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PETITIONER:

NANDU MAL GIRDHARI LAL ETC. ETC.

Vs.

RESPONDENT:

STATE OF UTTAR PRADESH AND ORS.

DATE OF JUDGMENT03/04/1992

BENCH:

MOHAN, S. (J)

BENCH:

MOHAN, S. (J)

PUNCHHI, M.M.

RAY, G.N. (J)

CITATION:

1992 AIR 2084 1992 SCR (2) 446

1993 SCC Supl. (1) 338 JT 1992 (2) 537

1992 SCALE (1)778

ACT:

U.P. Krishi Utpadan Mandi Adhiniyam Act, 1964/Rules,

1964: Sections 2,7,10,17/Rules 66,79-Market fees-Levy of-

Retrospective effect-Validity of.

HEADNOTE:

After this Court upheld the validity of the U.P. Krishi

Utpadan Mandi Adhiniyam Act, 1964, (AIR 1980 SC 1124), the

authorities called upon the commission agents carrying on

trade in the notified market area to submit their accounts

in order to fix their liability towards market fee. The

Traders Association objected that since no notification was

issued under section 10 of the Act, market fee could not be

levied. The authorities replied that the required

notification was already issued on 9.10.67. Certain other

objections were also raised and th authorities informed the

Traders Association that such objections were not tenable

and directed production of accounts. Demand Notices were

also issued and the traders were informed that if the market

fee was not paid, the same would be realised as arrears of

land revenue. The traders filed Writ Petitions before the

High Court challenging the demand notices.

The High Court having dismissed the Writ Petitions,

some of the Commission Agents have preferred the present

appeals.

The appellants contended that the liability sought to

be fixed retrospectively from 1973 to 1978 on the commission

agents was unreasonable, as they would not be able to

realise the same from the purchasers scattered all over

India, especially after a long gap and the relief against

the purchaser has become time barred and as such the

retospective levy would impose a great burden on the

commission agents; that since the operation of the

notification was stayed by the High Court in 1973, which

stay was in force till 1975, no market fee could be levied

for the transactions during that period; and that as no

notification has been issued under section 10 read with

proviso to Rule 66 providing for trade charges and market

fees in respect of Khandsari sugar, the demand was invalid.

447

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On behalf of the respondents, it was contended that a

resolution was passed by the Mandi Samiti that market fee

would be payable with effect from 1.10.73 and that the same

was given wide publicity in the market area and also through

newspapers.

Dismissing the appeals, this Court,

HELD : 1. The fee has been validly imposed and no

exception could be taken to the same. It is incorrect to

state that notification under section 10 has not been

issued. Merely because there was a stay, it does not mean

the liability disappears. The notification dated 13.9.1973

stood suspended at the instance of other traders. That

cannot enure to the benefit of the appellants herein. They

were neither the petitioners nor the respondents in those

proceedings. Therefore, they cannot take advantage of the

stay order and plead inability to pay. In as much as the

Act itself has been retrospectively amended, the appellants

cannot disown their liability. [451C,D]

Jang Singh v. Brijlal and Ors., [1964] 2 SCR 145; Union

Carbide Corporation and Ors. v Union of India and Ors.,

[1991] 4 SCC 585, distinguished.

Ram Chandra Kailash Kumar & Co. v. State of U.P., AIR

1980 SC 1124, referred to.

2. It is one of the settled principles that because of

plenary powers, the Legislature could pass legislation

prospectively as well as retrospectively. This being so,

the retorspective liability between 11.10.73 and 12.10.75,

the period in dispute in these appeals, cannot be avoided.

[457E,F]

3. Merely because the commission agents could not

realise the amount from the purchasers at this distance of

time or that the purchasers are scattered, the statutory

liability cannot be avoided. [458B]

4. The appellants are liable to pay the demands raised

by the respondent Samiti against them. However, if with

regard to any particular transaction it is proved that by

the commission agents the purchasers had paid the market

fee, on such transaction the Samiti will not make them

liable once again. [458C]

JUDGMENT:

CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 7356-

7360 of 1983 etc. etc.

448

From the Judgment and Order dated 28.1.83 of the

Allahabad High Court in C.M.W.P. No. 6477, 6606, 6602, 6608,

6517 of 1981.

R. K. Jain, B.D. Aggrawal, Ramesh Chandra and P.K. jain

for the Appellants.

E.C. Agrawala for the Respondents.

The Judgment of the Court was delivered by

MOHAN, J. Since common points of law are involved, all

these appeals are dealt with under one judgment.

The appellants, commission agents were carrying on

trade in the notified market area. The attack is as to the

levy of market fee on them in relation to the business of

Khandsari sugar. To highlight the issue involved we will

set out the legal background first.

The U.P. Legislature passed an Act called U.P. Krishi

Utpadan Mandi Adhiniyam in the year 1964 as Act 25 of 1964.

The object of the Act was to regulate the sale and purchase

of agricultural produce and for the establishment,

superintendence and control of markets in U.P. Section 5 of

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the Act confers powers on the State Government in relation

to regulation of sale and purchase of any agricultural

produce in any area wherein such transactions are usually

carried on and for that purpose to declare the area as a

market area. This declaration is to be by way of a

notification. Section 7 empowers even a portion of that

market area be specified as a principal market yard, while

such other portions could be specified as sub-market yard.

The effect of such declaration of market area is spoken to

under Section 9. In that, no person shall deal with

specified agricultural produced except in accordance with

the conditions of licence granted by the Committee. Sub-

section (9)(ii) is specific, while it says the commission

agent, trader or broker will have to carry on the business

in accordance with the conditions of licence. Section 10

prohibits realisation of trade purchases from the producers

form the sale and purchase of specific agricultural produce

except those which are permitted by the rules or bye-laws.

Section 17, about which we will deal with later talks

of the powers of the Mandi Samiti. Section 40 confers

rule-making power.

449

The commission agents, carrying on business by sale and

purchase of gur, rab, shakkar and khandsari questioned the

enforcement of the Act in respect of these merchandise. A

Division Bench of the Allahabad High Court held they would

not constitute agricultural produce within the meaning of

clause (a) of Section 2 of the Act. The reason was it

involves manufacture changing the nature of agricultural

produce.

In order to get over this difficulty, the definition of

agricultural produce was amended by U.P. Act 10 of 1970, and

as a result, gur, rab, shakkar and khandsari and jagger

became agricultural produce. The validity of amending Act

10 of 1970 was questioned on various grounds, which, of

course, need not concern us. A Division Bench in Special

Appeal No. 175 of 1973 dated 7.9.77 concurring with the

Learned Single Judge repelled the contentions and upheld the

validity.

It is important to note that pending this Special Appeal

No. 175 of 1973, the operation of the notice dated 13.9.73

issued under Section 8 of the Act was suspended in so far as

it related to khandsari. However, on 6.8.75 order of stay

was modified and the Mandi Samiti was directed to keep the

amounts realised by them in a separate account. This order

was by agreement between the parties. It has an important

bearing since arguments were raised as to the effect of the

order of stay, and that is why, we are mentioning at this

stage itself.

The trader carrying on business within the jurisdiction

of several Market Committees challenged the levy of fee

before the High Court of Allahabad from time to time. There

were several rounds of litigation in which they failed.

Thereupon, they came up with an appeal. This court

ultimately gave a direction that the market fee should be

regularised and charged in the light of the judgment.

Concerning the services whenever rendered by the Market

Committee, it was observed at page 1141(A.I.R. 1980 SC) as

follows :

"....We do hope that services are being rendered

and will continue to be rendered by the various

Market Committees in the light of the judgment of

this Court in Kewal Krishan Puri's case. If in

regard to any particular Market Committee it is

found that services are not being rendered or in

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future lapses are made then it will be open to the

payers of fees to reagitate the matter in the High

Court in the light of that judgment."

450

The result of the judgment was the validity of U.P.

Krishi Utpadan Mandi Act was upheld. Thereafter, the

Commission Agents were called upon to submit the account for

the period 11.10.73 to 12.8.75 in order to fix the liability

of the market fee. An objection was raised by the Traders

Association that since no notification has been issued under

Section 10, market fee was not leviable. To this, a reply

was sent by the Director that as early as 9.10.67, a

notification had been issued. Then again, certain other

objections were raised. The Mandi Samiti informed the

Association that the objections were not tenable and the

Samiti need not have recourse to Rule 66 to support the

market fee and directed the production of account. Further

to his, a demand notice was issued and the appellants were

also informed should the market fee be not paid, it would be

realised by way off arrear of land revenue. As a result,

Writ Petitions were filed challenging the demands for the

period 11.10.73 to 12.8.75. A Division Bench of the

Allahabad High Court dismissed those Writ Petitions. Hence,

these civil appeals by a few of the commission agents.

Though several contentions were raised before the High

Court, only the following points were raised before us by

the appellants:-

(i) The liability to pay market fees was on the

seller till 1973. Thereafter, till 1978 the

purchasers, were made liable. The commission

agents are only the collecting agencies from the

sellers. The liability of the commission agents is

sought to be fixed up to 1978 retrospectively from

12.6.73. The fixation of such a libaility is

unreasonable. Firstly, the commission agents were

unable to realise the said amount from the

purchasers who were scattered all over India.

After 1980, when the demand was made the relief

against such purchaser has become time-barred.

(ii) The retrospective levy would impose a

great burden on the commission agents.

The operation of notification of the State

Government dated 13.9.73 including definition of

agricultural produce under Section 8 was suspended

by the High Court on 11.10.73. The stay was in

force till 1975. Hence, no market fee could be

charged or paid by anyone for the transaction

during that period.

451

(iii) Admittedly, no notification has been

issued under Section 10 read with proviso of Rule

66 providing for trade charges and market fees in

respect of khandsari sugar. Therefore, the demand

is invalid.

In opposition to this, it is argued on behalf of the

Samiti as early as 1975, Mandi Samiti, Muzaffarnagar passed

a resolution that the market fee would be payable @ 1% with

effect from 1.10.73. This resolution was given wide

publicity in the market area as well as through newspapers.

The fee has been validly imposed and no exception could

be taken to the same. It is incorrect to submit that

notification under Section 10 has not been issued. Merely

because there was a stay, it does not mean the liability

disappears. The notification dated 13.9.1973 stood

suspended at the instance of other traders. That cannot

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ensure to the benefit of the appellants herein. They were

neither the petitioners north respondents. Therefore,

they cannot take advantage of the stay order and plead

inability to pay. In as much as the Act itself has been

restrospectivley amended, the appellants cannot disown the

liability.

In order to appreciate the respective contentions we

will now refer to the relevant provisions of law in

relation to levy of market fess. Originally (prior to 1978)

Section 17 read as follows :-

"A committee shall, for the purpose of this Act,

have the power to-

(i).........

(ii) ..........

(iii) Levy and collect.

(a) "Such fees as may be prescribed for the issue

or renewal of licences, and

(b) Market fees on transactions of sale or purchase

of specified agricultural produce in the principal

market yard and sub-market yards from such persons

and at such rates as may be prescribed, but not

exceeding one half per centum of the price of the

specified agricultural produce sold or purchased

therein:

452

Provided that no market fee shall be levied or

collected on retail sale of any specified

agricultural produce where such sale is made to the

consumer.

(iv) ..........

(vii) ..........."

By President's Act No. 13 of 1973, Section 17(iii)(b)

was substituted by the following sub-section:-

"17(iii)(b) market fees, which shall be payable by

purchasers, on transactions of sale of specified

agricultural produce in the principal market yard

or a sub-market yard at such rates, being not less

than one per centum and not more than 1-1/4 per

centum of the price of the agricultural produce so

sold, as the State Govt. may specify by

notification in the Gazette."

The material change effected by this amendment was to

fix the liability on the purchaser instead of the seller.

Further, two limits were also prescribed viz. 1% and 1-1/2%

giving the right to the State Govt. to fix any amount in

between these limits relating to any Mandi Samiti. This

power was exercised by the Market Committees through the

bye-laws under the rules.

However, by U.P. Act 7 of 1978, a new sub-clause came

to be introduced retrospectively with effect from 12.6.73.

As a result, the Section reads as under:-

"Power of the committee- a committee shall for the

purpose of this Act, have the power to :-

(i) ...........

(ii)............

(iii) levy and collect.

(a) .........

(b) Market fees which shall be payable on

transactions of sale of specified agricultural

produce in the market area at such

453

rate, being not less than 1 per centum and not

more than 1 -1/2 per centum of the price of the

agricultural produce so sold as the State

Government may specify by notification and such

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fees shall be realised in the following manner :-

(1) If the produce is sold through a Commission

agent, the commission agent may realise the market

fees from the producer and shall be liable to pay

the same to the committee.

(2) If the produce is purchased directly by a

trader from a producer the trader shall be liable

to pay the market fees to the committee.

(3) If the produce is purchased by a trader from

another trader, the trader selling the produce may

realise it from purchaser and shall be liable to

pay the market fees to the committee, and

(4) In any other case of sale of such produce, the

purchaser shall be liable to pay the market fees to

the committee.

(iv)............

..........

(viii) ............"

Two things are evident from the above-(1) the Section

has got restrospective effect w.e.f. 12.6.73 and (2)

Commission agents are made liable.

Rule 66 runs to the following effect :-

"Market fee (Section 17 (iii) - (1) The Market

Committee shall have the power to levy and collect

fees on the specified agricultural produce brought

and sold in the Market Yards at such rates as may

be specified in the bye-laws but not exceeding one-

half of one per centum of the price of the

specified agricultural produce :

Provided that the market fee shall be payable by

the seller :

454

Provided further that no market fee shall be

levied and charged prior to the date on which

provisions of Section 10 of the Act are enforced.

Explanation - For the purposes of this sub-rule, a

sale of specified agricultural produce shall be

deemed to have been effected in Market Yard if it

has been weighed or measured by a licensed weighman

or measurer in the Market Yard for the purpose of

sale, notwithstanding the fact that the

proprietorship of such agricultural produce has by

reason of such sale passed to a person in a place

outside the Market Yard.

(2) No market fee shall be levied more than once

on any consignment of the specified agricultural

produce brought for sale in the Market Yard if the

market fee has already been paid on it in any

Market Yard of the same Market Area and in respect

of which a declaration has been made and a

certificate has been given by the seller in Form

No. V.

Notes : Rule 66 cannot be said to be invalid in so

far as it sub-delegated the authority to fix the

rate of market fee. Mandi Samiti v. L.P. Singh,

1972 ALJ 643."

By notification dated 27.10.65, it was declared in

exercise of the power under Section 6 of the Act that from

31.1.66 the area of the following Gaon Sabha for purposes of

the said Act with regard to (1) Wheat (2) Gram (3) Peas (4)

Paddy (5) Rice (6) Arhar (7) Sarson and Lahi (8) Potatoes

(9) Cotton (10) All kind of Gur, Rab and Deshi Shakkar and

their compounds will be the Muzaffarnagar Mandi area.

Thus, it would be seen that 10 agricultural produce had

come to be included. It also requires to be noted that

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khandsari sugar did not form part of the notification. On

26.9.67, a notification was issued under Section 7 of the

Act that from 30.12.67. the principal Mandi area and sub-

Mandi area of Muzaffarnagar Mandi area came to be specified.

Then came the notification dated 9.10.67 issued in exercise

of the power under Section 10(1). That notification is

reproduced below :-

"October 9, 1967

455

No. SAM-1038 (Rec) 3812

In exercise of the power delegated by the State

Government vide Krishi (kha vibhag Notification No.

R.2048/XII-8-1498-65, dated September 14, 1967, it

is hereby notified under sub-section (1) of section

10 of the U.P. Krishi Utpadan Mandi Adhiniyam 1964

(U.P. Act No. XXV of 1964), that with effect from

December 20, 1969, no person shall, in the

Muzaffarnagar Principal Market yard and the Shahpur

and Budhana Sub-Market Yards of Muzaffarnagar

market Area levy charge or realise any trade

charges other than those prescribed under rule 79

of the Uttar Pradesh Krishi Utpadan Mandi

Niyamavli, 1966, in respect of any transaction of

sale or purchase of the agricultural produce

specified vide notification No. H5353A/XII-B-

1047(2) 65, dated October 27, 1965."

The last of the notification is one issued under Sub-

Section (1) of Section 8 on 13.9.73, which is reproduced

below:-

"Government of Uttar Pradesh Agriculture Section-5

No.A-7756 12B (5) 490/72

Dated : Lucknow 13, September, 1973

Notification

Under the proviso of Sub-Section (1) of Section

8 U.P. Krishi Utpadan Mandi Act, 1964, (U.P. Act

No. 25 of 1964) in Notification No. H-7372/12B-

1200(3)69 dated 16.3.71 issued by the State

Government with regard to the Agriculture

Production in the Muzaffarnagar Mandi area District

Muzaffarnagar, under Section 6 of the said Act, in

Notification No. H-5353-A/12B- 1047(2)/65 dated

27.10.65, the Government had made a declaration of

its objects including in the specified agricultural

production in the list. And objections and

suggestions if any with regard to the proposed

declaration had to be made to the Director of

Agriculture within the period specified in the said

notification. And with regard to the said object,

consideration has been done by the State Government

of all objection and suggestion received by the

Director of Agriculture within the prescribed time.

456

Now therefore in exercise of the powers

conferred by part(a) of Sub-Section (1) of Section

8 of the said Act the Governor declares that from

25.9.73 for the purposes of the said Act, the

following agriculture products i.e. (1) Khatai

Amchur (2) Barseen (seed) (3) Fodder (4) khansari

will be included in the list of agricultural

products as indicated in Section 6 of the said Act

with regard to the Muzaffarnagar Mandi area

District Muzaffarnagar.

By order :

Sd/- A.P. Singh

Deputy Secretary.

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The effect of the last notification is khandsari gets

included to the list of agricultural produce to the

notification issued under Section 6 dated 27.10.65.

As a matter of fact, Section 8 of the Act clearly

postulates such a procedure. Section 8(1)(a) is reproduced

below :-

"Alteration of Market Area and Modification of

the List of Agricultural produce-(1) The State

Government, where it considers necessary or

expedient in the public interest so to do, may, by

notification in the Gazette, and in such other

manner as may be prescribed and with effect from

the date specified in the notification,-

(a) include any agricultural produce in, or

exclude any agricultural produce from, the list of

agricultural produce specified in the notification

under Section 6;"

The consequence of it will be that w.e.f. December 20,

1969, no person in the Muzaffarnagar principal Market Yard

may levy charge or realise any trade charges other than

those prescribed under rule 79 in respect of sale or

purchase of agricultural produce, specified in the

notification dated 27th October, 1965.

This is apparent from the notification under Section 10

dated 9.10.67 as seen from the above extract.

On 24.9.73, acting under Section 17(iii) as amended,

the State

457

Government issued a notification providing for realisation

of market fee @1% on the price on sale and purchase of

specified agricultural produce in the principal Market Yard

of Muzaffarnagar w.e.f. 1.10.73.

Pursuant to this notification, the U.P. Krishi Utpadan

Mandi Samiti Muzaffarnagar informed as follows:-

"...all the traders and commission agents of the

Mandi Area, Muzaffarnagar, Distt. Muzaffarnagar,

are informed that they will now realise Mandi fee

on all agricultural produce at its sale value at

the rate of 1% of the total sale or purchase from

the purchaser. The amount of Mandi fee realised in

this way shall be deposited as order earlier in the

office of the Samiti by the commission agent

traders within the prescribed period and after this

notice no amount will be deducted as Mandi fee from

the seller.

Sd. Kanhaiyalal Agrawal

Pergana Officer, Muzaffarnagar

President

Krishi Utpadan Mandi Samiti

Muzaffarnagar"

From the above narration it will be clear that once the

Act itself amended retrospectively w.e.f. 12.6.73, we do not

know how the commission agent can escape the liability. It

is one of the settled principles that because of plenary

powers, the Legislature could pass legislations

prospectively as well as retrospectively. This being so,

the liability between 11.10.73 to 12.10.75, the period in

dispute in these appeals, cannot be avoided.

It has already been seen how khandsari has come to be

validly included. Therefore, for dealing in this commodity

the commission agents will be liable to pay at the rate

prescribed.

Turning to the stay, it has already been noted that

though stay was granted on 11.10.73, it was not at the

instance of the appellants herein. As a matter of fact,

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they never questioned the validity of the amending Act or

the notification. Therefore, they cannot take advantage of

the same. The said stay also came to be modified on 6.8.75

by agreement. Even to that agreement, the appellants were

not the parties. Therefore, neither of the

458

rulings viz. Jang Singh v. Brijlal and others, [1964] 2 SCR

145 and Union Carbide Corporation and others v. Union of

India and others, [1991] 4 SCC 585 would have any

application to the facts of the case. Merely because the

commission agents cannot realise the amount from the

purchasers at this distance of time or that they are

scattered, the statutory liability cannot be avoided.

In the result, we hold that they are liable to pay the

demands raised by the respondent Samiti against them.

However, if with regard to any particular transaction it is

proved by the commission agents the purchasers had paid the

market fee on such transaction the Samiti will not make them

liable once again. Subject to the only qualification the

appeals are hereby dismissed. However, there shall be no

order as to costs.

G.N. Appeal dismissed.

459