REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO.9589 OF 2010

Krishi Utpadan Mandi Samiti & Anr. …Appellants

Versus

Ved Ram …Respondent

J U D G M E N T

T.S. THAKUR, J.

1.This appeal by special leave calls in question the

correctness of an order passed by the High Court of

Judicature at Allahabad whereby Civil Misc. Writ Petition No.

58900 of 2007 filed by the respondent-company has been

allowed, the order passed by the Krishi Utpadan Mandi

Samiti, Ghaziabad and that passed by the Deputy Director,

Rajya Krishi Utpadan Mandi Parishad, Meerut in revision set

aside. The High Court has further directed the Krishi

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Utpadan Mandi Samiti, Ghaziabad to make a fresh

assessment of the market fee for the period in question

after providing an opportunity of being heard to the writ-

petitioner or his authorised agent. The challenge arises in

the following factual backdrop.

The respondent-company is engaged in the business

of manufacture and sale of milk products including d esi

ghee which it markets under the brand name ‘Paras’. The

company has set up a manufacturing unit at Sahibabad,

District Ghaziabad, which falls within the market area of

Krishi Utpadan Mandi Samiti, Ghaziabad (‘KUMS’ for short).

The company’s case is that it sells the milk products

manufactured by it through its consignee agents located at

several places in different parts of the country. A list of 15

consignee agents spread over the States of West Bengal,

Gujarat, Goa, Orissa, Maharashtra, Rajasthan and New Delhi

was in that regard enclosed by the respondent with the writ

petition filed by it before the High Court. These consignee

agents, according to the respondent-company, provide to

the company services like, unloading of goods from the

trucks, storage in the depots of the company, dispatch of

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the stocks by trucks to redistribution stockists as per sale

orders, raising sale invoices on behalf of the company and

collecting payments for the stocks sold.

In terms of a show-cause notice issued by the

appellant-Samiti, the respondent-company was called upon

to produce all relevant documents with regard to the

production, sale-purchase, movement and storage of its

product for the relevant period. This notice was triggered

by a declaration received from the respondent-company

that consignment note No.94 dated 14

th

May, 2004

dispatching 5250 Kgs. of desi ghee to Anand Sales

Corporation at Ahmedabad was a stock transfer which did

not require any gate pass for its movement outside the

market area.

On receipt of the notice the respondent-company filed

a reply explaining the nature of the transaction and

claiming that transfer of stocks to its godowns outside the

mandi area was on “stock transfer basis” and not pursuant

to any sale effected within the mandi area. The Mandi

Samiti remained dissatisfied with that explanation with the

result that by an order dated 27

th

April, 2005 the Samiti

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held that obtaining of gate passes after producing evidence

to rebut the presumption arising under Explanation to

Section 17(iii)(b) of the Uttar Pradesh Krishi Utpadan Mandi

Adhiniyam, 1964 was necessary. The Samiti further held

that the respondent-company had not adduced sufficient

evidence to rebut the presumption that the movement of

goods from the mandi area to places outside such area was

pursuant to a sale effected within the said area. The Samiti

accordingly levied a market fee of Rs.9,39,200/- and

development fee of Rs.2,34,800/- totalling Rs.11,74,000/-

for 3906.80 quintals of desi ghee taken out from the market

area of KUMS, Ghaziabad under Section 17(iii)(b) of the

Adhiniyam mentioned above. It was further directed that in

future the respondent-company shall produce the details of

its business and obtain gate passes whenever it removes

ghee from the market area of KUMS, Ghaziabad.

Aggrieved by the order passed by the Samiti, the

respondent-company filed a revision under Section 32 of

the Adhiniyam before the Regional Deputy Director, Rajya

Krishi Utpadan Mandi Parishad, U.P. which was dismissed by

the Deputy Director by its order dated 31

st

October, 2007.

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The Deputy Director while affirming the order passed by the

Samiti held that the transactions in question were not by

way of stock transfers but sales within the market area of

KUMS Ghaziabad, hence exigible to market fee.

The respondent-company then filed Writ Petition

No.58900 of 2007 before the High Court of Judicature at

Allahabad, challenging the orders passed by the Samiti and

the Deputy Director on several grounds. The High Court

has, by the order impugned in the present appeal, allowed

the said petition set aside the orders of the Samiti and the

Deputy Director and remanded the matter back to the

Samiti for a fresh assessment in accordance with law.

While doing so, the High Court has not only found fault with

the approach adopted by the Samiti and the Deputy

Director but also commented adversely about the capacity

of the officers making the orders in deciding the questions

of law and fact that arise in connection with such

transactions. According to the High Court the entire

approach adopted by the Samiti and the Deputy Director

was biased, arbitrary, and authoritative and based on a

misreading of the legal provisions and the judgments of this

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Court. The High Court felt that all this happened because

the officers who were handling the issue of such importance

were not equipped with the requisite knowledge about the

legal principles and procedure applicable while dealing with

complex questions of law and fact. More importantly, the

High Court evolved a new and somewhat novel procedure

for examination of the issues involved in such cases while

providing for safeguards by way of securing the amount

claimed by the Mandi Samiti towards market fee. The High

Court observed:

“The market fee is levied on the sale of agricultural

produce in the market area. The Explanation only raises

a rule of presumption which may be rebutted by

manufacturing trader or the trader as the case may be.

The Court cannot presume that the movement of goods

cannot be occasioned unless the sale is affected. The

nature of evidence to be produced at the time of gate

pass is a contentious matter which has not been

resolved in the last three decades. A number of

attempts made by the courts have not succeeded in

proper understanding of law by the officers and

employees of the market committees and Mandi

Parishad. In the circumstances, in addition to the

directions, which have been given by the judgments

cited above, the Court directs that the Petitioner will

furnish to Secretary, KUMS Ghaziabad, a ‘revolving

bank guarantee’ of the amount of market fees on

yearly basis based on the average of the historical sales

and payments of the market fees in the last three

years. The bank guarantee will be furnished on the first

of April and unless revoked, it shall be revalidated

every year. The market committee will issue gate

passes on a declaration made by the petitioners that

the goods are moving by way of stock transfer and

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have not been sold. They will produce the consignment

note, and the proof of dispatch giving names and

addresses of stockists. These documents will constitute

sufficient proof of rebuttal at the stage of a request for

gate pass. The market committee will assess the

market fee on yearly basis after 31

st

March of the next

year and consider documents furnished by way of

rebuttal of the presumption of sale in respect of each

and every transactions separately. It will not be

sufficient to say that the gate pass was not obtained or

obtained without payment of market fees or that

documents are not sufficient. The order would show

application of mind and reasoning for both accepting or

rejecting the proofs on the furnished in respect of each

and every transactions separately.”

2.On behalf of the appellant-Samiti it was argued by Mr.

Rakesh Dwivedi, learned senior counsel, that the

observations made by the High Court regarding the

capacity of the officers to understand and effectively

determine the contentious issues that arose for

determination was wholly unjustified. He submitted that

instead of finding fault with the capacity of the officers to

understand the issues, the High Court would have done

better in pointing out the errors committed by the

authorities below in either appreciating the law or applying

the same to the facts of the case at hand. He urged that the

officers had appreciated the evidence adduced by the

respondent properly and were well within their powers to

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reject the same for reasons which they had set out in their

respective orders. So long as there was no perversity in the

approach adopted by the Samiti and the Deputy Director in

appreciating evidence and/or the application of principles of

law to the facts of the case, the mere fact that those

officers were not formally trained in law was no reason to

dub them as incompetent or incapable, especially when any

such training was no guarantee against commission of

mistakes.

3.It was further argued that the High Court had

completely overlooked the fact that the respondent-

company had, in complete breach of the directions and

procedure sanctioned by the orders passed by this Court,

removed the stock of ghee without the requisite gate

passes necessary for such removal. The High Court had

also committed an error in evolving a procedure which was

different from the one that was stipulated by this Court in

Krishi Utpadan Mandi Samiti and Ors. v. Shree

Mahalaxmi Sugar Works and Ors. 1995 Supp (3) 433

and Krishi Utpadan Mandi Samiti v. M/s Saraswati

Cane Crusher & Co. & Ors. (Civil Appeal Nos. 1769-

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1773 of 1998) decided on 25

th

March, 1998. Mr. Sudhir

Chandra appearing for the respondent supported the order

passed by the High Court and prayed for dismissal of this

appeal.

4.In Shree Mahalaxmi Sugar Works (supra) this Court

noticed the Explanation under Section 17 of the Uttar

Pradesh Krishi Utpadan Mandi Adhiniyam, 1964 and

declared that the Samiti was entitled to raise demands

against the dealers before passes for removal of the goods

could be issued to them. This Court held that if there was a

valid rebuttal to the statutory presumption that a sale had

taken place within the notified market area, the dealers will

be entitled to the passes, otherwise not. If the dealers are

compelled to pay market fee as demanded, it shall be open

to the aggrieved to challenge the same in the manner

provided under the Act. The order passed by this Court

being a short order may be extracted in extenso:

“1. Leave granted.

2. The Explanation to Section 17 of the Uttar Pradesh

Krishi Utpadan Mandi Adhiniyam, 1964 reads as follows:

“Explanation.— For the purpose of clause ( iii),

unless the contrary is proved, any specified

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agricultural produce taken out or proposed to be

taken out of a market area by or on behalf of a

licensed trader shall be presumed to have been

sold within such area and in such case, the price of

such produce presumed to be sold shall be

deemed to be such reasonable price as may be

ascertained in the manner prescribed.”

From this it is clear that there is a presumption against

the dealers. In view of that presumption, it is open to

the appellants-Krishi Utpadan Mandi Samiti to raise

demands against the dealers before passes could be

issued. If there is a valid rebuttal in that the sale did not

take place within the notified market area, the dealers

will be entitled to the passes, otherwise not. Of course,

even the dealers are compelled to pay the market fee

as demanded. It is open to them to challenge it in the

manner provided under the Act.

3. The appeals are disposed of in the above terms.”

5.Pursuant to the above pronouncements the Mandi

Samiti appears to have started issuing gate passes on

payment of mandi fee demanded by them at the time of

issue of gate pass. A change in the procedure came about

as a result of the decision of this Court in M/s Saraswati

Cane Crusher (supra). In that case the dealers had argued

that the procedure being followed pursuant in Shree

Mahalaxmi Sugar Works (supra) was not satisfactory

inasmuch as the requirement of hearing and of an

adjudication was not being satisfied unless an aggrieved

dealer was in a position to challenge the assessment in the

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manner provided under the Act. A three-Judge Bench of

this Court found merit in that contention and held that the

order passed in Shree Mahalaxmi Sugar Works (supra)

required some repair work. The Court observed:

“We are satisfied that the orders of this Court afore-

referred to would need some repair work. We treat the

said order to be conceiving of a provisional assessment

where after doors are opened for a final assessment.

We conceive that when demands are raised by the

Krishi Utpadan Mandi Samiti against a trader before he

could ask for transit of goods outside the market area,

the trader would be entitled to tender a valid rebuttal to

say that no sale had taken place within the notified

area and that if the explanation is accepted there and

then by the Mandi Samiti, no question of payment

would arise as also of withholding the gate passes. If

prima facie evidence led by the trader is not accepted

by the Mandi Samiti, the trader or the dealer can be

compelled to pay the market fee as demanded before

issuance of gate pass. If the trader makes the payment

without demur, the matter ends and the assessment

finalized. But in case he does so and raises protest,

then the assessment shall be taken to be provisional in

nature making it obligatory on the trader to pay the fee

before obtaining the requite gate pass. After protest

has been lodged and the provisional assessment has

been made, a time frame would be needed to devise

making the final assessment. We, therefore, conceive

that it innately be read in the order of this Court that a

final assessment has to be made within a period of two

months after provisional assessment so that the entire

transaction in that respect is over enabling the

aggrieved party, if any, to challenge the final

assessment in the manner provided under the afore Act

or under the general law of the land in appropriate fora.

Having added this concept in this manner in the two

Judge Bench decision of this Court, we declare that

what repair has been done instantly would add to the

order of the High Court and the instant corrective

decision shall be the governing rule. The Civil Appeals

would thus stand disposed of.

Since the assessment thus far made against the

traders, who are involved in the instant appeals, would

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have to be treated as provisional awaiting final

assessment, we permit the concerned traders to move

the respective Mandi Samiti within two months from

today to hear their objections and proceedings onwards

be regulated in accordance with procedure devised

hereinbefore. Nonetheless we add that should the basis

of provisional assessment be knocked off, the Samiti

would refund the market fee to the traders/dealers

within two months thereafter.”

6.It appears from the above that the orders passed by

this Court in Shree Mahalaxmi Sugar Works (supra) was

interpreted to mean that a provisional assessment would be

made against the trader before he could ask for a transit

pass for removal of the goods outside the market area. In

the course of the said provisional assessment the trader

would be entitled to tender a valid rebuttal to the statutory

presumption under Section 17 of the Adhiniyam and argue

that no sale having taken place within the notified area, it

was not liable to pay any market fee on the movement of

goods. If the explanation offered by the trader was

accepted the gate pass would be issued without insisting

upon any payment of the fee. But if the evidence laid by

the trader is not prima facie accepted by the Mandi Samiti

the trader or the dealer can be compelled to pay market fee

before issue of gate pass to him. The Court further held that

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if the trader makes the payment without demand the

matter ends and the issue finalised. In case, however, he

raises a protest then the assessment shall be taken to be

provisional in nature making it obligatory for the trader to

pay the fee before obtaining the requisite gate pass. After

protest has been lodged the provisional assessment shall

be followed by a final assessment within a time frame. The

Court prescribed a period of two months in respect of each

such transaction enabling the aggrieved party to challenge

the same under the Act or under the general law of the land

before the appropriate fora.

7.The above procedure has been working effectively for

the past decade and a half and ought to have been

effective in the instant case also. The unfortunate part,

however, was that the respondent-company did not respect

the procedure stipulated under the above orders of this

Court. It did not apply for and obtain gate passes for

removal of its goods. The Samiti, therefore, had no occasion

to pass any provisional or final order based on the material

adduced before it. It is only when the respondent-company

filed a declaration that the removal of the stocks pursuant

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to consignment note No.94 dated 14

th

May, 2004 in favour

of Anand Sales Corporation at Ahmedabad was a stock

transfer and did not require a gate pass that the Samiti

issued a show-cause notice asking the respondent-company

to furnish the documents with regard to the production,

sale, purchase, movement and storage of the goods. Based

on the figures furnished pursuant to the said show-cause

notice the Samiti determined the market fee and the

development fee and raised a demand for payment thereof

with a direction to the company to follow the prescribed

procedure for removal of goods from the mandi area. The

revisional authority, as seen above, upheld the assessment

of the fee and the consequential directions issued by the

Samiti. The High Court, however, completely overlooked

the effect of the orders passed by this Court in the two

cases mentioned earlier and brought in a new mechanism

which could in its opinion be more effective, in dealing with

the situation that arose so very often between the Samiti on

the one hand and the traders on the other. The High Court

failed to appreciate that it was not on virgin ground. The

matter was fully covered by the decisions of this Court.

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Further repair of the procedure and the mechanism so

provided could only be under the orders of this Court. The

High Court ought to have left it to this Court to determine

as to whether the mechanism and procedure provided by

our orders required any modification, and if so, in what

form and to what extent. Instead of doing that, the High

Court embarked upon an exercise which was not necessary

especially when the same did no service to judicial

discipline.

8.The High Court was also in error in holding that even

when the movement of goods without gate passes may

have been in violation of the rules regulating the issue of

such passes, any such violation could only call for a penalty

under the said rules. Assessment of market fee on the

removal of such goods from the mandi area was, according

to the High Court, a different matter unrelated to the

breach of the rules requiring the traders to remove goods

only on the authority of validly issued gate passes. The

High Court appears to have overlooked the fact that if gate

passes are required to be obtained under the rules, removal

of stocks without applying for such gate passes and without

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furnishing prima facie evidence of proof that there was no

sale of the goods involved, was a reason enough for the

Mandi Samiti to demand payment of the market fee on the

stocks that were removed. The absence of gate passes was

tantamount to removal of the goods in breach of the

relevant rules and also in breach of the directions issued by

this Court in the two cases mentioned above. A dealer who

adopted such dubious procedure and means could not

complain of a failure of opportunity to produce material in

support of its claim that no sale was involved. No

opportunity to a dealer who was acting in defiance of the

rules and removing the goods without any intimation and

permission of the Samiti could be granted for the occasion

to grant such an opportunity would arise only when the

trader applied for the issue of a gate pass. As a matter of

fact, the goods having been taken away without gate

passes and without any material to show that there was no

sale, the Samiti could demand payment of the market fee

and leave it open to the respondent-trader to claim refund

by rebutting the presumption that the removal was

pursuant to a sale. At any rate, the Samiti and the Deputy

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Director have concurrently held that the respondent-

company has not been able to rebut the presumption under

Section 17 of the Adhiniyam. We see no reason to interfere

with that finding especially when the appraisal of the

evidence by the said two authorities has not been shown to

us to be in any way perverse to warrant interference with

the same.

9.In the result, we allow this appeal, set aside the order

passed by the High Court and restore that passed by the

Samiti and the Deputy Director in revision. The parties are

left to bear their own costs.

……………………..…………..

…J.

(T.S. THAKUR)

……………………..…………..

…J.

(DIPAK MISRA)

New Delhi

March 23, 2012

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