Holding

The market fee was validly imposed and the commission agents are liable to pay it despite the stay and alleged lack of notification.

Summary

The appellants, commission agents operating in the Muzaffarnagar market area, were required to pay a market fee under the Uttar Pradesh Krishi Utpadan Mandi Adhiniyam Act, 1964, as amended retrospectively to apply from 12 June 1973. They challenged the demand for fees covering the period 11 October 1973 to 12 August 1975, arguing that no notification under Section 10 (Rule 66) for khandsari sugar existed, that a stay order had suspended the levy, and that the retrospective imposition was unreasonable. The High Court dismissed their writ petitions and the appellants appealed to the Supreme Court. The Court held that a valid notification had been issued, that the retrospective amendment of the Act was within the legislature’s plenary powers, and that the stay order did not extinguish liability for parties not before it. Consequently, the commission agents were liable to pay the market fee, subject only to proof that the purchaser had already discharged the fee for a particular transaction. The appeals were dismissed.

Issues considered

The validity of the market fee levy on commission agents for the period 1973-1975.
Whether a notification under Section 10 read with Rule 66 was required for khandsari sugar and whether it had been issued.
The effect of the High Court's stay order on the liability of parties not before it.
The permissibility of retrospective amendment of the Act imposing liability on commission agents.

Legislation cited

President's Act No. 13 of 1973
U.P. Act 10 of 1970
U.P. Act 7 of 1978
U.P. Krishi Utpadan Mandi Adhiniyam Act, 1964s. 10, s. 17, s. 2, s. 7
U.P. Krishi Utpadan Mandi Rules, 1964s. 66

Subjects

market feeretrospective legislationcommission agentsUttar Pradeshstay ordernotificationagricultural producestatutory liability

Judgment

A NANDU MAL GIRDHARI LAL ETC. ETC.
v.
STATE OF UTTAR PRADESH AND ORS.

APRIL 3, 1992

B [M.M. PUNCHHI, S. MOHAN AND G.N. RAY, JJ.]
~
U.P. Krishi Utpadan Mandi Adhiniyam Act, 1964/Rules, 1964: Sections_
2, 7, 10, 17/Ru!es 66, 7~arket fees-Levy of-Retrospective effect-Validity

c
of.

After this Court upheld the validity of the U.P. Krishi Utpadan
Mandi Adhiniyam Act, 1964, (AIR 1980 SC 1124), the authorities called
Al(
--
upon the commission agents carrying on trade in the notified market area
~
to submit their accounts in order. to fix their liability towards market fee.
The Traders Association objected that since no notification was issued
D under section 10 of the Act, market fee could not be levied. The authorities
replied that the required notification was already issued on 9.10.67. Cer-
tain other objections were also raised and the authorities informed the
Traders Association that such objections were not tenable and directed
production of accounts. Demand Notices were also issued and the traders
E were informed that if the market fee was not paid, the same would be
realise6 as arrears of land revenue. The traders filed Writ Petitions before
the High Court challenging the demand notices. ~

The High Court having dismissed the Writ Petitions, some of the
Commission Agents have preferred the present appeals.
F
The appellants contended that the liability sought to be fixed
retrospectively from 1973 to 197~ on the commission agents was un-
reasonable, as they would not be able to realise the same from the pur-
chasers scattered all over India, especially after a long gap and the relief
against the purchaser bas become time barred and as such the retospective
G levy would impose·a great burden on the commission agents; that since the
operation of the notification was stayed by the High Court in 1973, which
stay was in force till 1975, no market fee could be levied for the transac-
tions during that period; and that as no notification has been issued under
section 10 read with proviso to Rule 66 providing for trade charges and
H market fees in respect of Khandsari sugar, the demand was invalid.
446
NANDU MAL v. STATE 447

On behalf of the respondents, it was contended that a resolution was A
passed by the Mandi Samiti that market fee would be payable with effect
from 1..10.73 and that the same was given wide publicity in the market area
and also through newspapers.

Dismissing the appeals, this Court,
B
HELD : 1. The fee has been validly imposed and no excepthm could be
taken to the same. It is incorrect to state that notification under section 10
has not been issued. Merely because there was a stay, it does not mean the
liability disappears. The notification dated 13.9.1973 stood suspended at
the instance of other traders. That cannot enure to the benefit of the C
appellants herein. They were neither the petitioners nor the respondents in
those proceedings. Therefore, they cannot take advantage of the stay order
and plead inability to pay. In as mm:h as the Act itself has been retrospec-
tively amended, the appellants cannot disown their liability. [451C, DJ

Jang Singh v. Brijlal and Ors., [1964] 2 SCR 145; Union Carbide D
Corporation and Ors. v. Union of India and Ors., [1991] 4 SCC 585,
distinguished.

Ram Chandra Kai/ash Kumar & Co. v. State of U.P., AIR 1980 SC
1124, referred to.
E
2~ It is one of the settled principles that because of plenary powers, the
Legislature could pass legislation prospectively as well as retrospectively.
This being so, the retorspective liability between 11.10.73 iilnd 12.10.75, the
period in dispute in these appeals, cannot be avoided. [457E, F]

3. Merely because the commission agents could not realise the F
amount from the purchasers at this distance of time or that the purchasers
are scattered, the statutory liability canl!ot be avoided, [458B]

4. The appellants are liable t~' pay the demands raised by the
respondent Samiti against them. However, if with regard to any particular G
transaction it is proved that by the commission agents the purchasers had
paid the market fee, on such transaction the Samiti will not make them
liable once agian. [458C]

CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 7356-
~ ~~~~ H
448 SUPREME COURT REPORTS [1992) 2 S.C.R.

A From the Judgment and Order dated 28.1.83 of the Allahabad High
Court in C.M.W.P. No. 6477, 6606, 6602, 6608, 6517 of 1981.

R.K. Jain, B.D. Aggarwal, Ramesh Chandra and P.K. Jain for the
Appellants.

B E.C. Agrawala for the Respondents.

The Judgment of the Court was delivered by

MOHAN, J. Since common points of law are involved, all these
appeals are dealt with under one judgment.
c
The appellants, commission agents were carrying on trade in the
notified market area. The attack is as to the levy of market fee on them in
relation to the business of Khandsari sugar. To highlight the issue involved
we will set out the legal background first.
D
The U.P. Legislature passed an Act called U.P. Krishi Utpadan
Mandi Adhiniyam in the year 1964 as Act 25 of 1964. The object of the
Act was to regulate the sale and purchase of agricultural produce and for
the establishment, superintendence and control of markets in U.P. Section
5 of the Act confers powers on the State Government in relation to
E regulation of sale and purchase of any agricultural produce in any area
wherein such transactions are usualiy carried on and for that purpose to
declare the area as a market area. This declaration is to be by way of a
notification. Section 7 empowers even a· portion of that market area be
specified as a principal market yard, while such other portions could be
F specified as sub-market yard. The effect of such declaration of market area
is spoken to under Section 9. In that, no person shall deal with specified
·-
agricultural produce except in accordance with the conditions of licence
granted by the Committee. Sub-section (9)(ii) is specific, while it says the
commission agent, trader or broker will have to carry on the business in
G accordance with the conditions of licence. Section 10 prohibits realisation
of trade purchases from the producers from the sale and purchase of
specific agricultural produce except those which are permitted by the ru.les
or bye-laws.

Section 17, about which we will deal with later talks of the powers of
H the Mandi Samiti. Section 40 confers rule-making power.
NANDU MAL v. STATE [MOHAN, J.] 449

The commission agents, carrying on business by sale and purchase A
of gur, rab, shakkar and khandsari questioned 'the enforcement of the Act
in respect of these merchandise. A Division Bench of the Allahabad High
Court held that they would not constitute agricultural produce within the
meaning of clause (a) of Section 2 of the Act. The reason was it involves
manufacture changing the nature of agricultural produce.
B
In order to get over this difficulty, the definition of agricultural
produce was amended by U.P. Act 10 of 1970, and, as a result, gur, rab,
shakkar and khandsari and jagger became agricultural produce. The
validity of amending Act 10 of 1970 was questioned on various grounds,
which, of course, need not concern us. A Division Bench in Special Appeal C
No. 175 of 1973 dated 7.9.77 concurring with the Learned Single Judge
repelled the contentions and upheld the validity.

It is important to note that pending this Special Appeal No. 175 of
1973, the operation of the notice dated 13.9.73 issued under Section 8 of
the Act was suspended in so far as it related to khandsari. However, on D
6.8.75 order of stay was modified and the Mandi Samiti was directed to
keep the amounts realised by them in a separate account. This order was
by agreement between the parties. It has an important bearing since
arguments were raised as to the effect of the order of stay, and that is why,
we are mentioning at this stage itself. E
The trader carrying on business within the jurisdiction of several
Market Committees challenged the levy of fee before the High Court of

-
Allahabad from time to time. There were several rounds of litigation in
which they failed. Thereupon, they came up with an appeal. This court
ultimately gave a direction that the market fee should be regularised and F
charged in the light of the judgment. Concerning the services whenever
rendered by the Market Committee, it was observed at page 1141(A.I.R.
1980 SC) as follows :

" ....We do hope that services are being rendered and will
continue to be rendered by the various Market Committees in G
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 reagitate
the matter in the High Court in the light of that judgment." H
450 SUPREME COURT REPORTS [1992] 2 S.C.R.

A The result of the judgment was the validity of U.P. Krishi Utpadan
Mandi Act was upheld. Thereafter, the Commission Agent~. were called
upon to submit the account for the period 11.10,73 to 12.8.75 in order to
fix the liability of the market fee. An objection was raised by the Traders
Association that since no notification has been issued under Section 10,
market fee was not leviable. To this, a reply was sent by the Director that
B as early as 9.10.67, a notification had been issued. Then again, certain. other
objections were raised. The Mandi Samiti informed the Association that
the objections were not tenable and the Samiti need not have recourse to
Rule 66 to support the market fee and directed the production of account.
, Further to this, a demand notice was issued and the appellants were also
C informed should the market fee be not paid, it would be realised by way
of arrear of land revenue. As a result, Writ Petitions were filed challenging
the demands for the period 11.10.73 to 12.8.75. A Division Bench of the
Allahabad High Court dismissed those Writ Petitions. Hence, these civil
appeals by a few of the commission agents.
D
Though several contentions were raised before the High Court, only
the following points were raised before us by the appellants:-

(i) The liability to pay market fees was on the seller till 1973.
Thereafter, till 1978 the purchasers were made liable. The
E commission agents are only the collecting agencies from the
sellers. The liability of the commission agents is sought to be
fixed up to 1978 retrospectively from 12.6.73. The fixation of
such a libaility is unreasonable. Firstly, the commission agents
were unable to realise the said amount from the purchasers
F . who were scattered all over India. After 1980, when the demand
was made the relief against such purchaser has become time-
barred.

(ii) The retrospective levy would impose a great burden on
the commission agents.
G
The operation of notification of the State Government dated
13.9.73 including definition of agricultural produce under Sec-
tion 8 was suspended by the High Court on 11.10.73. The stay
was in force till 1975. Hence, no market fee could be charged
H or paid by anyone for the transaction during that period.
NANDU MAL v. STATE [MOHAN, J.] 451

(iii) Admittedly, no notification has been issued under Sec- A
tion 10 read with proviso of Rule 66 providing for trade charges
and market fees in respect of khandsari sugar. Therefore, the
demand is invalid.

In opposition to this, it is argued on behalf of the Samiti as early as
1975, Mandi Samiti, Muzaffarnagar passed a resolution that the market fee B
would be payable @1% with effect from 1.10.73. This resolution was given
wide publicity in the market area as well as through newspapers.

The fee has been validly imposed and no exception could be taken

)....
to the same. It is incorrect to submit that notification under Section 10 has
not been issued. Merely because Lhere was a stay, it does not mean the
c
liability disappears. The notification dated 13.9.1973 stood suspended at
the instance of other traders. That cannot ensure to the benefit of the
appellants herein. They were neither the petitioners nor the respondents.
Therefore, they cannot take advantage of the stay order and plead inability
to pay. In as much as the Act itself has been restrospectivley amended, the D
appellants cannot disown the liability.

In order to appreciate the respective contentions we will now refer
to the relevant provisions of law in relation to levy of market fess. Originally
(prior to 1978) Section 17 read as follows :-
E
"A committee shall, for the purpose of this Act, have the power
to -

(i) ............ .
F
(ii) ........... ..

(iii) Levy and collect.

(a) "Such fees as may be prescribed for the jssue or renewal
of licences, and
G
(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 per centum of the price
of the specified agricultural produce sold or purchased therein: H
452 SUPREME COURT REPORTS [1992] 2 S.C.R.

A Provided that no market fee shall be levied or collected on
retail sale of any specified agricultural produce where such sale
is made to the consumer.

(iv) ................ .

B (Vil"") •••••••••••••••• "

By President's Act No. 13 of 1973, Section 17(iii)(b) was substituted
by the following sub-section:-

"17(iii)(b) market fees, which shall be payable by purchasers,
c 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 per centum and not more than 1-1/4 per
centum of the price of the agricultural produce so sold, as the
State Govt. may specify by notification in the Gazette."
D The material change effected by this amendment was to fix the
liability on the purchaser instead of the seller. Further, two limits were also
prescribed viz. 1% and 1-1/2% giving the right to the State Govt. to fix any
amount in between these limits relating to any Mandi Samiti. This power
was exercised by the Market Committees through the bye-laws under the
E rules.

However, by U.P'. Act 7 of 1978, a new sub~clause came to be
introduced retrospectively with effect from 12.6.73 .. As a result, the Section

F
reads as under:-

"Power of the committee- a committee shall for the purposes
of this Act, have the power to :-
-
(i) .............. .

(ii) .............. .
G
(iii) levy and collect.

(a) ........... .

(q) Market fees which shall be payable on transactions of sale
H of specified agricultural produce in the market area al such
NANDU MAL v. STATE [MOHAN, J.] 453

rate, being not less than 1 per centum and not more than 1 - A
1/2 per centum of the price of the agricultural produce so sold
as the State Government may specify by notification and such
fees shall be realised in the following manner:-

(1) If the produce is sold through a Commission agent, the
commission agent may realise the market fees from the B
producer 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 fees to
the committee. c
(3) If the produce is purchased by a trader from another
trader, the trader selling the produce may realise it from
purchaser and shall be liable to pay the market fees to the
committee, and
D
(4) In any other case of sale of such produce, the purchaser
shall be liable to pay the market fees to the committee.

(iv) .............. .

E
... ) .................. . ,,
( Vlll

Two things are evident from the above-(1) the Section has got
restrospective effect w.e.f. 12.6.73 and (2) Commission agents are made
liable. F
Rule 66 runs to the following effect :-

"Market fee (Section 17(iii) - (1) The Market Committee shall
have the power to levy and collect fees ~n the specified agricul- G
tural produce brought and sold in the Market Yards at such
rates as may be specified in the bye-laws but not exceeding one-
half of one per centum of the price of the specified agricultural
produce:

Provided that the market fee shall be payable by the seller : H
454 SUPREME COURT REPORTS (1992] 2 S.C.R.

A Provided further that no market fee shall be levied and charged
prior to the date on which provisions of Section 10 of the Act
are enforced.
NA.t'lDU MAL v. STATE [MOHAN, J.] 455

No. SAM-1038 (Rec) 3812 A
In exercise of the power delegated by the State Government
vide Krishi (kha vibhag Notification No. R.2048/XIl-8-1495-65,
dated September 14, 1967, it is hereby notified under sub-sec-
tion (1) of section 10 of the U.P. Krishi Utpadan Mandi
Adhiniyam 1964 (U.P. Act No. XXV of 1964), that with effect
from December 20, 1969, no person shall, in the Muzaffarnagar
Principal Market yard and the Shahpur and Budhana Sub-
Market Yards of Muzaffarnagar market Area levy charge or

-
realise any trade charges other than those prescribed under
rule 79 of the Uttar Pradesh Krishi Utpadan Mandi Niyamavii, c
1966, in respect of any transaction of sale or purchase of the
agricultural produce specified vide notification No.
H5353A/XIl-B- 1047(2) 65, dated October 27, 1965."

The last of the notification is one issued under Sub-Section(!) of
Section 8 on 13.9.73, which is reproduced below:- D
"Government of Uttar Pradesh Agriculture Section-5
No.A-7756 12B (5) 490/72
Dated : Lucknow 13, September, 1973

Notification E

\}oder the proviso of Sub-Section(l) of Section 8 U.P.
Krishi Utpadan Mandi Act, 1964, (U.P. Act No. 25of1964) in
Notification No. H-7372/12B-1200(3)/69dated16.3.71 issued by
the State Government with regard to the Agriculture Produc- F
tion in the Muzaffarnagar Mandi area District Muzaffarnagar,
under Section 6 of the said Act, in Notification No.H-5353-
A/12B- 1047(2)/65 dated 27.10.65, the Government had made
a declaration of its objects including in the specified agricul-
tural· production in the list. And objections and suggestions if
any with regard to the proposed declaration had to be made G
to the Director of Agriculture within the period specified in
the said notification. And with regard to the said object, con-
sideration has been done by the State Government of all ob-
jections and suggestions received by the Director of Agriculture
within the prescribed time. H
456 SUPREME COURT REPORTS [1992] 2 S.C.R.

A Now therefore in exercise of the powers conferred by
part(a) of Sub-Section (1) of Section 8 of the ~aid Act the
Governor declares that from 25.9.73 for the purposes of the
said Act, the following agriculture products i.e. (1) Khatai
Amchur (2) Barseen (seed) (3) Fodder (4) Khansari will be
included in the list of agricultural products as indicated in
B Section 6 of the said Act with regard to the Muzaffarnagar
Mandi area District Muzaffarnagar.

By order:
Sd/- A.P. Singh
c Deputy Secretary.

The effect of the last notification is khandsari gets included to the
list of agricultural produce to the notification issued under Section 6 dated
27.10.65. ~
D As a matter of fact, Section 8 of the Act clearly postulates such a
procedure. Section 8(1)(a) is reproduced below:-

"Alteration of Market Area and Modification of the List of
Agricultural produce-(1) The State Government, where it con-
siders necessary or expedient in the public interest so to do,
E may, by notification in the Gazette, and in such other manner
as may be prescribed and with effect from the date specified
in the notification,-

(a) include any agriculatural produce in, or exclude any
agricultural produce from, the list of agricultural produce
F
specified in the notification under Section 6;"

The consequence of it will be that w.e.f. December 20, 1969, no
. person in the Muzaffarnagar principal Market Yard may levy charge or
realise any trade charges other than those prescribed unde rule 79 in
G respect of sale or purchase of agricultural produce, specified in the
notification dated 27th October, 1965.

This is apparent from the notification under Section 10 dated 9.10.67
as seen from the above extract.

H On 24.9.73, acting under Section 17(iii) as amended, the State
NANDU MAL v. STATE [MOHAN, J.J 457

Government issued a notification providing for realisation of market fee A
@l % on the price on sale and purchase of
specified agricultural produce
in the principal Market Yard of Muzaffarnagar w.e.f. 1.10.73.

Pursuant to this notification, the U.P. Krishi Utpadan Mandi Samiti
Muzaffarnagar informed as follows:-
B
" ... all the traders and commission agents of the Mandi Area,
Muzaffarnagar, Distt. Muzaffarnagar, are informed that they
will now realise Mandi fee on all agricultural produce at its sale
value at the rate of 1% of the total sale or purchase from the
purchaser. The amount of Mandi fee realised in this way shall c
be deposited as ordered earlier in the office of the Samiti by
the commission agent traders within the prescribed period and
after this notice no amount will be deducted as Mandi fee from
the seller.

Sd. Kanhaiyalal Agrawal D
Pergana Officer, Muzaffarnagar
President
Krishi Utpadan Mandi Samiti
M uzaffarnagar"

)-- From the above narration it will be clear that once the Act itself E
amended retrospectively w.e.f. 12.6.73, we do not know how the commis-
sion agents can escape the liability. It is one of the settled principles that
because of plenary powers, the Legislature could pass legislations prospec-
tively as well as retrospectively. This being so, the liability between 11.10.73
to 12.10.75, the period in dispute in these appeals, cannot be avoided. F
-.l. It has already been seen how khandsari has come to be validly
~ included. Therefore, for dealing in this commodity the commission agents
will be lial:>le to pay at the rate prescribed.

Turning to the stay, it has already been noted that though stay was G
granted on 11.10.73, it was not at the instance of the appellants herein. As
a matter of fact, they never questioned the validity of the amending Act or
). the notification. Therefore, they cannot take advantage of the same. The
said stay also came to be modified on 6.8.75 by agreement. Even to that
agreement, the appellants were not the parties. Therefore, neither of the H
458 SUPREME COURT REPORTS (1992) 2 S.C.R.

A rulings viz. Jang Singh v. Brijlal and others, [1964) 2 SCR 145 and Union
Carbide Corporation and others v. Union of India and others, [1991] 4 SCC
585 would have any application to the facts of the case. Merely because
the commission agents cannot realise the amount from the purchasers at
this distance of time or that they are scattered, the statutory liability cannot
be avoided.
B
. In the result, we hold that they are liable to pay the demands raised
by the respondent Samiti against them. However, if with regard to any
particular transaction it is proved by the commission agents the purchasers

.C
bad paid the market fee on such transaction the Samiti will not make them
liable. once agian. Subject to the only qualification the appeals are hereby
- \

dismissed. However, there shall be no order as to costs.

G.N. Appeals dismissed.