerned to amend their bye-laws to 193      effect an  appropriate downward revision in the quantum      of the  fee. Wherever  the C.M.O.  is of  the  opinion,      after A  an examination of the proposals, that there is      no need  to make  a downward  revision, he shall make a      specific note in the behalf. These orders shall be made      within a period of 8 months from now."      This is the gist of the discussion of learned Judges of the High Court in regard to the above point No. 12 framed by them on  the question whether enhancement of the market fees leviable under.  S. 65  (2) of  the Act from one per cent to two per  cent brought about by the amendment of the bye-laws of the  Market Committees  is unsupportable in law and fails for want  of correlation with the value of services rendered to the  payers of the fee. The learned Judges have stated at the end  of the  point in  para 7 of their judgment that the discussion relating  to the  point is in paras 75 to 110 and that the  finding is  in para  111. Para 111 extracted above consists only  of the  direction given by the learned Judges of the  High Court  to  the  Chief  Marketing  Officer.  The learned Judges  have not  expressed their opinion one way or the other  in para  111 as regards the justification for the enhancement of  the market  fees leviable  on  buyers  under section 65  (2) of the Act from one per cent to two per cent by amendment of the bye-laws though earlier in para 107 they have observed that they           "are unable to hold, on the material placed before      us by  the petitioners  that the levy ought to fail for      want of  quid pro  quo; however,  having regard  to the      infirmities noticed  in  the  estimates  and  financial      projections of  the proposed developmental works on the      basis  of   which  the  enhancement  is  sought  to  be      justified,  we   are  also   unable  to  say  with  any      confidence   and    without   reservations   that   the      enhancement of  the fee,  depending as it does on those      estimate  is   totally  justified.   Some  time   bound      directions to  which we  will refer  presently,  for  a      second  look   at  the   estimates  of   the  statutory      authorities are required in this behalf." and they have given the same in para 109 of their judgment.      Dealing with  the provisions  of the Cardamom Act, 1965 and the  rules made  thereunder, in  paras 34  to 38  of the judgment the 194 High Court bas held that the provisions of the Act in so far as A  marketing of  cardamom is  concerned, are repugnant to the provisions of the Cardamom Act (Central Act 42 of 1965). But in  paras 41  and 42  the High  Court has  held that the Tobacco Board  Act, 1975 makes provision only in relation to Virginia tobacco  and not  all varieties  of tobacco and the Act is  not repugnant to the provisions of the Tobacco Board Act and all that is necessary is for the Market Committee to obtain auctioneer’s  licence under  the  provisions  of  the Tobacco Board  Act. Proceeding on the basis that the Tobacco Board Act  is in  relation only  to Virginia tobacco and not all varieties  of tobacco  the High  Court has observed that any  intention   of  the   "Superior  Legislature"  (meaning Parliament)  to   cover  the   whole  field   and   make   a comprehensive law  in regard  to marketing of tobacco is not

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manifest  in   the  Central   enactment  and  that  the  two legislations can co-exist and operate cumulatively.      I have  set out  above the  gist of  the  High  Court’s decisions on the points regarding which alone arguments were advanced before  this Court  in the  Writ  Petitions,  Civil Appeals and Special Leave Petitions. They are:           (1) That the provisions of S. 65 (1) of the Act ar      substituted by  the Amendment  Act 17  of 1980 and also      the validating S. 42 of that Amendment Act in so far as      it seeks  to validate the levy of market fee on sellers      of notified agricultural produce during the period from      19.5.1975 to 28.9.1978 are unconstitutional and void;           (2) That  the Chief Marketing Officer shall within      four months  from the  date of  the judgment evolve and      standardise the  norms and specifications and circulate      the same to the Market Committees is direction given by      the High  Court. This  was done by the High Court as it      was conceded  by the learned Advocate General appearing      for the  Market Committees  that the exercise suggested      by the  High Court  in para  109  of  the  judgment  is      ’necessary and  beneficial as  indeed that  the  matter      involved an  outlay of  nearly 145  crores of rupees in      the next 8 years on the regulated markets";           (3) That  the provisions  of the Act are repugnant      to the Cardamom Act, 1965 and the Rules framed there. 195      under but  not the provisions of the Tobacco Board Act,      1975; and           (4) That  a writ  of mandamus  be issued to direct      the State  Government  and  the  Market  Committees  to      refund to  the Writ  petitioners who had approached the      High Court and had the benefit of the issuance of writs      of mandamus  for the refund of the sellers’ market fees      actually paid  under S.  65  (1)  in  cases  where  the      mandamus issued  had not  been  complied  with  by  the      respondents in  the writ  petitioners in  view  of  the      validating  provision   contained  in   S.  42  of  the      Amendment Act  17 of  1980  on  such  writ  petitioners      filing  their  claims  in  writing  before  the  Market      Committees concerned,  and in  the second  category  of      cases where the writ petitioners had not approached the      High Court  earlier their  claims  for  refund  of  the      market fee paid by them as sellers shall be confined to      the market fees paid under S. 65 (1) within a period of      3 years  immediately preceding  the presentation of the      writ petitions,  and the  same procedure as in the case      of  the  other  class  of  writ  petitioners  shall  be      followed.      Mr.  Soli   J.  Sorabjee  appearing  for  most  of  the appellants and  the petitioners  in the  writ petitions  and special leave  petitions (namely traders) advanced arguments on all  the above  points. Mr. S.N. Kackar appearing for the appellants in  Civil Appeals  Nos.  1247  to  1474  of  1983 adopted the  arguments of  Mr. Sorabjee  and supplemented it with his  own. Mr.  Bhatt appearing  for the  State advanced arguments in  the State’s  appeals filed.  against the  High Court’s decision  invalidating S.  65 (1)  as substituted by the Amendment  Act 17  of  1980  and  also  S.  42  of  that Amendment Act and the direction for the refund of the market fees collected  under s.  65  (1)  as  substituted  by  that Amendment Act.  Mr..  A.K.  Sen  appearing  for  the  Market Committees  advanced   arguments  on  the  validity  of  the amendment of the bye-laws made for enhancement of the market fees on  buyers leviable  under s.  65 (2) of the Act, while Mr. S.T.  Desai, Dr.  Y S.  Chitale and late Mr. P.R. Mridul

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appearing  for  the  Market  Committees  advanced  arguments supporting the  High Court’s judgment that the provisions of the Act are not repugnant to those of the Tobacco Board Act, 1975. 196      The submissions of Mr. Sorabjee in short are these:      The item  of expenses envisaged for the rural roads has gone with  the striking down of s. 65 (1) and (3) of the Act and the  omission of clause (3) of s. 65 from the Act by the Amendment Act  17 of  1980 from the date of its commencement as if  it never  existed on  the statute  book.  The  amount collected under  that sub-section  will  take  care  of  the proposed  expenditure   envisaged  in   the  estimates   and projections for  the improvement  of  the  services  in  the regulated markets  and  therefore  the  enhancement  of  the market fee  from one  per cent  two per cent of the price of the specified agricultural produce is invalid. The reduction of the  enhanced levy  from two  per cent to one per cent by the  Circular  No.  SMD-268/RGN-83  dated  27.2.1984  issued pursuant to  the State  Government’s decision shows that the State Government  and  the  Market  Committees  prefer  this course to  the exercise  suggested by  the High  Court to be completed within  eight moths of the judgment and that there was no  justification for  the enhancement of the market fee from one  per cent  to two per cent by amendment of the bye- law relating  to the  levy of  market fee under s. 65 (2) of the Act. The amendment of the bye-laws was not in accordance with the procedure laid down by s. 148 of the Act for making bye-laws  and   amendments  thereto  for  want  of  previous approval  of   the  Chief  Marketing  Officer  and  previous publication of  the proposed  amendment and  hearing of  the affect interests, and ss. 3, 5 (a) and 5 (b) of Ordinance 22 of 1981  promulgated when  the hearing of the Writ Petitions in the High Court was in progress would not cure the defect- In the  course of the arguments before the High Court it was specifically conceded  that there was no compliance with the requirement of s. 148 in making the amendment of the bye-law for enhancement  of the  market fee from one per cent to two per cent.  But on  17.12.1981 Karnataka Ordinance 22 of 1981 was promulgated, and ss. 3 and 5 (a) thereof stated:           "3. Amendment of section 148-ID section 148 of the      principal Act,  in sub-section  (1), the  words  "after      previous publication  in the  prescribed manner", shall      be and shall be deemed always to have been omitted.           5 (a)  all acts,  proceedings or  things  done  or      action taken  by the  State Government or by the Market      Committees or by any other authority in connection with      the levy  Of collection  of market  fec shall  for  all      purposes 197      be deemed  to be  and to have always been done or taken      in accordance with law" and s. 5 (b) stated that:           "no suit or other proceedings shall be instituted,      maintained or  continued in  any court  or  before  any      authority for  refund of  any such  market fee  or  for      questioning the  validity of  any action or thing taken      or done  under the  said bye-laws  and no  court  shall      recognise or  enforce any decree or order declaring the      said bye-laws  or any  action or  thing taken  or  done      thereunder as  invalid on  the ground that the bye-laws      were made  with- out  giving reasonable  opportunity to      persons likely  to be  affected thereby  to file  their      objections  and   suggestions,  or   otherwise  without      following the procedure prescribed.’’

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    Ss. 3, 5 (a) and 5 (b) have been replaced by ss. 12 and 14  of   the  Karnataka   Agricultural   Produce   Marketing (Regulation) (Amendment)  Act, 1982.  The amendment  of  the bye-law made  for enhancement of the market fee from one per cent to two per cent is not in accordance with law. The High Court has  practically held  so as  can  be  seen  from  the direction given  by it in para 61 of the judgment as to what should be  done before a market committee amends its bye-law to make  an upward revision of the rate of market fee in the light of the submission made by the learned Advocate General appearing for  the State  and the  learned Counsel appearing for  the   Market  Committees  that  it  will  be  eminently desirable that  the  Market  Committees  should  adopt  some reasonable procedure  in that  behalf and that the amendment of s.  148 (1)  of the  Act made by Ordinance 22 of 1981 was only intended  to cure  the defect  in  the  making  of  the impugned amendment  of the  bye-law to  avoid  great  public inconvenience which will result from the invalidation of the bye-law and that there was no intention to make the deletion a permanent  feature, and any reasonable procedure which may be suggested  by the High Court would be adopted in practice even if  there was  no such  legal compulsion. There were no resolutions,  estimates   or  projections   of  the   market Committees for  making improvements to the regulated markets immediately or within the near future before the bye-law was amended for  enhancing the  market fee  from one per cent to two per cent under the directions of 198 the Chief  Marketing Officer,  and Exs.  R-1 to  R-l l l and other statements  referred to  in the  High Court’s judgment were prepared  long after  the date  of filing  of the  Writ Petitions in  the  High  Court  and  only  pursuant  to  the directions given  by the  High Court  for  that  purpose  on 30.11.1981. The High Court was not satisfied even with those estimates, projections  and  statements  and  has  therefore issued the  directions contained in paras 109 and 111 of the judgment and  those directions have been given in respect of all the  Market Committees and not in respect of only 8 or 4 Market  Committees   in  categories  ’C’,  ’D’  and  ’E’  as contended by  Mr. A.K.  Sen. Enhancement  of the  market fee from one per cent to two per cent is not justified. The High Court erred  in holding  that the  Tobacco Board  Act,  1975 covers only  Virginia tobacco  and is  not repugnant  to the provisions of  the Act, ignoring the provisions of ss. 8 (2) (a), 8  (3) and 12 of the Tobacco Board Act and r. 35 of the Rules  made   under  the  provisions  of  that  Act.  Though reference is  made in  s. 8  (2) (a)  to (g)  of that Act to Virginia  tobacco  clause  (h)  relates  to  "promoting  the gradation of  tobacco at  the level  of growers", clause (1) relates  to   "sponsoring,   assisting,   co-ordinating   or encouraging scientific,  technological and economic research for the  promotion of  tobacco industry",  and s.’  (3) says that:           "without  prejudice   to  the  generality  of  the      provisions of  subjection (1)  and subject  to priority      being given  to matters  specified in  sub-section (2),      the measures  referred to  in sub-section  (1) may also      provide in  relation to  tobacco, other  than  Virginia      tobacco, for  all or  any of  the matters  specified in      clauses (c)  to (g)  of sub-section  (2) and  for  this      purpose any  reference in  those  clauses  to  Virginia      tobacco shall  be construed as including a reference to      tobacco other than Virginia tobacco". S. 12 of the Act says that:           "no person  shall export  tobacco or  any  tobacco

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    products or  function as  a packer,  auctioneer of,  or      dealer in, tobacco unless he registers himself with the      Board in  accordance with  the rules  made  under  this      Act." R.  35   of  the   Tobacco  Board  Rules,  1976  relates  to registration as  exporter or  packer or  auctioneer  of,  or dealer in tobacco. 199      Clauses (c) to (g) of s. 8 (2) read thus:           "(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 plat      forms,  with  the  previous  approval  of  the  Central      Government,  for   the  sale  of  Virginia  tobacco  by      registered growers  or curers,  and functioning  of the      Board as an auctioneer at auction platforms established      by or  registered with it subject to such conditions as      may be specified by the Central Government;           (d) recommending to Central Government the minimum      prices which  may be  fixed far  purposes  of  Virginia      tobacco with  a view  to avoiding unhealthy competition      amongst the exporters;           (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 the nation;           (f) propagating information useful to the growers,      dealers and  exporters (including  packers) of Virginia      tobacco and  manufacturers of Virginia tobacco products      and others concerned with Virginia tobacco and products      thereof, and           (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";      These clauses (c) to (g) would apply to tobacco also in view of s. g (3) of the Tobacco Board Act.      Mr. Kacker  adopted the  arguments of  Mr. Sorabjee and supplemented it with his own. His submissions are these: 200      Before sub-section  (3) of  s. 65  was struck  down  in Rajasekhariah’s case  (supra) on 28.9.1978 several crores of rupees bad  been collected  under s.  65 (1)  from 19.5.1975 when it was amended by Amendment Act 24 of 1975 to 28.9.1978 and that amount must be sufficient to meet the estimates and projections  envisaged  in  Exs.  R-l  to  R-111  and  other statements prepared  and produced  by the  Market Committees pursuant to the High Court’s directions issued on 30.11.1981 having regard to the fact that subsection (3) of s. 65 under which that  amount had  to be  credited  to  the  Roads  and Buildings Fund  has been struck down in Rajasekhariah’s case (supra) and  that sub-section  has been omitted from the Act as if  it never  existed in  it. The  Market Committees  had surplus fund  with them  in 1979  and they bad no scheme for effecting improvements  to the  regulated markets  then they enhanced the  market fee  from one  per cent to two per cent under sub-section  (2) of  s. 65  of the Act by amending the bye-law except  the statements  produced in Vaman Rao’s case (supra) in  1974. The statements Exs. R-1 to R-111 and other statements produced  in the High Court were not in existence

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when the  Writ Petitions  were presented  in the High Court. The market  fee has  been since reduced to one per cent with effect from  1.4 1984.  The High Court should not have given an opportunity  to the  Market Committees  to  fill  up  the lacuna by  preparing and  producing Exs.  R- I to R- 111 and the other  statements when  the Writ  Petitions  were  being heard in the High Court.      On the other hand, Mr. A.K. Sen submitted his arguments which may be summarised thus:      As many as 4298 Writ Petitions were filed in respect of 93 Market  Committees. Clear quid pro quo was established in respect of  73 Market  Committees falling in categories ’A’, ’B’, ’C’  and ’D’ for enhancement of the market fee from one per cent  to two  per cent and no further enquiry was needed on the  principles laid  down in  Kewal Krishan  Puri’s case (supra). The  High Court  found that  reconsideration of the financial projections by the Market Committees was necessary only  in  regard  to  8  out  of  the  remaining  20  Market Committees, and it was entitled to give the directions which had been  given to the Chief Marketing Officer to re-examine them. There is no repugnancy between the Act and the Tobacco Board Act, 1975.      Mr. Bhatt  submitted that  after s.  65  (3)  has  been omitted from  the Act as if it never existed in it there was no question of striking 201 down s.  65 (1)  as substituted  by the  Amendment Art 17 of 1980, that  s. 42  of that  Amendment Act  has validated the levy and  there is no A question of the refund of the market fee collected under s. 65 (1) as the fee collected under the Act has to be used for the purposes envisaged by the Act and than in  any event  the refund  could be  only to the Market Committees and not to the traders.      It is not necessary for me to refer to the arguments of Mr. S.T.  Desai, Dr.  Y.S. Chitale  and late Mr. P.R. Mridul regarding the  question of  repugnancy of  the provisions of the Act  with those  of the  Tobacco Board  Act, 1975  as my learned brother  Murtaza Fazal  Ali, J.  has dealt with that question in  his judgment  and I  agree  with  him  in  that regard. I  wish to  add that  the learned Judges of the High Court have disposed of this matter of repugnancy between the Act and  the Tobacco  Board Act,  1975 in two short paras 41 and 42  without much  of a  discussion under the belief that the Tobacco  Board Act,  1975 concerns only Virginia tobacco and not  other varieties  of tobacco.  They have  held after some discussion  in paras  34 and  38 of their judgment that the Act  is repugnant  to the  Cardamom Act  which is almost similar to the Tobacco Board Act in its scope and operation. The consequence  is that cardamom has to be taken out of the schedule to  the Act.  No appeal has been filed against that part of  the High  Court’s  judgment.  The  Act  relates  to markets falling  under entry  28 of  List  II  (markets  and fairs) while  the Tobacco  Board Act falls under entry 52 of List  I   (industries)  of   the  Seventh  Schedule  to  the Constitution. Industries  would certainly  include marketing of the products. The Act would therefore be repugnant to the Tobacco  Board   Act  in   view  of  Art.  254  (1)  of  the Constitution. The  attention of  the learned Judges does not appear to  have been  focussed on  s. 8 (3) and s. 12 of the Tobacco Board  Act extracted  above and  r. 35  of the Rules framed under  that Act,  a perusal  of which would show that the Tobacco  Board Act  covers tobacco  of all  varieties in regard  to  matters  required  to  be  done  by  the  Market Committees under  the provisions  of the Act. The High Court has thus erred in holding that the provisions of the Act are

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not repugnant  to the  Tobacco Board Act, 1975 and that they can co-exist and operate cumulatively.      In the  course of  arguments both  sides  invited  this Court’s attention  to a  number of  decisions- I think it is sufficient if  reference is  made to  only five  of them and also to  the decision  of this  Court in  Civil Appeals Nos. 4500-4501 of 1984 (M/s. Amarnath Om Prakash 202 & Others v. State of Punjab and Food Corporation of India v. State of  A Punjab)  disposed of on 19.11.1984. The first of those decisions  is of Mathew, Bhagwati and Untwalia, JJ. in State of  Maharashtra &  Ors. v.  The Salvation  Army,(l) In that decision Mathew, J. speaking for the Bench observed:           "We do  not think  any such levy for investment or      diversion of  the surplus  would be consistant with the      principle behind the levy of fee. While we do not think      it necessary  that all  available surplus  in a year or      for some  years should  always go  in for  reducing the      rate of  contribution for the subsequent year or years,      we are  of the  view that  the organisation  cannot  be      allowed   to   accumulate   an   unreasonable   amount,      unreasonable in  the sense that the amount might not be      reasonably  required   for  the  proper  and  afficient      working of the organisation in a foreseeable future. No      hard and  fast rule  applicable -  in all contingencies      can be  formulated. The  Court will have to draw a line      somewhere  when   surplus  must   be  the   taken  into      consideration for reducing the levy of contribution. In      drawing the  line, the Court will have to look into the      nature of  the organisation,  the potentiality  for its      growth, the  multiplication in  its work  consequent on      its expansion  for rendering the services visualised by      the Act  and the  necessity for  capital expenditure in      the near  future, as  also the amount of levy collected      or expected  to be  collected in  a  year.  is  already      stated the  Division Bench  was of  the view  that  the      stage when  the surplus  must be  taken into account to      determine the  character of the levy was reached by the      end of  March 31,  1958 when the available surplus came      to Rs.  30, 44,  541/-. The Division Bench was alive to      the  desirability  of  locating  the  head  office  and      regional offices  in  buildings  to  be  owned  by  the      organisation and  incurring of  capital expenditure  in      that behalf.  The Charity  Organisation bas purchased a      building worth  about Rs.  30 lakhs.  Even according to      the  Division  Bench,  investment  of  the  surplus  in      buildings for  locating the  head and  regional offices      cannot be  said to  be diversion  of  the  surplus  for      purposes alien  to  the  object  of  the  organisation,      namely, the better administration of the trusts."      (1) [1975] 3 S.C.R. 475. 203      This decision  indicates what  should be  borne in mind when there is a complaint that the market fee already levied is A excessive or before any further increase in the levy is made.      The second  decision is that of a Bench of five learned Judges  of  this  Court  (Chandrachud,  C.J.  and  Bhagwati, Untwalia, Murtaza  Fazal Ali  and  Pathak,  JJ  )  in  Kewal Krishan Puri  v. State  of Punjab  (supra) where the purpose for which  Marketing Development  Fund and  Market Committee Funds levied  and collected  under the  Punjab  Agricultural Produce Markets  Act, 1961 and justification for enhancement of the  rate of  market fee  from two  per cent to three per cent came up for consideration. This appears to be a leading

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decision on  this subject.  It has been relied upon not only by Mr.  Sorabjee and  Mr. Kacker but also by Mr A.K. Sen. In that case,  Untwalia, J.  speaking for  the  Bench  observed thus:           "Such a  fee cannot be utilised for the purpose of      rendering all  sorts of facilities and services for the      benefit of  agriculturists throughout  the area. It may      be very  necessary  to  render  such  services  to  the      agriculturists; rather,  they must be rendered. But the      laudable end  in itself  cannot justify  the  means  to      achieve that  end if  the means have got no sanction of      the law .. ... ... ... ... ...           From a  conspectus of  the various  authorities of      this Court  we  deduce  the  following  principles  for      satisfying the tests for a valid levy of market fees on      the agricultural produce bought or sold by licensees in      a notified market  area:      (1)  That the  amount of fee realised 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,      (2)  That the  services rendered  to the licensees must           be in  relation to  the transaction of purchase or           sale of the agricultural produce.      (3)  That while  rendering services  in  the  marketing           area  for   the  purposes   of  facilitating   the           transactions of 204           purchase and  sale with  a  view  to  achieve  the           objects   of the  marketing legislation  it is not           necessary to  confer the  whole of  the benefit on           the licensees  but some  special benefits  must be           conferred on  them which  have a direct, close and           reasonable correlation  between the  licensees and           the transactions.      (4)  That while conferring some special benefits on the           licensees it is permissible to render such service           in the market which may be in the general interest           of all  concerned  with  the  transactions  taking           place in the market.      (5)  That spending  the amount  of market  fees for the           purpose of  augmenting the  agricultural  produce,           its facility  of  transport  in  villages  and  to           provide   other   facilities   meant   mainly   or           exclusively for  the benefit of the agriculturists           is  not   permissible  on  the  ground  that  such           services in the long run go to increase the volume           of   transactions   in   the   market   ultimately           benefiting the  traders also. Such an indirect and           remote benefit  to the  traders is  in no  sense a           special benefit to them.      (6)  That the  element of  quid  pro  quo  may  not  be           possible, or  even necessary,  to  be  established           with arithmetical  exactitude but even broadly and           reasonably  it   must  be   established   by   the           authorities who charge the fees that the amount is           being spent  for rendering  services to  those  on           whom falls the burden of the fee.      (7)  At least  a good  and substantial  portion of  the           amount collected  on account of fees, ma be in the           neighbourhood of two-thirds or three-fourths, must           shown with reasonable certainty as being spent for           rendering   services   of   the   kind   mentioned           above.................... The  benefit  of  market

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         fee, therefore,  has to  be  correlated  with  the           transactions taking  place at  the specified place           in the  market area  and not  in the  whole of the           area. 205           Supposing a market has been established consisting      of principal  market yard  or  sub-market  yards  at  a      particular place  where there  is no  facility for  the      carts or  the trucks  and other  vehicles to  go,  then      approach roads,  and if  necessary  even  culverts  and      bridges may  be constructed,  or repaired  out  of  the      Market Committee  Fund. Such  an expenditure within the      limited limit  will be  with the object of facilitating      the taking  place of  the transactions  of purchase and      sale  in  the  market  and  will  confer  some  special      benefits to  the traders  apart from  a  share  of  the      benefit going to the agriculturist who are not required      to share  the burden  of the market fee. But as we have      pointed out  above, if  one were  to give  a very  wide      meaning to  this phrase  of construction  and repair of      approach roads,  culverts and  bridges to say that such      construction can  be permitted  anywhere in  the market      area for  the  facility  of  the  agriculturists  which      ultimately will  benefit the  traders  also,  then  the      whole concept  of correlation  of fee and its character      of having  an element of quid pro quo will dwindle down      and become an empty formality.           If many  of the  purposes mentioned in the Act, as      we have  shown above,  are outside  the  ambit  of  the      service element  and  fall  within  the  realm  of  the      governmental functions, then it is plain that to say by      generalisation that  the fee money can be spent for the      purposes of objects of the Act is not quite correct.           The High Court points out that the money cannot be      spent in  construction of  governmental activities  for      providing main  roads in  the  State.  How,  then,  the      Market Committees  can be made to contribute a very big      chunk of their market fee income in the construction of      link roads  through all  villages ?  To put  the matter      logically, if  a link  road is to be constructed from a      village to  the main road for enabling an agriculturist      to trans- 206      port his  produce up  the main  road  then  the  Market      Committee should be under an obligation to construct or      at least  to maintain  the main  road also  in order to      enable that agriculturist to reach the market which may      be at  a distance of 20 miles from the link road. It is      plain that construction of such link roads is as much a      part of the R governmental activity as that of the main      roads.           The impost  must be correlated with the service to      be rendered  to the payers of the fees in the sense and      to the extent we have pointed out above. Again the High      Court fell  into  an  error  in  paragraph  15  of  the      judgment when,  while upholding  the  construction  and      repair of  approach roads,  culverts and bridges in the      larger sense of the term, it said:                ’If the  approach roads,  culverts or bridges           are in  such a  bad shape  that they  would become           hinderance in the mobility of the produce from one           part of  the notified market area to the principal           market yard, then the worst suffer or would be the           grower  for   whose  benefit   the  Act  has  been           enacted.’

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         It may  be as  was submitted  before us that it is      not imperative  either for the Market Committees or the      Board to  prepare balance-sheets because their accounts      are audited  by Government auditors but for the purpose      of raising  the market  fee any  further, the  balance-      sheet will  give a  truepicture of  the position  along      with the  budgets and  estimates. Then,  and then  only      there may be a legal justification for raising the rate      of the market fec further to a reasonable limit."      The third  decision is of Chinnappa Reddy, A.P. Sen and Baharul Islam, JJ. in Southern Pharmaceuticals and Chemicals v. State of Kerala & Ors. etc.(1) where Sen, J. speaking for the Bench has observed at page 542 thus:      (1) [1982]1 S.C.R. 519. 207           "It is also increasingly realised that the element      of quid  pro quo stricto senso is not always a sine qua      DOn of  A a  fee. It  is needless  to stress  that  the      element of  quid pro  quo is  not necessarily absent in      every tax."      It has  to be  noticed that the observation was made by the learned Judge in a case in which the appellants who were manufacturers   of   medicinal   and   toilet   preparations containing alcohol challenged the constitutional validity of certain provisions  of the  Kerala Abkari  Act, 1967. In the earlier part of the judgment Sen, J. has observed:           "The distinction between a ’tax’ and ’fee’ is well      settled. The question came up for consideration for the      first time  in this  Court in  the Commissioner, H.R.E.      Madras v.  Lakshmindra Thirtha  Swamiar of  Shirur Mutt      (1954 SCR  1005). Therein,  the Court  speaking through      Mukherjee, J.  quoted with  approval the  definition of      ’tax’ given  by Latham,  C.J. in  Matthews v.  Chickory      Marketing Board  (60 CLR 263). In that case the learned      Chief Justice observed:                ’A tax  is a  compulsory exaction of money by                public   authority    for   public   purposes                enforceable by  E law  and is not payment for                cervices rendered.’           Coming now  to fees, a fee is generally defined to      be  a   charge  for   a  special  service  rendered  to      individuals by some Governmental agency.           If, as  we hold,  a fee  is regarded  as a sort of      return or  consideration for  services rendered,  it is      absolutely necessary  that the  levy of  fees should on      the face of the legislative provision, be correlated to      the expenses  incurred by  Government in  rendering the      services."      The same  view was  taken in  Mahant Sri  Jagannath  v. State of  Orissa(1) and Rathilal Param Chand Gandhi v. State of Bombay.(2)      (1) [1954] S.C.R. 1046.      (2) 119541 S.C.C. 1055. 208 Therefore, the  aforesaid observation  of Sen, J. that it is now   increasingly realised that the element of quid pro quo stricto senso is not always a sine qua non of a fee and that it is  needless to stress that the element of quidpro quo is not necessarily absent in very tax cannot be made applicable to the  facts of  the present  cases which  relate to market fees where  the  element  of  quid  pro  quo  is  absolutely necessary.      The fourth  decision is  A.P. Sen,  Venkataramiah and R Misra, JJ,  in Sreenivosa General Traders & Ors. v. State of Andhra Pradesh(1)  where Sen,  J. speaking for the Bench has

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observed:           "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  service.  It  is  now      increasingly   realised   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..  .. ......  It is  also  increasingly      realised that the element of quid pro quo in the strict      sense is  not always  a sine  qua non  for a fee. It is      needless to  stress that the element of quid pro quo is      not necessarily absent in every tax."      The above decision arose out of proceedings taken under the Andhra  Pradesh  (Agricultural  Produce  and  Livestock) Market Act,  1966. With respect, it is not possible to agree with  the   above  observation  that  there  is  no  generic difference between  a tax  and a fee and the element of quid pro quo  in the  stricto senso  is not always a sine qua non for a  fee in  view of  my learned brother Sen’s approval in Southern Pharmaceutical and Chemical’s case (supra) of the i      (1) [1983] 3 S.C.R. 843. 209 distinction pointed  out by  Latham,  C.J.  in  Matthews  v. Chickory Marketing  Board (supra)  between a tax and fee and that it is A absolutely necessary that levy of fee should on the face  of the legislative provisions be correlated to the expenses incurred  in rendering  services  and  the  learned Judge’s observation  in that decision that the same view was reiterated by  this Court  in Mahant  Sri Jagannath  Ramanuj Das’s case  (supra),  Rathilat  Param  Chand  Gandhi’s  case (supra) and also in view of the decision of the larger Bench of five  Judges of  this Court  in Kewal Krishan Puri’s case (supra) that  quid pro  quo is  a necessary  element of  the market fee.  The fifth  decision is  of Desai  and Chinnappa Reddy, JJ.  in  Municipal  Corporation  of  Delhi  v.  Mohd. Yasin(1)  where   my  learned  brother  Chinnppa  Reddy,  J. speaking for the Bench has observed:           "Though a  fee must  have relation to the services      rendered or  the advantages  conferred,  such  relation      need not  be direct, a mere casual relation is enough."      D      That was  a case  where the Delhi Municipal Corporation purported to enhance the fee for slaughtering animals in the slaughter houses  from 25  paise to  one rupee per animal in the case  of sheep,  goats and  pigs and  from one  rupee to eight rupees  per animal  in the  case  of  buffaloes.  With respect, it  is not  possible to  accept  this  view  having regard to  the decision  of a  large Bench  of this Court in Kewal Krishan  Puri’s case  (supra) which  is relied upon by both sides in these cases as stated above.      (1) [1983] 3 S.C.R. 229, 210 observation. In  Kewal Krishan Puri’s case (supra) while the construction of  link roads has been welcomed by the learned Judges, it has been observed:

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         "Uplift of villages and helping the agriculturists      by all  means is  the duty  and the  obligation of  the      State no  doubt and  it  has  to  do  it  by  incurring      expenses out  of the public exchequer consisting of the      income from various kinds of taxes etc." Referring to  the observations of A.P. Sen. J. in Sreenivasa General Traders’s  case  (supra)  Chinnappa  Reddy,  J.  has observed in his judgment thus:           "He  also   draw  attention   to  the   increasing      realisation that  the element  of quid  pro quo  in the      strict sense was not always a sine que non for fee. Nor      was the  element of  quid pro quo necessarily absent in      every tax.  He further  pointed out  that an insistence      upon a  good  and  substantial  portion  of  an  amount      collected on  account of  fee, say in the neighbourhood      of  two-thirds   or  three-fourths,  being  shown  with      reasonable certainty as having been spent for rendering      services in  the market  to the  payer of the fee could      not be a rule of universal application, and that it was      a rule  which had  necessarily to  be confined  to  the      special facts  of Kewal  Krishan Puri’  s case (supra).      Other wise,  it would affect. the validity of marketing      legislations undertaken  throughout the  country during      the past half a century. We agree with the view of Sen,      J. that  the observations  extracted by  him from Kewal      Krishan Puri’s  case were not really necessary for that      case and  we also  agree with  the clarification of the      observation made by Sen, J.      With respect,  I am  not able  to see  how an  why  the observations made  in Kewal Krishan Puri’s case (supra) have to be  confined to  the special  facts of  that case.  Kewal Krishan Puri’s case arose out of proceedings taken under the Punjab Agricultural  Produce Markets  Act, 1961  which is an Act for the better regulation of the purchase, sale, storage and  processing   of  agricultural   produce  and   for  the establishment of  markets for  agricultural produce  in that State. The objects of that Act and the Act with which we are 211 concerned in  these cases  are almost  the same. The maximum rate of  market fee  which could  be levied  by the  various market committees  under s.  23 of  the Punjab Act was fifty paise for every hundred rupees. The fee was raised from time to time.  A number  of writ petitions were filed in the High Court challenging  the power  of the  Board to  increase the levy. That is what has happened in these cases arising under the Act  which relates  to  Karnataka  State.  The  question whether quid  pro quo  was necessary  and to what extent and what should  be done by the Market Committees before the fee could be  raised fell  for considration  in that  case as in these cases.  In Sreenivash   General  Traders’ case (supra) which arose  under the  Andhra Pradesh (Agricultural Produce and Livestock) Markets Act, 1966 the market fee which was 25 paise per  hundred rupees  was C  raised to 50 paise in 1972 and eventually  to one  rupee for  every hundred rupees. The contention was  that increase  in the rate of market from 50 paise to  one rupee was illegal on the ground that there was no  correlation   between  the  increase  and  the  services rendered. That  is exactly  the position in the present case where the  increase was from one per cent to two per cent of the price  paid by  the buyers. Therefore, with respect I an unable to  see how  and why  what l-as been decided in Kewal Krishan Puri’s  case (supra) should he confined to the facts of that  case alone.  Again with  respect, I consider myself bound by  the decision in Kewal Krishan Puri’s case and that even the  Bench of  which I am one of three is bound by that

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decision  having   regard  to   the   principles   governing precedents and the necessity to avoid confusion in the minds of the  High Courts  and Subordinate  Courts as  regards the correct view  to be  followed by them. Fortunately, in these cases, as  stated above, both sides relied upon the decision in Kewal  Krishan Puri’s  case (supra) which inter alia laid down of following principles:      1.   That the  amount of fee realised 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;      2.   That the  element of  quid  pro  quo  may  not  be      possible or  even  necessary  to  be  established  with      arithmetical exactitude;      3.   That at  least a  good and  substantial portion of      the amount  collected on account of fees, may be in the      neighbourhood of two-thirds or three-fourths, must 212      be shown  with reasonable certainty as being spent  for      rendering  services   of  the  kind  mentioned  in  the      judgment; and      4.   That if  the market  fee is  sought to  be  raised      proper budgets,  estimates and  balance-sheets  showing      the balance  of the  money in  hand and in deposit, the      estimated  income   and  expenditure   etc.  should  be      carefully prepared.      It may  be that  it is  not imperative  either for  the Market Committee  or the  Board (Chief  Marketing officer in the present  cases) to  prepare balance-sheets because their account are  audited by  Government auditors for the purpose of raising  market fee  any further.  The balance-sheet will given a  true picture  of the position also with the budgets and estimates  and then  and only  then there  may be  legal justification for  raising the  market fee  to a  reasonable extent. On  drawing the correct balance-sheets and preparing correct estimates  and budgets  the authorities will be able to know the correct position to decide reasonably as to what extent the raising of the market fee can be justified taking an over-all picture of the matter.      It may  be noticed  that even  the High Court has given similar directions  to the  Market Committees  and the Chief Marketing Officer  to see whether there is justification for increasing the  market fee from one per cent to two per cent on the  invitation of the learned Advocate General appearing for the  State and  the learned  Consel  appearing  for  the Market Committee as stated above.      Now that  I have  set out the facts and the decision of the High  Court to the extent necessary and the arguments of the learned  counsel for  the parties and the lay bearing on the questions  involved as  It understand the same I proceed to record  my findings.  The principles  of law laid down by the Bench  of five  learned Judges  of this  Court in  Kewal Krishan Puri’s  case (supra)  so long  as they have not been dissented from,  varied or  set aside  by a larger Bench are binding, with  respect, not  only on smaller Benches of this Court but  also undoubtedly  on the  High Courts  and  other Subordinate Courts  and parties  similarly  placed.  I  have already pointed  out that  the facts  and the  points  which arose for consideration in 213 Kewal  Krishan   Puri’s  case  (supra),  Sreenivasa  General Traders’ case  (supra) and  the present  cases  are  broadly similar. All  these cases   relate  to market  fees and  the enhancement thereof.  I have  set out  the seven points laid down by  this Court  in Kewal Krishan Puri’s case (supra) in

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the earlier  part of  my judgment  and four  of those points which have  a direct bearing on these cases in the preceding paras. It  16 not necessary to establish the element of quid pro  quo   in  regard   to  market  fees  with  arithmetical exactitude, but  an amount  of fee  must  be  earmarked  for rendering services to the buyers in the notified market area and a good and substantial portion of it must be shown to be expended  for  those  purposes.  The  good  and  substantial portion earmaked  for  rendering  services  may  be  in  the neighbourhood of  two-thirds or three-fourths and it must be shown with reasonable certainly as being spent for rendering services of  the kind mentioned in Kewal Krishan Puri’s case (supra). If  the market  fee is  sought to be raised, proper budgets, estimates, balance-sheets showing the money in hand and in  deposit, expenditure  on projects  to be  undertaken etc. should  be carefully prepared. Then and only then there may be  a legal  justification for  raising the  rate of the market fee further to a reasonable extent, for only then the authorities will be able to know the correct position and to decide reasonably  as to  what extent  the  raising  of  the market fee  can be justified, taking an over-all view of the matter. But in the present cases, none of these requirements was satisfied  before the  market fee  was raised The Market Committees had  no such  material before  them  before  they raised the  rate  of  the  market  fee  from  one  per  cent uniformly to two per cent by amendment of the bye-law on the mere direction  of the  Chief Marketing Officer. These facts are not  in dispute. Therefore, with respect, the High Court erred in  law in not applying the principle of law laid down by this  Court in  Kewal Krishan  Puri’s  case  (supra)  and failing to  strike down  the enhancement  of the  market fee from one  per cent to two per cent on account of the failure to comply  with the  principles laid  down in  Kewal Krishan Puri’s case  (supra). The  State Government  and the  Market Committees appear  rightly to  have retraced  their steps by reducing the rate of the market are from two per cent to one per cent by the Circular No. SMD-268/ RGN-83 dated 27.2 1984 with effect  from 1.4.1984.  The learned  Judges of the High Court themselves  do not  appear to  have been  quite  happy about how  the enhancement  of the market fee had been made, for they  have observed  in para  61 of  their judgment,  as mentioned above, that the question might become a live issue if the  Market Committees  were to  amend the  bye-laws made under s.l48 214 read with  s.65(2) of  the Act  in future  without giving an opportunity   to the  affected interests  of being  heard in regard  to   the  proposed  enhancement.  Even  the  learned Advocate General  appearing for  the State  and the  learned Counsel appearing  for  the  Market  Committees  had  stated before the learned Judges of the High Court that it would be eminently desirable  that the Market Committees should adopt some reasonable  procedure  in  that  behalf  and  that  the amendment to  s.148 of  the Act made by Ordinance 22 of 1981 dispensing with  the need  for prior publication and hearing of the  affected interests  was only  intended to  cure  the defect in  making the  impugned amendment to the bye-law for avoiding ’great  public inconvenience  which may result from the invalidation of the bye-law and there was no  intention  to make  the  deletion,  brought  about  by  the Ordinance, a  permanent feature’.  They submitted before the learned  Judges  of  the  High  Court  that  any  reasonable procedure which may be suggested by them would be adopted in future ’even if there is no such legal compulsion’. In these circumstances, the  High Court  has observed: "It appears to

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us that before the Market Committees propose to amend a bye- law to  make an  upward revision  of the  rate  of  fee,  in future,  the   Market  Committees   must  first  follow  the directions of  the Supreme Court (given) in para 55 in Kewal Krishan Puri’s  case". The  learned Judges  have  thereafter given the  directions contained in the judgment in that case as mentioned above. With respect, I am unable to see how the directions given  by this Court in Kewal Krishan Puri’s case (supra) should  be followed  only in future and how there is no compulsion in law for the Market Committees to follow the directions already  given by this Court in that case and how this could  be dispensed  with or ignored for the purpose of the impugned enhancement. with respect I think that the High Court has  erred in  not applying the principles of law laid down by  this Court in Kewal Krishan Puri’s case (supra) and in observing  that they should be applied only in future. In these circumstances,  I hold  that the  enhancement  of  the market fee from one per cent to two per cent by amendment of the bye-law  under the  directions of  the  Chief  Marketing Officer without complying with the principles of law down in Kewal Krishan  Puri’s case  (supra) is  bad in law. The same would be  the position  even if the amendment to the bye-law made in  accordance with  s. 148  of the  Act as it is stood before the amendment by the Ordinance 22 of 1981.      Point No.  12 in  para 7  of the  High Court’s judgment relating to  the question  of enhancement  of the market fee reads thus: 215           "Whether the  enhancement of  market fee  leviable      under s.  65(2) of the Act from one per cent to two per      A cent  brought about  by the  amendment of the bye-law      responnents-Market-Committees is  unsupportable in  law      and fails  for want  of correlation  with the  value of      services rendered to the payers of the fee."      The burden  cast on  the appellants  is  to  prove  the negative. The appellant are bound to succeed in the light of the decision  in Kewal  Krishan Puri’s  case (supra) if they prove that  the enhancement  of  the  market  fee  was  made without complying  with the law laid down in that case. That has been  established by the appellant without any manner of doubt whatsoever.      As rightly  contended by  Mr. Kacker the High Court has erred in  giving the direction dated 30.11.1981 to the Chief Marketing Officer  for furnishing  a comprehensive statement in respect  of each  of the  Market Committees  in a tabular form as  indicated in  para 69 of the impugned judgment, set out in  the earlier  part of  this judgment.  The High Court has, thus,  given an opportunity to the Market Committees to fill up  the lacuna  since the materials supplied thereafter by way of Exs. R- I to R- 111 and similar statements perused by the  High Court  were not available either on the date of the amendment  of the  bye-law enhancing  the  rate  of  the market fee  from one per cent to two per cent or even on the dates on  which the  Writ Petitions  were filed  in the High Court. The  High Court has erred in giving the direction and granting an  opportunity to the Market Committees to fill up the lacuna.  I do  not agree with Mr. A.K. Sen that the High Court was entitled to do so.      The High  Court has found even Exs . R- I to R- 111 and the other  statements prepared and furnished pursuant to its order  dated  30.11  1981  not  sufficient  to  sustain  the enhancement of  the fee.  This is  clear from  what the High Court has  stated in  paras 107 to 111 of its judgment which is extracted for ready reference:           "107. The  upshot of  the above discussion is that

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    though we  are unable  to hold,  on the material placed      before us  by the  petitioners, that  the levy ought to      fail for want of quid pro quo, however having regard to      the infirmities  noticed in the estimates and financial      projections of  the proposed developmental works on the      basis of which the 216      enhancement is  sought to  be justified,  we  are  also      unable  to   say  with   any  confidence   and  without      reservations that  the enhancement  of fee depending as      it does  on those  estimates is totally justified. Some      time-bound directions  to which we will refer presently      for a  second look  at the  estimates by  the statutory      authorities are required to be issued in this behalf.           108. Indeed,  having regard  to the  wide range of      the  apparently   inexplicable  disproportions  in  the      developmental   projects   of   the   various   Market-      Committees both  the learned  Advocate-General and  the      learned Counsel  for the Market Committees, stated that      there was  obvious scope-in  our opinion  an imperative      need-for  some   rationalisation  of   the  pattern  of      development of  market-yards based  upon and related to      the relevant  factors such  as quantum  and  nature  of      agricultural   produce    handled   by   the   markets;      potentialities of  development of  the  market  in  the      reason ably  near future  and the  like. It  is neither      possible nor advisable to lay down exhaustively all the      criteria that  may become relevant to the task. However      the need  for such exercise to regulate the development      to  these  market  yards  on  scientific  rational  and      uniform basis was accepted by all the parties.           109. A  time-bound schedule  has to  be prescribed      for the Chief Marketing Officer, as the authority under      the  ’Act,   approving  the   budgets,  to  evolve  and      standardise  broad   and  general  norms,  taking  into      account the  observations made  in the  course of  this      order,  both  for  infra-structural  and  developmental      works and  services, on  as  uniform  a  basis  as  may      reasonably  be   feasible,  for   the  various  markets      depending upon  their classification  to be made by the      C.M.O. On  the basis  of  such  criteria  he  may  deem      relevant and also to evolve corresponding cost patterns      of the  projects  with  suitable  inbuilt  indicia  for      escalation of  cost  structures,  from  time  to  time,      proportional to  the rise  in the  price  of  material.      These norms  shall operate  as broad and general guide-      lines for  the development  of  regulated  markets  and      shall be  kept in  view of  the  market  committees  in      planning developmental projects. 217      Departure from  these norms  and  standards  shall,  of      course,  be   permissible   on   grounds   of   special      requirements  of individual regulated markets depending      upon   their    specific   individual    problems   and      requirements. At the time of sanction of the budgets of      the Market-Committees  the C.M.O. should scrutinise the      budgets with  reference to and applying the broad-norms      and criteria  evolved and  adopted by  him so  that the      programme and  the projects  of development  for next 8      years are  need based  and are  as far  as may be, on a      uniform and rational basis.           110. The  learned Advocate-General and the learned      counsel for  the Market  Committees concede  that  this      exercise is  necessary and  beneficial  as  indeed  the      matter involved  an outlay  of  nearly  145  crores  of

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    rupees in the next 8 years on the regulated markets.           111. Accordingly, the C.M.O. shall within 4 months      from  now   evolve  and  standardise  these  norms  and      specifications and  circulate the  same to  the  Market      Committees. Respondent-Market-Committees  in categories      ’C’, ’D’ and ’E’ in Para-80 supra will, within 3 months      therefrom, revise  their proposals  for development  in      accordance  with   these  norms   and   specifications,      departures   from    standard    specification    being      permissible if  the special conditions peculiar to. the      particular markets  so require  and compel.  The C.M.O.      will again scrutinise these revised proposals and their      cost-projections and  if, upon  such  scrutiny,  is  of      opinion that  the present  2% market-fee cf any Market-      Committee in  the category  ’C’, ’D’  and ùE’  supra is      unjustified, the  C.M.O. will  make appropriate  orders      under s.  150 of the Act directing the Market Committee      or Committees  concerned to  amend  their  bye-laws  to      effect an  appropriate downward revision in the quantum      of the  fee. Wherever  the C.M.O.  is of  the  opinion,      after an examination of the proposals, that there is no      need to  make a  downward revision,  he  shall  make  a      specific note in the behalf. These orders shall be made      within a period of 8 months from now."      What the  High Court has stated in paras 107 to 110 and in the  first sentence  of para  111 would  apply to all the Market-Committees 218 which had  enhanced the  market fee from one per cent to two per A  cent, and  the Chief Marketing Officer has been given four months time from the date of the judgment to evolve and standaries the norms and specifications and to circulate the samo to the Market Committees. After giving such a direction the learned  Judges of  the High Court have given some other direction to  the Market  Committees falling  in  categories ’C’, ’D’  and ’E’  mentioned in  para 80  of their judgment, namely "within  three months  therefrom they  should  revise their proposals for development in accordance with the norms and specifications.  Then the  Chief Marketing  officer will again scrutinise  these revised  proposals  and  their  cost projections, and  if upon  such a  scrutiny  he  is  of  the opinion that  the present  two per cent of market fee of any Market  Committee   in  categories   ’C’  ’D’   and  ’E’  is unjustified, he  will make  the appropriate orders directing the Market  Committees concerned  to amend their bye-laws to effect an  appropriate downward  revision in  the quantum of the fee  and wherever he is of the opinion after examination of the  proposals that  there is  no need to make a downward revision he  shall make a specific not in this behalf and he shall make these orders within a period of eight months from the date  of the judgment". It is not clear why after giving the  general   direction  in   respect  of  all  the  Market Committees which  had enhanced  the market  fee from one per cent to  two per  cent the  learned Judges of the High Court thought it  necessary to  give another  set of directions to the Market  Committee falling in categories ’C’ ’D’ and ’E’. This confusion  was perhaps  responsible for  Mr.  A.K.  Sen contending seriously in the course of his arguments that the directions given  by the High Court relate to only 8 or 4 of the Market Committees falling in categories ’C’ ’D’ and ’E’. It is  not possible  to accept  this argument for the reason that the  High Court  has not  recorded any finding on Point No. 12 to the effect that there is sufficient correlation in respect of  all the  Market Committees  except 8 or 4 of the market Committees  falling in  categories ’C’, ’D’ and ’13’.

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After setting  out Point  No. 12 in para 7 of their judgment the learned Judges of the High Court have indicated that the discussion relating  to that point is in paras 75 to 110 and that the  finding is  in para  111.  As  stated  earlier,  a perusal of  paras 107 to 110 and first sentence in para 111, especially para  110, would show that the direction has been given by  the learned  Judges in  respect of  all the Market Committees which  had enhanced  the fee from one per cent to two per  cent. The  learned Judges  have stated  in para 110 that the  learned Advocate  General appearing  for the State and the learned Counsel appearing for the 219 Market Committees  conceded that  the exercise  suggested by the  learned  Judges  in  para  109  of  there  judgment  is necessary and   beneficial  as the matter involved an outlay of nearly  145 crores  of rupees  in the next eight years on the regulated  market. Surely,  an outlay  of 145  croces of rupees could  not be in respect of only 8 or 4 of the Market Committees falling  in categories  ’C’,  ’D’  and  ’E’.  The learned Judges  of the  High Court have observed in para 107 øf their  judgment that         having regard  to  the  infirmities noticed in  the estimates  and financial  projections of the proposed developmental  works on  the  basis  of  which  the enhancement is  sought to  be justified  they "are unable to say with  any confidence  and without  reservations that the enhancement of  the fee  depending, as  it  does,  on  these estimates is  totally justified",  and that  some time-bound directions to  which they  would refer  for having  a second look at  the estimates  of  the  statutory  authorities  are required  to   be  issued.   There  is   nothing  in   these observations of  the High  Court to  indicate that  they are confined to  only 8 or 4 of the market Committees falling in categories ’C’,  ’D’ and ’E’. The learned Judges of the High Court have  no doubt  observed in the first sentence in para 107 that  on the  materials placed  before them  by the writ petitioners they cannot hold that the levy ought to fail for want of  quid pro  quo. With  respect I  think that there is some confusion  in this  part of  the judgment  of the  High Court which has given room for argument of Mr. A.K. Sen that the directions  have been  given only in repect of 8 or 4 of the Market  Committees falling  in categories  ’C’, ’D’  and ’E’.As stated  earlier the  learned Judges of the High Court have not  recorded any finding on Point No. 12 to the effect that correlation  is established satisfactorily in regard to all the  Market Committees which had enhanced the market fee from one  per cent  to two  per cent  except 8  or 4  of the Market Committees  falling in  categories ’C’,  ’D’ and ’E’. The direction given in para 111 is stated under Point No. 12 in para 7 of the impugned judgment to be the finding on that point relating  to correlation. I, therefore, agree with Mr. Sorabjee that  the directions  given in paras 107 to 110 and the first  sentence in  para 111  of the  impugned  judgment relate to  all the  Market Committees which had enhanced the market fee from one per cent to two per cent and not to only 8 or  4 of  the Market Committees falling in categories ’C’, ’D’ and ’E’ and that in view of the observation made in para 107 that  having regard  to the  infirmities noticed  in the estimates  and   financial  projections   of  the   proposed development  works   on  the   basis  of   which  alone  the enhancement is sought to be justified they are unable to say with any confidence and without reservations 220 that the  enhancement of  the fee is totally justified, they should have  held that there is no conelation and that there is no  justification for  the enhancement  of  rate  of  the

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market fee.  For these  reasons, I  hold that  there  is  no correlation and  that there  is  no  justification  for  the enhancement of  the market  fee from one per cent to two per cent. I am constrained to observe that the learned judges of the High  Court have  failed to  exercise  the  jurisdiction vested in  them by law by not recording any finding on Point No. 12  one way  or the  other, namely,  that there is or no correlation,  and   that  they   have  clothed   the  Market Committees  and  the  Chief  Marketing  Officer  with  their jurisdiction to  decide the question whether the enhancement is justified  and if  not justified  to  effect  a  downward revision wherever necessary.      In view  of  what  has  been  stated  above  about  the enhancement of  the market  fee  the  question  whether  the amendment of the bye laws for raising the rate of the market fee from  one per cent to two per cent has been validly male or not  becomes academic and is, however, considered for the sake of  completeness. According to s. 148 (1) of the Act as it stood  on the  date of  the amendment of the bye-laws for enhancing the  rate of  the market  fee from one per cent to two per  cent and  on the  dates on which the Writ Petitions were filed  in the  High Court "subject to the provisions of this Act and the rules made thereunder under s. 146 and with the previous  sanction of  the  Chief  Marketing  Officer  a market committee  may, after  previous  publication  in  the prescribed  manner,  make  bye-law  for  regulation  of  the business and  the conditions  of trading in the market area. Every bye-law made in this section shall be published in the prescribed manner".  As  stated  earlier,  the  question  of market fee  would fall under s. 148 (2) (XXXiii) of the Act. It was  contended before  the High  Court that  there is  no compliance with  the requirement  of previous  sanction  and previous publication  in the  prescribed manner in regard to the amendment  of the  bye-laws for  raising the  market fee leviable under s. 65 (2) of the Act from one per cent to two per cent. The High Court has observed that finding no answer to that criticism in regard to the amendment of the bye-laws the State  Government has  come forward with Ordinance 22 of 1981 when the arguments in the Writ Petitions were coming to a close.  That Ordinance  has since  been  replaced  by  the Karnataka Act 4 of  1982. ss. 3 and 5 of the Ordinance which have been replaced by ss. 2 and 114 the Amendment Act may be extracted for easy reference: 221           "3. Amendment  of section  148.-In section  148 of      the principal Act, in sub-section (1), the words ’after      previous publication  in the  prescribed manner", shall      be and shall be deemed always to have been omitted."           "5. Validation-Nothwithstanding anything contained      in any  judgment, decree or order of any court or other      authority, any  bye-law made or purporting to have been      made, and levy or collection of market fee made and any      action or  thing taken or done in relation to such levy      or collection  under the  provisions of  the  principal      Act, before the commencement of this Ordinance shall be      deemed to  be as valid and effective as if such bye-law      or levy or collection or action or thing had been made,      taken or  done under  the principal  Act as  amended by      section 2 and 3 of this Ordinance and accordingly,-      (a)  all acts,  proceedings or  things done  or  action      taken by  the State  Government or by the Market Commit      tee or  by any other officer of the State Government or      of the  Market Committee  or by  any other authority in      connection with  the levy  or collection  of the market

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    fee shall,  for all  purposes, be  deemed to  be and to      have always  been done or taken in accordance with law;      and      (b)  no suit  or other proceedings shall be instituted,      maintained or  continued in  any Court  or  before  any      authority for  refund of  any such  market fee  or  for      questioning the  validity of  any action or thing taken      or done  under the  said bye-laws,  and no  court shall      recognise or  enforce any decree or order declaring the      said bye-laws  or any  action or  thing taken  or  done      thereunder as  invalid on  the ground that the bye-laws      were made  without giving  reasonable G  opportunity to      persons likely  to be  affected thereby  to file  their      objections  and   suggestions,  or   otherwise  without      following the procedure prescribed".      Previous publication  referred to  in s.  148(1) as  it originally stood  before the  amendment to the bye-la vs for enhancing the rate 222 validates the  amendment to  the bye-laws  made without such previous publication  without giving  an opportunity  to the affected interests  of being  heard in  the matter. The High Court has  found that  in these  cases the  Chief  Marketing Officer  himself   had  given   directions  to   the  Market Committees to  amend the  bye laws  for enhancing the market fee from  one per cent to two per cent and the bye-laws were amended by  the Market  Committees accordingly  and that the Chief Marketing  Officer’s direction  to amend  the bye-laws for enhancing  the rate of the market fee can be regarded as his previous  approval. I  am unable to agree with this view of the  learned Judges  of the High Court. Previous approval can only  be of  some proposal  or resolution  of the Market Committees for doing one or the other of the things required to  be   done  under   the  provisions   of  the  Act.  When undisputably there was no such resolution or proposal by the Market Committees  for enhancement of the rate of the market fee I  am unable  to see  how the  direction  of  the  Chief Marketing Officer  given to  the Market  Committees to amend the bye-laws for raising the rate of the market fee from one per cent  to two  per cent  can  be  considered  to  be  his approval. Admittedly,  there was  no previous publication as required by  s. 148(1) as it stood at the relevant time, and that requirement  is purported  to have  been dispensed with retrospectively by  s. 3  of Ordiance 22 of 1981. It is seen from the  impugned judgment that it was submitted before the learned  Judges   of  the   High  Court  that  the  affected interests’ right of being heard was conferred by the Statute and it  has been  taken away  by the subsequent amendment to the Statute  with retrospective  effect and  that there  is. therefore, no ground for the affected interests to complain. No such  submissions were,  however,  made  in  this  Court. Market fee  is not a tax which is imposed by law passed by a Legislature where the interests affected are or are supposed to be  represented unlike  the market  fee  the  enhancement whereof  is  made  by  subordinate  legislation  by  way  of amendment of  the relevant bye-law by the Market Committees. That is why the provision for  previous publication was made in s. 148(1) of the Act as it stood at the relevant time. It is not possible to accept the contention that the right given by law was taken away by law and cannot, therefore, be 223 claimed  by  the  affected  interests,  for  though  it  was mentioned in  s. 148(1)  of the  Act  as  it  stood  at  the relevant time  it was  a right  A which was available to the

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affected interests  under the  principles of natural justice of being  heard before  the enhancement  could be  made. The High Court  appears to  have been aware of this position and to have  not been  quite happy  about how the enhancement of the market  fee has  been brought  about,  for  the  learned Judges have  observed in  para 61 of their judgment that the question might  become a live issue if the Market Committees were to  amend the  bye-laws in  future  without  giving  an opportunity of  being heard  to the affected interests. Even the learned Advocate General appearing for the State and the learned Counsel  appearing for  the  Market  Committees  had stated before  the learned Judges of the High Court that the amendment to  s. 148(1)  made  by  the  Ordinance  was  only intended to  cure the defect in making the impugned bye-laws to avoid  great public  inconvenience and  that there was no intention  to  make  the  deletion  of  the  requirement  of previous publication  a permanent  feature. The right of the affected interests  of being  heard before Market Committees could raise  the rate  of  the  market  fee  being  a  right available to  them under  the principles  of natural justice cannot be  denied to  them even by omitting in s. 148(1) the clause relating  to previous  publication of the proposal to make or  amend any  bye-law under  s. 148 of the Act. In any event the  amendment has  not taken  away the requirement of previous approval  of the Chief Marketing Officer, and since there was no resolution or proposal of the Market Committees to enhance  the rate  of the  market fee  before  the  Chief Marketing  Officer   gave  the   direction  to   the  Market Committees to  amend the bye-laws for raising the market fee the direction  cannot  be  taken  as  previous  approval  of something which  was not  in  existence  at  that  time.  I, therefore, hold  that the amendment of the bye-laws made for enhancement of  the rate of the Market fee from one per cent to two  per cent  is invalid  in law notwithstanding s. 3 of Ordinance 22 of 1981 and s. 12 of Karnataka Act 4 of 1982.      S. 65(1) of the Act as it originally stood provided for Market Committees  to levy  and  collect  market  fees  from buyers in  respect of  agricultural produce bought by (V any trader or  other person  in the  yard and  (ii)  any  trader outside the market or sub-market in the market area, at such rate as  may be specified in the bye-laws (which will not be more than  thirty paise  per one hundred rupees of the price of the specified agricultural produce) in such manner and at such times  as may  be specified  in the  bye-laws. S. 65(2) laid down  that for  the purposes  of sub-section  (1),  all notified agricultural 224 produce leaving a yard shall, unless the contrary is proved, be presumed  to have  been bought  within such  yard by  the person in  possession of  such produce. S. 65 was amended by Amendment Act 24 of 1975 which came into force on 19.5.1975. S. 2  of  that  Amendment  Act  substituted  s.  65  of  the principal Act  as amended by Act "0 of 1973 by a new section which read as:           "S. 65. Levy of market fees.-      (1)  The  market  committees  shall  levy  and  collect      market fees from every buyer in respect of agricultural      produce sold  by such  seller in the market area at the      rate of  one rupee  for one hundred rupees of the price      of such produce sold;       (2) the  market  committees  shall  levy  and  collect      market fees from every buyer in respect of agricultural      produce bought by such buyer in the market area at such      rate as  may be  specified in the bye-laws (which shall      not be  more than  one rupee  per hundred rupees of the

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    price of  such produce  bought) in  such manner  and at      such  times as may be specified in the bye-laws;      (3)  every market  committee  shall,  not  withstanding      anything contained in this Act, credit to the Karnataka      Roads and  Bridges Fund constituted under the Karnataka      Motor Vehicles  Act, 1957  market fees  collected under      sub-section (1)  for being  spent  or  the  purpose  of      construction, repair,  improvement and  maintenance  of      rural roads in the State."      Market fee was levied on the sellers for the first time under s. 65(1) as substituted and the entire collection made under that  sub-section had  to be credited to the Karnataka Roads and  Bridges Fund  for being spent for the purposes of construction, repair  improvement and  maintenance of  rural roads in the State. Sub sections (1) and (3) of s. 65 of the Act, as  substituted by Amendment Act 24 of 1975 were struck down on  28 9.1978  by the  decision in Rajasekhariah’s case (supra). Subsequent to that decision s. 65 of 225 the principal Act as substituted by Amendment Act 24 of 1975 was amended by s. 20 of Amendment Act 17 of 1980 thus: A               "S. 20. Amendment of section 65.-In section 65      of the principal Act,-      (1)  for sub-section  (1),  the  following  sub-section           shall  be   and  shall  be  deemed  to  have  been           substituted with effect from 19th day of May, 1975           namely:-                "(1) In  respect of  the agricultural produce           sold in  a market  area, there shall be levied and           collected by  the market  committee there of, from           every seller,  market fees  at the rate of one per           cent of the sale proceeds of the produce so sold;      (2)  Sub-section (1)  as so  substituted shall  be  and           shall be  deemed to  have been omitted with effect           from the 23th day of September, 1978;      (3)  in sub-section (2), for the words "one rupee", the           words "two rupees" shall be substituted;      (4)  sub-section (3)  shall  be  and  shall  be  deemed           always to have been omitted."      The result  of the  amendment was  that  the  levy  and collection  of   market  fees   on  and   from  sellers   of agricultural produce  at One  per cent  of the  price of the agricultural produce  sold  in  the  market  area  had  been restricted to the period from 19.5.1975, the date on p which Amendment Act  24 of 1975 which substituted the new s. 65 in the place  of the  original section  65 came into force upto 28.9.1978, the  date on  which the  substituted sub-sections (1) and  (3) of  s. 65  were struck  down in Rajasekhariah’s case  (supra),  and  the  substituted  sub-section  (3)  was omitted by  Amendment Act  17 of 1980 as if it never existed in the Statute. S. 42 of Amendment Act 17 of 1980 relates to validation of market fees-etc. and reads:           "S. 42  Notwithstanding anything  contained in any      decree, order  of  judgment  of  any  court,  or  other      authority, any levy or collection of market fee made or      purported to  have been made, any action taken or thing      done in relation to such levy or collection under the 226      provisions of the principal Act before the commencement      A of  this section  shall be  deemed to be as valid and      effective as  if such  levy or  collection or action or      thing had  been made, taken or done under the principal      Act as amended by this Act and accordingly,-      (a)  all acts,  proceedings or  things done  or  action           taken by  any market  committee in connection with

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         the levy  and collection of such market fee shall,           for all  purposes, be  deemed to  be  or  to  have           always been made, done or taken in accordance with           law;      (b)  no suit  or other  proceedings shall be maintained           or continued  in any court or before any authority           for the refund of any such market fee; and      (c)  no  court   shall  enforce  any  decree  or  order           directing the refund of any such fee;      ...         ...         .... "      The market  fee levied  on and  collected from  sellers under the substituted s. 65(1) of the Act went to the credit of the  Karnataka Roads  and Bridges  Fund under sub-section (3). Sub-section (3) had been omitted by Amendment Act 17 of 1980 as  if it  never existed  in the  Statute as  mentioned above. The  High Court,  following this  Court’s decision in Kewal Krishna  Puri’s case (supra) has held that rural roads are essentially  and primarily  intended for  the benefit of the public and the class of market fee payers as part of the general public  is entitled to the benefit of their user and the fee  cannot be  levied on  and collected  from them  for being  spent   for  the  purpose  of  construction,  repair, improvement and  maintenance of  such roads, more so because rural roads,  even if  constructed,  repaired,  improved  or maintained from  the market  fee collected under the Act, do not become  the property  of the  Market Committees and shed their character  as public roads. Expenditure of market fees for construction  of roads,  main or rural, is impermissible in view  of  the  decision  in  Kewal  Krishan  Puri’s  case (supra), and  even s  65(3) has  been omitted as if it never existed  in   the  Statute  after  it  was  struck  down  in Rajasekhariah’s case  (supra). The quid pro quo for the levy under substituted  s 65(1)  on sellers was the construction, repair, improvement  and maintenance of rural roads which is no longer permissible 227 to be  done out of moneys collected as market fees. there is thus no  quid pro quo to any existent for the levy under the substituted s. 65(1) of the Act and therefore, it fails, and it is not protected even by s. 42 of the Amendment Act 17 of 1980 and  has been rightly struck down by the High Court. S. 42 of  the Amendment Act 17 of 1980 in so far as it seeks to save the  levy and collection of market fee on sellers under the substituted  s. 65(1)  cannot also stand. The High Court is, therefore,  right in  its finding  on this aspect of the case.      In the  Act there  is no  provision in  regard  to  the market fee  like s.  23A of  the Punjab  Agricultral Produce Markets Act sub-section (1) thereof reads thus:           "Notwithstanding   anything   contained   in   any      judgment, decree  or order  of any  court it  shall  be      lawful for  a market committee to retain the fee levied      and collected  by it  from a licensee in excess of that      leviable under  s. 23  if the  burden of  such fee  was      passed on  by the licensee to the next purchaser of the      agricultural produce  in respect  whereof such  fee was      levied and collected."      In Civil  Appeals Nos.  45()0-4501 of  1984 decided  on 19.11.1984 this  Court has  held that  what s.  23A  of  the Punjab Act  does is to prevent unjust enrichment by means of a refund  to which  the person  claiming it  has no moral or equitable entitlement. The market fee collected from sellers under the  substituted s.  65(1) must  have been credited to the Karnataka  Roads and  Bridges  Fund  and  used  for  the purpose of construction, repair, improvement and maintenance

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of rural  roads which are undoubtedly for the benefit of the general public.  The excess  fee collected under s. 65(2) of the Act  also must  have  been  utilised  for  the  purposes contemplated by  the Act.  The persons  from whom  they have been collected,  sellers and  buyers, would  naturally  have passed on  the levy  to those who purchased the agricultural produce from  them and  the levy  must have  ultimately been borne by  the consumers  of the produce. Any refund would go to unjust enrichment of the persons from whom they have been collected. In  these circumstances  I do  not think that any order for  refund of  the market  fee  collected  under  the substituted s.  65(1) and  the excess  market fee  collected under s. 65(2) of the Act could be made in these cases . 228 To summarise, my findings are:           (1) S.  65  (1)  of  the  Act  as  substituted  by      Amendment Act  24 of 1975 and Act 17 of 1980, and s. 42      of Amendment  Act 17  of 1980  in so for as it seeks to      save that  has been done under s. 65 (1) of the Act are      unconstitutional and  have been  rightly struck down by      the High Court;           (2) Enhancement of the rate of market fee leviable      under s.  65 (2)  of the  Act by amendments of the bye-      laws from  one per  cent to two percent of the price of      the notified agricultural produce is invalid in law for      non-compliance with  the law laid down in Kewal Krishan      Puri’s case (supra);           (3)  There   is   no   correlation   between   the      enhancement of  the rate  of the  market  fee  leviable      under s.  65(2) from  one per  cent to two per cent and      the services rendered or proposed to be rendered by the      Market Committees  and, therefore,  the enhancement  is      invalid in law;           (4) Amendment of the bye-laws made for enhancement      of the  rate the market fee leviable under s. 65 (2) of      the Act from one per cent to two per cent is invalid in      law;           (5) The provisions of the Act are repugnant to the      Tobacco Board  Act, 19,6  and,  therefore,  tobacco  is      liable to be removed from the schedule; and           (6) There  shall be  no refund  of the market fees      collected under  the substituted  s. 65  (1) of excesss      fee collected  under s.  65 (2)  either  by  the  State      Government or by any of the Market Committees.      The appeals, writ petitions and special leave petitions are disposed of accordingly. The Market Committees shall pay costs of  Rs. 15,000  to  the  parties  represented  by  Mr. Sorabjee and  Rs. 10,000  to the  parties represented by Mr. Kacker.       SABYASACHI  MUKHARJI, J.  Some Writ petitions out of a large number of petitions, nearly 4298 in number arising out of The Karnataka Agricultural Produce Marketing (Regulation) Act, 1966  (hereinafter referred  to as the ’Act’) were take up by the High 229 Court of Karnataka for hearing and disposed of by one common judgment  as  one  or  more  of  the  contentions  in  those petitions were  A common,  and all  the petitions were heard together by  the High  Court of  Karnataka so  as to  afford opportunities to  learned counsel  appearing in the cases to address arguments.  These were disposed of by a common order which was  representative of  the contentions  urged at  the hearing of  the argument. The learned judges directed B that the remaining writ petitions which had been heard along with those cases  would be  disposed of,  in convenient  batches,

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following the  findings on  the various contentions recorded in that order.      These appeals  arise out  of the  said order.  In these appeals we  were concerned with the provisions of the Act as well as  (1) the challenge to the constitutional validity of section 65  (1) of  the Act  as substituted by The Karnataka Agricultural Produce Marketing (Regulation) (Amendment) Act, 1980 (hereinafter  referred to  as the (Amending Act’) which sought to  validate the market fee levied on the "sellers of notified agricultural produce" under section 65 (1), for and during the  period of  its operation,  prior  to  its  being struck down by the Karnataka High Court in Rajasekhariah’ v. Tiplur Agrl.  Produce Marketing  Committee &  Anr.(l) (2) to the enhancement  of market fee from 1% to 2% effected by the various Market  Committees by  amending the  bye-laws  after permissible maximum  levy of  the fee  on the  buyers  under section 65 (2) was raised to 2 per cent by the said Amending Act, the  challenge  being  both  on  the  ground  that  the amendment of bye-laws was made in violation of the mandatory requirements  of   prior  publication   and  prior  sanction contemplated by  section 148  and on  the  ground  that  the enhancement of  fees fail  for want of quid-pro-quo; and (3) to the  inclusion of  certain items  such as wood, cardamom, sugarcane, tobacco  in  the  list  of  notified  agricultral produce incorporated in the Schedule to the Act.      On 1st  May, 1968,  the Act came into force. Section 65 of  the   Act  as   originally  stood  directed  the  Market Committees to  levy and  collect Market fees from the buyers in respect of agricultural produce by-      (i) any trader or other person in the yard, and      (1) 19791 Karnataka L.J. p. 43. 230      (ii) any trader outside the market or sub-market in tho      A market area.      Section 65 of the Act was amended on 20th October, 1973 by The  Karnataka Act No. 20 of 1973 raising the maximum fee leviable by a Market Committee from 30 paise to one rupee.      On the  17th December,  1974, the  enhancement  of  the market fee  from 30 paise to one rupee made by the amendment of the  bye laws  by  some  of  the  Market  Committees  was challenged by the traders-buyers of the agricultural produce before the  High Court of Karnataka in Writ Petition No. 537 of 1974 and the connected writ petitions in the case of K.S. Vaman Rao v. The Agricultral Produce Market Committee. Sagar and the High Court by its judgment dated 17th December, 1974 held that  the levy  authorised by  the section  was in  the nature of  a fee  and after  scrutinising  the  estimate  of expenditure of  each of  the Market Committees spread over a period of 15 years and the amount recoverable by way of fees thereto held that there was correlation between the services rendered and the amount of fees collected.      On  19th   May,  1975,   section  65  of  the  Act  was substituted by  a new  section (Act  No. 24  of  1975).  The substituted section reads as follows:-           "65. Levy of Market Fees-(1) The Market Commit tee      shall levy and collect market fees from every seller in      respect of  agricultural produce sold by such seller in      the market  area at  the rate  of  one  rupee  per  one      hundred Rupees of the price of such produce sold.           (2) The  Market Committee  shall levy  and collect      market fees from every buyer in respect of agricultural      produce bought  by such  buyer in  the market  areas at      such rate as may be specified in the bye-laws (which of      such produce  bought) in  such manner and at such times      as may be specified in the bye-laws.

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         (3) Every  Market Committee shall, notwithstanding      anything contained in this Act, credit to the Karnataka      Motor Vehicles  Taxation Act,  1957,  the  market  fees      collected under sub-section (1) for being spent for the 231      purpose  of   construction,  repair,   improvement  and      maintenance of rural roads in the State."      By Act  No. 14  of 1976  passed on  24th January,  1976 which replaced  and earlier  Ordinance. section  65 (1)  was amended by  insertion of  a proviso  to section  65  (1)  as under:-           "Provided that  the State Government may, by order      in public  interest, exempt  any Market  Committee from      such levy and collection in respect of any agricultural      produce."      On 1st  June, 1976, by the Amending Act No. 43 of 1976, the following changes were made:-      (a)  By  section  2  of  the  amending  Act,  the  word           "MARKETING" was  substituted for the words "buying           and selling" in the long title to the Act.      (b)  By section  (3) of  the  amending  Act,  the  word           ’MARKETING" was  substituted for the words "buying           and selling" in the preamble to the Act.      (c)  By section (4) of the amending Act a new clause 18           (A) was inserted as under:-              "18 (A) "Marketing" means buying and selling of           agricultural   produce   and   includes   grading,           processing, storage,  transport, packaging, market           information and channels of distribution.      "On or  about 1978  judgment was  delivered by the High Court of  Karanataka in  the case of Rajasekhariah v. Tiptur Agricultural Produce  Marketing Committee  and Anr. (supra). By the  said judgment, the High Court struck down section 65 (1) and  (3) of  the  Act  which  authorised  the  levy  and collection of  market fee  on the  sellers  of  agricultural produce, and  the High  Court  in  the  said  judgment  also considered the  levy of market fee at the rate of 1 per cent on  the  buyers  of  the  agricultural  produce  levied  and collected by  certain Market Committees and upheld such levy on the  buyers of agricultural produce following the earlier judgment dated  17th December,  1974  in  Vaman  Rao’s  case mentioned hereinbefore, 272      On or  about the  30th June,  1979 Ordinance  No. 2 was promulgated which brought about the following changes:-      (a)  Section 63  of the Act which deals with powers and           duties of  the Market  Committees was amended with           retrospective  effect  from  19-5-1975  so  as  to           provide that  in clause (ii) of sub-section (1) of           section 63,  the words  "Transport and  Marketing"           shall be  substituted for  the word "Marketing" in           the said  clause. Clause (ii) of sub-section(l) of           section 63 was amended to provide for "it shall be           the duty  of the  Market Committee to provide such           facilities  for   transport   and   marketing   of           agricultural produce therein".      (b)  In sub-section (2) of section 63 of the Act and in           clause (a)  thereto, the  following  was  inserted           after item (1):                "(ia) Provide  either independently  or along           with some other authority necessary facilities for           the transport  of notified agricultural produce to           the yard in such manner as may be prescribed."      (c)  Section 65  of the  Act was amended to provide for           the following consequences:

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         (i)  The Market fee levied and collected under sub                section (1) of section 65 of the Act for the                period 19-5-1975 to 28-9-1978 was validated.           (ii) Sub-section (1)  of section  65 was deemed to                have been omitted with effect from 28-9-1978.           (iii)Sub-section (2)  of section  65  of  the  Act                providing for  the levy  of Market fee on the                buyers  of   the  agricultural   produce  was                amended by  enhancing the maximum permissible                levy there to from 1 per cent to 2 per cent.           (iv) Sub-section (3)  of section  65  of  the  Act                which dealt  with the crediting of the Market                fee levied  and collected  under  sub-section                (1) was always deemed to have been omitted. 233      Pursuant to the amendment of sub-section (2) of section 65 of  the Act  enhancing the  maximum Market  fee  leviable thereto A  from I  per cent  to 2  per cent,  all the Market Committees in  the State  (except that of Mangalore) amended the bye-laws by enhancing the Market fee leviable under sub- section (2)  of section  65 of  the Act from 1 per cent to 2 per cent  and on  such enhancement  of the market fee from I per cent  to 2  per cent,  all the buyers-traders filed writ petitions before  the High Court assailing the said enhanced levy.      By Karnataka Ordinance No. 14 of 1979, on 2nd November, 1979, the  earlier Ordinance, namely Ordinance No. 2 of 1979 was  repealed.  Another  Ordinance  on  the  same  lines  as Ordinance No.  2 of  1979 was  promulgated on  3rd November, 1979. On  9th May,  ]980,  Karnataka  Act  No.  17  of  1980 containing the  same changes  were brought as noticed in the ordinance mentioned before.      Hearing of  these writ  petitions before the High Court commenced in  October-November, 1981. Section 148 of the Act was amended by Karnataka Ordinance No. 22 of 1981 during the hearing of  these writ  petitions and  by the said Ordinance the  conditions  of  previous  publication  contemplated  in section 148  of the  Act was  dispensed  with  retrospective effect.  We   shall  have  to  advert  to  these  provisions subsequently.      Judgment was  delivered by  the High Court of Karnataka on 25th  January, 1982  in these  writ petitions. Thereafter the rate  of market  fee payable under section 65 (2) of the Act was  reduced from  2 per  cent to  I per cent by all the market committees  by Circular dated 27th February, 1984. As mentioned hereinbefore,  these appeals  challenge  the  said judgment.      Several contentions were urged before the learned trial judge and  some of these contentions were pressed before us. One of  the questions  posed was,  whether section 65 (1) of the Act (as substituted by the Amending Act 17 of 1980) read with section  42 of  the said  Amending Act  retrospectively validating the  levy and  collection of  market fees  on the sellers at one per cent for the period between 19-5-1975 and 28-9-1978 was constitutionally valid. By the said 234 amending Act it was provided that the following sub-sections shall A  be deemed to have been substituted with effect from 19th May, 1975, namely:-           "(1) In  respect of  the agricultural produce sold      in a  market area,  there shall be levied and collected      by the  market committee  thereof, from  every  seller,      market fees  at the  rate of  one per  cent of the sale      proceeds of the produce so sold;           (2) Sub-section (1) as so substituted shall be and

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    shall be  deemed to  have been omitted with effect from      the 28th day of September, 1978."      It was  contended on  behalf of  the petitioners before the High  Court that section 65 (l) as substituted by Act 17 of 1980 read with section 42 of the Amending Act, seeking to validate the  collection of  market fee  on  "sellers"  made under the  old section  65 (1) was constitutionally invalid. It must  be kept  in view  that this  validation had  become necessary  in   view  of  the  judgment  of  this  Court  in Rajasekharioh’s case  (supra) striking down sub-sections (1) and (3)  of section  63 of  the Act as these then stood. The present substituted  section 65  (1) read with section 42 of the Amending  Act sought  to  validate  the  collections  of market fee  on sellers  made when the earlier section 65 (l) was operative.      The High  Court in  the case  of  Rajasekhariah’s  case struck down section 65 (1) (3) on grounds as follows:           "(a) The  though the fees levied under sub-section      (1)  of  section  65  were  required  to  be  spent  on      construction, repair,  improvement and  maintenance  of      rural roads,  the construction or repair or improvement      and maintenance  of Rural  roads was  not  one  of  the      obligatory functions of the Market committees under the      Act; and  the construction  and  maintenance  of  rural      roads,  which  were  public  roads,  were  the  primary      responsibility of  the State  and its instrumentalities      such   as   the   authorities   under   the   Karnataka      Municipalities Act, 1976; Karnataka Municipalities Act,      1964; etc. 235           (b)  Secondly,  having  regard  to  the  essential      element in  the concept  of fee  requiring some special      benefit by A way of quid-pro-quo, "to flow to the class      of persons  on whom fee is levied, the construction and      maintenance of  public  roads  could  not  be  said  to      constitute or  provide any  such special benefit to the      payer of  the fee  who, as  members of  the public were      entitled to  the use  and benefit  of public  roads and      that they  could not be compelled to pay a fee for what      they, in common with the general public, were otherwise      entitled to as of right."      Pursuant to  the judgment  in Rajasekhariah’s case, the State was  exposed  to  the  liability  for  refund  of  fee collected for the period between 19-5-1975 when sub-sections 65 (1)  and (3)  were introduced  by the  Amending Act 24 of 1975 and  28-9-1978 when the judgment was pronounced. By the Act 17 of 1980, this levy was sought to be validated and the fee retained by the State Government.      After  discussing   the  rival  submissions  and  after discussing the  legal principles  and the  decisions in  the cases of  Misrilal Jain  v. State of Orissa,(l) Shri Prithvi Cotton  Mills   Ltd.  v.   Broach  Borough  Municipality,(2) Ahmedabad Corporation  v. New  Shirock  Spg.  and  Wvg.  Co. Ltd.,(8)  I.N.   Saxena  v.   State  of   M.P.,(4)  and  the Commissioner, Hindu  Religious  Endowments,  Madras  v.  Sri Lakshmindra Thirtha  Swamiar of Sri Shirur Mutt,(5) the High Court of  Karnataka  distinguished  fee  and  tax  and  then referred to  the case  of Kewal  Krishan Puri  v.  State  of Punjab.(") Reliance  was also  placed on the observations of this Court  in Southern  Pharmaceuticals  and  Chemicals  v. State of  Kerala(7) and  then the  Court addressed itself to the question  whether construction  of rural roads for which fee was  levied on  the sellers  can be said to be a special service primarily  and directly  intended for the benefit of the class which paid the fee.

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(1) A.I.R.1977 S.C.1686. (2) A.I.R.1970 S.C.192. (3) A.I R. 1970 S.C. 1292. (4) A.I.R. 1976 S.C.2250. (5) A.I.R. 1954 S.C.282. (6) A I. R.1980 S.C. 1008. (7) A.I.R.1981 S.C.1863. 236      After  discussing  several  decisions,  Karnataka  High Court felt  that the  second major defect noticed in the law in the  case of Rajasekhariah’s case namely the construction of rural  roads could  not qualify  for  being  reckoned  as special service to a class of persons paying the fee had not been cured  or removed  by the  law which sought to validate the levy and in view of these circumstances,  the  Court came  to the  conclusion that  section 5  (1) as substituted by  section 20 of the Amending Act 17 of 1980 as well  as   section  42   of  the   Amending  Act   was   not constitutionally valid and was liable to be struck down.      As  mentioned  before  several  other  contentions  and submissions  were urged before the learned trial Judge but before us the following main submissions were urged:      (1) There was no quid-pro-quo between the imposition of fees and  the services  rendered,  (2)  In  so  far  as  the Amending Act  17  of  1980  sought  to  validate  the  taxes realised following  the defects mentioned in Rajasekhariah’s case valid  or not, and, if not, whether the appellants were entitled to  refund of  any amount  ? (3)  Is imposition  of market fee  on Tobacco  valid ?  (4) Is  the deletion of the provisions for  previous publication  in section  148 proper and valid ?      I will,  however, notice  the other contentions briefly raised in those writ petitions.           It was contended that the Act as amended by Act 17 so far as marketing of cardamom was concerned, was repugnant to  The  Cardamom  Act.  1965.  The  High  Court  held  that Karnataka Legislature  was not entitled to impose market fee so far as cardamom was concerned. It may be noted before the High Court  that the  inclusion of  cardamom in  the Act was contended to  be bad in view of entry 52 of List I and entry 33  of  List  III  but  it  appears  the  question  was  not considered in  the light  of entry 52 of List I and entry 28 of List  II in  the present  case. The  High Court, further, found that  the rules  framed under the Cardamom Act were at variance with  the present  Act. So  far as  sugar-cane  was concerned it was held that sugarcane was outside the pale of the present Act. The Government has not appealed against the findings so  far as cardamom was concerned. In so far as the High Court held that 237 sugarcane was  outside the  pale of  the  Act,  no  argument impugning that finding was canvassed before us.      It was  for the  first time  by the  Amending Act 17 of 1980 that  tobacco was enumerated as an agricultural produce for the purpose of the Act. It may be borne in mind that the Amending Act  17 of  1980  for  the  first  time  enumerated tobacco for  the purpose  of the "Act". The amending Act was not reserved for the consideration of the President.      On a  consideration of  the provisions  of the  Tobacco Board Act,  1975  and  the  present  Act,  after  discussing various contentions,  the High  Court held that there was no repugnancy and conflict as between the provisions of Tobacco Board Act, 1975 and the present Act.      One of the main contentions urged before the High Court

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and reiterated before us was whether the Act in so far as it provided  for   regulating  the   marketing  of  tobacco  is unconstitutional as  being repugnant  to the Central Act and on the  same topic  marketing of  tobacco  is  regulated  by Tobacco Board  Act, 1975.  It should  be borne  in mind that there was  a declaration  under section 2 of the Central Act namely Tobacco  Board Act, 1975 pursuant to entry 52 of List I regarding tobacco. It was contended that tobacco after the declaration under  section 2 of the Tobacco Board Act became part of  entry 52  of List  I and it was submitted that once the declaration has made, any legislation by the State after such declaration  trenching upon  the field disclosed in the declaration must  necessarily  be  unconstitutional  because that field  or area according to the appellants was excluded from the  legislative competence  of the  State Legislature. Entry 52 of List I reads as follows:-           "Industries, the  control of which by the Union is      declared by  Parliament by  law to  be expedient in the      public interest."      There has  been a  declaration by  the Union  that  the control of  tobacco industry  has been  taken over in public interest. Thereafter  Tobacco Board Act, 1975 being Act 4 of 1975 was passed for the development under the control of the Union of  the tobacco  industry. Chapter  II of the said Act deals with  the establishment and constitution of the Board. Section 7 permits the Board to appoint committees 238 as might  be necessary  for the  efficient discharge  of its duties and  A performance  of its  functions under  the Act. Sub-section (2)  of section  7 enjoins  that the Board shall have powers  to co-opt  members. Section  8 of  the  Tobacco Board Act,  1975 deals  with the  functions of the Board and empowers by  sub-section (1)  of section  8 of  the  Tobacco Board the  duty to  promote, by  such measures  as it thinks fit, the  development  under  the  control  of  the  Central Government of  the  tobacco  industry.  Sub-section  (2)  of section   of the  said Act  lays down different functions of the Board  and, inter alia, by clause (a) permits regulating the production  and curing of virginia tobacco having regard to the  demand therefor  in India and abroad. Clause (cc) of section 8 (2) empowers the Board as follows:           "establishment by  the Board of auction platforms,      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   action  platforms  established  by  or      registered with it subject to such conditions as may be      specified by the central Government."      Section 10  provides for registration of the growers of virginia tobacco.  Section 13  provides that  no  registered grower or  curer shall  sell or  cause to  be sold  virginia tobacco elsewhere  than at  an auction  platform registered. with the  Board in accordance with the rules made under this Act or  established by  the Board under this Act. Section 14 deals with  the application,  cancellation, fees  and  other matters relating to registration. Section 14A deals with the power 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 specify.      Section  11  provides  that  no  person  other  than  a registered curer  shall cure  or  undertake  the  curing  of virginia tobacco unless he registers himself as a curer with the Board in accordance with the rules made under the Act.      Chapter V  deals with the control by Central Government

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of import  and export of tobacco and tobacco products. There are  provisions   under  section  21  for  the  issuance  of directions by  the Central  Government and  by section 22 of returns and reports. 239 Chapter VI  deals with  the penalties  and offences  by  the companies. Section  31 provides  that the  provisions of the said Act  shall be  in A  addition to, and not in derogation of, the  provisions of  any other  law for the time being in force. Section  32 provides  for the  power of  the  Central Government to  make rules.  Section I  provides that the Act will come  into force on such date as the Central Government may by  notification in  the Official  Gazette  appoint  and proviso of  sub-section 1  empowers that different dates may be appointed  for different  provisions of  the Act  and for different States  or different  parts  thereof.  Under  sub- section (3)  of section  I of  Tobacco Board  Act, 1975,  by Notification dated  31st May,  1980, the  Central Government appointed 31st  May, 1980  as the  date on which sections 10 and 11  would come  into force in the States of Maharashtra, West Bengal, Gujarat, Tamil Nadu and Uttar Pradesh.      Section 13  of  the  Tobacco  Board  Act  is  important because it  empowered that  no registered  grower  or  curer shall sell  or cause  to be  sold virginia tobacco elsewhere than at  an auction  platform registered  with the  Board in accordance with the rules made under the Act. There was some confusion at the stage of the argument as to on what date it has come  into force  or even  if it  has not specially come into force  in the State of Karnataka, by the passing of the Act  itself,  the  Center  has  sufficiently  expressed  its intention to occupy the field so as to exclude the operation of any  activity by  the State.  Our attention has, however, been drawn to a Notification being Notification No. S. 0 665 (E) dated  31st August,  1984 whereby section 13 of the said Act came  into force  in the State of Karnataka from 1st day of September,  1984. I  have already  noted the provision of section 13  of the  said Act.  It may be mentioned that this notification as such would be of no assistance to us because this notification  came into  force subsequent  to the  writ petitions and  after hearing in these matters was concluded. It was  the contention  on behalf of the petitioners that by declaration under  entry 52  of List I and by the passing of the Act  in question  i.e. Tobacco  Board Act, 1975, tobacco became an  occupied field  of Central  Parliament and  would prevail  over   the  ’Act’   irrespective  of  any  separate notification making  Tobacco Board  Act, 1975, applicable to the State  of Karnataka. In exercise of powers under section 32 of  Tobacco Board  Act, 1975  the Central  Government was empowered to  make rules.  These are  known as Tobacco Board Rules,  1976.   Rule  33   of  chapter   VII  provides   for registration of  growers,  curers,  exporters,  packers  and auctioneers of, and dealers in tobacco, 240      The High  Court was  of the  view that  unlike the  law governing A  the marketing  of Cardamom  and Sugarcane,  the Tobacco 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. According  to the  High Court the two legislations could  co-exist and  operate cumulatively.  The High Court  was of  the  view  that  any  intention  of  the superior legislature  to cover  the whole  field to  make  a comprehensive law  with regard  to marketing  of tobacco was not manifest  in the  legislation. The High Court noted that it was  not disputed  during the  arguments  that  the  only provision on  what might  be called  the area  of  marketing

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covered under  the Tobacco  Act was  the one  requiring  the auctioneers of  tobacco to  hold a licence for establishment of auction platforms. The High Court was of the view that as long as  the market  committees became such licensees, there was no further requirement under the Tobacco Board Act which could  be  said  to  render  the  provisions  of  the  ’Act’ regulating marketing  of tobacco  under the Act repugnant to or irreconcilable.  It may  ,  however,  be  noted  that  by letters dated  15th September, 1983 and 23rd September, 1983 appearing at  pages 462  and 466  of the  Paper Book, it was pointed out  on behalf  of the petitioners before this Court that the  market committees had not even upto that date been registered under  the Tobacco  Board Act, 1975, in the first letter written  to the  Market Committee  it was stated that the market  J committee  could  not  be  given  registration because these  lacked certain  necessary qualifications  and was therefore  incapable of  rendering any  service at  all. Here it  may have to be borne in mind that section 12 of the Tobacco Board  Act, 1975 enjoins that no person shall export tobacco or  any tobacco  products or  function as  a packer, auctioneer of,  or dealer  in, tobacco  unless he  registers himself with  the Board  in accordance  with the  rules made under this Act.      The High Court took the view that on the limited aspect of marketing  provided for  Tobacco Board  Act, 1975 it only made provisions  in relation to virginia tobacco and not for all varieties  of tobacco.  The High  Court therefore was of the view  that the  provisions of the Act were not repugnant to the  Tobacco Board  Act, 1975  and all that was necessary for the market committees was to obtain auctioneer’s licence under the  provisions of  Tobacco Act  1 and’  or to get the necessary  qualifications   so  as  to  be  able  to  obtain necessary licence.  The High  Court came  to the  conclusion that provisions  of the Act in relation to the regulation of tobacco were 241 not repugnant  to the Act. The High Court further noted that neither the  Union of  India nor  the Tobacco Board had been impleaded as  parties to  the writ  applications before  the findings on  these contentions  were strenuously  challenged before us  on behalf  of the  appellants. On  behalf of  the appellants, it  was urged  that tobacco was covered by entry 52 of List I by virtue of the declaration under section 2 of the Tobacco  Board Act,  1975 namely the Central Government. It was submitted that once a declaration had been made under section  2,   pursuant  to  Entry  52,  the  Parliament  had exclusive competence  to legislate  every aspect or activity pertaining to tobacco and the State would have no competence to legislate on that topic.      Reference was  made to  the decision  in  the  case  of Baijnath Kedia v. State of Bihar & Ors.(1)      I need  not detain  ourselves on  the permissibility of the regulation  of marketing  of  cardamom  under  the  Act, because the same was not canvassed before us.      So far  as the  point relating  to ’wood’  and  ’forest produce’ was  concerned, the High Court felt that this point was concluded  by the  pronouncement of  this Court  in  Ram Chandra Kailash  Kumar & Co. v State of U.P.(2) In any event we are  not concerned  with this controversy as the same was not canvassed before us.      lt was  contended that section 65(2) of the Act gave an uncanalised and  excessive power to the market committees in the matter  of specifying  the rate  of fee. The upper limit for the  levy was  fixed at  2 per  cent. It  could only  be related to  the notified  agricultural produce  sold in  the

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market. The  concept of  fee is itself a further limitation- The High Court therefore was unable to accept the submission that section  65(2) was  bad  for  excessive  delegation  of legislative powers.      It was  contended that  the bye-laws  were unreasonable and without  proper criteria. Reliance was placed before the High Court  on the  decision in the case of Maneka Gandhi v. Union of India (3) (1) [1970] 2 S.C.R. 100 at 113. (2) A.l.R. 1980 S.C. 1124. (3) A.l.R. 1978 S.C. 597, 242 and Ajay  Hasia etc.  v. Khalid Mujib Sehravardi & Ors. etc. (1).  The   A  High  Court  has,  however,  found  that  the legislative measure  could not  be invalidated on the ground that the  relevant criteria was not shown to have been taken into account  in making the legislation. Reliance was placed in Tulsipur  Sugar Co.  v. Notified Area Committee, Tulsipur (2) and  in the  said case on the observations of Megary, J- in  rates  v.  Lord  Hailsham  of  St.  Marylebone  (3)  the following effect:           "...... Let me accept that in the sphere of the so      called quasi judicial the rules of natural justice run,      and that in the administrative or executive field there      is a  general duty  of  fairness.  Nevertheless,  these      consecrations do  not seem  to me to affect the process      of legislation  whether primary  or delegated.  Many of      those affected  by delegated  legislation, and affected      very substantially,  are never consulted in the process      of enacting  that legislation;  and yet  they  have  no      remedy .. ."      I am  in respectful  agreement with the aforesaid view. It may further be noted that a minister or any other body in making legislation  was not  subject  to  rules  of  natural justice. See  in  this  connection  Prof.  Wade’s  ’Judicial Review of  Administrative Action ’, 4th Edn. page 185 at 192 (De Smith).  Though we  are in  general agreement  with  the aforesaid view,  the High  Court, however,  did  not  detain itself on this point because the High Court, was of the view that the  fixation of  market fee was challenged not because the persons  concerned were  not heard but because there was no quid pro quo.      The High  Court felt that the challenge to the doctrine of ultra  vires on  the  basis  that  hearing  of  interests affected was  an imperative  requirement, not  in compliance with rules  of natural justice but as a duty implicit in the nature of  the power.  Section 148(1)  of  the  Act,  as  it originally stood  provided that  a  market  committee  could frame bye-laws  after previous publication in the prescribed manner and  also with  the previous  sanction of  the  Chief Marketing Officer.  The contention  was  that  no  procedure having been prescribed by the (1) A.l.R. 1981 S.C. 487. (2) A.l.R. 1980 S.C. 882. (3) [1972] I W.L.R. 1371. 243 rules, the  concepts implicit  in previous  publication  and incorporated in  section 23 of the General Clauses Act, 1897 were attracted.  It was  A urged  that  there  had  been  no compliance with  the requirement  of previous  sanction  and publication contemplated  in this  section. As the narration of events  indicated before,  an  Ordinance  was  introduced namely Karnataka  Ordinance No. 22 of 1981 during the period when the  arguments in  these cases  were coming  to a close before  the  High  Court.  The  amendment  sought  to  amend

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sections 137,148  and 158 of the principal Act. By section 3 of the  Ordinance which amended section 148 of the principal Act, the words "after previous publication in the prescribed manner" occurring in section 148(1) of the principal Act had been deleted  with retrospective  effect i. e. from the date of commencement of the Act itself. It was contended that the requirement of  hearing of interests affected was not merely a procedural  requirement of  Section 148  of the Act but an exercise inherent  in the  exertion of  power  of  delegated legislation. The very concept of ’fee’ and the determination of its extent and incidence by subordinate legislation would require for  its reasonable  exercise an opportunity for the interests affected being heard, it was submitted.      On behalf  of the Market-committees and the Government, it was  contended that  on a  proper construction of section 65(2) of  the Act,  such an  implication of  a duty  to hear affected interests  did not  at all  arise. Any  argument of such a statutory implication could not survive the amendment made by  Ordinance of  17th December,  1981 which,  in turn, clearly took away the obligation of prior hearing.      The High  Court was of the opinion that the authorities relied on  before  it  indicated  that  the  opportunity  of consultation and hearing P of affected interests were merely informal and  extra-judicial. The High Court referred to the observations in  Wade’s Administrative  Law and  referred to certain decisions.      The High  Court was  of the  view that persons affected did not  have any  right to  be heard  before the  statutory rules or  bye-laws were  made unless the right was conferred by the statutes.      The High  Court ultimately  came to the conclusion that in the  batch of  cases, this  was not of much importance on the ground  that  by  specific  and  express  provisions  of section 5  (a) of  the amending  Ordinance  which  validated these  bye-laws   notwithstanding  the  fact  that  affected interest were not heard in any manner. 244      The Advocate-General  stated before the High Court that A though  there was  no obligation,  it would  be  eminently desirable to  consult or  ascertain the  views of  those who would be  affected and  the High  Court, therefore, observed that before  a market-committee  proposed to amend a bye-law to make  an upward  revision of  rate of fee, in future, the market committee  could follows the directions of this Court in Kewal  Krishan Puri’s  case and the High Court, suggested certain means.  Ultimately,  the  High  Court  came  to  the following conclusions:           (a) Section  65(2) of  the Act  did not  confer an      unguided, arbitrary  power and  there was  no excessive      delegation  of   legislative  power   to  the   market-      committees and therefore not vitiated on that account;           (b)  The   question   whether,   upon   a   proper      construction, section  65(2) must  be held  to imply an      obligation on the part of the market committees to hear      affected interested  parties before the rate of fee was      fixed, was  left open with certain observations made in      that judgment.           (c) The contention that challenged the bye-law for      want of  previous sanction  under section 148(1) of the      Act was not accepted.      It had  been contended before the High Court that there was discrimination  on the ground that there was levy of the same rate  of fee  on all  types of  produce. The High Court repelled this  contention relying  mainly on the decision of this Court  in the  case of  Ganga Sagar Corporation Ltd. v.

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The State of Uttar Pradesh and Others.(1)            One of the main contentions urged before the High Court was  that there  was no  quid-pro-quo. The  High Court examined this  contention  with  reference  to  the  factual details.          The High court referred to the decision in the case of  Kewal   Krishan  Puri  (supra)  and  observed  that  the following seven principles were laid down by this Court:      (1)  The amount  of fee realised must be ear-market for           rendering  services   to  the   licensees  in  the           notified      (1) A.I.R. 1980 286. 245           market area  and a good and substantial portion of           it must be shown to be expanded for this purpose.      (2)  The services  rendered to the licensees must be in           relation to  the transactions  of purchase or sale           of the agricultural Produce.      (3)  While rendering  services in  the market  area for           the purpose  of facilitating  the transactions  of           purchase and sale with view to achieve the objects           of the  marketing legislation  it is not necessary           to  confer   the  whole  of  the  benefit  on  the           licensees  but   some  special  benefits  must  be           conferred on  them which  have a direct, close and           reason- able correlation between the licensees and           the transactions.      (4)  While conferring  some  special  benefits  on  the           licensee, it is permissible to render such service           in the market which may be in the general interest           of all  concerned with  transactions taking placed           in the market.      (5)  While spending  the amount  of market fees for the           purpose of  augmenting the  agricultural  produce,           its facility  to  transport  in  villages  and  to           provide   other   facilities   meant   mainly   or           exclusively for  the benefit of the agriculturists           is  not   permissible  on  the  ground  that  such           services in the long run go to increase the volume           of transaction in the market ultimately benefiting           the traders  also. Such  an  indirect  and  remote           benefit to  the traders  is in  no sense a special           benefit to them.      (6)  The element of quid-pro-quo may not be possible or           even necessary to be established with arithmetical           exactitude but even broadly and reasonably it must           be established  by the  authorities who charge the           fees that  the amount is being spent for rendering           services to  those on whom falls the burden of the           fee.      (7)  At least  a good  and substantial  portion of  the           amount collected on account of fees, may be in the 246           neighbourhood of  two-thirds or three-fourths must           be shown  with reasonable certainty as being spent           for rendering services of the kind noted before.      The High  Court by  an order  dated 30th November, 1981 had directed  the Chief  Marketing  Officer  to  furnish  in respect  of   each  marketing   committees  a  comprehensive statement in  a tabulation  from setting out certain factors which were  relevant for  determination  of  this  question. These factors  have been  mentioned in  the judgment  of the High Court.  Such statements or similar statements were duly filed.      The High  Court noted  that out of 33 market committees

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which  were   involved,  2   were  tobacco  markets.  Market committees   whose    routine   recurring   annual   revenue expenditure was  somewhere in the nature of 45 to 60% of the market-fee receipt  formed one  group. The  High Court  felt that in  the case  of these  market committees  even  though revenue  expenditure  did  not  sufficiently  establish  the requisite degree of correlation. It was reasonable to assume that  having   regard  to   the  extent  of  infrastructural facilities available  in most  of the  modest allocations on future development work of non-controversial kind will bring about the  correlation required  to pass  the test of market fee.      The High  Court observed  that  the  market  committees where  the  routine  recurring  annual  revenue  expenditure itself was  over 60% of the receipts of the market-fee at 2% thereby established  a broad and substantial correlation. In the case  of these  markets, the  High Court  felt  that  no further investigation was required.      In  this   class  of  cases  were  included  33  market committees. Their  names are  tabulated at  page 140  of the High Court  judgment (page  314 of  the Paper  Book).  These market committees were classed as Category ’A’.      The High  Court at page 315 of the Paper Book (page 141 of the  judgment) tabulated other markets and the High Court felt  that   in  case   of  those   markets,  estimates  for developmental work  need not  also be  subjected  to  minute examination. These  markets were  16 in number and mentioned in the judgment of the High Court namely, (1) Doddaballapur, (2) Gubbi, (3) Sira, (4) Jamkhandi, (5) Kundgoi. 247 (6) Laxmeshwar, (7) Siruguppa, (8) Aurad, (9) Gulbarga, (10) Nalwar, (11)  Shorapur, (12)  Yadgir,  (13)  Yelburga,  (14) Kollegal, (15)  Bhadravati and  (16 Manvi. These are classed as Category ’B’.      The next  category was  market committees whose routine annual  revenue   expenditure  plus   proposed  outlays   on infrastructural   and   developmental   works   which   were indubitably relatable  to services  to the  buyers showed  a broad  correlation.  These  were  about  14  in  number  and mentioned at pages 142-143 of the judgment (pages 315-316 of the Paper  Book). These  market committees  were classed  as Category C.      In Category  ’D’, the  High Court mentioned ten markets where  there  were  proposals  for  outlays  on  account  of permissible items of expenditure vis-a-vis the Buyers-fee.      Then the  High Court in Category ’E’ dealt with markets whose I.  financial estimates  required to  be  individually examined. These  were the  regulated markets  of  Bangalore, Hubli, Sagar,  Bijapur. Raichur, Gadag, Tiptur and Siddapur. The High  Could was  of the  opinion that correlation of fee and services  could not be reckoned on the basis of receipts and expenditure for one or two years only.      The High  Court noted  and in our opinion rightly, that these regulated  markets were  yet in developmental stage, a stage which  should be  marked by  rapid growth. The initial planning and  the infrastructure must be taken into account, not only  potentialities for  growth and  expansion  in  the immediate near future but also long range possibilities. But apart from  such basic  infrastructure,  which  stood  on  a different  footing,  the  benefit  of  utilitarian  projects relatable to  and  developed  from  fee  resources  must  be available  to   the  payers  of  the  fee  for  at  least  a considerable part  of the  period, covered  by the financial estimates and  projections. The High Court noted that if the logic of  some of  the market  committees in this behalf, is

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pushed to  its logical  or illogical conclusions, would mean that the  present generation  of fee-payers  would  pay  for services  which   would  only   be  available  to  the  next generation The  High Court  was of the view that levy of fee could not  be justified on such wholly prospective services. The High  Court, however,  was of  the view  that during the period  of  execution  of  the  works  particularly  at  the formative stages  of the  markets the  actual benefit of the services 248 might not be available to the payers of the fees; but if the execution A  of the  work is so planned as to apply over the years in  future as to be incapable of providing any service to the  class of  fee-payers  for  and  during  at  least  a considerable part  of the  unit of  time-in these cases a 15 years’ period  from 1974-75  to 1988-89  fixed by the market committees themselves then the concept of quid-pro-quo would dwindle down  to something  which could not be characterised as illusory..      The High  Court then  dealt in detail with the category of markets  mentioned herein before classed as Category ’E’. It was  contended that  buyers of different kinds of produce were differents,  therefore service  to one  kind of  buyers would not  be service  to the  other kind  of  buyers.  Such argument based on the dichotomy of service as between buyers of different  kinds of goods for example, buyers of rice and buyers of  vegetables, was  rightly   rejected by  the  High Court.  Such  an  argument  ignored  practical  and  working problems.      On a  detailed examination of the factual position, the High Court  was of  the view  that it should go by financial projections made. These aspects were directed to be examined by the  Chief Marketing Officer and the market committees in terms of certain directions that the High Court gave which I shall mention later.      The High  Court, however, felt that on the basis of the estimate as  these stood  the enhanced  levy  could  not  be quashed.      So far  as Hubli  market committee  was concerned,  the High Court  dealt with it in detail. Amongst the items which were specially  mentioned was  an item  of outlay of Rs. 150 lakhs proposed  for construction  of large  godowns,  second item was of Rs. 60 lakhs for construction of shops and small godowns; and  the third  item was the proposed outlay on the ’museum’ and the fourth item was the estimated outlay of Rs, 75 lakhs for acquisition of 466 acres of land.      After detailed  examination of these projects, the High Court was  of the  view that  the  market  committees  would perhaps be  in a  position to  establish a broad and general correlation of 66 per cent 249 On the  basis of  its present  proposals and  the High Court came to the conclusion that these were not unreasonable.      As mentioned  hereinbefore, there  was an outlay of Rs. 75 lakhs on the aquisition of land. The provisions of Rs. 75 lakhs was  a modest  estimate and it could not be said to be unreasonable. So  far as the outlay on museum was concerned, it was  an essential  amenity for dissemination of ideas and it was therefore valid.      The High  Court then  examined in detail the markets of Sagar, Bijapur,  Raichur, Tiptur,  Gadag and  Siddapur.  The High Court  for the  reasons recorded and taking all factors into consideration  came to the conclusion that though there was room for criticism, on the whole, however taking all the relevant factors  into consideration  it could  not be  said

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that the projections were unreasonable.      I am  in agreement  with the  High Court that there was limitation on  the powers  of the  Court in a controversy of this  nature.   In  ascertaining   whether   the   necessary correlation between  the services  and fee  existed or  not, what was  required to  be examined  was  only  a  broad  and general correlation  not an  equivalence  with  arithmetical accuracy and  precision. The Court was neither equipped for, nor should it permit itself, the role of inspecting auditors much less  should it  assume the  role of technical experts. The other  aspect which  should be borne in mind was that in scrutinising the  items of  work and  services undertaken by market committee, in case of this kind where the controversy was confined  to the  existence of correlation. the exercise was not  whether the  items of  work should or should not be undertaken  by  the  market  committees.  The  question  was somewhat different.  The courts  merely examined whether the outlays on  the concerned works and services qualified was a special service vis-a-vis the ’Fee’.      The High  Court as  a result  of the  discussion of the aforesaid markets  came to the conclusion that it was unable to hold  on the  materials placed  before it  that the  levy ought to  fail for  want of  quid-pro-quo.  However,  having regard to  the infirmities  noticed in the estimates and the financial projections of the proposed developmental works on the  basis  of  which  the  enhancement  was  sought  to  be justified, they  were unable  to say with any confidence and without reservations  that the enhancement of fee, depending as it did on those 250 estimates was  totally justified.  The High Court was of the opinion A  that some  time bound program was necessary to be given for  a second look at the estimates. At the invitation of the  Advocate General  and the  counsel  for  the  Market Committee, the  High Court was of the opinion that there was obvious scope and imperative need for giving some directions and  the  High  Court  gave  certain  directions  which  are contained in  paragraphs 109  onwards of the judgment of the High Court.  This part  of the  judgment  has  come  in  for criticism because  on behalf  of the petitioners/appellants, it was  contended that  in fact the High Court had abandoned its obligation  to come to a finding whether there was quid- pro-quo or  not when  there was  a challenge  on that point. Therefore, it  was contended  that there was no quid-pro-quo established in  respect of  these markets. On the other hand it was  contended that  the  High  Court  did  come  to  the conclusion that  there was  quid-pro-quo but  the High Court gave certain directions which it was competent to give. This position will be dealt with in this judgment later.      The High Court came to the following conclusions           (a) that  the provisions  of section  65(1) of the      Karnataka Agricultural  Produce Marketing  (Regulation)      Act, ;966  and section  42 of  the Karnataka  Act 17 of      1980 in  so far  as and  to the  extent these sought to      validate the  levy of  market fee  on sellers  for  the      period between  19.5.1975 and  28.9.1978 were  declared      unconstitutional and void;           (b) the  provisions of  the Karnataka Agricultural      Produce Marketing  (Regulation) Act, 1966, in so far as      these sought to provide for the regulation of marketing      of cardamom was concerned, were held to be repugnant to      the provisions of Cardamom Act, 1965:           (c) the provisions of the Karanataka  Agricultural      produce Marketing  (Regulation) Act, 1966, in so far as      these sougth to regulate the marketing of sugarcane was

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    concerned, were  held to be repugnant to the provisions      of the  Sugarcane (Control)  Order, 1956,  a  statutory      order made under section 3 of the Essential Commodities      Act, 1955; 251           (d) the  High Court  directed that Chief Marketing      Officer should, within four months from the date of the      A judgment  of the  High Court,  evolve and standardise      specifications   and   norms   with   regard   to   the      infrastructural and  developmental requirements for the      market-yards and  sub-market yards  and communicate the      same to  the market  committees in terms indicated. If,      upon such  scrutiny, the market-fee under section 65(2)      now being levied at 2 per cent was found, in respect of      any market  committee, to be excessive and without quid      pro quo, the Chief marketing Officer should make orders      under section  ] 5()  directing a suitable reduction in      the quantum  of the market fee of the market-committees      concerned.      So far  as the  prayer for  issue of mandamus directing refund of  sellers’  market-fee  paid  under  section  65(1) sought  by  producer  sellers  and  trader-sellers  who  had earlier approached  the High  Court was  concerned, the High Court directed  that mandamus  should issue.  In so  far  as producer-sellers  and   other  petitioners  who  were  trade sellers who  had paid sellers fee under section 65(1) of the Act, a mandamus to the State Government and to the concerned Market  Committees  was  directed  to  be  issued  in  terms indicated in the judgment of the High Court.      With the  other directions of the High Court for refund and otherwise, it is not necessary to detain ourselves..      The following  broad questions were canvassed before us for consideration in these appeals:           (1)  Whether   the  government   and  the   market      committees had  been able  to establish  that there was      quid-pro-quo and  as such  levy of fee and the increase      of fee  from 1 per cent to 2 per cent was justified? It      may be mentioned that after this judgment, the levy was      decreased from 2 per cent to I per cent again.           (2) Whether there could or should be refund of any      of these amounts to any of the parties?           (3)  Whether  the  High  Court  had  come  to  any      definite conclusion  in respect  of  the  eight  Market      Committees mentioned hereinbefore? 252           (4) Whether  the High  Court had  abandoned its  A      jurisdiction in  not coming  to a  definite  conclusion      about the  required correlation to sustain quid pro quo      for the imposition of market fees?           (5) Whether  the High  Court was competent to give      directions to  the Market  Committees in  the manner it      had done?           (6) 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  item 54  of  List  I  of  the  VIIth      Schedule, or  whether  the  State  Legislature  had  no      competence to  legislate on  this  point  as  such  the      impugned legislation was ultra-vires ?           (7) Whether  the amendment  of section  148 of the      Act as  mentioned aforesaid  whereby the opportunity of      previous publication was deleted was valid or not?      It is  necessary now  to deal with the contentions that arise in  these  appeals  as  enumerated  hereinbefore.  The rationale and  the necessity  for the  imposition of fees in

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contra-distinction of  ’tax’ have been recognised for a long time.  Our   Constitution  has  recognised  the  distinction between ’taxes’  and ’fees’.  Entry 66  of List  II  of  VII Schedule  speaks   of  ’fees’   in  respect  of  the  matter enumerated in  List It. Similarly, Entry 96 of List I of VII Schedule speaks  of fees’ in respect of matters mentioned in List 1.  Entry 97  of List  I speaks  of ’tax’.  The classic distinction  between   the  two   was  reiterated   in   the observations of J. Latham in the case of Matthews v. Chicory Marketing Board (60 Commonwealth Law Report p. 263). A ’tax’ is a  compulsory exaction  of money  by public authority for public purposes  enforceable by  law and  is not payment for services rendered.  In the  case of  The Commissioner, Hindu Religious  Endowments  Madras  v.  Sri  Lakshmindra  Thirtha Swamiar of  Sri Shirur  Mutt.,(l) this court reiterated that ’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 a payment for a special benefit or  __ privilege’. (1) 119541 S.C.R. 1005, 253      From time  to time  in several  decisions the  need for imposition  of  fees  by  the  market-committees  have  been emphasised  and   A  examined.  Rajamanner,  C.J.  and  T.L. Venkatarama Aiyar, J. in the case of Kuttf Keya v. The State of Madras(l)  dealt with  the marketing legislation and need for the  same and  referred  to  the  report  of  the  Royal Commission on  Agriculture in  India. The  decision  of  the Madras High  Court was  affirmed by  a Constitution Bench of this Court  in the  case of  Arunachala Nadar  v.  State  of Madras(2) where  Subba Rao, J. referred to the background of the marketing  legislation. It  is not  necessary to deal in detail with the said decisions,      Most of  these decisions were reviewed by this Court in judging the  validity of  fees imposed  in the case of Kewal Krishan Puri  (supra). Several  principals deduced  from the decision in  Kewal  Krishan  Puri’s  case  have  been  noted hereinbefore. Prior  thereto the  question was considered in the case  of  Government  of  Andhra  Pradesh  v.  Hindustan Machine Tools  Ltd.(3) which  was  noted  in  Kewol  Krishan Purl’s case.  Kewal Krishan  Puri’s case  specifically noted that the  element of quid pro quo might not possible of even necessary to  be established  with  arithmetical  exactitude even broadly  and reasonably  it must  be established by the authority which  charged the  fees that the amount was being spent for  rendering services  to those  on  whom  fell  the burden of  the fee.  At least  a good and substantial amount collected on  account of  fees might be in the neighbourhood of 2/3rd or 3/4th must be shown with reasonable certainty as being spent  for rendering  services to  those from whom the fees are  realised. The  Court, however,  noted  that  while conferring special  benefits to  the licensees  or payers of fees, it  was permissible  to render  other services  in the market which  might  be  in  the  general  interest  of  all concerned in  respect of transactions that take place in the markets. Services  rendered  to  the  licenses  must  be  in relation to  the transactions of purchase or sale of produce in the  market. It  is not necessary, however, to confer the whole of  the benefit  on the  licensees  but  some  special benefits must  be conferred  on them  which have  a  direct, close, and  reasonable correlation between the licencees and transactions. But  imposition of  fees for  general  benefit like augmenting  the agricultural  produce, its  facility of transport in villages and to provide other (1) A.T.R. 1943 MAD 621.

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(2) A.I.R. 1959 S.C. 300. (3) [1975] Supp. S.C.R. 394. 254 facilities meant  mainly or  exclusively for  the benefit of agriculturists A was not permissible on the ground that such service in  the long run augmented the volume of transaction in the  market ultimately  benefiting the  traders. Such and indirect benefit  could not  be considered  to be sufficient quid-pro-quo to justify imposition of market-fee.      This question  was examined  in the  case of  H.H. Shri Swamiji of  Shri Admar Mutt, etc. v. the Commissioner, Hindu Religious &  Charitable Endowments  Department &  Ors(l) The correlation was  again reviewed  in the decision in the case of Ramesh  Chandra etc.  v. State  o f  U  P.  etc.(2)  This question was  again examined  by this  Court in  the case of Municipal Corporation  of Delhi  and Others  v. Mohd. Yasin. (3) There  this Court  reiterated that  the mere  fact there others besides those paying the fees were also benefited did not detract from the character  of the fee. Tn fact the special benefit or advantage to the payers of  the fees might even be secondary as compared with the primary motive of regulation in the public interest. The Court was  not  expected  to  assume  the  role  of  a  cost accountant. It  is neither  necessary nor expedient to weigh too meticulously  the cost  of the  services  rendered  etc. against the amount of fees collected so as to evenly balance the two. A broad correlationship was all that was necessary. Quid pro  quo in  the strict  sense is  not the one and only true index  of a fee; nor is it necessarily absent in a tax. A.P. Sen,  J. in  the said  decision observed at page 235 of the report as follows:-           "What do  we learn from these precedents? We learn      that there is no generic difference between a tax and a      fee, though  broadly a  tax is a compulsory exaction as      part of a common burden, without promise of any special      advantages to  classes of tax payers whereas a fee is a      payment for  services  rendered,  benefit  provided  or      privilege conferred.  Compulsion is not the hallmark of      the distinction between a tax and a fee. That the money      collected (1) [1980] I S.C R. 368. (2) [1980] 3 S.C.R. 104. (3) 11983] 3 S.C.C. 229. 255      does not  go into a separate fund but goes into the con      solidated fund  does not also necessarily make a levy a      A tax.  Though a fee must have relation to the services      rendered, or  the advantages  conferred, such  relation      need not  be direct;  a mere  casual  relation  may  be      enough. Further,  neither the  incidence of the fee nor      the service  rendered need  the  uniform.  That  others      besides those  paying the  fees are also benefited does      not detract  from the character of the fee. In fact the      special benefit  or advantage to the payers of the fees      n-ay even  be secondary  as compared  with the  primary      motive of regulation in the public interest. Nor is the      court to  assume the  role of  a cost accountant. It is      neither  necessary   nor   expedient   to   weigh   too      meticulously the  cost of  the services  rendered  etc.      against the  amount of  fees collected  so as to evenly      balance the two. A broad correlationship is all that is      necessary. Quid  pro quo in the strict sense is not the      one and only true index of a fee, nor it is necessarily      absent in a tax."      In the  case of  Southern Pharmaceuticals  &  Chemicals

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Trichur &  Ors. Etc.  v. State  of Keral & Ors. Etc.(1) This view as  again reiterated  at page  542 of  the report, A.P. Sen, J. Observed as follows:-           "It  is  now  increasingly  realised  that  merely      because the  collections for  the services  rendered or      grant of  a privillege  or licence,  are taken  to  the      consolidated fund  of the  State and are not separately      appropriated towards  the expenditure for rendering the      service is  not by itself decisive. That is because the      Constitution did not contemplate, it to be an essential      element of  a fee  that it  should  be  credited  to  a      separate fund  and not  to the consolidated fund. It is      also increasingly realised that the element of quid pro      quo stricto  senso is  not always  a sine  quo non of a      fee. It  is needless to stress that the element of quid      pro quo is not necessarily absent in every tax." (1) [1982]1 S.C.R. 519. 256      The learned  judge at  page 543  of the report observed that  the   A  traditional  concept  of  quid  pro  quo  was undergoing a transformation.      It is  not necessary,  however, for the purpose of this case to  express any  opinion as  to whether the traditional concept of quid pro quo is undergoing any transformation and if so  to what  extent? Even  on the  basis  of  traditional concept it  is well-settled  that though  there must be some special services  to the  payers of the fees, to be a fee it is not necessary that all the services must be to the payers of the  fees nor  can the correlation between payment of fee and  services  rendered  be  established  with  mathematical exactitude. It  is permissible  in the modern set up to take into account  projections  into  future  and  not  only  the present  services   can  be   utilised  for  justifying  the imposition of fee. All planning, project into the future for its existence and survival.      Any incidental  benefit to  those other than the payers of the fee is not decisive of the fact whether it is a ’tax’ or a  ’fee’. It  is necessary to find out the primary object and essential purpose of the imposition (emphasis supplied). If  the   primary  object   and  essential  purpose  of  the imposition be  service of  some special kind to the users of the market  or payers  of fee,  other consequences  or other benefits to  others do not in the least affect the position. The concept of benefit to the users of market must he looked at from  a  broad  commonsense  point  of  view,  taking  an integrated view.  In today’s  world you  cannot build a good market if  the accesses  through which  the produce comes to the market  are not  maintained. However,  at what point the roads will  begin and at what point the roads will end to be able to  justify the  roads necessary to maintain solely the market, appears to be highly theoretical and unreal question in the modern concept of integrated development.      In the case of Sreenivasa General Traders and Others v. State Of  Andhra Pradesh  and Others(1),  a bench  of  three judges of  this Court  had to  deal with  this question. The said decision reiterated the distinction between a fee and a tax and  observed that  a tax was levied as part of a common burden, while a fee was for payment of a specific benefit or privilege although  the special  advantage was  secondary to the primary motive of regulation in public interest (1) [1983] 4 S.C.C. 353. 257 According to this decision in determining whether a levy was of fee,  the true  test must  be  whether  its  primary  and essential purpose  was A  to render  specific services  to a

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specified area  or class; it might be of no consequence that the State  might ultimately and directly be benefited by it. There must,  however, be a reasonable relationship between a levy of fee and the services rendered to the payers of fees. According to  this decision,  Kewal Krishan  Puri’s case did not lay  down any  legal principle of general applicability. Sreenivasa General  Traders’ case  (supra) was  approved  by another decision of the bench of three learned judges in the case of  Amar Nath Om Parkash & Ors. etc. v. State of Punjab & Ors.(l) (Judgment delivered by O. Chinnappa Reddy, J.).      Prior to  all this, in the case of State of Maharashtra & Ors.  v. The  Salvation Army,  Western India Territory(1), this Court  had to consider the question of fee under Bombay Public Trust Act, 1950. The Court noted that fee was defined as a charge for a special service rendered to individuals by the Government  or some  other agency like a local authority or statutory  corporation. The  amount  of  fee  levied  was supposed to  be based  on expenses incurred in rendering the services, though  in many  cases the  cost  was  arbitrarily assessed. This  Court noted that fees were generally uniform but absence of uniformity was not a criterion on which alone it could  be said that levy was in the nature of a tax. As a fee was  regarded as  a sort  of return or consideration for services rendered,  it was  necessary that  levy  should  be correlated  to   the  expenses  incurred  in  rendering  the services. This  Court in  Salvation Army’s  case  reiterated that in might not however be possible to prove in every case that the  fees collected always approximated to the expenses that were  incurred in  rendering  the  particular  kind  of services or  in  performing  any  particular  work  for  the benefit of  certain individuals.  In that  case,  the  Court found that  revenue expenditure was about 62 per cent of the amount of  revenue receipts  from 1953  to 1970 and this was considered approximate  correlation and  the Court held that the levy  was in  the nature  of a fee. The Court dealt with the question  of G capital expenditure and observed that the expenditure in  constructing buildings for locating the head offices and  regional offices and the increase in allowances or other amenities to the staff had also to be (1) Civil  Appeal  Nos.  4500  and  4501  of  1984-(judgment delivered by 19.1 1.1984). (2) [1975] S.C.R. 475, 258 included in  the cost  of services.  The Court observed that when A  there was a surplus it could not immediately be said that the  surplus must  necessarily go  in reduction  of the rate of contribution to be levied thereafter. This Court was of the view that it was neither expedient nor prudent to lay down  any  abstract  proposition  that  whenever  there  was surplus in  a particular  year or  years that  surplus  must always  be   taken  into   consideration  and  the  rate  of contribution  should   be  reduced  for  the  next  year  or subsequent years.  An organisation  like the  Salvation Army had to  incur capital  expenditure for the better allowances or other  amenities  to  the  staff  and  these  had  to  be included. tn after taking into account the capital and other expenditure  necessary   for  efficient  functioning  of  an organisation for  the better  administration of Trust a very large surplus  was still left then, the Court noted that the question would arise whether then it was permissible for the organisation to  continue the  levy at  the rate which would only result  in further  surplus and  to invest  the surplus solely for earning income or to divert the surplus for other objects. The  Court noted that it was not necessary that all available surplus  should always  go in reducing the rate of

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contribution for  subsequent years,  the organisation  could not be  allowed to  accumulate  unreasonable  amounts  i.e., amounts which  might not  reasonably be  required for proper and efficient  working of  the organisation.  In drawing the line, however,  the Court would have to look into the nature of the  organisation, the  potentiality of  its growth,  the multiplication in  its work  consequent or its expansion for rendering to  services  visualised  and  the  necessity  for capital expenditure  in near  future and  also the amount of levy collected  or expected  to  be  collected.  It  may  be mentioned that  in  the  case  of  Indian  Mica  &  Micanite Industries Ltd.  v. State  of Bihar  & Ors.(1)  whether in a particular  case   there  was  a    correlation  or  not  is essentially a question of fact.      As has been noted estimates had been filed on behalf of the various  market committees  before the High Court. These estimates  were   criticised  on   behalf  of   petitioners- appellants  as   being  totally   at   variance   with   the corresponding estimates  furnished for  the same  period and furnished   for   1974-75.   The   present   estimates   and projections, it  was submitted  on behalf of the appellants, were prepared  only with a view to supply an artificial quid pro quo for the enhanced levy and were merely show-pieces on paper to get over the (3) [1971] Supp. S.C.R. 319. 259 present challenge.  It was  further  contended  that  having regard to the pace of growth and performance levels over the past seven  years A  out of the fifteen years period, it was unreasonable  to   expect  that   the   huge   developmental activities now  projected for  the  next  eight  years  were really intended to be acted upon.      Secondly, it  was submitted  that the  disparities  and variance in  the proportion of the proposed development from market-yard to market-yard were so glaring that no authority in  the  position  of  the  Chief  Marketing  Officer  could reasonably approve  of  such  uncoordinated  and  disjointed development of the regulated markets.      Thirdly, it was urged that many items of work envisaged in the  development schemes  such as  construction of shops, godowns and  the like  were  unrelated  to  the  concept  of special service  to the  buyers and could not be reckoned as qualified for  correlation, and  that if these impermissible items were deleted from the estimates, the market committees would not  be in a position to establish the requisite quid- pro-quo.      Fourthly, it  was said  that a  substantial part of the proposed financial  outlays related  to development  of what were  called   "Rural  Markets"   and  these   outlays  were ineligible to be reckoned as special service to the buyers.      The  High   Court  in   its  judgment   analysed  these submissions and  contentions carefully with reference to the financial statements  and projections  filed by  the market- committees  and   these   statements   were   discussed   at considerable length by the High Court.      In the  context of the said contentions urged on behalf of the  appellants, the  High Court  had examined  the  said statements and projections and recorded findings on these in its  judgement.  The  High  Court  had  also  given  certain directions. It was, therefore, submitted that the market fee on the  buyers of  the agricultural  produce was  originally levied at  3 )  p. which was increased to I per cent and was further increased from l per cent to 2 per cent and the said enhancement of  market  fees  was  thus  challenged  by  the appellants on  the ground  of non-existence  of quid pro quo

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and the  respondents-market committee  attempted to  justify the enhanced  levy of  2  per  cent  on  the  basis  of  the statements and projections 260 mentioned hereinbefore.  The High Court noted that that were certain  inaccuracies   and  lack   of  particulars  in  the projections but  the  High  Court  ultimately  came  to  the conclusion that  on the  materials placed  before it  on the basis of  the principles  of la  v as  discussed by the High Court, it  could not be said that there was no quid-pro quo. On the  other  hand  it  was  contended  on  behalf  of  the appellants that there was a total failure on the part of the respondents to  discharge  the  burden  for  sustaining  the enhanced levy  of market  fee, it  was urged  that the  High Court consequent to its findings referred to above, ought to have quashed  the  bye-laws  of  the  market  committees  in respect  of   categories  C,   and  mentioned  hereinbefore. According to  the appellants,  the enhanced  market fee from 30th June, 1979 could not be supported.      The contention of learned counsel for the appellant was that tho  findings of the High Court with reference to eight committees in category ’E’ were untenable. On the other hand on behalf  of the  respondents it  was submitted that out of the 93 market committees, in respect of 73 market committees falling under categories A, B, C D, a clear quid pro quo was established  and  no  further  enquiry  was  needed  on  the principles laid down by this Court.      Having examined  the nature of the transactions and the principles of  law applicable  to this  case as I have noted before, I am of the opinion that the High Court was right in its conclusion.      The proper  principles discernible from these decisions are; (1)  there should  be relationship  between service and fee, (2)  that the  relationship  is  reasonable  cannot  be established with  mathematical exactitude  in the sense that both sides  must be  equally balanced,  (3) in the course of rendering such  services to  the payers  of the  fee if some other benefits  accrue or  arise to  others, quid-pro-quo is not destroyed.  The concept of quid-pro-quo should be judged in the  context of  the present  days-a concept  of  markets which are  expected to  render various  services and provide various amenities and these benefits cannot be divorced from the  benefits   accruing  incidentally   to  others,  (4)  a reasonable projection  for the  future years  of a practical scheme is  permissible and  (5) services rendered must be to the users  of those  markets or  to the  subsequent users of those markets as a class. Though fee is not levied as a part of common  burden yet  service and payment cannot exactly be balanced. (6) The primary 261 Object and  the essential  purpose of the imposition must be looked into.      Having  regard   to  the   detailed  analysis   of  the expenditure of  the various market committees, we agree with the conclusion  of the  High Court that it could not be said that  the  expenditure  and  appropriation  of  fee  was  so disproportionate to  the projects  actual and projected that it could be said that the levy lost the character of fee. An analysis of  the High  Court’s judgment  would indicate that out of  93 market  committees about which the High Court was concerned, in  respect of 73 market committees falling under categories A,  B, &  D, a clear quid-pro-quo was established on a reasonable view. In respect of the 20 market committees falling in  category of,  the High  Court  found  that  with regard to  the 8  committees only, final projections for the

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purpose of  correlating the  fees charged  and the  services rendered  required   individual  consideration.  These  were Bangalore, Hubli. Sagar, Bijapur, Raichur, Tiptur, Gadag and Siddapur.  The   High  Court   found  that   the   projected expenditure was  relatable to and referrable to the services rendered and  to be rendered to the payers of the fee. While the High  Court observed that the levy of fee was justified, the High  Court laid  down certain  guidelines and norms for the market committees for the future.      The High Court examined in detail the estimates of each of the  market committees.  The High Court felt that even if some of  the items  of expenditure  which were  specifically challenged and  which the High Court noted were not strictly permissible, on  the basis  of the remaining works there was ground  to   hold  that   there  was  requisite  measure  of correlation  between  fees  collected  and  intended  to  be collected and  services rendered and intended to be rendered but the High Court felt that for proper working of statutory bodies like  the market committees, general directions about the future expenditure should be given.      As we have mentioned hereinbefore, at the invitation of Advocate-General and  the counsel for the market committees, the High  Court gave certain directions. It is not necessary in disposing  of these  appeals to  deal in  detail with the specific directions  given. The  High Court was competent to give these  directions. We  accept the  submissions urged on behalf of  the respondents that these directions were within the competence of the High Court while 262 dealing with  the grievances  made under  Article 226 of the Constitution   to    ensure   that   appropriate   statutory authorities  acted   according   to   law   after   properly ascertaining the facts and for the purpose of rendering full justice to  the parties.  (See for  the nature of directions the High Court is capable of giving under Article 226 of the Constitution Bandhua Mukti Morcha v. Union of India & Ors(l) See also  the decision  in the  case of  State of  Kerala v. Kumari T.P.  Roshana &  Anr.(3) In the case of Kewal Krishan Puri &  Anr. v. State of Punjab & Others, (supra) this Court had given  certain   directions for  future guidance  of the authorities.      For  the  purpose  of  how  the  Court  can  mould  its directions  in   order  to   give  relief  in  a  particular situation, we may refer to the nature of directions given by the   American   Supreme   Court,   in   abolishing   racial discrimination and  the judicial efforts made with attending difficulties,  and   how  the   Supreme  Court   of  America formulated by  trial and  error the  process of  making  the relief  effective   to  the   discussions  in  Corwin’s  The Constitution and  what it  means today’  14th Edn pages 504- 511].      Therefore, the High Court, while finding that there was a correlation  between the  services rendered  and the  fees charged with regard to the eight market committees, directed the Chief  Marketing Officer  to make  certain enquiries  on certain principles  of correlation and directed the surplus, if found,  on such  enquiry, to be appropriately adjusted in the’ future by way of reductions of fees.      Pursuant to  the above  directions in  respect of eight Marketing committees,  the Chief Marketing Officer went into the facts.  After the  Marketing  Committees  had  submitted their budgets  and the projections, these have been approved by the  Chief Marketing  Officer. After  such approval,  the concerned  Marketing   Committees  have  passed  appropriate resolution for  giving effect to the norms laid down and the

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projects approved.  This has  been stated  in the  affidavit filed by  the Chief  Marketing Officer  in reply  to special leave petition.  (See  the  affidavit  filed  by  the  Chief Marketing  Officer   in  the   Belgana  Marketing  Committee petition). This, in our opinion is a constructive approach. (1) [1984]3 S.C.C. 161 at 240-242. (2) [1965] 2 S.C.R. 974. 263          Courts of today cannot and do not any longer remain passive with  the negative  attitude, merely striking down a law or  preventing A  something being  done. ’Thou shall not do’t’ used  to be  the previous form of remedy encouraged by Courts. But the new attitude is towards positive affirmative actions, directions  people or  authorities  concerned  that ’thou shall do’t’ in this manner. While it is true that if a law is bad, the Court must strike it down, if the law by and large and  in its  true perspective  of a  social purpose if implemented in a particular manner could be valid, then. the Court can  and should  ensure that implementations should be done in  such particular  manner and give directions to that effect. In the instant case the High Court having found with which finding  we  are  in  agreement,  that  basically  and essentially the  fee was justified on the theory of quid pro quo, the  Court was  entitled to give positive directions in the manner the money should be spent.      Another argument  on this  aspect was  that estimate of Tiptur Market  Committee showed that there was a surplus Rs. 72 lakhs  in the  year ending 1982. It was contended that so long as  this  surplus  remained,  there  was  no  case  for increasing market  fee from  I percent  to 2 percent. It was also submitted  that according  to the projections filed and the estimated  expenditure for the future upto 1988-89 there would be a surplus of about Rs. 3 crores at the end of 1988- 89. But  reading the  projections properly  it appears  that though estimated  earning would be Rs. 3.26 crore at the end of 1988-89;  at  the  same  time  the  estimate  showed  the projected expenditure  from 1981-82  to 1988-89 would amount to Rs. 4.28 crores. These projections are not imaginary, and if the  Market committee,  in the present trend of inflation and  the   need  for  modern  markets,  had  taken  these  F projections into consideration, the same cannot be condemned as unreasonable.  Thus looked  at, it appears that the extra expenditure of  estimates showed  a projected  loan for  the deficit.      In the  aforesaid view of the matter, we are of opinion that the  High Court  was right in holding (a) that the quid pro quo  necessary to  be established in these types of fees has been  established, (b)  that the  projections have  been properly taken  into consideration  and they  are reasonable projections, (c) the directions given by the High Court were within the  competence of the High Court to meet the ends of justice. 264      In the  premises the  first question  reserved for  our consideration A  must be  answered by  saying that  the High Court is  right in  holding that the increase was justified. Necessarily point No. 3 must also be answered by saying that the High  Court had  come, in the facts and circumstances of the case, to a definite conclusion of this aspect in respect of eight  market committees mentioned hereinbefore. The High Court had  not abandoned,  for the  reasons mentioned herein before,  its  jurisdiction  in  not  coming  to  a  definite conclusion about  the requisite  correlation to  sustain the quid-pro-quo for the imposition of the market fee. I am also of the  opinion that  the High  Court was  competent for the

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reasons indicated  hereinbefore to  give directions  to  the market committees  in the manner it had done.  Point Nos. l, 3, 4 & 5 mentioned hereinbefore are therefore disposed of in favour of  the respondents  in the  manner indicated  herein before.      So far  as to  the question  of refund of the amount of the market  fees to  any of  the party is concerned. 11 will briefly have  to  note  the  position  arising  out  of  the judgment of the High Court.      It was  contended on  behalf  of  the  appellants  that section 65(1)  as substituted  by Act  17 of 1980, read with section 42  of the  Amending Act,  seeking to  validate  the collection of  market fee  on "sellers"  made under  the old section 65  (1) of  the Act is constitutionally invalid. The validation became  necessary as  mentioned  hereinbefore  in view of  the judgment  of the,  Karnataka High  Court in the case  of  Rajasekhariah  (supra).  The  present  substituted section 65(1) read with section 42 of the Amending Act seeks to validate  the collection  of market  fee on  sellers made when the  earlier section  65(1) was  operative. We have set out the  relevant  provisions  and  the  background  of  the challenge to the Act.      The High  Court of  Karnataka in  its impugned judgment had set  out exhaustively  the grounds  upon which  the said High Court  has (previously  in Rajasekhariah’s  case struck down section 65 (1) (3) of the Act. Pursuant to the judgment in Rajasekhariah’s  case,  the  State  was  exposed  to  the liability to  refund the  fee collected  for the period from 19.5.1975 when  section 65(]) and (3) were introduced by the Amending Act 21 of 1975 and 28.9.1978 when that judgment was pronounced. By  the said Act of 1980, the levy was sought to be validated  and the  fee retained by the State Government. The High  Court noticed  the relevant substitution First, by virtue of 265 sub-section 1(2)  of section  19 of  the amending  Act,  the amendment had  been  deemed  to  have  come  into  force  on 19.5.1975-  in   other  A  words  making  it  retrospective. Secondly by  clause (ii)  of subsection  63 and item (ii) of clause (a)  of sub-section (2) of section 63 as amended, the expression  "Marketing"   was  substituted   by  the   words "transport and marketing". In clause (ii) of sub-section (2) of section  63, item  (ia) was  newly introduced  making the provision for, either independently or along with some other authority,  necessary   facilities  for   the  transport  of notified agricultural  produce from  and to the yard, as one of the obligatory functions of the market committees.      Thirdly, section  20 of  the Amending Act brought about certain changes  in the structure of section 65 while making such amendment  retrospective with  effect  from  19.5.1975- being the date on which it was originally introduced.      The High  Court has  set out section 42 of the Amending Act which validated the levy of market fee etc. It was urged before the  High Court  that the market recollected from the sellers  between  19.9.1975  and  28.9.1978  under  the  old section 65(1)  had gone  to the  credit of and merged in the "Karnataka Roads  and Bridges  Fund" constituted  under  the Karnataka Motor  Vehicles Taxation  Act and  the market fees have obviously  been spent  for the  purposes and objects of "Karnataka Roads  and Bridges Fund", and by deleting section 65(3)-even if  it be  with retrospective effect - the events that have  factually happened pursuant to section 65(3) when it was  operative, could  not be reversed. The effect Or the amendment was  not, it was submitted, before the High Court, to put  the funds  back into  the coffers  of the respective

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market committees  enabling them  to spend  them for such of the  purposes   authorised  by   the  Act  as  would  afford correlation by  way of  service to  the fee.  It was further contended that  all that,  at best.  the amendments could be said to  have achieved  was that  providing "facilities  for transport" which  was not one of the duties and functions of the market  committees earlier  had now  been made as one of their duties  and functions.  It was  urged that even if the "facilities  for   transport"  could   be  said  to  include construction of  rural  roads,  only  the  first  defect  or infirmity pointed  out in  Rajasekharih’s case could be said to have  been cured  or removed  but not  the more important one, the second.      Learned Advocate-General contended that the only ground on which  the previous  judgment invalidated the levy on the sellers was 266 that the market committees were not statutorily charged with the A  duty of constructing and maintaining rural roads, and now that,  the duty  of providing,  either independently  or along with  any other  authority, necessary  facilities  for transport, which  included the making of roads in the market area leading to and from the marketyards, the defect noticed in the law has been removed and the legal basis for the levy supplied.  Learned  Advocate-General  submitted  that  as  a result of  Rajasekhariah’s case  the State  was exposed to a liability to  refund several crores of rupees which had been realised by  way of  sellers fee  under section  65(1),  and which according  to  him,  had,  in  fact,  been  spent  for providing  facilities   for  transport   in  the   form   of construction, improvement  and  repair  and  maintenance  of rural roads.      The High  Court noticed the relevant provisions and the principles of  law which  should govern  the  power  of  the legislature to  cure any  defect in  law with  retrospective effect and  to validate  acts done  or taken under defective law which were declared invalid by the courts on any around.      It is  well-settled that  if such  validating law cures the constitutional  vice from  which the earlier legislation suffered, the  validation must  be given  effect  to.  These principles are  well-settled by  the decisions of this Court in the  cases of  Misrilal Jain etc. etc. v. State of Orissa and Another(l),  Shri Prithvi  Cotton Mills  Ltd. &  Anr. v. Broach  Borough   Municipality  &   Ors.  (   ’),  Municipal Corporation of  the City  of Ahmedabad,  Etc. v. New Shorock Spg. &  Wvg. Co. Ltd., Etc (B) and l.N. Saksena v. The State of Madhya  Pradesh.(4) The  tests are well settled and it is not  necessary   to  reiterate  those.  The  validity  of  a validating law  has to  be judged mainly by judging, firstly whether a  legislature possesses competence over the subject matter i.e., whether by validation, the legislature exercise competence over  the subject  matter and secondly whether by validation the  legislature has removed the defect which the court had  found in  the previous law and thirdly whether it is consistent  with  the  provisions  of  Part  III  of  the Constitution. (1) A.I.R. 1977 S.C. 1686=[1977] 3 S.C.R. 714. (2) A.l.R. 1970 S.C. 192=[1970] 1 S.C.R. 388. (3) A.I.R. 1970 S.C. 1292=[1971]1 S.C.R. 288. (4) A.l.R. 1976 S.C. 2250=[1976} 3 S.C.R. 237. 267      The High  Court was  of the  view that  facilities  for rural roads  could not  be a  ground for collection of fees. The High  Court was  A further  of the  view that  this  was concluded by  the decision  of this  Court in  Kewal Krishan

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Puri’s case (supra).      l have  set  out  hereinbefore  the  principles  to  be governed  in   case  of   judging  the  correlation  between ’service’  and  ’fee’  and  the  changing  pattern  of  this concept. Construction  of rural  roads giving facilities for going to  the market  is a  special  service  primarily  and (directly intended  for tile benefit of the users of market. Market could  not be  reached and  people cannot go and come from the  market if  there are  no good rural roads to reach those markets.  This view  has been  recently reiterated  by this Court  after discussing several authorities in the case of M/s Amar Nath Om Parkash & Ors. Etc. v. The State  Punjab & Ors.  Etc. (supra)  where it  was  held  that  it  was  of fundamental importance  that there  should be  a network  of roadways if  effective aid  was to  be given  to farmers  to transport and  market  their  produce.  In  this  connection reliance may  be placed  also on  the observations  of  this Court in  the case  of Municipal Corporation Delhi v. MOJId. Yasin (supra)  where it  was reiterated  that the  fact that others besides those paying the fees are o benefited did not detract from  the characted  of the  fee. The Court observed that in  fact the special benefit or advantage to the payers of the  fees might  even be  secondary as  compared with the primary motive  of regulation  in the public interest. Quid- pro-quo in  strict sense  is not the one and only true index of a fee as we have mentioned hereinbefore.      Judged by  this concept,  in my opinion, the High Court was in  error in  view of  the principles  we have discussed about the  concept of  fee and  therefore  rural  roads  for construction, improvement  and maintenance  of which sellers fees have  been applied could be said to be an obligation of the market  committee. Now  that has  been made function and obligation of  the market  committees by  the amendment with retrospective effect  which  we  have  noticed  before.  The learned Advocate-General  had stated  before the  High Court that the  funds from  the "Karnataka  Roads &  Bridges Fund" collected from  these fees  have in  fact been spent for the rural roads, the facilities for which are for the benefit of the users  of the markets. In the facts and circumstances it should be  presumed and  assumed that the funds spent by the "Karnataka Roads  & Bridges  Fund" under  the Motor Vehicles Act have in fact been spent as an agency of the market 268 committees in  discharge of the functions and obligations of these A committees. In view of the amended provisions of the statute which  we have  mentioned providing  facilities  for transport  is   one  of   the  obligations   of  the  market committees. In  my opinion,  realisation of  fees  for  such facilities would  be justified  and valid.  If, as  we  have discussed, without rural roads, markets could not be reached and the  functions for  which  the  market  committees  were constituted could  not be performed, if it is of fundamental importance that  there should  be a  network of  roadways if effective aid  is to be given to buyers and sellers of goods for marketing  their products,  then in my opinion, the fact that the  public streets and roads are public properties and the State  holds such streets and roads as trustees would be of no consequences in considering such realisation as fees.      The contribution  to the  "Karnataka Roads  and Bridges Fund" maintainable under Motor Vehicles Act having been made as an  agency of  the market committees for the construction of these  roads which  facilitated the purpose of the market committees as  amended by the Amending Act. I am, therefore, of the  opinion that  the High Court was in error in holding that the  second major defect noticed in the law authorising

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the levy  on the  sellers in  Rajasekhariah’s  case  (supra) namely construction  of rural  roads would not qualify being reckoned as a special service to the class of persons paying the fee,  had not  been cured  or removed  by the  law which sought to  validate  the  levy.  The  Act  which  sought  to validate the  levy contributed  to the  "Karnataka Roads and Bridges Fund"  was for the maintenance of rural roads which, as I  have noticed, forms an integral part of the facilities for marketing of the goods. I am therefore unable to sustain the findings  of the  High Court  of Karnataka  that section 65(1) as  substituted as Section 20 of the Act 17 of 1980 as well  as   section  42   of  the   Attending  Act   was  not constitutional valid  and was  liable to  be struck  down. I hold that  these are  constitutionally valid  in view of the perspective in  which the concept of fee has to be judged in the light  of the  decision I have referred to hereinbefore. If that  is the  position then  no question  of refund would really arise,  in view  of the provisions of the said Act as amended by  Act 17  of 1980  and section 42 of the Act 17 of 1980 as  it validated  the market  fee  on  sellers  between 19.5.1975 and  28.9.1978. The  funds collected  had remained with the  Government and  have been spent for purposes which are valid  purposes in view of the amendment. So no question of refund arises. 269      In any  event I am of the opinion that there should not be any  refund in  the facts  and circumstances of the case, Section 42  of the  A Amending Act has specifically provided against refund  of levy  of fees  already  collected,  I  am therefore of the opinion that such a provision was valid. At no stage  was it claimed or stated that the traders had paid market fees themselves. The appellants before this Court are buyers in  the Market but they themselves are trading in the commodities purchased  by  them.  On  further  sale  of  the commodities as  traders they  have recovered  the fees  from their purchasers. For this purpose reliance may be placed on the observations  of this  Court in the decision in the case of D.  Cawasji &  Co. Etc.  Etc. v.  The State  of Mysore  & Anr.(1) Most  of these  have been  discussed in  the  recent decision of this Court in the case of Amar Nath Om Parkash & Ors. (supra)  and in  that view of the matter and in view of section 42  of the  Amending  Act  which  provided  for  the validation of  the levy  of market  fee and  which  provided further by  section 42(1)(b)  & (c)  that no proceedings for refund would lie, in my opinion, in so far as the High Court had directed  to refund in certain cases as indicated in the judgment of the High Courts I am unable to sustain that part of the order and that order is set aside. I may mention that when there  was no provision like section 42 of the Amending Act and  there was  a liability of refund n the case of Shiv Shenkar Dal  Mills Etc..  Etc v.  State  of  Haryana  &  Ors Etc.(x),  this  Court  had  evolved  certain  procedure  for utilisation of  the funds  collected so  as to  avoid  undue enrichment. In  view of  the principles  discussed above and the cases  noted in  the aforesaid  decision in Amar Nath Om Parkash &  Ors. case  (supra), we  are of  the opinion  that section 42 of the Amending Act is valid and by virtue of the said section,  that cannot  be any  order for  refund in the instant case.  It must  be borne in mind that the High Court has given specific directions for utilisation of the surplus fund in  certain matters to the market committees. Point (2) noted above is thus disposed of.      The next  question that arises is whether the amendment of the  bye-laws enhancing  the market  fee was  invalid for want of  compliance with  the mandate  of section 148 of the

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Act requiring  previous publication and previous sanction of the Chief Marketing Officer. The High Court had exhaustively discussed this matter and I have (1) [19751 2 S.C.R. 511. (2) 11980]1 S.C.R. 1170. 270 referred to  this discussion  before and  had  come  to  the conclusion A that section 65(2) did not confer any arbitrary power and  there was  no excessive delegation of legislative power to the market committees and therefore not vitiated on that account.  The question whether on a proper construction of section 65(2) there was any obligation on the part of the marketing committee  to hear  the parties was left open with certain observations  and directions  contained in paragraph 61 of  the judgment  of the  High Court.  I am in respectful agreement with that direction of the High Scud.      So far  as the  High Court held against the contentions of the  appellants that  bye-laws were  invalid for  want of previous publication or for want of consulting the interests affected, I  am also in respectful agreement for the reasons discussed by  the High Court which need not to be reiterated again, with  that view. The principle of audi alteram partem has  application   only  to   judicial,  quasijudicial   and administrative  functions   and  not   to  any   legislative functions   See The  Tulsipur Sugar Co. Ltd. v. The Notified Area Committee,Tulsipur.(’), S.A. de Smith ’ Judicial Review of Administrative  Action ’,  4th P.dn. pages 181 to 183. In any event the rule of ’audi alteram partem’ is applicable in exercise of  the States’ power of taxation-See Avinder Singh Etc. v.  State of  Punjab &  Anr. Etc  (2) This  disposes of point no. (7).      The next  contention canvassed before us was whether in view of the Tobacco Board Act, 1975, hereinafter referred to as the  Central Act  and the issue of the notification dated 31st August, 1984 by which section 13 of the Central Act was made applicable  in the State of Karnataka, in so far as the Central Act  dealt with  the marketing of tobacco, the State legislature was not competent to pass this enactment. It was submitted that  tobacco was covered by entry 52 of List I by virtue of  the declaration  under section  2 of  the Central Act. It  was submitted  that the High Court has erred by not acting in  the parity  of reasoning  adopted in  respect  of Cardamom Act.  As I  have noticed  that in  case of Cardamom Act, 1965, the High Court was of the opinion in the impugned judgment that  the said Act was not within the competence of the State Legislature. Yet neither the market committees nor the State  Government had preferred any appeal in respect of that finding. It was sought to be (1) [1980] 2 S.C.R. 1111 at pages 1118 to 1121. (2) [1979]1 S.C.R. 845. 271 impressed before  this Court  that the same reasoning should apply in view of the similarity of provisions of the Central Act as  with A  Cardamom Act  as it  should have  been  held logically by  the High  Court that the State Legislature was not competent  to extend  marketing provisions to tobacco in the State Act. Tobacco was brought within the network of the Act by virtue of Karnataka Act 17 of 1980.      Two  broad  principles  should  be  borne  in  mind  in deciding the  controversy of  this nature.  One is whether a particular legislation or enactment is within the competence of particular  legislature must  be judged after finding out the pith  and substance,  in other words the true nature and character, of  the legislation  in question and secondly the entries in  the list  should be  given liberal  and generous

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construction.  All   the  entries  should  be  construed  in harmonious manner  so as  to  avoid  conflict.  In  case  of conflict, however,  in respect  of entries  where  both  the State and  the Centre can legislate, the Central legislation would prevail  over the  State Legislation  in view  of  the provisions of  Articles 245  to 254  of the Constitution. It was submitted  that the  effect  of  the  declaration  under section 2  of the Central Act pursuant to Entry 52 of List I is that the Parliament has exclusive competence to legislate upon  every  aspect  or  activity  pertaining  to  ’tobacco’ including marketing  thereof and  the State  would  have  no competence  to   legislate  on   that  topic.  As  mentioned hereinbefore a declaration under Entry 52 of List I of-Vllth Schedule has  been made  in respect. Of tobacco. Entry 52 of the said  list provides ’Industries, the control of which by the Union  is declared  by Parliament by law to be expedient in the public interest.’      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 also  be  construed  most  liberally  and  in  their  widest amplitude. See  Navinchandra Mafatlal v. C. 1. T. Bombay(l). On behalf  of the  appellants reliance  was  placed  on  the observations in  the case of Baijnath v. Bihar State(2) that once a  declaration was  made, 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. See Kannan (1) [1955]1 S.C.R. 829 at page;836-37. (2) [1970] 2 S.C.R. 100 at 113. 272 Devan Hills  Co. v.  Kerala(1) and  Ganga Sugar  Co. Ltd. v. State of   U.P..(2)  where dealing  with the sugar industry, this Court  observed  that  it  was  undisputed  that  sugar industry was  a controlled  industry, within  the meaning of entry  52,  List  I  of  7th  Schedule  and  therefore,  the legislative power  of  Parliament  covered  enactments  with respect to industries having regard to Article 246(1) of the Constitution. If  the impugned  legislation invaded Entry 52 it must be repulsed by the Court.      It was urged that in the instant case declaration under section 2  of the  Central Act was in respect of the tobacco industry and  not any  particular type of tobacco as held by the High Court that it was only virginia tobacco. Therefore, there was  no warrant  for restricting or limiting the width and amplitude  of the words "tobacco industry" and confining it to a particular type or kind of tobacco.      So fast  as it  was submitted  that the Central Act was not concerned  with virginia  tobacco only but covered other tobaccos the High Court was in error. On the construction of the Central  Act read  with the  rules it appears to us that the said  Central Act  and the declaration made by section 2 of the said Act covers all kinds of tobaccos.      It  is   well-settled  principle   that   Article   246 recognised the  principle of  Parliamentary supremacy in the field of  legislation in  case where  both legislatures have competence   to    legislate   (emphasis    supplied).   The constitutional  scheme  is  that  Parliament  has  full  and exclusive power to legislate with respect to matters in List I and has also power to legislate with respect to matters in List  III.  A  State  Legislature  has  exclusive  power  to legislate with  respect to matters in List II, excluding the matters  falling  in  List  I  or  List  III  and  has  also

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concurrent  power  to  legislate  with  respect  to  matters falling in List III excluding matters falling in List I. The dominant position  of the Central Legislature with regard to matters in  List I  and List III is established. See in this connection the  decision in  Subrohmanyam v.  Muthuswamy.(3) Justice Suliaman  in that  case observed  that the rigour of that literal interpretation of section 100 of the Government (1) [1973]1 S.C.R. 356 at 369. (2) 11980] I S.C.R. 769 at 781. (3) [1940] 45 C.W.N. (FC) I=A.I.R. 194] FC 47 at 57-58. 273 Of India Act, 1935 with which Federal Court was concerned in that decision  was relaxed  by the  use of  the words  "with respect to  which A  only signify pith and substance" and do not forbid  a mere incidental encroachment. This is also the position  that   emerges  from   Article   246(1)   of   the Constitution.      It was  submitted on  behalf of the appellants that the power of  the State  Legislature with  respect to matters in List II  was made  subject to  the power  of  Parliament  to legislate with  respect to  matters in  List I and therefore followed that if any entry in List I and List II appeared to overlap, if  these appeared  partly to cover the same field, the field of legislation covered by the entry in List I must be considered  to be  taken out of the scope of the entry in List Il and C reserved to be only dealt with the Parliament. In other  words, to  that extent  the  power  of  the  State Legislature must be considered to be curtailed and the field must be held to have been occupied by the Centre.      In the present case the Central Act, it was urged, fell within entry  52 of  List I.  To the  extent that  Karnataka State Act,  by amending  the Schedule brought tobacco within the provisions  of the  State Act,  it was urged that it was beyond the  competence of  the State  Legislature and it had encroached upon the Union List.      It was,  further, submitted  that in any event that the competence of  the Parliament  to legislate  in respect of a matter which  is exclusively  entrusted to it must supersede pro-tanto the  exercise of  power of  the State Legislature. Reliance was  placed on  Sudhir Chand v. Wealth Tax Officer, Calcutta(1). But  in resolving the rights of component units of federal  or quasi-federal  set  up  (to  which  category, however,   Indian    Constitutional   set    up   belongs-no Constitutional pundit  has yet  been able  to  say)  earnest endeavour should  be made  to avoid  a conflict  between two competing enteries,  as to  too  liberal  an  interpretation given to both of them might create a clash. Therefore it was urged that the competence of the Karnataka State Legislature will regard  to marketing  of tobacco and levy of market fee thereon under  entry 28  read with entry 66 of List lI which is "markets  and fairs"  stood pro-tanto  superseded by  the exercise of the Parliamentary power under entry 52 read with entry 96 of List I. (1) [1969] S.C.R. 108 at 113, 274      It was  urged that  in the  case of  Cit. Tika  Ramji & Others Etc.  A v.  The State  of Uttar  Pradesh & Others(l), this Court  rejected  the  contentions  that  all  sugarcane legislation linked  to sugar industry was sugar legislation. Furthermore, on the facts of the case, the Court came to the conclusion that  the impugned  Act did not concern itself at all with  the controlling  or licensing of sugar industry or with the  production or  manufacture of  sugar or with trade and commerce  in sugar and therefore, there was no trenching upon the  Union List by the impugned State Act. Reliance was

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placed on  the observations  at pages  422-23  of  the  said decision, mentioned  hereinbefore. Reliance  was also placed at pages  783-84 in the case of Ganga Sugar Co. Ltd v. State of U.P. (supra)      It was  submitted on  behalf of the appellants that the State Legislature  lost its competence because the field was occupied by  Parliament in  view of  the  declaration  under section 2  of the Central Act. It was evident, it was urged, that the  intention  to  cover  the  whole  field  has  been expressed by  the Central  Act and  as intended, the Central Act is  complete and  exhaustive Code in respect of tobacco. Consequently,  the   enactment  of   the  subsequent   State Legislation was  overborne  on  the  ground  of  repugnancy. Reliance was  placed on the decision in the case of State of Orissa v. M.A. Tulloch & Co.(2).      The following  submissions were placed before us on the around of repugnancy:      (1)  There may  be inconsistency in the actual terms of           the  competing   statutes.  (See   R.V.  Brishbane           Licensing Court, [19201 28 C.L.R. 23.      (2)  There may  be no direct conflict and the State law           may be inoperative because the Commonwealth law or           the award  of the  Commonwealth Court was intended           to  be   a   complete   exhaustive   code   (Clyde           Engineering Co.  Ltd. v.  Cowburn [1926] 37 C.L.R.           466).      (3)  Even in  the absence  of intention, a conflict may           arise when  both  State  Legislature-  and  Common           wealth (1) [1956] S.C.R. 393. (2) [1964] 4 S.C.R. 461 at 477. 275           seek to  exercise their powers on the same subject           Victoria v.  Commonwealth, [1937]  58 C.L.R.  618;           Wenn Attorney General (Vict.) [1948] 77 C.L.R. 84)           Nicholas, Australian  Constitution 2nd  Edn at  p.           303. Tikaramji  [1956] SCR  393 at  424-425.  Deep           Chand v. State of U.P. [1959] Suppl. 2 SCR p. 8 at           43. Ex-Parte  Mclean [1930]  43 C.L.R.  472 at 483           and the  observations of  Justice B.N.  Rau in the           Calcutta decision  of  G.P.  Stewart  v.  B.K  Roy           Choudhury (AIR  1939 Cal  628 at 634). As Sir B.N.           Rau mentioned in Stewart v. Brogendra Kishore- the           principles deducible  from these cases seem to be-           if the  dominant law  has expressly  or  impliedly           evinced its  intention, an  intention to cover the           whole field,  then a  subordinate law  in the same           field is  repugnant and,  therefore,  inoperative,           whether and  to what  extent in  a given  case the           dominant  law   evinces  such  an  intention  must           necessarily  depend   on  the   language  of   the           particular law.      Applying these  tests, it  would be  apparent,  it  was submitted by the appellants that the State Act was repugnant to the Central Act.      It was  finally submitted  that in  any  event  without prejudice to  other submissions  that so  far as tobacco was concerned, no  service had  in fact  been  rendered  by  the market committees  nor could they in law be rendered because of legal  constraints  imposed  by  the  provisions  of  the Central Act  and, in  particular, section  12 and rule 35 of the Tobacco  Board Rules, 1976. By virtue of section 12, the Market Committees  could not  auction or  deal in tobacco at all  unless   these  were   registered  with  the  Board  in accordance with the Central Act.

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    It was  evident from  the letters  dated 15.9.1983  and 23.9.1983 at  pages 462  and 466  of the Paper Book that the market committees  had not  been and  even today  registered under the  Central  Act  and  were  therefore  incapable  of rendering any  service at  all. For  this reason  there  was complete failure  of quid-pro-quo and therefore there cannot be any  charge of  fees by  enacting  State  legislation  on tobacco. 276      It appears  that the principles of repugnancy in Indian Constitution are well-settled. These are as follow:      (1)  A legislation,  which in  its pith  and substance,           falls within  any of  the entries of List I of the           Seventh Schedule  to the  Constitution,  would  be           exclusively   within   the   competence   of   the           Parliament.      (2)  A legislation falling exclusively, in its pith and           sub stance,  within any  of the entries in List II           of the  Seventh  Schedule,  would  be  within  the           exclusive competence of the State Legislature.      (3)  A Central  law which  in its  pith and  substance,           falls within  any entry  in List  I would be valid           even though it might contain incidental provisions           in List II which may contain ancilliary provisions           which  might   touch  on   an  entry   of  List  I           incidentally.      (4)  A State  law, which  in its  pith  and  substance,           within any  entry in  List II  would be valid even           though it  might incidentally touch upon a subject           falling within List I.      (5)  A Central  law, which  in its  pith and substance,           dealt with  a subject falling within List Il would           be  bad   and  ultra   vires   the   Constitution.           Similarly, a  State law  which  in  its  pith  and           substance dealt  with a matter falling within List           I  would   be  invalid   and   ultra   vires   the           Constitution.      (6)  The concept  of repugnancy arises only with regard           to laws  dealing  with  subjects  covered  by  the           entries falling  in List  III in  respect of which           both  parliament   and   State   Legislature   are           competent to  legislate. Under  Article 254 of the           Constitution, a  State law  passed in respect of a           subject matter  comprised in  List  III  would  be           invalid if  its provisions were repugnant to a law           passed on  the same  subject  by  Parliament.  The           repugnancy arose  only if  both the laws could not           exist together.  Repugnancy does  not arise simply           because Parliament and the States pass’ law on the           same subject. There cannot be any 277           repugnancy in  respect of  State  laws  passed  in           respect of  matter falling  pith and  substance in           List II  or in A respect of Central laws passed on           subject  falling  in  List  I.  Parliament  cannot           legislate on  a State  subject  and  Slate  cannot           legislate on a Central subject. If either trenches           upon the  field of  the other,  law will  be ultra           vires.  See   in  this   connection  M/s   Hoechst           Pharmaceuticals Ltd.  & Others  Etc. v.  State  of           Bihar and  Others (1) etc., Ramesh Chandra Etc. v.           State of  U.P, Etc.  (supra) at  page 135  and The           Calcutta Gas  Company (Proprietary)  Ltd.  v.  The           State of  West Bengal and Others.(a) Like entry 25           of  List   II-Gas  and   Gas   Works-without   any

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         limitation of  entry 28  in List  II-in respect of           any legislation  which is  in substance  and  true           nature deals  with ’markets  and fairs’  read with           entry 66  of the said List has complete ascendency           and there cannot be any intrusion of that filed by           another   entry-See   in   this   connection   the           discussion on  "Union &  State Relation  under the           Indian Constitution"-M.C.  Setalvad-p. 48,  49. In           Calcutta Gas  Company’s case (supra) by comparison           of entry 7 and entry 52 of List I with entry 25 of           List Il,  this Court  upheld State  legislation of           take over the Gas industry in spite of declaration           under entry 52.      In the  present case  the Karnataka Marketing Act deals with the subject of market in entry 28 read with entry 66 of List II.  Such Acts  are covered  by entry  28  of  List  II exclusively unlike  entries 23,24,26 and 27. It is important to bear  in mind  that entry 28 is not subject to withdrawal into List I by Parliament as under entries 52 and 54 of List I and  entry 33  of List  III. 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. Therefore, there cannot be any question of  repugnancy. Section 31 of the Central Act makes it clear  that it  does not derogate from any law but enacts something in addition.      In the  High Court,  counter-affidavits were  filed  to establish the  quid-pro-quo and rendering of the services to the traders including (1) [1983] 4 S.C.C. 45. (2) [1962] 3 Supp. S.C.R. 1. 278 tobacco merchants  by the  respective six market committees. In fact  A before  the High  Court,  no  contention,  as  it appears from  the judgment  impugned, was at all advanced on the question  of services  to tobacco  trade in  the markets concerned. In fact they are entitled to the same services as other traders  as provided by the Act. The provisions of the Marketing Act  and Tobacco  Board Act  and the Rules are not inconsistent.      It is  therefore necessary  to note the true nature and character of  the Acts  namely  the  Karnataka  Agricultural Produce  Marketing  Act,  1966  and  the  Central  Act.  The Marketing Act  is an  Act as  the preamble  states, for  the better regulating  of buying  and  selling  of  agricultural produce and  establishment and  a administration  of markets for  agricultural   produce  and   whereas  it  was  thought expedient to provide for the better regulation of buying and selling agriculture produce and establishment of markets for agricultural produce  and matters  connected therewith  that the State  Act was  passed. I have noted some of the salient features of  the Act.  The Act  was to regulate the sale and purchase  of   agricultural  produce   and   ’tobacco’   was introduced by  Act 17  of 1980  as one  of the  agricultural produces and  thereby it was sought to be brought within its purview. The Act constituted different market committees. It laid down the functions, duties of the market committees and matters incidental thereto. It imposed obligations to impose fees for  better maintenance  of markets, in other words for better administration of markets. The Central Act was an Act to provide for the control of the union of tobacco industry. How better to control the industry of tobacco was the object of the  Center11 Act.  For this  purpose I  have noted  the salient features  of the  Act, the  functions and  duties of Tobacco Board,  the regulation of production and disposal of virginia tobacco.

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    Clause (cc)  of sub-section  (2) of  section 8  of  the Central Act  authorised  the  Board  to  establish  auction) platforms with  the approval  of the  Central Government for sale of  tobacco and  for the functioning of the Board as an auctioneer  and   that  the   platforms  established  by  or registered with  the Board subject to such conditions as may be specified  by the  Central Government-  Section 12 of the Central Act  provides that no person shall export tobacco or any tobacco products or function as a packer, auctioneer of, or dealer  in, tobacco unless the registers himself with the Board in  accordance with  the Rules  made  under  the  Act. Section 13  of the  Central Act  states that  no  registered grower or curer shall sell or cause to be sold virginia 279 tobacco elsewhere  than at  an auction  platform  registered with the  Board in accordance with the rules made under this Act or  established by  the Board under this Act. Section 31 of the Central Act specifically mentions that the same is in addition to, and not in derogation of, the provisions of any other law  for the  time being in force. Tobacco was brought within the  marketing Act  in 1980  and section  13  of  the Tobacco Board  Act, 1975 was made applicable in the State of Karnataka only  on 31st  August, 1984  by  the  notification referred to  hereinbefore. Therefore essentially the Central Act was  for the development of the industry of tobacco and, incidentally, certain  provisions for better sale of tobacco through certain  auction platforms  had been  made. There is nothing in the Act or in the Rules which indicate that it is inconsistent with  or cannot  be  operated  along  with  the marketing regulations.  It is  true that  for  this  purpose certain sanction under the Act is required.      Rule  35  of  the  Tobacco  Board  Rules  provides  for registration as  exporter, or  packer Of  auctioneer  of  or dealer in  tobacco and  lays  down  certain  provisions.  By virtue  of  section  12  of  the  Central  Act,  the  market committees cannot auction or deal with tobacco at all unless they are  registered with  the Board  in accordance with the Act.      In a  letter written  on 15.9.1983  in  respect  of  an application made  by the  Marketing Committee, Honsur, State of Karnataka,  the Tobacco  Board refused the-application on certain grounds  mentioned in  that letter.  That  indicated that it  was thought that the Market committees should apply to the  Tobacco Board  for  registration,  yet  on  13th  of October, 1983, Tobacco Board applied to the Market committee for the  grant of  licence to it. The position is not clear- but it is fully manifest 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. While  giving due  weight to Centre’s supremacy  in   the  matters  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. If in spite of declaration under  entries 7  and 54 of List I in respect of Gas, the  State Legislature  can  still  legislate  for  the nationalisation of  Gas industry as was held in Calcutta Co. (Prop.) Ltd v. State of West Bengal (supra) because entry 25 of 280 List II,  it cannot  be said  that no legislation regulating the market  A can be done by the State of Karnataka in spite of entry  28 read  with entry  66  of  List  II  because  of

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declaration under  entry 52  of List I in respect of tobacco industry. That  would be inconsistent and illogical See also P.D. Shamdaswami v. Central Bank of India.(l)      While it  is true  that in  the spheres  very carefully delineated  the   Parliament  has   supremacy   over   State Legislatures, supremacy  in the  the  sense  that  in  those fields, Parliamentary  legislation would hold the field ands 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 mobilise 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  mobilise resources  in their exclusive fields.  In the instant case by complying with the State Act. the Central Act can function to serve the purpose and object  of the  Central Act, but if only the Central Act was to  prevail, the State Act of marketing for coffee would become non  est-wholly unnecessary  and undesirable  result. The Marketing  Act is  essentially an  Act to  regulate  the marketing  of   agricultural  produce,   control  of  coffee industry would not be defeated if the marketing of coffee is done within  the provisions  of the  Marketing Act.  It must therefore be  held that  the State  Act should  prevail. One should avoid  corroding  the  State’s  ambit  of  powers  of legislations which  will ultimately lead to erosion of India being a Union of States.      The contentions  OD behalf of the appellants therefore, on this  point have  to be rejected. As to who should obtain licence or as to who would have to be registered, the Market Committee or the Tobacco Board is a question which should be settled by proper adjudication.      Some argument  has been built upon the fact that though more or less identical in nature, in respect of the Cardamom Act, 1965,  it was  held that  the State Legislature was not competent to  enact the  Cardamom Act,  1965 in  view of the declaration  under  entry  52  of  List  I  of  the  Seventh Schedule. It  was therefore  suggested that  it would not be correct to take inconsistent views in respect of this Act      (1) [1952] S.C.R. 391 at 394. 281 as against  the Tobacco  Board Act.  As noticed  before, the contention of  validity of the Cardamom Act on the ground of entry 28  of A  List II  of the  Seventh  Schedule  was  not canvassed. Furthermore, it was held that the rules under the Cardamom Act  which were  framed were  in variance  with the present Act. The Government had accepted the findings of the High Court  so far as Cardamom Act is concerned. Had it been otherwise and  had it  been examined  by this  Court for the reasons which  are noted  herein, what  would have  been the result it  is difficult  to state.  In any  event,  in  this background that  cannot be  any reason far less a compelling reason to  hold  that  Tobacco  Board  Act  was  within  the competence  of   the  State   Legislature  for  the  reasons indicated in  this judgment.  Therefore that  cannot be  any argument for consideration at all.      In so  far as  the High  Court directed  the refund  as indicated before,  the appeals by the Government are allowed to that  extent and  the orders  of the  High Court  are set aside. The  other appeals  by  the  parties,  are,  for  the reasons mentioned hereinbefore, dismissed. Parties will bear and pay their own costs throughout.      In  view  of  the  majority  decision,  all  the  civil appeals, special  leave petitions  and writ  petition except

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civil appeal  No. 629 of 1983 (Karnataka Market Fee matters) are dismissed without any order as to costs.      Civil appeal  No.629 of 1983(I.T.C.) however is allowed and the judgment of the High Court is set aside. There will, however be  no order  as to  costs in  this case and any fee realised will not be refunded. M.L.A.                      Appeals and Petitions dismissed. 282