Holding

The government has an inherent obligation to provide sufficient accommodation to existing licensed dealers, and merely allowing them to compete in an open auction does not discharge that duty; the State may fix rates above the reserve price but must do so reasonably and may give preferential allotment to existing traders.

Summary

The appellants, food‑grain dealers who had operated for over fifty years in the old market areas of Ferozepur district, were required to shift to newly created Mandi complexes after the Punjab Government decided to auction stalls there without granting any concession to existing traders. They challenged this on the ground that the government has an inherent obligation to provide sufficient accommodation to all licensed dealers and that merely allowing them to compete in an open auction violates Article 14 and impairs their right to trade under Article 19(1)(g). The Supreme Court examined Section 3(2) of the Punjab New Mandi Township (Development and Regulation) Act, 1960 and held that the statutory power to sell, lease or otherwise transfer land is wide but must be exercised equitably, taking into account the handicaps of existing dealers. The Court ruled that the obligation is not discharged by merely offering an opportunity to bid; the government may fix rates above the reserve price but must do so reasonably and may give preference to existing dealers. Consequently, the appeals were allowed, the High Court judgments set aside, and the State directed to provide preferential allotment to the appellants.

Issues considered

The scope of Section 3(2) of the Punjab New Mandi Township Act regarding sale, lease or transfer of land and whether it permits the government to auction stalls without concession to existing traders.
Whether the government has an inherent constitutional obligation to provide sufficient accommodation to existing licensed dealers in newly created Mandi townships.
Whether mere competition in a public auction satisfies the government's obligation under the Act and Article 14 of the Constitution.
Whether the government may fix rates above the reserve price for existing dealers and what limits apply.

Legislation cited

Subjects

Mandi townshipAuction of stallsEquitable allocationInherent governmental obligationArticle 14Article 19(1)(g)Land acquisitionPublic auction

Judgment

A M/S LABHA RAM AND SONS AND ORS. ETC.
v.
STATE OF PUNJAB AND ORS.

APRIL 30, 1998

B
[M.M. PUNCHHI, CJ., K.T. THOMAS AND D.P. WADHWA, JJ.]

Punjab New Mandi Township (Development and Regulation) Act, 1960:

C Section 3-Expression "or otherwise transferred by auction, allotment
or otherwise "-Scope of

Agricultural produce-Mandi township-Tra1*rs-Food grain
business-Creation of new Mandi Complex-Decision to auction stalls in
new Mandi Complex-No concession to existing traders-Both existing
D traders and new traders to compete for stalls in auction-Claim for
ameliorative relief by existing traders-Held Government has inherent
obligation to provide all existing licensed dealers sufficient accommodation
to carry on their trade-Such obligation is not discharged by merely allowing
existing traders to compete with new traders-Earning of Revenue is not the
E sole purpose of public auction-For allotment of stalls to existing traders
Government may fix up rate above the reserve price.

The appellants were doing business in food-grain for over fifty years
at the old market areas in Ferozepur District. In 1992 the Punjab Government
created a r.ew Mandi Complex and decided to auction the stalls in the said
F -complex. As a result the appellants had to move their business from the
existing market areas to the new township in order to prevent closure of
· their business. For the purpose of securing allotment of stalls in the new
market area existing traders were uot given any concessions but were placed
on par with new comers as both were to compete in the open auction. The
appellants unsuccessfully sought ameliorative relief before the Punjab and
G Haryana High Court. Hence appeals before this Court.

Allowing the appeals, this Court

HELD : I. Government has an inherent obligation to provide all the
licensed dealers sufficient accommodation for carrying on their trade. There
H. is much force in the contention that merely providing an opportunity to
112
LAB HA RAM AND SONS v. ST ATE 113
compete with the rest of the public for getting accommodation in the new A
market, is not sufficient to discharge the inherent obligation of the
Government to provide the existing traders at the new market area.
(116-F-G)
2. The words "or otherwise transferred by auction, allotment or
otherwise" in Section 3(2) of the Punjab New Mandi Township (Development B
and Regulation) Act, 1960 are quite wide enough to enable the Government
to take into consideration various factors including equitable considerations
for deciding in what manner and on what conditions the lands and plots in
the new Mandi should be allotted. But such wide powers are not intended
to be used to the detriment of the victims of the newly created Mandis. It is
not that the State Government must sell the land or the building by auction C
without any other option. In the case of sale by public auction the sale price
shall be the reserve price or the price offered by the highest bidder whichever
is lighter. In the case of sale by allotment the sale price can be determined
by the Sate Government from time to time keeping in view the market price
thereof. While allotment of buildings and plots is made, the State Government D
has a duty to take into account the handicaps to which existing dealers are
subjected on account of creation of the new Mandi. It is neither suggested
that Government should give preference to the erstwhile dealers by providing
free allotment of buiidings or plots nor to fix a rate which is below the
reserved price. It is open to the Government to fix up any rate above the
reserved price for such licensed dealers, of course such fixation should not E
be at unreasonable rates. (117-C-F)

3. Land is acquired under the provisions of the Land Acquisition laws
for establishing new Mandi township. Land so acquired is developed, plots
are carved out and shops and flats are built thereon. Plots as such may be
disposed of or shops and other construction thereon can be made for use of F
the trading. Hence the land for establishment of new Mandi is not to· generate
Revenue for the State. It may be a laudable object for the State to earn
revenues in the process but that could not be the sole or even the main
purpose of acquiring land. (118-8-C)

Mis Prem Chand Trilok Chand v. State of Haryana, CA No. 3122 of G
1991 decided by Supreme Court on 7.8. 1991, affirmed.

Chint Ram Ram Chandv. State of Punjab, (l996) 9 SCC 338, overruled.

Ms Puran Mal Ram Chander v. State of Haryana, CA No. 827of1998
decided by Supreme Court on 13.2.1998, referred to. H
114 SUPREME COURT REPORTS [I 998] 3 S.C.R.

A CIVIL APPELLATE JURISDICTION: Civil Appeal No. 2505 of
I 998 Etc. 'f

From the Judgment and Order dated 2.2 .. 96 of the Punjab & Haryana
High Court in C. W.P. No. 7198 of 1995.

B V.R. Reddy, Additional Solicitor General, R.K. Jain, Neeraj K Jain, Manish,
Mohan, Ms. Abha R. Sharma, Ms. Madhu Moolchandani and R.S. Sodhi for
the appearing parties.

The Judgment of the Court was delivered by

C THOMAS, J. Leave granted.

Appellants are dealers in food-grains having their business places at
two certain localities in Ferozepur District (Punjab). Appellants in one appeal
are dealers at Guru Har Sahai and appellants in the other appeals are dealers
at Talwandi. According to them, they have been doing business at the old
D market areas in those localities for over fifty years and the State Government
have declared such places as "market area" as per the provisions of Punjab
Agricultural Produce Markets Act 1961 ( For short 'the Markets Act"). Those
areas attained much development with many facilities due to increased
governmental activities.
E
With the enactment of Punjab New Mandi Township (Development and
Regulation) Act 1960 (for short 'Mandi Township Act') powers have been
conferred on the State Government to create and declare new Market (Mandi)
Townships. As per Section 3 of that Act, the State Government have power
to sell, lease or otherwise transfer either by allotment or auction o"r otherwise,
F any land or building in the new Mandi Township on such terms and conditions
as the Government may deem fit to impose.

In the year 1992 Government decided to create a new Mandi Complex
at Guru Har Sahai and another at Talwandi. Lands were acquired by Government
G for that purpose and buildings were constructed for providing the infrastructure
to the new market areas. The immediate impact of creation of such new market
townships on the appellants was that they had to move their business from
the existing market areas to the new township in order to prevent closure of
their business. Resultantly all of them became anxious to .get accommodation
in the respective new market areas but they are told to stand in the queue
H along with all the _new comers and compete with them in the open auction.
LABHA RAM AND SONS v. STATE [THOMAS, J.) 115
On earlier occasions when such new Mandi townships were created the A
"' ~ Government had provided some ameliorative reliefs to the existing traders by
fixing concessional rates as for them in respect of the plots or buildings in
the new Market areas. In 1985 Government issued a circular stating that "grain
shops, subzi shops and food stall/booths will be allotted to Arhtis (traders)
in all the new Mandi area established and developed by the colonization
department on 25% above the reserved price", of course subject to certain
B
other terms and conditions. But Government did not continue with such
reliefs being afforded to the existing traders for long. This is reflected in later
i-. circular issued by the Government that stalls/plots would be auctioned in
open and any one could compete and t,he highest bidder would be preferred
for allotment. c
Government in the present situation also entrusted the work of allotment
of stalls/plots to the Colonization Department which in turn took a decision
to auction such plots/stall in the new Mandi complex without providing any
.concession for the existing traders despite they being badly affected by the
establishment of new complex. Appellants, therefore, filed writ petitions in the D
High Court of Punjab and Haryana for issuing necessary directions to the
respondents. But these writ petitions, were dismissed. Hence these appeals.

Shri RK Jain, learned Senior Counsel argued for the appellants that if
the existing traders and the new-comers are placed on equal position between
them for securing allotment of stalls/plots in the new Market Area that will E
in effect amount to treating claimants unequally which would offend Article
14 of the Constitution. He also contended that the consequences which had
befallen the appellants on account of creation of the new Mandi included
their virtual displacement from the place where they established themselves
over the years and they are compelled to abandon their existing trading F
' places. According to the counsel, if they have to contest along with the new-
comers for getting accommodation in the new Mandi, it would only be at the
risk of substantial impairment of their right to trade under Article 19(1 )(g) of
the Constitution. Learned counsel relied on the decision of a three judge
bench of this Court in Mis Prem Chand Tri/ok Chand v. State of Haryana,
dated 7.8.1991 (CA No. 3122/91) in which claims of similar traders situated in G
similar circumstances were upheld by this Court. Their Lordships held thus:

"We are of the view that normally once the Government starts regulating
the place. of sale of agricultural produce/covered by the Act and does
not permit any other place to be used for the purpose, there is an
inherent obligation for the Government to provide at the new site for H
116 SUPREME COURT REPORTS [ 1998] 3 S.C.R.

A all the licensed dealers sufficient accommodation for carrying on their
trade and until that is done it would not be possible for the Government
to direct closure of the old site."

However, iearned counsel for the respondents invited our attention to
another decision of a two judge bench in which a different view has been
B adopted Chint Ram Ram Chandv. State ofPunjab, [1996] 9 SCC 338. Learned
counsel or the appellants on the other hand informed us that subsequently
another two judge bench of this Court (Majmudar and Kurdukar JJ.) has
decided on 13.2.1998 exactly in accordance with the three judge bench decision
in Mis Puran Mal Ram Chander v. State ofHmyana, (CA 827/98). But learned
C Judges made it clear that the said decision is "based on the peculiar facts of
the case and it shall not be treated as a precedent". Hence, it is not proper
to treat that decision as laying down any proposition of law.

In Chint Ram (supra) the two judge bench has considered the earlier
decision of the three judge bench in Prem Chand Trilok Chand and made the
D following observations:

"Putting new sites to auction and allowing everyone to compete
would tantamount to the Government providing an opportunity to
enable the existing licensees to shift their place of business to the
new Mandi, if they so desire. Therefore, the observations in Prem
E Chand's case to the effect that there was an obligation to provide new
sites for all licensed dealers would only mean that an opportunity
should be granted to the licensed dealers to acquire sites in the new
Mandi."

It is noted that learned judges did not doubt the correctness of the
F principle that Government has an inherent obligation to provide all the licensed
dealers sufficient accommodation for carrying on their trade. But can it be said
that such obligation stands discharged merely by allowing them to compete
with outsiders in the open auction. It must be remembered that even without
any special provision the existing traders can have such a right to compete
G with rest of others. We find much force in the contention of the learned
counsel for the appellant that merely providing an opportunity to compete
with the rest of the public for getting accommodation in the new Market, is
not sufficient to discharge the inherent obligation of the Government to
provide the existing traders at the new market area. Hence, it is difficult to
concur with the view adopted in Ch int Ram Ram Chand v. State of Punjab,
H (supra).
LABHA RAM AND SONS v. STATE [THOMAS, J.] 117

Section 3(1) of the Township Act confers power on the Government A
to carve out an area and to create a new Mandi with such area to be known
by such name as may be specified in the notification. Sub-section (2) reads
thus:

"The State Government may sell, lease or otherwise transfer, by auction,
allotment or otherwise, any land or building belonging to or vested B
in the State Government in any new Mandi Township on such terms
and conditions as it may, subject to any rules that may made under
this Act, deem fit to impose."

It is by virtue of the said power that the Government authorised
Colonization Department to deal with the matter. The words "or otherwise c
transferred by auction, allotment or otherwise" in Section 3(2) of the Township
Act are quite wide enough to enable the Government to take into consideration
various factors including equitable considerations for deciding in what manner
and on what conditions the lands and plots in the new Mandi should be
allotted. But such wide powers are not intended to be used to the detriment D
of the victims of the newly created Mand is. It is not that the State government
must sell the land or the building by auction without any other option. Rule
3 which has been framed under Section 3(2) and Section 25(a) of this Act
states that the lands and buildings shall be sold by the State Government by
public auction or allotment. In the case of sale by public auction the sale price
shall be the reserve price or the price offered by the highest bidder whichever E
is higher. In the case of sale by allotment the sale price can be determined
by the State Government from time to time keeping in view the market price
thereof. While allotment of buildings and plots is made, the State Government
has a duty to take into account the handicaps to which existing dealers are
subjected on account of creation of the new Mandi. Section 4 of the Mandi F
Township Act imposes a bar that no one shall erect or occupy any building
or use or develop any site without the previous permission in writing of the
"Administrator". In such a situation the only avenue open to the traders is
through the allotments sanctioned by the authorities.

Learned counsel for the respondent had fairly conceded that there is no G
difficulty to find space to accommodate the erstwhile dealers in the new
market area. But the contention advanced is that the purpose of public
auction was to earn revenue and there was no bar on the existing traders to
compete with the new comers and that sufficient number of plots/shops were
available to satisfy all such traders if they choose to bid in the open auction.
It was also submitted that there was no bar on those traders to continue their H
118 SUPREME COURT REPORTS (1998] 3 S.C.R.

A business at old places, although for sale and purchase of agricultural produce
thP,y may have to move their business at the market yards of the new Mandis.

The above line of argument of the State seems to us rather specious.
Land is acquired under the provisions of the Land Acquisition laws for
establishing new Mandi township. Land so acquired is developed, plots are
B carved out and shops and flats are built thereon. Plots as such may be
disposed of or shops and other construction thereon can be made for use of
the trading. Hence the land for establishment of new Mandi is not to generate
revenue for the State. It may be a laudable object for the State to earn
revenues in the process but that could not be the sole or even the main
C purpose of acquiring land. New Mand is are established because of increase
in business transactions and congestion in the old Mandis and for other such
objects.

It is easy to contend that the existing traders can still operate from their
old places but then for the conduct of their business for sale of agricultural
D produce they have to come to new Mandi. It would mean that they have to
come to the new Mandis for conduct of their routine business but for
rudimentary business they could continue to do the same at old places. The
fact remains that any trader would like to conduct his business of sale and
purchase of agricultural produce at the platform close to his shop.

E We do not suggest that government should give preference to the
erstwhile dealers by providing free allotment of buildings or plots nor to fix
a rate which is below the reserved price. It is open to the Government to fix
up any rate above the reserved price for such licensed dealers, of course such
fixation should not be at unreasonable rates.

F We are, therefore, of the view that the decision of the three judge bench
in Prem Chand Trilok Chand requires no re-thinking. Hence, we direct the
respondents to prcvide preference to the appellants in the matter of allotment
of building or plot in the light of the observations made above.

Appeals are thus allowed and the impugned judgments are set aside.
G '
T.N.A. Appeals dismissed.