http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 9  

PETITIONER: NANDU MAL GIRDHARI LAL ETC. ETC.

       Vs.

RESPONDENT: STATE OF UTTAR PRADESH  AND ORS.

DATE OF JUDGMENT03/04/1992

BENCH: MOHAN, S. (J) BENCH: MOHAN, S. (J) PUNCHHI, M.M. RAY, G.N. (J)

CITATION:  1992 AIR 2084            1992 SCR  (2) 446  1993 SCC  Supl.  (1) 338 JT 1992 (2)   537  1992 SCALE  (1)778

ACT:      U.P.  Krishi Utpadan Mandi Adhiniyam  Act,  1964/Rules, 1964:  Sections 2,7,10,17/Rules 66,79-Market  fees-Levy  of- Retrospective effect-Validity of.

HEADNOTE:      After this Court upheld the validity of the U.P. Krishi Utpadan  Mandi Adhiniyam Act, 1964, (AIR 1980 SC 1124),  the authorities  called upon the commission agents  carrying  on trade  in the notified market area to submit their  accounts in  order  to fix their liability towards market  fee.   The Traders Association objected that since no notification  was issued under section 10 of the Act, market fee could not  be levied.    The   authorities  replied  that   the   required notification  was already issued on 9.10.67.  Certain  other objections were also raised and th authorities informed  the Traders  Association that such objections were  not  tenable and  directed production of accounts.  Demand  Notices  were also issued and the traders were informed that if the market fee  was not paid, the same would be realised as arrears  of land  revenue.  The traders filed Writ Petitions before  the High Court challenging the demand notices.      The  High  Court having dismissed the  Writ  Petitions, some  of  the Commission Agents have preferred  the  present appeals.      The  appellants contended that the liability sought  to be fixed retrospectively from 1973 to 1978 on the commission agents  was  unreasonable,  as they would  not  be  able  to realise  the  same from the purchasers  scattered  all  over India,  especially after a long gap and the  relief  against the  purchaser  has  become  time barred  and  as  such  the retospective  levy  would  impose  a  great  burden  on  the commission   agents;  that  since  the  operation   of   the notification  was  stayed by the High Court in  1973,  which stay  was in force till 1975, no market fee could be  levied for  the  transactions during that period; and  that  as  no notification  has  been issued under section  10  read  with proviso  to Rule 66 providing for trade charges  and  market fees in respect of Khandsari sugar, the demand was invalid.                                                   447

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 9  

    On  behalf of the respondents, it was contended that  a resolution  was passed by the Mandi Samiti that  market  fee would be payable with effect from 1.10.73 and that the  same was given wide publicity in the market area and also through newspapers.      Dismissing the appeals, this Court,      HELD  :  1.  The fee has been validly  imposed  and  no exception  could be taken to the same.  It is  incorrect  to state  that  notification  under section  10  has  not  been issued.   Merely because there was a stay, it does not  mean the liability disappears.  The notification dated  13.9.1973 stood  suspended  at the instance of  other  traders.   That cannot enure to the benefit of the appellants herein.   They were  neither the petitioners nor the respondents  in  those proceedings.   Therefore, they cannot take advantage of  the stay  order and plead inability to pay.  In as much  as  the Act itself has been retrospectively amended, the  appellants cannot disown their liability. [451C,D]      Jang Singh v. Brijlal and Ors., [1964] 2 SCR 145; Union Carbide  Corporation  and Ors. v Union of  India  and  Ors., [1991] 4 SCC 585, distinguished.      Ram  Chandra Kailash Kumar & Co. v. State of U.P.,  AIR 1980 SC 1124, referred to.       2. It is one of the settled principles that because of plenary  powers,  the  Legislature  could  pass  legislation prospectively  as well as retrospectively.  This  being  so, the  retorspective liability between 11.10.73  and  12.10.75, the  period in dispute in these appeals, cannot be  avoided. [457E,F]      3.  Merely  because  the commission  agents  could  not realise  the amount from the purchasers at this distance  of time  or  that the purchasers are scattered,  the  statutory liability cannot be avoided. [458B]      4. The appellants are liable to pay the demands  raised by  the  respondent Samiti against them.  However,  if  with regard  to any particular transaction it is proved  that  by the  commission  agents the purchasers had paid  the  market fee,  on  such  transaction the Samiti will  not  make  them liable once again. [458C]

JUDGMENT:      CIVIL APPELLATE JURISDICTION : Civil Appeal Nos.  7356- 7360 of 1983 etc. etc.                                                   448      From  the  Judgment  and Order  dated  28.1.83  of  the Allahabad High Court in C.M.W.P. No. 6477, 6606, 6602, 6608, 6517 of 1981.      R. K. Jain, B.D. Aggrawal, Ramesh Chandra and P.K. jain for the Appellants.      E.C. Agrawala for the Respondents.      The Judgment of the Court was delivered by      MOHAN, J. Since common points of law are involved,  all these appeals are dealt with under one judgment.      The  appellants,  commission agents  were  carrying  on trade in the notified market area.  The attack is as to  the levy  of market fee on them in relation to the  business  of Khandsari  sugar.  To highlight the issue involved  we  will set out the legal background first.      The  U.P. Legislature passed an Act called U.P.  Krishi Utpadan Mandi Adhiniyam in the year 1964 as Act 25 of  1964. The object of the Act was to regulate the sale and  purchase of   agricultural   produce  and  for   the   establishment, superintendence and control of markets in U.P. Section 5  of

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 9  

the  Act confers powers on the State Government in  relation to  regulation  of  sale and purchase  of  any  agricultural produce  in any area wherein such transactions  are  usually carried  on  and for that purpose to declare the area  as  a market  area.   This  declaration  is to  be  by  way  of  a notification.   Section  7 empowers even a portion  of  that market  area be specified as a principal market yard,  while such  other portions could be specified as sub-market  yard. The  effect of such declaration of market area is spoken  to under  Section  9.   In  that, no  person  shall  deal  with specified  agricultural produced except in  accordance  with the  conditions of licence granted by the  Committee.   Sub- section  (9)(ii) is specific, while it says  the  commission agent,  trader or broker will have to carry on the  business in  accordance with the conditions of licence.   Section  10 prohibits realisation of trade purchases from the  producers form the sale and purchase of specific agricultural  produce except those which are permitted by the rules or bye-laws.      Section  17, about which we will deal with later  talks of  the  powers  of the Mandi Samiti.   Section  40  confers rule-making power.                                                   449      The commission agents, carrying on business by sale and purchase  of gur, rab, shakkar and khandsari questioned  the enforcement  of the Act in respect of these  merchandise.  A Division  Bench of the Allahabad High Court held they  would not  constitute agricultural produce within the  meaning  of clause  (a)  of  Section 2 of the Act.  The  reason  was  it involves  manufacture  changing the nature  of  agricultural produce.      In order to get over this difficulty, the definition of agricultural produce was amended by U.P. Act 10 of 1970, and as  a  result, gur, rab, shakkar and  khandsari  and  jagger became  agricultural produce.  The validity of amending  Act 10  of  1970 was questioned on various  grounds,  which,  of course,  need not concern us.  A Division Bench  in  Special Appeal  No.  175 of 1973 dated 7.9.77  concurring  with  the Learned Single Judge repelled the contentions and upheld the validity.     It is important to note that pending this Special Appeal No.  175 of 1973, the operation of the notice dated  13.9.73 issued under Section 8 of the Act was suspended in so far as it  related to khandsari.  However, on 6.8.75 order of  stay was  modified and the Mandi Samiti was directed to keep  the amounts realised by them in a separate account.  This  order was  by agreement between the parties.  It has an  important bearing since arguments were raised as to the effect of  the order  of stay, and that is why, we are mentioning  at  this stage itself.      The trader carrying on business within the jurisdiction of  several  Market Committees challenged the  levy  of  fee before the High Court of Allahabad from time to time.  There were  several  rounds of litigation in  which  they  failed. Thereupon,  they  came  up  with  an  appeal.   This   court ultimately  gave a direction that the market fee  should  be regularised  and  charged  in the  light  of  the  judgment. Concerning  the  services whenever rendered  by  the  Market Committee,  it was observed at page 1141(A.I.R. 1980 SC)  as follows :          "....We  do hope that services are  being  rendered          and  will  continue to be rendered by  the  various          Market  Committees in the light of the judgment  of          this  Court in Kewal Krishan Puri’s  case.   If  in          regard  to  any particular Market Committee  it  is          found  that services are not being rendered  or  in

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 9  

        future lapses are made then it will be open to  the          payers of fees to reagitate the matter in the  High          Court in the light of that judgment."                                                     450      The  result  of the judgment was the validity  of  U.P. Krishi  Utpadan  Mandi  Act  was  upheld.   Thereafter,  the Commission Agents were called upon to submit the account for the period 11.10.73 to 12.8.75 in order to fix the liability of  the market fee.  An objection was raised by the  Traders Association that since no notification has been issued under Section  10, market fee was not leviable.  To this, a  reply was  sent  by  the  Director that as  early  as  9.10.67,  a notification  had  been issued.  Then again,  certain  other objections  were  raised.   The Mandi  Samiti  informed  the Association  that  the objections were not tenable  and  the Samiti  need  not have recourse to Rule 66  to  support  the market fee and directed the production of account.   Further to  his, a demand notice was issued and the appellants  were also informed should the market fee be not paid, it would be realised  by way off arrear of land revenue.  As  a  result, Writ  Petitions were filed challenging the demands  for  the period  11.10.73  to  12.8.75.   A  Division  Bench  of  the Allahabad High Court dismissed those Writ Petitions.  Hence, these civil appeals by a few of the commission agents.      Though several contentions were raised before the  High Court,  only the following points were raised before  us  by the appellants:-              (i) The liability to pay market fees was on the          seller  till  1973.   Thereafter,  till  1978   the          purchasers,  were  made  liable.   The   commission          agents  are only the collecting agencies  from  the          sellers.  The liability of the commission agents is          sought to be fixed up to 1978 retrospectively  from          12.6.73.  The  fixation  of  such  a  libaility  is          unreasonable.  Firstly, the commission agents  were          unable   to  realise  the  said  amount  from   the          purchasers  who  were  scattered  all  over  India.          After  1980,  when the demand was made  the  relief          against such purchaser has become time-barred.              (ii)  The  retrospective levy  would  impose  a          great burden on the commission agents.               The  operation  of notification of  the  State          Government  dated 13.9.73 including  definition  of          agricultural produce under Section 8 was  suspended          by  the  High Court on 11.10.73.  The stay  was  in          force  till  1975.  Hence, no market fee  could  be          charged  or  paid  by anyone  for  the  transaction          during that period.                                                     451               (iii)  Admittedly,  no notification  has  been          issued  under Section 10 read with proviso of  Rule          66  providing for trade charges and market fees  in          respect of khandsari sugar.  Therefore, the  demand          is invalid.      In  opposition to this, it is argued on behalf  of  the Samiti as early as 1975,  Mandi Samiti, Muzaffarnagar passed a resolution that the market fee would be payable @ 1%  with effect  from  1.10.73.   This  resolution  was  given   wide publicity in the market area as well as through newspapers.      The fee has been validly imposed and no exception could be  taken  to  the  same. It is  incorrect  to  submit  that notification  under Section 10 has not been issued.   Merely because  there  was a stay, it does not mean  the  liability disappears.    The   notification  dated   13.9.1973   stood suspended  at  the instance of other traders.   That  cannot

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 9  

ensure  to the benefit of the appellants herein.  They  were neither  the  petitioners north   respondents.    Therefore, they  cannot  take  advantage of the stay  order  and  plead inability  to  pay.  In as much as the Act itself  has  been restrospectivley  amended, the appellants cannot disown  the liability.      In  order to appreciate the respective  contentions  we will  now  refer  to  the relevant  provisions   of  law  in relation to levy of market fess.  Originally (prior to 1978) Section 17 read as follows :-          "A  committee shall, for the purpose of  this  Act,          have the power to-          (i).........          (ii) ..........          (iii) Levy and collect.          (a)  "Such fees as may be prescribed for the  issue          or renewal of licences, and          (b) Market fees on transactions of sale or purchase          of specified agricultural produce in the  principal          market yard and sub-market yards from such  persons          and  at  such rates as may be prescribed,  but  not          exceeding  one half per centum of the price of  the          specified  agricultural produce sold  or  purchased          therein:                                                   452          Provided  that  no market fee shall  be  levied  or          collected   on   retail  sale  of   any   specified          agricultural produce where such sale is made to the          consumer.          (iv) ..........          (vii) ..........."      By  President’s Act No. 13 of 1973, Section  17(iii)(b) was substituted by the following sub-section:-          "17(iii)(b) market fees, which shall be payable  by          purchasers,  on transactions of sale  of  specified          agricultural  produce in the principal market  yard          or a sub-market yard at such rates, being not  less          than  one  per centum and not more than  1-1/4  per          centum of the price of the agricultural produce  so          sold,   as   the  State  Govt.   may   specify   by          notification in the Gazette."      The  material change effected by this amendment was  to fix  the liability on the purchaser instead of  the  seller. Further, two limits were also prescribed viz. 1% and  1-1/2% giving  the  right to the State Govt. to fix any  amount  in between  these  limits relating to any Mandi  Samiti.   This power  was  exercised by the Market Committees  through  the bye-laws under the rules.      However,  by U.P. Act 7 of 1978, a new sub-clause  came to  be introduced retrospectively with effect from  12.6.73. As a result, the Section reads as under:-          "Power of the committee- a committee shall for  the          purpose of this Act, have the power to :-          (i) ...........          (ii)............          (iii) levy and collect.          (a) .........          (b)   Market  fees  which  shall  be   payable   on          transactions  of  sale  of  specified  agricultural          produce in the market area at such                                                        453           rate,  being  not less than 1 per centum  and  not          more  than  1 -1/2 per centum of the price  of  the          agricultural   produce   so  sold  as   the   State          Government  may  specify by notification  and  such

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 9  

        fees shall be realised in the following manner :-           (1)  If the produce is sold through  a  Commission          agent, the commission agent may realise the  market          fees  from the producer and shall be liable to  pay          the same to the committee.           (2)  If  the produce is purchased  directly  by  a          trader  from a producer the trader shall be  liable          to pay the market fees to the committee.          (3)  If the produce is  purchased by a trader  from          another trader, the trader selling the produce  may          realise  it from purchaser and shall be  liable  to          pay the market fees to the committee, and           (4) In any other case of sale of such produce, the          purchaser shall be liable to pay the market fees to          the committee.          (iv)............           ..........           (viii) ............"      Two  things are evident from the above-(1) the  Section has  got  restrospective  effect  w.e.f.  12.6.73  and   (2) Commission agents are made liable.  Rule 66 runs to the following effect :-           "Market  fee  (Section 17 (iii) - (1)  The  Market          Committee shall have the power to levy and  collect          fees on the specified agricultural produce  brought          and  sold in the Market Yards at such rates as  may          be specified in the bye-laws but not exceeding one-          half  of  one  per  centum  of  the  price  of  the          specified agricultural produce :           Provided  that the market fee shall be payable  by          the seller :                                                        454           Provided  further  that  no market  fee  shall  be          levied  and  charged  prior to the  date  on  which          provisions of Section 10 of the Act are enforced.           Explanation - For the purposes of this sub-rule, a          sale  of  specified agricultural produce  shall  be          deemed  to have been effected in Market Yard if  it          has been weighed or measured by a licensed weighman          or  measurer in the Market Yard for the purpose  of          sale,    notwithstanding   the   fact   that    the          proprietorship of such agricultural produce has  by          reason  of such sale passed to a person in a  place          outside the Market Yard.           (2)  No market fee shall be levied more than  once          on  any consignment of the  specified  agricultural          produce brought for sale in the Market Yard if  the          market  fee  has  already been paid on  it  in  any          Market Yard of the same Market Area and in  respect          of  which  a  declaration  has  been  made  and   a          certificate  has been given by the seller  in  Form          No. V.          Notes : Rule 66 cannot be said to be invalid in  so          far  as it sub-delegated the authority to  fix  the          rate  of  market fee. Mandi Samiti v.  L.P.  Singh,          1972 ALJ 643."      By  notification  dated 27.10.65, it  was  declared  in exercise  of the power under Section 6 of the Act that  from 31.1.66 the area of the following Gaon Sabha for purposes of the said Act with regard to (1) Wheat (2) Gram (3) Peas  (4) Paddy  (5) Rice (6) Arhar (7) Sarson and Lahi  (8)  Potatoes (9)  Cotton (10) All kind of Gur, Rab and Deshi Shakkar  and their compounds will be the Muzaffarnagar Mandi area.      Thus, it would be seen that 10 agricultural produce had come  to  be included.  It also requires to  be  noted  that

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 9  

khandsari  sugar did not form part of the notification.   On 26.9.67,  a notification was issued under Section 7  of  the Act  that from 30.12.67. the principal Mandi area  and  sub- Mandi area of Muzaffarnagar Mandi area came to be specified. Then came the notification dated 9.10.67 issued in  exercise of  the  power under Section 10(1).   That  notification  is reproduced below :-           "October 9, 1967                                                        455           No. SAM-1038 (Rec) 3812           In  exercise of the power delegated by  the  State          Government vide Krishi (kha vibhag Notification No.          R.2048/XII-8-1498-65, dated September 14, 1967,  it          is hereby notified under sub-section (1) of section          10 of the U.P. Krishi Utpadan Mandi Adhiniyam  1964          (U.P.  Act No. XXV of 1964), that with effect  from          December   20,  1969,  no  person  shall,  in   the          Muzaffarnagar Principal Market yard and the Shahpur          and  Budhana  Sub-Market  Yards  of   Muzaffarnagar          market  Area  levy  charge  or  realise  any  trade          charges  other than those prescribed under rule  79          of   the   Uttar  Pradesh  Krishi   Utpadan   Mandi          Niyamavli,  1966, in respect of any transaction  of          sale  or  purchase  of  the  agricultural   produce          specified   vide  notification  No.   H5353A/XII-B-          1047(2) 65, dated October 27, 1965."      The  last of the notification is one issued under  Sub- Section  (1)  of Section 8 on 13.9.73, which  is  reproduced below:-           "Government of Uttar Pradesh Agriculture Section-5            No.A-7756       12B (5)            490/72                Dated : Lucknow 13, September, 1973                               Notification              Under the proviso of Sub-Section (1) of Section          8  U.P. Krishi Utpadan Mandi Act, 1964,  (U.P.  Act          No.  25  of 1964) in Notification  No.  H-7372/12B-          1200(3)69   dated  16.3.71  issued  by  the   State          Government   with   regard   to   the   Agriculture          Production in the Muzaffarnagar Mandi area District          Muzaffarnagar, under Section 6 of the said Act,  in          Notification  No.  H-5353-A/12B-  1047(2)/65  dated          27.10.65, the Government had made a declaration  of          its objects including in the specified agricultural          production   in  the  list.   And  objections   and          suggestions  if  any with regard  to  the  proposed          declaration  had  to  be made to  the  Director  of          Agriculture within the period specified in the said          notification.  And with regard to the said  object,          consideration has been done by the State Government          of  all  objection and suggestion received  by  the          Director of Agriculture within the prescribed time.                                                        456             Now   therefore  in  exercise  of   the   powers          conferred by part(a) of Sub-Section (1) of  Section          8  of the said Act the Governor declares that  from          25.9.73  for  the  purposes of the  said  Act,  the          following  agriculture  products  i.e.  (1)  Khatai          Amchur  (2) Barseen (seed) (3) Fodder (4)  khansari          will  be  included  in  the  list  of  agricultural          products as indicated in Section 6 of the said  Act          with   regard  to  the  Muzaffarnagar  Mandi   area          District Muzaffarnagar.                                                   By order :                                              Sd/- A.P. Singh                                            Deputy Secretary.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 9  

    The  effect of the last notification is khandsari  gets included  to  the  list  of  agricultural  produce  to   the notification issued under Section 6 dated 27.10.65.      As  a  matter  of fact, Section 8 of  the  Act  clearly postulates such a procedure.  Section 8(1)(a) is  reproduced below :-             "Alteration  of Market Area and Modification  of          the  List  of Agricultural  produce-(1)  The  State          Government,   where  it  considers   necessary   or          expedient in the public interest so to do, may,  by          notification  in  the Gazette, and  in  such  other          manner  as may be prescribed and with  effect  from          the date specified in the notification,-             (a)  include  any agricultural  produce  in,  or          exclude any agricultural produce from, the list  of          agricultural produce specified in the  notification          under Section 6;"      The consequence of it will be that w.e.f. December  20, 1969,  no person in the Muzaffarnagar principal Market  Yard may  levy  charge or realise any trade  charges  other  than those  prescribed  under  rule  79 in  respect  of  sale  or purchase   of   agricultural  produce,  specified   in   the notification dated 27th October, 1965.      This is apparent from the notification under Section 10 dated 9.10.67 as seen from the above extract.      On  24.9.73, acting under Section 17(iii)  as  amended, the State                                                        457 Government  issued a notification providing for  realisation of  market  fee  @1% on the price on sale  and  purchase  of specified agricultural produce in the principal Market  Yard of Muzaffarnagar w.e.f. 1.10.73.      Pursuant to this notification, the U.P. Krishi  Utpadan Mandi Samiti Muzaffarnagar informed as follows:-             "...all the traders and commission agents of the          Mandi  Area, Muzaffarnagar,  Distt.  Muzaffarnagar,          are  informed that they will now realise Mandi  fee          on  all agricultural produce at its sale  value  at          the  rate of 1% of the total sale or purchase  from          the purchaser.  The amount of Mandi fee realised in          this way shall be deposited as order earlier in the          office  of  the  Samiti  by  the  commission  agent          traders within the prescribed period and after this          notice no amount will be deducted as Mandi fee from          the seller.                                      Sd. Kanhaiyalal Agrawal                               Pergana Officer, Muzaffarnagar                                                    President                                  Krishi Utpadan Mandi Samiti                                               Muzaffarnagar"      From the above narration it will be clear that once the Act itself amended retrospectively w.e.f. 12.6.73, we do not know how the commission agent can escape the liability.   It is  one  of the settled principles that because  of  plenary powers,    the   Legislature   could    pass    legislations prospectively  as well as retrospectively.  This  being  so, the  liability between 11.10.73 to 12.10.75, the  period  in dispute in these appeals, cannot be avoided.      It  has already been seen how khandsari has come to  be validly included.  Therefore, for dealing in this  commodity the  commission  agents will be liable to pay  at  the  rate prescribed.      Turning  to  the stay, it has already been  noted  that though  stay  was  granted on 11.10.73, it was  not  at  the instance  of  the appellants herein.  As a matter  of  fact,

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 9  

they  never questioned the validity of the amending  Act  or the notification.  Therefore, they cannot take advantage  of the same.  The said stay also came to be modified on  6.8.75 by  agreement.  Even to that agreement, the appellants  were not the parties.  Therefore, neither of the                                                        458 rulings viz. Jang Singh v. Brijlal and others, [1964] 2  SCR 145  and  Union Carbide Corporation and others v.  Union  of India   and  others,  [1991]  4  SCC  585  would  have   any application  to the facts of the case.  Merely  because  the commission  agents  cannot  realise  the  amount  from   the purchasers  at  this  distance  of time  or  that  they  are scattered, the statutory liability cannot be avoided.      In the result, we hold that they are liable to pay  the demands  raised  by  the  respondent  Samiti  against  them. However, if with regard to any particular transaction it  is proved by the commission agents the purchasers had paid  the market fee on such transaction the Samiti will not make them liable  once again.  Subject to the only  qualification  the appeals  are hereby dismissed.  However, there shall  be  no order as to costs. G.N.                                        Appeal dismissed.                                                        459