Appeal Nos 858 to 861 of 1964
Appeals by special leave from the judgment and order of the Andhra Pradesh High Court in Second Appeals Nos 720 and 724 to 726 of 1957
CB Agarwala and T V R Tatachari for the appellants in all the appeals
P Ram Reddy and K R Sharma for the respondent in all the appeals  The Judgment of the Court was delivered by Shelat J
All these four appeals by special leave raise a common question regarding interpretation of section 111 of the Madras Commercial Crops Market Act XX of 1933 and Rule 28 of the Rules made thereunder and therefore can be disposed of by a common judgment
The Act was originally enacted by the Madras Legislature
It was a law in force immediately before the constitution of the State of Andhra Pradesh and governed the territories now forming part of that State
By virtue of Andhra Pradesh Act of 1953 and the Adaptation of Laws Order passed on November 1 1953 by the State Government of Andhra Pradesh it became applicable to the newly formed State of Andhra Pradesh
By a Notification dated June 27 1949 the then Government of Madras in exercise of the power conferred on it by section 21a declared coconuts and copra to be commercial crops
Under section 4 of the Act the State Government also declared the District of East Godavari as the notified area for purposes of the Act in respect of coconuts and copra
By a further notification dated December 5 1950 issued under section 4a of the Act it established a Market Com 976 mittee at Rajahmundry for the said notified area
The said Market Committee levied the following fees viz 1 a licence fee under section 51 of the Act read with Rule 283 2 a licence fee for storage wharfage etc under section 53 read with Rule 283 3 a registration fee under section 18 read with Rule 37 4 a fee on the said goods bought and sold within the notified area and under section II 1 read with Rule 281 and 5 a fee under the same section on consign ments of coconut oil
Contesting the levy of fees under items 2 to 5 as being illegal on the ground that they sold coconuts and copra to customers outside the notified area and in some cases outside the State the appellants filed various suits in the court of the District Munsif Amalapuram for refund of the said fees collected by the said Committee at different times
The Market Committee resisted the said suits claiming that the aforesaid provisions conferred power upon it to levy the said fees and that the said levy was valid and legal
The said suits were tried together and the District Munsif by his judgment dated October 17 1955 inter alia held that the levy under section 111 read with Rule 281 though called a fee was really a tax that the said provisions empowered the Committee to impose the said tax only when the said goods were bought and sold within the notified area that the sales effected by the appellants were to customers outside the said area and in some cases outside the State that the Committee had no power to levy and collect the said fees  and therefore the appellants were entitled to refund of the said fees and accordingly passed decrees in all the suits
In appeals by the Committee the Subordinate Judge Amalapuram held that though the appellants purchased the said goods within the notified area they exported them to their customers outside the notified area and outside the State and relying upon the decision in Kutti Koya vs State of Madras he held that though section II 1 called the said levy as fee it was in substance a tax and that such a tax being oil sales completed at the places of their customers outside the State offended article 286 of the Constitution and was therefore illegal
The Subordinate Judge except for deleting the relief granted in respect of licence fee under section 53 of the Act dismissed the appeals and confirmed the judgment and decree of the Trial Court
The Market Committee thereupon filed Second Appeals in the High Court of Andhra Pradesh
Before the High Court the controversy centered round the question of fee under section 11 1 only
By its common judgment dated November 8 1961 the High Court relying upon the judgment of a Division Bench of that Court in Satyanarayana and Venkataraju Firm vs Godavari Market Committee2 held that the word fee in section II 1 was in fact a fee and not a tax The Division Bench also held that the said goods were pur 1 AIR 1954 Mad 621
2 AIR 1959 Andh
Pradesh 398
977 chased by the appellants from producers or petty dealers within the notified area and then sold by them to customers outside the said area or the State that the transactions which were the subjected matter of the levy under section 111 were transactions consisting of purchase of the said goods by the appellants and the corresponding sales to them by the producers and petty dealers and not the subsequent sales effected by them to their customers outside the notified area or the State that therefore the transactions on which the said fee was levied were effected and completed inside the notified area and fell within the expression bought and sold in section 11 1 and therefore the Market Committee rightly levied the said fee on those
transactions
In the result the Division Bench allowed the appeals and dismissed the appellants  suits
It is this judgment and decree against which these appeals are directed
The preamble of the Act states that the Act was passed for making provisions for better regulation of buying and selling of and the establishment of markets for commercial crops
As stated in MCVS Arunachala Nadar vs The State of Madras1 the Act was the result of long exploratory investigation by experts in the field conceived and enacted to regulate the buying and selling of Commmercial crops to provide suitable and regulated markets to eliminate middlemen and bring 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 of the producers
It therefore provided a machinery for regulating trade by providing a common place where facilities would be furnished by way of space buildings and storage accommodation and where market practices would be regularised and market charges clearly defined and unwarranted ones prohibited where correct weighment would be ensured by licensed weighmen and all weights would be checked and stamped where payment on hand would be ensured where provision would be made for settlement of disputes where daily prevailing prices would be made available to the grower and reliable market information provided regarding arrivals stocks prices etc and where quality standards would be fixed when necessary and contract forms standardized for purchase and sale
The result of the implementation of the Act would be thus to give reasonable facilities to the growers of commercial crops ensuring proper price for their commodities
Section 4a 1 provides for the formation of a market com mittee for enforcing the provisions of the Act and the Rules and bylaws framed thereunder
Sub section 2 lays down that the Committee shall establish in the notified area such number of markets providing such facilities as the State Government may from time to time direct for purchase and sale of commercial crops
Section 5 1 1959 Suppl
1 SCR 92
978 prohibits any person to set up establish or use continue or allow to be continued any place within the notified area for the purchase or sale of commercial crops except under a licence and in accordance with the conditions thereof
The Market Committee however can exempt from the provisions of this sub section any person who carries on the business of purchasing or selling any commercial crop in quantities not exceeding those prescribed by the Rules
It also exempts from the provisions of this section a person selling a commercial crop which has been grown by him or a co operative society selling a commercial crop which has been grown by any of its members and also a person purchasing for his private use a commercial crop in quantities not exceeding those prescribed by the rules
Section 6 provides that every market committee shall consist of such number of members not exceeding twelve as may be fixed by the State Government and provides for representatives of licencees under section 5 and buyers sellers and buyers and sellers registered under the Rules prescribed in that behalf
Section II 1 with which we are concerned in these appeals reads The Market Committee shall subject to such rules as may be made in this behalf levy fees on the notified commercial crop or crops bought and sold in the notified area at such rates as it may determine
 The Explanation to sub section 1 provides that all notified commercial crops leaving a notified area shall unless the contrary is proved be presumed to be bought and sold within such area
Sub section 2 provides that the fee chargeable under sub section1 shall be paid by the purchaser of the commercial crop concerned provided that where such a purchaser cannot be identified the fee shall be paid by the seller
Section 12 provides that all monies received by a market committee shall be paid into a fund and all expenditure incurred by the market committee shall be defrayed out of the said fund
The expenditure which the committee can incur is for purposes set out in section 13 which incidentally reflect the object and purpose of the Act
Section 18 empowers the State Government to make rules including rules for licence fee under section 5 the registration fee and the prohibition of buying and selling of commercial crops in the notified area by persons not so registered and the fee to be levied on commercial crops bought and sold in the notified area
Rule 28 lays down the maximum fee leviable on commercial crops under section 11 I as also the maximum fee payable for licences and registration
Rule 28 A provides that the fees referred to in sub rule 1 that is fees under section 11 1 shall not be levied more than once on a commercial crop in a notified area
These provisions clearly show the policy of safe_guarding the interests of the producers and of guaranteeing to them 979 reasonable return for the crops they would bring to sell without being exploited
Mr Agarwala raised the following contentions 1 that the fee charged by the Market Committee under s111 was on sales effected by the appellants with their customers some of whom were admittedly outside the notified area and the rest outside the State 2 that that was the footing on which the parties proceeded with the suits but that case was given up in the High Court and the High Court was in error in permitting the Committee to shift its case and argue that the fee was levied not on those sales but on transactions of purchase entered into by the appellants with the producers and other petty dealers
It is true that in para 3 of their plaint the appellants averred that their business activities consisted of buying coconuts and copra in East Godavari District and selling them to customers outside the notified area and even the State and that those sales were completed at the respective places of those customers
The appellants  case therefore was that in respect of these sales with customers some of whom were outside the notified area and the rest outside the State the levy of fee was in the former case beyond the ken of section II 1 and in the latter case repugnant to article 286 of the Constitution
The written statement of the respondent committee denied these allegations
The Committee asserted that both the purchases and sales took place in the notified area and that though the fee levied by it was on sales by the appellants and though delivery of the said goods thereunder took place outside the notified area the sales in respect thereof were made within the notified area and therefore the question of the levy under section 11 1 being repugnant to article 286 of the Constitution did not arise
Besides these pleadings Mr Agarwala drew our attention to certain notices of demand and circulars issued by the Committee in which it was stated that the said fee was being levied on goods exported outside East Godavari District and that the traders were liable to pay it both on coconuts exported to outsiders and also consumed internally
That presumably was stated because if the goods were bought and sold within the notified area even if they were subsequently exported outside section 111 would apply
The practice followed by the appellants and not denied by the Committee was that they used to despatch these goods by rail to their customers
Railway receipts and hundies were then sent to their bankers at the destination and railway receipts were delivered to the customers on their honouring the hundies Thus the goods were delivered outside the notified area and the sales effected by the appellants to their customers were also completed at places outside the notified area and in some cases outside the State
On these facts the District Munsif held that property in the goods having passed at destination sales took place outside the 980 notified area and therefore the fee charged by the Committee was illegal as section 111 permitted such a levy only on goods bought and sold within the notified area
On appeal by the Committee the Subordinate Judge held that the said fee was a tax that it was a tax on sales outside the notified area and the State and was not therefore warranted under section 11 1 and was repugnant to article 286
It seems that in both the courts the real issue was lost sight of viz whether the goods in respect of which the fee under section 1 1 I was levied were goods bought and sold within the notified area as envisaged by the section
In the High Court however the questions convassed were 1 whethe r the fee provided in section 11 1 was a fee or a tax and 2 even if it was a fee whether the Committee had the power to levy it in respect of goods sold by the appellants outside the notified area
As already stated the Trial Judge and the Subordinate Judge had proceeded on the footing that the said fee was levied on sales entered into by the appellants with their customers who undoubtedly were outside the notified area
But the real question that ought to have been dealt with by the Trial Judge and on appeal by the Subordinate Judge was not whether the appellant s sales were to customers outside the notified area or the State but whether the fee which was levied was valid
The question of the validity of the levy entailed another question viz whether the levy was on transactions effected by the appellants before they sold those goods to their customers
Were the appellants entitled to a refund of the fees levied on them under section II 1  was the principal question in the suits
To decide that question it was necessary for the court to go into the question whether the fee was charged on the sales by the appellants or on the transactions made between them and those from whom they purchased the goods in question
Since neither the Trial Court nor the Subordinate Judge had gone into that question it was necessary for the High Court to go into it not only to do justice to the parties but also because that was the real issue arising in the suits and was the crux of the litigation
There was therefore no question of the High Court allowing the respondent Committee to make out a new case
The question from the very inception was whether the Committee was competent to levy the fee in question under section 111
To answer that question the court necessarily had to enquire on which transactions could the said fee be levied under section 111 and whether it was rightly levied by the Com mittee
The High Court answered these questions by holding that it was levied on the transactions effected by the appellants with those from whom they bought the said goods that section 111 dealt with those transactions and was not therefore concerned with the subsequent sales entered into by the appellants with their customers outside the notified area
Since according to the High Court those transactions were admittedly effected within the noti 981 fied area the levy was valid and warranted under section 1 1 1
In our view the High Court approached the question from a correct angle and therefore there was no question of its having allowed the Committee to change its case or make out a new case
That being the position the next question is whether the Committee could levy fee under section II 1 on the transactions effected by the appellants before they sold those goods to their customers
Mr Agarwala s contention was that the fee levied under section 111 could only be in respect of goods bought and sold and not in respect of transactions where goods were only bought or only sold
According to him it is only when a person bought goods and sold those identical goods within the notified area that the fee under section 111 could be levied
According to him the transactions effected by the appellants consisted in their purchasing the said goods they stopped at the stage of goods bought
Therefore the other ingredient for a valid levy of the fee not being present the fee levied in the present case was not in accordance with the requirements of section 11 1 and was unwarranted
This contention raises the question as to the meaning of the words bought and sold in section 111
At first sight they would appear to be susceptible of three meanings viz 1 that they mean duality of transactions where the same person buys goods and sells those identical goods in the notified area 2 that they mean bought or sold the conjunctive and meaning in the context of the sub section the disjunctive or and 3 that they apply to a transaction of purchase as the concept of purchase includes a corresponding sale
When a person buys an article from another person that other person at the same time sells him that article and it is in that sense that section 111 uses the words bought and sold
 The incidence of the fee under section 111 is on the goods thus bought and sold
This last interpretation was favoured by the High Court of Madras in Louis Dreyfus  Co vs South Arcot Groundnut Market Committee1 which has been accepted by the High Court in the present case
If the construction commended to us for acceptance by Mr Agarwala were to be correct viz that the appellant s transactions stopped at the stage of goods bought they would not be transactions in respect of goods bought and sold
If the fee was levied on sales effected by the appellants with their customers its levy would not be valid under section 1 1 1 and would also be repugnant to article  286 where goods were delivered outside the State
But it is a well settled rule of construction that the court should endeavour as far as possible to construe a statute in such a manner that the construction results in validity rather than its invalidity and gives effect to the 1 982 manifest intention of the legislature enacting that statute
The object in passing the Act was to prevent the mischief of exploitation of producers of commercial crops such as coconuts and copra and to see that such producers got a fair price for their goods
The mischief to prevent which the Act was enacted was the exploitation of these producers by middlemen and those buying goods from them and therefore the Act provided facilities such as market place place for storage correct weighment etc so that the producers and his purchasers come face to face in a regulated and controlled market and a fair price was obtained by them
If the construction suggested by Mr Agarwala were to be accepted and the section were to be construed as being applicable to those transactions only which have a dual aspect that is buying by a dealer from a producer and the dealer selling those identical goods within the notified area the object of the Act would be defeated for in a large number of cases the transactions would halt at the stage of buying and the Committee in those cases would have no power to levy the fee on them
Why is a buyer or a seller or a buyer and seller required to be registered and why does the Act prevent those who have not registered themselves from effecting transactions in commercial crops unless the object was to regulate and control transactions in those commodities at all stages and in a manner preventing the exploitation of the producer  The legislature had thus principally the producer in mind who should have a proper market where he can bring his goods for sale and where he can secure a fair deal and a fair price
The Act thus aims at transactions which such a producer would enter into with those who buy from him
The words bought and sold used in section 111 aim at those transactions where under a dealer buys from a producer who brings to the market his goods for sale
The transactions aimed at must be viewed in the sense in which the legislature intended it to be viewed that is as one transaction resulting in buying on the one hand and selling on the other
Such a construction is commendable because it is not only in consonance with the words used in section 111 but is consistent with the object of the Act as expressed through its various provisions
The construction on the other hand canvassed by the appellants is defeative of the purpose of the Act and should unless we are compelled to accept it be avoided
The construction which we are inclined to accept acquired some support from the fact that section II makes the purchaser and not the seller primarily responsible for payment of the fee and it is only when the purchaser cannot be identified that the seller is made liable
Mr Agarwala at first also urged that the fee under section 11 1 amounted to a tax and that it was in fact a sales tax
But at the last moment he stated that he did not wish to press that contention and requested us not to express any opinion thereon
Since the contention is not pressed we need not express any opinion on that ques 983 tion and confine ourselves to the question as to the interpretation of the words bought and sold in that section
In our view the construction placed by the High Court on section 111 was a correct construction and therefore the respondent committee had rightly charged the appellants with said fee
The appeals therefore fail and are dismissed with costs
One hearing fee


Summary:
By a notification in June 1949 the State Government in exercise of a power under section 21a of the Madras Commerical Crops Market Act 1933 declared coconuts and copra to be commercial crops  within the meaning of the Act
The respondent Market Committee IL vied in respect of the declared commerical crops a fee on the goods bought and sold  within the notified area under section 111 of the Act read with Rule 281 of the Rules made under the Act
The appellants filed various suits contesting the levy on the ground that they sold coconuts and copra to customers outside the notified area and in some cases outside the State consequently they sought refund of the fees collected by the respondent committee
The suits filed were tried together and the trial Judge held that the levy though called a fee was really a tax and that the Committee was only empowered to impose such tax when the goods were bought and sold within the notified area
He therefore passed decrees in all the suits for refund of the fees collected
The first appeal by the respondent Committee was dismissed by the Sub Judge who further held that the fee in substance being a tax such tax on sales completed outside the State would also offend article 286 of the Constitution
However a second appeal to the High Court was allowed on the view that the transactions which were the subject matter of the levy under Section 111 were transactions consisting of the purchase of the goods by the appellants and the corresponding sales to them by the producers and not the subsequent sales effected by the appellants to their cus tomers outside the notified area or the States therefore the transactions on which the said fee was levied were effected and completed inside the notified area and fell within the expression bought and sold in section 111
In the appeal before this court it was contended on behalf of the appellants that the transactions effected by them consisted in their purchasing the goods and stopped at the stage of goods bought so that no fee could be levied in the absence of the other ingredient ie sale within the notified area
HELD  The construction placed on section II 1 by the High Court was correct and the respondent Committee had therefore rightly charged the fee
983 B 975 The words bought and sold used in section 111 aim at those transactions where under a dealer buys from a producer who brings to the market his goods for sale
The transaction aimed at must be viewed in the sense in which the legislature intended it to be viewed that is as one transaction resulting in buying on the one hand and selling on the other
Such a construction is commendable because it is not only in consonance with the words used in section 11 1 but is consistent with the object of the Act as expressed through its various provisions ie to prevent the mischief of exploitation of producers of commercial crops such as coconuts and copra and to see that such producers got a fair price for their goods
982 A B E F Kutti Koya vs State of Madras AIR 1954 Mad 621 Satyanarayana and Venkataraju Firm vs Godavari Market Committee AIR 1959 Andh
Pra 398 MCVS Arunachala Nadar vs The State of Madras 1959 Suppl
1 SCR 92 Louis Drevfus  Co vs South Arcot Groundnut Market Committee  referred to