http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 59

CASE NO.:

Appeal (civil) 398 of 1977

PETITIONER:

BELSUND SUGAR CO.LTD.

RESPONDENT:

STATE OF BIHAR & ORS. ETC.

DATE OF JUDGMENT: 10/08/1999

BENCH:

A.S.ANAND CJI & S.B.MAJMUDAR & SUJATA V.MANOHAR & K.VENKATASWAMI & V.N.KHARE

JUDGMENT:

JUDGMENT

DELIVERED BY:

S.B.MAJMUDAR, J.

S.B. Majmudar, J

Leave granted in the Special Leave Petitions.

These appeals and writ petitions mainly raise the

question regarding the legality of the levy of market fee

under the provisions of Bihar Agricultural Produce Markets

Act, 1960 (hereinafter referred to as the Market Act for

short). The grievance made by the appellants/writ

petitioners pertained to the following commodities with

which the respective proceedings are concerned. 1.

Sugarcane, Sugar and molasses (briefly referred to as Sugar

matters) matters)

2. Wheat products Atta, Maida, Suzi, Bran etc.; 3.

Vegetable Oil; 4. Rice milling; 5. Milk and milk

products; 6. Tea.

It will, therefore, be appropriate to deal seriatim

the grievances centering round the levy of market fee on

transactions concerning the aforesaid commodities.

GRIEVANCES IN CONNECTION WITH MARKET FEE CONCERNING

SUGAR MATTERS

So far as this group of matters is concerned, first

two Civil Appeal Nos. 398 & 399 of 1977 arise out of

certificates of fitness granted by the High Court of

Judicature at Patna under Articles 132(1) and 133(1) of the

Constitution of India. The said certificates pertain to a

common judgment of the High Court rendered in two writ

petitions of two sugar mills located in the State of Bihar.

By the common judgment dated 20th April, 1976 the High Court

dismissed both the writ petitions. The said judgment of the

High Court is reported in The Belsund Sugar Co. Ltd., Riga

and another vs. The State of Bihar and others, (AIR 1977

Patna 136). By the impugned common judgment, the imposition

of market fee under the Market Act on the transactions of

purchase of sugarcane by the sugar mills concerned and also

on their transactions covering sale of sugar and molasses

manufactured by utilising the purchased sugarcane was upheld

by the High Court. In view of the fact that the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 59

certificates of fitness were granted by the High Court as

aforesaid this group of matters was directed to be placed

before a Constitution Bench of this Court as per Article 145

of the Constitution of India. Though initially they were

directed to be placed before a Bench of seven Judges,

subsequently by a latter order dated 9th December, 1998,

these appeals were directed to be placed before a five Judge

Bench and that is how these appeals and other cognate

matters were placed before this Bench for final hearing.

Though the certificates of fitness granted by the High Court

were on the basis that the cases involved a substantial

question of law as to the interpretation of Article 254(1)

of the Constitution of India, at the time when these appeals

and the cognate matters reached final hearing before us,

learned senior counsel Shri Shanti Bhushan and Shri Gupta

appearing for the appel lants, raised mainly two contentions

for our consideration :

1. Whether the Market Act can apply to the

transactions of purchase of sugarcane and sale of sugar and

molasses by the appellant sugar mills in view of the fact

that regulation of these transactions is already effected by

Bihar Sugarcane (Regulation of Supply and Purchase) Act,

1981 (for short Sugarcane Act) as well as and Sugar both

issued under Section 3 of the Essential Commodities Act,

1955 (hereinafter referred to as the Essential Commodities

Act) and also under the provisions of Bihar Molasses

(Control) Act, 1947.

2. In the alternative, whether imposition of market

fee under the Market Act by the respective market committees

is justified in the absence of any service rendered to the

appellant sugar mills under the provisions of the Market Act

and consequently the levy of market fee can be said to be

not supported by any quid pro quo.

RIVAL CONTENTIONS :

Learned senior counsel for the appellants vehemently

submitted in support of the aforesaid twin contentions that

the Market Act which was enacted by the Bihar legislature

under Entries 26 and 27 of the State List read with Entry 28

therein had to be read subject to Entry 33 of the Concurrent

List and as the Bihar Legislature itself had enacted the

Sugar Act in exercise of its legislative powers under Entry

33 of the Concurrent List, there was no occasion left for

the State of Bihar to get satisfied about the need to

regulate the production and sale of sugarcane as well as

manufactured items therefrom as per the Market Act. In

short, the invocation of Section 3 read with Section 4 of

the Market Act was totally misconceived and uncalled for.

It was further contended that once the State of Bihar in

exercise of its power of exemption under Section 42 of the

Market Act had exempted the appellant sugar factories from

applicability of Section 18 of the Market Act, the entire

machinery under the Market Act became inapplicable to

regulate the sale and purchase of transactions concerning

sugarcane, sugar and molasses as entered into by the

appellant sugar factories. Consequently, there remained no

occasion for the authorities functioning under the Market

Act for demanding any market fee from the appellants under

Section 27 of the Market Act. It was also contended in

further support of this submission that the Sugarcane

Control Order, 1966 as well as the Sugar (Control) Order of

the same year issued under Section 3 of the Essential

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 59

Commodities Act, 1955 and also the provisions of the Bihar

Molasses (Control) Act, 1947 fully occupied the field of

regulation of sale and purchase of sugarcane, sugar and

molasses and on that ground also the provisions of the

Market Act could not be pressed in service against the

appellant sugar factories undertaking the purchase and sale

of the concerned transactions. In the alternative, it was

contended that once Section 15 of the Market Act is out of

picture and once it remains an admitted position that the

appellant sugar factories have to purchase sugarcane from

purchase centres, there remains no occasion for the market

committees to give any services under the Market Act to the

appellant sugar factories. Hence the market committees were

not entitled to recover any market fee from the appellants

as there was no return benefit or quid pro quo made

available to the appellants by the market committees and

hence the impugned market fee in substance became a tax

which could not be recovered under the Market Act by the

market committees.

Replying to these contentions, learned senior counsel

for the State of Bihar and learned senior counsel appearing

for the market committees submitted that the appellant sugar

factories have no locus standi to maintain these proceedings

for the simple reason that so far as their challenges to the

levy of market fee on transactions of sale of sugar and

molasses were concerned, as under Section 27 of the Market

Act levy was imposed on the buyers of sugar and molasses

manufactured by the appellant companies, these sugar mills

were not affected by the levy. That the appellant companies

may at the highest be collecting agents of market fee if the

buyers were not licensed under the Act but in most of the

cases the appellant sugar companies were selling levy sugar

to the Food Corporation of India and even free sugar was

mostly sold by them to licensed buyers. Same was the case

of sale of molasses to the concerned buyers. They, however,

rightly conceded that the appellants cannot be said to be

not having any locus standi to challenge the market fee

levied on their purchase of sugarcane as the charge of

market fee would be on them as buyers of sugarcane.

On the merits of the contentions raised by learned

senior counsel for the appellants, learned senior counsel

for the respondents submitted that even if the exemption

notification under Section 42 of the Act purports to exempt

the appellant sugar companies from whole of Section 15 of

the Market Act, in substance the exemption is confined to

Section 15(2) of the Act as there is already a declaration

under Section 4 of the Market Act treating the purchase

centres of the appellant sugar companies at the factory

gates as well as at other places in the market area as

sub-market yards. On a conjoint reading of these two

notifications, therefore, it can be seen that exemption

under Section 42 of the Act was confined to excluding the

operation of Section 15(2) of the Act qua these sugar

factories. In the alternative, it was submitted that if the

exemption notification is treated to cover entire Section 15

even then once the transactions of sale and purchase take

place within the market area, charge under Section 27 would

get settled on these transactions. It was further submitted

that there is enough return benefit made available to the

sugar factories admittedly situated within the market area.

That, in fact, their service centres are also declared to be

sub-market yards even beyond the factory gate. That they

utilise the link roads made available by the market

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 59

committee for bringing sugarcane produce to the factory

premises by giving facility of swift transportation. Thus

the sugarcane as a raw material is brought to the factory

premises before it gets dried up. This yields better

quality and larger quantity of sugar and molasses. In

addition thereto facilities of supply of necessary

information regarding the prevalent prices of sugarcane are

made available by the market committee. But even apart from

that, the market committee can act as a mediator in enabling

the sugarcane growers to get better price of sugarcane above

the minimum price fixed under the Control Order and the

Sugarcane Act and this role of the market committee would be

beneficial not only to the producers of sugarcane but also

to the factories which can be assured of appropriate good

quality sugarcane purchased from the sugarcane growers. It

is, therefore, wrong to suggest that there is no quid pro

quo between the charge of market fee and the payment thereof

by the sugarcane factories, that the infrastructural

facilities made available to the industry as a whole have to

be seen and transactions are not to be dissected for finding

out the quid pro quo between charging of the market fee and

the burden thereof borne by the sugar companies. It was,

therefore, contended that none of the submissions canvassed

by learned senior counsel for the appellants deserved to be

accepted. In the light of the aforesaid rival contentions,

we now proceed to deal with the twin contentions submitted

for our consideration by learned senior counsel for the

appellants in support of these appeals. However, before we

deal with the merits of these contentions, the question of

locus standi of the appellants is required to be considered

at the outset.

LOCUS STANDI OF THE APPELLANTS TO MAINTAIN THESE

PROCEEDINGS :

It has to be kept in view that as per Section 27 of

the Market Act the charge of the market fee is on the buyer

of the agricultural produce bought or sold in the market

area. The said section reads as under :

"Power to levy fees - (1) The Market Committee shall

levy and collect market fees on the agricultural produce

bought or sold in the market area at the rate of rupee one

per Rs.100 worth of agricultural produce.

Xxxxx xxxx xxxx

(2) The market fee chargeable under sub-section (1)

shall be payable by the buyer, in the manner prescribed.

(3) The fee chargeable under sub-section (1) shall not

be levied more than once on a notified agricultural produce

in the same notified Market Area.

It is not in dispute between the parties that

sugarcane is an agricultural produce as it is grown in

fields by the cultivators. Both sugarcane and sugar are

listed as Item nos. 1 and 3 in Para XII dealing with

miscellaneous items as found in the Schedule to the Market

Act enacted as per Section 2(1)(a) of the Act.

Section 2(1)(a) of the Act defines agricultural produ

as under : Agricultural produce means all produce

whether processed or non-processed, manufactured or not, of

Agriculture, Horticulture, Plantation, Animal, Husbandry,

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 59

Forest, Sericulture, Pisciculture, and includes livestock or

poultry as specified in the Schedule.

In the light of the aforesaid provisions, it is

obvious that the sugar factories operating in the market

area within the jurisdiction of the market committee

concerned can be said to be buyers of sugarcane, an

agricultural produce. Their purchase centres are situated

within the market area. As submitted by learned senior

counsel for the respondents, all the purchase centres at

which the appellant sugar factories purchase sugarcane as

raw material are not only situated within the market area

but are also declared as submarket yards. In fact the

entire Bihar State is comprised of various market areas

within the jurisdiction of different market committees. If

that is so, it has to be held that when the charge under

Section 27 of paying market fee is imposed on the sugar

factories as buyers of sugarcane within the market area,

they have to be treated to be having sufficient locus standi

as buyers of sugarcane to challenge the imposition of market

fee on their purchase transactions. On this aspect, learned

senior counsel for the respondents did not contest.

However, their submission was that when purchased sugarcane

is processed at the factories and converted into sugar and

molasses and when such sugar and molasses are sold by the

sugar factories, the charge of market fee on these sale

transactions would settle on the buyers of sugar and

molasses who have not made any grievance about payment of

market fee. That may be so, however, the fact remains that

if the sugar factories sell manufactured sugar and molasses

out of the purchased raw material-sugarcane, and if the

buyers are not licensed then as per the provisions of Rule

82 (iii) of the Bihar Agricultural Produce Markets Rules,

1975 the sugar factories as sellers have to realise the

market fee from the buyers and have to deposit the same with

the market committees. That obligation by itself would give

sufficient locus standi to the sugar factories which sell

sugar and molasses within the market area to challenge the

aforesaid statutory obligation imposed on them by the Act

and the Rules and to submit as to how they are not covered

by the provisions of the Act. It may be that when they sell

levy sugar to the Food Corporation of India, they may not

have to undertake this liability as collecting agents of the

market committee, so far as the market fee is concerned.

Still even if partially in case of sale of free sugar to

unlicensed buyers they have to be called upon to discharge

their statutory obligation under Rule 82 (iii), it cannot be

said that they have no locus standi to challenge the

imposition of market fee on the transactions of sale

effected by them in connection with sugar and molasses. The

preliminary objection of learned senior counsel for the

respondents against the locus standi of the appellants to

maintain these proceedings is, therefore, over-ruled. This

takes us to the consideration of the main twin contentions

canvassed by learned senior counsel for the appellants for

our consideration. CONTENTION NO. 1 : Applicability of

the Market Act to appellants transaction of purchase of

sugarcane and sale of sugar and molasses.

So far as this contention is concerned, we have to

keep in view the relevant provisions of the Market Act,

Sugar Act as well as the Orders under the Essential

Commodities Act. In the first instance, we shall deal with

the transactions of purchase of sugarcane by the sugar

factories functioning in the market areas falling within the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 59

jurisdiction of respective market committees constituted

under the Market Act. The Market Act has been enacted by

the Bihar Legislature as per the legislative power vested in

it by Entries 26, 27 and 28 of List II of Seventh Schedule

of the Constitution. These entries read as under : 26.

Trade and commerce within the State subject to the

provisions of entry 33 of List III. 27. Production, supply

and distribution of goods subject to the provisions of entry

33 of List III. 28. Markets and fairs.

It becomes at once clear that if location of markets

and fairs simpliciter and the management and maintenance

thereof are only contemplated by the Market Act, then they

would fall squarely within the topic of legislative power

envisaged by Entry 28 of List II. However, the Market Act,

as we will presently show, deals with supply and

distribution of goods as well as trade and commerce therein

as it seeks to regulate the sale and purchase of

agricultural produce to be carried on in the specified

markets under the Act. To that extent the provisions of

Entry 33 of List III override the legislative powers of the

State Legislature in connection with legislations dealing

with trade and commerce in, and the production, supply and

distribution of, goods. Once we turn to Entry 33 of the

Concurrent List, we find that on the topic of trade and

commerce in, and the production, supply and distribution of,

goods enumerated therein at sub-clause (b), we find listed

items of foodstuffs, including edible oilseeds and oils.

Thus to the extent to which the Market Act seeks to regulate

the transactions of sale and purchase of sugarcane and sugar

which are foodstuffs and trade and commerce therein, it has

to be held that the Market Act being enacted under the

topics of legislative powers under Entries 26, 27 and 28 of

List II will be subject to any other legislation under Entry

33 of the Concurrent List. As it will be seen hereinafter,

the Bihar Legislature itself has enacted the Sugarcane Act

in exercise of its legislative powers under Entry 33 of the

Concurrent List and, therefore, the field covered by the

Sugarcane Act would obviously remain exclusively governed by

the Sugarcane Act and to the extent the latter Act carves

out an independent field for its operation, the sweep of the

general field covered by the Market Act which covers all

types of agricultural produce, would pro tanto get excluded

qua sugarcane and the products prepared out of it. So far

as the Market Act is concerned, it is necessary to note that

it is an Act to provide for better regulation of buying and

selling of agricultural produce and the establishment of

markets for agricultural produce in the State of Bihar and

for matters connected therewith. The said Act is enacted

essentially to protect the growers of agricultural produce

in the State who on account of their ignorance, illiteracy

and lack of collective bargaining power may get exploited by

middlemen and economically strong purchasers of their

agricultural produce with the result that the agriculturists

may not get adequate price for their produce. It is with

that end in view that the Market Act has been enacted. The

constitutional validity of the Madras Commercial Crops

Markets Act, concerned with the regulation of purchase and

sale of commercial crops grown by agriculturists was

considered by a Constitution Bench of this Court in the case

of M.C.V.S. Arunachala Nadar Etc. vs. The State of Madras

& Others [(1959) Supp.(1) SCR 92]. Subba Rao J., speaking

for the Court while upholding the constitutional validity of

the said Act emphasised the necessity of such enactment with

a view to protect the producers of commercial crops from

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 59

being exploited by the middlemen and profiteers and to

enable them to secure a fair return for their produce. The

learned Judge referred to, with approval, the following

recommendations of Royal Commission on Agriculture in India

appointed in 1928. That cultivator suffers from many

handicaps : to begin with he is illiterate and in general

ignorant of prevailing prices in the markets, especially in

regard to commercial crops. The most hopeful solution of

the cultivators marketing difficulties seems to lie in the

improvement of communications and the establishment of

regulated markets and we recommend for the consideration of

other Provinces the establishment of regulated markets on

the Berar system as modified by the Bombay legislation. The

establishment of regulated markets must form an essential

part of any ordered plan of agricultural development in this

country. The Bombay Act is, however, definitely limited to

cotton markets and the bulk of the transactions in Berar

market is also in that crop. We consider that the system

can conveniently be extended to other crops and, with a view

to avoiding difficulties, would suggest that regulated

markets should only be established under Provincial

legislation.

Reference was also made to the Report of an Expert

Committee appointed by the Government of Madras which

graphically described the difficulties of the cultivators

and their dependence upon the middlemen. The following is

the extract from the Report of the Expert Committee as noted

by Subba Rao J., for highlighting the need for regulated

markets for cultivators of commercial crops. The middleman

plays a prominent part in sale transactions and his terms

and methods vary according to the nature of the crop and the

status of the cultivator. The rich ryot who is unencumbered

by debt and who has comparatively large stocks to dispose

of, brings his produce to the taluk or district centre and

entrusts it to a commission agent for sale. If it is not

sold on the day on which it is brought, it is stored in the

commission agents godown at the cultivators expense and as

the latter generally cannot afford to wait about until the

sale is effected he leaves his produce to be sold by the

commission agent at the best possible price, and it is

doubtful whether eventually he receives the best price. The

middle class ryot invariably disposes of his produce through

the same agency but, unlike the rich ryot he is not free to

choose his commission agent, because he generally takes

advances from a particular commission agent on the condition

that he will hand over his produce to him for sale. Not

only, therefore, he places himself in a position where he

cannot dictate and insist on the sale being effected for the

highest price but he loses by being compelled to pay heavy

interest on the advance taken from the commission agent.

His relations with middlemen are more akin to those between

a creditor and a debtor, than of a selling agent and

producer. In almost all cases of the poor ryots, the major

portion of their produce finds its way into the hands of the

village money-lender and whatever remains is sold to petty

traders who tour the villages and the price at which it

changes hands is governed not so much by the market rates,

but by the urgent needs of the ryot which are generally

taken advantage of by the purchaser. The dominating

position which the middleman occupies and his methods of

sale and the terms of his dealings have long ago been

realized.

Relying on the aforesaid observations Subba Rao J.,

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 59

speaking for the Constitution Bench, justified the need for

such legislations and upheld the Act by laying down as under

: The aforesaid observations describe the pitiable

dependence of the middle-class and poor ryots on the

middlemen and petty traders, with the result that the

cultivators are not able to find markets for their produce

wherein they can expect reasonable price for them. With a

view to provide satisfactory conditions for the growers of

commercial crops to sell their produce on equal terms and at

reasonable prices, the Act was passed on July 25, 1933. The

preamble introduces the Act with the recital that it is

expedient to provide for the better regulation of the buying

and selling of commercial crops in the Presidency of Madras

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 meet on

equal terms, thereby eradicating or at any rate reducing the

scope for exploitation in dealings. Such a statute cannot

be said to create unreasonable restrictions on the citizens

right to do business unless it is clearly established that

the provisions are too drastic, unnecessarily harsh and

overreach the scope of the object to achieve which it is

enacted.

It, therefore, cannot be gainsaid that the need to

have a regulated market where the agriculturist who grows

sugarcane as a commercial crop can be assured of adequate

price of the sugarcane produced by him and may not be

exploited by middlemen, would justify the enactment of the

protective umbrella of the Market Act. However, if the Act

had stood by itself, no legitimate grievance could have been

made by anyone on this score. But so far as the facts of

the present cases are concerned, the very same Bihar

Legislature enacted the Sugarcane Act of 1981 which has

operated simultaneously with the Market Act for the entire

State. The said latter Act is obviously enacted by the very

same legislature in exercise of its legislative powers under

Entry 33 of the Concurrent List. It is, of course, true

that the Union Parliament has not passed any similar

legislation in exercise of its concurrent legislative power

under the very same Entry 33 of List III. We will,

therefore, have to see to what extent the Sugarcane Act,

which is a latter Act, has carved out a field for itself for

protecting the sugarcane growers resulting in withdrawing

the same subject matter from the general sweep of the Market

Act which covers not only sugarcane but also number of other

agricultural produce. In this connection, Section 3 of the

Market Act requires to be noted. It reads as under : 3.

Notification of intention of exercising control over

purchase, sale, storage and processing of agricultural

produce in specified area -

[(1) Notwithstanding anything to the contrary

contained in any other Act for the time being in force, the

State Government may, by notification, declare its intention

of regulating the purchase, sale, storage and processing of

such agricultural produce and in such area, as may be

specified in the notification.]

(2) A notification under sub-section (1) shall state

that any objection or suggestion which may be received by

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 59

the State Government within a period of not less than two

months to be specified in the notification, shall be

considered by the State Government.

As per the aforesaid provisions, it has to be kept in

view by the State Government concerned while forming the

requisite intention whether there is any special legislation

of the same State Legislature holding the field and serving

the very same purpose of regulating such transactions. Mr.

Shanti Bhushan, learned senior counsel for the appellant,

vehemently contended that the Bihar Legislature itself had

enacted the Sugarcane Act of 1981 whereunder adequate

provision was made for regulating the purchase, sale,

storage and processing of sugarcane. The complete machinery

was provided thereunder for protecting the sugarcane growers

and, therefore, there was no occasion for the State of Bihar

to continue the regulation of purchase and sale transactions

of sugarcane atleast after 1981 as per Section 3(1) of the

Market Act. The preamble of the Sugarcane Act shows that

amongst others it is enacted to regulate the production,

supply and distribution of sugarcane intended for use in

sugar factories and taxation of sugarcane and matters

incidental thereto. Chapter II of the Sugarcane Act

provides for Administrative Machinery for carrying out the

purposes of the Act. Section 3 thereof deals with

Establishment of Sugarcane Board. Section 4 lays down the

Functions of the Board - (1) The Board shall advise the

State Government on the following matters, namely :-

(a) planning of development schemes connected with

production, research, transport and sale of sugarcane;

(b) matters pertaining to regulation of supply,

purchase and weighment of cane;

(c) the varieties of sugarcane, tested by the

Sugarcane Research Institute in the State, which are

suitable or unsuitable for use in a factory;

(d) recommendations in respect of the price of cane to

be supplied to factories;

(e) determination of the price of cane payable by

owners of units;

(f) maintenance of healthy relations between the

occupiers and managers of factories on the one hand and the

cane-growers and co-operative societies on the other; and

(g) such other matters as may be prescribed.

Section 7 deals with Establishment of Zonal

Development Council working of which can be supervised by

the Board. The Collector of the District or the

Sub-divisional Officer is to be the Chairman of the Zonal

Development Council and is to be assisted by various persons

as provided by Section 7. Section 8 deals with Functions of

the Council - The functions of the Council shall be as

follows :(a) to consider and prepare the programme for the

development of communications, irrigations, soil analysis

and other agricultural facilities relating to sugarcane;

(b) to devise ways and means for executing development

plan in all its essential including improvement and

development of communications, cane varieties, supply of

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 59

good quality seeds, fertilisers and manures, plant

protection and prevention and control of diseases and pests;

(c) to render all possible help in agricultural

extension work of cane;

(d) to assist in arrangements for the training of

cultivators in improved methods of sugarcane cultivation;

and

(e) to perform such other functions pertaining and

conducive to the general development of the reserved area as

may be prescribed.

Section 12 deals with Appointment of Cane

Commissioner. It reads as under :- (1) The State

Government may, by notification in the official Gazette,

appoint any person to be the Cane Commissioner for the State

of Bihar and to exercise the powers and perform the duties

conferred and imposed on the Cane Commissioner by or under

this Act.

(2) The State Government may, by notification in the

official Gazette, appoint such persons as it thinks fit to

be the Additional Cane Commissioner, Joint Cane

Commissioner, Deputy Cane Commissioner and Assistant Cane

Commissioner to assist the Cane Commissioner within such

local limits as may be assigned to them and confer and

impose upon them all or any of the powers and duties of the

Cane Commissioner within their respective jurisdiction.

Section 13 deals with Appointment of Cane Officer.

Then comes Chapter IV which deals with Purchase and Supply

of Cane to sugar factories. Section 25 deals with

Appointment of Manager and provides as under :- (1) Within

thirty days of the commencement of this Act and thereafter

within the same period before the commencement of every

crushing year the occupier of a factory shall send to the

Collector a notice of appointment of any person as manager

for the purposes of this Act or the rules :

Provided that until the first notice of appointment of

manager under this Act is sent, the person appointed or

deemed to be appointed as manager under the Bihar Sugarcane

(Regulation of Supply and Purchase) Ordinance, 1973 (Bihar

Ordinance 47 of 1973) shall be deemed to be a manager under

this Act.

(2) No person shall be deemed to have been appointed

as manager until a sum of two thousand and five hundred

rupees is deposited by him or on his behalf as security,

with the Collector concerned in the prescribed manner.

(3) Whenever a new manager is appointed, the occupier

of the factory shall send to the Collector a written notice

of the change within fifteen days of the date on which the

new manager assumes charge of his work.

(4) During any period for which provisions of

sub-sections (1) and (2) are not complied with or the person

appointed as manager does not manage the factory, or his

security money is not replenished to the extent of its

forfeiture under sub-section (2) of section 57, the occupier

of the factory himself shall be deemed to be the manager of

the factory for the purposes of this Act and the rules.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 59

Section 27 deals with Estimate of quantity of cane

required by factory and lays down as follows:- (1) The

occupier of every factory shall submit to the Cane

Commissioner, on or before the prescribed date, in every

crushing year, an estimate, in the prescribed manner, of the

quantity of cane which may be required in the factory during

such crushing year.

(2) The Cane Commissioner shall examine every estimate

submitted under sub-section (1) and where the occupier of a

factory has failed to submit an estimate under subsection

(1), he shall draw up an estimate by himself in the

prescribed manner and shall publish the same in such manner

as may be prescribed with such modifications, if any, as he

may think fit, after consultation with the council

concerned.

(3) The prescribed authority may, either suo motu or

on an application made to it by the occupier of the factory,

within thirty days of the publication of the estimate under

sub-section (2), revise the estimate, published under that

sub-section and that authority shall cause the estimate so

revised to be published in the prescribed manner.

Section 28 deals with Conditions precedent to

commencement of purchase of cane. It states as under :(1)

The occupier of a factory or any person acting on his behalf

shall not commence the purchase of cane unless adequate

arrangements, as may be prescribed, have been made in

respect of the following matters, namely :-

(a) weighment of cane to be purchased; (b) payment of

the price of cane purchased; (c) parking of cane-carts;

(d) approach roads to the place of weighment; and (e)

distribution of requisition slips.

(2) Where survey has not been made under section 34,

the occupier of the factory shall, before the commencement

of purchase of cane, have the survey of the standing

cane-crop made as the prescribed manner.

Then follows Section 29 which deals with Establishment

of purchasing centres. It reads as under :- (1) The

occupier of a factory, or the Secretary of a Cooperative

Society may establish a purchasing centre after giving a

notice in writing to the Collector at least thirty days

before the commencement of purchase of cane and copies of

such notice shall be sent by the occupier of the factory or

the Secretary of the Society forthwith to the Cane Officer

concerned and the Cane Commissioner .

The remaining sub-sections of Section 29 lay down the

procedure under which the Collector can direct shifting of

the location of any purchasing centre to another place and

also the power of the prescribed authority to revise the

order of the Collector. Section 31 deals with Declaration

of reserved area and provides as follows :(1) The Cane

Commissioner may, having regard to the crushing capacity of

the factory, the availability of sugarcane in such area and

the need for production of sugar and after consulting the

council concerned and the occupier of the factory or the

occupiers of other affected factories and after considering

any objection that may be raised, issue an order, by

notification in the official Gazette, declaring any area to

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 12 of 59

be the reserved area for the purpose of supply of cane to

the factory during a particular crushing year or years and

may likewise cancel any such order or alter the extent of

the area so reserved :

Section 32 deals with Purchase of cane grown in a

reserved area. Sub-section (6) thereof reads as follows

Except with the permission of the State Government, cane

grown in a reserved area shall not be sold to or purchased

by -

(i) the occupier of any factory other than the factory

for which the area is reserved; or

(ii) any person for the purpose of supply to any

factory other than the factory for which the area is

reserved; or

(iii) the owner of a unit to whom a licence has not

been granted under section 16.

Sub-section (9) of Section 32 reads as follows :-

Subject to the provisions of sub-section (1), the State

Government may prohibit or restrict or otherwise regulate

the movement of sugarcane from any reserved area except

under and in accordance with a permit issued by it in this

behalf.

Section 39 deals with Recording of correct weight of

cane and reads as under :- (1) The occupier of every

factory, the owner of every unit, Secretary of every

Co-operative Society and every person in charge of

weighmens shall maintain, subject to such limits of error

as is prescribed by the State Government under the law

relating to weights and measures, for the time being in

force, a record of the correct weight of cane purchased at

the place of weighment.

(2) No cane shall be purchased without being weighed.

Section 40 deals with Provisions for approach roads

etc., at the purchasing centres and reads as under :The

occupier of a factory or a co-operative society purchasing

cane at any purchasing centre shall make such provisions for

the following and keep them in such repairs as may be

prescribed, namely :-

(a) approach road and parking space for animal-driven

carts;

(b) sheds for animals and cart-drivers;

(c) drinking water for persons using the purchasing

centre; and

(d) drinking water and water-trough for animals.

Then follows Chapter V which deals with Payment of

price of cane and other matters. Section 42 deals with

minimum price of cane supplied to a unit and reads as under

:The State Government may, after consulting the Board,

determine by notification in the official Gazette, in

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 13 of 59

respect of any area the minimum price of cane payable by the

owners of units to the cane-growers or co-operative

societies for cane supplied to them in the crushing year

concerned :

Provided that the minimum price so determined shall

not exceed the minimum price payable by the occupier of a

factory under any law for the time being in force, in

respect of the cane supplied from the same area.

Mode of payment of price of cane to the sugarcane

growers is provided by Section 43. Section 44 deals with

Deduction and provides as follows :(1) The occupier of a

factory or any person on his behalf shall not make any other

deductions from the price of cane except the deduction on

account of any loan advanced by him, or on his guarantee or

otherwise advanced by a bank or other institutions under

section 50(1).

The remaining sub-sections of Section 44 deal with the

circumstances under which any person in charge of payment of

price of cane on behalf of a co-operative society cannot

make deductions from the price of cane as fixed. Section 46

deals with Decision of certain disputes and

reads as under :-

(1) If any dispute arises regarding the price of cane

supplied to the occupier of a factory the person entitled to

the price or the document on the basis of which the price is

claimed, payment of the price shall be withheld and the

occupier of the factory to which the cane was supplied shall

enter the dispute in a register in the prescribed form and

refer it within the prescribed period to the prescribed

authority who shall, after giving the parties a reasonable

opportunity of being heard and after such inquiry as he may

consider necessary, decide the dispute :

Provided that whenever the payment of the price is

whether held under this sub-section, the occupier of the

factory shall deposit with the prescribed authority in the

prescribed manner the amount in dispute, within one week of

such reference.

(2) Any other dispute touching an agreement for

purchase of cane by the occupier of a factory or its supply

to him and any dispute relating to purchase of cane or

cane-juice by the owner of a unit and payment of price

thereof shall be referred to the authority prescribed under

sub-section (1) who shall decide it in the manner laid down

in that subsection.

Xxxx xxxx xxxx

(3) Any person aggrieved by a decision made under

subsection (1) or sub-section (2) may, within thirty days of

the decision, prefer an appeal to the Collector who shall,

after giving the parties a reasonable opportunity of being

heard and after such inquiry as he may consider necessary,

pass such order, as he thinks fit.

(4) An order of the Collector under sub-section (3)

and subject to such order, the decision of the prescribed

authority under sub-sections (1) or sub-section (2) shall be

final.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 14 of 59

Section 48 deals with Payment of commission on

purchase of cane and reads as follows :(1) The State

Government may, by notification in the official Gazette,

require the occupier of a factory to pay in the prescribed

manner a commission not exceeding fifteen paise per quintal

on the purchase of cane made by him or on his behalf and

may, by a like notification exempt the occupier of any new

factory to be specified in the notification, from the

payment of such commission for prescribed period.

Section 49 imposes Tax on Sugarcane which reads as

follows :(1) The State Government may, by notification in

the official Gazette, impose -

(a) a tax not exceeding one rupee per quintal on entry

of sugarcane into a local area specified in such

notification, for consumption or use of, or sale to a

factory situated therein :

(b) a tax not exceeding one rupee per quintal on the

purchase of sugarcane by or on behalf of the occupier of a

factory :

Section 50 deals with Advance of loan by occupier of

factory and lays down as follows :(1) The occupier of a

factory or any person working on his behalf or any bank may

advance loan to a cane-grower or a Co-operative Society for

such purposes connected with cultivation or supply of cane

to the extent of the amount and in the manner as may be

prescribed.

(2) Interest at the rate specified in section 51 shall

be payable on the loan advanced under sub-section (1) and

the loan and the interest shall be realisable in the

prescribed manner.

Chapter VI deals with miscellaneous items. Section 52

of the said chapter deals with penalty for offences and

provides as follows :If any person contravenes or attempts

to contravene or abets the contravention of any of the

provisions of this Act or the rules or of any order made or

direction given thereunder or the terms and conditions of

any licence, he shall be punishable with imprisonment which

may extend to six months or with fine which may extend to

five thousand rupees or with both and in the case of a

continuing contravention, with an additional fine which may

extend to one thousand rupees for every day during which

such contravention continues after conviction for the first

contravention :

Section 58 deals with the power to summon and enforce

attendance of witnesses and production of documents and

provides as under :For the purposes of enquiries under this

Act the Cane Commissioner or any person exercising the

powers of the Cane Commissioner or a Cane Officer or an

Officer appointed under section 34 shall have the same

powers to summon and enforce the attendance of witnesses and

parties and to examine them on oath and to compel the

production of document as a civil court under the Code of

Civil Procedure, 1908 (5 of 1908) :

Provided that for the purpose of any penalty under the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 15 of 59

provision of the said Code upon any defaulter, a reference

shall be made to the civil court of competent jurisdiction

for appropriate action.

The aforesaid provisions of the Sugarcane Act leave no

room for doubt that the Bihar Legislature in its wisdom has

enacted a special machinery for regulating the purchase and

sale of sugarcane to be supplied to sugar factories for

manufacturing sugar out of the sugarcane produced for them

in the reserved area. The relevant provisions of the Act

project a well knit and exhaustive machinery for regulating

the production, purchase and sale of sugarcane for being

supplied as appropriate raw material to the factories

manufacturing sugar and molasses out of them. We may also

turn to Rule 22 of the 1978 Rules, made under the Bihar

Sugarcane Act, which provides that the factory shall not

commence the purchase of cane at any purchasing centre

unless (a) all the weighbridges to be used for weighment of

cane have duly been checked and certified as workable by the

competent authority under the law relating to weights and

measures;

(b) appropriate arrangements to the satisfaction of

the Collector have been made for arranging funds for making

payment of the price of cane;

(c) Cane Officer of the area concerned has certified

that suitable arrangements for parking of cane carts and

approach roads, as specified in rule 30 and for distribution

of requisition slips and identification cards have been

made; and

(d) adequate arrangements for weighment, adequate

staff, sufficient number of weighbridges and adequate means

of transport for carrying cane from all outlying purchasing

centres to the factory, to the satisfaction of the

Collector, have been made.

Rule 30 requires the sugar factory to : (a) provide

at every purchasing centre suitable approach roads

connecting the nearest public roads with the parking ground

and likewise suitable tracks from the parking ground to the

point where cane is unloaded after weighment;

(b) keep such roads and tracks repaired and

satisfactorily workable at all times the purchasing centre

is in operation;

(c) provide space in the parking ground for

accommodating at least one-fourth of the maximum number of

animal-driven carts carrying cane required to be brought to

the purchasing centre on any day for weighment and purchase;

(d) keep the metalled tracks neat and clean and

separated by railing or trenches;

(e) provide shelters for animals and cart-drivers at

every purchasing centre, to the satisfaction of the

Collector;

(f) provide at least four water taps or hand pumps at

convenient points of each purchasing centre located at or

adjoining factory premises (referred to hereinafter as mill

gate purchasing centre) and one such water tap or hand pump

at every purchasing centre other than the mill gate

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 16 of 59

purchasing centre (referred hereinafter as the outstation

purchasing centre),

(g) provide adequate number of water troughs in each

parking yard to be located at such points as may be

determined by the Cane Officer concerned, and;

(h) provide such other facilities at any purchasing

centre as may be specified in the directions of the Cane

Commissioner issued from time to time.

The aforesaid provisions, therefore, clearly indicate

that the need for regulating the purchase, sale, storage and

processing of sugarcane, being an agricultural produce, is

completely met by the comprehensive machinery provided by

the Sugarcane Act enacted by the very same legislature which

enacted the general Act being the Market Act. Once that

conclusion is reached, it becomes obvious that the Market

Act which is an enabling Act empowering the State

Authorities to extend the regulatory net of the said Act to

notified agricultural produce as per Section 3(1) will get

its general sweep curtailed to the extent the special Act

being the Sugarcane Act enacted by the very same legislature

carves out a special field and provides special machinery

for regulating the purchase and sale of the specified

agricultural produce, namely, sugarcane. It has also to

be kept in view that the very heart of the Market Act is

Section 15 of the Act which reads as under : [15. Sale of

agricultural produce - (1) No agricultural produce specified

in notification under sub-section (1) of section 4, shall be

made bought or sold by any person at any place within the

market area other than the relevant principal market yard or

sub-market yard or yards established therein, except such

quantity as may on this behalf be prescribed for retail sale

or personal consumption.

(2) The sale and purchase of such agricultural produce

in such areas shall not withstanding anything contained in

any law be made by means of open auction or tender system

except in cases of such class or description of produce as

may be exempted by the Board.]

It is this section which enables the market committee

concerned to monitor and regulate the sale and purchase of

the agricultural commodity which is covered by the

protective umbrella of the Act. Once such an agricultural

produce is brought for sale in the market yard or sub-market

yard, the sale is to be effected by auction or by inviting

tenders. Such a scheme is in direct conflict with the

scheme of the Sugarcane Act wherein there is no question of

sugar factory being called upon to enter into a public

auction for purchasing sugarcane which is specially

earmarked for it out of the reserved area. In fact,

provisions of the Sugarcane Act and the provisions of the

Market Act, especially Section 15 read with Section 3(1),

cannot harmoniously co-exist. It is precisely to avoid such

a possible conflict and head-on collision between general

Act, namely, the Market Act and the special Act, namely, the

Sugarcane Act which was later on enacted in 1981 by the very

same Bihar Legislature, that the State Government in

exercise of its exemption power under Section 42 of the

Market Act issued a notification dated 22nd March, 1976 to

the following effect: S.O. 550 the 22nd March, 1976

(Published in Bihar Gazette (ex-order) dated 23-3-1976) .-

In exercise of the powers conferred under Section 42 of the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 17 of 59

Bihar Agricultural Produce Markets Act, 1960, the Governor

of Bihar is pleased to exempt all sugar mills from the

provisions of Section 15 of the Bihar Agricultural Produce

Markets Act, 1960 with regard to their sale and purchase of

agricultural produce notified under sub-section (1) of

Section 4 of the said Act)

This very notification shows that the State Government

had given up its erstwhile intention of regulating the sale

and purchase of sugarcane as per Section 3(1) of the Market

Act which could not survive any further after the issuance

of the aforesaid exemption notification. It is easy to

visualise that the market committee can control purchase,

sale, storage and processing of agricultural produce in the

specified area under the Market Act only when the sale and

purchase of agricultural produce can be effected as per

Section 15 in the principal market yard or sub-market yard.

Market is defined by Section 2(1)(h) of the Market Act which

reads as under : market means a market established under

this Act for the market area and includes, a principal

market yard and sub-market yard or yards, if any.

It is at such market yard that the regulation of sale

and purchase of agricultural produce shall be effected as

required by Section 15. Once Section 15 is out of picture,

the mere declaration of market area as per Section 4 and the

general declaration of intention to regulate purchase, sale,

storage and processing of agricultural produce like

sugarcane as per Section 3 of the Market Act or declaration

of market yard or sub-market yards as per Section 5 would

remain an empty formality or would represent an empty

eggshell with its contents taken out. The entire machinery

of the Market Act would be rendered redundant qua

agricultural produce to which Section 15 does not apply.

Section 15 is the heart and soul of the Act. Due to its

inapplicability to a given agricultural produce there would

remain no occasion for the market committee concerned to

exercise its regulatory functions for such a produce. This

is the precise result which has ensued regarding regulation

of purchase and sale of sugarcane by the market committee

concerned in view of the combined operation of the relevant

provisions of the Sugarcane Act and the exemption

notification under Section 42 of the Market Act excluding

the application of Section 15 of the Market Act to the sale

and purchase transactions of sugarcane in the market area.

It is not possible to agree with learned senior counsel for

the respondents that notification under Section 42 of the

Act in substance excludes only the applicability of Section

15(2). On the express wordings of the said notification it

is not possible to countenance this contention. Even if

declaration under Section 5 treating the premises of the

sugar factories and the purchase centres from which they

have to purchase sugarcane as per the Sugarcane Act is to be

held to be operative, such a declaration would be devoid of

any efficacy under the Market Act as the very purpose of the

declaration of such market yard would not get fructified

once sugarcane will not be required to be brought for

purchase and sale in such declared market yard. It has to

be kept in view that the relevant provisions of the Market

Act laying down the machinery for effecting the regulation

of purchase, sale, storage and processing of agricultural

produce cannot be of any avail once purchase and sale of

such an agricultural produce are not required to be effected

at the relevant market yard and have not to be subjected to

open auction or tender for fixing proper prices for such

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 18 of 59

agricultural produce to be paid to the growers of such

produce. It must, therefore, be held that the entire

machinery of the Market Act cannot apply to the transactions

of purchase of sugarcane by the appellant sugar factories as

they are fully covered by the special provisions of the

Sugarcane Act. It is also necessary to note that if both

these Acts are treated to be simultaneously applying to

cover sale and purchase of sugarcane, the possibility of a

clear conflict of decisions of Officers and Authorities

acting under the Sugarcane Act on the one hand and the

Market Act on the other would arise. These authorities

acting under both the State Acts, dealing with the same

subject-matter and covering the same transactions may come

to independent diverse conclusions and none of them being

subordinate to the other may create a situation wherein

there may be head-on collision between the decisions and the

orders of these authorities acting on their own in the

hierarchy of the respective statutory provisions. For

example, the Marketing Inspector may find that weighment of

sugarcane was not proper at a given point of time, while the

Cane Officer may find to the contrary. In the hierarchy of

proceedings under the Market Act the market committee may

take one decision with respect to the same subject matter,

for which the Collector exercising appellate powers under

the Sugarcane Act may take a contrary decision. This would

create an irreconcilable conflict of decisions with

consequential confusion. So far as the buyers and sellers

of agricultural produce-sugarcane are concerned, it is of

no avail to contend as submitted by learned counsel for the

respondents that for avoiding such conflicts, Section 15 is

dispensed with by the State in exercise of its power under

Section 42 of the Market Act, whether such an exemption can

be granted by the State under Section 42 or not is not a

relevant consideration for deciding the moot question

whether the statutory scheme of the Market Act can

harmoniously co-exist with the statutory scheme of the

Sugarcane Act as enacted by the very same legislature. It

is possible to visualise that the State Authorities may not

exercise powers under Section 42 of the Act. In such an

eventuality, the Sugarcane Act would not countenance a

public auction of sugarcane to be supplied by cane grower to

the earmarked factory for which sugarcane is grown in the

reserved area. On the other hand, the Market Act would

require the very same sugarcane to be brought to the market

yard for being sold at the public auction to the highest

bidder who may not be the sugar factory itself. Thus what

is reserved for the sugar factory by way of raw material by

the Sugarcane Act would get de-reserved by the sweep of

Section 15 of the Market Act. To avoid such a head-on

conflict, it has to be held that the Market Act is a general

Act covering all types of agricultural produce listed in the

Schedule to the Act, but out of the listed items if any of

the agricultural produce like sugarcane is made

subject-matter of a special enactment laying down an

independent exclusive machinery for regulating sale,

purchase and storage of such a commodity under a special

Act, then the special Act would prevail over the general Act

for that commodity and by necessary implication will take

the said commodity out of the sweep of the general Act.

Therefore, learned counsel for the appellants are right when

they submit that because of the Sugarcane Act the regulation

of sale and purchase of sugarcane has to be carried out

exclusively under the Sugarcane Act and the said

transactions would be out of the general sweep of the Market

Act. None of its machinery would be available to regulate

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 19 of 59

these transactions. But even apart from the provisions of

the Sugarcane Act, learned senior counsel for the appellants

also placed reliance on the Sugarcane (Control) Order, 1966

enacted under the provisions of Section 3 of the Essential

Commodities Act, 1955 for submitting that purchase and sale

of sugarcane is also controlled by the aforesaid Central

Government Order issued under the Essential Commodities Act,

and consequently the said provision would supersede the

general provisions of the Market Act. We, therefore, now

proceed to consider this submission. Sugarcane (Control)

Order, 1966 is issued by the Central Government in exercise

of powers conferred by Section 3 of the Essential

Commodities Act, 1955. Clause 2 sub-clause (c) defines

factory and reads as under : factory means any premises

including the precincts thereto in any part of which sugar

is manufactured by vacuum pan process.

Price is defined by sub-clause (g) thereof which reads

as under : price means the price or the minimum price

fixed by the Central Government from time to time for

sugarcane delivered

Clause 3 of the Order deals with the fixation of

minimum price by the Central Government for making it

payable by purchaser of sugar to the sugarcane growers.

Clause 3A deals with rebate that can be deducted by

purchaser of sugar from the price to be paid to the

sugarcane grower or the sugarcane growers co-operative

society. Rebate provided therein pertains to the minimum

price of sugarcane fixed under Clause 3, or the price agreed

to between the producer or his agent and the sugarcane

grower or the sugarcane growers co-operative society.

There is a provision for additional price to be paid to the

sugarcane grower by the purchaser of sugarcane as laid down

in Clause 5. Clause 5-A deals with additional price for

sugarcane purchased on or after 1st October, 1974 by the

producer of sugar. Clause 6 deals with power of the Central

Government by Order to regulate distribution and movement of

sugarcane. As per this clause the Central Government can,

by order, direct the sugarcane growers to supply the

earmarked quantity of sugarcane grown by them in the

reserved area fixed for sugar factories to ensure continuous

supply of sugarcane as raw material to such factories. This

provision is parallel to the statutory provisions enacted by

the Bihar Legislature in the Sugarcane Act referred to

earlier by us. Clause 9 refers to the power of the Central

Government or any person authorised in this behalf to call

for information from various sources as enacted therein.

Clause 9-A deals with the power of entry, search and seizure

of premises which obviously has to be exercised for

fructifying the purposes of the Act. Clause 11 deals with

delegation of powers by the Central Government to any

officer or authority thereof or to any State Government or

any officer/authority of a State Government. The aforesaid

relevant provisions of the Sugarcane (Control) Order show

that it seeks to lay down the minimum guaranteed price of

sugarcane to the sugarcane growers with a corresponding

obligation on them to supply sugarcane to the earmarked

factories for which the reserved areas can be fixed. This

Order also contemplates negotiated price between the

sugarcane growers on the one hand and the sugarcane

factories on the other, for whom fixed quota of sugarcane

can be earmarked. It has to be appreciated that the

aforesaid provisions of the Sugarcane (Control) Order

operate in the same field in which the Bihar Legislative

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 20 of 59

enactment, namely, the Sugarcane Act operates and both of

them are complementary to each other. When taken together,

they wholly occupy the field of regulation of price of

sugarcane and also the mode and manner in which sugarcane

has to be supplied and distributed to the earmarked sugar

factories and thus lay down a comprehensive scheme of

regulating purchase and sale of sugarcane to be supplied by

sugarcane growers to the earmarked sugar factories. It is,

however, true that comprehensive procedure or machinery for

enforcing these provisions is found in greater detail in the

Sugarcane Act of the Bihar Legislation. But on a combined

operation of both these provisions, it becomes at once clear

that the general provisions of the Market Act so far as the

regulation of sale and purchase of sugarcane is concerned

get obviously excluded and superseded by these special

provisions. In this connection, we may refer to a decision

of the Karnataka High Court in the case of Vasavi Traders

vs. State of Karnataka & Ors. (1982 (2) Karnataka Law

Journal 357). In that case Venkatachaliah J., (as he then

was) speaking for a Division Bench of the Karnataka High

Court, considered the impact of Sugarcane (Control) Order on

the general sweep of the Karnataka Agricultural Produce

Market (Regulation) Act, 1966. Point no. 3 was framed in

this connection, which reads as under : Whether the Act

as amended by Act 17 of 1980 in so far it provides for

regulation of marketing of sugarcane is unconstitutional, as

its marketing is regulated by the provisions of the Central

Act, viz., The Essential Commodities Act, 1955, and the

Sugarcane (Control) Order made thereunder?

While answering point no.3 in affirmative, the learned

Judge at para 39 of the report, made the following pertinent

observations : .. It appears to us that the Sugarcane

(Control) Order regulates every aspect of marketing of

sugarcane and its provisions are irreconcilable with the

provisions relating to the marketing under the Act. For

instance, the place of delivery, the price, the manner of

its payments are all fixed by the statutory order. The same

aspects of marketing are sought to be regulated by the Act.

The two sets of provisions collide. S.6 of the Essential

Commodities Act gives overriding effect to the orders made

under S.3 of that Act as against any other Law. The small

portion of the sugarcane grown by the grower the sale of

which is left regulated under the statutory Order is again a

matter - and part - of the policy of the regulation itself.

Accordingly, point no.3 in that case was answered in

affirmative apart from the question of repugnancy which

strictly did not arise for their consideration. The

aforesaid reasoning of the learned Judges of the Karnataka

High Court clearly indicates that the entire field of

regulation of purchase and sale of sugarcane in the market

area is occupied by the Sugarcane Control Order. This

reasoning was left untouched by this Court in appeal against

the said decision and, therefore, got confirmed in the case

of I.T.C. Ltd. and Others vs. State of Karnataka and

Others (1985 (Suppl.) SCC 476). Learned senior counsel for

the respondents was right when he contended in the aforesaid

decision before this Court that the merits of the reasoning

which appealed to the High Court were not gone into as the

appeal arising from the judgment on this point was not

pressed. However, the fact remains that the aforesaid

reasoning of the Karnataka High Court remained untouched by

this Court, nor was it dissented from. The facts of the

present case project even a stronger situation, so far as

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 21 of 59

the appellants are concerned. Whatever shortfall is found

in the Sugar (Control) Order has been supplemented by the

Sugarcane Act by the Bihar legislation itself. Reasoning

which appealed to the Karnataka High Court in the above

judgment rendered in absence of a separate complementary

legislation by the Karnataka Legislature gets further

strengthened in the light of the Sugarcane Act in the

present case. Consequently on a conjoint reading of the

Sugarcane Order as well as the Sugarcane Act, an inevitable

conclusion has to be reached that the regulation of sale and

purchase of sugarcane in the entire market area for which

the general Act, namely, the Market Act is enacted, is fully

governed and highlighted by these two special provisions

harmoniously operating in the very same field. Therefore,

there would remain no occasion for the State Authorities to

rationalise and reasonably visualise any need for regulating

the purchase, sale as well as storage of sugarcane in the

market area concerned. The wide sweep of general

notification of Section 3 of the Market Act, therefore, will

have to be read down by excluding from its general sweep

sugarcane and its products as the definition of

agricultural produce as noted earlier would otherwise

include not only primary produce of agriculture but also any

other commodity processed or manufactured out of such

primary agricultural produce. That is precisely the reason

why the State of Bihar having realised the futility of the

need about controlling and regulating the sale and purchase

of sugarcane in the market area by the sugar factories

excluded the operation of Section 15 of the Act, which noted

earlier, is the soul of the Act. It is easy to visualise

that if transactions concerning an agricultural produce

are excluded from the operation of Section 15 of the Act,

the entire machinery available to the market committee to

regulate such transactions would get out of picture and

there would be no room for the market committee to supply

any infrastructural facility or other benefits to the seller

of such agricultural produce on the one hand and the

purchaser thereof on the other. Before parting with the

discussion on this point, it is necessary to note one

submission of learned senior counsel Shri Rakesh Dwivedi for

the respondents - State of Bihar. He submitted that the

legal proposition regarding special Act excluding the

operation of general Act can be invoked only when the

general Act irreconciliably derogates or conflicts with the

special Act while dealing with the same subject matter and

cannot be harmonised. He submitted that the broad objective

of the two enactments is different. The Sugarcane Act

purports to regulate production, supply and distribution of

sugarcane whereas the Market Act lays emphasis on regulating

the market. The subject matters are closely allied, but

nevertheless distinct. He placed reliance on two decisions

of this Court in support of his aforesaid contention. In

the case of Jugal Kishore vs. State of Maharashtra and

Others (1989 Suppl. (1) SCC 589), this Court was concerned

with the question whether the provisions regarding Ceiling

on Land as fixed by the Maharashtra Agricultural Lands

(Ceiling on Holdings) Act, 1961 could be reconciled and

could harmoniously co-exist with 1958 Act. In this

connection, Sabyasachi Mukharji J., speaking for the Court

made the following pertinent observations : Unless the

Acts, with the intention of implementing various

socio-economic plans, are read in such complementary manner,

the operation of the different Acts in the same filed would

create contradiction and would become impossible. It is,

therefore, necessary to take a constructive attitude in

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 22 of 59

interpreting provisions of these types and determine the

main aim of the particular Act in question for adjudication

before the court.

The aforesaid observations cannot be of any assistance

to learned senior counsel for the respondents as the schemes

of the relevant Acts to which we have made a detailed

reference contra-indicate the possibility of harmonious

operation of the Market Act on the one hand and the

Sugarcane Act and the Sugar (Control) Order on the other.

Shri Dwivedi tried to get out of this situation by

submitting that as there is already an exemption

notification under Section 42 of the Market Act, Section 15

will not be applicable to such transactions and, therefore,

it would remain governed by the provisions of the Sugarcane

Order and the Sugarcane Act. With respect, as seen earlier,

it is an over simplification of the situation. As a

question arises whether two legislations operating in the

same field can be reconciled or not, a mere possibility of

the provisions of one of the inconsistent enactments being

excluded by resorting to exemption power under another

enactment cannot cure the basic inconsistency between them.

It is obvious that such exemption power entrusted to its

delegate by its Legislature may or may not be utilised.

Consequently, a basic inconsistency between two legislative

enactment would remain operative dehors such exemption, if

any. Such conflicting statutory schemes in their operation

in the same field would directly collide. It may be that

the Market Act and the Sugarcane Act can both be treated as

dealing with socio-economic balancing of interests of

growers of agricultural produce and the purchasers thereof,

but if it is impossible to reconcile them, the statute

laying down the general scheme of operation has to make room

for a special statute for which a separate and exclusive

field is carved out by the legislature itself. Reliance

placed by Shri Dwivedi, senior counsel for the State of

Bihar, on a decision of the two judge Bench of this Court in

the case of S. Satyapal Reddy and Others vs. Govt. of

A.P. and Others (1994(4) SCC 391) for submitting that

minimum qualifications prescribed by the rules framed under

the Central Act could co-exist with higher qualifications

prescribed by the State rules also cannot be of real

assistance to him for the simple reason that if minimum

prices were fixed by the Sugarcane (Control) Order and the

Sugarcane Act had stopped short by providing only minimum

price and had not regulated the fixation of even higher

contractual price by providing for a machinery for the same

and had not fixed and regulated the production, control,

distribution, sale and purchase of sugarcane, it could have

been urged by counsel for the respondents with some emphasis

that both these statutory provisions could harmoniously

coexist but as discussed earlier such a possibility is not

only remote but incapable of visualisation. It is also not

possible to agree with the contention of learned senior

counsel Shri Dwivedi that the Sugarcane Act of 1981 does not

expressly purport to exclude the Market Act, especially when

the Bihar Legislature that had enacted the former Act was

aware of the Market Act, 1960 holding the field. That this

circumstance shows that the legislature purposely did not

exclude the applicability of the Market Act so far as the

purchase and sale of sugarcane in market areas were

concerned. However, this contention by itself cannot clinch

the issue. If the very same legislature had felt that

existing general Act was sufficient to foot the bill, then

there would have been remained no occasion for the very same

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 23 of 59

legislature to enact a special Act for control, regulation,

sale and purchase of sugarcane after passage of 21 years.

Therefore, the latter Act clearly envisaged carving out of a

special field for regulating the sale and purchase of

sugarcane and to that extent pro tanto it excluded the

operation of the Market Act for that commodity. The

intention of the legislature is thus very clear on this

aspect. But apart from that, intention of its delegate-the

State of Bihar itself is also clear when it excluded Section

15 of the Market Act in exercise of its exemption power

under Section 42 of the Market Act. It is difficult to

appreciate the contention of learned senior counsel that

Section 15 of the Market Act is not the core of the Act. On

a conjoint reading of Sections 3, 4, 15, 27 and 30 of the

Act it has to be held that it is only because of the

operation of Section 15 covering the sale and purchase

transactions of agricultural produce that the market

committee can effectively discharge its functions entrusted

to it by the Act. But for Section 15 there would remain no

occasion for the market committee to effectively regulate

the sale and purchase transactions of the agricultural

produce concerned. Section 15 mandates the sellers and

producers of agricultural produce to operate in the notified

market yard or sub-market yards and only at these places the

market committee through its officers and servants can

discharge its functions effectively by regulating these

transactions and for that purpose all the infrastructural

facilities would be available. The entire machinery

provisions enacted for the purpose would fulcrum round the

vibrant operation of Section 15. Once Section 15 is

excluded qua any agricultural produce the entire machinery

of the Market Act would come to a grinding halt so far as

such an excluded agricultural produce is concerned.

Sugarcane is one such produce as we have already seen

earlier. Consequently, qua such a produce the general sweep

of the Market Act will be a total non-starter. Logically,

therefore, there would remain no occasion for the market

committee to justify levy of market fee under Section 27 of

the Act read with Section 30 on these transactions. On a

conjoint reading of Sections 27 and 30 of the Market Act, it

becomes clear that a market committee which has to

effectively control and regulate the sale and purchase of

agricultural produce brought for sale and purchase in the

market area as enjoined by Section 15 can effectively

discharge its functions and spend its funds for supplying

the necessary infrastructure for this purpose as laid down

by Section 30. At this stage, we may also refer to an

additional submission of the Addl. Solicitor General of

India Shri R.N. Trivedi in support of the respondents. He

submitted that Entry 28 of List II of the Seventh Schedule

of the Constitution operates on its own and cannot be

affected by any legislation pertaining to industry as found

in Entry 52 of List I of Seventh Schedule of the

Constitution. To that extent the learned senior counsel is

right. However, as we have seen earlier, Entry 28 of List

II dealing with Markets and Fairs has to be read jointly

with Entries 26 and 27 dealing with Trade and Commerce and

once the State Legislation deals with these topics then it

also squarely invokes legislative powers under Entry 33 of

List III. That is precisely the entry under which the

Sugarcane Act, 1981 can be said to have been enacted. It

is, of course, true that the Union Parliament has not

exercised its concurrent legislative powers under Entry 33

of List III for regulating the sale and purchase of

sugarcane. But, as noted earlier, the Sugarcane (Control)

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 24 of 59

Order promulgated under the central legislation of the

Essential Commodities Act when read harmoniously and in

conjunction with the State Sugarcane Act carves out a

special field for their operation and by the sweep of their

combined operation the general provisions of the Market Act

pro tanto get excluded so far as the transactions of

purchase and sale of sugarcane in the market area are

concerned. 2. SALE OF SUGAR AND MOLASSES: So far as the

sale transactions pertaining to these commodities are

concerned, it has to be kept in view that they will have to

be treated as agricultural produce in the light of the

definition of Section 2(1)(a) of the Market Act. They get

manufactured from the basic agricultural produce, namely,

the sugarcane. However, the question remains whether their

sales are also controlled by the relevant special statutory

provisions. It will, therefore, be necessary for us to have

a look at these relevant special statutory provisions. In

this connection, our attention was invited to four Orders

framed under Section 3 of the Essential Commodities Act

pertaining to sugar : 1. Sugar (Control) Order, 1966; 2.

Sugar (Packing & Marking) Order, 1970; 3. Sugar

(Restriction on Movement) Order, 1970; 4. Levy Sugar

Supply (Control) Order, 1979. Clause 3 of the Sugar

(Control) Order, 1966 deals with regulation and production

of sugar which enables the Central Government to direct that

no sugar can be manufactured from sugarcane except and in

accordance with the conditions specified in a licence issued

in this behalf. Clause 4 thereof deals with permissible

directions to be issued by the Central Government to the

effect that no producer shall sell or agree to sell or

otherwise dispose of or deliver or agree to deliver any kind

of sugar or remove any kind of sugar from the bonded godowns

of the factory in which it is produced. Clause 5 enables

the Central Government to issue directions to producers and

dealers of sugar regarding the production, maintenance of

stock, storage, sale grading, packing, marking, weighment,

disposal, delivery and distribution of (any kind of sugar).

Clause 6 deals with the power of the Central Government to

regulate movement of sugar. Clause 7 deals with the power

to regulate quality of sugar. Clause 10 deals with the

power of the Central Government to call for requisite

information from different sources enacted therein. Clause

11 deals with the power of any officer authorised by the

Central Government to inspection, entry, search, sampling,

seizure, etc. as enacted therein. The Sugar (Packing and

Marking) Order, 1970 provides statutory directions as to the

quality of sugar to be packed in each bag. The Sugar

(Restriction on Movement) Order, 1970 deals with

restrictions on transport of certain types of sugar. The

Levy Sugar Supply (Control) Order, 1979 enables the Central

Government to issue directions to any producer or recognised

dealer to supply levy sugar of such type or grade to such

persons or organisation as may be enacted in the Order. The

aforesaid provisions of the various Orders issued under

Section 3 of the Essential Commodities Act clearly indicate

that all sale transactions of sugar by factories

manufacturing sugar out of the sugarcane, the basic

agricultural produce and raw material, are regulated by

these provisions. As noted earlier, Section 15 of the

Market Act is out of picture qua even these transactions.

The sale of sugar manufactured out of sugarcane and fixation

of price thereof would also, therefore, go out of the sweep

of Section 15(1) & (2) of the Market Act and would be

governed wholly by these special provisions of the Control

Orders. On the parity of reasons governing the transactions

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 25 of 59

of sale and purchase of sugarcane, transactions of sale of

sugar manufactured out of purchased sugarcane by the very

same sugar factories functioning in the market area would

also be governed by special provisions of the aforesaid

special Sugar (Control) Orders and would pro tanto get

excluded from the general sweep of the Market Act. In this

connection, we may also refer to the main contentions of

Shri Rakesh Dwivedi, learned Senior counsel for the State.

He submitted that the aforesaid various Control Orders

regulating sugar have been issued with the objective of

maintaining supply of sugar and ensuring availability of the

same. Not only the object is different, but in effect the

Control Orders regulate production of sugar, impose levy,

determine price of levy sugar, provide for packing in bags

in quantities of 100 kgs., provide for transport under a

permit issued by the Central Government/State Government

when sold under Section 3(2)(f) of Essential Commodities

Act, 1955 (levy sugar) and specifications of dealer for

supply of levy sugar. As far as free sugar is concerned,

only monthly quotas are fixed (see pages 44-46 of additional

documents). Thus, as far as free sale sugar is concerned,

the Central Government does not fix the price and does not

determine the person to whom it is to be sold or the manner

in which it is to be transported. The various provisions of

the Market Act for regulating sale, purchase and storage of

free sugar would, therefore, be available and the capacity

of market committee to regulate these transactions is not

affected by these Orders and to that extent there is no

repugnancy between them and the Market Act. It is not

possible to agree with this submission for the simple reason

that the provisions of Sugar (Control) Orders have not to be

read in isolation but will have to be read with the special

provisions controlling the production, sale and purchase of

sugarcane out of which sugar is manufactured by the very

same sugar factories functioning in the market area. They

are all integrated transactions and are subject to a well

knit statutory scheme of control of these commodities. It

is obvious that regulation of sugarcane supply and

distribution is not in isolation. The main purpose of such

regulation is for ensuring better quality and adequate

quantity of sugar manufactured out of sugarcane supplied by

sugarcane growers to earmarked sugar factories which

manufacture sugar by crushing sugarcane in their factories

by resorting to vacuum pan manufacturing process.

Therefore, it is the ultimate sale of the manufactured

article, namely, sugar by way of levy sugar or in free

market that is sought to be controlled by the Control Orders

which cannot effectively operate save and except in harmony

with the provisions enacted for the control of raw material,

namely, the sugarcane as envisaged by the Sugarcane Orders

as well as the Sugarcane Act. They together, therefore,

provide a complete machinery for controlling the production,

sale and purchase not only of the raw material - sugarcane

but also finished product sugar and in this background we

have to visualise the legislative intent underlying the

enactment of the Sugarcane Act on the one hand and the

exclusion of Section 15 to such transactions by the delegate

of the legislature, namely, the State of Bihar on the other.

It is also necessary to visualise that once Section 15 is

out of the way for governing the sale and purchase

transactions by sugar factories not only the purchase of

sugarcane as raw material by them but also the sale of their

finished product, namely - sugar is also out of the sweep of

Section 15 of the Market Act. Consequently, the entire

regulatory machinery and the infrastructural facilities to

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 26 of 59

be made available by the market committees for regulating

the sale and purchase of such an agricultural produce

would not give any signals and would get totally excluded.

SALE OF MOLASSES : This takes us to the consideration of

the statutory control of sale of molasses by sugar factories

functioning in the market area. It has to be kept in view

that molasses is a by-product of the sugar industry and the

sale of molasses by the sugar factories is wholly controlled

by the statutory provisions contained in the Bihar Molasses

(Control) Act, 1947. The preamble to the Act reads as under

: An Act to provide for the control of the distribution,

supply, storage and price of molasses produced by factories

in the State of Bihar.

Section 2(c) of the Molasses Act defines Molasses as

under : Molasses means final residual by-product of

factories manufacturing sugar from cane or by refining gur,

by means of vacuum pans but does not include convertible

molasses, which are the final residual by-product of sugar

factories operating on the open pan system.

Section 3 of the Act provides as under : Submission

of returns by occupiers of factories and stockists.- Every

owner, manager or occupier of a factory and every stockist

shall furnish to the Controller within the time and in the

manner specified by the Controller such returns relating to

stocks of molasses as the Controller may, by order from time

to time, direct.

Section 4 of the Act provides that No molasses

produced in the State nor any molasses held by the stockists

in this State, shall, without the permission of the

Controller, be moved by rail, road or river from any place

in the State to any other place therein.

As per Section 5 of the Act, a sugar factory cannot

even enter into an agreement or contract with any person

other than the Government or person licensed by the

controller for supply of molasses. All molasses have to be

sold by sugar factories in accordance with the directions of

the Molasses Controller issued under Section 6 of the

Molasses Act. The price of molasses is regulated by Section

8 of the Act. Section 8A provides that the State Government

may impose administrative charges on the sale of released

molasses for meeting the cost of establishment for

supervision and control over such release. It is thus clear

that the sale of molasses is also regulated by the State

Government and the cost of such regulation is recovered

under the Molasses Act in the form of administrative

charges. Section 8C requires every owner occupier and

manager of sugar factory to place in a separate fund

suitable amount for the purpose of construction and

maintenance of adequate facilities for storage of molasses.

Section 9C makes detailed provisions relating to storage of

molasses and construction of storage tanks by the sugar

factories. Section 11 gives overriding effect to the

provisions of the Molasses Act over any provision contained

in any other Act. Section 13 which is the section

conferring the power to make Rules provides for the making

of rules for carrying out the purposes of the Act and

empowers in particular a) prescribe the specifications and

tests in respect of the purity of molasses;

b) regulate sale and price of molasses intended for

use in distilleries or for other purposes;

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 27 of 59

c) prescribe conditions in respect of storage, loading

and transport of molasses at factories;

d) prescribe the forms and returns to be submitted,

and the records and books to be maintained, by factories;

e) prescribe the manner in which molasses produced in

factories shall be graded, marketed, packed or stores for

sale;

f) regulate imposition and recovery of permit fee and

administrative charges on released molasses;

ff) prescribe the manner in which accounts of funds

for regulation of adequate storage facilities in respect of

molasses produced in factories shall be maintained and

operated;

g) any other matter which is required to be or which

may be prescribed under this Act.

The Bihar Molasses (Control) Rules, 1955 contain

detailed provisions in Rule 3 relating to supply of molasses

by sugar factories. Reference may be made to clause h of

Rule (3), which is in the following terms : Every sugar

factory and every stockist shall, on receipt of an order

from the Controller and on intimation of the allotment of

tank wagons for the transport of molasses, make all

necessary arrangements promptly for the haulage and loading

of molasses and where the owner, occupier or Manager of a

sugar factory or the stockist fails to make such

arrangements without sufficient reason, the Excise Officer

shall have the power on his behalf, to enter upon the

premises, make arrangement for the haulage and loading of

molasses by manual labour, if necessary recover the cost

incurred thereby from the said owner, occupier as manager of

the sugar factory or the stockist.

Rule 10 provides that no molasses can be moved from

the premises of a sugar factory except under a pass in Form

M.F.6. Rule 11 provides that molasses cannot be moved from

the premises of any sugar factory except under a movement

order in Form M.F.7 issued by the Controller as provided in

the Act and Rules. The aforesaid provisions leave no room

for doubt that the sale and purchase of molasses which would

be an agricultural produce as defined by Section 2(1)(a) of

the Market Act being a by-product resulting from manufacture

of sugar by utilising the basic agricultural produce,

namely, sugarcane are wholly controlled by the Molasses

Control Act enacted by the very same legislature which has

enacted the Market Act. It is easy to visualise that the

very same legislature which enacted both these provisions

was pressed to be alive to the need of having special

provisions for regulating the sale and purchase of molasses

and that by itself would exclude the need to get these

transactions generally controlled and regulated by the sweep

of the Market Act as per Section 3 of the said Act. That is

precisely the reason for even its delegate, the State of

Bihar in its wisdom to exclude the applicability of Section

15 of the Market Act, so far as the sale transactions of

molasses by the sugar factories operating in the market area

are concerned. The validity of the Bihar Molasses Act, 1947

has been upheld by this Court in the case of SIEL Ltd. and

Others vs. Union of India and Others (1998 (7) SCC 26). It

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 28 of 59

has been held to be traceable to Entry 33 List III and is

having Presidents assent. It is, therefore, obvious that

the Molasses Act laying down a detailed statutory scheme of

control of sale and purchase of molasses produced by the

sugar factories in the market area will remain within the

statutory framework of the aforesaid special statute. The

general provisions of the Market Act has, therefore, to give

way to the aforesaid special provisions. It was next

submitted by learned senior counsel for the State of Bihar

that even though the market committee may not be in a

position to regulate sale, purchase, storage or processing

of molasses not released by the Controller atleast after

they were decontrolled by the Central Government in June,

1993 and even when the State Governments have partially

decontrolled transactions regarding molasses, such

transactions could be regulated under the Market Act. This

submission also cannot be countenanced. The reason is

obvious. Once the State of Bihar itself has exempted these

sale transactions from the operation of Section 15 of the

Act, they would be out of sweep of the general provisions of

the Market Act and would not statutorily enjoin the market

committees to provide any infrastructure for regulating sale

of molasses to enable them to bring home the charge of

market fee on the sale transactions of molasses as per

Section 27 of the Act. As a result of this discussion, the

first contention will have to be answered in negative by

holding that the provisions of the Market Act cannot apply

to the transactions of purchase of sugarcane and sale of

sugar and molasses by the sugar mills situated and

functioning within the market area of the concerned market

committee constituted under the Market Act. CONTENTION NO.

2 : This takes us to the consideration of the alternative

contention canvassed by learned senior counsel for the

appellants in support of the appeals. Strictly speaking,

this alternative contention does not survive for our

consideration, in view of our answer to the first

contention. However, as we have heard learned counsel for

the parties on this alternative contention, we may deal with

the same on merits. It has to be kept in view that market

fee levied under the Market Act is a fee and not a tax.

The Market Act in so far as it enacts Section 27 levying

market fee is referable to Entry 66 of the State List read

with Entry 47 of the Concurrent List. Both of them deal

with topics of legislation pertaining to fees in respect of

the matters enumerated in the respective lists. In the case

of Kewal Krishan Puri and Anr. vs. State of Punjab and

Anr. etc. etc. (1980 (1) SCC 416), a Constitution Bench

of this Court, while upholding the levy of market fee under

the Punjab Agricultural Produce Markets Act, 1961, has made

the following pertinent observations in paragraph 23 of the

report. Untwalia J., speaking for the Court observed :

From a conspectus of the various authorities of this Court

we deduce the following principles for satisfying the tests

for a valid levy of market fees on the agricultural produce

bought or sold by licensees in a notified market area :

(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.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 29 of 59

(3) That while rendering services in the market area

for the purposes 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

benefits must be conferred on them which have a direct,

close and reasonable correlation between the licensees and

the transactions.

(4) That while conferring some special benefits on the

licensees it is permissible to render such service in the

market which may be in the general interest 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 benefiting 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

with reasonable certainty as being spent for rendering

services of the kind mentioned above.

It becomes at once clear that before justifying levy

of market fee on any transaction the services to be rendered

by the market committee must be in connection with the sale

and purchase transactions of agricultural produce falling

for regulation under the Market Act, when the purchase and

sale of agricultural produce like sugarcane, sugar or

molasses are not governed by the Market Act, as we have seen

while considering contention no.1, there would remain no

occasion for the market committee to be statutorily under

any obligation to provide any services or infrastructural

facilities for covering such transactions so as to be

entitled to charge market fee on such transactions. It was

vehemently contended by learned senior counsel for the

respondents that various types of infrastructural facilities

are being made available to sugar factories who are

purchasing sugarcane in the market area and selling

manufactured sugar and molasses in the very same market

area. The following are the various facilities and services

highlighted in this connection :1. Link road facilities by

which market committees were to spend monies for connecting

villages in the market area with the main roads for

facilitating the movement of agricultural produce including

the sugarcane from the farms to the purchase centres of the

factories.

2. Spread of information regarding prices of

agricultural produce for information of growers of

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 30 of 59

sugarcane.

3. Providing mediation facility to enable the growers

of sugarcane to get higher price for sugarcane as compared

to the minimum prices fixed under the control orders.

4. Supervision of weighment of sugarcane.

5. Licensing of weighing inspectors.

6. Providing for drinking facility and park.

7. Parking facilities at the purchase centres.

Shri Trivedi, Addl.Solicitor General, in his turn,

tried to highlight the concept of link roads being other

than approach roads. He submitted that near the factory

gate or purchase centres provision of approach roads may be

a statutory obligation of the sugar factories. Thus

approach roads would connect the purchase centres with the

nearby public roads. But so far as link roads are

concerned, they are also public roads other than approach

roads which connect villages with main roads and all these

facilities make possible quicker movement of sugarcane from

farms to the purchase centres. This results in supplying

better quality of sugarcane for being crushed in the

factories so that before such sugarcane dries out it gets

crushed resulting in better quality and larger quantity of

sugar for the benefit of sugar factories. Strong reliance

was placed in this connection on various provisions of

Section 30 of the Market Act and it was submitted by learned

senior counsel for the respondents that all these benefits

are being made available to sugar factories and there is no

reason for them to oppose payment of small amounts of market

fees after getting these benefits from the market

committees. The aforesaid contentions of learned senior

counsel for the respondents for salvaging the situation for

the market committees though appearing attractive at the

first blush, do not survive on a closer scrutiny. The

reason is obvious. Only because the sugarcane factories are

located in the market area they can be said to be covered by

the general sweep of Section 27 of the Market Act as the

agricultural produce, namely, sugarcane as well as sugar

and molasses can be said to be bought and sold in the

market area. But by the fact only of sale and purchase of

these commodities in the market area, it cannot be said that

such agricultural produce belongs to the category of

agricultural produce which is covered by the general sweep

of the Act. In order to attract the charge under Section

27, the concerned agricultural produce on which the market

fee is to be levied must be required to be bought and sold

in the market area within the jurisdiction of the concerned

market committee as per Section 15 of the Market Act which

enjoins that no agricultural produce specified in the

notification under sub-section (1) of Section 4 shall be

bought or sold by any person within the market area other

than the relevant principal market yard or sub-market yards.

Thus, on a conjoint reading of Sections 27 and 15 of the

Market Act, it must be held that before any charge of market

fee can settle regarding any purchase and sale transactions

concerning the agricultural produce, such agricultural

produce must have been required to be sold or purchased at

the relevant principal market yard or sub-market yards. It

is obvious that principal market yard or submarket yards

would be situated within the market area, but if any

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 31 of 59

agricultural produce is exempted from the provisions of

Section 15(1) of the Act as in the case of sugarcane, sugar

and molasses there would remain no occasion for transactions

of sale and purchase of these commodities to be carried on

only in the principal market yard or sub-market yards and

not elsewhere in any other part of market area. It is only

those agricultural produce which are required to be bought

and sold in the relevant principal market yard or sub-market

yards situated within the market area that attract charge of

Section 27 of the Act. Once this charge is attracted, the

further question whether it is backed by any quid pro quo

would survive for consideration. On the facts of the

present case, Section 15 as a whole is out of picture for

controlling purchase and sale of sugarcane, sugar and

molasses by sugar factories operating in the market area, as

we have seen earlier, the charge of market fee as envisaged

by Section 27 would not get attracted at all for them.

Hence the aforesaid list of the infrastructural facilities

made available to sugar factories in general with other

dealers in agricultural produce attracting Section 15 of the

Act would pale into insignificance. Market Committees would

not supply adequate quid pro quo for levying market fee as

the charge itself does not settle on these transactions by

the sugar factories. It may be, as submitted by learned

senior counsel for the respondents, that some sugar

factories may have taken benefit of electric lighting and

preparation of approach roads by the market committees which

might have spent sufficient funds for giving these

facilities. Still they would not be a part and parcel of

the statutory obligations of the market committees qua such

sugar factories and may remain in the domain of Section 72

of the Indian Contract Act and if such benefits are received

by the factories they may be liable on the principle of

quantum meruit to reimburse or compensate the market

committees for the voluntary facilities given by them but

they would not support any legal quid pro quo by way of

statutory obligation of the market committees for giving

facilities to the sugar mills for supporting the levy of

market fees on their transactions. Contention no.2 is,

therefore, answered in negative not on the ground that the

services rendered by the market committee to the appellant

sugar factories were not having any adequate quid pro quo

but on the ground that they were not statutorily required to

be made available to the sugar factories by way of statutory

obligation of the market committee to regulate the sale and

purchase transactions of sugarcane, sugar and molasses by

these sugar factories and also on the ground that the charge

under Section 27 by levying market fee on the aforesaid

transactions was not attracted at all on the facts and

circumstances of the case, as seen earlier. As a result of

our conclusion on the findings of the aforesaid two

contentions, the appeals and other Writ Petition in sugar

group matters will be required to be allowed and the

impugned judgment of the High Court in all these matters

will have to be set aside. However, the further question

that survives is as to what relief can be given to the

appellants and the writ petitioners in this sugar group of

matters. It is obvious that during the pendency of these

proceedings no interim relief was given to the appellants

and the writ petitioners. Therefore, they must have paid

the market fee on the concerned transaction all these years.

In the common course of events, they would have passed on

the burden of market fee on purchasers and the ultimate

consumers of sugar and molasses produced by the sugar

factories by utilising sugarcane as raw material. Shri

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 32 of 59

Shanti Bhushan, learned senior counsel for the appellants,

in this connection, submitted that accepting the principle

of unjust enrichment we may reserve liberty to the

appellants to show before the authorities whether they have

in fact passed on the burden of impugned market fee at the

relevant time and if they could show to the satisfaction of

the authorities that in fact they have not passed on the

burden then they may be treated to be entitled to get refund

of all the appropriate amounts of market fee not passed on.

In our view it is not possible to accept this contention as

years have rolled by since the impugned market fees have

been levied by the different market committees in the State

of Bihar. In the normal course of events, no prudent

businessman/manufacturer would ever bear the burden of such

compulsory fee or tax to be paid from his own pocket. Even

otherwise reserving such liberty would create unnecessary

complication and may give rise to spate of avoidable

litigations in the hierarchy of proceedings. Under these

circumstances, keeping in view the peculiar facts and

circumstances of these cases, we deem it fit to direct in

exercise our powers under Article 142 of the Constitution of

India that the present decision will have only prospective

effect. Meaning thereby that after the pronouncement of

this judgment all future transactions of purchase of

sugarcane by the sugar factories concerned in the market

areas as well as the sale of manufactured sugar and molasses

produced therefrom by utilising this purchased sugarcane by

these factories will not be subjected to the levy of market

fee under Section 27 of the Market Act by the market

committees concerned. All past transactions upto the date

of this judgment which have suffered the levy of market fee

will not be covered by this judgment and the collected

market fees on these past transactions prior to the date of

this judgement will not be required to be refunded to any of

the sugar mills which might have paid these market fees.

However, one rider has to be added to this direction. If

any of the market committees has been restrained from

recovering market fee from the writ petitioners in the High

Court or if any of the writ petitioners in the High Court

has, as an appellant before this Court, obtained stay of the

payment of market fee, then for the period during which such

stay has operated and consequently market fee was not paid

on the transactions covered by such stay orders, there will

remain no occasion for the market committee concerned to

recover such market fee from the concerned sugar mill after

the date of this judgment even for such past transactions.

In other words, market fees paid in past shall not be

refunded. Similarly market fees not collected in past also

shall not be collected hereafter. The impugned judgments of

the High Court in this group of sugar matters will stand set

aside as aforesaid. The Writ Petition directly filed before

this Court also will be required to be allowed in aforesaid

terms. Before parting with this group of matters, it must

be clarified that the present judgment will be applicable in

connection with the purchase of sugarcane by the sugar

factories as well as the sale of manufactured sugar and

molasses by these factories functioning in the areas of

market committees concerned and whose transactions are

governed by the provisions of the Sugarcane (Control) Order,

1966 as well as the Sugarcane Act of 1981 and also by the

relevant provisions of the Sugar Orders and the provisions

of Molasses Control Act. Any other transactions of purchase

and sale, in principal market yard or sub-market yards, of

sugarcane, sugar or molasses by any other licensed dealers

not governed by the aforesaid provisions will not be covered

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 33 of 59

by the ratio of this judgment.

2. WHEAT PRODUCTS - ATTA, MAIDA, SUZI, BRAN ETC. In

this group of matters, six flour mills functioning in market

areas within the jurisdiction of market committees concerned

have brought in challenge the applicability of the Market

Act to the transactions of purchase of wheat by these mills

and manufacture out of the same different wheat products

like atta, maida, suzi, bran, etc. The High Court of

judicature at Patna repelled their contentions against the

applicability of the Market Act. On grant of special leave

to appeal they are before us in these proceedings. Shri

Ranjit Kumar, learned counsel appearing for the appellants

raised two contentions for our consideration. 1. Under the

Industries (Development and Regulation) Act, 1951 (for short

I.D.R. Act) in public interest the Union of India has

taken over the control of the wheat industry as specified in

the First Schedule to the Act and consequently any

transaction of purchase and sale of the products of that

industry cannot be regulated by the State Act like the

Market Act. As a part of the very same contention, it was

submitted that Wheat Rolling Flour Mills (Licensing and

Control) Order, 1957 and the Bihar Trading Articles

(Licenses Unification) Order, 1984 issued under Section 3 of

the Essential Commodities Act, 1955 lay down a complete

scheme for regulating purchase and sale of wheat products

and hence these transactions cannot be covered by the

general sweep of the Market Act. 2. Alternatively, it was

contended that wheat may be an agricultural produce, but

sale of atta, maida, suzi cannot be treated as agricultural

produce. We shall deal with the aforesaid contentions point

wise. Point No.1: It is true that the Union Parliament in

exercise of its legislative power under Entry 52 of List I

of the Seventh Schedule has enacted the I.D.R. Act. It is

also true that flour industry is listed as one of the

scheduled industries as item no.27(4) under the caption

food processing industries. However, production of wheat

as raw material or its sale is not covered by the said Act.

Consequently, so far as wheat as agricultural produce is

concerned, it is outside the sweep of the I.D.R. Act.

However, when flour industry is covered by the said Act,

question remains whether sale of flour or any other products

out of wheat can be said to be covered by the sweep of the

I.D.R. Act. Regulation of sale and purchase of flour as a

controlled industry was sought to be emphasised by Shri

Ranjit Kumar by inviting our attention to Section 18G of the

I.D.R. Act. Section 18G sub-section (1) reads as follows :

18G. Power to control, supply, distribution, price, etc.,

of certain articles. - (1) The Central Government, so far

as it appears to it to be necessary or expedient for

securing the equitable distribution and availability at fair

prices of any article or class of articles relatable to any

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 34 of 59

scheduled industry, may, notwithstanding anything contained

in any other provision of this Act, by notified order,

provide for regulating the supply and distribution thereof

and trade and commerce therein.

It is obvious that unless the Central Government in

exercise of its statutory power under Section 18G

promulgates any statutory order covering this field, it

cannot be said that mere existence of a statutory provision

for entrustment of such power by itself would result into

regulation of purchase and sale of flour even if it is a

scheduled industry. Shri Ranjit Kumar fairly stated that no

such order has been promulgated by the Central Government

for regulating the purchase and sale of flour in the market

area. According to him, however, the mere existence of such

a statutory provision in the Act enabling the Central

Government to issue such orders would be sufficient to

occupy the filed contemplated by this provision. In support

of this contention, he invited our attention to a decision

of this Court in the case of The Hingir-Rampur Coal Co.,

Ltd. and Others vs. The State of Orissa and Others (1961

(2) SCR 537). At page 558 of the report Gajendragadkar J.,

speaking for the Court, made the following pertinent

observations : .Entry 54 in List I dealing with

Regulation of mines and mineral development to the extent

to which such regulation and development under the control

of the Union is declared by Parliament by law to be

expedient in the public interest. The effect of reading

the two Entries together is clear. The jurisdiction of the

State Legislature under Entry 23 is subject to the

limitation imposed by the latter part of the said Entry. If

Parliament by its law has declared that regulation and

development of mines should in public interest be under the

control of the Union, to the extent of such declaration the

jurisdiction of the State Legislature is excluded.

It was contended by Shri Ranjit Kumar relying on these

observations that mere declaration under the I.D.R. Act is

enough to exclude the jurisdiction of the State Legislature

in connection with such a declared industry. It is

difficult to appreciate this contention. It has to be kept

in view that any legislation in exercise of legislative

power under Entry 54 of List I would enable the Parliament

to regulate mines and mineral development by taking them

under the control of the Union in public interest. Thus all

aspects of mining industry would be covered by the general

sweep of such a declaration. However, so far as the I.D.R.

Act is concerned, it is enacted under Entry 52 of the First

Schedule which deals with industries in general.

Simultaneously in the State List itself there is Entry 24

which deals with industries subject to the provisions of

Entries 7 and 52 of List I. Consequently, the products of

such controlled industries would necessarily not be governed

by the sweep of the general legislation pertaining to such

industries as per Entry 52 of the Union List. The aforesaid

Constitution Bench judgment was not concerned with any State

Legislation enacted under Entry 24. On the contrary, it

dealt with legislation of the Union Parliament under Entry

54 of the Union List read with Entry 23 of the State List.

The scheme of the aforesaid legislative entries is entirely

different from the scheme of Entry 52 of List I read with

Entry 24 of List II with which we are concerned. On a

conjoint reading of the aforesaid two entries, therefore,

the ratio of the decision of the Constitution Bench in the

aforesaid case cannot be effectively pressed in service by

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 35 of 59

Shri Ranjit Kumar for supporting his contention. In this

connection, we may usefully refer to a decision of this

Court in SIEL Ltd. and Others (supra) wherein one of us,

Sujata V. Manohar, J was a member. It has rightly

distinguished the ratio of the Constitution Bench decision

in the case of The Hingir-Rampur Coal Co., Ltd. and Others

(supra) and taken the view that merely because an industry

is controlled by a declaration under Section 2 of the I.D.R.

Act enacted by Entry 52 of the Union List, the State

Legislature would not be denied of its powers to regulate

the products of such an industry by exercise of its

legislative powers under Entry 24 of the State List. In

that case the question was whether U.P. Sheera Niyantran

Adhiniyam, 1964 could be said to be repugnant to the

Molasses Control Order issued by the Central Government

under Section 18-G of the I.D.R. Act imposing restrictions

on the sale of molasses and fixing the maximum price of

molasses. Answering the question in negative, it was held

that the term industry in Entry 24 would not take within

its ambit trade and commerce or production, supply and

distribution of goods which are within the province of

Entries 26 and 27 of List II. Similarly, Entry 52 in List I

which deals with industry also would not cover trade and

commerce in, or production, supply and distribution of, the

products of those industries which fall under Entry 52 of

List I. For the industries falling in Entry 52 of List I,

these subjects are carved out and expressly put in Entry 33

of List III. It was also held that since the Molasses

(Control) Order of 1961 passed by the Central Government in

exercise of powers conferred by Section 18-G was not

extended at any point of time to the State of U.P. or the

State of Bihar, the question of repugnancy between the

Molasses Control Order, 1961 and the U.P. Sheera Niyantran

Adhiniyam, 1964 does not arise. Consequently, it must be

held that in the absence of statutory order promulgated

under Section 18G of the I.D.R. Act, it cannot be said that

the field for regulation of sale and purchase of products of

flour industry like atta, maida, suzi, bran etc. would

remain outside the domain of the State Legislature. Shri

Ranjit Kumar then placed reliance on the statutory orders

framed under Section 3 of the Essential Commodities Act,

1955. So far as the Wheat Rolling Flour Mills (Licensing

and Control) Order, 1957 is concerned, reliance was placed

by him on Clauses 2 and 10 of the definition clause. These

clauses clearly indicated that the said order was not

concerned with agriculturists nor was the order concerned

with the pricing, purchase and sale of wheat or wheat

products. Consequently, the said order cannot be said to

have occupied the field so far as these topics are

concerned. He then invited our attention to the Bihar

Trading Articles (Licenses Unification) Order, 1984.

Clauses 2 (c) (g) (h) and (j) as well as Clauses 15 and 18

on which reliance was placed were found not to be of any

assistance to him for the simple reason that under that

Order dealers of foodgrains like wheat had to be licensed

and their activities had to be supervised. This order had

also nothing to do with fixation of prices and regulating

the purchase and sale of wheat and wheat products.

Consequently, the first contention canvassed by Shri Ranjit

Kumar cannot be sustained and is accordingly rejected.

POINT NO. 2: So far as the alternative contention is

concerned, he submitted that even though wheat is an

agricultural produce, atta, maida, suzi manufactured out of

the same cannot be said to be agricultural produce as it is

a produce of the factory and not of an agriculturist. This

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 36 of 59

contention of Shri Ranjit Kumar also cannot be sustained for

the simple reason that agricultural produce as defined by

Section 2(1), as already noted earlier, would include all

agricultural produce whether processed, non-processed or

manufactured out of any primary agricultural produce. Wheat

is a produce of agriculture, therefore, any product

resulting after processing such basic raw material or which

results after process of manufacture is carried on qua such

basic raw material would remain agricultural produce. Shri

Ranjit Kumar fairly stated that he has not challenged the

vires of Section 2 (1)(a) but in his submission items 14 to

16 as found in the Schedule to the Act under the caption

Cereals are wrongly included as agricultural produce as

they are not produce of agriculture. Moment the artificial

definition of agricultural produce as aforesaid holds the

field, as a logical corollary these three disputed items

would squarely get covered by the sweep of the term

agricultural produce and hence their inclusion in the

schedule enacted under Section 2(1)(a) as types of cereals

cannot be found fault with. These were the only contentions

canvassed by Shri Ranjit Kumar in support of his appeals.

As they fail the inevitable result is that all the civil

appeals would be liable to be dismissed.

3. VEGETABLE OILS : Civil Appeal No.1427 of 1979

moved by M/s Rohtas Industries Ltd., which is now under

liquidation represented through its liquidator raises

similar contention as canvassed by Shri Ranjit Kumar in

support of the appeals moved by flour mills. All vegetable

oils are treated to be agricultural produce as per serial

no.4 of the schedule framed under Section 2(1)(a) of the

Market Act. In view of the general sweep of the said

definition, oil manufactured by the oil mills functioning

within the areas of the Market Committees concerned by

crushing oil-seeds which are undisputedly agricultural

produce and subjecting them to manufacturing process cannot

be said to be outside the sweep of the regulatory provisions

of the Market Act. Reliance placed in support of this

appeal on the Vegetable Oil Products Control Order, 1947 the

Pulses, Edible Oilseeds and Edible Oils (Storage Control)

Order, 1977, the Vegetable Oil Product Producers (Regulation

of Refined Oil Manufacture) Order, 1973, all framed under

Section 3 of the Essential Commodities Act, 1955, also

cannot be of any avail to the appellant industries for the

simple reason that none of these orders deals with the topic

of regulation of prices and sale and purchase of vegetable

oil products. Consequently, the field is wide open for the

legislation of the State, namely, the Market Act for its

applicability to the transactions of sale and purchase of

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 37 of 59

vegetable oil products in the market areas concerned. This

civil appeal, therefore, also is liable to fail, falling in

line with the appeals concerning wheat and wheat products.

Civil Appeal Nos. 4500-05 of 1992 and Civil Appeal arising

out of SLP (C) No.9684 of 1992 raise similar contentions in

connection with vegetable edible oils on the very same

reasoning, as aforesaid. These appeals are liable to fail.

4. RICE MILLING INDUSTRIES The appeals arising from

SLP (Civil) Nos.3159-60 of 1994 are moved by Rice Milling

Industries operating in the market area of the concerned

market committees. Learned senior counsel for the appellant

mills challenged notices issued to them by the Agricultural

Produce Market Committees concerned requiring them to shift

their trade to principal market yards. It was contended

that on account of the Rice Milling Industry (Regulation)

Act, 1958 which is a Central Act, the field for regulation

of purchase and sale of products of rice milling industries

would be fully occupied by the Central Act and if the State

Act like the Market Act seeks to encroach upon the said

field, it would become repugnant to the Central Act. A

close look at the relevant provisions of the said Act shows

that it does not seek to cover the aforesaid field.

Sub-section (1) of Section 6 of the said Act reads as

follows :Any owner of an existing rice mill or of a rice

mill in respect of which a permit has been granted under

section 5 may make an application to the licensing officer

for the grant of a licence for carrying on rice-milling

operation in that rice mill. Section 8 deals with

restrictions statutorily imposed on rice mills. Section 9

empowers the licensing officer or any person authorised by

the Central Government to inspect the working of the rice

mill. The aforesaid relevant provisions of the Act leaves

no room for doubt that the working of the rice milling

industries was sought to be regulated by the said Act and it

has nothing to do with the regulation of purchase and sale

of products of such mills. It was then submitted that the

appellant rice mills import paddy from other State

territories which are outside the notified market area

falling under the Market Act and such imported paddy is

processed and after manufacturing activities qua them, rice

is manufactured, hence such activity cannot be governed by

the Market Act. It is obvious that if the appellant rice

mills import paddy already purchased from outside the market

area then on such transactions of outside purchase and

import of paddy in the market area, there would remain no

occasion for the market committees concerned to subject such

transactions to the regulating machinery of the Market Act

or to demand any market fee thereof. This was fairly

conceded by learned senior counsel for the respondents. He,

however, added that if these rice milling industries located

and functioning in the market area purchase within the

market area, raw material paddy, whether grown in the market

area concerned or outside, then such purchases within the

market area will attract the regulatory provisions of the

Market Act. There cannot be any dispute on this aspect as

paddy obviously is an agricultural produce being item no.1

in the category of Cereals as found in Schedule to the

Act. So far as the manufactured rice out of such paddy is

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 38 of 59

concerned, once manufacturing takes place within the market

area, it would get squarely covered by the wide sweep of

definition of Section 2(1)(a), as we have seen earlier.

Even apart from that, rice is mentioned as a separate item

no.2 in the category of Cereals in the Schedule of the

Market Act. It cannot be disputed that rice manufactured

out of basic agricultural produce paddy would also remain

agricultural produce falling within the sweep of the Act.

So far as the regulation of sale and purchase of rice within

the market area is concerned, Section 15 of the Act applies

to the transactions of licensed dealers dealing with such

agricultural produce in the market area. Hence the entire

machinery of the Market Act will be applicable to regulate

transactions of sale and purchase of paddy by the rice mills

within the market area as well as sale of rice by them

within that area as all these transactions will have to take

place in the market yard or sub-market yards as per Section

15 of the Act. However, one grievance voiced by learned

senior counsel for the appellants deserved to be noted

before parting with the discussion in these appeals. He

submitted that there is no power and authority in the market

committee to insist that the location of the rice milling

industries also should be changed and must be shifted to the

market yard. In this connection, our attention was invited

to the notice (page 156 of the paper book) as a specimen

notice. In the said notice addressed to Janta Rice & Flour

Mills issued by the advocate acting on behalf of the

Secretary, Agricultural Produce Market Committee, Chakulia,

in the last but one paragraph, the addressee was requested

to shift the establishment of business in the main market

yard at Dighi of the Agricultural Produce Market Committee,

Chakulia within 7 days. It was submitted that this part of

the direction is totally without jurisdiction as no market

committee can compel the shifting of the business premises

of the rice milling industries to any particular market yard

as Section 15 of the Act only requires the sale and purchase

transactions regarding the agricultural produce to be

carried on in the market yard or sub-market yards. To that

extent, learned senior counsel for the appellant is right.

The statutory mandate of Section 15 does not go beyond the

regulation of transactions regarding purchase and sale of

agricultural produce and that can be required to be effected

only at the relevant principal market yard or sub-market

yard or yards. None of the provisions of the Market Act

would entitle the market committee to insist on shifting of

the business premises of any milling company or factory

processing agricultural produce located within the market

area to any particular market yard or sub-market yards.

Learned senior counsel for the respondents Shri Dwivedi

fairly conceded that the aforesaid direction contained in

the impugned notice as worded is not correct and can be read

down to mean only the shifting of the sale and purchase

transactions concerning paddy and rice to the relevant

market yard or sub-market yards. These directions are

accordingly read down. The said notice when so read down

would remain well sustained. In other words, the appellants

will not be required to shift the location of the rice mills

to principal market yard or sub-market yards if otherwise

they are not already so located but are functioning at any

place within the market area. However, their sale and

purchase transactions of paddy and rice will, of course, be

required to be carried on only in market yard or sub-market

yards concerned as mandated by Section 15 of the Market Act.

Subject to these clarifications and modifications in the

directions contained in the impugned notice, these appeals

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 39 of 59

are liable to fail.

5. MILK AND MILK PRODUCTS This takes us to the

consideration of Civil Appeal No.1880 of 1988. The

appellant in this appeal is an incorporated company with its

Registered Office and factory at Bombay. It claims to

produce baby food under the trade names LACTODEX and

RAPTAKOS S.I.F. (Special infant food). Its products are

sold all over the country including Bihar State. It has its

Central Office at Patna. Being located outside Bihar it

purchases its raw materials from the territories outside

Bihar. Out of the raw materials procured from outside, the

aforesaid two types of infant food are manufactured outside

Bihar but some of the products of the company are received

in Bihar State packed in sealed tins. The appellant company

earlier had two branches being sales offices, one at Patna

and other at Muzaffarpur. The latter branch is since

closed. Both these branches fall within the jurisdiction of

the Agricultural Produce Market Committees at Patna and

Muzaffarpur. According to the appellant though its

activities were not covered by the sweep of the Market Act,

it was required to obtain licences under the Act for

operating at both these places in the market areas. The

appellant contended in the Writ Petition before the High

Court that the direction of the marketing authorities

requiring the appellant to take licences under the Market

Act was clearly ultra vires and illegal for the simple

reason that the products sold by it within the market area

were not agricultural produce at all. Therefore, they were

not governed by the sweep of the Act. The High Court in the

impugned judgment negated this contention and held that both

these articles sold in packed tins were in substance milk

products and, therefore, agricultural produce as defined

by Section 2(1)(a). Learned counsel appearing for the

appellant vehemently submitted that before the aforesaid two

products can be subjected to the regulatory procedure of the

Market Act, it must be shown by the respondents that they

are agricultural produce. He invited our attention to

Section 3 of the Act and submitted that the very first step

of the applicability of the Act is the declaration of

intention by the State Government for regulating the

purchase, sale, storage and processing of agricultural

produce as mentioned in the notification. That the said

term agricultural produce as defined by Section 2(1)(a)

clearly indicates that the agricultural produce which is to

be covered by the sweep of the Act has to be one which

should be specified in the Schedule. When we turn to the

Schedule of the Act framed as per Section 2(1)(a), we find

one of the animal husbandry products at item VIII, sub-item

20 as milk except liquid milk. Thus any product consisting

of solidified milk, like milk powder, is contemplated by the

said item. It was submitted that in the entire Schedule no

where we find any mention of baby food which may be a

substitute for milk or solidified milk. It was, therefore,

contended that the appellant which manufactures and sells

special infant foods like Lactodex and "Raptakos" cannot

be required to take any licence under the Market Act.

Refuting this contention, learned senior counsel for the

respondents submitted that as noted by the High Court the

aforesaid two products manufactured and sold by the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 40 of 59

appellant do contain as base material "milk" in solidified

form. He invited our attention to the details submitted by

the appellant before the High Court and as noted by the High

Court in its judgment in connection with the ingredients and

constituents of these two products. "LACTODEX"

Per 100 ml. When reconstituted. 6 g. : 45 ml.

Protein 1.9 g. Carbohydrate 9.6 g. Milk fat 0.9 g.

Minerals 0.5 g. Vitamin A 265 I.U. Vitamin B6 40 mcg.

Including that derived from milk powder Vitamin D 40 I.U.

Calories 54

RAPTAKOS S.I.F.

Per 100 ml. When reconstituted 4.5 g. : 30 ml.

Protein 1.8 g. Fats 3.0 g. Carbohydrates 9.6 g. Minerals

(Ash) 0.4 g. Iron 0.6 g. Vitamin A 225 I.U. Vitamin D 60

I.U. Vitamin E 1.3 I.U. Vitamin B1 0.07 mg. Vitamin B2

0.11 mg. Nicotinamide 0.9 mg. Vitamin B6 0.04 mg. Vitamin

B12 0.15 mg. Vitamin C 0.5 mg. Calories 73 mg.

Placing reliance on these ingredients, it was

submitted that per 100 milligrams of Lactodex milk fat

content is 0.9 gms and that other minerals and vitamins may

also include milk powder. Similarly, Raptakos (Special

infant food) also contains proteins and fats. He also

contended that even milk which is a complete food may

contain vitamins, therefore, it cannot be said that these

two products are not milk products or products containing

some ingredients of milk. It is difficult to accept this

contention for the simple reason that the aforesaid Schedule

at sub-item no.20 captioned under the title "Animal

Husbandry Products" refers to milk except liquid milk. By

no stretch of imagination, tinned baby food containing

various ingredients which may include some milk fats or

proteins though in powder form can be said to be milk powder

simpliciter or whole milk not in liquid form. It is also

pertinent to note that there is no item of milk products in

the Schedule to the Act under the caption "Animal Husbandry

Products". In this connection, it is profitable to

contradistinguish this entry in the Schedule with items

14,15 and 16 under the caption "Cereals" in the very same

Schedule. In the listed items under the caption "Cereals",

we find "Wheat" separately mentioned at item no.3 as

compared to Wheat Atta, Suzi and Maida separately mentioned

at items 14,15 and 16. This shows that basic agricultural

produce - "wheat" is treated as a separate agricultural

produce as compared to its own products manufactured out of

wheat, namely, atta, suzi and maida. Those products of the

concerned basic agricultural produce are separately

mentioned as "agricultural produce" in the Schedule so far

as "cereals" are concerned. But similar is not the scheme

in connection with milk. Milk products like baby foods are

not separately mentioned. Under the very caption "Animal

Husbandry Products", Butter and Ghee are separately

mentioned as items 7 & 8 which are wholly manufactured out

of milk. It, therefore, becomes clear that save and except

butter and ghee no other milk product is sought to be

covered by the sweep of the Act as "Animal Husbandry

Products" and the basic Animal Husbandry Produce like "milk"

only in solid form is sought to be covered by a separate

solitary item no.20 as one of the "Animal Husbandry

Products". Therefore, any other manufactured product like

the present ones, utilising same ingredients of milk powder

as one of the ingredients but which are processed by

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 41 of 59

addition of all other extra items with the result that

finished products like baby foods emerge as manufactured

items for serving as substitute for milk to be fed to

infants who cannot digest liquid milk or solidified milk as

such, cannot be treated to be "agricultural produce" as part

and parcel of listed "Animal Husbandry Products" mentioned

in the Schedule to the Act. Learned senior counsel for the

appellant in support of his contentions tried to rely upon

specimen copies of printed material affixed to the sealed

tins of these manufactured commodities, "Lactodex" and

"Raptakos", which, according to him, are substitutes for

mother's milk and are to be used to feed infant babies who

cannot take milk in its natural form. Learned senior

counsel for the respondents tried to repel this submission

by contending that this type of printed material was not

produced before the High Court. Be that as it may, the

undisputed fact remains that these two special infant foods

are meant for infant babies who are to be fed by mixing this

baby food powder with water to make it a paste as a

substitute for mother's milk. In the light of the express

provisions concerning the relevant items of the Schedule to

the Act to which we have referred, it has to be held that on

the material before the High Court in connection with the

ingredients of the aforesaid two products of the appellant,

it could not be effectively shown by the respondents beyond

any doubt that these two products also were "agricultural

produce" being Animal Husbandry Products of "milk" in a

non-liquid form. Consequently, there was no occasion for

the respondent authorities to insist that the appellant for

the sale of the aforesaid two products within the market

area governed by the Market Act in the State of Bihar was

required to take any licence under that Act. It is not the

case of the appellant that any market fee was required to be

charged from him by the market committee. The only

grievance made was that the appellant was required to take

licence under the Market Act. Hence the question of refund

of any market fee would not survive for consideration in the

present case. This appeal will have to be allowed and the

Writ Petition filed by the appellant in the High Court also

consequently will have to be allowed by quashing the

impugned notice calling upon the appellant to take licences

under the Market Act.

6. TEA MATTERS In the appeal filed by M/s. Lipton

Tea (India) Ltd., the appellant company has brought in

challenge the order of the High Court of judicature at Patna

in Writ Petition No.1027 of 1977 which was disposed of along

with other cognate matters by a common judgment. The

appellant had contended before the High Court that the

Market Act cannot apply to the transaction of manufactured

blended tea sold in packed tins and packets by it in the

State of Bihar, consisting of areas of different market

committees. According to the appellant, the object of the

Market Act was to provide for better regulation of buying

and selling of agricultural produce. It was for the benefit

of the agriculturists by providing them a market assuring a

reasonable price of their products and also eliminating

unhealthy competition and loss due to malpractices

prevailing in the market. That the appellant was neither an

agriculturist nor did it purchase any article from any

agriculturist in the Bihar State. That it purchased tea in

auction under the Tea Act held at various notified centres

in other States outside the Bihar territory. That the

purchased tea was blended at appellant's factories which

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 42 of 59

were also situated outside Bihar. Only after the purchased

tea had undergone manufacturing process in appellant's tea

factories, after blending and preparation of appropriate

final product packed in tins and other receptacles, this

marketable commodity "tea" consisting of red label, green

label tea etc. was being brought for sale within the

territories of the State of Bihar. Hence, there was no

occasion for the market committees to regulate the sale and

purchase of such tea by the appellant manufactured outside

the State of Bihar. It was also contended that the Tea Act,

which is the Central Act, fully occupied the field of

regulation of sale of such tea by the appellant. In view of

the special machinery provided under the Tea Act, the

general sweep of the Market Act could not be made applicable

to the appellant's sale transactions of manufactured tea

within the State of Bihar. It was lastly contended that

when the appellant was selling its manufactured tea in

packed condition in the market area through its stockists,

no benefits of infrastructural facilities were required to

be furnished by the market committee concerned and,

therefore, insistence on the part of the market committee,

that the appellant's stockists should sell packed tea only

in the market yard or sub-market yards was totally

unauthorised and in fact amounted to imposition of sales tax

on the sale transactions of tea and could not remain in the

realm of genuine market fee. These contentions were

repelled by the High Court and it was also held that any

manufactured product out of the basic agricultural produce,

namely, tea leaves, would be covered by the Act and as the

manufactured items in packed conditions out of the basic

agricultural produce - "tea" were being sold in the market

area, the machinery of the Act was applicable to cover these

transactions. Accordingly, the Writ Petition was dismissed.

Hence this appeal by special leave. The learned senior

counsel for the appellant Shri Shanti Bhushan vehemently

submitted that the very purpose of the Market Act is not to

regulate the sale of tea manufactured by big tea

manufacturing companies like the appellant whose factories

are situated outside the State of Bihar. They purchase tea

leaves in auction under the Tea Act held at different

centres outside the State of Bihar and manufacture after

proper blending tea by packing it in suitable packings

having labels showing different qualities of tea like green

label tea, red label tea etc. That because the appellant

imports manufactured tea only for the purpose of sale in

Bihar markets, it cannot be said that the machinery of the

Market Act which is essentially meant to regulate the sale

and purchase of agricultural produce, gets attracted. That

the Market Act is, in substance, meant to cover agricultural

produce which are first grown in the market area and then

sold within the same area. It was also contended that tea

was not one of the scheduled items earlier covered by the

Act enacted as early as in 1960. That only after 16 years

in 1976, tea was added as one of the items in the Schedule

to the Act under the caption "Miscellaneous item No. XII"

as sub item 30 being Tea (leaf and dust). It was submitted

that this addition to the Schedule was made by the State of

Bihar in exercise of its power under Section 39 of the Act

which confers power on the State Government by notification

to add any of the items to be treated as "agricultural

produce" for being specified in the Schedule. That this

addition was made after the basic notification under Section

3 of the Act was issued declaring the intention of the State

to regulate the purchase, sale, storage and process of

agricultural produce in such areas as may be specified in

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 43 of 59

the notification. This basic notification which was

followed by the procedure of inviting objections and

suggestions had culminated into declaration of market area

under Section 4. That initially as the item of tea was not

in the Schedule, it was obviously not sought to be subjected

to the regulation under the Act. Consequently, its

purchase, sale, storage and process were obviously not

intended to be covered by the Act. But when tea was added

as an item in the Schedule in 1976 the procedure

contemplated by Section 3 was obviously not undergone and no

objections were invited. Section 4 (a) of the Act which was

inserted by way of clarification in 1993 also made it clear

that the provisions of Sections 3 and 4 shall not apply to

the exercise of power by the State Government under Section

39 to amend the Schedule by addition of any item of

agricultural produce not specified therein. In the light of

the aforesaid statutory scheme, it was vehemently submitted

by Shri Shanti Bhushan, learned senior counsel appearing for

the appellant, that this insertion of tea as an added item

in the Schedule was ex-facie unauthorised and a result of

total nonapplication of mind on the part of the State and it

is this exercise under Section 39 of the Act by the State

authorities that was challenged in the Writ Petition. In

support of this challenge, Shri Shanti Bhushan pressed in

service the following three contentions :CONTENTION NO.1:

The very scheme and purpose underlying the enactment of the

Market Act shows that only those agricultural produce which

are grown within the market area and whose sale in the first

instance is to be regulated and also the subsequent sale of

any manufactured item out of such basic agricultural produce

raw material taking place within the market area are

required to be regulated by the Act so that illiterate and

ignorant agriculturists who would, otherwise, suffer at the

hands of middlemen and may not get adequate price for their

product and due compensation for the toil undertaken by them

in producing these agricultural commodities, may get

adequate return for their products. The benevolent

provisions of the regulatory scheme of the Act are essential

to protect the agriculturists from exploitation of

middlemen. In this connection, our attention was drawn to

the salient observations highlighting the basic purpose for

enactment of such Market Acts as laid down by the

Constitution Bench of this Court in M.C.V.S. Arunachala

Nadar case (supra). Shri Shanti Bhushan submitted that the

large scale manufacturers like Lipton Tea (India) Ltd. who

manufacture tea outside the State in their sophisticated

factories having latest machinery are not illiterate

agriculturist producers of agriculture goods and commodities

in their fields and do not require protection under the Act.

That as these salient features of the Act are not kept in

view by the State Authorities while inserting entry of tea

in the Schedule, the said Act on the part of the State

authorities was clearly ultra vires and incompetent.

CONTENTION NO. 2: In any case, as the purchase and sale of

tea were governed by the comprehensive provisions of the

Central Act, namely, the Tea Act, 1953, the said Act would

wholly govern transactions of purchase and sale of tea by

the appellant and to that extent the Market Act would stand

superseded or at least the statutory intention of regulating

the purchase, sale, storage and processing of tea as per the

provisions of Section 3 of the Market Act would stand

completely negated. Hence, on that ground also the

insertion of this item in the Schedule would remain

unauthorised and consequently the insistence on the part of

the authorities that the sale transactions should be carried

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 44 of 59

on only within the market yard or sub-market yard was

clearly illegal and violative of Article 19 of the

Constitution of India. CONTENTION NO. 3: It was lastly

contended by Shri Shanti Bhushan that no quid pro quo

existed between the demand for market fee by the market

committees and the sale transactions effected by appellants

selling agents so far as tea in packed tins was concerned.

No infrastructural facilities were available for or required

to be supplied to the sellers of such tea. Learned senior

counsel for the respondents, on the other hand, tried to

salvage the situation by submitting that even though the Tea

Act may control the sale and purchase of tea which is a

highly monopolistic and export earning commodity, once the

blended tea in deliverable state duly packed in tins and

other packages by the appellant tea company enters the Bihar

markets for sale, it cannot be said that the sale of this

commodity cannot be treated to be sale of agricultural

produce by the appellant within the market area in the State

of Bihar as agricultural produce defined by Section 2(1)(a),

would cover not only the purchase and sale of agricultural

produce in its raw form but also in its processed and

manufactured form as per the wide sweep of the said

definition. He submitted that it cannot be disputed that

tea in its raw form is an agricultural produce because tea

leaves are grown in tea gardens and then they are plucked

and processed in tea factories and after blending the

manufactured tea in deliverable state becomes available to

be sold in wholesale markets and then in the retail markets.

That even though the appellant's factory manufacturing the

blended tea may be outside the State of Bihar, the moment

the blended tea in packed form is sold in the State of Bihar

in the market areas concerned, it cannot be said that the

provisions of the Market Act would not apply to such sale

transactions. On a conjoint reading of Section 2(1)(a) and

the Schedule under Miscellaneous item XII sub-item 30,

therefore, it has to be held that the Market Act would

squarely get attracted to regulate the sale of such produce

of tea by the appellant in the Bihar markets. So far as the

Tea Act is concerned, it is submitted that it only regulates

the sale of plucked tea from the tea gardens and provides

machinery for sale by auction of such tea at the relevant

centres and even in such auction when the appellant

purchases these roasted tea leaves, it cannot be said that

the Tea Act would cover any further transactions of

manufactured tea out of the purchased tea leaves by auction

purchasers like the appellant at its factories situated

outside the Bihar State. That auction purchased tea leaves

are processed by the appellant and blending work is done

thereafter. That what is relevant for the applicability of

the Market Act is the fact that this manufactured tea packed

in suitable packets and tins is brought for sale within the

market area in the Bihar State and these are the

transactions of sale of manufactured tea out of the basic

agricultural produce tea leaves that would attract the sweep

of the Market Act, notwithstanding the provisions of the Tea

Act. That once the Market Act applies to such sale

transactions, the entire infrastructural facilities would be

available to the appellant as these sales have to take place

in the market yard or sub-market yards as required by

Section 15 of the Act. Once the appellant gets the benefit

of this infrastructure, it cannot be said that no sufficient

quid pro quo is made available under the Act by the market

committees concerned to justify them to levy the market fee

from the buyers of tea. That so far as the appellant is

concerned, there is no burden of paying market fee as a

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 45 of 59

seller of manufactured tea. The burden will be borne by the

buyers who are not making any grievance in this connection.

In the light of the aforesaid contentions, the following

points arise for our consideration :1. Whether the basic

agricultural produce i.e. "tea leaves" which is subjected

to manufacturing process outside the Bihar State and is

imported and sold in manufactured condition as packed tea

within the Bihar State in the market areas concerned,

attracts the provisions of the Market Act for regulating

such transactions of sale. 2. Whether the Tea Act of 1953

and the relevant orders promulgated thereunder fully occupy

the field regarding regulation of purchase and sale of tea

and, consequently, the Market Act, being a general Act,

would get excluded for regulating the transactions of sale

of manufactured tea in Bihar State and 3. Whether there is

adequate quid pro quo supporting the levy of market fee on

such transactions of sale of manufactured and packed blended

tea in markets governed by the Market Act. We will now deal

with the aforesaid three points in the same sequence in

which they were pressed for consideration. POINT NO.1: At

first blush, learned senior counsel for the appellant Shri

Shanti Bhushan appeared to be on a firm footing when he

submitted that the legislative intention underlying the

enactment of the Market Act was to protect illiterate and

unwary agriculturist from middlemen so that he may not be

exploited by them and may get appropriate price for his

basic agricultural produce. But on a closer scrutiny, the

said contention does not appear to be well sustained.

Section 2(1)(a) of the Market Act, as seen earlier, includes

in the definition of agricultural produce not only the

primary produce grown in the field but also covers all

processed or non-processed, manufactured or nonmanufactured

agricultural produce as specified in the Schedule. In the

light of the aforesaid wide sweep of this definition, it

cannot be said that tea leaves which are produced in tea

gardens being primary agricultural produce would cease to be

agricultural produce once they got processed. After plucked

tea leaves are processed by roasting them and then by

subjecting them to further process of blending and

ultimately packing them in suitable packets they still

remain all the same agricultural produce so manufactured out

of the basic agricultural raw material "tea leaves". It is

also not in dispute that Tea (leaf and dust) is a Scheduled

item. Once that is so, sale of manufactured tea in packed

condition within the market area would squarely attract the

charge under Section 27 of the Act which, as noted earlier,

is widely worded. The moment the agricultural produce as

defined by Section 2(1)(a), is bought or sold in the market

area, Section 27 would get attracted to cover such

transaction. It is also pertinent to note that Section 15

sub-section (1) of the Act is applicable in the present case

to cover such transactions of sale of packed tea within the

market areas of the concerned market committees governed by

the Act. Save and except such quantity as may be prescribed

for retail sale or personal consumption to be outside the

sweep of Section 15(1) of the Act, rest of these sale

transactions regarding manufactured agricultural produce

would remain governed by the sweep of the Act. On a

conjoint reading of Section 2(1)(a) and Section 15 and the

relevant entry in the Schedule, there is no escape from the

conclusion that whether the manufactured agricultural

produce has undergone manufacturing process within the

market area or not or whether such agricultural produce in

its raw form is grown in the market area or outside or

whether the processed "agricultural produce" is imported

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 46 of 59

only for sale within the market area, the applicability of

the Act cannot be said to be ruled out to cover all these

types of sale transactions. The question posed by Shri

Shanti Bhushan learned senior counsel appearing for the

appellant for our consideration is no longer res integra. A

Constitution Bench of this Court in the case of Ram Chandra

Kailash Kumar and Company and Others vs. State of U.P. and

Another etc. etc. (1980 Suppl. SCC 27), speaking through

Untwalia J., had to consider the question of imposition of

market fee under the Uttar Pradesh Krishi Utpadan Mandi

Adhiniyam, 1964 on transactions of purchase and sale of

agricultural produce in the market area. While considering

this question, various contentions raised by traders

operating in the agricultural market in U.P. were listed in

para 9 of the report. Contentions no.9 and 23 listed in

para 9 of the report are relevant for our purpose.

Contention no.9 reads as under : "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."

Contention no.23 reads as under : "Fee can be charged

only on those transactions in which the seller is producer

and not on any other transaction."

Repelling these contentions, the Constitution Bench

held that market fee could be levied on transactions of sale

of goods even though such goods are produced outside the

State of Uttar Pradesh or outside the market area of that

particular market committee, provided the transactions of

sale take place within the limits of that market area. It

was also held that, on the other hand, there was 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. So far as

Contention no.23 was concerned, approving the Patna view it

was held that in the U.P. Act even traders under certain

circumstances had been made liable to pay such fee.

Similarly, the argument that the 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, was also found devoid of any substance by the

Constitution Bench. In view of the aforesaid pronouncement

of the Constitution Bench, therefore, it must be held that

even if an agricultural produce initially is not grown in

the market area and it is brought in manufactured form

within the market area for sale, such sale transaction in

connection with such a produce would be covered by the sweep

of the Market Act. The same view was taken by two later

judgments of this Court. In the case of Rameshchandra

Kachardas Porwal and Others vs. State of Maharashtra and

Others etc. etc. (1981 (2) SCC 722), wherein a three Judge

Bench of this Court, speaking through Chinnappa Reddy, J.

amongst others, had to consider the question whether change

of location of market under the Maharashtra Agricultural

Produce Marketing (Regulation) Act, 1963 could be held to be

legally justified. It was held that the power to establish

principal market or a subsidiary market carried with it the

power to "dis-establish" such market and that power to

establish principal or sub-market yard could be exercised

from time to time. In para 11 of the report the further

contention was examined as to whether agricultural produce

which is imported into the market area from outside the

market would be covered by the sweep of the Market Act.

While answering this contention in affirmative, it was held

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 47 of 59

that even if agricultural produce is imported into the

market area and subjected to sale and purchase thereof in

the market area, the provisions of the Market Act would get

attracted. The very same contention which learned senior

counsel Shri Shanti Bhushan urged for our consideration that

the Act is enacted for the interest of agriculturists only

and for their sole benefit was repelled. For coming to that

conclusion reliance was placed on a decision of the

Constitution Bench of this Court in the case of

Rameshchandra Kachardas Porwal and Others (supra). In this

connection, the following pertinent observations were made

at page 735, para 11 of the report. "..The basic

assumption of the submission was that the Maharashtra

Agricultural Produce Marketing (Regulation) Act was

conceived in the interests of the agriculturists only and

intended for their sole benefit. This basic assumption is

not well founded.

It is also clear to our mind that the regulation of

marketing of agricultural produce, if confined to the sales

by producers within the market area to traders, will very

soon lead to its circumvention in the guise of sales by

traders to traders or import of agricultural produce from

outside the market area to within the market area..

In our view the aforesaid observations are in

Rameshchandra Kachardas Porwal's case (supra) are in

consonance with the decision of the Constitution Bench of

this Court in Ram Chandra Kailash Kumar and Company and

Others (supra) and are well sustained. This very question

was once again examined by another three Judge Bench of this

Court in the case of Rathi Khandsari Udyog and Others vs.

State of Uttar Pradesh and Others (1985 (2) SCC 485) wherein

Fazal Ali J., speaking for majority, relying upon the

earlier decisions of this Court including the Constitution

Bench judgment in the case of Ram Chandra Kailash Kumar and

Company and Others (supra), considered the very same

contention as canvassed by learned senior counsel Shri

Shanti Bhushan, namely, that the Market Act was meant to

protect the agriculturists who produce basic agricultural

produce and was not meant to protect big producers having

factories wherein they process the raw agricultural produce

and manufacture marketable commodity out of it. Repelling

such narrow view of the regulatory provisions of the Market

Act, at para 35 of the report, the following pertinent

observations were made : "The Legislature, it is also

argued, "could not have intended" to cover the produce

turned out by producers like the petitioners.

While this is one of the objects of the Act, it is not

the sole or only object of the Act. The Act has many more

objects and a much wider perspective such as development of

new market areas, efficient collection of data, and

processing of arrivals in Mandis with a view to enable the

World Bank to give substantial economic assistance to

establish various markets in Uttar Pradesh, as also

protection of consumers and even traders from being

exploited in the matter of quality, weight and price.."

In view of this settled legal position, therefore, it

cannot be held that merely because the tea leaves produced

in tea gardens outside the State of Bihar are processed by

the appellant in its factories outside Bihar and are

converted into blended and branded qualities of packed tea

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 48 of 59

like red label tea or green label tea etc., and even though

such packed tea is sold within Bihar Market areas, the

Market Act cannot be applied to such sale transactions of

manufactured tea after importing it in the State of Bihar.

The first point, therefore, has to be rejected. That takes

us to the second contention in support of the appeal. POINT

NO.2 : The Tea Act of 1953 provides for control by the

Union Government of the Tea Industry, including the control,

in pursuance of the International Agreement now in force, of

the cultivation of tea in, and of the export of tea from,

India and for that purpose to establish a Tea Board and levy

a duty of excise on tea produced in India. It is necessary

to have a bird's eye view of its relevant provisions.

Section 4 deals with a board called "Tea Board". The

members of the board not exceeding forty are to be appointed

by the Central Government by notification in the official

gazette and would consist of various persons representing -

(a) owners of tea estate and gardens and growers of tea;

(b) persons employed in tea estates and gardens; (c)

manufacturers of tea; (d) dealers including both exporters

and internal traders of tea; (e) consumers; (f)

Parliament; (g) the Government of the principle tea-growing

States. Amongst others, Section 10 deals with the Functions

of the Board - It provides as under :

"(1) It shall be the

duty of the Board to promote, by such measures as it thinks

fit, the development under the control of the Central

Government of the tea industry.

(2) Without prejudice to the generality of the

provisions of sub-section (1), the measures referred to

therein may provide for -

(a) regulating the production and extent of

cultivation of tea; (b) improving the quality of tea; (c)

promoting co-operative efforts among growers and

manufacturers of tea; (d) undertaking, assisting or

encouraging scientific, technological and economic research

and maintaining or assisting in the maintenance of

demonstration farms and manufacturing stations; (e)

assisting in the control of insects and other pests and

diseases affecting tea; (f) regulating the sale and export

of tea; (g) training in tea testing and fixing grade

standards of tea; (h) increasing the consumption in India

and elsewhere of tea and carrying on propaganda for that

purpose; (i) registering and licensing of manufacturers,

brokers, tea waste dealers and persons engaged in the

business of blending tea; (j) improving the marketing of

tea in India and elsewhere; (k) Xxxx xxx xxxx"

Section 12 deals with method of control of extension

of tea cultivation. Section 14 deals with grant of

permission to plant tea. Section 15 provides for grant of

permission to plant tea in special circumstances. Owners of

tea estate can establish tea nurseries as provided by

Section 16. Chapter IIIA deals with management or control

of tea undertakings or tea units by the Central Government

in certain circumstances. Section 16E provides for power of

the Central Government to take over tea undertaking or tea

unit without investigation under certain circumstances.

Chapter IV deals with control over the export of tea and tea

seed. Section 30 in Chapter IV deals with power of the

Central Government to control price and distribution of tea

or tea waste. "Power to control price and distribution of

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 49 of 59

tea or tea waste.- (1) The Central Government may, by order

notified in the Official Gazette, fix in respect of tea of

any description specified therein(a) the maximum price or

the minimum price or the maximum and minimum prices which

may be charged by a grower of tea, manufacturer or dealer,

wholesale or retail, whether for the Indian market or for

export; (b) the maximum quantity which may in one

transaction be sold to any person." Sub-section (3) of

Section 30 enables the Central Government by general or

special order to - "(a) prohibit the disposal of tea or tea

waste except in such circumstances and under such conditions

as may be specified in the order; (b) direct any person

growing, manufacturing or holding in stock tea or tea waste

to sell the whole or a part of such tea or tea waste so

grown or manufactured during any specified period, or to

sell the whole or a part of the tea or tea waste so held in

stock, to such person or class of persons and in such

circumstances as may be specified in the order."

Sub-section (4) of Section 30 reads as under : "Where

in pursuance of any order made with reference to clause (b)

of sub-section (3), any person sells the whole or a part of

any quantity or tea or tea waste, there shall be paid to him

as price therefor-

(a) where the price can be fixed by agreement

consistently with the order, if any, relating to the

fixation of price issued under sub-section (1), the price so

agreed upon; (b) Xxxxxxxxxx (c) Xxxxxxxxx."

Section 32 deals with appeal to the Central

Government. Section 33 deals with licensing of brokers, tea

manufacturers, etc. Section 39 deals with penalty for

illicit cultivation. Section 40 deals with removal of tea

planted without permission. It is not in dispute between

the parties that, as per the scheme of the Tea Act, tea

leaves which are plucked in tea gardens in different States

of the country, especially, in North-eastern State like

Assam, West Bengal and other States and which are roasted in

tea factories are auctioned at Calcutta, Guwahati, Siliguri

and other notified places. It is also an admitted position

that the appellant purchases roasted tea leaves at such

auctions and then they are blended and packed according to

different brands and rates by the appellant at its factories

outside the Bihar State and then markets it throughout India

at fixed prices, local taxes varying from place to place.

The aforesaid provisions of the Tea Act which are enacted by

the Union Parliament under Entry 52 of List I read with

Entry 33 of List III deal with the control of tea industry

in public interest. The basic feature of the Tea Act is to

provide for control of extension of tea cultivation in the

areas where tea leaves are grown in tea gardens. However,

it is pertinent to note that the said Act does not provide

for regulating the sale of purchased roasted tea leaves

after they are subjected to manufacturing process of

blending and are brought in the market for sale as packed

tea. The place where such packed tea is to be sold and the

price at which it has to be sold are matters on which the

Tea Act, 1953 does not contain any statutory provisions.

However, Shri Shanti Bhushan, learned senior counsel for the

appellant, strongly relied upon Section 30 of the Act. It

is true, as seen earlier, that the said section found in

Chapter VI deals with control by the Central Government and

lays down the power of the Central Government regarding

control, price and distribution of tea or tea waste.

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 50 of 59

However, it is to be noted that till date no such control

order has been issued by the Central Government under the

said provision. Learned senior counsel submitted that once

the Central Legislature has enacted the aforesaid provision

and evinced its intention to control price and distribution

of tea or tea waste, the field gets occupied by legislation

under Entry 33 of the Concurrent List and to that extent the

provisions of Market Act would get excluded. It is not

possible to accept this contention for the simple reason

that so long as the Central Government does not issue any

order under Section 30 of the Tea Act, the field dealing

with fixation of maximum price or minimum price to be

charged by a grower of tea, manufacturer or dealer,

wholesale or retail, for Indian market leaving aside the

question of export, would not be occupied. In other words,

it would remain open for the State Legislature to cover that

field by exercising its legislative power under Entry 33 of

the Concurrent List. Even this aspect of the matter is also

not res integra. It is covered by a decision of the

Constitution Bench of this Court in Ch. Tika Ramji & Others

etc. vs. The State of Uttar Pradesh & Others (1956 SCR

393). In that case, the Constitution Bench was concerned

with the question whether the U.P. Sugarcane (Regulation of

Supply and Purchase) Act, 1953 could be said to have been

legally enacted by the Uttar Pradesh State Legislature

despite the operation of the I.D.R. Act which contained a

declaration whereby sugarcane industry was sought to be

regulated by the I.D.R. Act. Section 18G of the Act

referred to earlier whereunder there was a possibility of

the Central Government issuing appropriate control order to

occupy that field was held not to bar the legislative

competence of the State Legislature to enact appropriate

provisions regarding the said industry. Such a mere

possibility of promulgation of order under Section 18G of

the I.D.R. Act was held not to have occupied the field

whereby the State Legislature could not enact appropriate

statutory provisions by exercise of its legislative power

under Entry 33 of List III. Bhagwati, J., speaking for the

Constitution Bench, placing reliance on the observations of

Sulaiman J., in the decision of the Federal Court in

Shyamakant Lal vs. Rambhajan Singh [(1939) F.C.R. 188,

212] extracted, with approval, the following passage from

the said decision at page 427 of the report as under :

"When the question is whether a Provincial legislation is

repugnant to an existing Indian law, the onus of showing its

repugnancy and the extent to which it is repugnant should be

on the party attacking its validity. There ought to be a

presumption in favour of its validity, and every effort

should be made to reconcile them and construe both so as to

avoid their being repugnant to each other; and care should

be taken to see whether the two do not really operate in

different fields without encroachment. Further, repugnancy

must exist in fact, and not depend merely on a possibility.

Their Lordships can discover no adequate grounds for holding

that there exists repugnancy between the two laws in

districts of the Province of Ontario where the prohibitions

of the Canadian Act are not and may never be in force:

(Attorney-General for Ontario v. Attorney-General for the

Dominion)"

Thereafter the following pertinent observations were

made by Bhagwati, J., speaking for the Constitution Bench :

"In the instant case, there is no question of any

inconsistency in the actual terms of the Acts enacted by

Parliament and the impugned Act. The only questions that

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 51 of 59

arise are whether Parliament and the State Legislature

sought to exercise their powers over the same subjectmatter

or whether the laws enacted by Parliament were intended to

be a complete exhaustive code or, in other words, expressly

or impliedly evinced an intention to cover the whole field."

and thereafter Section 18-G of the I.D.R. Act was

considered and it was held as under : "Even assuming that

sugarcane was an article or class of articles relatable to

the sugar industry within the meaning of Section 18-G of Act

LXV of 1951, it is to be noted that no order was issued by

the Central Government in exercise of the powers vested in

it under that section and no question of repugnancy could

ever arise because, as he has noted above, repugnancy must

exist in fact and not depend merely on a possibility. The

possibility of an order under Section 18-G being issued by

the Central Government would not be enough. The existence

of such an order would be the essential prerequisite before

any repugnancy could ever arise."

The aforesaid decision of the Constitution Bench,

therefore, clearly repels the submission of learned senior

counsel Shri Shanti Bhushan that merely because there is a

possibility of issuance of a Control Order under Section 30

of the Tea Act by the Central Government, the field is fully

occupied in connection with fixation of the maximum and

minimum prices of packed tea to be charged by manufacturer

or dealer, wholesale or retail or regulating the maximum

quantity of packed tea to be sold to any person. In a later

decision of the Bench of two learned judges to which one of

us, Sujata V. Manohar J., was a party, the very same view

has been reiterated relying upon the aforesaid decision in

Ch. Tika Ramji & Others etc. vs. The State of Uttar

Pradesh & Others (supra). The latter decision is rendered

in the case of SIEL Ltd. and Others vs. Union of India and

Others (supra), as noted earlier. It must, therefore, be

held that mere possibility of issuance of any future order

under Section 30 (1) of the Tea Act by the Central

Government, in the absence of any existing express order to

that effect, cannot be said to have occupied the field

regarding purchase and sale of manufactured tea and fixation

of maximum or minimum price thereof, or the location of such

sales. These topics cannot be said to be legitimately

covered by the Tea Act. Hence, the field is wide open for

the State Legislature to exercise its concurrent legislative

power under Entry 33 of List III for effectively dealing

with these matters. This is precisely what has been done by

the State Legislature by enacting the Market Act. The

insertion of item pertaining to Tea (leaf and dust) in the

Schedule, therefore, cannot be said to be an unauthorised

exercise on the part of the delegate of the State

Legislature, namely, the State Government which has

exercised its power under Section 39 of the Market Act.

Before parting with the discussion on the Tea Act, it is

also necessary to keep in view the history of tea industry

in India. It is apparent that the Tea Committee 1934,

Indian Tea Control Act, 1938 and Central Tea Board Act, 1949

had been made with a view to control export of tea and tea

cultivation. The Tea Act, 1953 was enacted to provide for

taking several functions of licensing and vesting it in the

Board and to exercise (1) control over tea cultivation and

(2) control over the export of tea and tea seeds. The

preamble of the Act states that it is intended to provide

for the control by the Union of the tea industry, including

the control, in pursuance of the International Agreement, of

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 52 of 59

the cultivation of tea and export of tea. Thus the

objective of the Tea Act is focussed on tea cultivation/tea

export and establishment of tea manufacturing plants. It is

quite different from that of the Market Act, 1960 made by

the Bihar Legislature. The Tea Act has no concern with the

establishment of markets in the State of Bihar or other

States wherein packed tea could be sold in wholesale or

retail markets so as to ultimately reach the Indian

consumers. That takes us to the consideration of the

Control Orders issued by the Central Government in exercise

of its power under Section 30, sub-sections (3) and (5)

thereof. One such order is the Tea (Distribution and

Export) Control Order, 1957 which pertains to licensing of

the distributors and exporters of tea. Clause 3 requires

distributors carrying on the business of distributing tea to

have a licence under this order. The export of tea is not

touched by the Market Act as it has nothing to do with the

export of tea to other countries. Clause 9 says that the

licence given is personal and nontransferable. Clause 10

requires the licensee to pack and mark containers of tea in

the manner mentioned therein. The proviso is significant.

According to it, Clause 10 (c) does not apply to containers

containing not more than 20 Kg. net or such other weight as

to make it package tea for the purpose of the Central

Excises and Salt Act, 1944. Clause 11 provides that no

distributor shall distribute tea for sale which is not

packed and marketed as per Clause 10 and which is

adulterated or which makes false claim for such tea.

Thereafter, are noted various statutory requirements.

Firstly, the "distributor" contemplated by the 1957 Order is

a distributor in the commercial sense who as principal or

agent distributes tea to the wholesaler. Secondly, the

distribution controlled is linked with export. Thirdly,

since distribution is clubbed with export, it can at best be

said to be distribution which is being made in similar bulk

as exports. Fourthly, Form A provides for granting of

licence to carry on business in manufactured tea as

distributors at the places mentioned in the application.

While Form B deals with licence to carry on business in

manufactured tea as distributor/exporter of tea. It thus,

becomes at once clear that this Control Order does not

command licencee to carry on distribution of tea for sale at

any particular place/market. The aforesaid Control Order

has nothing to do with the establishment of markets for

selling packed tea. The requirement of packing and

marketing is again not contemplated by the Market Act, 1960.

Hence, it is difficult to appreciate how this Control Order

has occupied the field of regulation of sale and purchase of

packed tea in market areas. The next Order on which Shri

Shanti Bhushan, learned senior counsel for the appellant,

strongly relied was the Tea (Marketing) Control Order, 1984.

The said Order was promulgated by the Central Government in

exercise of its power under subsections (3) and (5) of

Section 30 of the Tea Act, 1953. It pertains to licensing

of the distributors and exporters. A mere look at the said

Order shows that it does not provide for any regulation of

sale and purchase of tea in the markets in different States

in India. Clause 3 requires registration of manufacturer of

tea and such manufacturer has to submit monthly return under

Clause 5 in Form C. Clauses 6 and 7 pertain to Organiser of

Tea Auction and Broker in Tea Auction. Clause 14 declares

that the licence is personal and non-transferable. These

persons are to maintain records as per Clause 16. Clause 17

directs the manufacturer to sell not less than 75% or such

higher percentage, as specified by the Board, of tea

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 53 of 59

manufactured by him in a year through public tea auctions in

India held under the control of organisers of tea auction.

Clause 19 exempts tea marketed directly by the manufacturer

as packet tea, instant tea, tea bags, aromatic tea and green

tea from computation of the total production under para 17.

Firstly, 1984 Order deals with manufacturers and organisers

of tea auction and brokers of tea auction and its basic

concern is to require them to have licences in the form of

authority. It is obvious that even this Order cannot

advance the case of the appellant. The next Order which was

pressed in service was the Tea Warehouses (Licensing) Order,

1989. The said order was also promulgated by the Central

Government in exercise of the power conferred by

sub-sections (3) and (5) of Section 30 of the Tea Act, 1953.

A mere look at the salient features of 1989 Order shows that

it has not covered the field tried to be occupied by the

Market Act. The public tea auctions contemplated by 1984

Order are those which are held under Clause 3 of the Tea

Warehouses (Licensing) Order, 1989. In fact Clause 14(7)

prohibits the warehouse owner from entering into any

transaction with the manufacturer/broker/organiser of tea

auction unless they have licences under the 1984 Order. The

public tea auctions are held in specified areas in Calcutta,

Siliguri, Guwahati, Cochin, Coimbatore and Amritsar. Thus,

the 1984 Order and the Tea Warehouses (Licensing) Order 1989

are basically concerned with the public tea auctions and the

licensing of manufacturer/broker/organiser of public auction

and warehouses with regard to holding of public tea

auctions. The warehouse is to be governed as per Clause

10(7) of the 1989 Order. This Order does not apply to the

storage godowns in the markets established under the Market

Act, 1960. But assuming it applies, the only effect would

be that the storage places in markets should be in

conformity with Clause 10(7). As far as obtaining of

licence is concerned, it has to be obtained by the warehouse

owner who carries on the activities of storing, blending or

packing of tea in the warehouse. Once the manufacturer or

trader takes space from the Market Committee in the godown

in the Market Yard, then he would be the warehouse owner

under Clause 2(1) of the 1989 Order and would have to take a

licence, as authority, from the Tea Board. Both under the

1984 Order and 1989 Order, there is no requirement to carry

on the business at any particular place/market. These

Orders do not concern themselves with establishment of

market or fixing place of business. The aforesaid Orders on

which reliance was placed by learned senior counsel Shri

Shanti Bhushan indicate that the Central Government in its

wisdom did not think it fit to issue any Order under Section

30, sub-section (1), clauses (a) & (b) and, therefore, kept

the field wide open in connection with the topics covered by

the said provisions of Section 30 for the State Governments

to exercise their legislative powers and enact suitable

legislations under Entry 33 of the Concurrent List III of

the Seventh Schedule of the Constitution. Our attention was

then invited by Shri Shanti Bhushan, learned senior counsel

for the appellant, to the Tea Waste (Control) Order, 1959.

Even this order is issued by the Central Government under

sub-sections (3) and (5) of Section 30 The Tea Waste

(Control) Order, 1959 applies only to tea waste as defined

in Clause 2 (f). Thereunder a person selling/offering for

sale/buying/holding any stock in tea waste is required to

have licence. (Clauses 3,4,5, and 6). Clause 9 provides

that licence is not transferable. Clause 13 provides that

licensee shall have in possession tea waste not exceeding

that which may be fixed by the licensing authority. Under

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 54 of 59

Clause 19A false declaration is prohibited. On a conjoint

reading of the aforesaid statutory Orders issued under the

Tea Act and the relevant scheme of the Tea Act, it becomes

at once clear that the provisions regarding fixation of

appropriate price at which blended and packed tea can be

sold to wholesalers in any established market or particular

place at which sale transactions of such manufactured tea

between the manufacturers on the one hand and the traders or

other wholesale producers/dealers on the other are outside

the sweep either of the Tea Act or of the relevant statutory

Orders framed under Section 30 by the Central Government

under the very same Act. The places at which public

auctions can be held in connection with sale of roasted tea

leaves to be purchased by manufacturers like the appellant

are the earmarked six places indicated in 1984 and 1989

Orders. These auctions have nothing to do with the later

sales of manufactured blended tea by such auction purchasers

of tea leaves, who manufacture packed tea by blending and

packing roasted tea leaves in their factories. The public

auctions as contemplated by these Orders, therefore, serve

out their purpose once the manufacturers of blended tea,

like the appellants, purchase roasted tea leaves in public

auctions. Once such purchased tea leaves are further

processed after blending and packed in suitable receptacles

for sale in local markets the stage is reached for

regulating such sale transactions by manufacturers of tea

when they are subjected to further auctions to be held in

the market areas wherein the licensed distributors and

manufacturers of tea can be subjected to the procedure of

Section 15, sub-section (2) of the Market Act. So far as

these later transactions are concerned, neither the Tea Act

nor any of the aforesaid Orders can hold the field. Such

sale transactions of manufactured tea in packed condition

will, therefore, necessarily have to be governed by the

provisions of the Market Act applicable to the area wherein

such sale transactions in favour of wholesalers or retailers

are effected by the stockists of the appellant operating in

the market areas concerned. It is also pertinent to note

that Section 15 of the Market Act gets attracted to such

transactions of sale. It is not possible to agree with the

contention of learned senior counsel Shri Shanti Bhushan

that once the retail prices are fixed by the appellant there

is no necessity of auctioning this tea in packed condition

as per Section 15 sub-section 2 of the Market Act. It has

to be kept in view that under the relevant Orders issued by

the Central Government under Section 30 of the Tea Act, as

noted earlier, the purchasers of tea have also to be

licensed. Such licensed purchasers can bid at the auctions

to be held as per Section 15, sub-section (2) of the Market

Act for purchasing such packed tea. At that stage, there is

no inconsistency or conflict between the earlier public

auction held under the relevant statutory Orders issued

under Section 30 of the Tea Act concerning roasted tea

leaves and the auction of packed and processed tea by the

appellant selling such commodities in the market areas

through their stockists to wholesale dealers and traders

operating in the market area and the market yard or

sub-market yards concerned. In this connection, we may note

one other submission of learned senior counsel Shri Shanti

Bhushan for the appellant. He submitted that for almost 16

years tea was not a scheduled item governed by the Market

Act. In fact, the Bihar Legislature did not think it fit to

include Tea (leaf and dust) as a scheduled item from the

inception but it is only the delegate, namely, the State of

Bihar in exercise of its power under Section 39 thought it

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 55 of 59

fit to introduce Tea (leaf and dust) as a scheduled item.

The procedure of Sections 3 and 4 has not to be followed

while undertaking this exercise. In this connection, it was

submitted that no reasonable person could have undertaken

such an exercise as tea was already a controlled commodity

under the Tea Act and also governed by the relevant Orders

issued thereunder. As we have seen earlier, under the

relevant provisions of the Tea Act and the operative Orders

promulgated thereunder the Central Government has left

untouched the field of regulation of prices and the location

of market places where such packed tea could be sold to the

wholesale dealers or even to the retailers. When that field

was wide open, the State Government in its wisdom, could

legitimately try to cover the filed by issuing appropriate

Orders under Section 39 of the Act. It cannot be said,

therefore, that such an exercise was totally ultra vires or

amounted to non-application of mind. In fact, what the

Central Government should have done and did not do by

issuing appropriate Orders under Section 30, subsection (1)

Clauses (a) & (b) of the Tea Act could legitimately be done

by the State Government. It was not required to wait

indefinitely till the Central Government could find time to

issue such an Order. Shri Shanti Bhushan, in this

connection, further submitted that if that is so, then if in

future the Central Government wakes up and issues such an

Order, would the then existing Entry in the Schedule

regarding tea get superseded or become inoperative ? This

is a hypothetical question raised which does not require any

answer obviously at this stage. As and when in future such

an eventuality occurs, then the question of continuation of

regulation of sale and purchase transactions of Tea (leaf

and dust) by retaining this item in the Schedule may have to

be examined. But as the statutory provisions stand at

present, in the absence of any such existing Order under

Section 30 sub-section (1) Clauses (a) & (b) by the Central

Government, the field remains wide open and at least it was

definitely open when the State Government introduced the

Entry of Tea (leaf and dust) in the Schedule to the Market

Act in 1976. This exercise, by no stretch of imagination,

could be said to be unauthorised, illegal or amounting to

non-application of mind. The second contention, therefore,

is answered in negative against the appellant and in favour

of the respondent. That takes us to the consideration of

contention no.3 POINT NO. 3 : Once it is held that the

Market Act covers the transactions of sale of packed blended

tea in sealed packets and receptacles by the appellant's

stockist in the market areas concerned especially when these

transactions take place in the market yard or sub-market

yards as laid down by Section 15 of the Act which remains

fully operative to cover such transactions, there is no

escape from the conclusion that the entire infrastructural

facilities for regulation of such sale transactions as made

available by the market committee concerned would enure for

the benefit of sellers of such packed blended tea. It is

also pertinent to note that so far as the appellant is

concerned, all that is required of it is to take licence for

selling packed tea in market yards, sub-market yards from

the market committee concerned. The appellant is not

required to bear the burden of any market fee. As per

Section 27 of the Act, the burden of market fee is to be

borne by the purchasers of such packed tea, namely, the

wholesale dealers licensed to purchase such tea as per the

Central Orders mentioned earlier. Such purchasers have not

brought in challenge levy of market fee on them. So far as

the appellant is concerned, once its stockist sells the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 56 of 59

packed tea in the market yard or sub-market yards maintained

by the market committee, the entire infrastructural

facilities made available by the market committee to all the

purchasers and sellers of agricultural produce in the market

yard, would automatically become available to the

appellant's stockist who sells its goods, namely, packed tea

in the market yard or sub-market yards concerned. In this

connection, it has also to be kept in view that

establishment of markets and maintenance thereof is a topic

of legislation squarely covered by Entry 28 of List II of

the Seventh Schedule. For maintaining such markets, the

market committees obviously have to spend large amounts for

providing necessary infrastructure for the benefit of those

who use such established markets. In this connection,

Section 30 of the Market Act, as noted earlier, becomes

relevant for our consideration. Amongst others, the Market

Committee Fund has to be utilised under Section 30 for the

following purposes :

"(i) the acquisition of a site or site

for the market;

(ii) the maintenance and improvement of the market;

(iii) the provision and maintenance of standard

weights;

(iv) the construction and repair of buildings [check

posts, market gates and other fixtures] necessary for the

purpose of such market and for the health, convenience and

safety of the persons using it;

(v) Xxxx xxx xxx

(vi) Xxxx xxx xxx

(vii) Xxxx xxx xxx

(viii) The construction, repair and maintenance of

means of communication which are useful for the purposes of

[regulation, control and] development of a market or for the

convenience and safety of the persons using it;

(viii-a)link roads connecting the main road from the

villages in the Market Area of the concerned market

committee shall be constructed on priority basis from the

Development Fund to facilitate the farmers to go to and from

the villages;]

(ix) the planting and rearing of trees, and making

arrangements for providing to the persons and cattle coming

to a market and like purposes;

(x) Xxxxxx xxxxx xxxxx

(xi) Xxxxx xxxx xxxxx

(xii) Xxxxx xxxx xxxx"

All these provisions clearly indicate that once the

transaction of sale or purchase of any agricultural produce

is governed by the Act and once Section 15 of the Act

applies to such transaction, the entire machinery of the Act

would get attracted to regulate such transaction and the

complete infrastructure for which provisions are made by the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 57 of 59

market committee including the facilities available at such

markets would become available to the purchasers and sellers

of such commodities in the market. For providing these

infrastructural facilities the market committee has to spend

from its funds. This would supply adequate quid pro quo for

levying market fee on the buyers of commodities sold at its

market yard or sub-market yard. It is, therefore, not

possible to agree with the learned senior counsel for the

appellant that there is no quid pro quo underlying

transactions of sale of packed tea by the appellant's

stockist in the market yard or sub-market yards maintained

by the market committee concerned. The third contention,

therefore, is to be answered in affirmative against the

appellant and in favour of the respondent. Before parting

with this appeal, it is necessary to briefly deal with the

written submissions furnished in support of the appeal by

learned counsel after arguments were over and which have

already been dealt with by us in detail hereinabove. So far

as the written submissions filed by the appellant on 8th

May, 1999 are concerned, we may state that to the extent

they tried to re-iterate what was submitted earlier and

considered by us, will stand repelled in the light of the

detailed reasons recorded by us earlier in this connection.

Processing of packed tea manufactured out of tea leaves

purchased by the appellant in the auction at six places

obviously is not covered by the applicability of the Market

Act in the present case. All that the Market Act seeks to

cover is the sale transactions pertaining to packed tea

branded and marked in accordance with the regulations made

by the Tea Board to the extent these sealed packets are sold

by the appellant within the market area. These transactions

of sale of packed tea, as discussed by us earlier, would

squarely attract the applicability of the Market Act as they

take place within the market area governed by the Market

Act. As seen earlier, manufacturing activities concerning

this packed tea has no relevance for arriving at an

appropriate answer to this question. Contention raised in

para 2 of the written submissions is also besides the point,

whether other States levy market fee or not is not at all

relevant. The Bihar legislation may be a pioneer in this

field. The short question is whether the Market Act can

govern the transaction of sale of packed manufactured tea by

the appellant within the market areas in the State of Bihar

? So far as this question is concerned, the aforesaid

contention can be of no assistance to the appellant.

Contention in para 3 of the written submissions about the

basic object of the Bihar Market Act and whether it should

ensure only the protection to the grower of the agricultural

produce within the market area stands repelled by a

Constitution Bench Judgment of this Court to which a

detailed reference has been made in the earlier part of this

judgment. Para 4 of the written submissions deals with

various statutory provisions of the Tea Act of 1953 and the

relevant Control Orders thereunder. As discussed earlier,

the schemes of the Tea Act and the Control Orders do not

cover the field carved out by the Market Act for bringing

within its sweep transactions of sale of agriculture produce

encompassed by the wider definition thereof under that Act

insofar as such produce is sold within the market area to

which the Market Act applies. It is difficult to appreciate

the contention in para 8 of the written submissions to the

effect that the State had not applied its mind in bringing

tea within the sweep of the Market Act in exercise of its

power under Section 39 of the Act. As discussed earlier,

this contention is devoid of any substance. Contention in

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 58 of 59

para 9 of the written submissions is also devoid of any

merit. It is not the case of the appellant that the sale of

manufactured tea in Bihar markets within the market area of

the concerned market committee requires the appellant to

bear the burden of the market fee. It is obvious, as seen

earlier, that charge of market fee is on the buyer of

branded tea and not on the seller thereof, like the

appellant. The purchasers of branded market tea

manufactured by the appellant who purchase the said produce

in market areas governed by the Market Act have made no

grievance in this connection. Even otherwise, as seen

earlier, once the wide definition of "agricultural produce"

as found in the Market Act governs such sale transactions

and when Section 15 of the Act covers such transactions, the

charge under Section 27 would obviously get settled on these

transactions. As a logical corollary thereof, even if the

appellant may have to act as a collecting agent for the

market committee concerned as per its legal obligation in

given circumstances, that by itself cannot exonerate it,

once the statutory scheme of the Act covers transactions of

sale of branded tea carried out by the appellant in the

market area governed by the Market Act. Contentions found

in para 10 of the written submissions are to be stated to be

rejected. Once the sale transactions of packed tea are

governed by the sweep of the Market Act, and once such sale

transactions have to be regulated as per the machinery of

the Market Act, on the applicability of Section 15 of the

Act, the entire infrastructure available for regulating such

sale transactions at the market yard or sub-market yards

whose benefit would obviously be available to the appellant

cannot entitle the appellant to contend that its fundamental

right under Article 19(1)(g) of the Constitution is

violated. To say the least, it would be a reasonable

restriction on exercise of such a right. It is pertinent to

note that the appellant has not challenged the vires of

Section 27 of the Market Act. It is difficult to appreciate

the submission that compelling the sealed and packed tea to

be brought into the market yard and to be auctioned thereof

cannot be considered to advance the public interest in any

manner. Public interest obviously gets advanced as the sale

transactions will get regulated by the infrastructural

machinery at the market yard and sub-market yards concerned,

where such transactions take place. The contention that the

Bihar Act would be unconstitutional cannot be countenanced

for twin reasons. Firstly, such a contention was not

canvassed either before the High Court or before this Court

in the present proceedings. Secondly, in any case, on the

applicability of the Act once the transaction of sale of

packed tea takes place in the market area, it cannot but be

said to be imposing reasonable restriction under Article 19

sub-article (6) on the appellant's fundamental right. The

appellant, as a seller of manufactured tea, has not to bear

any burden of the imposed market fee on sale transactions.

All that it gets is the benefit of the infrastructural

facilities made available by the market committee for

regulating such transactions and if the appellant is likely

to get more price for its branded tea by subjecting its sale

transactions to auction instead of the said provision

adversely affecting the appellant would, on the contrary, be

more beneficial to it. Maybe, the appellant from commercial

point of view may not like to charge higher price for the

packed tea from its customers but that does not mean that

the infrastructural facilities made available by the market

committees to the appellant to get more price of its branded

tea if so desired by it can be construed in any way to be

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 59 of 59

adversely affecting its commercial business interests. For

obvious reasons, therefore, none of the contentions found in

the written submissions can advance the case of the

appellant's and they necessarily have to stand repelled.

These were the only contentions canvassed by learned senior

counsel in support of the appeal and as they fail, the

inevitable result is that this appeal fails and will be

liable to be dismissed. FINAL ORDER : As a net result of

the aforesaid discussion, therefore, the following orders

are passed : 1. SUGAR GROUP MATTERS: These appeals,

namely, Civil Appeal Nos. 398 and 399/1977, 234/1995,

8163/1994, 7432/1994, 2632-33/1982, 1282/1995 are allowed.

The judgments and orders passed by the High Court impugned

in these appeals are set aside. The Writ Petition No.

1250/1986 filed by the petitioner will stand allowed

accordingly as detailed in this judgment subject to the

riders mentioned hereinabove. Civil Appeal Nos.4500-05 of

1992, so far as they seek to challenge the levy of market

fee on sugar are concerned, will stand allowed. The

respective six petitions filed before the High Court dealing

with levy of market fee on sugar will stand allowed. Civil

Appeal arising out of S.L.P. (C) No.9684 of 1992 will stand

allowed to the extent Civil Writ Petition No.5974 of 1988

filed before the High Court deals with the contention

regarding market fee on sugar. Instead of the relief

granted by the High Court limiting to the non-levy of market

fee on sugar after 2.5.1977, it is directed that levy of

market fee on sugar for the entire period covered by the

writ petition will be treated to be unauthorised. This

judgment will have only prospective operation and will not

affect past transactions entered into prior to the date of

this judgment.

2. WHEAT PRODUCTS LIKE ATTA, MAIDA, SUZI, ETC. These

appeals, namely, Civil Appeal Nos. 2951, 2952 and 2953 of

1992, 3505 & 3506 of 1992 and 829/1993 are dismissed. 3.

VEGETABLE OIL MATTERS : Civil Appeal No.1427 of 1979 is

dismissed. Civil Appeal Nos.4500-05 of 1992, so far as they

deal with levy of market fee on Vanaspati Oil are concerned,

will stand dismissed and the High Courts decision in all

six writ petitions pertaining to levy of market fee on

edible oil shall remain confirmed. Civil Appeal arising out

of S.L.P. (C) No.9684 of 1992, so far it challenges the

levy of market fee on edible oil is concerned, stands

dismissed. The order of the High Court in C.W.J.C. No.5974

of 1984 concerning the vegetable oil is confirmed and the

writ petition to that extent will stand dismissed. 4. RICE

MILLING INDUSTRY: These Civil Appeals arising out of SLP

(C) Nos.3159-60 of 1994 are dismissed.

5. MILK AND MILK PRODUCTS This Civil appeal No.1880

of 1988 is allowed. The judgment and order of the High

Court are set aside. However, the past transactions will

not be reopened and this judgment will have only prospective

effect governing future transactions that are to be entered

into after the date of this judgment. 6. TEA MATTER This

Civil Appeal No.2532 of 1980 is dismissed. In the facts and

circumstances of the case, there will be no order as to

costs in all these appeals.