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TMI Blog1983 (9) TMI 315X X X X Extracts X X X X X X X X Extracts X X X X ..... nsaction of purchase or sale of notified agricultural produce, livestock or pro ducts of livestock in a notified market area or outside the market in that area as violative of Art. 19 (1) (g) of the Constitution. (2) As to the power of the market committees to levy market fee under sub-s. (1) of s. 12 of the Act at rupee. One per hundred rupees of the aggregate amount for which such agricultural produce, livestock or products of livestock is purchased or sold outside their markets but within their respective notified market areas. And (3) Whether under r. 74 (1) of the Andhra Pradesh (Agricultural Produce and Livestock) Markets Rules, 1969 (Rules' for short) if purchase or sale of paddy has suffered market fee in the hands of a rice miller, the subsequent purchase or sale of rice by a miller to a trader, or by a trader to a trader, can be subjected to payment of market fee again. Writ Petition No. 1286 of 1973 questions the validity of a notification issued by the State Government being G. O. M. S. No. 2095 dated October 29, 1968 declaring rice to be a notified agricultural produce under s. 2 (i), and the notification issued by the State Government of Andhra Pradesh under su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of land and establishment of markets with modern infrastructure facilities. The Director of Marketing accordingly addressed a letter dated February 16, 1976 to all the agricultural market committees in the State inviting their attention to the resolution of the Advisory Board and requesting them to place the proposal for the enhancement of the existing rate of market fee from SO paisa to rupee one before the market committees and communicate their consent for levy of the enhanced rate of market fee under sub-s. (1) of s. 12 of the Act read with bye-law No. 24 (i) of the concerned market committee bye-laws. Accordingly, all the market committees throughout the State accepted the recommendation of the Advisory Board and resolved to enhance the market ' fee from 50 paisa to rupee one requesting the Director to forward the amended bye-law No. 24 (i) to the State Government for their approval. The State Government of Andhra Pradesh by notification dated January 1, 1978 published in the Andhra Pradesh Gazette dated February 23, 1978 accorded their approval to the amended bye law, In pursuance of the impugned notification the market committees throughout the State began to levy mar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ufficient for regulating the transactions of sale and purchase of agricultural produce. The Market Committee therefore permitted the traders of Malakept to carry on their business from their respective licensed premises, subject to the supervision and control of the functionaries of the Market Committee. Due to the location of the present markets in busy and congested places, it was not possible to extend the market areas any further. The Committee therefore acquired an area of 41 acres 22 guntas at Malakpet on a permanent lease from the Andhra Pradesh Housing Board in April 1980 It also applied for acquisition of 20 acres 20 guntas at Bahadurpura, 70 acres at Mansoorabad and 50 acres at Kukatpally. The aforesaid construction work for expansion of the markets was in progress when the writ petitions were filed. It appears from the statement of income and expenditure for the years 1978-79, 1979-80 and 1980-81 that the income from the market fee even after its increase from 50 paisa to rupee one is not sufficient to meet the expenditure of the Market Committee. It is not always possible to work out with mathematical precision the amount of fee required for the services to be render ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the income and expenditure of the market committees and a detailed chart indicating the nature of development works undertaken by each. It is clear from the material placed before us that the income from the market fee even after its increase from 50 paisa to rupee one is not sufficient to meet the expenditure of the market committees. In all fairness to learned counsel for the petitioners, we must state at the very outset that they do not challenge the levy of market fee of 50 paisa per hundred rupees in the year 1972 and have confined their submissions questioning the increase in the rate of market fee from 50 paisa to rupee one per hundred rupees of the price. In support of these petitions, three main contentions were raised, namely: (1) Sub-s. (6) of s. 7 of the Act which totally prohibits purchase or sale of any notified agricultural produce, livestock and products of livestock in a notified market area, outside the market in that area, encroaches upon the right of citizens to carry on trade or business and is repugnant to Art. 19(1)(g) of the Constitution and is in consequence void, (2) The levy of market fee by the market committees under sub-s. (1) of s. 12 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature either processed or unprocessed and declared by the Government by notification to be agricultural produce for the purposes of this Act. The term 'market' as defined in s. 2 (vi) means a market established under sub-s. (3) of s. 4 and includes market yard and any building therein. The expression 'notified area' as defined in s. 2 (xi) means any area notified under s, 3, and 'notified market area in clause (xii) means any area declared to be a market area by notification under s. 4. Under s. 3 of the Act, the State Government is empowered to declare their intention or regulating the purchase and sale of such agricultural produce, livestock or products of livestock in such area as may be specified in such notifications. After considering the objections and suggestions, if any, the State Government is authorized to publish a final notification under sub-s. (3) thereof declaring such area to be a notified area. By sub-s. (1) of s. 4, the State Government is empowered to constitute a market committee for every notified area which shall be a body corporate having perpetual succession and a common seal. The duty of enforcing the provisions of the Act and the rule ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ltural produce, livestock or products of livestock is purchased or sold, whether for cash or deferred payment or other valuable consideration. Explanation 1: For the purposes of this section, all notified agricultural produce, livestock or products of livestock taken out of a notified market area shall, unless the contrary is proved, be presumed to have been purchased or sold within such area. ... ... ... ... ... (2) The fees referred to in sub-section (1) shall be paid by the purchaser of the notified agricultural produce, livestock or products of livestock: Provided that where the purchaser cannot be identified, the fees shall be paid by the seller. Under the scheme of the Act, the market committee is 'enjoined by sub-s. (1) of s. 14 to pay into a fund called the 'Market Committee Fund' all moneys received from the traders as market fee on transactions of sale or purchase of agricultural produce taking place within the notified market area and they are to be credited in the nearest Government treasury or in a Bank, with the previous sanction of the State Government. All expenditure incurred by the market committee under and for purposes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncidental to, the conduct of elections; (xi) the promotion of grading services; (xii) measures for the preservation of foodgrains; (xiii) such other purposes as may be specified by the Government by general or special order. Sub-s (1) of s. 16 of the Act provides that there shall be formed for the whole of the State a fund to be called the 'Central Market Fund'. Every market committee is required to contribute 10% of its annual income to the Central Market Fund and the contribution so paid shall be placed to the credit of the said Fund. Sub-s. (2) of s. 16 provides that the Central Market Fund shall be vested in the State Government and deposited in the Government treasury at Hyderabad. It is administered and applied by the Director of Marketing for all or any of the purposes set out therein viz.: (i) grant-in-aid of the market committees for the first year after their constitution under this Act; (ii) grant-in-aid of a deficit market committee for a period not exceeding three years; (iii) grant of loans to the market committees at such rates of interest as are charged on loans granted by the Government for development purposes; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial crops in the Presidency of Madars and for that purpose to establish markets and make rules for their proper administration. The Act, therefore, was the result of a long exploratory investigation by experts in the field, conceived and enacted to regulate the buying and selling of commercial crops by providing suitable and regulated markets by eliminating middlemen and bringing face to face the producer and the buyer so that they may meet on equal terms, thereby eradicating or at any rate reducing the scope for exploitation in dealings . The learned Judge brought out the purpose and object of the legislation and stated: The Act, Rules and the Bye-laws framed thereunder have a long-term target of providing a net work of markets wherein facilities for correct weighment are ensured, storage accommodation is provided, and equal powers of bargaining ensured, so that the growers may bring their commercial crops to the market and sell them at reasonable prices. Till such markets are established, the said provisions, by imposing licensing restrictions, enable the buyers and sellers to meet in licensed premises, ensure correct weighment, make available to them reliable market & ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equipped as a market and made no provisions for rendering services, and observed: According to counsel, a market must be a well defined site with market equipment and facilities. The argument overlooks the definition of market in section 2 (h). The market consists of market proper and the market yards. The market yards are well-defined enclosures, buildings or localities but the market proper is under Section 2 (k) read with Section 5 (2) (ii) a larger area. For establishing a market it is sufficient to make a declaration under Section 5(2) fixing the boundaries of the market proper and the market yards on the recommendation of the market committee made under Rule 59(2). Under section 18 (1) the market committee must provide for such facilities in the market as the State Government may from time to time direct. It is not shown that the market committee refused to carry out any direction of the Government. The market committee may, in view of Sections 28 (2) and 30 (i), acquire and own lands and buildings for the market, but it is not always obliged to do so. The market is established on the issue of a notification under Section 5 (2) declaring the market proper and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1) (g) of the Constitution. It is urged that the limitation which arbitrarily or excessively invades the right cannot be said to contain the quality of reasonableness and unless it strikes a balance between the freedom guaranteed in Art. 19 (1) (g) and the social control permitted by cl. (6) of Art. 19, it must be held to be void. The contention is obviously based on the following passage in Halsbury's Laws of England, 3rd edn., vol. 32 p. 15 para 9 which explains what freedom of business signifies: It is the general principle of the common law that a man is entitled to exercise any lawful trade or calling as and where he wills; and the law has always regarded jealously any interference with trade, even at the risk of interference with freedom of contract, as it is public policy to oppose all restraints upon liberty of individual action which are injurious to the interests of the State. The fundamental right of all citizens to practise any profession or to carry on any occupation or trade or business guaranteed under Art. 19 (1) (g) has its own limitations. The liberty of an individual to do as he pleases is not absolute. It must yield to the common good. Absolute o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te the possibility of his being victimized by malpractices. Supervision of the operations in the notified market area can be more conveniently done if business is carried on in a specified area or areas intended for that purpose. The Act is an integrated one and it regulates the buying and selling of notified agricultural produce, livestock and products of livestock from a centralized place. The petitioners being licensed traders under sub-s. (1) of s. 7 are bound by sub-s. (5) thereof to comply with the provisions of the Act, the Rules and the bye-laws framed thereunder. They are therefore subject to the restriction contained in sub-s. (6) of s. 7 of the Act. The non obstante clause in sub-s. (6) of s. 7 provides that no person shall purchase or sell any notified agricultural produce, livestock and products of livestock in a notified market area, outside the market in that area. Having regard to the purpose and object of the legislation, it must be held that the restriction imposed by sub-s. (6) of s. 7 of the Act is a reasonable restriction within the meaning of cl. (6) of Art. 19 on the fundamental right of a citizen to carry on trade or business under Art. 19 (1) (g). It was so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the establishment of a regulated market for the purchase or sale of notified agricultural produce, livestock or products of livestock is itself a service rendered to persons engaged in the business of purchase or sale of such commodities. The duty of a market committee constituted under sub-s. (1) of s. 4 of the Act does not end with establishing such number of markets in the notified market area under the first part of sub-s. (3) but also extends to the providing of such facilities in the market as the Government may from time to time by general or special order specify under the second part of sub-s. (3). In exercise a of their powers under s. 33 of the Act, the State Government have framed the Andhra Pradesh (Agricultural Produce Live stock) Markets Rules, 1969. Chapter V relates to `Regulation of trading'. It would appear that Rules 48 to 53 are the machinery provisions for controlling the trade in notified agricultural produce, livestock and products of livestock in a notified area while Rules 54 to 73 impose restrictions on the carrying on of all such trade in such area. It is clear from the provisions of s. 15 of the Act that the services to be rendered by the market ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Alladi Kuppuswami, C. J. speaking for himself and Jeevan Reddy, J. followed the earlier decision in Immidisetti Ramakrishnaiah Sons' case, supra, and held that the services to be rendered and the facilities to be provided by the market committees extended throughout the notified market area without being confined to the market proper. The view expressed by the High Court in these two cases is clearly in consonance with the scheme of the Act. lt appears that taking advantage of the ad-interim orders issued by this Court staying prosecution under sub-s. (1) of s. 23 of the Act, the petitioners who are big merchants engaged in the business of purchase and sale of agricultural produce, livestock and products of livestock throughout the State, are with impunity committing breach of the prohibition contained in sub-s. (6) of s. 7 of the Act. We trust that the market committees in various parts R of the State shall take immediate steps to shift all these traders to the markets proper of the respective notified market areas in the interests of the general public and shall also strictly enforce the provisions of the Act, the Rules and the bye-laws framed thereunder. We are unable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rol of the market committee established under the Act. Arguments in these proceedings have revolved around certain observations of Untwalia, J. in Kewal Krishan Puri and Anr v. State of Punjab and Ors (1) where he, speaking for the Court, after referring to the judgment of Mukherjea, J. (as he then was) in the leading case of the Commissioner, Hindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt(2) known as the Shirur Mutt case, and the dictum of Latham, C. J. in Matthews v. Chicory Marketing Board(3) upon which it was based, and the subsequent decisions on the subject, drew a distinction between a tax and a fee. Stress was particularly laid on these observations which, torn out of context, tend to suggest that there must be actual quid pro quo between the prayer and the market committee i.e. there must be actual correlation between the service rendered by a market committee and the prayer of the market fee, and that such service must be In relation to each transaction. Emphasis was placed on the following observations of Untwalia, J. in Kewal Krishan Puri's case, supra: 1. It must be shown with some amount of certainty, reasonablen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upees to ₹ 3 was quashed. It appears that the income of almost all the market committees was to the tune of several lakes of rupees per year and every market committee was required under sub-s. (2) (a) of s. 27 to pay 30 per centum of its income to the Punjab State agricultural Marketing Board as its contribution to the Marketing Development Fund maintained under s. 25 of that Act. Due to the progressive increase in the rate of market fee from 0.50 p. to ₹ 2 per hundred rupees during the course of few years both the State Agricultural Marketing Board as well as the market committees throughout the State were left with huge surplus funds. The State Government in exercise of the powers vested under s. 26 (xvii) and s. 28 (xvii) directed the State Agricultural Marketing Board and the market committees throughout the State to contribute rupees one crore to Guru Gobind Singh Medical College at Faridkot. In the year 1974 under the directions of the State Government, all the market committees were required to deposit the surplus amounts lying with them with the State Agricultural Marketing Board and the Board advanced an interest-free loan of rupees five crores to the Punjab S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he generality of the expressions which may be found that there are not intended to be expositions of the whole law but governed or qualified by the particular facts of the case in which such expressions are to be found. It would appear that there are certain observations to be found in the judgment in Kewal Krishan Puri's case, supra, which were really not necessary for purposes of the decision and go beyond the occasion and therefore they have no binding authority though they may have merely persuasive value. The observation made therein seeking to quantify the extent of correlation between the amount of fee collected and the cost of rendition of service, namely: At least a good and substantial portion of the amount collected on account of fees, may be in the neighborhood of two-thirds or three- fourths, must ba shown with reasonable certainty as being spent for rendering services in the market to the payer of fee , appears to be an obiter. The traditional view that t ere must be actual quid pro quo for a fee has under gone a sea change in the subsequent decisions. The distinction between a tax and a fee lies primarily in the fact that a tax is levied as part of a common b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngly realized that merely because the collections for the services rendered or grant of a privilege or licence are taken to the consolidated fund of the State and not separately appropriated towards the expenditure for rendering the service is not by itself decisive. Presumably, the attention of the Court in the Shirur Mutt case was not drawn to art. 266 of the Constitution. The Constitution no where contemplates it to be an essential element: of fee that it should be credited to a separate fund and not to the consolidated fund. It is also increasingly realized that the element of quid pro quo in the strict sense is not always a sine qua non far a fee. It is needless to stress that the element of quid pro quo is not necessarily absent in every tax: Constitutional Law of India by H. M. Seervai, Vol. 2, 2nd Edn., p. 1252, para 22.39. Viewed from this perspective, the conclusion is inevitable that the observation made in Kewal Krishan Puri's case that At least a good and substantial portion of the amount collected on account of fees, may be in the neighborhood of two-thirds or three-fourths, must be shown with reasonable certainty as being spent for rendering services in the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd for purposes of the Act have to be defrayed out of the said Fund and any surplus remaining after such expenditure, has to be invested in such manner as may be prescribed. Under sub-s. (2) thereof, every market committee has to pay to the State Government out of its fund the cost of any special or additional staff employed by the Government with their consultation. Under sub-s. (3) the market committee may grant loans to another market committee out of its surplus funds, with the previous sanction of the State Government, at such rates of interest as may be prescribed. The purpose for which the proceeds of the Market Committee fund can be expended are set out in s. 15 of the Act. There can be no doubt that the purposes mentioned viz. acquisition of site for the market, establishment, maintenance and improvement of the market, construction of buildings, maintenance of standard weights and measures, promotion of grading services, measures for the preservation of foodgrains etc. etc. are all purposes which are extremely beneficial to the growers and the traders. In the present case, there is no allegation anywhere by any of the petitioners, nor was any contention advanced that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the market, drinking water for the cattle, shed for use of the users of yards etc. We were not referred to any specific instance where any of the market committees have not provided these basic amenities. Much emphasis was however laid on the second part of the aforesaid G.O. which reads : The Governor of Andhra Pradesh also directs the market committees to provide the other facilities mentioned below at the market yards in course of time as and when funds permit. 1. Rest House for Ryots. 2. Electrification of Market yard. 3. Auction-cum-Weighing shed. 4. Auction Platforms. 5. Internal Roads. 6. Telephone Booth. 7. Canteen. 8. Office Building. 9. Godown for use of Producer-Seller. 10. Approach Roads. 11. Library-cum-Club Building. 12. Resting House for traders. It will be noticed that these facilities are to be provided by the market committees in course of time 'as and when funds permit'. It is needless to stress that the question of providing these facilities would depend on the financial capacity of each market committee. That would depend on whether there are sufficient fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to a trader or by a trader to a trader should again be subjected to payment of market fee. The contention is that under Rule 74(1) of the Andhra Pradesh (Agricultural Produce Livestock) Markets Rules, 1969 no such market fee is payable on rice produced from paddy. The same is the contention with regard to cotton seed extracted from cotton. Rule 74(1) of the rules reads as follows: 74. Market Fees: (1) The fees leviable under sub-section (1) of section 12 on notified agricultural produce, livestock and products of livestock, if paid to a Market Committee within the State shall not be collected by another Market Committee when such notified agricultural produce, livestock or products of livestock are brought into the notified market area of another Market Committee for the purpose of processing, pressing packing, storage, export and on sales effected in the course of commercial transactions between the licensed traders, and the licensed traders and consumers subject to production of such evidence as may be prescribed in the bye-laws about the payment of market fees from where it was brought: Provided that the fees shall be levied on notified agricultural produce, livestock ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... trader, neither the seller nor the purchaser can be made to pay the market fee under sub-clause (3). The scheme of the Act with which we are concerned appears to be entirely different. Under Sub-s. (1) of. s. 12 of the Act, a market committee is empowered to levy market fee on any notified agricultural produce, livestock or products of livestock purchased or sold in the notified market area. It would appear that every purchase or sale of any notified agricultural produce, livestock or products of livestock attracts the levy of market fee. One is apt to think that rice and paddy are the same commodity and therefore there is double taxation but, in reality, it is not so. There is distinction between 'paddy' and 'rice' and although paddy is milled into rice by the process of de- husking, they are two separate and distinct commercials commodities and have both been separately specified as notified agricultural produce in Schedule II of the Rules as items 1 and 2 respectively. On the plain language of sub-s. (1) of s. 12 of the Act, the market fee is leviable on both on purchase paddy by a rice miller from a producer and also on purchase or sale of rice by a miller to a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remains whether in view of r. 74 (1) the power of a market committee to levy market fee on such transactions is in any way affected: and if so, to what extent., The words used in 3 r. 74 (1) are: The fees leviable under sub-s. (1) of 8. 12 on notified agricultural produce, livestock and products of livestock, if paid to a market committee within the State, shall not be collected by another market committee , when the conditions set out therein are 3 fulfilled. Rule 74 (1) postulates that no market fee leviable under sub-s. (1) of s. 12 shall be collected by another market committee: (1) When such notified agricultural produce, livestock or products of livestock on which market fee has already been paid to a market committee within the State, is brought into the notified market area of another market committee for the purpose of processing, pressing, packing, storage, export and (2) on sales effected in the course of commercial transactions between licensed traders, and licensed traders and consumers. Use of the word 'and' makes the two conditions conjunctive. The exemption from payment of market fee over again to such other market committee claimable under r. 74 (1) is ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r products of livestock on which such fee has already been levied under sub-s. (1) of s. 12 by a market committee within the State. According to the terms of r. 74 (1) read with the proviso thereto, the fee leviable under sub-s. (1) of s. 12 on any notified agricultural produce, livestock or products of livestock, if paid to a market committee within the State, shall not be collected by another market committee when such notified agricultural produce, livestock or products of livestock is brought into the notified , market area of such other market committee for the purpose of processing, pressing, packing, storage, export and on sales effected in the course of commercial transactions between licensed traders, and the licensed traders and consumers. This is of course subject to production of such evidence as may be prescribed in the bye- laws about the payment of market fees from where it was brought. Upon the construction placed by us, the exemption under r. 74 (1) is also claimable if such transactions take place within the notified market area of the same market committee. The normal function of a proviso is to except something out of the main enacting part or to qualify some ..... 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