SREENIVASA GENERAL TRADERS & ORS. ETC. v. STATE OF ANDHRA PRADESH & ORS. ETC.

The Judgment of the Court was delivered by H SEN, J. These petitions under Art. 32 of the Constitution principally lay a challenge to the constitutional validity of the increase iQ the ~ate of market fee levied .by .the markei committees in· the State

; . SREEN!VASA G. TRADERS v. ANDHRA PRADESH {Sen, J.) 849

of Andhra Pradesh under sub·s. (I) of s. 12 of the Andhra Pradesh (Agricultural Produce and Livestock) Markets Act, 1966 ('Act' for A · short) from 50 paisa to rupee one on every one hundred rupees of the aggregate amount for which the notified agricultural produce, livestock or products of livestock are purchased or sold in their respective notified market. area~ on the ground that there was no quid pro quo i. e. there was no correlation between the increase in _the rate B of market fee ~nd the service rendered.

There are also certain subsidiary questions raised in these petitions viz. : As to (1) Thf constitutional validity of sub-s. (6) of s.7 of the Act which prohibits the carrying on of any transaction of purchase or sale of notified agricultural produce, livestock or pro- c ~· '-.-l"-' ducts of livestock in a notified market area or outside the market in that area as violative of Art. 19 (I) (g) of the Constitution. (2) As to the power of the market committees to levy inarket fee under sub-s. ( 1) of s. 12 of the Act at rupee one per hundred rupees of the aggre- gate amount for which such agricultural produce, livestock or products 'D of livestock is purchased or sold outside their markets but within their respective notified market areas. And·(3) Whether under r. 74 (I) of the Andhra Pradesh (Agricultural Produce and Livestock) Markets Rulos, 1969 (Rules' for short) if purchase or sale of paddy has suffered market fee in the hands of a rice miller, the subsequent purchase E . . or sale or rice by .a miller to a trader, or -by a trader to a trader, can be subjected to payment of market fee again.

Writ Petition No. I 286 of 1973 questions the validity of a notification issued by the State Government being G. 0. M. S. No. 2095 dated· October 29, 1968 declaring rice to be a notified agricul- F tural produce under s. 2 (i), and the n_otification issued by the State Government of Andhra Pradesh under sub-s. (4) of s. 4 of the Act being G.O.M.S. No. 971 dated July 16, 1971 declaring an area of 20 kms. around Kothavalasa to be the notified market area of the Kotha· valasa Agricultural Market Committee for the district of Visakha- patnam, as well as the constitutional validity of sub-s. (6) of s. 7 of G tlie Act and sub-s. (I) of s. 12 of the Act. Civil Appeal No. 1485 of !972 is directed against the judgment of the Andhra Pradesh High Court dited July 7, 1971.upholding the constitutional validity of sub-s. f6) of s. 7 of the Act and suh-s. (I) of s. 12 of the Act. Civil Appeal No. 2108 of 1972 is directed against the judgment of.the Andhra Pradesh High Court dated July 27, 1971 uphol\iing the increase in the rate of market fee from 13 paise per quintal to 25 paise per . •

850 SUPREME COURT REPORTS ( 1983] l s.c.R.

hundred rupees by the Agricultural Market Committee, Guntur in ·1·: -~ - '. '

A the year 1970 on the ground that there was no quid pro quo i. e. there ·:);.. was no correlation between the service and the increase in .the rate of market fee. Civil Appeal No. 2502 of 1981 is directed against the judgment of the Andhra Pradesh High Court dated April 21, 1981 upholding the levy of market fee at 50 paisa per hundred rupees on B cotton seeds by an agro-based industry engaged in the business of manufacture and sale of cotton seed oil. Civil Appeal No. 4013 of 1982 is directed against the judgment of the Andhra Pradesh High court dated September 17, 1982 upholding the increase in the rate of market fee from 50 paisa per hundred rupees to rupee one by the Agricultural Market Committee, Gunt\JI' upon the basis that there c need be no quid pro quo to justify the levy of such market fee.

It appears that initialiy in the year 1970 the bye-Jaws of all the market committees throughout the State provided for the levy of market fee @ 25 paisa for every hundred rupees of the aggregate amount for which the notified agricultural pro<)uce liyestock or products of livestock was purchased or sold. Sub~quently, in 1972 the rate of market fee was increased to 50 paisa per hundred rupees of the value of such agricultural produce, livestock or products of livestock. The State Advisory Board at its meeting held or January E 27 and 28, 1976 resolved to recommend the enhancement of the existing rate of market fee to rupees one per hundred rupees so as to enable the market committees to build up adequate finances to meet the increasing cost towards acquisition of land and establishment of markets with modern infrastructure facilities. The Director of Marketing accordingly addressed a letter dated February 16, 1976 to F all the agricultural market committees in the State inviting their attention to the resolution of the Advisory Board and requesting them to place the proposal for the enhancement of the existing rate of market fee from 50 paisa to rupee one before the market committees and communicate their consent for levy of the enhanced rate of market fee under sub-s. (!) of s. 12 of the Act read with bye-law No. G 44 (i) of the concerned market committee bye-laws. Accordingly, all the market committees throughout the State accepted the reco!il· mendation of the Advisory Board· and resolved to enhance the market fee from 50 paisa to rupee one requesting the Director to forward 'H the amended bye· law No' 24 (i) to the State Government for their - approval. J'he State Government of Andhra Pradesh by notification dated January I, 1978 published in the Andbra Pradesh Gazette dated February 23, 1978 accorded their approval to the amended bye law. . . •

SkBENIVASA o. TRADERS v. ANDHRA PRADESH (Sen, J.) SS! In pursuance of the impugned notification the market committees throughout the State began to levy market fee @ rupee oue per A hundred rupees.

Some of the petitioners challeged the increase in the rate of levy of matket fee from 5Ci paisa to rupee one by filing petitions under Art. 226 of the Constitution before the Andhra Pradesh High Court. All these writ petitions were disposed 'of by the High Court by its judgment in Sri Vijaya Cotton Traders and Ors. v. The State of Andhra Pradesh and Ors.(1) by which it negatived many of the ·sub- missions advanced before us .. Aggrieved by the decision of the High Court, the petitioners applied to this Court for grant of special leave 'under Art. i 36. After hearing learned counsel appearing for them c at considerable length, the Court dismissed the special leave petitions by its order dated May I, 1981. Undaunted by the dismissal of the special leave petitions, these petitioners along with others have now filed petitions under Art. 32' of the Constitution and secured a rule nisi on the pretext that similar questions were involved in Civil Appeal No. 2108 of 1972 and Writ Petition No. 1286 of 1973. D

~- The pattern of working of the market CQmmittees in the State is more or less the same although the circumstances in which each market committee is placed may differ. Facts as far as they can be gleaned from some of the writ petitions where counters have been filed may be briefly stated. The Malakpet Agricultural Market Committee, Hyderabad has in its counter in Writ Petition No. 2911- of 1981 furnished sufficient material to show the nature of services rendered by the Market Committee. It has established and has under its control various Markets in the twin cities of Hyderabad and Secunderabad viz. (i) Osmanganj Market for the purchase and sale of foodgrains and other notified agricultural produce, (ii) Jambagh Market for sale of fruits, (iii) Miralam Mandi and Sabzi Mandi for the sale of vegetables in Hyderabad, and Hissamgunj Market in Secunderabad for the pur9_hase .and sale 'Of foodgrains and vegetables. In all those markets, . the Committee is providing necessary facilities to the traders and produ~rs of agricultural produce. The Market Committee during the financial year 1981-82 incurred an expenditure of Rs. 8 28 crores for the construction of godowns, shops, platforms, formation of internal roads, approach roads, construction of press building'etc. So far as the Malakept area is concerned, the Osman- H gang Market was not sufficient for regulating the transactions of sale

(I) A.l.R. 1981 A.P. 203.

852 [i985] 3s.c.t ·-

and purchase of agricultural produce. The Market Committee there- A fore permitted the traders of Malakept to carry on their business from their respective licensed premises, subject to the supervision and control of the functionaries of the Market Committee. Due· to the location of the present markets in busy and congested places, it was not possible to extend the market areas any further. The .Committee B therefore acquired an area of 41 acres 22 guntas at Miilakpet on a permanent lease from the Andhra Pradesh Housing Board in April .

1980. It also applied for acquisition of 20 acres 20 guntas at Bahadurpura, 70 acres at Mansoorabad and 50 acres at Kukatpally. The aforesaid construction work for expansion of the markets was in progress when the writ petitions were filed. It appears from the statement of income and expenditure for the years 1978'79, 1979-80 - and 1980-81 that the income from the market fee even after its increase from 50 paisa to rupee one is not sufficient to meet the expenditure of the Market Committee . • D It is not always possible to work out with mathematical precision the amount of fee required for the services to be rendered each year and to collect only just that amount which is sufficient for meeting the expenditure in that year. In some years, the income of a market committee by way of market fee· and licence fee may exceed the ,E expenditure and in another year when the development works are in progress for providing modern infra-structure facilities, the expendi- ture may be far in excess of the income. It is wrong to take only one particular year or a few years into consideration to decide whether the fee is commensurate with the services rendtn d. An overall picture has to be taken in dealing with the question whether there is quid pro quo i. e. there is correlation between the irycrease in the rate of fee from 50 paisa to rupee one and the services renderd. The High Court in Sri Vijaya Cotton Traders' case, supra has dealt with the Nizamabad Agricultural Market Committee. It observed from the statement showing the details of income and expenditure for three years 1977-78, 1978-79 ·and <1979-80 that there was a· closing balance of about Rs. 39 lakhs at the end of the year 1977-78, of about Rs. 15 lakhs at the end of I 978-79'and of about Rs. 66 lakhs at· the end of 1979-80. The Market Committee filed a counter- affidavit showing that it had taken up constructional works with a spill over for the year 1978-79, estimated at over Rs. 16 lakhs and had to complete new works costing about Rs. 21 lakhs. That apart, the expenditure for development of the eastern portion of the market yard at SJ,raddhanand Gunj'. Nizamabad came to nearly Rs. 24 lakhs

- ct SREENIVASA G. TRADERS v. ANDHRA PRADESH (Sen, J.)

and that on the western side came to Rs. 134 Iakhs. It was stated that for the year 1977-78-the Committee derived a total income of 853

Rs. 18 Iakhs by way of market fees and licence fees and the expendi· · A .ture was to the tune of Rs. 16 Iakhs. At the end of the year 1977-78 the closing balance was Rs. 39 Iakhs but it was not sufficient to meet the cost ofland acquisition, cost for development works and providing of modern facilities. In these thousand and odd writ petitions, it is B difficult to expect each and every market committee to file their counter but some of the market committees like the Agricultural Market Committee, Guntur, Kothavalasa, Bheemavaram anc~ Ambajipeta have filed their counter showing the nature of servic~s rendered. Learned counsel appearing for the State Government has filed a statement showing the income and expenditure of the market c committees and a detailed chart indicating the nature·of development works undertaken by each. It is clear from the material placed before \ us that the income from the market fee even after its increase from '- 50 P.aisa to rupee one is not sufficient to .meet the expenditure of the market committees. D In all fairness to learned counsel for the petitioners, we must state attbe very outset that they do not challenge the levy of market ' fee of 50 paisa per hundred rupees in the year 1972 and have con· fined their submissions questioning the increase in the rate of market fee from 50 paisa to rupee one per hundred rupees of the price. E

In support of these petitions, three main contentions were raised, namely: (I) Sub-s. (6) of s. 7 of the Act which totally prohibits purchase or sale of any notified agricultural produce, live· stock and products of livestock in a notified market area, outside the market in that area, encroaches upon the right of citizens to carry on trade or business and is repugnant to Art. 19(i)(g) of the Consti· tution and is in consequence void. (2) The levy of market fee by the market committees under sub-s. (1) of s.12 of the Act on transactions of purchase or sale of any notified agricultural produce, livestock or products of livestock in the notified market area effected by_ the petitioners from their business premises therein but located outside the market prorer is per se illegal and unconstitutional as such levy of market fee is not correlated to any service rendered to them. {3) If paddy is brought by the producer into the notified market area for purposes of the de-husking and is sold to the miller, no market fee is Ieviable on subsequent transaction of sale ·or purchase of rfoe by the miller to a trader, or by a trader to a trader, or by a trader to a . ..

854 SUPREME COURT REPORTS [1983] 3 s.c.ll.

consumer. At any rate, there should be no levy of market fee on sale of toodgrains by a trader to a consumer. A

It is a common feature throughout the country· wherever t.here · is such marketing legislation whether be it the State of Andhra Pradesh or any other State, that there is the usual reluctance of the B traders who deal in foodgrains etc. to shift from their established trading premises situate in a notified market area to the market proper. The petitioners before us are all merchants licensed under sub·s. (I) of s. 7 of the Act to C2fry on the business of purchase and sale of notified agricultural produce, livestock and products of live· stock by different market committees in various parts of the State. c They are therefore subject to the restrictions contained in sub·ss. (I) and (6) of s 7 and the terms and conditions of their licence.

The object and purpose of the Andhra Pradesh (Agricultural Produce & Livestock) Markets Act, 1966' as reflected in the long title is to consolidate and amend the law relating to the regulation of purchase and sale of agricultural produce, livestock and products of livestock and the establishment of markets in connection there· with. The legislation is designed to eliminate middlemen in notified ·agricultµral produce, livestock and products of livestock, to protecl the producers of such agricultural produce, livestock and products of livestock from exploitation and to ensure to them a fair price for their produce. The material provisions of the Act may be referred to. s. 2 is the definition clause and defines the expression 'agricultural produce' in cl. (i) to mean anything produced from land in the course of agriculture or horticulture and includes forest produce or any produce of like nature either processed or unprocessed and declared by the Government by notification to be agricultural produce for the putposes of this Act. The term 'market' as defined in s. 2 (vi) means a market established under sub-s. (3) of .s. 4 and includes market yard and .any building therein. The expression.'notified area' as defined in s. 2 (xi) means any area notified under s. 3, and . 'notified market area" in clame (xii) meMs any area declared to be a market area by notification under s. 4. Under s. 3 of the Act, the State Government is empowered to declare their intention or regulating the purchase and sale of such agricultural produce, livestock or products of live- H stock in such area as may be specified in such notifications. After considering the objections and suggestions, if any, the State Govern· ment iS authorized to publish a final notification under sub-s. (3) thereof declaring such area to be a notified area. By sub·s. (I) of

'

SREENIYASA G. TRADERS v. ANDHRA PRADESH {Sen; J,) 855 s. 4, the State GovernlJ\ent is empowered to consti.tnte a market committee for every notified area which shall be a body corporate having perpetual succession and a common seal. The duty of enforc· ' ing the provisions of the Act and the ruk s and bye· laws is entrusted to a market committee under sub-s. (2) thereof. Sub-s. (3) of s. 4 em· powers the market committee to establish such number of markets as the State Government may, from time to time, direct for the purchase and sale of any notified agricultural produce, livestock or products of livestock. Sub-s. (3) of s. 4 provides such facilities in the market . as may be specified by the Government from time to time by a gene· ral or special order. Sub·s. (4) provides that the State Government shall, after the establishment of a market under sub·s. (3), declare, by notification the market area and such other area adjoining thereto 0 as niay be specified in the notification, to be a notified market . area for the purposes of the Act. Section 1 insofar as material provides as follows :

· "7. Trading etc., in notified agricultural produce, livestock and producrs of livestock in the notified area : D • (I) No person shall, within a notified area, set up, establish or use, or continue or allow to continued, any place for the purchase, sale, storage, weighment, curing, pressing or processing · of any notified agriculturi:il produce or products of livestock or for the purchase or E sale of livestock except under and in accordance with the conditions of a licence granted to him by the market committee. ' (2) Nothing in sub-se_ction (I). shall apply to a person purchasing notified agricu1tural produce, live- F stock or products of livestock for his own domestic .. consumption . • (5) A person to whom a licence is granted ·under sub- section (I) shall comply with the provisions of this Act, G ,the rules and the bye-laws made thereunder and the conditions specified in the lincence.

(6) Notwithstanding anything in sub-section (1), n'o person shall purchase or sell any notified agricultural produce, live;tock a11d products of livestock in a notified market area, out'\ide the market in that area."

856 SUPREME COURT REPORTS h983] 3s.c.li.. Section 12 ot the Act which provides for the levy of market fee and as an important bearing, reads : · - ·

"I 2 Lel'y offees by the market committees

(I) The market committee shall levy fees on any notified 8 agricultural produce, livestock or products of live- stock purchased or sold in the notified market area at such rate, not exceeding one rupee, as may be . specified in the bye-laws for every hundred rupees of the aggregate amount for which the notified agricul- tural produce, livestock or ·products of livestock is c I. purchased or sold, whether for cash· ot deferred payment or other valuable consideration.

Explanation I : For the purposes of this section~ all notified agricultural produce, livestock or products D of livestock taken out of a notified market area shall, unless the contrary is proved; be presumed to have been purchased or sold within such area.

E (~) The fees referred to in sub-section (I) shall be paid by the purchaser of the notified agricultural produce, . livestock or products . of livestock :

Provided that where the purchaser cannot be F identified, the fees shall be paid by the seller."

Under the scheme of the Act, the market committee is enjoined · by sub-s. (I) of s. 14 to pay into a fund called the 'Market Commit- tee Fund' all moneys received from the traders as market fee on ' G transactions of sale or purchase of agricultural produce taking place within the notified market area and they are to be credited in the nearest Government treasury or in a Bank, with the previous sanction of the State Government. All expenditure incurred by the market committee under and for purposes of the Act have to be defrayed out of the said Fund and any surplus remaining after such expef!diture, has to be invested in such manner as may be prescribed. Under sub·s. (2), every market committee has to pay to the State Government out of its Fund the cost of any :Special or additional

sREENIVASA G. TRADERS v. ANDHRA PRADESH (Sen, J.) 857

staff employed by the Government with their consultation. Where such odditional staff is employed for the purposes of one or more market committees, the State Government has to apportion the ·cost of such special or additional staff among the market committees concerned in such manner as they think fit. Under _sub-s. •(3), the market committee may grant loans to another market committee out of its surplus funds, with the previous sanction of the State Govern- B ment, at such rates_ of interest as may be prescribed. The purposes for which the market Committee Fund may be expended are set out in s. J 5 whiCh reads :

(i) the acciuisition of site for the market;

(ii) the establishment, maintenance and improvement c . of the market;

{iii) the construction and maintenance of buildings, necessary for the market and for the health, convenience and safety of the persons using the D market and maintenance of buildings under the control of the ~arket committee;

(iv) the provision and maintenance of standard weights and measures; E (v) the pay, pensions, le.ave allowance, gratuities, compassionate allowances and contribution • . towards leave allowances, pensions or provident fund of officers and servants employed by the market committee; F (vi) the payment of interest on loans that may. be raised for purposes of the market and the provisions of a sinking fund in respect of such loans;

(vii) the collection and dissemination of information regarding all matters relating to ·crop statistics and marketing in respect of notified agricultural produce, livestock and products of livestock; H (viii) schemes for the extension or cultural improvement of notified agricultural produce,

'

' 858 SUPREME COURT REPORTS [i983] 3 s.c..R.

livestock and products of livestock within the · A notified area, including the grant, subject to the approval of the Government, of financial aid to the schemes for such extension or improvement within such area, .undertaken by other bodies or individuals; . ,.. B (ix) propaganda for the improvement of agriculture, livestock and products of livestock and thrift;

(x) the expenses of, and incidental to, the conduct of 'elections; c (xi) the promotion of grading services;

(xii) measures for the preservation of foodgrains;

D (xiii) such other purposes as may be specified by the Government by general or special order. .. Sub's. (I) of s. 16 of the Act provides that there shall be formed for the whole of the State a fund to be called the 'Central Market Fund'. Every ~1arket committee is required to contribute E 10% of its annual income to the Central Market Fund and the contribution so paid shall be placed to the credit of the said Fund. Sub-s. (2) of s. 16 provides that th¢ Central Market Fund shall be vested in the State Government and deposited in the Government • treasury at Hyderabad. H is administered and applied by · the F Director of Marketing for all or any of the purposes set out therein . I VlZ,:

(i) grant-in-aid of the market committees for the. first year after their constitution under this. Act; G (ii) grant-in-aid of a deficit market committee for a period not exceeding three years;

H (iii) grant of loans to the market committees at such rates of interest as are charged on loans granted by the Government for · deveL:ipment purposes; and

SREBNJVASA G. TRADERS v. ANDHRA PRADESH (Sen, J.) 859

(iv) such other similar or allied purposes as may be specified by the Govrnment by general or special A order.

In exercise of ihe powers conferred by s. 33 of the Act, the State Government of Andhra Pradesh have framed the Andhra Pradesh (Agricultural Produce & Livestock) Marke(s Rules, 1969. B Chapter IV of the Rules deals with the powers and functions of the market committees and Chapter V deals with the regulation of trading. Chapter VI relates to the levy and collection of market fee, Chapter VII regulates the manner in which the Market Committee Fund shall be maintained and Chapter VIII the manner in which the market committees shall function. The Act and the Rules ·provide for a c complete scheme for the establishment and regulation of markets for the purchase and sale of notified agricultural produce, livestock and products of livestock in the State of Andhra Pradesh. We arc here concerned with Chapter V.

Marketing legislation which seeks to enable producers to act D a fair price for the commodities by eliminating middlemen and providing a regulated market,. cannot be said to impose 'unreasol}able • restriction' on the citizens right to do business unless it is clearly · ctablished that the provisions are too drastic to achieve the object for which it was enacted. In order to make effective •uch legislation . E for the control of a market, it would be reasonable for the legislature to control transactions between tra.ders and also the sale of produce grown outside the market area, if sold in the market area. In M.C.V.S. Arunachala Nadar etc. v. The State of Madras & ·Ors(') Subba Rao, J. speaking for t!ie Court, upheld the validity of the Madars Commercial Crops Markets Act, 19J3 which provided for the establishment of certain controlled markets for the sale of commer- cial crops and provided that after the establishment of such markets, no person would be al!01yed to establish any other market within the specified distances of the controlled markets so that the growers of such crops would be obliged to resort to the controlled markets only for the sale of their produce. The learned Judge thus explained the scheme, in these words :

"The Madras Commercial Crops .Markets Act was passed on July 25, 1933. The preamble introduces- the H •• (ll [1959] Suppl. 1 s.c.R. 92.

860 "SUPREME COURT REPORTS · [1983] 3 s.c.i...

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 Madars and for that purpose to establish markets and make rules for •their proper adminis(ration: The Act, therefore, was the result of a long exp!oratory investigation by experts in the field, conceived and enacted to regulate the buying and selling of commercial crops by providing suitable and regulated markets by eliminating middlemen and bringing face· to face the producer and the buyer so that they may meet on equal terms, thereby eradicating or at any rate reducing ihe scope for exploitation in dealings". c The learned Judge brought out the pwpose and object of the legislation and stated :

"The Act;'Rules and the Bye-laws framed thereunder D . have a long·term target of providing a net work of markets wherein facilities for correct · weighment are ensured, storage accommodation js provided, and equal powers of bargaining ensured, so that the growers may bring their commercial crops to·the market and sell them at reasonable prices. Till such· markets are established, the. said provisions, by imposing licensing restrictions, enable the buyers and sellers to meet in licensed premises, ensure correct weighment, make available to them reliable market 'information' and provide for them a simple machinery for settlement of disputes. After the markets are·bulit or opened by the marketing committees, within reasonable radius from the market, as prescribed by the Rules, no licence is issued; thereafter all growers will have to resort to the market for vending thier goods. The result of the implementation of the Act would be to eliminate, as far as possible, the middlemen and to give reasonable facilities for the growers of commercial crops to secure best prices for their commodities". . The Act did not directly prohibit the business of middlemen engaged in the trade of selling commereial crops, but the result of the operation of the Act was to. eliminate the middlemen. It was held that both the restriction as to the place where transactions of pur· chase or sale of commercial crops would . be effected and the total /

SREEN!VASA G. TRADERS v. ANDHRA PRADESH (Sen, J.) - 861

or substantial elimination of middlemen "as a reasonable restriction. in order to prevent the exploitation of the poor cultivators engaged in ·the production of C!Jmmercial crops which necessitated such marketing legislation. In Mohammad Hussain Gu/am Mohammad & Anr. v. The State of Bombay & Anr.(') and Mohammadbhai Khudabux Chhipa & Anr. v. The State of Gujarat & Anr.(') this Court held following the vie-w in Arunachala Nadar's case, supra, that the Bombay Agricultural Produce Markets· Act, 1939 did not violate Art. 8 19 (1) (g) and further upheld the levy of market fee as a fee charmed . for services rendered by the market committees. Following the decision in Arunacha/a Nadar's case, supra, the regulatory provisions of such marketing legislation throughout India have been upheld ' as imposing reasonable restrictions in the interests of the growers of agricultural produce in particular and of the community at !age. c The specific question whether a fee levied by a market committee under the Bihar Agricultural Produce Markets Act, 1960 was a fee or a tax came up for consideration before the Court in Lakhan Lal & Ors. etc. v. The State of Bihar & Ors. etc.(') In that case the entire area under the- jurisdiction of the Gaya Municipality and several villages around it were declared as the market area for the sale and purchase of certain agricultural produce. The Court repelled the contention that the market committee had not established any market inasmuch as a market must be a well·defined site fully equipped as a market and made no provisions for rendering. services, and observed :

• "According to counsel, a market must be a well defined site with market equipment and facilities. The argument overlooks the definition of market in section 2 (h). The market consists of market proper ·and the · F market yards. The market yards are well-defined enclosures, bulidings or localities but the market proper is under Section 2 (k) read with Section 5 (2) (ii) a larger area. For establishing a market it is sufficient to make a declaration under Section 5(2) fixing the boundaries of the G market proper and the market yards on the recommenda- tion of the market committee made under Rule 59(2). Under section 18 (!) the market committee must provide

H (I) [1962] 3 S.C.R. 659. (2) [1962] Suppl. 3 S.C.R. 875. (3) (1968] 3 S,C.R. 534, •

p. 862

for such facilities in the maket as the State Government A may from time to time direct. It is not shown that the market committee refused to ~arry out any direction of the Government. The market committee may, in view of Sections 28 (2) and 30 (i)~ acquire and own lands and bnildings for the market, but it is not always obliged to do so. The marke(Js established on the issue of a notifica• B tion under Section 5 (2) declaring the m~rket proper and the market yards".

The Court then rejected the contention that the fees levied by the market committee were in the natnre of a tax as the committee did c not render any services to the users of the market and therefore the levy of fee was illegal, and stated :

' "The market committee has taken steps for the establishment of a market where buyers and sellers meet and sales and purchases of agricultural produce take· place at fair prices. Unhealthy market practices are eliminated, market charges are defined and improper ones are prohibited. Correct weighment is ensured by employ- ment of licensed we_ighment and by inspection of scales, weights and measures and weighing and measuring instruments. The market committee has appointed a dispute committee for quick settlement of disputes. It has set up a market inteiligence unit for collecting and • publishing the daily prices and information regarding the -stock, arrivals and despatches of agricultural produce. It F has provided a grading unit where the technique of grad- fog agricultural produce iS taught. The contract from ·for purchase and sale. js standardized. The provisions of the Act and the Rules are enforced through inspectors and other staff appointed by the market committee. The fees charged by the market committee are correlated to the expenses incurred by it for rendering these services. The market fee of 25 naye paise per Rs. 100 worth of agricul- tural produce and the licence fees prescribed_-by Rules 71 and 73 are not excessive. the fees collected 'by the market committee · form part of the market .committee fund which is set apart and ear-marked for the purposes of the Act. There is sufficient quid pro quo for the • levies and they satisfy the test of ,'fee' as I.aid down in

SREENIVASA G. TRADERS v. ANDHRA PRADESH (Sen, J.) 863

Commissioner, Hindu Religious Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar of Sri Sirur Mutt (1954) A SCR 1005."

These observations are of some relevance as the Bihar Act is more . or less on similar Jines as the Act with which we are concerned. B The contention that the provision contained in sub-s. (6) of s. 7 of the Act which prohibits the carryin.g on of any transaction of purchase or sale of agricultural produce, livestock or products of livestock in a notified market area, outside the market ·in that area, infringes the right of a citizen to trade "as and where he wills" and therefore must be struck down as obnoxious to Art. 19 (I) (g) of the c Constitution. It is urged that the limitation which arbitrarily or excessively invades the right cannot be said to contain the quality ofreas'onableness and unless it strikes a balance between the freedom guaranteed in Art. 19 (1) (g) and the social contr"ol permitted by cl. (6) of Art. 19, it must be held to be void. The contention iS obvioulsy based on the following passage in Halsbury's Laws of England, 3rd D edn., vol. 32 p. 15 P'lra 9 which explains what freedom of business signifies,:

"It is the genesal principle of the common law that ·a man is entitled to exercise any lawful trade or calling· as andwhere he wills; and the law has .always regarded jeal- ously any interference with trade; even at the risk of interference with freedom of contract, as it is public policy to oppose all restraints upon liberty of individual action which are injurious to the i~terests. of the State."' F The fundamental right of all, citizens ~o practise any profession or to carry on any 9ccupation or trade or business guaranted under Art. 19 (1) (g) has its own limitations. The liberty of an individual to do as he pleases is not absolute. It must yield to the common good. Absolute or unrestricted individual rights do not arid cannot exist in any moder~ State. There is no protection of the rights themselves unless there is a measure of control and regulation of the rights of each individual in the interests of all.

in order to determine the reasonableness of a restriction B imposed upon th_e right guaranteed by Art. 19 (I) (g), the Court m11st have regard_ to the nature -and the conditions prevailing mthat trade ..

p. 864

A It is obvious that these factors must differ from trade to trade aud· no hard and fast rules concerning all trades can be laid down. In· other ...... r words, the pursuit of any lawful trade. or business may be made subject to such conditions and restrictions ·as may be deemed essential by the legislature to be in the interests of the general public. · Sub·s. (6) of s. 7 undoubtedly restricts the freedom-of a citizen to trade "as_ B and where he wills'.'; indeed it was enacted for the very purpose of controlling business in agricultural produce, livestock and products of livestock by the establishment of regulated markets iu counection therewith. It is difficult to concei.ve how the restriction imposed by sub-s. (6) of s. 7 which interdicts that no person shall purchase or sell any notified agricultural produce, livestock .and products of · c livestock in a notified market area, outside the market in that area, can be said to be arbitrary or of an excessive nature beyond what is required in the interests of the community. In Arunachala Nadar's case, supra, the Court repelled the contention based on similar provision that. a person who is having a licence to trade in or about ·the place where the market is fixed will be deprived of his livelihood D unless he resorts to the market and therefore it was au unreasonable . restriction upon his right-to do business. It was observed that such a provision was necessary for preventing the business in such .. agricultural produce being diverted to other places aud the object cif the scheme being defeated.

It is obviously in the interests of the producers of agricultural produce that they can get the best competitive prices in ail open marl,<et aud that they have not to. pay the middlemen. Sale or pur· chase of agricultural produce in such a market under the supervision F .and control of the market committee is likely to be in ready cash and therefore advantageous to the producers and the use of stan· · dard weight must eliminate the. possibility of his being victimized by malpractices. Supervision -of the operations· in the notified · market area can be more conveniently done if business is carried . on in a specified area or areas intended for that purpose. The Act is an integrated one and it regulates the buying and selling of notified agricultural produce, livestock and products of livestock from a centralized place. Tile petitioners being licensed traders under sub-s. (!)of s. 7 are bound by sub·s. (5) thereof to comply with the provisions of the Act, the Rules and the bye-laws framed thereunder. They are therefore subject to the restriction contained in sub-s. (6) .. of s. 7 of the Act. The non obstante clause in sub-s. (6) of s. 7 proviqes tb,at no perso11 shall purchese or sell any notified agricul·

SREENIVASA G. TRADEFS v. ANDERA PRADESH (S~n, J.) 865

·tural produce, livestcrk' ar,d proc~cts of livestock in a notified market area, outside the market in that area. Having regard to the _A purpose and· object of the legislation, it must be held that the f restriction imposed by sub•s. (6) of s. 7 of the Act is a reasonable restriction within the meaning of cl: (6) of Art. 19 on the funda- mental right of a citizen to carry on trade or business under Art. 19 (!) (g). It was sought to be impressed upon us that at any rate a tran- B saction between a retail dealer and. a consumer should not bt subjected to the restriction placed by sub-s. (6) of s. 7. The Legisla- ture has already .ta]>en care of thi's eventuality under sub-s. (2) of . s. 7 of the Act. .

That takes us to the contention that there is no liability cast on c the petitioners to pay market fee on transactions ofsale and purchase of notified agricultural produce, livestock and products of livestock taking place from their business premises in the notified market area, but outside the market in that area. Alternatively, the contention is that there is no correlation between the service and the increase in the rate of market fee from 50 paisa to rupee one per hundred D rupees of the .price. It is suggested that there were amounts held in ... surplus by almcst all the market ccmmittees and therefore there was no lawful justification for the increase in the rate of market fee. There • is no warrant for any of the contentions. E ·The contention that there is no liability cast .on the petitioners to pay market fee on transactions of sale and purchase of notified agricultural produce, Iivectock and products of livestock proceeds on a wrongful assumption that they can still carry on such trade from their premises in the notified market area, but outside the market in that area. In view of the express prohibition contained in. F sub-s. (6) of s 7, the petitioners cannot carry on such trade by not resorting to the market proper. It is pertinent to observe that a 1 ·contravention of the provisions of ·sub-s. (6) of s. 7 by persons engaged in the business of purchase and sale of notified agricultural produce, livestock and products of livestock is a penal offence under snb-s. (I) of s. 23 of the Act. The petitioners cannot be heard to G say by cpmmitting a breach of sub-s. (6) of s. 7 that since they effect their transactions in the notified market area, but outside the market, there is no liability to pay market fee because there is no quid pro. quo i. e. services are not rendered-outside the market. ' i H There is a fallacy underlying the argument that since the . services are rendered b~ the. market committees within the mar\<ct

866 SUPREME COURT REPORTS • [1983] 3 S.C.R.

proper, there is no liability to pay a market fee on purchase or sale taking place in the notified market area but outside the 'market.- The contention does not take note of the fact that the establishment of ) a regulated market for the purchase or sale ·of notified agricultural produce, livestock or products of livestock is itself a service rendered ·.to persons engaged hi the business of purchase or sale of such commodities. The duty of a malket committee constituted under sub-s. (l) of s. 4 of the Act does not end' with establishing such number of mark\"ts in the notified market area under the fisrt part of sub-s. (3) but also extends to the providing of such facilities in the market as the Government may from time to time by general or special order specify under the second part of sub-s. (3). In exercise c of their powers under s. 33 of the Act, the State Government have framed the Andhra Pradesh (Agricultural Produce & Live- stock) Markets Rules, 1969. Chapter V relates to ·Regulation of trading'. It would appear that Rules 48 to 53 are the machi- nery provisions for controlling the trade in notified agricultural produce, livestock and products of livestock in a notified area D while Rules 54 to 73 .impose restrictions on the carrying on of . all such trade in such area. It is clear from the provisions of ··s. 15 of the Act that the services to be renderd by the market ... committee and facilities to be provided are not confined to the market vroper but extend. throughout tM ·notified area. We find thai E Chinnappa Reddy, J. speaking.for himself and Jeevan Reddy, J. in lmmidisetti Ramakrishnaiah & Sons, Anakapal/i, represented by I. Ramakrishana Rao & Ors. v. 111e State of Andhra Pradesh. represe11- ted by its Secretary, Food & Agricultural by Penta Kofa Sitaram & Ors.(') repelled a similar contention and obsereved : F :'The argument proceed on the assumption that sales and purchases of notified agricultural produce, livestock and products of livestock in a notified market area could take place even 9utside the market. That is an unfounded assumption. Section 7 (6) of the Act prohibits sales or G purchases of notified agricultural produce, livestock and products of livestock outside the market. It says. "notwithstanding anything in sub-section (1 ), .. no person shall purchase or sell any notified .agricul- tural produce, livestock and products of livestock in a 8 notified market area outside _the market in· that area."

(I) {1976\ J.L.R. A.P. 878.

.

SREEN!VASA G. TRADERS v. ANDlIRA PRADESH (Sen, i.) 867 Another unfounded assumption o.f the learned coun- sel was that the activities of , the market committee and the facilities provided by it were confined by Act to the market area only. The establishment, maintenance and improvement of the market is one of the purposes for which the market committee fund might be expanded under Section 15 of the Act. The other services such as the provision and maintenance of standard weights and measures, the coilection and dissemination of information regarding all matters relating to crop statistics and mar- keting in respect of notified agricultural.produce, livestock and .products. of livestock, schemes for the extension . or cultural improvement of notified agricultural produce c including the grant of financial aid to schemes for such extension or improvement within such area undertaken by other bodies or individuals, prop~ganda for the improve- ment of agricultural produce, livestock and products of livestock and thrift, the promotion -of grading. services, measures for the preservation of the foodgrains, etc., are D not services which are confined to the market area only. They are services which are required to be performed by the market committee and which may be rendered throughout the nptified market 'area· without bein£ confined to the market." E

In Sri Vijaya Cotton Traders' case, supra, Alladi Kuppuswami, C. J. speaking for himself and Jeevan Reddy, J. followed the earlier decision in lmmidisetti Ramakrishnaiah & Sons' case, supra, and held, that the services to be rendered and the facilities to be provided by the market committees "extended throughout the notified market area without being confined to the market proper. The view expressed by the High Court in these two cases is clearly in consonance with the scheme of the Act. It appears that taking advantage of the ad- interim orders issued by this Court staying prosecution under sub-s. ( 1) of s. 23 of the Act, the petitioners who are big merchants engaged G in the business <if purchase and sale of agrkultural produce, livestock and products of livestock throughout the. State, arc with impunity committing breach of the prohibition contained in sub-s. (6) of s. 7 of the Act. We trust that the market committees in various parts of the State shall take immediate steps to shift all these traders to the B markets proper of the respective notified market ar~as in the interests

·•

868 SUPREME COURT REPORTS (1983J 3 S.C.R.

of the general public and shall also strictly enforce the provisions of I A the Act, the Rules and the· bye-laws framed thereunder. \ We are unable to appreciate that shere is irreconcilable conflict , between sub-s. (6) ofs. 7 and sub-s. (!) of s. 12. These provisions are meant to achieve two distinct and sparate objects and they B operate on two differ_ent planes. Sub-s. (6) of s. 7 imposes a restric- . tion on a trader licensed · to deal in notifiec! agricultural produce, livestock _and products of livestock. that no purchase or sale in such commodities shall take place in any notified area, outside the market ' in that area. The constitutional validity of rnb-s. (6) of s. 7 is beyond question as a aeasonable restriction in the interests of the general c public.· It would frustrate. the very object and purpose of the legisla- f • tion if such a restriction was not imposed on the traders. Sub-s. (1) of s. 12 is !l charging provision and it empowers a market committee to levy fees on any notified agricultural prcduce, livestock or products of livestock purchased or sold in the notified market area at such rate, not exceeding one rupee as may be specified in the bye. D laws, for every hundered rupees of the aggregate amount for which such commodities are purchased or sold, whether for cash or deferred . payment or other valuable consideration: Explanation I thereto by a legal fiction provides that all notified agricultural produc,, livestock or products of livestock taken out of a notified market area shall, E unless the contrary is proved, be presumed to have been purchased or sold within such area. Sub-s. (2) of s. 12 casts the liability to pay market fee on the purchaser of such agricultural produce, livestock or products of livestock.·

F It was. contended that many of the petitioners are food grains dealers licensed under the Andhra Pradesh Foodgrains Dealers Licensfog Order, 1964 issued under sub-s. '<O of s. 3 of the Essential ·Commodities Act, 1955 and that they are required under the terms ·of their licence to. carry on their business from their licensed premises, maintain stock registrer, exhibit pricelist etc. The petitioners having been licensed as dealers under sub-s. (I) of s: 7 are bound by the terms and conditions of their licence and al so they are subject to the restrictions imposed by sub-s. (6) of s. 7. They must comply with the provisions of the .Act, the Rules and the bye-laws framed thereunder, and effect all sales of notified agricultural produce, livestock and products of livestock under the supervision and contro~ of the market committee established ui1der. the Act.

. , . SREENIVASA G. TRADERS v. ANDHRA PRADESH (Sen, J.) 869

Arguments in these proceedings have revolved around certain observations of Untwalia, J, in Kewal Krishan Puri' and Anr v. State A of Punjab and Ors.( 1) where he, speaking for the Court, after referring to the judgment of Mukherjea, J. (as he then was) in the leading case of The Commissioner, Hindu Re/ii;ous Endowments, Madras v. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt(') known as the Shirur Mutt case, and the dictum of Latham, C. J. in Matthews v. B Chicory Marketing Board(') upon which it was based, and the subsequent dicisions on the subject, drew a distinction between a tax and a fee. Stress was particularly laid on these observations which, torn out of context, tend to suggest that there must' be actual quid pro quo between the prayer and the market committee i.e. there must be actual correlation between· the service rendered by a. market c committee and the prayer of the market fee, and that such service must be in relation to each transaction. Emphasis was placed on the following obJerv,itions of Untwalia, J. in Kewal Krishan Puri's case, supra : • D

1Copy pinpoint1. It must be shown with some amount of certainty,. reasonableness or preponderance of probability that quite a substantial portion of· the amount of fee realized is spent for the special benefit of its prayers. (p. 1230 G & H). E

3. A fee is levied essentially for services rendered and as such there is is an element of quid pr.a quo between the person who pays the fee and the public authority which imposes it. (p. 1232 G) F " -

2Copy pinpoint2. Service means service in relation to. the transactio1i\, property or the institution in respect of which he is made to pay the fee. (p. 1233 D) . G With utmost respect, these obser.vations of the learned Judge are not . .to be read as Euclid's theorems, nor as provisions of a statute. These observations must be read in the context in which they appear. · H (I) [1979) 3 S.C.R. l217. (2) [1954] S.C.R. I.COS. (3) 60 Com:L.Rc 263.

870 SUPREME COURT REPORTS [1983j 3 s.c.Ii..

It is however strenuously urged on the strength of these obser- A vations made in Kewal Krishan Puri's case, supra, that the market committees have not placed all"relevant material to show with reason- able certainty that 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, was being spent for rendering services B to the petitioners, nor was there any material to show that a sub- stantial portion of the fee realized was actually spent for rendition of any special benefit to them. In relation to the transactions of purchase and sale of agricultural produce, livestock and products of livestock effected by the petitioners,· it was urged that the market committees did not provide any additional facilities ·to justify the c increase in the rate of levy of market fee. There was therefore no quid pro quo between the increase in the rate of fee from 50 paisa per hundred rupees in the price to rupee one and the services rendered. To say the least, the contention is wholly. devoid of substance.

D There was quite some discussion at the Bar as to the binding effect of the aforesaid observations inade by this Court in· Kewal Kris/tan Puri's case, supra. With greatest respect, the decision in Kewal Krishan Puri's case does not lay down any legal principle of . general applicability. The decision in Kewal Krishan Puri's case is clearly distinguishable on facts. In that case, there was sufficient material showing that the income from the market fee in the State of Punjab had become a source of revenue, and .therefore the increase ' the· rate of market fee from Rs. 2 per hundred rupees to Rs. 3 was quashed. 'It· appears that the income of almost . all the. market committees was to the tune of several lakhs of rupees per year and every market co·mmittee was required under sub-s. (2) (a) of s. 27 to pay 30 per centum of its income to the Punjab State Agricultural Marketing Board as its contribution to the Marketing Development Fund ma,intained under s. 25 of that Act. Due to the progressive · increase in the rate of market fee from 0.50 p. to Rs. 2 per hundred rupees during the course of few years both the State Agricultural Marketing Board as well as the market committees throughout the State were left with huge surplus funds.. The State Government in. exercise of the powers vested under s. 26 ·(xvii) and s. 28 (xvii) directed the State Agricultural Marketing Board and the market ff committees throughout the State to contribute rupees one crore to Guru Gobind Singh Medical College at Faridkot. In the year 1974 under the directions of the State Government, all the. market· committees were required to deposit the surplus amounts lying with

••

s!i.EEN!VASA G. TRADERS v. ANDH~A PRADESH (Sen, J.} 871

them with the State Agricultural Marketing Board and the Board advanced an interest-free loan of rupees five· crores to the Punjab A State Cooperative Supplies. and Marketjng Federation, known as 'Markfed'. Apart from these unauthorized expenditure, the judgment reveals that there were surplus funds -to the tune of rupees nine crores with market committee~ and each .of them was required to make huge donations of Rs. 50, 000 and above to many educational institutions. B Besides, the statement of income and expenditure of the Board. for the year 1975-76 showed that a sum of Rs. I, 28, 000 was spent on general improvement of the municipal areas and a· sum of Rs. 95 lakhs· and odd was spent on ·setting up a gober gas plant. It would appear that the increase in the rate of market fee from Rs. 2 to Rs. 3 in the year 1978 was largely brought about to compensate the market c committees for having contributed Rs. one crore to the medical college at Faridkot. The decision really turned on the provisions of cl. (xvii) of ss. 26 and 28 of the. Punjab Agricultural Produce Markets Act, 1961 which permits diversion of the ~onies lying in ·the Market Committee Fund. and the Marketing Development Fund D by the market committees and the State Agricultural Marketing Board with the sanction of the Board or the State Government, as the case may be, for any purpose calculated to promote the general interests of the Board or the committees, or the national or public . interest. The decision of the Court was rendered by Untwalia, J. in these words : E

"How ill-conceived the second part of clause (xvii) is? Is it permissible to spend the market fees realized from the traders for any purpose calculated to promote the national or public interest ? Obviously not. No market F committee can be permitted to utilize the fund for an ulterior purpose howsover benevolent, laudable and charitable the object may be. The whole concept of fee will collapse if the amount realized by the market fees could be permitted to be spent in this fashion." G In the ultimate anal;ysis; the Court ·held in Kewal Krishan Puri' s case, supra, that so long as the concept of fee remains distinct and limited in contrast to tax, such expenditure of the amounts recovered by the levy of a mtrket fee cannot be countenanced in law. A case is an authority only for what it actually decides and not for what may logically follow· from it. Every judgment must be read as applicable to the particular facts proved, or assumed to be proved,

872. SUPREME COURT REPORTS (1983j 3 S.C.R.

since the generality of the expressions which may be found that there arc not intended to be expositions of the whole law but governed or qualified by the particular facts of the case in_ which such expressions are to be fou_nd. It would appear that there are certain observations to be found in the judgment ii\ Kewal Krishan Pu_ri's case; supra, which were really not necessary for. purposes of the decisio.n and go ,B beyond the occasion and therefore they have no binding authority though they may have merely persuasive value. The observation made therein seeking to· quantify the extent bf correlation between the amount of fee collected and the cost of rendition of service, namely : "At least a good and substantial portion of the aniount collected on account of fees, may be in the neighbourhood of two· c thirds or three-fourths, must 'be shown with reasonable certainty as being spent for rendering services in the market to the payer of fee", appears to be an obi1~r.

The traditional view that there must be actual quid pro quo for D a fee has uader gone a sea change in the subsequent decisions. The distinction between a tax and a fee lies pril:narily in the fact that a tax is levied as part of a common burden, while a fee is for payment ., of a specific benefit or privilege although the special advantage is secondary to the primary m_otive of regulation in public interest. If the element of revenue for general purpose of the State predominates, the levy becomes a tax. In regard to fees there is, and must always be, correlation between the fee collected and the service intended to. be rendered. In determining whether a levy is a fee, the true test must be whether its primary and essential purpose is to render specific services to a specified area or class ; it may be of no consequence that the State may ultimately and indirectly ·be benefited by it. The power of any legislature to levy a fee is conditioned by the fact that it must be "by and large" a quid pro, quo for the· services rendered. Howevfr, correlationship between the levy and the services rendered. "expecNd is one of general character and not. of mathematical exacti· tude. All that is necess'ary is that there should be a "reasonable relationship" between the levy of the fee and the services rendered. If authority is needed for this proposition, it is to be found in the several decisions of this Court drawing a distinctbn between a 'tax' and a 'fee'. See : The Commissioner, . Hindu Religious Endowmentv, Madras v. Sri Lakshmindra Thirtf1a Swamiar of Sri H Shirur Mutt, supra: H. H. Sudhundra Thirtlia Swamiar v. Commissioner for . Hindu Religious and Charitable Endowments,

, f SREEN!VASA G. TRADERS v. ANDHRA PRADESH (Sen, J.)

Mysore;{') The Hingir-Rampur Coal Co. Ltd. v. The State of Orissa and Ors;(') H. H. Shri Swamiji of S/1ri Admar Mutt etc. v. The Commissioner, Hindu Religious and Charitable Endowments Depart· ment and Ors. :(')·Southern Pharmaceuticals and Chemicals Trichur 873

A

and Ors. etc. v. State of Kera/a and Ors. etc.(') and Municipal Cor• poratinn of Delhi and Ors. v. Mohd. Yasin."(') B There is no geneic difference between a tax and a fee.· Both are .compulsory exactions of money by public authorities. Compulsiou lies in the fact that payment is enforceable by law against a person in spite .of his unwiliinJlness or want of consent. A levy in the nature of a·fee does not cease to be of that character merely because there is an element of compulsion or coerciveness present in it, .nor is it a -.,· . postulate of a fee that it must have . direct relation to the actual service rendered by the ·authority io each individual who obtains the of benefit thc·service.' It is now increasingly realized that merely because the collections for the services rendered or grant of a privi-. lege or licence are t.1ken to the consolidated fund of the State and not separately appropriated towards the expenditure for rendering lhe service is not by itself decisive.· Presumably, the attention of the Court in the Shirur Mutt case was not drawn to art. 266 of the Constitution. The Constitution no where contemplates it to be an · essential element of fee that it shou.ld be credited to a separate flind and not to the consolidated.fund. It is also increasingly realized that the element of quid pro quo in the strict sense is not always a sine qua non far a fee. It is needless to stress that the element' of quid pro quo is not necessarily a_bsent in every tax : Constitutional Law oflndia by H. M. Seervai, Vol. 2, 2nd Edn., p. 1252, para 22.39. F . , Viewed fro!ll this perspective, the conclusion is inevitable that the observation ; made in Kewal Krishan Puri's case that "At least a good. and substantial portion of the amount collected on account of fees, may be in the neighbourhood of two-thirds or three-fourths must. be shown with ·reasonable certainty as being spent for' rend~rin~ G services in the market to the payer .of fee" was not intended to lay down a rule ofuniv~rsal application but it was a decision which must·

' (I) (19631 Supp. 2 S.C.R. 302. (2) [195112 S.C.R. 537. (J) (198011 s:c.R. 368. (4) [19821 I S.C.R. 519. (5) A.LR. 1983 S.C. 617. H

p. 814

I

be confined to the special facts of that case. Otherwise it may affect the validity of many similar marketing legislations nndertaken during the past 50 years relating ·to the regulation o_f purchase and sale of agricultural produce, livestock and . products of livestock and the establishment of markets in connection there with and the levying of a market fe? in lieu thereof towards the cost of rendering such service by different States on the .recommenJa tions made in the Report of the Royal Commission on Agriculture in India, 1928 · and of those of many high-powered bodies of experts constituted from time to time by the Centre and the different States. In the subsequent decision ·in Ramesh Chandra etc. v. State of U. P. etc.,(') Untwalia, J. speaking for the Court has considerably narrowed down his obser· c vations in Kewal Ktishan Puri's case at p. 116 of the Report saying that 'the free realized from the payer of the fee has, by and large, to be spent for his special benefit and for the benefit of other persons connected with the transactions of purchase and sale in the various .Mandis.' If the quantum of quid pro quo was to be quantified to the extent as indicated in Kewal Krishan Puri's case for the levy of a fee or cess, it may affect many other beneficient legislations brought in by the Centre and the States For rendering service to a specified area or a specified class or persons or trade or business in any local area. There are many other observattions in Kewal Krishmt Puri' s case which were really not necessary for purposes .of the decision in tliat case and need to be clarified. The word 'fee' cannot be said to have acquired a rigid technical meaning during the past three decade• and should not be given such a narrow construction.

The levy of market fee nnder sub-s. (1) of ·s. 12 of the Act is correlated to the purposes mentioned in s. 15 of the Act. All the moneys received by a market committee from the traders as market fee on transactions of sale or purchase of agricultural produce, livestock and products of livestock taking place within the notified market area have to be paid into a fund called the Market Com- mittee Fund under sub-s. (IJ of s. 14 of the Act .. All expenditure incurred by the market committee under and for purposes of the Act have to.be defrayed' out of the said Fund and any surplus remaining after such expenditure, has to be invested in such manner as may be prescribed. Under sub·s. (2) .thereof, every market com- mittee has to pay to the State Government out of its fund the cost of any special or additional staff employed by the Government with ff

(_I) [1980] 3 S.C.R. 104.

SREENIVASA G. T.RADERS v. ANDHRA PRADESH (Sen, J.) 875

their consultation. Under sub-s. (3) the market committee may grant loans to another market committee out of its surplus funds, with the previous sanction of the State Government, at such rates of interest as may be prescribed. - The purpose Tor which. the pro- ceeds of the Market Committee Fund can be expeuded are set out in s. 15 of the Act. There can be no doubt that the purposes men- tioned viz. acquisition of site for the market, establishment, main- tenance and improvement of the market, construction of bu.ildings, B ·maintenance of standard weights and measures, promotion of grading services, measures for the preservation of foodgrains etc. etc. are all purposes which are extremely beneficial to the growers and the traders. 1'

c In the present case, there is no allegation anywhere by any of t)le petitioners, nor was any contention advanced that there was any unauthorized expenditure by any of the market. committees for purposes not authorized by the Act. There is only a bare assertion on their part that there are surplus funds available with the market D committees and therefore the increase in the rate of market fee from 50 paisa per hundred rupees to rupee one was without lawful justi- fication. From the material on record it is quite apparent that the income from the market fee derived from some of the market com- mittees is not sufficient to meet the- expenditure incurred by them. That apart, when the petitioners concede that they do not challenge the levy of market fee @50 paisa per hundred rupees in the year 1972, the.re can be no basis for challenging the increase in the rate of market fee from 50 paisa to rupee one in 1978. Surely the cost of rendering services has correspondingly increased with the fall in the value of rupee. In the economic sense, 50 paisa of 1972 is certainly equivalent to at least rupee one of today, if not more. F

There is no material placed on record by the petitioners to show that the market committees are ·rendering no service. Under the scheme of the Act, there are certain obligatory duties of a market committee. Sub·s. (3) of s. 4 provides that every market committee shall establish in· the notifie~ area such number of markets as the Government may, from time to .time, direct for the purchase and sale of any notified agricultural produce; livestock or products of .,,. livestock and ~hall provide such facilities in ihe market as may be specified by the Government from time to time by a general or special order. Chapter V provides for various regulatory measures in Rules 54 \o 73 for the control of a market in that correct weigh·

p. 876

ments would be secured, storage facilities provided and equal powers of bargaining assured so that the growers may bring their agricul- tural produce, livestock and. products of livestock to the market and sell them at a reasonable price. There was not a whisper during the course of the arguments that the market co)nmittees were not pro· viding th~ services as enjoined by Rules 54 to 73: A!l that was said is that there was no due observance of the directions issued by the State Government and the Food & Agricultural Department GOMs. No. 719 dated December 27, 1979 drawing the attention of the market committees to certain basic amenities like drink.ing water for users of the market, drinking water for the cattle, shed for use of the users of yards etc. We were n9t referred to any specific instance c where any of the market committees. have not provided these basic amenities. Much empliasis ·was however laid on the second part of the aforesaid G.O. which reads:

"The Governor of Andbra. Pradesh also directs the market committees to provide the other facilities men- tioned below at the market yards in course of time as and when funds permit.

I. Rest House for Ryots.

E 2. Electrification of Market yard.

3Copy pinpoint3. Auction-cum-Weighing shed.

4Copy pinpoint4. Auction Platforms.

5Copy pinpoint5. Internal Roads.

6Copy pinpoint6. Telephone Booth.

7Copy pinpoint7. Canteen. F

8Copy pinpoint8. Office Building.

9Copy pinpoint9. Godown for use of Producer-Seller.

10Copy pinpoint10. Approach Roads. H . 11. Library-cum-Club Building. /

12Copy pinpoint12. Resting House for traders."

SREENIVASA G. tRADERS v: ANDHRA PRADESH (Sen, J.) 877

~t will be noticed that these facilities are to be provided by the market committees in course of time 'as and. when funds permit'. A It is needless to stress that the question of providing these facilities would depend on the financial capacity. of each market committee. That would depend on whether there are sufficient· funds available its at disposal in· the. Market Committee Fund. We are not im- pressed by the submission that if a market committee does not have ,3 .: sufficient funds to provide the special amenities, it should borrow loans from the State Government under sµb-s. (1) of s. 18 of the Act or the State Government should provide grant-in-aid to snch market committee under .sub-s. (2)(iii) of s. 16 of the Act. If any particular market committee persistently makes default in not performing the duties imposed on it by or under the Act, or neglects or refuses to c carry out any ·general or special direction issued by the State Govern- 1· . ment under sub-s. (3) of s. 4 as regards providing of facilities or abus~s its powers, the "petitioners have t!ie remedy to take up the matter with the State Government. The Stat~ Government has ample power under s. 22 of the Act to direct the supersession of such a market committee. D ·- It is obvious that the phrase 'prayer ·Of the Jee' used by this Court in the authorities referred to above represents collectively the class of persons to whom the benefit . is directly intended by the establishment of a regulated marke,t in notified agricultural produce, livestock of products of livestock and not the actual individual who· belongs to that class i.e. the trader: · No doubt, the petitioners initially pay the market fee under sub-s. (2) of s. 12 of the Act, but there is passing on of liability by them to the consumer: as part of the price. The observation in Kewal Krishan Puri's case, supra, as to the service to the 'payer of the fee' must, therefore, be understood as meaning service to the users of the market. The services are rendered te the users of the market i.e the growers of agricultural produce, livestock or products of livestock and persons. engaged in the business of purchase, or sale of the same. · G ,. The contention that the increase in the rate of market fee I levied by the market committees in the State under sub-s. (!) of s. 12 of the Act from 50 paisa to rupee one was illegal and invalid on the H ground that there was no quid pro quo i.e. there was no correlation · between the increase in the rate of market fee and the service rendered must therefore fail.

878 SUPREME COURT REPoRTS (1983J 3 S.C.R.

There still remains the question that if purchase or sale of paddy has suffered market fee in the hands of a rice miller, whether subsequent purchase or sale of. rice by a. miller to a trader or by a· trader to a trader should again be subjected ··to· payment of market fee. The contention is that under Rule 74( I) of the Andhra Pradesh (Agricultural Produce & Livestock) Markets Rules, 1969 no such B market fee is payable on rice produced from paddy. The same is the contention with regard to cotton seed extracted from cotton. Rule 74(1) of the rules reads as follows :

"74. Market Fees : (!) The fees leviablc under sub-section (!) of section 12 on notified agricultural c produce, livestock and products of livestock, if paid to a Market Committee within the State shall not be collected by another Market Committee when such notified agri- cultural produce, livestock or products of livestock are brought into the notified market area of another Market D Committee for the purpose of processing, pressing pack- ing, storage, export and on sales effected in the course of commercial transactions bc:twecn the licensed traders, and the licensed traders and consumers subject to produc- tion of such evidence as may. be prescribed in the bye-laws about the payment of market fees from where it \Vas E brought:

Provided that the fees shall ·be levied on notified agricultural produce, livestock or products of livestock when such agricultural produce, livestock or products of livestock are sold in auction or in any other manner F prescribed in the bye-laws in the Market either directly or through Commission Agents even though purchased · already in the same market or same .other market or _place within the State".

G His contended that the whole object and purpose behind Rule 74(1) is to prevent multi-point levy of market fee on the same commodity. The submission that no such fee is payable on rice is also based on the following observations of Untwalia, J.; speaking for the Court in Ramesh Chandra's case, supra : H "If paddy is purchased in a particular market area by a rice miller and the same paddy is converted into

SREENIVASA G. TRADERS v. ANDHRA PRADESH (Sen, J.) '. 879

rice and sold then the rice miller will be liable to pay market fee on his . purchase of paddy from the agricul- turist:producer under sub-Clause (2) of section 17(iii)(b). He cannot be asked to pay market fee over again under sub-clause (3) in relation to the transaction of rice".

The learned Judge then went on to say : B . "If, however, paddy is brought by the rice-miller from another market area, then the Market . Committe of the area where paddy is converted into rice and sold will be entitled to charge market fee on the transaction of sale. in accordance with sub-clause (3)". c . The view that the market fee is payable on pnrchase or sale of . rice stems from the premise that since paddy is dehusked into rice there cannot be levy of market fee at both the stages i'. e. on purchase of paddy by a. rice milier from a producer and again on purchase or sale of rice by a rice miller to a trader or by a trade! to .a trader. D · the question is whether the fee ispayable at both the.· stages ? It would all depend upon the scheme of each Act. The decision in Ramesh Chandra's case, supra, turned cin a construction of sub-clause (2) of s. 17 (iii) (b) of the Uttar Pradesh Krishi Utpadan Mandi Adhiniyam, 1964, as amended by U.P. Act 7 of 1978. It was conce- ded in that case on behalf of the State (Jovernment and the market committees that there cannot be any·multi·point levy of market fee ~in the same market area. Under sub-clause (2) of s. 17 (iii) (b) of · that Act if in agricultural produce is purchased from a producer directly, the trader is liable to pay market fee· but when -the trader sells the s_ame produce or any products of the same produce to another trader, .neither the seller nor the purchaser can be made to pay the market fee. under sub-clause (3 ). The scheme . of the Act with.which we are concerned appears to be entirely different. Under Sub-s. (I) of. s. 12 of the Act, a market committee is empowered to levy market fee on any notified agricultural produce, livestock or products of livestock purchased or sold in· the notified market area. G It would appear that every purchase or sale of any notified agricul- tural proudce, livestock or products of livestock attracts the levy of ·market fee. One is apt to think that rice and paddy are the same commodity and therefore there is double taxation but, in reality, it is not so. .There is distinction between 'paddy' and 'rice' and H although paddy is milled into rice by the process of de-husking, they are two separate and distinct corµmerial comn;\odjti~s an~ haye l)otil

818 SUPREME COURT REPORTS [!983] 3 s.c.R.

been separately .specified as notified agricultural produce in Schedule A II of the Rules as items I and 2 respectively. On the plain language of sub-s. (!) of s. 12 of the Act, the market fee is leviable on both on purchase paddy by a rice miller from a producer and also on pur- chase or sale of rice by a miller to a trader or by a trader to a trader because there is service rendered by a market committee at each of the stages. • D It appears that the State Government in the Food & Agricul- ture Department by its memo dated March 23, 1978 informed the Director of Marketing, Andhra Pradesh that it had been decided to amend Rule 74 in order that no market fee shall be leviable on the ·C sale or purchase of agricultural produce manufactured or extracted from the agricultural produce in which such fee was already levied. Pending such · amendment, he was directed to advise the market committees not to press for recovery of arrears of market fee on purchase or sale of rice when such fee had already been collected on purchase or sale of paddy. The matter was however re-examined by D thditate Government with reference to the provisions contained in ·~ub-s. (1) of s. J2 of the Act. The State Government were of the view that market fee was leviable under sub-s. (1) of s. 12 on the paddy if it is sold in th<; notified marker area and it is also leviable ) on rice if it is put to sale irrespective of the fact that wlietber market fee was paid earlier on paddy or not. That. view proceeded upon the basis that the market committee is required to supervise and ~ontrol the sale of such commodities at both the stages and was therefore entitbd to recaver market fees both on paddy and rice. The State Government accordingly issued GOMs No. 136 dated March 26, l 981 to the effect ; ·,:.- F · "Government .on reconsideration decided that Rice need not be exempted from the levy of market fees even .if the Paddy from which the Rice is extracted was subject to market levy, orders were accordingly issued in the Memo second above that market fees should be levied G both on paddy and rice. ,__ The preliminary notification proposing to ·amend rule 74 of the A.P. (Agricultural Produce & Livestock) H Markets Rules, 1969 issued in G.O. first read above and published at pages 227-229 of the Rules .supplement to Part II of the A.P. Gazette No. 23 dated 15.6,1978 js hereby cancelleq."

SREENIVASA G. TRADERS v. ANDHRA PRADESH (Sen, J.) 881 • J In view of this clarification, it follows that paddy and rice having both been notified to be two separte agricnltural commodities, A ~ upon the language of sub-s. (!) of s. 12 of the Act, market fee is leviable both on sale of paddy by a producer to a rice miller and on purchase and sale by a miller to a trader or by a trader to a trader. The question still remains whether in view ofr. 74 (1) the power of

r a market committee to levy market fee on such transactions is in any way affected : and if so, to what extent. The words used in· r. 74 (I) are: "The fees leviable under sub·s. (1) of s. 12 on notified agricultural produce, livestock and products of live"stock, if paid to a market committee within the State, shall not be collecteCI by another market committee", when the conditions ser out therein are B

fulfilled. Rule 74 (I) postulates that no market fee leviahle. under c sub-s. (1) of s. 12 shall be collected by another market· committee : (I) When such notified agricultural produce, livestock or products of livestock on which market fee· has already been paid to a market committee within the State, is bronght into the notified .market area of another market committee for the purpose of processing, pressing, packing, .storage, export and (2) On sales effected. in the course of commercial transactions between licensed traders, and licensed traders and consumers. Use of the word 'and' makes the two conditions conjunctive. The exemption from payment of market fee over again to such other market committee claimalJle under r. 74 (!) is however subject to production of such evidence as may be prescribed in the bye-laws about the payment of market fee to the market committee · from where it was brought ..

The question is not by any means free from difficulty; but after carefully considering the agrument which has been addressed to us we have come to the conclusion that there is no reason why the word 'and' should be read disjunctively as 'or'. Any such co.nstruction would, in our opinion, produce an unintelligible and absurd result and would be against the clear intention of the Legislature. It would be more appropriate in the context of sub-s. (6) of s. 7 of the Act add sub-s. (I) of s. 12 of the Act to read the word 'and' in r. 74 (!) G conjunctively. The critical words of r. 74 (I) are "brought into the · notified area of market committee for the purpose of processing, pressing, packing, storage, export", subject of course to the condition that market fee has already been paid on such commodity under sub•s. (I) of s. 12 of the Act to a marl\et committee within the H • State. 011 a reasonable construction of r. 74 (I), the legal ~onseC\uences set forth fl\USt ensue. If paddy is subjected to levy

p. 882