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PETITIONER: RAMESH CHANDRA ETC.

       Vs.

RESPONDENT: STATE OF U.P. ETC.

DATE OF JUDGMENT25/03/1980

BENCH: UNTWALIA, N.L. BENCH: UNTWALIA, N.L. CHANDRACHUD, Y.V. ((CJ) KRISHNAIYER, V.R. SHINGAL, P.N. KOSHAL, A.D.

CITATION:  1980 AIR 1124            1980 SCR  (3) 104  CITATOR INFO :  RF         1981 SC1127  (11)  D          1983 SC1246  (32,39,41)  R          1984 SC1870  (15,16)  R          1985 SC 679  (33)  RF         1992 SC2084  (8)

ACT:      Uttar  Pradesh  Krishi  Utpadan  Mandi  Adhiniyam  1954 (U.P., Act  XXV of  1964), Ss.  2 (a), (p), (y), (k), 6, 17, and Uttar  Pradesh Krishi  Utpadan Mandi  Niyamawalli  1965, Rules 66,  67 and 68-Levy of market fee by market Committees in Uttar  Pradesh on  transactions relating  to agricultural produce-Validity of-Declaration of big areas as market area- Whether offends the law.      Market Committees-To be constituted in a regular manner and on a permanent basis-Machinery to be evolved for setting disputes.

HEADNOTE:      The Uttar  Pradesh Krishi Utpadan Mandi Adhiniyam, 1964 (U.P. Act  XXV of  1964) provides for the regulation of sale and  purchase   of  agricultural   produce   and   for   the establishment superintendence  and  control  of  markets  in Uttar Pradesh.  The enactment was passed for the development of new  market areas  and for  efficient data collection and processing of  arrivals in  the Mandies  to enable the World Bank to  give a  substantial help  for the  establishment of various markets in the State of Uttar Pradesh. It led to the establishment of  Market Areas,  Principal Market  Yards and Sub-Market Yards  and levying  of the  fee  in  relation  to transactions of  certain commodities  in the  State of Uttar Pradesh. Various  Market Committees  were  formed  known  as Mandi Samitis. In order to give effect to the working of the Act the Uttar Pradesh Krishi Utpadan Mandi Niyamawalli 1965, being Rules under the Act were made by the Governor. The Act was amended several times but the Rules were not accordingly amended as  and when  required  to  make  them  uptodate  in accordance with the amended Act.      "Agricultural Produce"  has been  defined in clause (a) of s. 2 of the Act to mean:-

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    "Such items  of produce  of agriculture,  horticulture,      viticulture,  apiculture,  sericulture,  pisci-culture,      animal husbandry  or forest  as are  specified  in  the      Schedule, and includes a mixture of two or more of such      items, and  also includes  any such  item in  processed      form, and further includes gur, rab, shakkar, khandsari      and jaggery." while Clause (e) defines "commission agent" or "Arhatiya" to mean:-      "a person  who, in  the ordinary  course  of  business,      makes  or  offers  to  make,  a  purchase  or  sale  of      agricultural produce,  on behalf of the owner or seller      or purchaser  of agricultural  produce,  for  Arhat  or      commission". 105 under clause (p),      ""producer" means  a person  who, whether by himself or      through hired  labour, produces,  rears or catches, any      agricultural produce,  not being  a producer  who  also      works as a trader, broker or Dalal, commission agent or      Arhatiya or  who is otherwise ordinarily engaged in the      business of storage of agricultural produce". Cause (y) defines a "trader" to mean:-      "a person  who in  the ordinary  course of  business is      engaged in  buying or selling agricultural produce as a      principal or  as a duly authorised agent of one or more      principals and includes a person, engaged in processing      of agricultural produce."      Under Clause  (k), ’Market Area’ means an area notified as such  under Section  6, or  as modified  under Section 8, while ’Principal  Market Yard’ has been defined under clause (o) to  mean, the portion of a Market Area, declared as such under Section  7, and  ’Sub Market  Yard’ under  clause  (w) means a  portion of  a Market  Area, declared  as such under Section 7.      The State  Government under  s. 8  has got the power to alter any  market area  and modify  the list of agricultural produce. Section 9 provides for the effect of declaration of Market  Area.   Chapter  III  of  the  Act  deals  with  the establishment, incorporation  and constitution of the Market Committees,  section  17  provides  for  the  power  of  the Committee. Clause  (i) authorises  a Committee  to issue  or renew licences  under the  Act on  such terms and conditions and subject  to such  restrictions  as  may  be  prescribed. Clause (iii)  authorises a Committee to levy and collect (a) such Fees  as may  be prescribed for the issue or renewal of licences, and  (b) market  fee at the rate and in the manner provided therein. [Though clause (b) of section 17 (iii) had undergone drastic  changes from time to time, the Rules were not correspondingly  amended.] Section  19 provides  for the Market Committee  Fund and its utilisation. Section 19-B was introduced in  the Act  by U.P.  Act 7 of 1978 w.e.f. 29-12- 1977 providing  for the establishment of ’Market Development Fund’ for each committee.      The Rule  making power  of the  State Government  is in Section 40.  Rule 66 deals with the levy of market fee, Rule 68 provides  for its  recovery  and  Rule  67  provides  for licence fee.      By a State Government notification, which was issued on April 11,  1978 making it effective from May 1, 1978, almost the whole  of Uttar Pradesh had been declared to be a Market Area, dividing  it into 250 areas and indicating in Schedule 8 of  the Notification  115 commodities  in respect of which the  fee   could  be   levied  by   the  Market  Committees. Declaration of  Principal Market  Yards and Sub-Market Yards

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under Section 7 had also been made.      Various traders  carrying on  business in  the State of Uttar Pradesh  within the  jurisdiction  of  several  Market Committees challenged the levy of fee in the High Court from time to  time. There  were several  rounds of litigation and the  writ  petitions  were  dismissed.  On  account  of  the litigations between  the traders  and the Market Committees, the  working   of  the   Committees  had   not  successfully proceeded, as fees levied from time to time could not be 106 realised  in   full.  Sometimes   illegal  or   unauthorised collections have  been made. Money justifiably realised also had not been fully utilised as it ought to have been done.      In the  appeals and writ petitions to this court it was contended on behalf of the appellants and petitioners that:-      1. Big areas consisting of towns and villages have been notified as  Market Areas  without  rendering  any  service, which is  contrary to  the whole  object of  the Act and the concept of fee.      2. No  market area  or market  yard  had  been  validly created.      3. No  Mandi Samiti (Market Committee) had been validly appointed.      4. No  machinery had  been provided  in the  Rules  for adjudication of disputes.      5. Fixation  of minimum  of 1%  to be charged as market fee by  all the Market Committees under s. 17(iii)(b) of the Act was illegal as the requirement of and the services to be rendered by  the various  Market Committees  could not be on the same footing.      6. There  was no  application of  mind in  issuing  the notification dated  11-4-1978 whereby  250 market areas were notified  and   115  items   of  agricultural  produce  were specified.      7. There  could not  be any  multi point  levy  of  any market fee  either in  the same  market area or in different market areas.      8. The retrospective operation of the law brought about in s.  17(iii)(b) by U.P. Act 7 of 1978 w.e.f. 12-6-1973 was bad.      9. No  market fee could be levied on goods not produced within the  limits  of  a  particular  market  area  and  if produced outside and brought in such area.      10. No  market fee  could be  levied both  on paddy and rice. The  rice millers  had been  illegally  asked  to  pay market fee  on their  sale of  rice. Similarly no market fee was payable on Ghee either by the producer-trader of Ghee or by its purchaser.      11. Fee  could be  charged on sale of animals but could not be  charged on  hides and  skins as  was being illegally done.      12. Fee  could be  charged on  wood or timber but could not be  charged either  on furniture  manufactured from such wood or timber or on Catechu (Katha).      13.  Wood   cut  and  brought  from  the  jungle  by  a manufacturer or paper could not be subjected to levy of fee.      14. Some of the items mentioned in the notification are Kirana goods  brought from  outside the  market area or even from other  States for  sale in different Mandis, and cannot be subjected to the levy of market fee.      15. No  market fee could be charged on tobacco or tendu leaves nor on bidis.      16. No  market fee  could be charged on rab salawat and rab galawat. 107

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    17. No  market fee  can be  charged if  only goods  are brought in  a market  area and despatched outside it without there taking  place any  transaction of purchase and sale in respect of these goods.      18. If  no licence  is issued or taken under s. 9(1) of the Act then there is no liability to pay a market fee.      19. No  market fee  can be  levied on  transactions  of match boxes, soyabin products.      20. No  market fee  can be  charged from the vendors of fruits and vegetables through their Commission Agents.      21. Fee  can be  charged only  on those transactions in which  the   seller  is   producer  and  not  on  any  other transaction, and  market fee  can be  charged only  on those transactions  in  which  the  seller  is  the  purchaser  of agricultural produce and not on any other transaction. ^      HELD: 1.  Declaration of big areas as Market Areas does not offend  any provision  of law.  Any area  big  or  small including towns  and villages can be declared as Market Area under s. 6 of the Act. [121 F]      2. The  traders are required to take out licences under s.9(2) read  with s.11  of the  Act, for such place which is either a  principal Market  Yard or  a sub-Market Yard or at any specified  place in  the Market  Area. No  body  can  be permitted to  carry on  his business  anywhere in the Market Areas as  the Market  Committee will  not be able to control and levy fee throughout the Market Area. [121 G-H]      3. (i)  Market Committees have not yet been constituted in accordance  with the provisions contained in s. 13 of the Act. They  have been  constituted  temporarily  under  Uttar Pradesh Krishi  Utpadan Mandi  Samitis (Alpakalik Vyawastha) Adhiniyam, 1972  which was  a temporary  Act, extended  from year to  year. It is high time that Market Committees should be constituted  in a  regular manner on a permanent basis in accordance with  the provisions  contained in Chapter III of the Act. [123 C]      (ii) The  levy and  collection of  fee by the temporary Market Committees  is not illegal as argued on behalf of the appellants. [123 D]      Kewal Krishan  Puri v.  State of Punjab [1979] 3 S.C.R. 1217, referred to.      4.  A   machinery  for   adjudication  of  disputes  is necessary to  be provided  under the  Rules for  the  proper functioning of the Market Committees. [123 E]      5(i) Under  clause (b)  of s.  17(iii)  of  the  Act  a minimum and  maximum limit of market fee chargeable has been fixed by  the legislature. The minimum is 1% and the maximum is 1 1/2% of the price of the agricultural produce sold. The fixing of the minimum of 1% fee by itself is not illegal but it would  be subject  to the rendering of adequate services. [123 G]      (ii) The  charging of  1% fee  throughout the  State of Uttar Pradesh  by all  the market  Committees is not illegal and does  not go beyond the quid pro quo theory discussed in Puri’s case. [124 A] 108      6. The  notification dated  11-4-1978 indicates that in the various  Districts, which  number about  55, 250  Market Committees have  been constituted  and about  115 items have been selected  in respect  of  which  market  fee  has  been directed to  be levied.  None of  the items  so specified is such that  it cannot  be covered  by the Schedule which is a part of the Act. The definition of ’agricultural produce’ is very wide,  and it  is not confined to items of agricultural produce’ only but includes items of produce of horticulture,

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viticulture, apiculture,  sericulture, pisci-culture, animal husbandry or forest. [124 C]      7(i) All  the four  clauses of clause (b) of S. 17(iii) are mutually  exclusive. If  the produce is purchased from a producer directly  the trader  shall be  liable to  pay  the market fee  to the  Committee in  accordance with sub-clause (2). But if the trader sells the same produce or any product of the  same produce  to another  trader neither  the seller trader nor  the purchaser  trader can  be made  to  pay  the market fee under sub-clause (3). [125 C]      (ii) In  a particular  market area market fee cannot be levied both  in relation  to the transaction of purchase and sale of paddy and the rice produced from the same paddy. Fee can be  charged only  on one transaction. This finds support from the unamended Rules as they are, wherein is to be found sub-r. (2) of Rule 66. There is nothing in the provisions of the Act  or the  Rules to  warrant the  view that in another market area  the Market  Committee of  that area cannot levy fee on a fresh transaction of sale and purchase taking place in that area. [125 H-126 A]      8(i) Before 1973, reading the provisions of the Act and the Rules,  market fee  was to  be charged  at such rates as specified in  the bye-laws of a particular Market Committee. But it  could not  exceed 1/2  percentum of the price of the agricultural produce.  The liability  to pay  the fee was of the seller  of the  agricultural  produce.  Market  fee  was liable to  be  paid  under  Rule  68(2)  (ii)  even  if  the specified agricultural  produces was  sold directly  by  the seller  to   the  consumer.  This  provision  has  now  been superseded by  an amendment in the Act brought about by U.P. Act 19 of 1979. [127 F-G]      (ii) After  the amendment  in the  Statute, Rules could apply  only  mutatis  mutandis  and  wherever  there  was  a conflict between  the Rules and the Statute the latter had o prevail. [128 D]      (iii) The  State Legislatures  are  competent  to  make retrospective amendment  and retrospective  imposition of  a fee is  valid. However,  in a  given case  and  in  a  given situation the  retrospective operation may be hit by Article 19. [129 A-B]      B. Banerjee  v. Anita  Pan [1975] 2 S.C.R. 774, M/s. S. K. G.  Sugar Ltd.  v. State  of Bihar & Ors. [1975] 1 S.C.R. 312 and  H. H. Sudhundra Thirtha Swamiar v. Commissioner for Hindu  Religious  &  Charitable  Endowments,  Mysore  [1963] Suppl. 2 S.C.R. 302 referred to.      (iv) The  Rules which  were framed in 1965 namely Rules 66 and  68 are  very different from the present provision of law. The  Government has  failed  to  amend  the  Rules  and bringing it in confirmity with the amended provisions of the Statute from  time to  time. The  Rules will apply as far as possible so  long they  do not  come in  conflict  with  the Statute and even 109 without the  aid of  the  Rules  the  provision  in  section 17(iii) (b)  as it  stands after the amendment brought about by U.P.  Act 7  of 1978  is workable and can be given effect to. [128 G-H]      In the  present case  the retrospectivity of the law as such is  not bad  and the  only safeguard  will be  that  if market fee  has been  realised by  any Market  Committee  in respect of  transactions of  sale  of  agricultural  produce taking place  between 12-6-1973 and the coming into force of U.P. Act  7 of  1978, in accordance with law as it prevailed then, no  market fee  under the  amended law can be realized again. But  if in  respect  of  any  transactions  aforesaid

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market fee had not yet been realised then it can be realised in accordance with the amended provision of the law. [129 C]      9. No  provision in  the Act  or the  Rules  limit  the operation of  the law  in a  particular market  area only in respect of  the agricultural  produce produced in that area. [129 G]      10(i) A  producer  who  produces  agricultural  produce generally does  not indulge  in trading  activities so as to become a  trader within  the meaning  of clause  (y). He  is covered by  clause (p)  only. If a person is simply a trader indulging  in  trading  activities  he  is  covered  by  the definition in clause (y). The expression producer-trader has been  coined  for  a  person  who  is  both  a  producer  of agricultural produce  and himself  trades  in  it.  For  the purposes of the Act he ceases to be a producer and becomes a trader only as the definition indicates. [130 A-B]      (ii) If  paddy is purchased in a particular market area by a  rice miller  and the same paddy is converted into rice and then  sold the  rice miller will be liable to pay market fee on his purchase of paddy from the agriculturist producer under sub-clause  (2) of  section 17 (iii) (b). He cannot be asked to  pay market  fee over again under sub-clause (3) in relation to the transaction of rice. [130 E]      (iii) Market  fee has  to be  levied and  collected  in relation to  the transaction of paddy alone. Otherwise there will be  a risk  of violation of Article 14 if it is left to the Market  Committee in  the case  of some  rice millers to charge market  fee on  the transaction  of paddy  and in the case of  others to charge it when the sale of the rice takes place. If, however, paddy is brought by the rice miller from another market  area, then  the Market Committee of the area where paddy is converted into rice and sold will be entitled to  charge  market  fee  on  the  transaction  and  sale  in accordance with sub-clause (3). [130 F-G]      (iv) In  transactions of  Ghee, a  dealer who purchases milk or cream from the villagers and others and manufactures Ghee in  his plant  will be liable to pay market fee because he is the producer of Ghee within the meaning of the Act and at the  same time  a trader in Ghee also. When he sells Ghee to another  dealer in Ghee who is simply a dealer then under sub-clause (3)  of  Section  17(iii)(b),  the  manufacturing dealer will  be liable  to pay  market  fee  to  the  Market Committee or  the  transaction  of  Ghee,  but  he  will  be entitled to pass on the burden to his purchaser. [131 C-D]      11. The  definition clause  (a) of  section 2  uses the expression ’animal  husbandry’s by  way of a descriptive one without strictly confining to the pro- 110 products of  animal husbandry as the additions, of the words ’specified in the schedule’ indicates. In the schedule under the group  ’husbandry products’  are mentioned item 11 hides and skins,  item 12  bones, item 13 meat etc. Market fee is, therefore, leviable  on the  transactions of hides and skins as no  market fee can be charged on transactions of sale and purchase of  animals in  a market area in the State of Uttar Pradesh  the   same  having   not  been   included  in   the notification. Had it been included in the notification, then no market  fee could  be charged  in the same market area on hides and skins. It could only be charged in relation to the transaction of  purchase and sale of animals. [131 H, G; 132 B-C]      12. Group  E of  the notification dated 11-4-1978 deals with forest  products. The  items mentioned  therein are (1) Gum, (2)  Wood, (3)  Tendu leaves, (4) Catechu, and (5) Lac. Market fee  can be  charged on  purchase of wood by a trader

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from a  producer. No  fee can  be charged  on  the  sale  of furniture manufactured  by the  purchaser of wood. According to the Market Committees Catechu is a product from timber or trees like  Gum or  Lac, which trickles down from the trees, while, according  to the  Catechu dealers  by processing  of Khar trees  Catechu is  produced. This  question of  fact is left to be decided by the Market Committees concerned in the first instance  and then  by a court of law. If Catechu is a product of  Khar trees  by some processing as prima facie it appears to be so, it is plain that market fee can be charged only on  the purchase  of Khar  wood and  not on the sale of Catechu. [D, F]      13. The  owner of  the jungle wherefrom the wood is cut and brought will be a producer within the meaning of the Act and the  licensee-producer of that wood would be a purchaser of an  agricultural produce within the meaning of sub-clause (2) of  section 17(iii)  (b) of the Act liable to pay market fee. It  matters little what use is made of the wood by him. The question  of quid  pro quo and service cannot be decided by a  dichotomy of  service to every payer of fee as held in Kewal Krishan  Puri’s case. The matter has to be judged in a broad sense  and not  in the  sense of  rendering service to every individual payer of the fee. [133 B-C]      14.  In  group  A-VI  Spices  are  mentioned  including certain Kirana  items such  as Ripe Chillies, Sonf, turmeric etc. They  are sold  by the  Kirana dealers.  Sometimes they purchase them  from the  agriculturists in  the same  market area. In  relation to those transactions they will be liable to pay  market fee  under sub-clause  (2) of section 17(iii) (b). More  often than  not such  articles are  brought  from outside and  sold by  the Kirana merchants. If they are sold to consumers,  no market  fee can  be levied  in view of the proviso added  in  the  year  1979.  If  they  are  sold  in wholesale, then the transaction can be subjected to the levy of market fee because in a particular market area they enter into the  first  transaction  of  sale  in  respect  of  the specified agricultural produce. [133 E-F]      15. Market fee can be charged on transaction of tobacco as it  is included in group A-V of the notification. Similar is the position in regard to tendu leaves which is mentioned in group  E. Bidi  cannot  be  treated  as  an  agricultural produce as  it is  not an  admixture of  tobacco  and  tendu leaves within the meaning of section 2(a) of the Act. But if a Bidi  manufacturer purchases  tobacco and  tendu leaves in the market area and uses them in the manufac- 111 ture of  bidi, he  will be  liable  to  pay  market  fee  in relation to  the transaction  of tobacco  and tendu  leaves. [133 G-134 A]      16. Market  fee can  be levied on the first transaction of rab  taking place  in any  market area in accordance with any of  the sub-clause  of section  17(iii)(b),  as  may  be applicable.  It  cannot  be  again  charged  on  the  second transaction of rab galawat or rab salawat even assuming that it is rab. [134 F]      17. If  goods are merely brought in any market area and are despatched  outside it  without any  transaction of sale taking place  therein, then no market fee can be charged. If the bringing  of the  goods in  a particular market area and their despatch  therefrom are as a result of transactions of purchase and  sale taking  place outside the market area, it is plain that no fee can be levied. [135 B]      18(i) Producer as defined in clause (p) of section 2 is not  required   to  take   any  licence   for  selling   his agricultural produce  nor is  he required  to pay market fee

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under any  of the sub-clauses of section 17(iii) (b). But if he is  a producer-trader  in the sense explained above, then he will be required to take out a licence in accordance with s. 9(2)  of the Act and no body can be permitted to carry on any trade in agricultural produce in the market area without a valid licence. [135 E]      The proviso  to clause  (p) of  s. 2  will be attracted only if  a question  arises as  to whether  any person  is a producer or  not for  the purposes  of the  Act and  in that event the  decision of  the Director  made after  an inquiry conducted in  the manner  prescribed by  the Rules  shall be final. If  a question  arises whether  a person  is merely a producer or  producer-trader the Director will have no power to decide  this question.  Such a  question will  have to be decided by the Market Committee itself which will be subject to the final decision of a court of law. [135 G-H]      (ii) The  traders cannot  escape their liability to pay the fee  on account of their default of taking out licences. [136 D]      19. Market  fee can be charged only on the transactions of purchase  of wood  and if  a manufacturer of match-sticks purchases  wood   from  the  producer  for  the  purpose  of manufacturing the  sticks he  will be required to pay market fee on  such purchase  of wood  only and  not on the sale of match-sticks or  match boxes.  Similarly market  fee will be leviable on  the transaction  of purchase of soyabin and not on transaction of sale of soyabin products. [136 E]      20. Under  sub-clause (1)  of s.  17(iii)(b) of the Act when fruits  and vegetables  are sold  through a  commission agent by the producer then the commission agent is liable to pay the  market fee and he can realise it from the purchaser of fruits  and vegetables.  The burden  does not fall on the producer. The  liability in  the first  instance is  of  the commission  agent  and  finally  of  the  purchaser  of  the articles. [136 H]      21.  In   the  U.P.  Act  even  traders  under  certain circumstances have  been made  liable to  pay such fees. The argument that  market fee  can  be  charged  only  on  those transactions  in   which  the  seller  is  the  producer  of agricultural produce  and not  on any  other transaction  is devoid of substance. [138 C] 112      Mangalchand Ramchandra  and others  etc.  v.  State  of Bihar [1971] B.L.J.R. 1038 approved.      22. If  anything has  been realised from the traders or any other  person which  goes contrary  to this judgment the same should  be refunded  by the  Market Committee concerned within six  months. The form of the order in relation to the refund of  the  market  fee  may  vary  from  case  to  case depending upon  the facts  and circumstances  of each  case. [138 D]      23.  Market   fee  due   from  the  traders  should  be regularised and  be charged  in the  light of this judgment, and paid  within a  period of  six month.  If there  is  any disputed question  of fact  to  be  decided  by  the  Market Committee then  it should  be decided as quickly as possible leaving the  person concerned  to agitate  the matter  in  a court of  law, preferably,  in the  High Court, within short time thereafter. [138 E-F]

JUDGMENT:      CIVIL APPELLATE  JURISDICTION: Civil  Appeal Nos. 1841- 1846 of 1978.

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    From the  Judgment and  Order dated  21-9-1978  of  the Allahabad High  Court in  W.P. Nos.  4846, 4436, 3815, 5040, 475 and 4587/78.                             AND      CIVIL APPEAL No. 871 of 1978.      From the  Judgment and  Order dated  29-4-1977  of  the Allahabad High Court in W.P. No. 1749 of 1974.                             AND      CIVIL APPEAL No. 1921 OF 1978.      From the  Judgment and  Order dated  21-9-1978  of  the Allahabad High Court in W.P. No. 4566 of 1978.                             AND      CIVIL APPEAL No. 1960 OF 1978.      From the  Judgment and  Order dated  21-9-1979  of  the Allahabad High Court in W.P. No.4568/78.                             AND      CIVIL APPEAL Nos. 2169-2173 OF 1978.      From the  Judgment and  Order dated  21-9-1978  of  the Allahabad High  Court in  W.P.  Nos.  4542,  5589,  5592  to 5594/78.                             AND      CIVIL APPEAL Nos. 2178-2187 of 1978.      From the  Judgment and  Order dated  21-9-1978  of  the Allahabad High  Court in  W.P. Nos.  4921, 4625, 4449, 5002, 5003, 5007, 5068, 5069, 5284 and 4568 of 1978. 113                             AND      CIVIL APPEAL Nos. 2219-2226 OF 1978.      From the  Judgment and  Order dated  21-9-1978  of  the Allahabad High Court in W.P. Nos. 5185 and 5059 of 1978.                             AND      CIVIL APPEAL Nos. 2269, 2302, 2373-2375 OF 1978.      From the  Judgment and  Order dated  21-9-1979  of  the Allahabad High  Court in W.P. Nos. 5193/78, 5192, 5010, 4584 and 4583 of 1978.                             AND      CIVIL   APPEAL    Nos.   2321,2322,2356,2359,2386,2406- 2408,2426-2428,2430  &   2431,     2457,2504,2507/1978   and 142,144,174,230,385,388,429,438,599,635,745,821,929        & 1007,1009/79,1149,1149A,1346,1630,1636,1638,1863,1865,1866,1 867 & 1869/79 and 2270,2272/78.      From the  Judgment and  Order dated  21-9-1978  of  the Allahabad High  Court in  W.P. Nos.5521, 4982, 5001,4447/78, 4454, 2311,  5134,  3826,  4409,  4020,  5144,  5728,  5002, 4455/78, 6948,  4665, 4560,  4666, 4985,  4449, 5540,  4823, 4619, 5150,  4588, 4593, 4926, 4947, 4948, 5012, 5062, 5088, 5089, 5191,  5539, 5106, 5097, 4833, 4911, 1398, 2114, 2515, 898/78, 5071,  5454, 5592,  5072, 5034,  4149,  5153,  5169, 5734/78, 4947/76,  5533/78, 3299/77,  4943, 4629/78  & 5194, 5195, 5196/79.                             AND      CIVIL APPEAL No. 487 of 1979.      From the  Judgment and  Order dated  21-9-1978  of  the Allahabad High Court in W.P. No. 4445 of 1978.                             AND      WRIT PETITION Nos. 257 & 600 of 1979.      (Under Article 32 of the Constitution).      F.S. Nariman,  R. F. Nariman and P. C. Bhartari for the Appellants in CA Nos. 2260 & 2261.      S. P.  Gupta, H.  K.Puri, V.  K  Bahl  and  Miss  Madhu Moolchandani for the Appellants in CAs 1841 to 1846, 2426 to 2428, 929, 1007 to 1009, 1630, 2169 to 2172 and 1635.      V.M. Tarkunde,  G. B.  Pai,  Mrs.  Saran  Mahajan,  Mr. Arvind Kumar,  Mrs. Lakshmi  Arvind and  R. K. Sinha for the Appellants in CA Nos. 2507, 2322, 2457 and 871.

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114      Shanti Bhushan,  S. P.  Gupta, H. K Puri and Miss Madhu Moolchandani for the Appellants in CA 174.      L. N.  Sinha, S. S. Ray, Ghayyas Alam and R. K Jain for the Appellants in CA 2269, 2270 to 2272.      Shanti Bhushan,  Subhash  Chandra  Birla  and  Shreepal Singh for the Appellants in 2373, 2302, 2374 and 2375.      Yogeshwar  Prasad   and  Mrs.   Rani  Chabra   for  the Appellants in  CA 599,  142 to 144, 385, 1638, 2219 to 2226, 1921, 1960,  2173, 2178, 2180 to 2187, 2179, 386 to 388, 429 to 438 and W.P. 257.      Pramod Swarup for the Appellants in CAs Nos. 230, 2359, and 2386.      P. R. Mridul and Ashok Grover for the Appellants in CAs 2406 to 2408.      Veda Vyasa,  N. C.  Sikri, A. K Sikri and Vijay Jaiswal for the Appellants in CA 821 & 487 and W.P. 600.      O.P.Verma for the appellants in CAs 1867 and 1869.      Dr.Y.S.Chitale, Mrs.  Shandhana Ramachandran  and P.  K Pillai for Appellant No. 1 in CA 1846, 745 and Appellant No. 2 in CA 1633 and 1634.      S.K.Jain for the Appellants in CA 187/79.      T.S.Arora for the Appellants in CA 2356/78 & 1346/79.      Y.S.Chitale, O.  P. Rana  and Mrs.  S. Ramachandran for the Appellants  in CA 1866 and Appellants in CA 1865 and R.1 in CAs  142 &  143 and  144 and  for the  Appellants in CAs. 1631, 1632  and for  appellant No.  1 in  CA 1633,  1634 and Appellants in CA 1863.      S.K Dhingra for the Appellants in CA 2321/78.      J M.Khanna for the Appellants in CA 2430 & 2431.      K B.Rohtagi  and Praveen  Jain for the Appellants in CA 2504/78.      M.M.L.Srivastava for the Appellants in CA 1149 & 1149A.      K C.Dua for the Appellants in CA 1635 & 1636.      L M.Singhvi,  B.D. Madhyan, R.N. Dikshit and L.K.Pandey for the Respondents (Mandi Samiti) CA 1841 to 1846,1921,2169 to 2173,2178  to 2187,2219 to 2226, 2260,2261,2269,2302,2373 to 2375,2322,2356,2406  to 2408,2420  to 2423,2431,  2426 to 2428,2507,142    to     144,174,385    to     388,429     to 439,599,230,635,1007 & 1008, 1149, 1149A, 1630 & 1631, 1638, 5135, 1346 and 2212. 115      E.C.Aggarwala  and   R.  Satish   for  RR   2   in   CA 2179,2180,2222 2271,2431,2433,  2504/78 and  1869 and 143/79 and in  other matters for Mandi Samiti for Muzaffarnagar and Meerut.      Ravinder Bana  for RR  2 in 2457,2270 and 2272 and RR 2 and RR 3 in CA 2269  and WP No. 257/79.      M.V.Goswami for RR 1 in CA 2356.      The Judgment of the Court was delivered by      UNTWALIA J.,  The Uttar  Pradesh Krishi  Utpadan  Mandi Adhiniyam, 1964  being U.P.  Act XXV  of  1964,  hereinafter called the  Act, was  passed in  that year.  It led  to  the establishment of  Market Areas,  Principal Market  Yards and Sub-Market Yards etc. and the levying of the fee in relation to transactions of certain commodities in the State of Uttar Pradesh. Various  Market Committees  were  formed  known  as Mandi Samitis. In order to give effect to the working of the Act The Uttar Pradesh Krishi Utpadan Mandi Niyamavali, 1965, hereinafter called  the Rules,  were made by the Governor of Uttar Pradesh.  The Act  has been amended several times. But we  were   distressed  to  find  that  the  Rules  were  not accordingly amended  as  and  when  required  to  make  them uptodate in accordance with the amended Act. Various traders carrying on  business in  the State  of Uttar Pradesh within

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the jurisdiction of several Market Committees challenged the levy of  fee in  the High  Court of  Allahabad from  time to time. There  were several rounds of litigation in which they by and  large, failed.  Finally  many  Writ  Petitions  were dismissed by  the High Court by its judgment dated September 21, 1978  on  which  date  many  writ  petitions  were  also dismissed in limine. Civil Appeal 1841 of 1978 and about 103 more appeals  are from  the said  judgment and  order of the High Court. Immediately preceding the said judgment a longer and more  elaborate judgment  had been delivered by the High Court on  April 29, 1977. Civil Appeal 871 of 1978 and Civil Appeal 1636  of 1979  are from the said judgment. Along with these 106  appeals, two Writ Petitions were also heard being Writ Petition  No. 257  of 1979 and Writ Petition No. 600 of 1979. Thus  in all  108 matters have been heard together and are being disposed of by this judgment.      At the  outset it  may be mentioned that because of the litigations cropping  up  from  time  to  time  between  the traders  and  the  Market  Committees  the  working  of  the Committees had  not successfully  proceeded so far, as, fees levied from time to time could not be realised in. Sometimes illegal or unauthorised collections seem to have been 116 made. Money  justifiably realised also does not seem to have been fully  utilised as it ought to have been done. In order to  enable   the  Market  Committees  in  their  attempt  to implement the  law as  far as  possible and  to  save  their attempt from being thwarted by any unnecessary litigation we allowed the  parties to  advance a full throated argument in this Court  including some  of the  points  which  were  not argued in  the High Court or in support of which foundations of fact were lacking. In this judgment our endeavour will be to formulate  the points  of law  and decide  them as far as practicable so  that in  future the  business of  the Market Committees may  be conducted  in the  light of this judgment leaving no  scope for unnecessary litigation. Of course even in our  judgment at  places it  would be indicated, and even apart from  that, some genuine and factual disputes may crop up which  in the first instance may be decided by the Market Committees, preferably  a Board  constituted by a particular Committee for deciding such disputes and then, if necessary, by the  High Court.  We do hope that no further time will be lost by  the State  Government in  amending  the  Rules  and making them  up-to-date to fit in with the latest amendments in the Act.      The long  title of  the Act indicates that it is an Act "to provide  for the  regulation of  sale  and  purchase  of agricultural   produce    and   for    the    establishment, superintendence, and  control of  markets therefor  in Uttar Pradesh." From  the Objects  and Reasons of the enactment it would appear that this Act was passed for the development of new market  areas and  for efficient  data,  collection  and processing of  arrivals in  the Mandis  to enable  the World Bank to  give a  substantial help  for the  establishment of various markets  in the  States of  Uttar Pradesh.  In other States the  Act is  mainly meant to protect an agriculturist producer from  being exploited  when he  comes to the Mandis for selling  his agricultural produce. As pointed out by the High Court  certain other  transactions also have been roped in the  levy of the fee, in which both sides are traders and neither side is an agriculturist. This has been done for the effective implementation  of the  scheme of establishment of markets mainly  for the  benefit of  the producers.  But  as pointed out  recently by  a Constitution Bench of this Court in the case of Kewal Krishan Puri v. State of Punjab the fee

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realised from  the payer of the fee has, by and large, to be spent for  his special  benefit and for the benefit of other persons connected with the transactions of purchase and sale in the various Mandis. The earlier cases on the point of fee have been  elaborately reviewed in that judgment and certain principles have  been called  out which  will be adverted to hereinafter. While deciding the question of quid pro quo in 117 relation to  the impugned  fees the  High Court  had not the advantage of the judgment of this Court. In that regard this judgment is  a settler  on the  point and  we hope  that the authorities and  all other  concerned in  the matter will be guided by and follow the said decision in the matter of levy and utilisation of the market fee collected.      We shall  now at  the  outset  refer  to  the  relevant provisions of  the Act  as they  stood in  the year 1978 and some of  the rules  framed  thereunder.  Wherever  necessary reference will  be made  to the  unamended provisions of the Act.      In clause  (s) of s.2 of the Act "Agricultural produce" has been defined to mean:-           "Such   items    of   produce    of   agriculture,      horticulture,  viticulture,   apiculture,  sericulture,      pisci-culture,  animal   husbandry  or  forest  as  are      specified in  the Schedule,  and includes  admixture of      two or  more of  such items, and also includes any such      item in  processed form, and further includes gur, rab,      shakkar, khandsari and jaggery." The ’Board’  means the  State Agricultural  Produce  Markets Board constituted  under Section  26-A. Clause  (e)  defines "commission agent" or "Arhatiya" to mean:-      "person who,  in the ordinary course of business, makes      or offers  to make,  a purchase or sale of agricultural      produce, on  behalf of the owner or seller or purchaser      of agricultural produce, for Arhat or commission." Under clause  (k) "Market  Area" means  an area  notified as such under Section 6, or as modified under Section 9. Clause (o) defines "Principal Market Yard" to mean the portion of a Market Area,  declared as  such under  Section 7. Clause (p) must be read in full:-      "Producer’ means  a person  who, whether  by himself or      through hired  labour, produces,  rears or catches, any      agricultural produce,  not being  a producer  who  also      works as a trader, broker or Dalal, commission agent or      Arhatiya or  who is otherwise ordinarily engaged in the      business of storage of agricultural produce.      Provided that  if a  question arises  as to whether any      person is  a producer  or not  for the purposes of this      Act, the  decision  of  the  Director,  made  after  an      enquiry, conducted in such manner as may be prescribed,      shall be final." 118 Under clause  (w) "Sub-Market  Yard" means  a portion  of  a Market Area,  declared as  such under  Section 7. Clause (y) defines a "trader" to mean:-      "a person  who in  the ordinary  course of  business is      engaged in  buying or selling agricultural produce as a      principal or  as a duly authorised agent of one or more      principals and includes a person, engaged in processing      of agricultural produce."      Action under  s.5 was  taken by  the  State  Government declaring its  intention to  regulate and  control sale  and purchase of  agricultural produce in any area and thereafter declaration of  Market Area  was made  under s.6.  Under the present impugned notification, which was issued on April 11,

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1978 making  it effective from May 1, 1978, almost the whole of Uttar  Pradesh  has  been  declared  to  be  Market  Area dividing it  into 250  areas and indicating in Schedule B of the notification 115 commodities in respect of which the fee could  be   levied  by  the  Market  Committees.  Under  s.7 declarations of  Principal Market Yards and Sub-Market Yards have been  made. Most  of such areas declared so far are the markets or  the Mandis  where the  traders are  carrying  on their businesses.  It is  proposed  to  establish  Principal Market Yard  and Sub-Market Yards separately in every market area and  a question of asking the traders to carry on their business only in such Market Yards is under consideration of the Government.  The State  Government under s.8 has got the power to  alter any  market area  and  modify  the  list  of agricultural produce.  Section 9 provides for the effects of declaration of  Market Area.  Chapter III  of the  Act deals with the  establishment, incorporation  and constitution  of the Market Committees. The most important section is section 17 which  provides for  the powers  of the Committee. Clause (i) authorises  a Committee to issue or renew licences under the Act  on such  terms and  conditions and  subject to such restrictions as may be prescribed. Clause (iii) authorises a Committee to  levy and  collect (a)  such  fees  as  may  be prescribed for  the issue  or renewal  of licences,  and (b) market fee  at the  rate and in the manner provided therein. Clause (b)  of section 17(iii) has undergone drastic changes from time to time and that enabled the appellants to advance certain serious  arguments to challenge the levy of the fees especially when  the Rules were not correspondingly amended. We shall  advert to  this aspect of the matter later in this judgment at  the appropriate  place. Section 19 provides for the Market  Committee Fund and its utilisation. Section 19-B was introduced  in the  Act by U.P. Act 7 of 1978 w.e.f. 29- 12-1977  providing   for  the   establishment   of   ’Market Development 119 Fund’ for each committee. The rule making power of the State Government is to be found in Section 40.      From  the   Rules  no  provision  is  necessary  to  be specifically referred  here except  to point  out  that  the State Government will be well advised to provide a machinery in the  Rules for  the adjudication of disputes which may be raised by  the persons  liable to  pay  the  market  fee  in relation to their factum or quantum of liability. We are not impressed with the argument advanced on behalf of the Market Committees that  no such  disputes  actually  exist  or  are likely to  exist which  require any  machinery of the Market Committee for  its adjudication.  At places  hereinafter  in this judgment  we shall  point out  the nature  of  disputes which are  likely to  arise and which have got to be decided in the first instance by a machinery of the Market Committee such as a Board or the like. It would be just and proper and also convenient  for  all  concerned  if  the  disputes  are thereafter taken to any court of law.      Chapter VI  of the Rules deals with levy and collection of fees.  Rule 66  dealing with  the levy  of market fee and Rule 68  providing for  its recovery  on  reference  to  the provisions of  s.17(iii) will  be alluded  to hereinafter to point out  the chaotic  conditions in  which the  Rules have been left  inspite of  the amendment  in s.17(iii)(b) of the Act. Rule  67 provides  for licence fee and in none of these appeals we  are concerned  with  the  question  of  levy  or quantum of  the licence  fee. Chapter  VII  deals  with  the transaction of business in market Yards.      Several sets  of arguments  were advanced  on behalf of

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the trader  appellants  in  the  various  appeals  by  their respective learned  counsel. Three  sets of  arguments  were advanced on  behalf of  the various  Market Committees and a separate argument  was addressed  to us  on  behalf  of  the State. In  some of  the appeals  the State and/or the Market Committees are the appellants. The points urged on behalf of the  trader-appellants,   although  too   numerous,  broadly speaking are the following:-      (1)  Big areas  consisting of  towns and  villages have           been notified  as Market  Areas without  rendering           any service.  This is contrary to the whole object           of the Act and the concept of fee.      (2)  No market  area or  market yard  has been  validly           created.      (3)  No  Mandi   Samiti  (Market  Committee)  has  been           validly appointed. 120      (4)  No machinery  has been  provided in  the Rules for           adjudication of disputes.      (5)  Fixation of  minimum of 1% to be charged as market           fee   by   all   the   Market   Committees   under           s.17(iii)(b)  of   the  Act  was  illegal  as  the           requirement of  and the services to be rendered by           the various  Market Committees could not be on the           same footing.      (6)  There was  no application  of mind  in issuing the           notification dated  11-4-1978 whereby  250  market           areas were  notified and 115 items of agricultural           produce were specified.      (7)  There could  not be  any multi  point levy  of any           market fee  either in  the same  market area or in           different market areas.      (8)  The retrospective  operation of  the  law  brought           about in s.17(iii)(b) by U.P. Act 7 of 1978 w.e.f.           12.6.1973 is bad.      (9)  No  market  fee  could  be  levied  on  goods  not           produced within  the limits of a particular market           area and  if produced  outside and brought in such           area.      (10) No  market fee  could be  levied both on paddy and           rice. The  rice millers  have been illegally asked           to pay market fee on their sale of rice. Similarly           no market  fee was  payable on  Ghee either by the           producer-trader of Ghee or by its purchaser.      (11) Fee  could be charged on sale of animals but could           not be  charged on  hides and  skins as  was being           illegally done.      (12) Fee  could be  charged on wood or timber but could           not be  charged either  on furniture  manufactured           from such wood or timber or on Catechu (Katha).      (13)  Wood  cut  and  brought  from  the  jungle  by  a           manufacturer of  paper such  as Star  Paper Mills,           Saharanpur could not be subjected to levy of fee.      (14) Some  of the  items mentioned  in the notification           are Kirana  goods brought  from outside the market           area  or  even  from  other  States  for  sale  in           different Mandi.  They cannot  be subjected to the           levy of market fee.      (15) No market fee could be charged on tobacco or Tendu           leaves nor on bidis. 121      (16) No fee  could be charged in a municipal area as no           market committee can be constituted there nor in a           Nyaya Panchayat.      (17) No market  fee could be charged on rab salawat and

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         rab galawat.      (18) No market  fee can  be charged  if only  goods are           brought in a market area and despatched outside it           without there  taking place  any  transactions  of           purchase and sale in respect of these goods.      (19) Any goods  sold under  any controlled  legislation           such as  rice etc.  cannot attract the levy of fee           as there is no freedom to make any sale in respect           of such commodity.      (20) If no  licence is  issued or taken under s.9(1) of           the Act then there is no liability to pay a market           fee.      (21) No market  fee can  be levied  on transactions  of           matchboxes, soyabin  products,  articles  sold  by           Kisan Products Ltd. and Pan (betel leaves).      (22) No market  fee can  be  charged  from  vendors  of           fruits and  vegetables  through  their  Commission           Agents.      (23) Fee can  be charged  only on those transactions in           which the  seller is producer and not on any other           transaction.      (24) Market  fee   can  be   charged  only   on   those           transactions in  which the seller is the purchaser           of agricultural  produce  and  not  on  any  other           transaction. Points 1 to 4      These four  points are taken up together as there is no substance in any of them. Declaration of big areas as Market Areas does  not offend any provision of law. Any area big or small including towns and villages can be declared as Market Area under s.6 of the Act. As explained in the case of Kewal Krishan Puri  (supra) the  whole of  the market  area is not meant where  the traders  or the licensees can be allowed to set up and carry on their business. The traders are required to take out licences under s.9(2) read with s.11 of the Act, for such  place which is either a Principal Market Yard or a Sub-Market Yard  or at  any specified  place in  the  Market Area. No  body can  be permitted  to carry  on his  business anywhere in the Market Area as the Market Committee will not be able  to control and levy fee throughout the Market Area. The question of rendering service and its co- 122 relation  to  the  charging  of  fee  has  been  elaborately discussed in  the said decision and the following principles have been culled out:-      "(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 market area           for the  purpose of  facilitating the transactions           of 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 benefit  must  be           conferred on  them which  have a direct, close and           reasonable co-relation  between the  licensees and           the transactions.      (4)  That 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

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         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           benefitting 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, may be in the           neighbourhood of two-thirds or three-fourths, must           be shown 123           with  reasonable  certainty  as  being  spent  for           rendering services of the kind mentioned above." As already  stated, Market  Yards also have been established while issuing  notifications under  s.7. By  and large,  the Mandis where  the traders are carrying on their business for the time  being have been declared as Market Yards. When the Market Committees  are able  to construct  their own  Market Yards, as  in some  places they have been able to do, then a question will  arise whether a trader can be forced to go to that place only for carrying on his business in agricultural produce or  he can  be permitted to carry on his business in his old  place. For  the time  being this  question is  left open. Market  Committees have  not been  constituted yet  in accordance with the provisions contained in s.13 of the Act. They have  been constituted  temporarily under Uttar Pradesh Krishi   Utpadan   Mandi   Samitis   (Alpakalik   Vyawastha) Adhiniyam, 1972  which Act  was a temporary Act and has been extended from  year to year. But it is high time that Market Committees should  be constituted  in a  regular manner on a permanent basis  in accordance with the provisions contained in Chapter  III of  the Act.  But the levy and collection of fee by  the temporary  Market Committees  is not  illegal as argued  on   behalf  of  the  appellants.  A  machinery  for adjudication of  disputes is  necessary to be provided under the  Rules   for  the   proper  functioning  of  the  Market Committees. We  have already observed and expressed our hope for bringing  into existence  such machinery  in one form or the other.  But it  is not correct to say that in absence of such a  machinery no  market fee can be levied or collected. If a  dispute arises  then in  the first instance the Market Committee itself  or any  Sub-Committee appointed  by it can give its  finding which  will be subject to challenge in any court of  law when  steps are  taken for  enforcement of the provisions for realisation of the market fee. Point No. 5      Under clause  (b) of s.17(iii) of the Act a minimum and maximum limit of market fee chargeable has been fixed by the legislature. The  minimum is  1% and the maximum is 1 1/2 of the price  of the  agricultural produce  sold. The fixing of the minimum  of 1% fee by itself is not illegal but it would

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be  subject   to  the  rendering  of  adequate  services  as explained by  this Court  in Kewal  Krishan Puri’s case. The facts placed  before the  High Court  as also before us were too meagre  to indicate  that services  to the extent of the fee levied  at 1%  are not being rendered. In Puri’s case we upheld the  levy of  market fee  at 2%  on the  value of the goods sold. But there we found that the 124 Market Committees  were rendering  greater services than are being rendered  by the  Market Committees  of Uttar Pradesh. Yet charging  of 1%  fee as  is being charged throughout the State of  Uttar Pradesh  by all the Market Committees is not illegal and  does not  go beyond  the quid  pro  quo  theory discussed in Puri’s case. Point No. 6      It is  difficult to understand the significance of this point. The  notification dated  11-4-1978 indicates  that in the various  Districts, the number of which is about 55, 250 Market Committees  have been constituted and about 115 items have been  selected in  respect of which market fee has been directed to  be levied.  None of  the items  so specified is such that  it cannot  be covered  by the Schedule which is a part of  the Act.  The definition of agricultural produce is very wide.  It is  not confined  to  items  of  agricultural produce only  but includes items of produce of horticulture, viticulture, apiculture,  sericulture, pisci-culture, animal husbandry or  forest. Such  items are  specified in  the Act which is  undoubtedly a  part of  the  Act.  That  being  so challenge to  the notification dated 11-4-1978 on the ground that it was issued without any application of mind is devoid of any substance and must be rejected. Point No. 7      It is  clear and it was expressly conceded to on behalf of the  Market Committees and the State that there cannot be any multi  point levy of market fee in the same market area. The reason  is obvious.  Section 17(iii)(b),  as amended  by U.P. Act 7 of 1978 reads as follows:-      "market fee,  which shall be payable on transactions of      sale specified  agricultural produce in the market area      at such  rates, being  not less  than one percentum and      not more  than one  and half  percentum of the price of      the  agricultural   produce  so   sold,  as  the  State      Government may  specify by  notification, and  such fee      shall be realised in the following manner-      (1)  if the produce is sold through a commission agent,           the commission  agent may  realise the  market fee           from the  purchaser and shall be liable to pay the           same to the Committee;      (2)  if the  produce is  purchased directly by a trader           from a  producer the trader shall be liable to pay           the market fee to the Committee; 125      (3)  if the  produce is  purchased  by  a  trader  from           another trader, the trader selling the produce may           realise it  from the purchaser and shall be liable           to pay the market fee to the Committee; and      (4)  in any  other case  of sale  of such  produce, the           purchaser shall be liable to pay the market fee to           the Committee." All the  four clauses  of clause (b) are mutually exclusive. If the  produce is  purchased from  a producer  directly the trader shall  be  liable  to  pay  the  market  fee  to  the Committee in  accordance with  sub-clause (2).  But  if  the trader sells  the same  produce or  any product  of the same produce to  another trader neither the seller-trader nor the

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purchaser-trader can  be made  to pay  the market  fee under sub-clause (3).  So far the position was not disputed by the Market Committees,  rather  it  was  conceded,  and  in  our opinion, rightly.  But some  difficulty arises  in regard to the products  of the  agricultural produce  which  has  been subjected to  the levy  of market fee. This will be relevant when we come to consider the various agricultural produce in respect of  which challenge  was made  on the ground that it amounts to  multi point  levy. At  this stage we may explain our view  point by  taking a  few examples from the Schedule appended to  the Act.  Wheat, an  agricultural  produce,  is mentioned  under   the  heading   ’Cereals’.   Suppose   the transaction  of   wheat,  namely,  wheat  purchased  from  a producer by  a trader  has been  subjected to levy of market fee under  s.17(iii) (b)(2) no further levy of market fee in the same  market area could be made, not even on wheat flour if flour  were to  be included  in the  Schedule. The better example can  be found in the items under the heading ’Animal Husbandry Products’  wherein in  the Schedule  milk and Ghee both are mentioned. Milk, of course, is not mentioned in the notification dated  11-4-1978. But  if it  would  have  been mentioned then  only the transaction of milk in a particular market area  could be  subjected to  levy of  fee  and  Ghee manufactured from  milk could not be so subjected. But since milk is not mentioned in the notification the transaction of Ghee can  be subjected to the levy of fee in accordance with the principle  to  be  discussed  hereinafter.  The  greater difficulty arises  with respect to paddy and rice as both of them are  mentioned in  the  Schedule  as  well  as  in  the notification. We shall show hereinafter that in a particular market area market fee can not be levied both in relation to the transaction  of purchase  and sale of paddy and the rice produced from the same paddy. Fee can be charged only on one transaction. This  finds support from the unamended Rules as they are,  wherein is  to be found sub-r.(2) of Rule 66. But we find nothing in the provisions of the Act or the Rules to 126 warrant the  taking of  the view that in another market area the Market Committee of that area cannot levy fee on a fresh transaction of  sale and purchase taking place in that area. Supposing the  Wheat is  purchased in  market area  X  by  a trader  from  a  producer,  fee  will  be  chargeable  under s.17(iii)(b)(2). If  the same  Wheat  is  taken  to  another market area  say Y  and  another  transaction  of  sale  and purchase takes place there between a trader and a trader the market fee will be leviable under sub-clause (3). It is also not correct  to say  that the agricultural produce must have been produced  in the market area in which the first levy is made. It  might have been produced in another market area or even outside the State of Uttar Pradesh but if a transaction of sale  and purchase takes place of an agricultural produce as defined in the Act and covered by the notification within a particular market area then fee can be charged in relation to the said transaction. Point No. 8      In order to appreciate the implication of this point we have  first   to  read   and  compare   the  provisions   of s.17(iii)(b) of  the Act  as they stood before 1973, between 1973 and  1978 and after the amendment by Act 7 of 1978. The provision as  enacted in  U.P.  Act  XXV  of  1964  read  as follows:-      "17. A  Committee shall,  for the purposes of this Act,      have the power to:-      (iii) levy and collect:      (b)  market fees on transactions of sale or purchase of

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         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  percentum of  the price of the           specified agricultural  produce sold  or purchased           therein;"      The Rules  which were  framed in  1965  prescribed  the rates of  and the liability of the persons to pay the market fee. The  relevant provision  of Rules  66 and 68 are quoted below:-           "66. 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  byelaws  but  not  exceeding  one-half  of  one      percentum of  the price  of the  specified agricultural      produce:           Provided that  the market  fee shall be payable by      the seller. 127           68.  "Recovery  of  fees-Section  17(iii)-(1)  The      market fee  on specified  agricultural produce shall be      payable  as  soon  as  such  produce  is  sold  in  the      Principal Market Yard or Sub-Market Yards in accordance      with the  terms of and conditions specified in the bye-      laws.           (2)  The market  fee shall  be realized  from  the      seller in the following manner:-           (i)  If the specified agricultural produce is sold                through the  Commission agent  or directly to                the  trader,  the  Commission  agent  or  the                trader, as  the case  may  be,  shall  charge                market fee from the seller in sale voucher in                Form No.  VI and deposit the amount of market                fee so  realised with the Market Committee in                accordance  with   the  directions   of   the                Committee issued in this behalf.           (ii) If the specified agricultural produce is sold                directly by  the seller  to the consumer, the                market fee  shall be  realised by the servant                of the  Market Committee  authorized by it in                this behalf.           (3)  The licence  fee shall be paid along with the      application for licence:           Provided that in case the Market Committee refuses      to issue  a licence, the fee deposited by the applicant      shall be refunded to him.           (4)  The payment  of market  fee and  licence  fee      shall be made to the Committee in cash."      It would  thus be  seen that  before 1973,  reading the provisions of  the Act  and the  Rules, market fee was to be charged at  such rates  as specified  in the  bye-laws of  a particular Market  Committee. But  it could  not exceed  1/2 percentum of  the price of the agricultural produce. We were informed at  the Bar  that almost every Market Committee had levied fees  @ 1/2%. The liability to pay the fee was of the seller of the agricultural produce. Market fee was liable to be  paid   under  Rule   68(2)(ii)  even  if  the  specified agricultural produce  was sold directly by the seller to the consumer. This  provision has  been  superseded  now  by  an amendment in  the Act  brought about by U.P. Act 19 of 1979, whereby a  proviso to the following effect has been added to section 17(iii)(b):-           "Provided that  no market  fee shall  be levied or      collected  on   the  retail   sale  of   any  specified

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    agricultural produce  where such  sale is  made to  the      consumer." 128      Clause (b)  of section  17(iii) was amended by U.P. Act 13 of  1973 as  re-enacted by  U.P. Act 20 of 1974. The said clause stood as follows after the said amendment:-           "(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      percentum and not more than one-and-a-half percentum of      the price  of the  agricultural produce so sold, as the      State Government  may specify  by notification  in  the      Gazette;" It would be noticed that by the said amendment in clause (b) the minimum rate fixed was 1 percentum and the maximum 1-1/2 percentum and  the liability  to pay  the fee became that of the purchaser instead of the seller as prescribed earlier by the Rules. Yet the Rules continued as they were. Nonetheless it is  plain that  after the amendment in the Statute, Rules could apply  only mutatis  mutandis and wherever there was a conflict between the Rules and the Statute the latter had to prevail.      In passing,  reference may  be made to the substitution of the  words market  area in  place of the words "Principal Market Yard or the Sub-Market Yards" occurring in clause (b) by U.P.  Act 6  of 1977  w.e.f. 20-12-1976.  We have already adverted to  this aspect  of the matter and pointed out that transactions cannot  take place  in whole of the market area and although  theortically fee is chargeable in the whole of the area  now but  actually the  Rules  and  especially  the Explanation to  Rule 66  indicate that  the transactions  do take place  in the  Principal Market Yard or Market Yards or some specified  place or places in a particular market area. Then came  the amended  section 17(iii)(b)  of U.P. Act 7 of 1978, which had already been extracted above and it was made retrospective w.e.f.  12-6-1973. Under the present provision a liability  to pay the fee is under four mutually exclusive clauses. The Rules which were framed in 1965 namely Rules 66 and 68  are so  very different from the present provision of law that  we had to express our distress in the beginning of this judgment for the failure of the Government to amend the Rules and bring it in conformity with the amended provisions of the  Statute from  time to  time. Any way, the Rules will apply as  far as  possible so  long  they  do  not  come  in conflict with  the Statute  and even  without the aid of the Rules the provision in section 17(iii)(b) as it stands after the amendment  brought about  by  U.P.  Act  7  of  1978  is workable and can be given effect to. The 129 State  legislature   was  competent  to  make  retrospective amendment vide  B. Banerjee  v. Anita  Pan and  M/s. S. K.G. Sugar Ltd.  v. State  of Bihar  and Ors.  It has  also  been pointed  out   in  H.   H.  Sudhundra   Thirtha  Swamiar  v. Commissioner for  Hindu Religious  & Charitable  Endowments, Mysore at  pages 324-25  that retrospective  imposition of a fee is  valid. Of course, this cannot be a rule of universal application. In  a given  case and  in a given situation the retrospective operation may be hit by Article 19. But in the present case  we are  inclined to  take the  view  that  the retrospectivity of  the law  as such is not bad and the only safeguard which  we want to point out is this. If market fee has been  realised by  any Market  Committee in  respect  of transactions of  sale of  agricultural produce  taking place between 12-6-1973  and coming  into force  of U.P.  Act 7 of

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1978, in  accordance with  the law  as it prevailed then, no market fee  under the amended law can be realised again. But if in  respect of  any transactions aforesaid market fee has not yet  been realised then it can be realised in accordance with the  amended provision  of the  law. The  only hardship will be  to persons  covered  by  sub-clauses  (1)  and  (3) wherein a  provision has  been made to pass on the burden of fee to  others. In the case of sub-clause (1) the commission agent can  realise the market fee from the purchaser and the seller-trader under  sub-clause (3)  can realise it from the purchaser. If  market fees are realised from such persons in accordance with  the amended  provision of  the law  then in turn they  may be  able to  realise it  from persons on whom they could  pass on  the burden. We are not disposed to hold the law bad only on that account. Point No. 9      We have  already alluded  to this  aspect of the matter earlier in  our judgment  and taken the view that market fee could be levied on transactions of goods not produced within the limits  of  a  particular  market  area  by  the  Market Committee of  that area  even though  the goods are produced outside the  State of  Uttar Pradesh  or outside  the market area  of  that  particular  Market  Committee  provided  the transactions take  place within  the limits  of that  Market area. On  the other  hand we find no provision in the Act or the Rules  to limit the operation of the law in a particular market area  only in  respect of  the  agricultural  produce produced in that area. Point No. 10      Apropos this point attention is first to be focussed on the definition  of the  word ’producer’  in clause  (p)  and ’trader’ in clause (y) of 130 section 2  of the  Act which  have already  been  quoted.  A producer who  produces agricultural  produce generally  does not indulge  in trading  activities so as to become a trader within the  meaning of  clause (y).  He is covered by clause (p) only.  If a  person is  simply  a  trader  indulging  in trading activities he is covered by the definition in clause (y). We  have coined  the expression  producer-trader for  a person who  is both  a producer  of agricultural produce and himself trades  in it. For the purposes of the Act he ceases to be a producer and becomes a trader only as the definition indicates. While  discussing the  question of levy of market fee on paddy and rice this aspect of the matter is important and therefore  we thought  it appropriate to highlight it at this stage.  By and  large in  the notification  dated April 11,1978 there  is hardly  any duplication  of  any  item  of agricultural produce.  As for  example, under Group D Animal Husbandry Products,  milk has been omitted although it is to be found  in the Schedule appended to the Act. From milk can be prepared  Ghee or  Khoya and items 1 and 2 in Group D are the said  articles. Hides  and Skins  can be  had  from  the animals, so  wool is obtained from the sheep. But in case of paddy and  rice mentioned  as items  3 and  4 in  Group  A-I "Cereals", there  is a  duplication as rice is obtained from paddy. We  would, therefore, like to clarify the position of law in  this regard.  If paddy  is purchased in a particular market area by a rice miller and the same paddy is converted into rice  and sold  then the  rice miller will be liable to pay  market   fee  on   his  purchase   of  paddy  from  the agriculturist-producer  under   subclause  (2)   of  section 17(iii)(b). He  cannot be asked to pay market fee over again under sub-clause (3) in relation to the transaction of rice. Nor will  it be  open to  the  Market  Committee  to  choose

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between either  of the two in the example just given. Market fee has  to be  levied and  collected  in  relation  to  the transaction of  paddy alone. Otherwise, there will be a risk of violation  of Article  14 if it is left to the sweet-will of the  Market Committee in the case of some rice millers to charge market fee on the transaction of paddy and in case of others to  charge it  when the sale of rice takes place. If, however, paddy  is brought  by the  rice-miller from another market area,  then the  Market Committee  of the  area where paddy is  converted into  rice and  sold will be entitled to charge market  fee on  the transaction of sale in accordance with sub-clause  (3). We now take the example of a producer- trader who is an agriculturist and produces paddy in his own field but  owns a rice mill also in the same market area. He mills the paddy grown by him into rice and sells it as such. It is plain that in his case no market fee can be charged on paddy because  there is  no transaction of sale and purchase of paddy  and market  fee can be charged only on the sale of rice by him in accordance with sub-clause (3) and he will be entitled to 131 pass on  the burden to his purchaser. Disputes of facts were raised before  us as  to whether paddy had been subjected to the charge  of market  fee or not and whether the same paddy has been  milled into  rice. We  did  not  enter  into  this disputed question  of fact,  and as  observed  above,  after clarifying the  law we  direct the Market Committees to levy market fee in the light of this Judgment. It will be open to any trader  to go to the High Court again, if necessary, for the redress  of his  grievance in connection with a disputed question which may arise even after our Judgment.      In relation  to the  transactions of  Ghee we  had  two types of  dealers before  us-(1) a dealer who purchases milk or cream from the villagers and others and manufactures Ghee in his  plant and  (2) a dealer who purchases such Ghee from the manufacturer  of Ghee  and sells it to another trader in the same market area. The first dealer will be liable to pay market fee  because he  is the  producer of  Ghee within the meaning of  the Act  and at  the same  time a trader in Ghee also. When  he sells  Ghee to  another dealer in Ghee who is simply  a  dealer  then  under  sub-clause  (3)  of  section 17(iii)(b) the  manufacturing dealer  will be  liable to pay market fee  to the  Market Committee  on the  transaction of Ghee. But  he will  be entitled to pass on the burden to his purchaser.  Apropos   the  Market  Committee,  however,  the liability will  be of  the manufacturing  dealer.  If  milk, butter or cream would have been included in the notification then  the   charging  of   fee  in  relation  to  the  first transaction of  sale and  purchase of such commodities would have been  attracted in the light of the principle of law we have enunciated  above with reference to paddy and rice. But in the case of Group D such commodities are not mentioned in the notification. Point No. 11      An attempt  was made  on behalf  of the Hides and Skins dealers  to   show  that   hides  and  skins  cannot  be  an agricultural produce within the meaning of the Act. They are obtained from the carcass of an animal and not from a living animal. Argument  stressed was  that under  group G  in  the Schedule appended  to the Act Animal Husbandry Products only can come.  Item 11  Hides and  Skins, item 12 bones, item 13 meat  etc.  are  not  products  of  Animal  Husbandry.  Some authoritative books  were cited  before  us  on  "Words  and Phrases" to  show the  meaning of  ’Animal’, ’Husbandry’ and ’Animal Husbandry’.  Animal Husbandry  means that  branch of

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agriculture which  is concerned with farm animals especially as  regards  breeding,  care  and  production.  We  are  not impressed by  this argument.  The definition  clause (a)  of section 2 uses the expression ’animal husbandry’ by way of a descriptive one  without strictly  confining to the products of animal husbandry 132 as the  addition of  the words  "specified in  the schedule" indicates.  In  the  schedule  under  the  group  ’husbandry products’ are  mentioned all  these items.  We may  also add that one  may breed  and rear  animals in  a  farm  for  the purpose  of   obtaining  hides  and  skins  after  they  are butchered.      Market fee  is, therefore, leviable on the transactions of hides  and skins  as no  market fee  can  be  charged  on transactions of  sale and  purchase of  animals in  a market area in the State of Uttar Pradesh, the same having not been included in  the notification.  Had it  been included in the notification, then  no market  fee could  be charged  in the same market  area on  hides and  skins.  It  could  only  be charged in  relation to the transaction of purchase and sale of animals. Point No. 12      For discussing  this point  we have to refer to group E of the  notification dated 11-4-1978 which deals with forest products. The items mentioned in the said group are (1) Gum, (2) Wood,  (3) Tendu leaves, (4) Catechu and (5) Lac. Market fee can  be charged  on purchase  of wood by a trader from a producer. No  fee can  be charged  on the  sale of furniture manufactured by  the purchaser of wood. It was also conceded on behalf  of the  Market Committees that market fee was not being charged  on the  sale of  furniture. If it has been so charged it  will be  refunded.  Furniture  is  not  an  item mentioned in  the group  of forest products. Therefore, this question does  not present any difficulty at all. Difficulty cropped up in relation to the charging of market fee apropos the  transaction   of  Catechu.   According  to  the  Market Committees Catechu  is a  product from  timber or trees like Gum or  Lac. It  trickles down  from the trees. On the other hand, according to the Catechu dealers by processing of Khar trees Catechu is produced. We leave this question of fact to be decided  by the  Market Committees concerned in the first instance and then by a court of law. If Catechu is a product of Khar  trees by  some processing as prima facie it appears to us  to be  so, then  it is  plain that  market fee can be charged only  on the  purchase of  Khar wood  and not on the sale of Catechu. Point No. 13      This item  presented some  difficulty  in  solution.  A licence is  granted to  a Paper  Mill and  to other kinds of dealers for  cutting wood from the jungle and bringing it to their factories  for manufacture of various articles such as paper etc.  It was  argued that  there was no transaction of sale and  purchase involved in the above operation. Moreover the wood is cut from the jungle area which although has been roped in  the market area but no service is rendered in that jungle area by any Market 133 Committee. In our opinion in the licence is involved sale of wood and  a right  to go  to that land to cut that wood. The wood may  be used  by  the  manufacturer  for  manufacturing furniture or  may be used in the manufacture of paper or any other commodity. That is immaterial. The owner of the jungle wherefrom the  wood is  cut and  brought will  be a producer within the  meaning of  the Act and the licensee-producer of

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that wood  would be  a purchaser  of an agricultural produce within the  meaning of  sub-clause (2) of section 17(iii)(b) of the  Act liable to pay market fee. It matters little what use is made of the wood by him. The question of quid pro quo and service  cannot be  decided by a dichotomy of service to every payer  of fee  as held  by this Court in Kewal Krishan Puri’s case.  The matter  has to  be judged in a broad sense and  not   in  the  sense  of  rendering  service  to  every individual payer of the fee. Point No. 14      This point  also presented  some difficulty.  But on  a parity of  reasoning mentioned so far in connection with the other items,  we have  got to hold that such Kirana goods as are included  in the  notification brought  from  outside  a particular market  area or  even from  outside the  State of Uttar Pradesh  are chargeable  to market fee when their sale takes place  in a  particular market  area.  In  group  A-VI Spices are  mentioned including certain Kirana items such as Ripe Chillies,  Sonf, turmeric  etc. They  are sold  by  the Kirana  dealers.  Sometimes  they  purchase  them  from  the agriculturists in the same market area. In relation to those transactions they  will be  liable to  pay market  fee under sub-clause (2)  of section  17(iii)(b). More  often than not such articles  are brought  from outside  and  sold  by  the Kirana merchants.  If they  are sold to consumers, no market fee can  be levied  in view of the proviso added in the year 1979. If  they are  sold in  wholesale, then the transaction can be  subjected to  the levy  of market  fee because  in a particular market area they enter into the first transaction of sale in respect of the specified agricultural produce. Point No. 15      Market fee  can be charged on transaction of tobacco as it is  included in  group A-V of the notification. As in the case of  other items  so in  this case  also the fee will be leviable if  tobacco is  purchased in  the same  market area from an  agriculturist in  accordance with  sub-clause  (2). Otherwise it would be leviable under sub-clause (3). Similar is the position in regard to tendu leaves which is mentioned in group  E. Bidi  cannot  be  treated  as  an  agricultural produce as  it is  not an  admixture of  tobacco  and  tendu leaves within the meaning of section 2(a) of the Act. It was conceded on  behalf of  the Market Committees that no market fee was being charged on the transactions of Bidi. But 134 if a Bidi manufacturer purchases tobacco and tendu leaves in the market area and uses them in the manufacture of Bidi, he will be  liable  to  pay  market  fee  in  relation  to  the transaction of tobacco and tendu leaves. Point No. 16      This point has been stated merely to be rejected. There is no  substance in  this point.  Our attention was drawn to some provisions  in the municipal Acts and the Zila Parishad Acts to  show that  no market committee could be constituted in a municipal area or a Nyaya Panchayat. We do not consider it necessary  to deal  with this  point in  any  detail.  We merely reject it as being devoid of any substance. Point No. 17      Gur, rab,  shakkar, khandsari and jaggery are expressly included in  the definition of agricultural produce given in clause (a)  of section  2 of  the Act. We are here concerned with the  question as to whether rab galawat and rab salawat are rab  within the  meaning of  section 2(a)  or  are  bye- products of  molasses received at the time of manufacture of khandsari. According  to the  case of some of the appellants who deal  in these commodities they are the bye-products and

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market fee has already been charged on rab and therefore the fee cannot  be charged again on rab galawat and rab salawat. Disputes of  facts were  raised in this connection before us on behalf  of the Market Committees. On the materials placed before us  it was  clear to  us that  rab  galawat  and  rab salawat cannot  be subjected  to a separate charge of market fee apart  from the  transaction of  rab. Market  fee can be levied on  the first  transaction of rab taking place in any market area  in accordance  with any  of the  sub-clauses of section 17  (iii) (b), as it may be applicable. It cannot be again charged  on the  second transaction  of rab galawat or rab salawat  even assuming  that  it  is  rab.  But  on  the materials placed  before us  it  appeared  to  us  that  rab galawat and rab salawat are not rab in the original form but they are  obtained at  one stage or the other in the process of manufacture  of khandsari.  Any way  the question of fact may be  decided as we have indicated in respect of the other items in  the first  instance by  the Market  Committee  and thereafter by  the High Court, if necessary, in a fresh writ petition. It  will bear  repetition to  say  that  the  only transaction which  can be subjected to levy of market fee in a particular market area is the first transaction of rab and no other transaction of rab galawat and rab salawat. Point No. 18      This point  urged on  behalf of  the appellants is well founded and  must  be  accepted  as  correct.  On  the  very wordings of clause (b) of 135 section 17(iii)  market fee  is payable  on transactions  of sale of  specified agricultural  produce in  the market area and if  no transaction  of sale  takes place in a particular market area no fee can be charged by the Market Committee of that area.      If goods  are merely brought in any market area and are despatched outside it without any transaction of sale taking place therein,  then no  market fee  can be  charged. If the bringing of  the goods in a particular market area and their despatch therefrom  are  as  a  result  of  transactions  of purchase and  sale taking  place outside the market area, it is plain that no fee can be levied. Point No. 19      This point has no substance and has got to be rejected. As held  in Vishnu  Agencies (Pvt.)  Ltd. etc. v. Commercial Tax Officer  & Ors.  etc. on  a review  of earlier decisions even if  a commodity  is sold  pursuant  to  the  controlled regulations still  some small  area is  left to  make  it  a transaction of  sale. It may well be that no freedom is left to the  parties in a large area of the transaction yet it is a transaction of sale. Point No.20      This point  also must  be rejected.  A pure  and simple producer as  defined in  clause (p)  of  section  2  is  not required to  take any  licence for  selling his agricultural produce nor  is he  required to  pay market fee under any of the sub-clauses  of section  17(iii)(b).  But  if  he  is  a producer-trader in  the sense  we have explained above, then he will be required to take out a licence in accordance with s. 9(2)  of the Act and no body can be permitted to carry on any trade in agricultural produce in the market area without a valid  licence. Merely  for his  lapse of not taking out a licence he  cannot escape  the liability  to pay  the market fee. Market  fee will  still be  chargeable from the trader, as, in s. 17(iii)(b) it is not stated that market fee can be charged only  from the  licensees. The proviso to clause (p) of s.  2 will  be attracted  only if a question arises as to

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whether any  person is a producer or not for the purposes of the Act  and in that event the decision of the Director made after an  inquiry conducted  in the manner prescribed by the rules shall  be final.  The proviso has nothing to do with a case of  a producer-trader.  If a  question arises whether a person is  merely a producer or producer-trader the Director will have  no power to decide this question. Such a question will have to be decided by the Market Committee itself which will be subject to the final decision of a court of law. 136      In support of the argument reliance was placed upon the decision of  this Court in Raunaq Ram Tara Chand & Ors. etc. v.  The   State  of   Punjab  &   Ors.  But   that  case  is distinguishable because  of the  language of rules 29 and 31 of the  Punjab Agricultural  Produce Market  Rules framed in accordance with the Punjab Agricultural Produce Markets Act, 1961. Both  the rules  aforesaid clearly stated that the fee could be charged from the licensees only. Not only that even the  charging  section  23  of  the  Act  itself  stated:-"a Committee may,  subject to  such rules as may be made by the State Government  in this  behalf, levy  on ad valorem basis fees  on   the  agricultural  produce  brought  or  sold  by licensees  in  the  notified  market  area  at  a  rate  not exceeding rupee  one  fifty  paise  for  every  one  hundred rupees, provided...  "On the  other hand in section 17 (iii) (b) of  the U.P.  Act and  Rules 66  and  68  of  the  Rules charging  of  market  fee  in  terms  is  not  found  to  be chargeable from  the  licensees  only.  The  traders  cannot escape their  liability to  pay the  fee on account of their default of taking out licences. Point No. 21      This point is also well founded and must be accepted as correct. Market  fee can be charged only on the transactions of purchase  of wood  and if  a manufacturer of match-sticks purchases  wood  from  the  producer  for  the  purposes  of manufacturing the  sticks he  will be required to pay market fee on  such purchase  of wood  only and  not on the sale of match-sticks or  match boxes.  Similarly market  fee will be leviable on  the transaction  of purchase of soyabin and not on transaction of sale of soyabin products. Exactly the same will be  the position  with regard  to the  articles sold by Kisan Products  Ltd.  and  the  sale  of  Pan.  Agricultural produce purchased  by the  dealers  will  be  chargeable  to market fee  and not  the sale of the products after one kind of processing or the other. Point No. 22      Under this  head the  submission on behalf of the fruit and vegetable  merchants was  that they bring their products to the  market and  sell them  in  wholesale  through  their commission agents.  No  market  fee,  therefore,  should  be charged from  them. In our opinion the argument so placed on behalf of  the merchants  is misconceived.  Under sub-clause (1) of  s. 17(iii)(b)  of the Act when fruits and vegetables are sold through a commission agent by the producer then the Commission agent  is liable to pay the market fee and he can realise it  from the purchaser of fruits and vegetables. The burden does  not fall  on the producer. The liability in the first instance  is of  the commission,  agent and finally of the purchaser of the articles. 137 Point No. 23 Point No. 24      Reliance was  placed upon a decision of the Mysore High Court (now  Karnataka) in  the case of K. N. Marudaradhya v. The Mysore State but the view taken by the Mysore High Court

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was dissented  from by  the Patna  High Court in the case of Mangalchand Ramchandra  and others  etc. etc.  v.  State  of Bihar. One  of us  (Untwalia J,)  delivering the judgment of the Patna High Court stated at page 1053 thus:           "At this stage I would discuss a Bench decision of      the Mysore  High Court  on  which  great  reliance  was      placed on behalf of the petitioners in support of their      contention that  no fee can be levied on transaction of      buying and  selling between  a dealer and a dealer even      though such  transactions take  place within the market      area or  the market  proper. The decision of the Mysore      High Court  is in the case of K. N. Marudaradhya v. The      Mysore State  A.I.R. 1970,  Mysore  114.  At  page  126      (column 2)  from paragraph  33 starts the discussion on      the point  at issue. To the extent the decision goes to      hold that  the purchase  in respect  of which  the  fee      could be  levied or collected is the earliest purchase,      that is  to say,  the fee  can be  levied only  on  one      purchase and  not on subsequent purchases, with respect      I am  inclined to  agree with  that view  expressed  in      paragraphs 33  to 38.  But while  discussing the point,      Iyer J.,  has confined  this earliest  purchase of  the      agricultural produce  belonging to  the producer  only.      There does  not seem  to be a pointed discussion of the      question whether the first purchase from a dealer could      be  subjected   to  levy   or  not.  But  by  necessary      implication, as  I read  the judgment,  it seems, their      Lordships of  the Mysore  High Court took the view that      such a  deal cannot  be subjected  to the  levy of fee.      With great respect, in that regard, I strike my note of      dissent from  the view  expressed by  the  Mysore  High      Court.  Firstly,  merely  because  the  object  of  the      legislation is the protection of the agriculturist, the      plain meaning  of  the  section  cannot  be  cut  down.      Secondly, they have relied upon the practice prevailing      around the  area  under  different  State  statutes  as      mentioned in  paragraph 36.  If I may say with respect,      law could not be so 138      decided on  the basis  of any  practice. Of course, the      interpretation given to the Statute can be supported by      reference to  practice. Thirdly, I am inclined to think      that the  Supreme Court decision in the case of Krishna      Coconut Company  does not  lend support  to the limited      view expressed by the Mysore High Court. We approve  of the  Patna view and in the set-up of the U.P. Act after  an elaborate discussion we have pointed out as to in what  kind of transaction who is liable to pay the market fee.  In   the  U.P.   Act  even   traders   under   certain circumstances have  been  made  liable  to  pay  such  fees. Similarly the  argument that  market fee can be charged only on those transactions in which the seller is the producer of agricultural produce  and not  on any  other transaction  is also devoid of any substance. Conclusions      For the  reasons stated  above, we hold that market fee should be  regularised and  be charged  in the light of this Judgment. If  anything has been realised from the traders or any other  person which  goes contrary  to this Judgment the same should  be refunded  by the  Market Committee concerned within six  months from  today. This may not be treated as a precedent for  all cases of this type. The form of the order in relation  to the  refund of  the market fee may vary from case to  case depending  upon the facts and circumstances of each case.  Market fee  due from the traders in the light of

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this judgement  should also  be charged  and paid  within  a period of  six months  from today.  If there is any disputed question of  fact to be decided by the Market Committee then it should  be decided  as quickly  as possible  leaving  the person concerned  to agitate  the matter  in a court of law, preferably  in   the  High   Court,  within   a  short  time thereafter. The High Court will proceed to decide the matter in the  light of  our Judgment. 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 future lapses are made then it will be open  to the  payers of  fees to re-agitate the matter in the High Court in the light of that judgment.      For the  reasons stated  above  the  appeals  and  writ petitions are  partly allowed  and partly  dismissed in  the manner indicated  above. There  will be no order as to costs in any of them. N.V.K.                 Appeals and petitions partly allowed. 139