Case: Agricultural Market Committee  Vs. Shalimar Chemical Works Ltd

2. Agricultural Market Committee (for short the Committee) which is the appellant before us is a statutory body created under the Andhra Pradesh (Agricultural Produce and Livestock) Markets Act, 1966 (the Act) while the respondent is a licensed trader dealing in copra (dried coconut kernel) which it imports from various places in the State of Kerala for manufacturing coconut oil3. Copra is a notified agricultural produce and, therefore, the Committee has a right to levy and realise the market fee on all transactions of purchase and sale provided the transactions take place within the notified area of the Committee, the Assessing Authority who is also the Secretary of the Committee levied the market fee on the respondent who challenged those orders in appeals (No. 1 and No. 2 of 1989), filed under SectionE but the appeals were dismissed on the technical ground of) under which the whole amount of market fee had to be deposited before filing the appeal5. The respondent then approached the Andhra Pradesh High Court in Writ Petition No. 12199 of 1991 which was allowed and the appeals were directed to be entertained provided the respondent deposited half of the amount of market fee and furnished bank guarantee for the remaining half. The appeals were consequently taken up for being but were dismissed compelling the respondent to file a revision under SectionF of the Act which was dismissed by the Director of Marketing by order dated. The respondent then approached the High Court by another appeal under SectionG which was allowed by judgment dated6 and consequently the matter has come to this Court6. In order to levy market fee on the transaction of sale and purchase by the respondent, the Assessing Authority had relied upon Rule 74(2) of the Andhra Pradesh (Agricultural Produce and Livestock) Market Rules, 1969 (for short the Rules) and Explanation tos of the Committee which contained a statutory presumption that if a notified agricultural produce was weighed or measured within the notified area of the Committee, it shall be deemed to have been purchased or sold within that area. The appellate as also the revisional authorities had also relied upon this provision and had held that since copra which was imported from the State of Kerala was, admittedly, weighed at Hyderabad, it shall be deemed to have been sold to the respondent at Hyderabad and, consequently, the respondent was liable to pay market fee on all the transactions of sale/purchase of copra during the period in question7. The High Court held that the provisions contained in Rule 74(2) andw 24(5) relating to the rule of presumption were beyond the scope of the Act and, consequently, were bad in law. It also held on the basis of evidence and material on record that the transaction of sale/purchase took place in the State of Kerala and not at Hyderabad and, therefore, the authorities under the Act were not justified in levying the market fee on those transactions8. The findings recorded by the High Court have been challenged before us on the ground that the goods were imported into the State of Andhra Pradesh on the basis ofX prescribed under the Act and the delivery of commodity was taken by the respondent after weighment indicated that the transaction of sale took place at Hyderabad and not in the State of Kerala from where the goods were imported. It was also contended that after weighment, if the commodity was found to be deficient in weight, a debit note is issued to the seller which also indicated that the property in the goods passed only at Hyderabad where weighment was made by the respondent after payment of price and collection of documents through a bank. The findings of the High Court that Rule 74(2) andw 24(5) were beyond the scope of the Act was also assailed and it was contended that these provisions were made only to give effect to the policy already laid down by the legislature in the principal Act

Court's reasoning:
42. In the instant case, the goods which were ther of sale were ascertained goods. They were also in a deliverable state. On the order being placed by the respondent, the seller in the State of Kerala, loaded the goods on the lorry and despatched the same to Hyderabad. It is at this stage that the conduct of the parties becomes extremely relevant. It was one of the terms of the contract between the parties that the seller would not be liable for any future loss of goods and that the goods were being despatched at the risk of the respondent. The respondent had also obtained insurance of the goods and had paid the policy premium. He, therefore, intended the goods to be treated as his own so that if there was any loss of goods in transit, he could validly claim the insurance money. The weighment of the goods at Hyderabad or the collection of documents from the bank or payment of price through the bank at Hyderabad were immaterial, inasmuch as the property in the goods had already passed at Kerala and it was not dependent upon the payment of price or the delivery of goods to the respondent43. We are in full agreement with the view expressed by the High Court and are also of the opinion that having regard to the evidence on record which indicated that on the order placed by the respondent, the stocks were loaded into the trucks for despatch to Hyderabad with the clear stipulation that the despatch was at the risk of the purchaser and that the seller had no liability with regard to any future losses and that the stock was insured and the insurance premium was paid by the respondent, the sale took place in the State of Kerala and not at Hyderabad28. The Government to whom the power to make rules was given under Section 33 and the committee to whom power to makes was given under Section 34 widened the scope of presumption by providing further that if a notified agricultural produce is weighed, measured or counted within the notified area, it shall be deemed to have been sold or purchased in that area. The creation of legal fiction is thus beyond the legislative policy. Such legal fiction could be created only by the legislature and not by a delegate in exercise of theg power. We are, therefore, in full agreement with the High Court that Rule 74(2) andw 24(5) are beyond the scope of the Act and, therefore, ultra vires. The reliance placed by the assessing authority as also by the appellate and revisional authority on these provisions was wholly misplaced and they are not justified in holding, merely on the basis of weighment of copra within the notified area committee that the transaction of sale took place in that market area27. Applying the above principles to the instant case, it will be seen that the market fee can be levied under the Act only on the sales and purchase of notified agricultural produce within the notified area. Explanation I to Section 12 creates a legal fiction and provides that if any notified agricultural produce is taken out of a notified market area, it shall be presumed to have been purchased or sold within such area. The presumption is a rebuttable presumption and can be shown to be not correct. The policy in enacting this provision is only to cover such transactions of sale and purchase for which direct evidence may not be available. Since a notified agricultural produce can be sold only within the notified market area, and, that too, by a trader having a licence issued to him by the committee, it is obvious that if such commodity is moved out of the notified area, it would mean either that it has been sold or purchased. Otherwise, there would be no occasion to move such commodity out of the notified market area. The legal fiction was thus limited to the moving of the commodity from within the market area to a place outside the market area26. The principle which, therefore, emerges out is that the essential legislative function consists of the determination of the legislative policy and the legislature cannot abdicate essential legislative function in favour of another. Power to make subsidiary legislation may be entrusted by the legislature to another body of its choice but the legislature should, before delegating, enunciate either expressly or by implication, the policy and the principles for the guidance of the delegates. These principles also apply to taxing statutes. The effect of these principles is that the delegate which has been authorised to make subsidiary rules and regulations has to work within the scope of its authority and cannot widen or constrict the scope of the Act or the policy laid down thereunder. It cannot, in the garb of making rules, legislate on the field covered by the Act and has to restrict itself to the mode of implementation of the policy and purpose of the Act