Civil Appeal Nos
1841 1846 of 1978
From the Judgment and Order dated 21 9 1978 of the Allahabad High Court in WP Nos
4846 4436 3815 5040 475 and 458778
AND CIVIL APPEAL No 871 of 1978
From the Judgment and Order dated 29 4 1977 of the Allahabad High Court in WP No 1749 of 1974
AND CIVIL APPEAL No 1921 OF 1978
From the Judgment and Order dated 21 9 1978 of the Allahabad High Court in WP No 4566 of 1978
AND CIVIL APPEAL No 1960 OF 1978
From the Judgment and Order dated 21 9 1979 of the Allahabad High Court in WP No456878
AND CIVIL APPEAL Nos
2169 2173 OF 1978
From the Judgment and Order dated 21 9 1978 of the Allahabad High Court in WP Nos
4542 5589 5592 to 559478
AND CIVIL APPEAL Nos
2178 2187 of 1978
From the Judgment and Order dated 21 9 1978 of the Allahabad High Court in WP Nos
4921 4625 4449 5002 5003 5007 5068 5069 5284 and 4568 of 1978
113 AND CIVIL APPEAL Nos
2219 2226 OF 1978
From the Judgment and Order dated 21 9 1978 of the Allahabad High Court in WP Nos 5185 and 5059 of 1978
AND CIVIL APPEAL Nos
2269 2302 2373 2375 OF 1978
From the Judgment and Order dated 21 9 1979 of the Allahabad High Court in WP Nos
519378 5192 5010 4584 and 4583 of 1978
AND CIVIL APPEAL Nos
232123222356235923862406 24082426 24282430  2431 2457250425071978 and 142144174230385388429438599635745821929  100710097911491149A13461630163616381863186518661 867  186979 and 2270227278
From the Judgment and Order dated 21 9 1978 of the Allahabad High Court in WP Nos5521 4982 5001444778 4454 2311 5134 3826 4409 4020 5144 5728 5002 445578 6948 4665 4560 4666 4985 4449 5540 4823 4619 5150 4588 4593 4926 4947 4948 5012 5062 5088 5089 5191 5539 5106 5097 4833 4911 1398 2114 2515 89878 5071 5454 5592 5072 5034 4149 5153 5169 573478 494776 553378 329977 4943 462978  5194 5195 519679
AND CIVIL APPEAL No 487 of 1979
From the Judgment and Order dated 21 9 1978 of the Allahabad High Court in WP No 4445 of 1978
AND WRIT PETITION Nos 257  600 of 1979
Under Article 32 of the Constitution
FS Nariman R F Nariman and P C Bhartari for the Appellants in CA Nos
2260  2261
section P Gupta H KPuri V K Bahl and Miss Madhu Moolchandani for the Appellants in CAs 1841 to 1846 2426 to 2428 929 1007 to 1009 1630 2169 to 2172 and 1635
VM Tarkunde G B Pai Mrs Saran Mahajan Mr Arvind Kumar Mrs Lakshmi Arvind and R K Sinha for the Appellants in CA Nos
2507 2322 2457 and 871 114 Shanti Bhushan section P Gupta H K Puri and Miss Madhu Moolchandani for the Appellants in CA 174
L N Sinha section section Ray Ghayyas Alam and R K Jain for the Appellants in CA 2269 2270 to 2272
Shanti Bhushan Subhash Chandra Birla and Shreepal Singh for the Appellants in 2373 2302 2374 and 2375
Yogeshwar Prasad and Mrs Rani Chabra for the Appellants in CA 599 142 to 144 385 1638 2219 to 2226 1921 1960 2173 2178 2180 to 2187 2179 386 to 388 429 to 438 and WP 257
Pramod Swarup for the Appellants in CAs Nos 230 2359 and 2386
P R Mridul and Ashok Grover for the Appellants in CAs 2406 to 2408
Veda Vyasa N C Sikri A K Sikri and Vijay Jaiswal for the Appellants in CA 821  487 and WP 600 OPVerma for the appellants in CAs 1867 and 1869
YSChitale Mrs Shandhana Ramachandran and P K Pillai for Appellant No 1 in CA 1846 745 and Appellant No 2 in CA 1633 and 1634
SKJain for the Appellants in CA 18779
TSArora for the Appellants in CA 235678  134679
YSChitale O P Rana and Mrs section Ramachandran for the Appellants in CA 1866 and Appellants in CA 1865 and R1 in CAs 142  143 and 144 and for the Appellants in CAs
1631 1632 and for appellant No 1 in CA 1633 1634 and Appellants in CA 1863
SK Dhingra for the Appellants in CA 232178
J MKhanna for the Appellants in CA 2430  2431
K BRohtagi and Praveen Jain for the Appellants in CA 250478
MMLSrivastava for the Appellants in CA 1149  1149A K CDua for the Appellants in CA 1635  1636
L MSinghvi BD Madhyan RN Dikshit and LKPandey for the Respondents Mandi Samiti CA 1841 to 184619212169 to 21732178 to 21872219 to 2226 22602261226923022373 to 2375232223562406 to 24082420 to 24232431 2426 to 24282507142 to 144174385 to 388429 to 4395992306351007  1008 1149 1149A 1630  1631 1638 5135 1346 and 2212
115 ECAggarwala and R Satish for RR 2 in CA 217921802222 227124312433 250478 and 1869 and 14379 and in other matters for Mandi Samiti for Muzaffarnagar and Meerut
Ravinder Bana for RR 2 in 24572270 and 2272 and RR 2 and RR 3 in CA 2269 and WP No 25779
MVGoswami for RR 1 in CA 2356
The Judgment of the Court was delivered by UNTWALIA J
 The Uttar Pradesh Krishi Utpadan Mandi Adhiniyam 1964 being UP Act XXV of 1964 hereinafter called the Act was passed in that year
It led to the establishment of Market Areas Principal Market Yards and Sub Market Yards etc
and the levying of the fee in relation to transactions of certain commodities in the State of Uttar Pradesh
Various Market Committees were formed known as Mandi Samitis
In order to give effect to the working of the Act The Uttar Pradesh Krishi Utpadan Mandi Niyamavali 1965 hereinafter called the Rules were made by the Governor of Uttar Pradesh
The Act has been amended several times
But we were distressed to find that the Rules were not accordingly amended as and when required to make them uptodate in accordance with the amended Act
Various traders carrying on business in the State of Uttar Pradesh within the jurisdiction of several Market Committees challenged the levy of fee in the High Court of Allahabad from time to time
There were several rounds of litigation in which they by and large failed
Finally many Writ Petitions were dismissed by the High Court by its judgment dated September 21 1978 on which date many writ petitions were also dismissed in limine
Civil Appeal 1841 of 1978 and about 103 more appeals are from the said judgment and order of the High Court
Immediately preceding the said judgment a longer and more elaborate judgment had been delivered by the High Court on April 29 1977
Civil Appeal 871 of 1978 and Civil Appeal 1636 of 1979 are from the said judgment
Along with these 106 appeals two Writ Petitions were also heard being Writ Petition No 257 of 1979 and Writ Petition No 600 of 1979
Thus in all 108 matters have been heard together and are being disposed of by this judgment
At the outset it may be mentioned that because of the litigations cropping up from time to time between the traders and the Market Committees the working of the Committees had not successfully proceeded so far as fees levied from time to time could not be realised in
Sometimes illegal or unauthorised collections seem to have been 116 made
Money justifiably realised also does not seem to have been fully utilised as it ought to have been done
In order to enable the Market Committees in their attempt to implement the law as far as possible and to save their attempt from being thwarted by any unnecessary litigation we allowed the parties to advance a full throated argument in this Court including some of the points which were not argued in the High Court or in support of which foundations of fact were lacking
In this judgment our endeavour will be to formulate the points of law and decide them as far as practicable so that in future the business of the Market Committees may be conducted in the light of this judgment leaving no scope for unnecessary litigation
Of course even in our judgment at places it would be indicated and even apart from that some genuine and factual disputes may crop up which in the first instance may be decided by the Market Committees preferably a Board constituted by a particular Committee for deciding such disputes and then if necessary by the High Court
We do hope that no further time will be lost by the State Government in amending the Rules and making them up to date to fit in with the latest amendments in the Act
The long title of the Act indicates that it is an Act to provide for the regulation of sale and purchase of agricultural produce and for the establishment superintendence and control of markets therefor in Uttar Pradesh From the Objects and Reasons of the enactment it would appear that this Act was passed for the development of new market areas and for efficient data collection and processing of arrivals in the Mandis to enable the World Bank to give a substantial help for the establishment of various markets in the States of Uttar Pradesh
In other States the Act is mainly meant to protect an agriculturist producer from being exploited when he comes to the Mandis for selling his agricultural produce
As pointed out by the High Court certain other transactions also have been roped in the levy of the fee in which both sides are traders and neither side is an agriculturist
This has been done for the effective implementation of the scheme of establishment of markets mainly for the benefit of the producers
But as pointed out recently by a Constitution Bench of this Court in the case of Kewal Krishan Puri vs State of Punjab the fee realised 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
The earlier cases on the point of fee have been elaborately reviewed in that judgment and certain principles have been called out which will be adverted to hereinafter
While deciding the question of quid pro quo in 117 relation to the impugned fees the High Court had not the advantage of the judgment of this Court
In that regard this judgment is a settler on the point and we hope that the authorities and all other concerned in the matter will be guided by and follow the said decision in the matter of levy and utilisation of the market fee collected
We shall now at the outset refer to the relevant provisions of the Act as they stood in the year 1978 and some of the rules framed thereunder
Wherever necessary reference will be made to the unamended provisions of the Act
In clause s of s2 of the Act Agricultural produce has been defined to mean Such items of produce of agriculture horticulture viticulture apiculture sericulture pisci culture animal husbandry or forest as are specified in the Schedule and includes admixture of two or more of such items and also includes any such item in processed form and further includes gur rab shakkar khandsari and jaggery
 The Board  means the State Agricultural Produce Markets Board constituted under Section 26 A Clause e defines commission agent or Arhatiya to mean person who in the ordinary course of business makes or offers to make a purchase or sale of agricultural produce on behalf of the owner or seller or purchaser of agricultural produce for Arhat or commission
 Under clause k Market Area means an area notified as such under Section 6 or as modified under Section 9
Clause o defines Principal Market Yard to mean the portion of a Market Area declared as such under Section 7
Clause p must be read in full 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
Provided that if a question arises as to whether any person is a producer or not for the purposes of this Act the decision of the Director made after an enquiry conducted in such manner as may be prescribed shall be final
 118 Under clause w Sub Market Yard means a portion of a Market Area declared as such under Section 7
Clause y defines a trader to mean 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 principals and includes a person engaged in processing of agricultural produce
 Action under s5 was taken by the State Government declaring its intention to regulate and control sale and purchase of agricultural produce in any area and thereafter declaration of Market Area was made under s6
Under the present impugned notification which was issued on April 11 1978 making it effective from May 1 1978 almost the whole of Uttar Pradesh has been declared to be Market Area dividing it into 250 areas and indicating in Schedule B of the notification 115 commodities in respect of which the fee could be levied by the Market Committees
Under s7 declarations of Principal Market Yards and Sub Market Yards have been made
Most of such areas declared so far are the markets or the Mandis where the traders are carrying on their businesses
It is proposed to establish Principal Market Yard and Sub Market Yards separately in every market area and a question of asking the traders to carry on their business only in such Market Yards is under consideration of the Government
The State Government under s8 has got the power to alter any market area and modify the list of agricultural produce
Section 9 provides for the effects of declaration of Market Area
Chapter III of the Act deals with the establishment incorporation and constitution of the Market Committees
The most important section is section 17 which provides for the powers of the Committee
Clause i authorises a Committee to issue or renew licences under the Act on such terms and conditions and subject to such restrictions as may be prescribed
Clause iii authorises a Committee to levy and collect a such fees as may be prescribed for the issue or renewal of licences and b market fee at the rate and in the manner provided therein
Clause b of section 17iii has undergone drastic changes from time to time and that enabled the appellants to advance certain serious arguments to challenge the levy of the fees especially when the Rules were not correspondingly amended
We shall advert to this aspect of the matter later in this judgment at the appropriate place
Section 19 provides for the Market Committee Fund and its utilisation
Section 19 B was introduced in the Act by UP Act 7 of 1978 wef
29 12 1977 providing for the establishment of Market Development 119 Fund  for each committee
The rule making power of the State Government is to be found in Section 40
From the Rules no provision is necessary to be specifically referred here except to point out that the State Government will be well advised to provide a machinery in the Rules for the adjudication of disputes which may be raised by the persons liable to pay the market fee in relation to their factum or quantum of liability
We are not impressed with the argument advanced on behalf of the Market Committees that no such disputes actually exist or are likely to exist which require any machinery of the Market Committee for its adjudication
At places hereinafter in this judgment we shall point out the nature of disputes which are likely to arise and which have got to be decided in the first instance by a machinery of the Market Committee such as a Board or the like
It would be just and proper and also convenient for all concerned if the disputes are thereafter taken to any court of law
Chapter VI of the Rules deals with levy and collection of fees
Rule 66 dealing with the levy of market fee and Rule 68 providing for its recovery on reference to the provisions of s17iii will be alluded to hereinafter to point out the chaotic conditions in which the Rules have been left inspite of the amendment in s17iiib of the Act
Rule 67 provides for licence fee and in none of these appeals we are concerned with the question of levy or quantum of the licence fee
Chapter VII deals with the transaction of business in market Yards
Several sets of arguments were advanced on behalf of the trader appellants in the various appeals by their respective learned counsel
Three sets of arguments were advanced on behalf of the various Market Committees and a separate argument was addressed to us on behalf of the State
In some of the appeals the State andor the Market Committees are the appellants
The points urged on behalf of the trader appellants although too numerous broadly speaking are the following 1 Big areas consisting of towns and villages have been notified as Market Areas without rendering any service
This is contrary to the whole object of the Act and the concept of fee
2 No market area or market yard has been validly created
3 No Mandi Samiti Market Committee has been validly appointed
120 4 No machinery has been provided in the Rules for adjudication of disputes
5 Fixation of minimum of 1 to be charged as market fee by all the Market Committees under s17iiib of the Act was illegal as the requirement of and the services to be rendered by the various Market Committees could not be on the same footing
6 There was no application of mind in issuing the notification dated 11 4 1978 whereby 250 market areas were notified and 115 items of agricultural produce were specified
7 There could not be any multi point levy of any market fee either in the same market area or in different market areas
8 The retrospective operation of the law brought about in s17iiib by UP Act 7 of 1978 wef 1261973 is bad
9 No market fee could be levied on goods not produced within the limits of a particular market area and if produced outside and brought in such area
10 No market fee could be levied both on paddy and rice
The rice millers have been illegally asked to pay market fee on their sale of rice
Similarly no market fee was payable on Ghee either by the producer trader of Ghee or by its purchaser
11 Fee could be charged on sale of animals but could not be charged on hides and skins as was being illegally done
12 Fee could be charged on wood or timber but could not be charged either on furniture manufactured from such wood or timber or on Catechu Katha
13 Wood cut and brought from the jungle by a manufacturer of paper such as Star Paper Mills Saharanpur could not be subjected to levy of fee
14 Some of the items mentioned in the notification are Kirana goods brought from outside the market area or even from other States for sale in different Mandi
They cannot be subjected to the levy of market fee
15 No market fee could be charged on tobacco or Tendu leaves nor on bidis
121 16 No fee could be charged in a municipal area as no market committee can be constituted there nor in a Nyaya Panchayat
17 No market fee could be charged on rab salawat and rab galawat
18 No market fee can be charged if only goods are brought in a market area and despatched outside it without there taking place any transactions of purchase and sale in respect of these goods
19 Any goods sold under any controlled legislation such as rice etc
cannot attract the levy of fee as there is no freedom to make any sale in respect of such commodity
20 If no licence is issued or taken under s91 of the Act then there is no liability to pay a market fee
21 No market fee can be levied on transactions of matchboxes soyabin products articles sold by Kisan Products Ltd and Pan betel leaves
22 No market fee can be charged from vendors of fruits and vegetables through their Commission Agents
23 Fee can be charged only on those transactions in which the seller is producer and not on any other transaction
24 Market fee can be charged only on those transactions in which the seller is the purchaser of agricultural produce and not on any other transaction
Points 1 to 4 These four points are taken up together as there is no substance in any of them
Declaration of big areas as Market Areas does not offend any provision of law
Any area big or small including towns and villages can be declared as Market Area under s6 of the Act
As explained in the case of Kewal Krishan Puri supra the whole of the market area is not meant where the traders or the licensees can be allowed to set up and carry on their business
The traders are required to take out licences under s92 read with s11 of the Act for such place which is either a Principal Market Yard or a Sub Market Yard or at any specified place in the Market Area
No body can be permitted to carry on his business anywhere in the Market Area as the Market Committee will not be able to control and levy fee throughout the Market Area
The question of rendering service and its co 122 relation to the charging of fee has been elaborately discussed in the said decision and the following principles have been culled out 1 That the amount of fee realised must be earmarked for rendering services to the licensees in the notified market area and a good and substantial portion of it must be shown to be expended for this purpose
2 That the services rendered to the licensees must be in relation to the transaction of purchase or sale of the agricultural produce
3 That while rendering services in the market area for the purpose of facilitating the transactions of purchase and sale with a view to achieve the objects of the marketing legislation it is not necessary to confer the whole of the benefit on the licensees but some special benefit must be conferred on them which have a direct close and reasonable co relation between the licensees and the transactions
4 That while conferring some special benefits on the licensee it is permissible to render such service in the market which may be in the general interest of all concerned with the transactions taking place in the market
5 That spending the amount of market fees for the purpose of augmenting the agricultural produce its facility of transport in villages and to provide other facilities meant mainly or exclusively for the benefit of the agriculturists is not permissible on the ground that such services in the long run go to increase the volume of transactions in the market ultimately benefitting the traders also
Such an indirect and remote benefit to the traders is in no sense a special benefit to them
6 That the element of quid pro quo may not be possible or even necessary to be established with arithmetical exactitude but even broadly and reasonably it must be established by the authorities who charge the fees that the amount is being spent for rendering services to those on whom falls the burden of the fee
7 At least a good and substantial portion of the amount collected on account of fees may be in the neighbourhood of two thirds or three fourths must be shown 123 with reasonable certainty as being spent for rendering services of the kind mentioned above
 As already stated Market Yards also have been established while issuing notifications under s7
By and large the Mandis where the traders are carrying on their business for the time being have been declared as Market Yards
When the Market Committees are able to construct their own Market Yards as in some places they have been able to do then a question will arise whether a trader can be forced to go to that place only for carrying on his business in agricultural produce or he can be permitted to carry on his business in his old place
For the time being this question is left open
Market Committees have not been constituted yet in accordance with the provisions contained in s13 of the Act
They have been constituted temporarily under Uttar Pradesh Krishi Utpadan Mandi Samitis Alpakalik Vyawastha Adhiniyam 1972 which Act was a temporary Act and has been extended from year to year
But it is high time that Market Committees should be constituted in a regular manner on a permanent basis in accordance with the provisions contained in Chapter III of the Act
But the levy and collection of fee by the temporary Market Committees is not illegal as argued on behalf of the appellants
A machinery for adjudication of disputes is necessary to be provided under the Rules for the proper functioning of the Market Committees
We have already observed and expressed our hope for bringing into existence such machinery in one form or the other
But it is not correct to say that in absence of such a machinery no market fee can be levied or collected
If a dispute arises then in the first instance the Market Committee itself or any Sub Committee appointed by it can give its finding which will be subject to challenge in any court of law when steps are taken for enforcement of the provisions for realisation of the market fee
Point No 5 Under clause b of s17iii of the Act a minimum and maximum limit of market fee chargeable has been fixed by the legislature
The minimum is 1 and the maximum is 1 12 of the price of the agricultural produce sold
The fixing of the minimum of 1 fee by itself is not illegal but it would be subject to the rendering of adequate services as explained by this Court in Kewal Krishan Puri s case
The facts placed before the High Court as also before us were too meagre to indicate that services to the extent of the fee levied at 1 are not being rendered
In Puri s case we upheld the levy of market fee at 2 on the value of the goods sold
But there we found that the 124 Market Committees were rendering greater services than are being rendered by the Market Committees of Uttar Pradesh
Yet charging of 1 fee as is being charged throughout the State of Uttar Pradesh by all the Market Committees is not illegal and does not go beyond the quid pro quo theory discussed in Puri s case
Point No 6 It is difficult to understand the significance of this point
The notification dated 11 4 1978 indicates that in the various Districts the number of which is about 55 250 Market Committees have been constituted and about 115 items have been selected in respect of which market fee has been directed to be levied
None of the items so specified is such that it cannot be covered by the Schedule which is a part of the Act
The definition of agricultural produce is very wide
It is not confined to items of agricultural produce only but includes items of produce of horticulture viticulture apiculture sericulture pisci culture animal husbandry or forest
Such items are specified in the Act which is undoubtedly a part of the Act
That being so challenge to the notification dated 11 4 1978 on the ground that it was issued without any application of mind is devoid of any substance and must be rejected
Point No 7 It is clear and it was expressly conceded to on behalf of the Market Committees and the State that there cannot be any multi point levy of market fee in the same market area
The reason is obvious
Section 17iiib as amended by UP Act 7 of 1978 reads as follows market fee which shall be payable on transactions of sale specified agricultural produce in the market area at such rates being not less than one percentum and not more than one and half percentum of the price of the agricultural produce so sold as the State Government may specify by notification and such fee shall be realised in the following manner 1 if the produce is sold through a commission agent the commission agent may realise the market fee from the purchaser and shall be liable to pay the same to the Committee 2 if the produce is purchased directly by a trader from a producer the trader shall be liable to pay the market fee to the Committee 125 3 if the produce is purchased by a trader from another trader the trader selling the produce may realise it from the purchaser and shall be liable to pay the market fee to the Committee and 4 in any other case of sale of such produce the purchaser shall be liable to pay the market fee to the Committee
 All the four clauses of clause b are mutually exclusive
If the produce is purchased from a producer directly the trader shall be liable to pay the market fee to the Committee in accordance with sub clause 2
But if the trader sells the same produce or any product of the same produce to another trader neither the seller trader nor the purchaser trader can be made to pay the market fee under sub clause 3
So far the position was not disputed by the Market Committees rather it was conceded and in our opinion rightly
But some difficulty arises in regard to the products of the agricultural produce which has been subjected to the levy of market fee
This will be relevant when we come to consider the various agricultural produce in respect of which challenge was made on the ground that it amounts to multi point levy
At this stage we may explain our view point by taking a few examples from the Schedule appended to the Act
Wheat an agricultural produce is mentioned under the heading Cereals 
Suppose the transaction of wheat namely wheat purchased from a producer by a trader has been subjected to levy of market fee under s17iii b2 no further levy of market fee in the same market area could be made not even on wheat flour if flour were to be included in the Schedule
The better example can be found in the items under the heading Animal Husbandry Products  wherein in the Schedule milk and Ghee both are mentioned
Milk of course is not mentioned in the notification dated 11 4 1978
But if it would have been mentioned then only the transaction of milk in a particular market area could be subjected to levy of fee and Ghee manufactured from milk could not be so subjected
But since milk is not mentioned in the notification the transaction of Ghee can be subjected to the levy of fee in accordance with the principle to be discussed hereinafter
The greater difficulty arises with respect to paddy and rice as both of them are mentioned in the Schedule as well as in the notification
We shall show hereinafter that in a particular market area market fee can not be levied both in relation to the transaction of purchase and sale of paddy and the rice produced from the same paddy
Fee can be charged only on one transaction
This finds support from the unamended Rules as they are wherein is to be found sub r2 of Rule 66
But we find nothing in the provisions of the Act or the Rules to 126 warrant the taking of the view that in another market area the Market Committee of that area cannot levy fee on a fresh transaction of sale and purchase taking place in that area
Supposing the Wheat is purchased in market area X by a trader from a producer fee will be chargeable under s17iiib2
If the same Wheat is taken to another market area say Y and another transaction of sale and purchase takes place there between a trader and a trader the market fee will be leviable under sub clause 3
It is also not correct to say that the agricultural produce must have been produced in the market area in which the first levy is made
It might have been produced in another market area or even outside the State of Uttar Pradesh but if a transaction of sale and purchase takes place of an agricultural produce as defined in the Act and covered by the notification within a particular market area then fee can be charged in relation to the said transaction
Point No 8 In order to appreciate the implication of this point we have first to read and compare the provisions of s17iiib of the Act as they stood before 1973 between 1973 and 1978 and after the amendment by Act 7 of 1978
The provision as enacted in UP Act XXV of 1964 read as follows 17
A Committee shall for the purposes of this Act have the power to iii levy and collect b market fees on transactions of sale or purchase of specified agricultural produce in the Principal Market Yard and Sub Market Yards from such persons and at such rates as may be prescribed but not exceeding one half percentum of the price of the specified agricultural produce sold or purchased therein The Rules which were framed in 1965 prescribed the rates of and the liability of the persons to pay the market fee
The relevant provision of Rules 66 and 68 are quoted below 66
Market fee Section 17iii 1 The Market Committee shall have the power to levy and collect fees on the specified agricultural produce brought and sold in the Market Yards at such rates as may be specified in the byelaws but not exceeding one half of one percentum of the price of the specified agricultural produce Provided that the market fee shall be payable by the seller
127 68
Recovery of fees Section 17iii 1 The market fee on specified agricultural produce shall be payable as soon as such produce is sold in the Principal Market Yard or Sub Market Yards in accordance with the terms of and conditions specified in the bye laws
2 The market fee shall be realized from the seller in the following manner i If the specified agricultural produce is sold through the Commission agent or directly to the trader the Commission agent or the trader as the case may be shall charge market fee from the seller in sale voucher in Form No VI and deposit the amount of market fee so realised with the Market Committee in accordance with the directions of the Committee issued in this behalf
ii If the specified agricultural produce is sold directly by the seller to the consumer the market fee shall be realised by the servant of the Market Committee authorized by it in this behalf
3 The licence fee shall be paid along with the application for licence Provided that in case the Market Committee refuses to issue a licence the fee deposited by the applicant shall be refunded to him
4 The payment of market fee and licence fee shall be made to the Committee in cash
 It would thus be seen that before 1973 reading the provisions of the Act and the Rules market fee was to be charged at such rates as specified in the bye laws of a particular Market Committee
But it could not exceed 12 percentum of the price of the agricultural produce
We were informed at the Bar that almost every Market Committee had levied fees  12
The liability to pay the fee was of the seller of the agricultural produce
Market fee was liable to be paid under Rule 682ii even if the specified agricultural produce was sold directly by the seller to the consumer
This provision has been superseded now by an amendment in the Act brought about by UP Act 19 of 1979 whereby a proviso to the following effect has been added to section 17iiib Provided that no market fee shall be levied or collected on the retail sale of any specified agricultural produce where such sale is made to the consumer
 128 Clause b of section 17iii was amended by UP Act 13 of 1973 as re enacted by UP Act 20 of 1974
The said clause stood as follows after the said amendment b market fees which shall be payable by purchasers on transactions of sale of specified agricultural produce in the Principal Market Yard or a Sub Market Yard at such rates being not less than one percentum and not more than one and a half percentum of the price of the agricultural produce so sold as the State Government may specify by notification in the Gazette It would be noticed that by the said amendment in clause b the minimum rate fixed was 1 percentum and the maximum 1 12 percentum and the liability to pay the fee became that of the purchaser instead of the seller as prescribed earlier by the Rules
Yet the Rules continued as they were
Nonetheless it is plain that after the amendment in the Statute Rules could apply only mutatis mutandis and wherever there was a conflict between the Rules and the Statute the latter had to prevail
In passing reference may be made to the substitution of the words market area in place of the words Principal Market Yard or the Sub Market Yards occurring in clause b by UP Act 6 of 1977 wef 20 12 1976
We have already adverted to this aspect of the matter and pointed out that transactions cannot take place in whole of the market area and although theortically fee is chargeable in the whole of the area now but actually the Rules and especially the Explanation to Rule 66 indicate that the transactions do take place in the Principal Market Yard or Market Yards or some specified place or places in a particular market area
Then came the amended section 17iiib of UP Act 7 of 1978 which had already been extracted above and it was made retrospective wef 12 6 1973
Under the present provision a liability to pay the fee is under four mutually exclusive clauses
The Rules which were framed in 1965 namely Rules 66 and 68 are so very different from the present provision of law that we had to express our distress in the beginning of this judgment for the failure of the Government to amend the Rules and bring it in conformity with the amended provisions of the Statute from time to time
Any way the Rules will apply as far as possible so long they do not come in conflict with the Statute and even without the aid of the Rules the provision in section 17iiib as it stands after the amendment brought about by UP Act 7 of 1978 is workable and can be given effect to
The 129 State legislature was competent to make retrospective amendment vide B Banerjee vs Anita Pan and Ms section KG Sugar Ltd vs State of Bihar and Ors
It has also been pointed out in H H Sudhundra Thirtha Swamiar vs Commissioner for Hindu Religious  Charitable Endowments Mysore at pages 324 25 that retrospective imposition of a fee is valid
Of course this cannot be a rule of universal application
In a given case and in a given situation the retrospective operation may be hit by Article 19
But in the present case we are inclined to take the view that the retrospectivity of the law as such is not bad and the only safeguard which we want to point out is this
If market fee has been realised by any Market Committee in respect of transactions of sale of agricultural produce taking place between 12 6 1973 and coming into force of UP Act 7 of 1978 in accordance with the law as it prevailed then no market fee under the amended law can be realised again
But if in respect of any transactions aforesaid market fee has not yet been realised then it can be realised in accordance with the amended provision of the law
The only hardship will be to persons covered by sub clauses 1 and 3 wherein a provision has been made to pass on the burden of fee to others
In the case of sub clause 1 the commission agent can realise the market fee from the purchaser and the seller trader under sub clause 3 can realise it from the purchaser
If market fees are realised from such persons in accordance with the amended provision of the law then in turn they may be able to realise it from persons on whom they could pass on the burden
We are not disposed to hold the law bad only on that account
Point No 9 We have already alluded to this aspect of the matter earlier in our judgment and taken the view that market fee could be levied on transactions of goods not produced within the limits of a particular market area by the Market Committee of that area even though the goods are produced outside the State of Uttar Pradesh or outside the market area of that particular Market Committee provided the transactions take place within the limits of that Market area
On the other hand we find no provision in the Act or the Rules to limit the operation of the law in a particular market area only in respect of the agricultural produce produced in that area
Point No 10 Apropos this point attention is first to be focussed on the definition of the word producer  in clause p and trader  in clause y of 130 section 2 of the Act which have already been quoted
A producer who produces agricultural produce generally does not indulge in trading activities so as to become a trader within the meaning of clause y
He is covered by clause p only
If a person is simply a trader indulging in trading activities he is covered by the definition in clause y
We have coined the expression producer trader for a person who is both a producer of agricultural produce and himself trades in it
For the purposes of the Act he ceases to be a producer and becomes a trader only as the definition indicates
While discussing the question of levy of market fee on paddy and rice this aspect of the matter is important and therefore we thought it appropriate to highlight it at this stage
By and large in the notification dated April 111978 there is hardly any duplication of any item of agricultural produce
As for example under Group D Animal Husbandry Products milk has been omitted although it is to be found in the Schedule appended to the Act
From milk can be prepared Ghee or Khoya and items 1 and 2 in Group D are the said articles
Hides and Skins can be had from the animals so wool is obtained from the sheep
But in case of paddy and rice mentioned as items 3 and 4 in Group A I Cereals there is a duplication as rice is obtained from paddy
We would therefore like to clarify the position of law in this regard
If paddy is purchased in a particular market area by a rice miller and the same paddy is converted into rice and sold then the rice miller will be liable to pay market fee on his purchase of paddy from the agriculturist producer under subclause 2 of section 17iiib
He cannot be asked to pay market fee over again under sub clause 3 in relation to the transaction of rice
Nor will it be open to the Market Committee to choose between either of the two in the example just given
Market fee has to be levied and collected in relation to the transaction of paddy alone
Otherwise there will be a risk of violation of Article 14 if it is left to the sweet will of the Market Committee in the case of some rice millers to charge market fee on the transaction of paddy and in case of others to charge it when the sale of rice takes place
If however paddy is brought by the rice miller from another market area then the Market Committee 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
We now take the example of a producer trader who is an agriculturist and produces paddy in his own field but owns a rice mill also in the same market area
He mills the paddy grown by him into rice and sells it as such
It is plain that in his case no market fee can be charged on paddy because there is no transaction of sale and purchase of paddy and market fee can be charged only on the sale of rice by him in accordance with sub clause 3 and he will be entitled to 131 pass on the burden to his purchaser
Disputes of facts were raised before us as to whether paddy had been subjected to the charge of market fee or not and whether the same paddy has been milled into rice
We did not enter into this disputed question of fact and as observed above after clarifying the law we direct the Market Committees to levy market fee in the light of this Judgment
It will be open to any trader to go to the High Court again if necessary for the redress of his grievance in connection with a disputed question which may arise even after our Judgment
In relation to the transactions of Ghee we had two types of dealers before us 1 a dealer who purchases milk or cream from the villagers and others and manufactures Ghee in his plant and 2 a dealer who purchases such Ghee from the manufacturer of Ghee and sells it to another trader in the same market area
The first dealer will be liable to pay market fee because he is the producer of Ghee within the meaning of the Act and at the same time a trader in Ghee also
When he sells Ghee to another dealer in Ghee who is simply a dealer then under sub clause 3 of section 17iiib the manufacturing dealer will be liable to pay market fee to the Market Committee on the transaction of Ghee
But he will be entitled to pass on the burden to his purchaser
Apropos the Market Committee however the liability will be of the manufacturing dealer
If milk butter or cream would have been included in the notification then the charging of fee in relation to the first transaction of sale and purchase of such commodities would have been attracted in the light of the principle of law we have enunciated above with reference to paddy and rice
But in the case of Group D such commodities are not mentioned in the notification
Point No 11 An attempt was made on behalf of the Hides and Skins dealers to show that hides and skins cannot be an agricultural produce within the meaning of the Act
They are obtained from the carcass of an animal and not from a living animal
Argument stressed was that under group G in the Schedule appended to the Act Animal Husbandry Products only can come
Item 11 Hides and Skins item 12 bones item 13 meat etc
are not products of Animal Husbandry
Some authoritative books were cited before us on Words and Phrases to show the meaning of Animal  Husbandry  and Animal Husbandry 
Animal Husbandry means that branch of agriculture which is concerned with farm animals especially as regards breeding care and production
We are not impressed by this argument
The definition clause a of section 2 uses the expression animal husbandry  by way of a descriptive one without strictly confining to the products of animal husbandry 132 as the addition of the words specified in the schedule indicates
In the schedule under the group husbandry products  are mentioned all these items
We may also add that one may breed and rear animals in a farm for the purpose of obtaining hides and skins after they are butchered
Market fee is therefore leviable on the transactions of hides and skins as no market fee can be charged on transactions of sale and purchase of animals in a market area in the State of Uttar Pradesh the same having not been included in the notification
Had it been included in the notification then no market fee could be charged in the same market area on hides and skins
It could only be charged in relation to the transaction of purchase and sale of animals
Point No 12 For discussing this point we have to refer to group E of the notification dated 11 4 1978 which deals with forest products
The items mentioned in the said group are 1 Gum 2 Wood 3 Tendu leaves 4 Catechu and 5 Lac
Market fee can be charged on purchase of wood by a trader from a producer
No fee can be charged on the sale of furniture manufactured by the purchaser of wood
It was also conceded on behalf of the Market Committees that market fee was not being charged on the sale of furniture
If it has been so charged it will be refunded
Furniture is not an item mentioned in the group of forest products
Therefore this question does not present any difficulty at all
Difficulty cropped up in relation to the charging of market fee apropos the transaction of Catechu
According to the Market Committees Catechu is a product from timber or trees like Gum or Lac
It trickles down from the trees
On the other hand according to the Catechu dealers by processing of Khar trees Catechu is produced
We leave this question of fact to be decided by the Market Committees concerned in the first instance and then by a court of law
If Catechu is a product of Khar trees by some processing as prima facie it appears to us to be so then it is plain that market fee can be charged only on the purchase of Khar wood and not on the sale of Catechu
Point No 13 This item presented some difficulty in solution
A licence is granted to a Paper Mill and to other kinds of dealers for cutting wood from the jungle and bringing it to their factories for manufacture of various articles such as paper etc
It was argued that there was no transaction of sale and purchase involved in the above operation
Moreover the wood is cut from the jungle area which although has been roped in the market area but no service is rendered in that jungle area by any Market 133 Committee
In our opinion in the licence is involved sale of wood and a right to go to that land to cut that wood
The wood may be used by the manufacturer for manufacturing furniture or may be used in the manufacture of paper or any other commodity
That is immaterial
The owner of the jungle wherefrom the wood is cut and brought will be a producer within the meaning of the Act and the licensee producer of that wood would be a purchaser of an agricultural produce within the meaning of sub clause 2 of section 17iiib of the Act liable to pay market fee
It matters little what use is made of the wood by him
The question of quid pro quo and service cannot be decided by a dichotomy of service to every payer of fee as held by this Court in Kewal Krishan Puri s case
The matter has to be judged in a broad sense and not in the sense of rendering service to every individual payer of the fee
Point No 14 This point also presented some difficulty
But on a parity of reasoning mentioned so far in connection with the other items we have got to hold that such Kirana goods as are included in the notification brought from outside a particular market area or even from outside the State of Uttar Pradesh are chargeable to market fee when their sale takes place in a particular market area
In group A VI Spices are mentioned including certain Kirana items such as Ripe Chillies Sonf turmeric etc
They are sold by the Kirana dealers
Sometimes they purchase them from the agriculturists in the same market area
In relation to those transactions they will be liable to pay market fee under sub clause 2 of section 17iiib
More often than not such articles are brought from outside and sold by the Kirana merchants
If they are sold to consumers no market fee can be levied in view of the proviso added in the year 1979
If they are sold in wholesale then the transaction can be subjected to the levy of market fee because in a particular market area they enter into the first transaction of sale in respect of the specified agricultural produce
Point No 15 Market fee can be charged on transaction of tobacco as it is included in group A V of the notification
As in the case of other items so in this case also the fee will be leviable if tobacco is purchased in the same market area from an agriculturist in accordance with sub clause 2
Otherwise it would be leviable under sub clause 3
Similar is the position in regard to tendu leaves which is mentioned in group E Bidi cannot be treated as an agricultural produce as it is not an admixture of tobacco and tendu leaves within the meaning of section 2a of the Act
It was conceded on behalf of the Market Committees that no market fee was being charged on the transactions of Bidi
But 134 if a Bidi manufacturer purchases tobacco and tendu leaves in the market area and uses them in the manufacture of Bidi he will be liable to pay market fee in relation to the transaction of tobacco and tendu leaves
Point No 16 This point has been stated merely to be rejected
There is no substance in this point
Our attention was drawn to some provisions in the municipal Acts and the Zila Parishad Acts to show that no market committee could be constituted in a municipal area or a Nyaya Panchayat
We do not consider it necessary to deal with this point in any detail
We merely reject it as being devoid of any substance
Point No 17 Gur rab shakkar khandsari and jaggery are expressly included in the definition of agricultural produce given in clause a of section 2 of the Act
We are here concerned with the question as to whether rab galawat and rab salawat are rab within the meaning of section 2a or are bye products of molasses received at the time of manufacture of khandsari
According to the case of some of the appellants who deal in these commodities they are the bye products and market fee has already been charged on rab and therefore the fee cannot be charged again on rab galawat and rab salawat
Disputes of facts were raised in this connection before us on behalf of the Market Committees
On the materials placed before us it was clear to us that rab galawat and rab salawat cannot be subjected to a separate charge of market fee apart from the transaction of rab
Market fee can be levied on the first transaction of rab taking place in any market area in accordance with any of the sub clauses of section 17 iii b as it may be applicable
It cannot be again charged on the second transaction of rab galawat or rab salawat even assuming that it is rab
But on the materials placed before us it appeared to us that rab galawat and rab salawat are not rab in the original form but they are obtained at one stage or the other in the process of manufacture of khandsari
Any way the question of fact may be decided as we have indicated in respect of the other items in the first instance by the Market Committee and thereafter by the High Court if necessary in a fresh writ petition
It will bear repetition to say that the only transaction which can be subjected to levy of market fee in a particular market area is the first transaction of rab and no other transaction of rab galawat and rab salawat
Point No 18 This point urged on behalf of the appellants is well founded and must be accepted as correct
On the very wordings of clause b of 135 section 17iii market fee is payable on transactions of sale of specified agricultural produce in the market area and if no transaction of sale takes place in a particular market area no fee can be charged by the Market Committee of that area
If goods are merely brought in any market area and are despatched outside it without any transaction of sale taking place therein then no market fee can be charged
If the bringing of the goods in a particular market area and their despatch therefrom are as a result of transactions of purchase and sale taking place outside the market area it is plain that no fee can be levied
Point No 19 This point has no substance and has got to be rejected
As held in Vishnu Agencies Pvt Ltd etc
vs Commercial Tax Officer  Ors etc
on a review of earlier decisions even if a commodity is sold pursuant to the controlled regulations still some small area is left to make it a transaction of sale
It may well be that no freedom is left to the parties in a large area of the transaction yet it is a transaction of sale
Point No20 This point also must be rejected
A pure and simple producer as defined in clause p of section 2 is not required to take any licence for selling his agricultural produce nor is he required to pay market fee under any of the sub clauses of section 17iiib
But if he is a producer trader in the sense we have explained above then he will be required to take out a licence in accordance with section 92 of the Act and no body can be permitted to carry on any trade in agricultural produce in the market area without a valid licence
Merely for his lapse of not taking out a licence he cannot escape the liability to pay the market fee
Market fee will still be chargeable from the trader as in section 17iiib it is not stated that market fee can be charged only from the licensees
The proviso to clause p of section 2 will be attracted only if a question arises as to whether any person is a producer or not for the purposes of the Act and in that event the decision of the Director made after an inquiry conducted in the manner prescribed by the rules shall be final
The proviso has nothing to do with a case of a producer trader
If a question arises whether a person is merely a producer or producer trader the Director will have no power to decide this question
Such a question will have to be decided by the Market Committee itself which will be subject to the final decision of a court of law
136 In support of the argument reliance was placed upon the decision of this Court in Raunaq Ram Tara Chand  Ors etc
vs The State of Punjab  Ors
But that case is distinguishable because of the language of rules 29 and 31 of the Punjab Agricultural Produce Market Rules framed in accordance with the Punjab Agricultural Produce Markets Act 1961
Both the rules aforesaid clearly stated that the fee could be charged from the licensees only
Not only that even the charging section 23 of the Act itself stated a Committee may subject to such rules as may be made by the State Government in this behalf levy on ad valorem basis fees on the agricultural produce brought or sold by licensees in the notified market area at a rate not exceeding rupee one fifty paise for every one hundred rupees provided On the other hand in section 17 iii b of the UP Act and Rules 66 and 68 of the Rules charging of market fee in terms is not found to be chargeable from the licensees only
The traders cannot escape their liability to pay the fee on account of their default of taking out licences
Point No 21 This point is also well founded and must be accepted as correct
Market fee can be charged only on the transactions of purchase of wood and if a manufacturer of match sticks purchases wood from the producer for the purposes of manufacturing the sticks he will be required to pay market fee on such purchase of wood only and not on the sale of match sticks or match boxes
Similarly market fee will be leviable on the transaction of purchase of soyabin and not on transaction of sale of soyabin products
Exactly the same will be the position with regard to the articles sold by Kisan Products Ltd and the sale of Pan Agricultural produce purchased by the dealers will be chargeable to market fee and not the sale of the products after one kind of processing or the other
Point No 22 Under this head the submission on behalf of the fruit and vegetable merchants was that they bring their products to the market and sell them in wholesale through their commission agents
No market fee therefore should be charged from them
In our opinion the argument so placed on behalf of the merchants is misconceived
Under sub clause 1 of section 17iiib of the Act when fruits and vegetables are sold through a commission agent by the producer then the Commission agent is liable to pay the market fee and he can realise it from the purchaser of fruits and vegetables
The burden does not fall on the producer
The liability in the first instance is of the commission agent and finally of the purchaser of the articles
137 Point No 23 Point No 24 Reliance was placed upon a decision of the Mysore High Court now Karnataka in the case of K N Marudaradhya vs The Mysore State but the view taken by the Mysore High Court was dissented from by the Patna High Court in the case of Mangalchand Ramchandra and others etc
vs State of Bihar
One of us Untwalia J delivering the judgment of the Patna High Court stated at page 1053 thus At this stage I would discuss a Bench decision of the Mysore High Court on which great reliance was placed on behalf of the petitioners in support of their contention that no fee can be levied on transaction of buying and selling between a dealer and a dealer even though such transactions take place within the market area or the market proper
The decision of the Mysore High Court is in the case of K N Marudaradhya vs The Mysore State AIR At page 126 column 2 from paragraph 33 starts the discussion on the point at issue
To the extent the decision goes to hold that the purchase in respect of which the fee could be levied or collected is the earliest purchase that is to say the fee can be levied only on one purchase and not on subsequent purchases with respect I am inclined to agree with that view expressed in paragraphs 33 to 38
But while discussing the point Iyer J has confined this earliest purchase of the agricultural produce belonging to the producer only
There does not seem to be a pointed discussion of the question whether the first purchase from a dealer could be subjected to levy or not
But by necessary implication as I read the judgment it seems their Lordships of the Mysore High Court took the view that such a deal cannot be subjected to the levy of fee
With great respect in that regard I strike my note of dissent from the view expressed by the Mysore High Court
Firstly merely because the object of the legislation is the protection of the agriculturist the plain meaning of the section cannot be cut down
Secondly they have relied upon the practice prevailing around the area under different State statutes as mentioned in paragraph 36
If I may say with respect law could not be so 138 decided on the basis of any practice
Of course the interpretation given to the Statute can be supported by reference to practice
Thirdly I am inclined to think that the Supreme Court decision in the case of Krishna Coconut Company does not lend support to the limited view expressed by the Mysore High Court
We approve of the Patna view and in the set up of the UP Act after an elaborate discussion we have pointed out as to in what kind of transaction who is liable to pay the market fee
In the UP Act even traders under certain circumstances have been made liable to pay such fees
Similarly the argument that market fee can be charged only on those transactions in which the seller is the producer of agricultural produce and not on any other transaction is also devoid of any substance
Conclusions For the reasons stated above we hold that market fee should be regularised and be charged in the light of this Judgment
If anything has been realised from the traders or any other person which goes contrary to this Judgment the same should be refunded by the Market Committee concerned within six months from today
This may not be treated as a precedent for all cases of this type
The form of the order in relation to the refund of the market fee may vary from case to case depending upon the facts and circumstances of each case
Market fee due from the traders in the light of this judgement should also be charged and paid within a period of six months from today
If there is any disputed question of fact to be decided by the Market Committee then it should be decided as quickly as possible leaving the person concerned to agitate the matter in a court of law preferably in the High Court within a short time thereafter
The High Court will proceed to decide the matter in the light of our Judgment
We do hope that services are being rendered and will continue to be rendered by the various Market Committees in the light of the Judgment of this Court in Kewal Krishan Puri s case
If in regard to any particular Market Committee it is found that services are not being rendered or in future lapses are made then it will be open to the payers of fees to re agitate the matter in the High Court in the light of that judgment
For the reasons stated above the appeals and writ petitions are partly allowed and partly dismissed in the manner indicated above
There will be no order as to costs in any of them
NVK Appeals and petitions partly allowed


Summary:
The Uttar Pradesh Krishi Utpadan Mandi Adhiniyam 1964 UP Act XXV of 1964 provides for the regulation of sale and purchase of agricultural produce and for the establishment superintendence and control of markets in Uttar Pradesh
The enactment was passed for the development of new market areas and for efficient data collection and processing of arrivals in the Mandies to enable the World Bank to give a substantial help for the establishment of various markets in the State of Uttar Pradesh
It led to the establishment of Market Areas Principal Market Yards and Sub Market Yards and levying of the fee in relation to transactions of certain commodities in the State of Uttar Pradesh
Various Market Committees were formed known as Mandi Samitis
In order to give effect to the working of the Act the Uttar Pradesh Krishi Utpadan Mandi Niyamawalli 1965 being Rules under the Act were made by the Governor
The Act was amended several times but the Rules were not accordingly amended as and when required to make them uptodate in accordance with the amended Act
Agricultural Produce has been defined in clause a of section 2 of the Act to mean Such items of produce of agriculture horticulture viticulture apiculture sericulture pisci culture animal husbandry or forest as are specified in the Schedule and includes a mixture of two or more of such items and also includes any such item in processed form and further includes gur rab shakkar khandsari and jaggery while Clause e defines commission agent or Arhatiya to mean a person who in the ordinary course of business makes or offers to make a purchase or sale of agricultural produce on behalf of the owner or seller or purchaser of agricultural produce for Arhat or commission
105 under clause p 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
Cause y defines a trader to mean 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 principals and includes a person engaged in processing of agricultural produce
 Under Clause k Market Area  means an area notified as such under Section 6 or as modified under Section 8 while Principal Market Yard  has been defined under clause o to mean the portion of a Market Area declared as such under Section 7 and Sub Market Yard  under clause w means a portion of a Market Area declared as such under Section 7
The State Government under section 8 has got the power to alter any market area and modify the list of agricultural produce
Section 9 provides for the effect of declaration of Market Area
Chapter III of the Act deals with the establishment incorporation and constitution of the Market Committees section 17 provides for the power of the Committee
Clause i authorises a Committee to issue or renew licences under the Act on such terms and conditions and subject to such restrictions as may be prescribed
Clause iii authorises a Committee to levy and collect a such Fees as may be prescribed for the issue or renewal of licences and b market fee at the rate and in the manner provided therein
Though clause b of section 17 iii had undergone drastic changes from time to time the Rules were not correspondingly amended Section 19 provides for the Market Committee Fund and its utilisation
Section 19 B was introduced in the Act by UP Act 7 of 1978 wef
29 12 1977 providing for the establishment of Market Development Fund  for each committee
The Rule making power of the State Government is in Section 40
Rule 66 deals with the levy of market fee Rule 68 provides for its recovery and Rule 67 provides for licence fee
By a State Government notification which was issued on April 11 1978 making it effective from May 1 1978 almost the whole of Uttar Pradesh had been declared to be a Market Area dividing it into 250 areas and indicating in Schedule 8 of the Notification 115 commodities in respect of which the fee could be levied by the Market Committees
Declaration of Principal Market Yards and Sub Market Yards under Section 7 had also been made
Various traders carrying on business in the State of Uttar Pradesh within the jurisdiction of several Market Committees challenged the levy of fee in the High Court from time to time
There were several rounds of litigation and the writ petitions were dismissed
On account of the litigations between the traders and the Market Committees the working of the Committees had not successfully proceeded as fees levied from time to time could not be 106 realised in full
Sometimes illegal or unauthorised collections have been made
Money justifiably realised also had not been fully utilised as it ought to have been done
In the appeals and writ petitions to this court it was contended on behalf of the appellants and petitioners that 1
Big areas consisting of towns and villages have been notified as Market Areas without rendering any service which is contrary to the whole object of the Act and the concept of fee
No market area or market yard had been validly created
No Mandi Samiti Market Committee had been validly appointed
No machinery had been provided in the Rules for adjudication of disputes
Fixation of minimum of 1 to be charged as market fee by all the Market Committees under section 17iiib of the Act was illegal as the requirement of and the services to be rendered by the various Market Committees could not be on the same footing
There was no application of mind in issuing the notification dated 11 4 1978 whereby 250 market areas were notified and 115 items of agricultural produce were specified
There could not be any multi point levy of any market fee either in the same market area or in different market areas
The retrospective operation of the law brought about in section 17iiib by UP Act 7 of 1978 wef 12 6 1973 was bad
No market fee could be levied on goods not produced within the limits of a particular market area and if produced outside and brought in such area
No market fee could be levied both on paddy and rice
The rice millers had been illegally asked to pay market fee on their sale of rice
Similarly no market fee was payable on Ghee either by the producer trader of Ghee or by its purchaser
Fee could be charged on sale of animals but could not be charged on hides and skins as was being illegally done
Fee could be charged on wood or timber but could not be charged either on furniture manufactured from such wood or timber or on Catechu Katha
Wood cut and brought from the jungle by a manufacturer or paper could not be subjected to levy of fee
Some of the items mentioned in the notification are Kirana goods brought from outside the market area or even from other States for sale in different Mandis and cannot be subjected to the levy of market fee
No market fee could be charged on tobacco or tendu leaves nor on bidis
No market fee could be charged on rab salawat and rab galawat
107 17
No market fee can be charged if only goods are brought in a market area and despatched outside it without there taking place any transaction of purchase and sale in respect of these goods
If no licence is issued or taken under section 91 of the Act then there is no liability to pay a market fee
No market fee can be levied on transactions of match boxes soyabin products
No market fee can be charged from the vendors of fruits and vegetables through their Commission Agents
Fee can be charged only on those transactions in which the seller is producer and not on any other transaction and market fee can be charged only on those transactions in which the seller is the purchaser of agricultural produce and not on any other transaction
 HELD 1
Declaration of big areas as Market Areas does not offend any provision of law
Any area big or small including towns and villages can be declared as Market Area under section 6 of the Act
121 F 2
The traders are required to take out licences under s92 read with s11 of the Act for such place which is either a principal Market Yard or a sub Market Yard or at any specified place in the Market Area
No body can be permitted to carry on his business anywhere in the Market Areas as the Market Committee will not be able to control and levy fee throughout the Market Area
121 G H 3
i Market Committees have not yet been constituted in accordance with the provisions contained in section 13 of the Act
They have been constituted temporarily under Uttar Pradesh Krishi Utpadan Mandi Samitis Alpakalik Vyawastha Adhiniyam 1972 which was a temporary Act extended from year to year
It is high time that Market Committees should be constituted in a regular manner on a permanent basis in accordance with the provisions contained in Chapter III of the Act
123 C ii The levy and collection of fee by the temporary Market Committees is not illegal as argued on behalf of the appellants
123 D Kewal Krishan Puri vs State of Punjab 1979 3 SCR 1217 referred to
A machinery for adjudication of disputes is necessary to be provided under the Rules for the proper functioning of the Market Committees
123 E 5i Under clause b of section 17iii of the Act a minimum and maximum limit of market fee chargeable has been fixed by the legislature
The minimum is 1 and the maximum is 1 12 of the price of the agricultural produce sold
The fixing of the minimum of 1 fee by itself is not illegal but it would be subject to the rendering of adequate services
123 G ii The charging of 1 fee throughout the State of Uttar Pradesh by all the market Committees is not illegal and does not go beyond the quid pro quo theory discussed in Puri s case
124 A 108 6
The notification dated 11 4 1978 indicates that in the various Districts which number about 55 250 Market Committees have been constituted and about 115 items have been selected in respect of which market fee has been directed to be levied
None of the items so specified is such that it cannot be covered by the Schedule which is a part of the Act
The definition of agricultural produce  is very wide and it is not confined to items of agricultural produce  only but includes items of produce of horticulture viticulture apiculture sericulture pisci culture animal husbandry or forest
124 C 7i All the four clauses of clause b of section 17iii are mutually exclusive
If the produce is purchased from a producer directly the trader shall be liable to pay the market fee to the Committee in accordance with sub clause 2
But if the trader sells the same produce or any product of the same produce to another trader neither the seller trader nor the purchaser trader can be made to pay the market fee under sub clause 3
125 C ii In a particular market area market fee cannot be levied both in relation to the transaction of purchase and sale of paddy and the rice produced from the same paddy
Fee can be charged only on one transaction
This finds support from the unamended Rules as they are wherein is to be found sub r
2 of Rule 66
There is nothing in the provisions of the Act or the Rules to warrant the view that in another market area the Market Committee of that area cannot levy fee on a fresh transaction of sale and purchase taking place in that area
125 H 126 A 8i Before 1973 reading the provisions of the Act and the Rules market fee was to be charged at such rates as specified in the bye laws of a particular Market Committee
But it could not exceed 12 percentum of the price of the agricultural produce
The liability to pay the fee was of the seller of the agricultural produce
Market fee was liable to be paid under Rule 682 ii even if the specified agricultural produces was sold directly by the seller to the consumer
This provision has now been superseded by an amendment in the Act brought about by UP Act 19 of 1979
127 F G ii After the amendment in the Statute Rules could apply only mutatis mutandis and wherever there was a conflict between the Rules and the Statute the latter had o prevail
128 D iii The State Legislatures are competent to make retrospective amendment and retrospective imposition of a fee is valid
However in a given case and in a given situation the retrospective operation may be hit by Article 19
129 A B B Banerjee vs Anita Pan   Ms section K G Sugar Ltd vs State of Bihar  Ors
1975 1 SCR 312 and H H Sudhundra Thirtha Swamiar vs Commissioner for Hindu Religious  Charitable Endowments Mysore 1963 Suppl
2 SCR 302 referred to
iv The Rules which were framed in 1965 namely Rules 66 and 68 are very different from the present provision of law
The Government has failed to amend the Rules and bringing it in confirmity with the amended provisions of the Statute from time to time
The Rules will apply as far as possible so long they do not come in conflict with the Statute and even 109 without the aid of the Rules the provision in section 17iii b as it stands after the amendment brought about by UP Act 7 of 1978 is workable and can be given effect to
128 G H In the present case the retrospectivity of the law as such is not bad and the only safeguard will be that if market fee has been realised by any Market Committee in respect of transactions of sale of agricultural produce taking place between 12 6 1973 and the coming into force of UP Act 7 of 1978 in accordance with law as it prevailed then no market fee under the amended law can be realized again
But if in respect of any transactions aforesaid market fee had not yet been realised then it can be realised in accordance with the amended provision of the law
129 C 9
No provision in the Act or the Rules limit the operation of the law in a particular market area only in respect of the agricultural produce produced in that area
129 G 10i A producer who produces agricultural produce generally does not indulge in trading activities so as to become a trader within the meaning of clause y
He is covered by clause p only
If a person is simply a trader indulging in trading activities he is covered by the definition in clause y
The expression producer trader has been coined for a person who is both a producer of agricultural produce and himself trades in it
For the purposes of the Act he ceases to be a producer and becomes a trader only as the definition indicates
130 A B ii If paddy is purchased in a particular market area by a rice miller and the same paddy is converted into rice and then sold the rice miller will be liable to pay market fee on his purchase of paddy from the agriculturist 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
130 E iii Market fee has to be levied and collected in relation to the transaction of paddy alone
Otherwise there will be a risk of violation of Article 14 if it is left to the Market Committee in the case of some rice millers to charge market fee on the transaction of paddy and in the case of others to charge it when the sale of the rice takes place
If however paddy is brought by the rice miller from another market area then the Market Committee of the area where paddy is converted into rice and sold will be entitled to charge market fee on the transaction and sale in accordance with sub clause 3
130 F G iv In transactions of Ghee a dealer who purchases milk or cream from the villagers and others and manufactures Ghee in his plant will be liable to pay market fee because he is the producer of Ghee within the meaning of the Act and at the same time a trader in Ghee also
When he sells Ghee to another dealer in Ghee who is simply a dealer then under sub clause 3 of Section 17iiib the manufacturing dealer will be liable to pay market fee to the Market Committee or the transaction of Ghee but he will be entitled to pass on the burden to his purchaser
131 C D 11
The definition clause a of section 2 uses the expression animal husbandry s by way of a descriptive one without strictly confining to the pro 110 products of animal husbandry as the additions of the words specified in the schedule  indicates
In the schedule under the group husbandry products  are mentioned item 11 hides and skins item 12 bones item 13 meat etc
Market fee is therefore leviable on the transactions of hides and skins as no market fee can be charged on transactions of sale and purchase of animals in a market area in the State of Uttar Pradesh the same having not been included in the notification
Had it been included in the notification then no market fee could be charged in the same market area on hides and skins
It could only be charged in relation to the transaction of purchase and sale of animals
131 H G 132 B C 12
Group E of the notification dated 11 4 1978 deals with forest products
The items mentioned therein are 1 Gum 2 Wood 3 Tendu leaves 4 Catechu and 5 Lac
Market fee can be charged on purchase of wood by a trader from a producer
No fee can be charged on the sale of furniture manufactured by the purchaser of wood
According to the Market Committees Catechu is a product from timber or trees like Gum or Lac which trickles down from the trees while according to the Catechu dealers by processing of Khar trees Catechu is produced
This question of fact is left to be decided by the Market Committees concerned in the first instance and then by a court of law
If Catechu is a product of Khar trees by some processing as prima facie it appears to be so it is plain that market fee can be charged only on the purchase of Khar wood and not on the sale of Catechu
D F 13
The owner of the jungle wherefrom the wood is cut and brought will be a producer within the meaning of the Act and the licensee producer of that wood would be a purchaser of an agricultural produce within the meaning of sub clause 2 of section 17iii b of the Act liable to pay market fee
It matters little what use is made of the wood by him
The question of quid pro quo and service cannot be decided by a dichotomy of service to every payer of fee as held in Kewal Krishan Puri s case
The matter has to be judged in a broad sense and not in the sense of rendering service to every individual payer of the fee
133 B C 14
In group A VI Spices are mentioned including certain Kirana items such as Ripe Chillies Sonf turmeric etc
They are sold by the Kirana dealers
Sometimes they purchase them from the agriculturists in the same market area
In relation to those transactions they will be liable to pay market fee under sub clause 2 of section 17iii b
More often than not such articles are brought from outside and sold by the Kirana merchants
If they are sold to consumers no market fee can be levied in view of the proviso added in the year 1979
If they are sold in wholesale then the transaction can be subjected to the levy of market fee because in a particular market area they enter into the first transaction of sale in respect of the specified agricultural produce
133 E F 15
Market fee can be charged on transaction of tobacco as it is included in group A V of the notification
Similar is the position in regard to tendu leaves which is mentioned in group E Bidi cannot be treated as an agricultural produce as it is not an admixture of tobacco and tendu leaves within the meaning of section 2a of the Act
But if a Bidi manufacturer purchases tobacco and tendu leaves in the market area and uses them in the manufac 111 ture of bidi he will be liable to pay market fee in relation to the transaction of tobacco and tendu leaves
133 G 134 A 16
Market fee can be levied on the first transaction of rab taking place in any market area in accordance with any of the sub clause of section 17iiib as may be applicable
It cannot be again charged on the second transaction of rab galawat or rab salawat even assuming that it is rab
134 F 17
If goods are merely brought in any market area and are despatched outside it without any transaction of sale taking place therein then no market fee can be charged
If the bringing of the goods in a particular market area and their despatch therefrom are as a result of transactions of purchase and sale taking place outside the market area it is plain that no fee can be levied
135 B 18i Producer as defined in clause p of section 2 is not required to take any licence for selling his agricultural produce nor is he required to pay market fee under any of the sub clauses of section 17iii b
But if he is a producer trader in the sense explained above then he will be required to take out a licence in accordance with section 92 of the Act and no body can be permitted to carry on any trade in agricultural produce in the market area without a valid licence
135 E The proviso to clause p of section 2 will be attracted only if a question arises as to whether any person is a producer or not for the purposes of the Act and in that event the decision of the Director made after an inquiry conducted in the manner prescribed by the Rules shall be final
If a question arises whether a person is merely a producer or producer trader the Director will have no power to decide this question
Such a question will have to be decided by the Market Committee itself which will be subject to the final decision of a court of law
135 G H ii The traders cannot escape their liability to pay the fee on account of their default of taking out licences
136 D 19
Market fee can be charged only on the transactions of purchase of wood and if a manufacturer of match sticks purchases wood from the producer for the purpose of manufacturing the sticks he will be required to pay market fee on such purchase of wood only and not on the sale of match sticks or match boxes
Similarly market fee will be leviable on the transaction of purchase of soyabin and not on transaction of sale of soyabin products
136 E 20
Under sub clause 1 of section 17iiib of the Act when fruits and vegetables are sold through a commission agent by the producer then the commission agent is liable to pay the market fee and he can realise it from the purchaser of fruits and vegetables
The burden does not fall on the producer
The liability in the first instance is of the commission agent and finally of the purchaser of the articles
136 H 21
In the UP Act even traders under certain circumstances have been made liable to pay such fees
The argument that market fee can be charged only on those transactions in which the seller is the producer of agricultural produce and not on any other transaction is devoid of substance
138 C 112 Mangalchand Ramchandra and others etc
vs State of Bihar approved
If anything has been realised from the traders or any other person which goes contrary to this judgment the same should be refunded by the Market Committee concerned within six months
The form of the order in relation to the refund of the market fee may vary from case to case depending upon the facts and circumstances of each case
138 D 23
Market fee due from the traders should be regularised and be charged in the light of this judgment and paid within a period of six month
If there is any disputed question of fact to be decided by the Market Committee then it should be decided as quickly as possible leaving the person concerned to agitate the matter in a court of law preferably in the High Court within short time thereafter
138 E F