ns Nos
1524 1537 1580 of 1973 and 74 75 254 510 512 of 19702  21 of 1971 and 1525  1581 1606 of 1973
Petitions under article 32 of the Constitution of India
A K Sen Yogeshwar Prasad section K Bagga and section Bagga for the petitioners in WPs
1524 and 1537 158073
A K Sea in WP No 7470 Hardyal Hardy in WP No 7570 Yogeshwar Prasad section K Bagga and section Bagga for the petitioners in WP Nos 74 75 254 and 510 51270 2171 and 1525 1581 16061973
L N Sinha Solicitor General and O P Rana for respondents in WPs
1524 1537 1580173
O P Rana for respondents in WPs
Nos 74 25470 21171 1525 1581 160673 and respondents nos
1  3 in WP 75 and 510 51270
V M Tarkunde and E C Agarwala for respondent No 2 in W P No 7570 and applicantintervener in WP No 7570
The Judgment of the Court was delivered by Goswami J
By the above writ applications under Article 32 of the Constitution the validity of the Uttar Pradesh Krishi Utpadhan Mandi Adhiniyam 1964 UP Act No XXV of 1964 as amended by UP Act No 10 of 1970 briefly called the Act and the rules made thereunder are challenged on the ground of violation of Article 14 and Article 191g of the Constitution
The petitioners in all the above cases are traders or commission agents dealing in agricultural produce
The following submissions are made on behalf of the petitioners 1 The constitution of the Market Committee under section 13 of the Act is highly prejudicial to their interests and of the traders in general since it will have a perpetual majority of producers
2 To entrustment of licensing to such a Market Committee instead of to any impartial authority is unfair and an un 
reasonable restriction on the right to trade
3 The Act in the matter of grant of licences gives no guidance at all and even under rule 704 two vague criteria have been laid down in the matter of issue of licences under the Act
4 The petitioners are required to provide a storage space to the producers for their agricultural produce going to the market and this obligation is also an unreasonable res triction on the fundamental right of the petitioners
379 5 Rule 76 1 is invalid and ultra vires section 40 of the Act and has also placed unreasonable restrictions on the right to carry on trade or business
Before we deal with these submissions we may turn out attention to the Act
As the preamble shows the Act has to provide for the regulation of sale and purchase of agricultural produce and fox the establishment superintendence and control of markets therefore in Uttar Pradesh
The statement of object and reasons gives a clear picture of the evils sought to be remedied by this legislation and a portion therefrom may be extracted below  The present chaotic state of affairs as obtaining in agricultural produce markets is an acknowledged fact
There are
innumerable charges levies
and exactions which the agricultural producer is required to pay without having any say in the proper utilisation of the amount so paid by him
In matters of dispute between the seller and the buyer the former is generally put at a disadvantage by being given arbitrary awards
The producer is also denied a large pa rt of his produce by manipulation and defective use of weights and scales in the market
The Government of India and the various committees and commissions appointed to study the condition of agricultural markets in the country have also been inviting the attention of the State Government from time to time towards improving the conditions of these markets 
The Planning Commission stressed long ago that legislation in respect of regulation of markets should be enacted and enforced by 1955 56
It is also mentioned that legislation in the State was first proposed in 1938 but lapsed
It also appears that most of the other states have already passed legislation in this respect
It is therefore clear that the principal object of this Act is to come in aid of the producers who are generally ill organised and are by far and large the exploited party in the bargain between unequals
Section 2 contains the definitions
By section 2a  agricultural produce  means such items of produce of agriculture horticulture viticulture apiculture sericulture pisciculture animal husbandry or forest as are specified in the schedule and includes admixture of 2 or more of such items and also includes any such item in processed form and further includes gur rab shakkar khandsari and jaggery
By section 2 f  Committee  means a Committee constituted under this Act
By section 2k  Market Area  means an area notified as such under section 6 or as modified under section 8
By section 2p  producer  means a person who whether by himself or through hired labour produces rears or catches any agricultural produce not being a producer who also works as a trader broker or Dalal commission agent or Arhatiya or who is otherwise ordinarily engaged in the business of storage of agricultural produce
We are not concerned with the pro viso attached thereto
By section 2y  trader  means a person who in the ordinary course of business is engaged in buying or selling agricultural produce as a principal or as a duly authorised agent of one or more 380 principals and includes a person engaged in processing of agricultural produce
After notification by the State Government of its intention to declare a particular area as a Market Area under section 5 and after inviting objections and consideration of the same the State Government under section 6 declares the whole or any specified portion of the area mentioned in the notification to be the Market Area in respect of such agricultural produce as may be specified
Similarly under section 7 the Principal Market Yard and Sub Market Yards are declared
Section 92 which is material for our purpose may be quoted No person shall in a Principal Market Yard or any Sub Market Yard carry on business or work as a trader broker commission agent warehouse man weighman palledar or in such other capacity as may be prescribed in respect of any specified agricultural produce except under and in accordance with the conditions of a licence obtained therefore from the Committee concerned
The petitioners make a great grievance of this licensing provision by the Market Committee called the Mandi Samiti of the Market Area
Section 13 provides for constitution of the Market Committee and provides for representation from different sources as detailed in i to xi thereunder
The learned counsel draws our attention to clauses vii and vii a of section 131 whereby ten representatives of the producers are included in the Committee
It is pointed out by the learned Solicitor General and not contradicted by Mr Sen that  the Committee under section 13 consists of 23 members out of which ten are from the producers
Section 16 provides for functions and duties of the Committee and inter alia under section 2i thereof a Committee shall ensure fair dealings between the producers and persons engaged in the sale or purchase of specified agricultural produce
 Under section 17 A Committee shall for the purposes of this Act have the powers to i issue or renew licences under this Act on such terms and conditions and subject to such restrictions as may be prescribed or after recording reasons therefore refuse to issue or renew any such licence ii suspend or cancel licences issued or renewed under this Act
Section 25 provides for appeals against the orders of the Committee to the Director of Agriculture who is to decide the same in accordance with the rules
Under section 32 the State Government also has powers of revision and may call for the records of the proceedings of the Committee and pass orders modifying annulling or reversing the same
Section 40 enables the State Government to make rules for carrying out the purposes of this Act
The rules inter alia provide for matters relating to the functions powers and duties of the Committee licensing fee or market fee which may be levied and realised by the Committee and their mode of recovery and the terms and conditions for assessment and renewal of licences under this Act section 40 2 
There is a schedule to the Act 381 which contains the description of the agricultural produce Under eight different heads
Chapter VIII of the rules deals with transaction of business in Market Yards and the opening rule 70 provides for licensing by the Market Committees
By sub rule3 any person desiring to hold licence under sub rule 1 shall make in Form No XI or Form No XII as the case may be a written application for a licence to the Market Committee and shall pay the licence fees prescribed under rule 67
Rule 704 i may now be quoted On receipt of such application together with the amount of fee prescribed under rule 67 the Market Committee may issue him the licence applied for if a it is satisfied that the applicant is solvent b it is satisfied that the applicant is a desirable person to whom a licence may be granted provided that the provisions of sub clause a shall not apply to weighmen measurers palledars truck plyers and Thela plyers
This rule will have to be read with section 17 quoted above
By rule 73 the order of refusal cancellation or suspension of a licence by the Committee shall be communicated to the person concerned in the specified manner indicated therein
Rule 761 which is impugned may be quoted  Every consignment of specified agricultural produce brought for sale into the Principal Market Yard or any sub Market Yard shall be sold by open auction Provided that nothing in this sub rule shall apply to a retail sale as may be specified in the bye laws of the Committee
Some provisions of similar Acts of the States of Madras Bombay and Gujarat had earlier been the targets of unsuccessful attack in this Court and hence the constitutional challenge in the present applications against the UP Act is necessarily on different ground
See M C V  section Arunchala Nadar etc
vs The State of Madras  others1 Mohammad Hussain Gulam Mohammad and Another vs The State of Bombay and another2 and Jan Mohammed Noor Mohammed Begban vs State of Gujarat and Another3
We may now turn to the Submissions
With regard to the first submission as earlier noted the grievance is not factually accurate
Out of 23 members of
the Committee only 10 are from the producers
Therefore there is no question of a perpetual majority of the producers in the Committee
Besides under section 131vii 8 producers are elected
It may be even a legitimate expectation of the legislature that there may be reasonable likelihood that Producers of eight categories of agricultural produce mentioned in the schedule 1 1959 Supp 1 SCR 92
2  3  382 may be represented
Under section 131vii a which was introduced by an amendment in 1970 two producers belonging to the scheduled castes are to be nominated by the State Government This provision is made in the interest of the People belonging to the scheduled castes who may not be able to
get due representation in the elections
We do not find any unreasonable features in the scheme of representation in the Committee under section 13
This will be clear even from section 14 whereby the first Committee appoints suit able members to represent different interests referred to in sub section 1 of section 13
The first submission of the petitioners is therefore of no avail
We may now take up consideration of the second and the third submissions which may be dealt with together
It is submitted that the licensing of the traders should not be left in the hands of the Market Committee
We find it difficult to appreciate how the performance of this duty by the Committee will at all prejudice the traders
To say the least it is a hypothetical objection in this case as we understand none of the petitioners have been refused a licence
It is true that usually some governmental authority is charged with the duty of granting of licences under various local Acts
That however does not prove that the duly cannot be properly and impartially exercised by the Committee representing various interests which are vitally interested in the trade of agricultural produce
Whether in a particular case the action of the Committee is mala fide or otherwise objectionable may be a different matter and such a grievance can be properly dealt with
That would however not make the provision invalid nor can it be said to place an unreasonable restriction on the right of the petitioners to trade
It is further submitted that there is no guidance in the Act in the matter of grant of licence and the relevant rule 7041 prescribes only two vague criteria in the matter
This submission fails to take note of the fact that the Committee which is entrusted with the duty of granting licences consists of people from different sources vitally interested in the marketing of agricultural produce
The Committee consists also of representatives from local bodies cooperative marketing societies Central Warehousing Corporation State Warehousing Corporation representatives of traders and commission agents Government officials of whom one shall be a representative of the Agriculture Department and the other of Food and Supplies Department and so forth
It is therefore a fairly well represented Committee which is expected to know the object and purpose of the Act of which it is a creature
One may legitimately expect that the members are well aware of the difficulties of the producers interests of the traders and the intricacies of the trade
There is sufficient guidance from the preamble and other provisions of the Act with which the members of the Committee owe their duty to be conversant For example under section 16 the Committee is charged with the duty of enforcing the provisions of the Act the rules and the bye laws
It has to exercise its powers and perform its duties and discharge its functions in accordance with the provisions of the Act and the rules
38 3 Under sub section 2 of section 16 the Committee shall ensure fair dealings between the producers and the traders besides performing other functions
Form No XI in which a trader has to submit his application for a licence
also gives various particulars from which the Committee would be able to consider his claim for a licence
It will be  seen that in this form the applicant has to undertake to abide by the conditions of the licence and the provisions of the Act and the rules
The condition of the licence which are noted in Form No XIII would also give an indication of the obligations of the licensee
All these would be known to the Committee
At any rate with the help of the Government officials in the Committee there is no reason to think that the work of the Committee will not function smoothly and that there will be any reason to apprehend that licences would be refused arbitrarily
Even the scope for such an apprehension is sought to be done away with by providing a provision Provision of appeal against the decision of the Committee and also a further revision to the State Government
There is a further limitation on the power of the Committee by insisting upon recording of reasons while refusing a licence
It is therefore clear that a speaking order has to be
passed when refusing a licence and it will have to justify that the licence is refused only on relevant considerations with regard to solvency and fitness in terms of the provisions
of the Act
It is submitted that the choice of the two criteria under rule 704 i is bad and there is no proper guidance in these criteria which are not capable of objective determination
The two criteria laid down are solvency and desirability
The applicant has to satisfy the Committee that he is solvent as opposed to insolvent that is bankrupt
We are informed that the original Hindi version of the rule which is translated into English gives the equivalents as follows  It is satisfied that the applicant is not a bankrupt rindiwali 
It is satisfied that the applicant is a proper upoyukta person to whom a licence may be granted
Mr Sen candidly admits that the criterion on the score of bankruptcy is well known and cannot be said to be vague or indefinite
Hi however submits that the second criterion is not at all precise and definite
Although perhaps a more expressive guidance could have been given we have already observed that the Act itself provides sufficient guidance to the Committee in the matter of deciding whether a particular applicant is or is not a proper person to hold a licence and we cannot accede to the submission that the two criteria taken with the other guidelines from the provisions of the Act and the rules offer no proper guidance to the Committee in tic matter of grant of licence
The second and the third submissions of the petitioners are therefore devoid of substance
With regard to the fourth submission it is sufficient to point out that under section 162vii the Committee has to provide inter 384 alia accommodation for storage and such other facilities as may be prescribed
Under rule 524 storing of the specified agricultural produce shall be subject to the payment of such storage fee and such other conditions as may be specified in the by laws
That being the position this may be even an interim measure pending arrangements bythe Committee for proper storage
Even otherwise the storage by the traders in the Market Yards will be always paid for under rule 524
There is therefore no substance in the fourth submission of the petitioner
With regard to the last submission regarding invalidity of rule 761 we are not satisfied that the same is ultra vires section 40 of the Act
Section 40 empowers the State Government to make rules for carrying out the purposes of the Act
Rule 761 is well within the rule making power of the State Government under section 402 clause xxvii
Section 92 restricts the right to carry on trade except under and in accordance with a licence
Section 17 provides for issuing or renewal of licences subject to the restrictions under the rules
Section 92 and section 17 are not challenged before us
Rule 761 prescribes the mode of sale that is to say by open auction under the rule making power under section 40 read with clause xxvii
The rule is not ultra vires section 40 of the Act
It is said that prohibiting private sales by confining only to sale by open auction puts an unreasonable restriction on the right to trade of the petitioners
If section 92 and section 17 are not challenged as invalid it is not understood how rule 761 which is within the rule making power can be said to be unreasonable
In order that the producers obtain the best price for their commodity sale by open auction is prescribed under rule 761 lo fulfil one of the important purposes of the Act
Sale by auction is a well known mode of sale by which the producers for whose interest this Act has been made can obtain the best price for their commodities
The definition of sale and purchase to which our attention has been drawn by the petitioners do not run counter to the provisions for auction sale under rule 76
It cannot by any stretch of imagination be held to be an unreasonable mode in the entire scheme of the Act
The legislature is intervening to see that the producers get the maximum pecuniary return possible in their transactions and as a necessary concomitant eliminated the mode of private sale by individual negotiations resulting in malpractices
Besides by the proviso to rule 761 this restriction is not allowed to operate in the case of retail sales
There is therefore no substance in the submission that rule 761 violates the fundamental right of the petitioners under Article 19 1 g of the Constitution
Mr Sen particularly drew our attention to two decisions of this Court
The first is given in Lala Hari Chand Sarda vs Mizo District Council and Anr
1 That was a case where the Executive Committee of the Mizo District Council refused to renew the temporary licence issued to the appellant therein who was a non tribal trader under section 3 of the Lushai Hills District Trading by non Tribals Regulation 1953
This Court by majority struck down section 3 as 1  385 violative of Article 191 g of the Constitution
This decision is clearly distinguishable from the present case
In that case there was no right of appeal to any superior authority against a refusal to grant or renew a licence and the non tribal trader had no remedy whatsoever against such an order
This Court also observed in that case that a perusal of the Regulation shows that it nowhere provides any principle or standard on which the Executive Committee has to act in granting or refusing to grant the licence emphasis added
The second decision is in Harakchand Ratanchana Benthia and Ors etc
vs Union of India and Ors1 This was a case under the Gold Control Act and Mr Sen drew our attention to the expression suitability of the applicant in section 276e of the Gold Control Act which was held to provide no objective standard or norm and as such was held to be constitutionally invalid
This Court while dealing with the objection to section 27 of the Gold Control Act which relates to licensing of dealers held as follows  Section 276a states that in the matter of issue or renewal of licences the Administrator shall have regard to the number of dealers existing in the region in which the applicant intends to carry on business as a dealer But the word region is nowhere defined in the Act
Similarly section 276b requires the Administrator to have due regard to the anticipated demand as estimated by him for ornaments in that region but the expression anticipated demand  is vague and incapable of objective assessment and is bound to lead to a great deal of uncertainty
In the same way the expression Suitability of the applicant in section 276  e and public interest in section 27 6 g do not provide any objective standard or norm
Further the requirement in the section imposing the same conditions for the renewal of the licence as for the initial grant is unreasonable as it renders the entire future of the business of the dealer uncertain and subject to the caprice and arbitrary will of the administrative autho rities
Therefore clauses a b e and g of section 276 are constitutionally invalid
In the instant case we have already examined the two criteria laid down under rule 704 i and have held that they do not place any unreasonable restriction on the right of the applicants to obtain a licence
By rule 704ib the Committee has to be satisfied that the applicant is a fit and proper person upoyukta to whom a licence may be granted
This is not the same thing as the suitability simpliciter which this Court had to deal with in the Gold Control Act case
The decision is therefore clearly distinguishable
In the result all the applications fail and are dismissed
The parties will pay and bear their own costs
VPS Petitions dismissed
1 1970 1 SCR479


Summary:
The Uttar Pradesh Krishi Utpadhan Mandi Adhiniyam 1964 as amended by UP Acts 25 of 1964 and 10 of 1970
was enacted to provide for the regulation of the sale and purchase of agricultural produce to protect the producers from exploitation and for the establishment superintendence and control of markets in UP
Under section 5 the State Government is empowered to declare a particular area as market area and under section 7
the principal market yard and sub market yards are declared
Section 72 provides that no person shall in a principal market yard or sub market yard carry on business as a trader broker commission agent etc in respect of specified agricultural produce except in accordance with the conditions of a licence obtained from he concerned market committee
Sec 13 provides for the constitution of the market committee and for representation on the committee from different sources
Under section 17
the committee has power to issue renew suspend or cancellicences
Section 25 provides for appeals against orders of the committeeto the Director of Agriculture and section 32 for revision by the State Government Under section 162vii the committee has to provide accommodation for storage
40 enables the  State Government to make rules Rule 7041provides that the Committee may issue a licence to an applicant if it is satisfied
a that the applicant is solvent and b that the applicant is a desirable person
Rule 761 provides that every consignment of specified agricultural produce brought for sale into the principal or sub market yard shall be sold by open auction
The petitioners who were traders or commission agents dealing in agricultural produce challenged the validity of the Act and the rules made thereunder on the ground of violation of articles 14 and191g
They contended that  1 that constitution of the committee is prejudicial to their interests since
it will have a perpetual majority of producers 2 the entrustment of licensing to such a committee is an unreasonable restriction on their right to trade 3 there is no guidance in the matter of grant of licences the criteria mentioned in r 704 being vague 4 the requirement to provide storage space for the producers by the petitioners is an unreasonable restriction and 5 r 761 is ultra vires section 40 and also places an unreasonable restriction on the petitioners
Dismissing the petitions HELD  1 Under section 13 the Committee is to consist of 23 members and out of them only 10 are from the producers
Therefore the submission is factually inaccurate as there is no question of a perpetual majority of producers
381G H 2 There are no unreasonable features in the scheme of representation in the committee
Under 8 13 8 producers are elected who may represent the 8 categories of agricultural produce mentioned in the schedule and two producers are nominated from the schedule castes by the Government because they may not get due representation in the election
The performance of the duty of licensing by such a committee cannot prejudice the petitioners
In fact none of the petitioners has been refused a licence
Though usually some governments authority is charged with the duty of granting licences under various Acts that does not prove that the duty cannot be property and impartially exercised by a Committee representing various interests which are 377 vitally interested in the trade
of agricultural produce
If in a particular case
the action of the Committee is mala fide  or otherwise objectionable such grievance can be properly dealt with
381H 382E 3 It is not correct to say that there is no guidance in the Act in the matter of grant of license and that the two criteria provided by rule 7041 are vague
382E F a The Committee which is entrusted with the duty of granting licences consists of people from different sources vitally interested in the marketing of agricultural produce as well as Government officials
It is a well represented Committee which is expected to know the object and purpose of the Act of  which it is a creature
There is sufficient guidance from the preamble and other provisions of the Act with which the members of the Committee would be familiar and conversant for example section 16 of the Act and the particulars in Forms XI and XIII
for the application of a licence and Conditions of a licence
With the help of Government officials in the committee there is no reason to think that the Committee will not function smoothly or to apprehend that licence would be refused arbitrarily
There is also a limitation on the power of the Committee in that the Act insists that the Committee should record its reasons while refusing a licence
Further there is provision of appeal against the decision of the Committee and a further revision to the State Government
382F 383D b One of the two criteria mentioned in r 704i
is solvency and the criterion on the score or bankruptcy is well known and cannot be said to be vague or indefinite
As regards the second criterion namely that the applicant should be a desirable person the Act itself provides sufficient guidance to the Committee in the matter of deciding whether a particular applicant is or is not a proper person to hold the licence
383F H 4 The requirement to provide a storage space is only an interim measure pending arrangements by the Committee for proper storage as required by section 16
Under r 524 storing of the specified agricultural produce shall be subject to the payment of such storage fee and other conditions as may be specified in the bye laws
Since the storage by the traders in the market yards will always be paid for under the rule there is no substance in the contention that the requirement is unreasonable
384A B 5a Rule 761 is not ultra vires section 40 Section 92 restricts the right to carry on trade except under and in accordance with the licence_ and section 17 provides for issuing or renewal of licences subject to the restrictions under the rules and these sections are not challenged
Section 40 empowers the State Government to make rules for carrying out the purposes of the Act and under section 402 xxvii r 761 only prescribes open auction as the mode of sale
384B D b The rule does not violate the fundamental right of the petitioners under article 191g
384G The definitions of sale and purchase in the
Act do not run counter to the provisions relating to auction sale under the rule and it Could not be field to be an unreasonable mode considered in the entire scheme of the Act
in order that the producers may obtain the best price for their commodity sale by open auction is prescribed under the rule to fulfil one of the important purposes of the Act
The legislature is intervening to see that the producers get the maximum pecuniary return possible in the transaction and as a necessary concomitant eliminated the made of private sale by individual negotiation resulting in malpractices
Besides by the Proviso to the rule the restriction is not allowed to operate in the case of retail sales
384D G Lala Hari Chand Sarda vs Mizo District Council and all 
and Harakchand Ratanchand Banthia and ors
vs Union of India and ors
  distinguished