Supreme Court of India
THE BELSUND SUGAR CO. LTD. ETC. ETC.versusTHE STATE OF BIHAR AND ORS. ETC.
- Citation
- 1999 INSC 315
- Decided
- 10 August 1999
- Disposal
- Disposed off
- Bench
- A S ANAND
Holding
The Market Act is inapplicable to sugarcane, sugar and molasses because the special statutes governing those commodities occupy the field, and consequently market fee cannot be levied on such transactions; the Act does apply to wheat products, vegetable oils, rice and tea, while baby‑food products are not agricultural produce.
Summary
The Supreme Court examined whether the Bihar Agricultural Produce Markets Act, 1960 (the Market Act) could be applied to transactions involving sugarcane, sugar, molasses, wheat products, vegetable oils, rice, milk products and tea. It held that the special statutes governing sugarcane, sugar and molasses – the Bihar Sugarcane (Regulation of Supply and Purchase) Act, 1981, the Sugarcane (Control) Order, 1966 and the Bihar Molasses (Control) Act, 1947 – occupy the field and exclude the Market Act, so no market fee can be levied on those transactions. The Court affirmed that the Market Act does apply to wheat products, vegetable oils, rice and tea, and that market fees may be imposed on those sales, while baby‑food products "Lactodex" and "Raptakos" are not agricultural produce and the licence requirement was quashed. The levy of market fee was declared a fee, not a tax, and the Court granted prospective relief: future sugar‑related transactions are exempt from market fee, past fees are not refundable, and the judgment does not affect earlier transactions. Appeals concerning sugar matters and milk products were allowed; appeals concerning wheat, vegetable oil, rice and tea were dismissed.
Issues considered
- The applicability of the Bihar Agricultural Produce Markets Act, 1960 to the purchase and sale of sugarcane, sugar and molasses.
- Whether the special legislation (Sugarcane Act, Sugarcane Control Order, Molasses Control Act) occupies the field and bars the Market Act.
- The locus standi of sugar factories to challenge the market fee under Section 27.
- The constitutional validity of the market fee under Articles 19(6) and 142 of the Constitution.
- The applicability of the Market Act to wheat products, vegetable oils, rice, milk products and tea.
- The requirement of quid pro quo for the levy of market fee and whether it is a tax.
Legislation cited
Subjects
Market feeAgricultural produceOccupied field doctrineReading downLocus standiEssential Commodities ActSugarcane regulationMolasses controlWheat productsVegetable oilRice millingMilk productsTea regulationArticle 19(6)Article 142Bihar Agricultural Produce Markets Act
Judgment
•
A THE BELSUND SUGA~ CO. LTD. ETC. ETC.
v. .
THE STA TE OF BIHAR AND ORS. ETC.
AUGUST 10, 1999
B [DR. A.S. ANAND, CJ., S.B. MAJMUDAR, SUJATA V. MANOHAR,
K. VENKATASWAMI AND V.N. KHARE, JJ.]
Constitution of India, 1950 :
c I 960-Providing
Articles 19(/)(g) and 19(6)-Bihar Agricultural Produce Markets Act,
for regulation of transactions of sale and purchase of
agricultural produce in market areas-Held, is not unconstitutional.
Seventh Schedule, List II, Entries 26 to 28-List III, Entries 33 and 47-
List I, Entry 52-'Markets and Fairs' and 'Trade and Commerce '-Market
D fee-Regulation of transactions ofpurchase and sale of agricultural produce
within market area under the Bihar Agricultural Produce Markets Act,
1960-Held, transactions of purchase of sugarcane by sugar factories are
covered under the specific provisions of Bihar Sugarcane ·(Regulation of .
Supply and Purchase) Act, 1981 and Sugarcane (Control) Order, 1966 and,
~
therefore, are excluded from the general sweep of the Market Act-Similarly
E transactions ofsale and purchase of sugar are covered under Sugar(Control)
Order, 1966 and other Orders issued under s.3 of the Essential Commodities
Act, 1955, and. transactions of sale and purchase of molasses are covered
under Bihar Molasses (Control) Act, 1947 and, are, therefore, excluded from
general sweep of the Market Act-Wide sweep of general notification under
F s.3 of Market Act will have to be read down with regard to these three
commodities-Doctrine of occupied field-Doctrine of reading down.
. /
Transactions of sale and purchase in the market area of wheat, and
wheal products i.e. Atta, Maida, Suji, Bran etc., paddy and rice, edible oils
and packed lea-Held, are not outside the sweep of regulatory provisions of
G Markel Act-Sale or purchase of any product resulting after processing '>
•
>-,
basic agricultural produce wheat is not covered by Industries (Development
and Regulation) Act, 1951-The various Orders with regard to edible oils
issued u/s. 3 of Essential Commodities Act, 1955 do not deal with sale and
purchase of vegetable oils-Neither Tea Act, 1953 nor various Tea (Control)
Orders framed uls.30 thereofprovide/or regulating sale ofpurchased roasted
H 146
BELSUND SUGAR CO.LTD. v. ST ATE 147
tea leaves after they are subjected to manufacturing process of blending and A
are brought in market area for sale as packed tea.
Article 142-Refund/Collection of market fee under Bihar Agricultural
Produce Markets Act, 1960 on transactions ofpurchase and sale ofsugarcane,
sugar and molasses-Held, Act is not applicable to these commodities-The
judgment will have only prospective operation-Jn view ofpeculiar facts and B
circumstances market fee paid in past shall not bs refunded and market fee
not collected in past shall not be collected-Doctrine of unjust enrichment.
Bihar Agricultural Produce Markets Act, 1960/Bihar Agricultural
Produce Market Rules, 1975: C
Ss. 2(1) (a), 3, 15 and 27 Rule 82-'Agricultura/ Produce'-Sale and
purchase of in market areas-Regulation of-Wheat and wheat products i.e.
Atta, Maida, Suji, Bran, 'Edible Oils', Paddy, rice and packed tea-Held, are
agricultural produce-Definition of agricultural produce would include not
only primary produce of agriculture but also any other commodity processed D
or manufactured out of such primary agricultural produce-Inclusion of
these items in the Schedule enacted under s.2(J)(a) cannot be found fault
with-Sale and purchase of these agricultural produce will attract regulatory
provisions of the Act.
E
Ss.2(J}(a),3,15,27 and 42-Sugarcane, sugar and molasses-Purchase
and sale in market area-Regulation of -Notification No. S. 0. 550 dated
22.3.1976 issued by state of Bihar exempting all sugar mills in the State from
application of provisions of s. 15 with regard to their sale and purchase of
agricultural produce -Held, though sugarcane, sugar and molasses are
agricultural produce as per s.2(J)(a), but sale and purchase of these F
commodities being regulated by Bihar Sugarcane (Regulation of Supply and
Purchase) Act, 1981; Sugarcane (Control) Order, 1966 and Sugar (Control)
Order, 1966 and Bihar Molasses (Control) Act, 1947, they are outside the
purview of s. 15 of Market Act-Consequently, entire regulatory machinery
and infrastructural facilities to be made available by marke( committees for O
regulating sale and purchase of such agricultural produce would get totally
excluded.
'Milk produce '-Baby food under trade names 'LACTODEX' and
'RAPTAKOS S.I.F' are not product of 'Milk' and, therefore, not being
agricultural produce are outside the purview of the Act. H
148 SUPREME COURT REPORTS [1999] SUPP. I S.C.R.
'A S.27-Market fee-Nature of-Held, market fee is a 'fee' and not a
'tax'-For levy of marketfee on any transaction, services to be rendered by ..
market committee must be in connection with the sale and purchase
transactions of agricultural produce falling for regulation under the Act-
Since s.15 as a whole is out of picture for controlling purchase and sale of
B sugarcane, sugar and molasses by sugar factories operating in market area,
charge of market fee would not get attracted at all.
Tea Act, 1953-s.30-Power of Central Government regarding control,
price and distribution of tea or tea waste-No such control order has been
issued by Central Government-Therefore the field remains wide open for
C State Legislature to exercise its concurrent legislative power under Entry 33
of List III of Seventh Schedule to the Constitution.
Doctrines-Doctrine of unjust enrichment; Doctrine of occupied field
and; Doctrine of reading down-Applicability of
D Locus standi-Sugar factories-Challenging imposition of market fee
on transactions ofpurchase and sale ofsugarcane, sugar and molasses under
Bihar Agricultural Produce Markets Act, 1960-Held have sufficient locus
standi to challenge the imposition of market fee.
The Bihar Legislature, in order to provide regulated markets for /
E agricultural produce, enacted the Bihar Agricultural Produce Markets Act,
1960 (Market Act) providing for levy of market fee on various agricultural
produce. Levy of market fee on sugarcane, sugar, molasses, wheat products
namely, Atta, Maida, Suji, Bran etc. Vegetable oils and Tea was challenged
in writ petitions before the High Court. The rice milling industries filed writ
F petitions challenging the notices issued to them by the Agricultural Produce
Market Committees concerned requiring them to shift their trade to principal
market yards. Another writ petition was filed by a company claiming to
produce baby food under the trade names of'LACTODEX' and 'RAPTAKOS'
S.I.F. ' (Special infant food). It challenged the notice issued to it to obtain
licence under the Market Act as according to the authorities the said items
G were 'milk products' and as such covered under the Act. The High Court
dismissed all the writ petitions. Aggrieved, the writ petitioners filed the
present appeals. A writ petition was also filed under Article 32 of the
Constitution with regard to sugar matters.
In respect of sugar matters, i.e. sugarcane, sugar and molasses, it was
H contended· for the sugar factories that general sweep of the Market Act
BELSUND SUGAR CO. LTD. v. STATE 149
would not cover the transactions of purchase of sugarcane and sale of sugar A·
and molasses by them as these transactions were specifically regulated by
Bihar Sugarcane (Regulation of Supply and Purchase) Act, 1981, Sugarcane
(Control) Order, 1966, Sugar (Control) Order, 1966 and other Sugar
(Control) Order issued under s.3 of the Essential Commodities Act, 1955,
and the Bihar Molasses (Control) Act, 1947. It was submitted that once the
State of Bihar, in exercise of its power of exemption under Section 42 of the B
Market Act, exempted the appellant-sugar factories from applicability of
Section 15 of the Market Act, the entire machinery under the Market Act
became inapplicable to regulate the transactions of purchase of sugarcane
and sale of sugar and molasses as entered into by the said sugar factories
and consequently, there remained no occasion for the authorities functioning C
under the Market Act to demand any market fee from them under Section
27 of the Market Act. In the alternative it was contended that imposition of
market fee by the respective market committees would not be justified in
absence of any service rendered to sugar factories and consequently the levy
of market fee would not be supported by any quid pro quo.
D
For the respondents, namely the State of Bihar and the market
committee, it was contended that the appellant sugar factories had no locus
standi because so far as their challenge to levy of market fee on transactions
of sale of sugar and molasses was concerned, the levy was imposed on buyers /
of these commodities and the appellants were not affected by the levy. On E
merits it was contended that exemption under Section 42 was confined to
exclude the operation of Section 15(2) of the Market Act qua the appellant-
sugar factories and if the exemption was treated to cover entire Section 15,
even then once the transaetion of sale and purchase took place within the
market area, charge under Section 27 would get settled on these transactions.
It was also contended that there was enough return benefit made available F
to the sugar factories situated within the market areas as they would utilise
the link roads for transportation of sugarcane and also the facilities of
supply of necessary information regarding the prevalent price of sugarcane.
With regard to wheat products, i.e. Atta, Maida, Suji, Bran etc. it was G
intended for the appellant-flour mills that under the Industries (Development
and Regulation) Act, 1951, the Union of India having taken over the control
of wheat industry, no transaction of purchase and sale of products of that
industry could be regulated by the Market Act It was also submitted that the
Wheat Rolling Flour Mills (Licensing and Control) Order, 1957 and the
Bihar Trading Articles (Licenses Unification) Order, 1984 issued under H
ISO SUPREME COURT REPORTS [1999] SUPP. l S.C.R.
A Section 3 of the Essential Commodities Act, 1955 laid down a complete
scheme for regulating purchase and sale of wheat products and, therefore,
these transactions could not be covered by the general sweep of the Market
Act. Raising similar contentions in support of the Vegetable Oils industry,
reliance was placed on Vegetable Oil Products Control Order, 1947, the
B Pulses, Edible Oil seeds and Edible Oils (Storage Control) Order, 1977, and
the Vegetable Oil Product. Producers (Regulation of Refined Oil
Manufacture) Order, 1973, all framed under section 3 of the Essential
Commodities Act, 1955.
As regards rice milling industries, it was contended for the appellants
C that on account of Rice Milling Industry (Regulation) Act. 1958, the field for
regulation of purchase and sale of products of rice milling industries would
be fully occupied by the said Central Act. It was also contended that the rice
mills also import paddy from other States outside the market areas falling
under the Market Act, and such imported paddy was processed and after
manufacturing activities qua them, rice was manufactured; therefore, such
D activity could not be governed by the Market Act.
For the company claiming to produce baby food under the trade names
'LACTODEX' and 'RAPTAKOS' S.l.F.' it was contended that direction of the
marketing a:uthorities requiring it to take licences under the marketing Act
was ultra vires illegal as the said two products were not 'agricultural produce'.
E
So far as levy of market fee on tea was concerned, it was contended for
the tea company that in order to protect the agriculturists from middlemen
the Market Act was enacted for the purpose of regulating sale and purchase
of agricultural produce grown within the market area and also the subsequent
F sale of any manufactured item out of such basic agricultural produce taking
place within the market area, and the large scale manufacturers like the
appellant-company who manufactured tea outside the State did not require
the protection of the Act; and that, in any case, purchase and sale of tea were
governed by the Tea Act, 1953, and, therefore, the insistance on the part of
the authorities that the sale transactions should be carried on only within
G the mark~t yards or sub-market yards was clearly illegal and violative of
Article 19 of the Constitution. It was also contended that no quid pro quo
existed between the demand for market fee by the market committees and the
sale transactions effected by appellant's selling agents so far as tea in
packed form was concerned.
H Disposing of the matters, the Court
BELSUND SUGAR CO. LTD. v. STATE 151
HELD: 1.1. Agricultural produce, as defined by s.2(1)(a) of the Bihar A
Agricultural Produce Markets Act, 1960, would include all agricultural
produce whether processed, non-processed or manufactured out of any
primary agricultural produce. [170-D-E)
1.2. Sugarcane being a primary agricultural produce, sugar
manufactured by utilising it is an agricultural produce and; molasses being B
a by-product resulting from manufacture of sugar by utilising the basic
agricultural produces namely, sugarcane, would be an agricultural produce
as defined by s.2(l)(a) of the Market Act. [203-A)
1.3. So far as wheat and its products namely, Atta, Maida, Suji etc. are
concerned, wheat being a produce of agriculture, any product resulting after C
processing such basic raw material or which results after process of
manufacture is carried on qua such basic raw material would remain
agricultural produce. (214-A-B)
1.4. Vegetable Oils manufactured by the oil mills by crushing oil D
seeds, the basic agricultural produce, are agricultural produce. All vegetable
oils are treated to be 'agricultural produce' as per serial No. 4 of the
Schedule framed under Section l(l)(a) of the Market Act. (214-E-F)
1.5. Paddy is an 'agricultural produce' being item No.I in the category
of 'Cereals' as found in the Schedule to the Market Act. Rice manufactured E
out of such basic agricultural produce would also remain agricultural produce.
Even apart from that, rice is mentioned separately as item No. 2 in the
category of 'Cereals' in the Schedule to the Market Act. (216-D-E)
1.6. Tea leaves are primary agricultural produce. After plucked tea F
leaves are processed by roasting them and then by subjecting them to
further process of blending and ultimately packing them in suitable packets
they still remain all the same agricultural produce. It is also not in dispute
that tea (leaf and dust) is a schedule item. (227-C-DJ
1.7. Baby food under the trade names 'LACTODEX' and 'RAPTAKOS' G
S.I.F.' (Special infant food) can not be treated as agricultural produce as
defined under s.2(1)(a) of the Market Act. (218-CJ
SUGAR MAITERS (i.e. Sugarcane, sugar and molasses)
LOCUS STAND!: H
152 SUPREME COURT REPORTS [1999] SUPP. I S.C.R.
A 2.1. The sugar factories operating in the !Ilarket area within the
jurisdiction of the market committee concerned are buyers of sugarcane, an·, ·
'agricultural produce'. All the purchase centres at which the appellant-
sugar factories purchase sugarcane as raw material are not only situated
within the market area but are also declared as sub-market yards. The
charge under Section 27 of paying market fee is imposed on the sugar
B factories as buyers of sugarcane within the market area and, therefore, they
have to be treated to be having sufficient locus standi as buyers of sugarcane
to challenge the imposition of market fee on their purchase transactions.
[170-E; HJ
C 2.2. If the sugar factories sell manufactured sugar and molasses out
of the purchased raw material-sugarcane, and if the buyers are not licensed,
then as per the provisions of Rule 82(iii) of the Bihar Agricultural Produce
Markets Rules, 1975 the sugar factories as sellers have to realise the
market fee from the buyers and have to deposit the same with the market
committees. That obligation by itself would give sufficient locus standi to the·
D sugar factories which sell sugar and molasses within the market area to
challenge the statutory obligation imposed on them by the Act and the Rules
and to submit as to how they are not covered by the provisions of the Act.
(171-A-C]
MARKET ACT IS NOT APPLICABLE TO SUGAR MATTERS:
E
(i) Purchase of sugarcane:
3.1. In view of the provisions ofspedfic enactment, namely, the Bihar
Sugarcane (Regulation of Supply and Purchase) Act, 1981 and the Sugarcane
(Control) Order, 1966 the regulation of sale and purchase of sugarcane in
F the entire market area for which the general Act, namely, the Market Act
is enacted, is fully governed and highlighted by these two special provisions
harmoniously operating in the very same field. Therefore, there would remain
no occasion for the State authorities to rationalise and reasonably visualise
any need for regulating the purchase, sale as well as storage of sugarcane
G in the market !)rea concerned. [193-C-E]
3.2. Entry 28 of List II of Seventh Schedule to the Constitution of India
dealing with 'Market ~nd Fairs' has to be read jointly with Entries 26 and
27 dealing with 'Trade and Commerce' and once the State Legislation deals
with these topics then it also squarely invokes legislative powers under
H Entry 33 of List Ill. If location of markets and fairs simpliciter and the
BEL SUND SUGAR CO.LTD. v. ST ATE 153
management and maintenance thereof are only contemplated by the Market A
Act, then they would fall squarely within the topic of legislative power
envisaged by Entry 28 of List II. However, the Market Act, deals with supply
and distribution of goods as well as 'trade and commerce' therein as it seeks
to regulate the sale and purchase of agricultural produce to be carried on
in the specified markets under the Act To that extent the provisions of Entry
33 of List III override the legislative powers of the State Legislature in B
connection with legislations dealing with trade and commerce in, and the
production, supply and distribution of goods. [172-C-D}
3.3. Entry 33 of the Concurrent List, on the topic of trade and commerce
in, and the production, supply and distribution of, goods enumerated therein C
at sub-clause (b), listed items of foodstuffs, including edible oilseeds and oils.
Thus to the extent to which the Market Act seeks to regulate the transactions
of sale and purchase of sugarcane and sugar which are foodstuffs and trade
and commerce therein, the Market Act being enacted under the topics of
legislative powers under Entries 26, 27 and 28 of List II will be subject to
any other legislation under Entry 33 of the Concurrent List. p 72-D-E-FJ D
3.4. So far as the Market Act is concerned, it is an Act to provide for
better regulation of buying and selling of agricultural produce and
- establishment of markets for agricultural produce in the State of Bihar and
for matters connected therewith. The Act is enacted essentially to protect the
growers of agricultural produce in the State. But the Bihar Legislature E
itself has enacted the Bihar Sugarcane (Regulation of Supply and Purchase)
Act, 1981, in exercise of its legislative powers under Entry 33 of the
Concurrent List and the provisions of the Sugarcane Act clearly indicate
that the need for regulating the purchase, sale, storage and processing of
sugarcane is completely met by the comprehensive machinery provided by p
the said Act. Therefore, the field covered by the Sugarcane Act would
obviously remain exclusively governed by the special Act being the Sugarcane
Act and to the extent it carves out an independent field for its operation, the
sweep of the general field covered by the Market Act which cover~ all types
of agricultural produce, would pro tanto get excluded qua sugarcane and the
products prepared out of it. (172-F-H; 173-A] G
MC. V.S. Arunacha/a Nadar Etc. v. The State of Madras & Others,
(1959) Supp. 1 SCR 92, relied on
Vascr.Ji Traders v. State of Karnatka & Ors., (1982) 2 Karnataka Law
Journal 357, approved. H
154 SUPREME COURT REPORTS [1999] SUPP. I S.C.R.
A 1. T.C. Ltd. and Ors. v. State of Karnataka and Ors., [1985) Suppl. SCC
476, referred to.
Juga/ Kishore v. State of Maharashtra and Ors., (1989) Supp. 1 SCC
589, distinguished.
B S. Satyapa/ Reddy and Ors. v. Govt. ofA.P. and Ors., [1994) 4 SCC 391,
held inapplicable.
Recommendations of Royal Commission in India (appointed in 1928),
referred to.
C 3.5. Section 15 of the Market Act enables the market committee
concerned to monitor and regulate the sale and purchase of the agricultural
commodity which is covered by the protective umbrella of the Act. Once such
an agricultural produce is brought for sale in the market yard or sub-
market yard, the sale is to be effected by auction or by inviting tenders. Such
a scheme is in direct conflict with scheme of the Sugarcane Act wherein
D there is no question of sugar factory being called upon to enter into a public
auction for purchasing sugarcane which is specially earmarked for it out
of the reserved area. In fact, provisions of the Sugarcane Act and the provisions
of the Market Act, especially Section 15 read with Section 3(1), cannot
harmoniously co-exist. Keeping this in view, state Government in exercise
..
E of its exemption power under section 42 of the Market Act issued a notification
dated 22nd March, 1976 which shows that the State Government h.ad given
up its intention of regulating the sale and purchase of sugarcane as per
Section 3(1) of the Market Act which could not survive any further after the
issuance of the aforesaid exemption notification. (187-C-E]
F 3.6. It is, of course, true that the Union Parliament has not ex~rCised
its concurrent legislative powers under Entry 33 of List III for regulating
the sale and purchase of sugarcane. But, the Sugarcane (Control) Order
1966 promulgated under the general legislation of the Essential Commodities
Act, 1955 when read harmoniously and in conjunction with the Sugarcane
G Act carves out a special field for their operation and by the sweep of their
combined operation the general provisions of the Market Act pro tanto get
excluded so far as the transactions of purchase and sale of sugarcane in the
market area are concerned. The wide sweep of general notification of Section
3 of the Market Act, therefore, will have to be read down by excluding from
its general sweep sugarcane and its products as the definition of'agricultural
H produce' would otherwise include not only primary produce of agriculture
BEL SUND SUGAR CO. LTD. v. ST ATE 155
but also any other commodity processed or manufactured out of such primary A
agricultural produce. (175-E-FJ
- SALE OF SUGAR
4.1. The relevant provisions of the various Sugar (Control) Orders,
namely, Sugar(Control) Order, 1966, Sugar (Packing and Marketing) Order
1970, Sugar (Restriction on Movement) Order, 1970 and Levy Sugar Supply
B
(Control) Order, 1979, issued under Section 3 of the Essential Commodities
Act clearly indicate that all sale transactions of sugar by factories
manufacturing sugar out of sugarcane, the basic 'agricultural produce' and
raw material, are regulated by these provisions. Section 15 of the Market
Act is out of picture qua even these transactions. The sale of sugar c
manufactured out of sugarcane and fixation of price thereof would also,
therefore, go out of the sweep of Section 15(1) and (2) of the Market Act and
would be governed wholly by these special provisions of the Control orders.
(198-G-H]
4.2. On the parity of reasons governing the transactions of sale and D
purchase of sugarcane, transactions of sale of sugar manufactured out of
purchased sugarcane by the very same sugar factories functioning in the
- market area would also be governed by special provisions of the Sugar
(Control) Orders and would pro tanto get excluded from the general sweep
of the Market Act. (198-H; 199-AJ
E
4.3. The provisions of Sugar (Control) Orders have not to be read in
isolation but will have to be read with the special provisions controlling the
production, sale and purchase of sugarcane out of which sugar is
manufactured by the very same sugar factories functioning in the market
area. They are all integrated transactions and are subject to a well knit F
statutory scheme of control of these commodities. They together, therefore,
provide a complete machinery for controlling the production, sale and
purchase not only of the raw material, i.e., sugarcane, but also finished
product i.e., sugar. In this background has to be visualised legislative intent
underlying the enactment of the Sugarcane Act on the one hand and the
exclusion of Section 15 of the Market Act to such transactions by the G
delegate of the legislature, namely, the State of Bihar, on the other.
(199-F; 200-A-B)
SALE OF MOLASSES
~
5.1. Molasses is a by-product of the sugar industry and the sale of H
156 SUPREME COURT REPORTS [1999) SUPP. I S.C.R.
A molasses by the sugar factories is wholly controlled by the statutory provisions
contained in the Bihar Molasses (Control) Act, 1947. As per Section 5 of ,
the Act, a sugar factory cannot even enter into an agreement or contract with
any person other than the Government or person licensed by the controller
for supply of molasses. AU molasses haye to be sold by sugar factories in
B accordance with the directions of the Molasses Controller issued under
Section 6 of the Molasses Act. [201-B-C]
5.2. The State Legislature felt the need of having special provisions for.
regulating the sale and purchase of molasses and that by itself would exclude
the need to get these transactions generally controlled and regulated by the
C sweep of the Market Act. Resultantly, the State of Bihar has also excluded
the applicability of Section 15 of the Market Act, so far as the sale transactions
of molasses by the sugar factories operating in the market area are concerned.
The Molasses (Control) Act specially enacted laying down a detailed statutory ....
scheme of control of sale and purchase of molasses produced by the sugar
factories in the market area will remain within the statutory framework of
D the special statute. The general provisions of the Market Act have, therefore,
to give way to the special statute. [203-C; E~F-G]
SIEL Ltd. and Others v. Union of India and others, [1998) 7 SCC 26,
referred to.
E 6.1. Once the State of Bihar itself has exempted the purchase of
sugarcane and the sale transactions of sugar and molasses from the operation
of Section 15 of the Market Act, they would be out of sweep of the general
provisions of the Market Act and would not statutorily enjoin the market
committees to provide any infrastructure for regulating purchase and sale
F of such agricultural produce to enable them to bring home the charge of
market fee on their purchase or sale transactions as per Section 27 of the
Market Act. (203-F-G)
6.2. Market fee levied under the Market Act is a 'fee' and not a 'tax'.
The Market Act in so far as it enacts Section 27 levying market fee is
G referable to Entry 66 of the State List read with Entry 47 of the Concurrent
List. Both of them deal with topics of legislation pertaining to fees in respect
of the matters enumerated in the respective lists. Before justifying levy of
market fee on any transaction the services to be rendered by the Market
Committee must be in connection with the sale and purchase transactions·
of agricultural produce falling for regulation under the Market Act. On the
H facts of the present case, Section 15 of the Market Act as a whole is out of
BEL SUND SUGAR CO.LTD. v. STATE 157
picture for controlling purchase and sale of sugarcane, sugar and molasses A
by sugar factories operating in the market area, and, therefore, the charge
of market fee as envisaged by Section 27 would not get attracted at all for
, them. [204-C; 205-E; 207-E-F)
Kewal Krishan Puri and Anr. v. State of Punjab and Anr. etc., (1980)
1 sec 416, relied on. B
Market fee paid in past shall not he refunded and Market Fee not
collected in past shall not be collected:
7.1. Keeping in view the p~culiar facts and circumstances of these
cases, in exercise of powers under Article 142 of the Constitution, it is C
directed that the present decision will have only prospective effect. After the
pronouncement of this judgment all future transactions of purchase of
sugarcane by the sugar factories concerned in the market area as well as
the sale of manufactured sugar and molasses produced therefrom by utilising
the purchased sugarcane by these factories will not be subjected to the levy
of market fee under Section 27 of the Market Act by the market committees D
concerned. All past transactions upto the date of this judgment which have
suffered the levy of market fee will not be covered by this judgment and the
collected market fees on the past transactions prior to the date of this
judgment will not be required to be refunded to any of the sugar mills which
might have paid the market fees. (209-A-B-C] E
7.2. However, if any of the market committees has been restrained from
recovering market fee from the writ petitioners in the High Court or if any
of the writ petitioners in the High Court has, as an appellant before this
Court, obtained stay of the payment of market fee, then for the period during
which such stay has operated and consequently market fee was not paid on F
the transactions covered by such stay orders, there will remain no occasion
for the market committee concerned to recover such market fee from the
concerned sugar mill after the date of this judgment even for such past
transactions. (209-D-E)
8. The present judgment will be applicable in connection with the G
purchase of sugarcane by the sugar factories as well as the sale of
manufactured sugar and molasses by these factories functioning in the
areas of market committees concerned and whose transactions are governed
by the provisions of the Sugarcane (Control) Order, 1966 as well as the
Bihar Sugarcane Act of 1981 and also by the relevant provisions of the
Sugar Orders and the provisions of Molasses (Control) Act. Any other H
158 SUPREME COURT REPORTS [1999] SUPP. 1 S.C.R.
A transactions of purchase and sale, in principal market yard or sub-market
yards, of sugarcane, sugar or molasses by any other licensed dealers not
governed by the aforesaid provisions will not be covered by the ratio of this
judgment. [209-H; 210-A)
WHEAT PRODUCTS-ATTA, MAIDA, SUJ!, BRAN ETC.
B
9.1. Wheat being a produce of agriculture, and Atta, Maida and Suji
being products resulting after processing such basic agricultural produce,
would squarely get covered by the sweep of the term 'agricultural produce'
and hence their inclusion in the Schedule enacted under Section 2(1)(a) of
C the Market Act as types of cereals cannot be found fault with. [214-C-D)
-
9.2. It is true that the Union Parliament in exercise of its legislative
power under Entry 52 of List I of the Seventh Schedule to the Constitution
has enacted the Industries (Development and Regulation) Act, 1951 which
D deals with industries in general. It is also true that flour industry is listed
as one of the scheduled industries as item no. 27(4) under the caption 'food
processing industries'. However, production of wheat as raw material or its
sale is not covered by the said Act. Further, unless the Central Government
in exercise of its statutory power under Section 18G of the said Act
promulgates any statutory order covering the field, it cannot be said that
E mere existence of a statutory provision for entrustment of such power by
itself would result into regulation of purchase and sale of flour even if it is
a scheduled industry. Admittedly no such Order has been promulgated by the
CentralGovernment for regulating·purchase and sale of flour in the market
areas. The Wheat Rolling Flour Mills (Licensing and Control) Order, 1957
F was neither concerned with agriculturists nor was it concerned with pricing,
purchase and sale of wheat and wheat products. Similarly Bihar Trading
Articles (Licenses Unification) Order, 1984 does not cover the field.
Therefore, it cannot be said that the field for regulation of sale and purchase
of products of flour industry like Atta, Maida, Suji, Bran etc. would remain
outside the sweep of Market Act. (210-H; 211-A; D-E; 213-E)
G
SIEL Ltd. and Ors. v. Union of India and Ors., [1998) 7 SCC 26, relied
on.
The Hingir-Rampur Coal Co. Ltd and Ors. v. The State ofOrissa and
H Ors., [1961)·2_SCR 537, distinguished.
BELSUND SUGAR CO. LTD. v. ST ATE 159
VEGETABLE OILS A
10.1. All vegetable oils are treated to be 'agricultural produce' as per
serial no. 4 of the schedule framed under Section 2(l)(a) of the Market Act.
In view of the general sweep of the said definition, oil manufactured by the
oils mills functioning within the areas of the Market Committees concerned
by crushing oil-seeds which are undisputedly agricultural produce and B
subjecting them to manufacturing process, cannot be said to be outside the
sweep of the regulatory provisions of the Market Act. [214-E-F]
10.2. Vegetable Oil Products Control Order, 1947, the Pulses, Edible
- Oilseeds and Edible Oils (Storage Control) Order, 1977, and the Vegetable
Oil Product Producers (Regulation of Refined Oil Manufacture) Order, C
1973, all framed under Section 3 of the Essential Commodities Act, 1955,
do not deal with the topic of regulation of prices and sale and purchase of
vegetable oil products. Consequently, the field is wide open for the legislation
of the State, namely, the Market Act for its applicability to the transactions
ofsale and purchase ofvegetable oil products in the market areas concerned. D
[214-G-H; 215-A]
RICE MILLING INDUSTRIES
11.1. Rice milling industries locatel1 and functioning in the market
area when purchase, within the market area, raw material paddy, whether E
grown in the market area concerned or outside, then such purchase will
attract the regulatory provisions of the Market Act. So far as the manufacture
... of rice out of such paddy is concerned, once manufacturing takes place
within the market area, it would get squarely covered by the wide sweep of
definition of Section 2(l)(a). The Rice Milling Industry (Regulation) Act,
1958 regulates the working of rice milling industries and it does not seek F
to cover the field of regulation of purchase and sale of products of rice
milling industries. (216-C-D)
11.2. However, if the appellant rice mills import paddy already purchased
from outside the market area then on such transactions of outside purchase
and import of paddy in the market area, there would remain no occasion for G
the market committees concerned to subject such transactions to the
regulating machinery of the Market Act or demand any market fee thereon.
[216-B]
1.2. So far as the regulation of sale and purchase of rice within the
market area is concerne<t, Section 15 of the Market Act applies to the H
r
160 SUPREME COURT REPORTS [1999] SUPP. I S.C.R.
A transactions of licensed dealers dealing with such agricultural produce in
the market area. Hence the entire machinery of the Market Act will be ,
- ·"
I
applicable to regulate transactions of sale and purchase of paddy by the rice
mills within the market area as well as sale of rice by them within that area
as all these transactions will have to take place in the market yard or sub-
B market yards as per Section 15 of the Act. [216-E-F)
13.1. The statutory mandate of Section 15 does not go beyond the
regulation of transactions regarding pur~hase and sale of agricultural produce
and that can be required to be effected only at the relevant principal market
yard or sub-market yard or yards. None of the provisions of the Market Act
C would entitle the market committee to insist on shifting of the business
premises of any milling company or factory processing agricultural produce
located within the market area to any particular market yard or sub-market
I-
yards. The directions in the notice issued to appellant-rice milling companies
requiring them to shift their establishments of business in the main market
yard or sub-market yards are accordingly read down. The said notice when
D so read down would remain well sustained. (217-C-D]
13.2. The appellants will not be required to shift the location of the rice
mills to principal market yard or sub-market yards if otherwise they arc not
already so located but are functioning at any place within the market area.
However, their sale and purchase transactions of paddy and rice will, of
E course, be required to be carried on only in market yard or sub-market
yards concerned as mandated by Section 15 of the Market Act. [217-E-F)
MILK AND MILK PRODUCTS
14.1. The term agricultural. produce as defined in s.2(1)(a) of the
F Market Act clearly indicates that the agricultural produce which is to be
covered by the sweep of the Act has to be one which should be specified in
the Schedule to the Act framed as per s.2(1)(a). The Schedule contains one
of the animal husbandry products at item VIII, sub-item 20 as milk ex-cept
liqui<i milk. Thus any product consisting of solidified milk, like milk powder,
G is contemplated by the said item. By no stretch of imagination, tinned baby
food containing various ingredients which may include some milk fats or
proteins though in powder form can be said to be milk powder simpliciter •.
or whole milk not in liquid form. It is also pertinent to note that there is no
item of milk products in the Schedule to the Act under the caption 'Animal
Husbandry Products', whereas Butter and Ghee are separately mentioned as
H items 7 and 8 which are wholly manufactured out of milk. Therefore, save
BELSUND SUGAR CO. LTD. v. STATE 161
and except butter and ghee no other milk product is sought to be covered by A
the sweep of the Act, as Animal Husbandry products and the basic 'Animal
Husbandry Produce' like 'milk' only in solid form is sought to be covered
by a separate solitary item no. 20 as one of the 'Animal Husbandry Products'.
Therefore, any other manufactured product namely, 'LACTODEX' and
'RAPT AKOS' S.I.F. (Special infant food) utilising some ingredients of milk B
powder as one of the ingredients but which are processed by addition of all
other extra items with the result that finished products like baby foods
emerges as manufactured items for serving as substitute of milk to be fed·
to infants who cannot digest liquid milk or solidified milk as such, cannot
be treated to be 'agricultural produce' as part and parcel of listed 'Animal
Husbandry products' mentioned in the Schedule. C
(218-F; 220-E; G-H; 221-A-B]
14.2. On the material before the High Court in connection with the
ingredients of the two products of the appellant, namely, 'LACTODEX' and
'RAPTAKOS' S.I.F. (Special infant food) it could not be effectively shown by
the respondents beyond any doubt that these two products also were D
'agricultural produce' being Animal Husbandry products of 'milk' in a non-
liquid form. Consequently, there was no occasion for the respondent
·- authorities to insist that the appellant for the sale of the aforesaid two
products within the market area governed by the Market Act in the State
of Bihar was required to take any licence under that Act. The impugned E
notice calling upon the appellant to take licences under the Market Act is
quashed. (221-E-F-Gl
14.3. Since only grievance of the appellant was with regard to taking
of licence by it, the question of refund of any market fee does not survive
for consideration. (221-Fl F
1FA
15.1. Manufactured tea being 'agricultural produce' under the Market
Act, sale of it in packed condition within the market area would squarely
attract the charge under Section 27 of the M~rket Act which is widely G
worded. The moment the agricultural produce as defined by Section 2(1)(a),
is bought or sold in the market area, Section 27 would get attracted to cover
such transaction. It is also pertinent to note that Section 15 sub-section (1)
of the Market Act is applicable in the present case to cover such transactions
of sale of packed tea within the market areas of the concerned market
committees governed by the Act. Save and except such quantity as may be H
162 SUPREME COURT REPORTS [1999) SUPP. 1 S.C.R.
A prescribed for retail sale or personal consumption to be outside the sweep
of Section 15(1) of the Act, rest of these sale transactions regarding
manufactured agricultural produce would remain governed by the sweep of
the Act. [227-D-F)
15.2. On a conjoint reading of Section 2(1)(a), Section 15 and the
B relevant entry in the Schedule, it is clear that whether the manufactured
agricultural produce has undergone manufacturing process within the market
area or not or whether such agricultural produce in its raw form is grown
in the market area or outside or whether the processed 'agricultural produce'
is imported only for sale within the market area, the applicability of the Act
C cannot be said to be ruled out to cover all these types of sale transactions.
Even if an agricultural produce initially is not within the market area and
it is brought in manufactured form within the market area for sale, such
sale transaction in connection with such a produce would be covered by the
swew of the Market Act. [227-G; 228-G)
D 15.3. It cannot be said that merely because the tea leaves produced in
tea gardens outside the State of Bihar are processed by the appellant in its
factories outside Bihar and are converted into blended and branded qualities
of packed tea like red label tea or green label tea etc., and even though such
packed tea is sold within Bihar Market areas, the Market Act cannot be
applied to such sale transactions of manufactured tea after importing it in
E the State of Bihar. [230-E-F)
Ram Chandra Kailash Kumar and Company and Ors. v. State of U.'P.
and Anr. etc. etc., [1980) Suppl. SCC 27, relied on.
Rameshchandra Kachardas Porwal and Ors. v. State of Maharashtra
F and Ors. etc. etc., [1981) 2 sec 722, affirmed.
16.1. The provisions of the Tea Act, 1953 which are enacted by the
Union Parliament under Entry 52 of List I read with Entry 33 of List Ill of
Seventh Schedule to the Constitution of India deal with the control of tea
industry in public interest. The basic feature of the Tea Act is to provide for
G control of extensio.J.1 of tea cultivation in the areas where tea leaves are grown
in tea gardens. However, it is pertinent to note that the said.Act does not
provide for regulating the sale of purchased roasted tea leaves after they are
subjected to manufacturing process of blending and are brought in the
market for sale as packed tea. The place where such packed tea is to be sold
and the price at which it has to be sold are matters on which the Tea Act,
H 1953 does not contain any statutory provisions. The objective of the Tea Act
>
BELSUND SUGAR CO. LTD. v. STATE 163
is focussed on tea cultivation/tea export and establishment of tea A
manufacturing plants. It is quite different from that of the Market Act, 1960
enacted by the Bihar Legislature. The Tea Act has no concern with the
establishment of markets in the State of Bihar or other States wherein
packed tea could be sold in wholesale or retail markets so as to ultimately
reach the Indian consumers. Similarly none of the following, viz. Tea B
Committee, 1934, Indian Tea Control Act, 1938 and Central Tea Board Act,
1949, Tea (Distribution and Export) Order, 1957, Tea (Marketing) Control
Order, 1984, Tea Warehouses (Licensing) Order, 1989, Tea (Waste) Control
Order, 1959 have occupied the field of regulation of sale and purchase of
packed tea in market areas. [233-H; 234-A-B; 237-B]
16.2. It is true Section 30 found in Chapter VI of the Tea Act deals with
c
control by the Central Government and lays down the power of the Central
Government regarding control, price and distribution of tea or tea waste.
However, till date no such control order has been issued by the Central
Government under the said provision. In the absence of any Order under
Section 30 sub-section (1) clauses (a) & (b) passed by the Central Government D
with regard to regulation of prices and location of market places where
packed tea could be sold to wholesale dealers or even to retailers, the field
remains wide open for the State Legislature to exercise its concurrent
legislative power under Entry 33 of List Ill for effectively dealing with these
matters. This is precisely what has been done by the State Legislature by E
enacting the Market Act. Mere possibility of issuance of any future order
under Section 30(1) of the Tea Act by the Central Government, in the
absence of any existing express order to that effect, cannot be said to have
occupied the field regarding purchase and sale of manufactured tea and
fixation of maximum or minimum price thereof or the location of such sales.
1234-C; 236-E-FI F
Ch. Tika Ramji & Ors. etc. v. The State of Uttar Pradesh & Ors., (19561
SCR 393.
SIEL Ltd. and Ors. v. Union of India and Ors., 119981 7 SCC 26,
affirmed.
G
Shyamkant Lal v. Rambhajan Singh, (1939) F.C.R. 188 212, referred
to.
16.3. The various Tea Orders indicate that the Central Government in
its wisdom did not think it fit to issue any Order under Section 30 of Tea
Act, sub-section (1), clauses (a) & (b) and therefore, kept the field wide open H
164 SUPREME COURT REPORTS [1999] SUPP. I S.C.R.
A in connection with the topics covered by the said provisions of Section 30 for
the State Governments to exercise their legislative powers and enact suitable
legislations under Entry 33 of the Concurrent List of the Seventh Schedule
to the Constitution. [239-E-F]
16.4. The insertion of the item pertaining to Tea (leaf and dust) in the
B Schedule to the Market Act, therefore, cannot be said to be an unauthorised
e~ercise on the part of the delegate of the State Le~islature, namely, the
State Government which has exercised its power under Section 39 of the
Market Act. (236-F)
16.5. Under the relevant Orders issued by the Central Government
C under Section 30 of the Tea Act, the purchasers of tea have also to be
licensed. Such licensed purchasers can bid at the auction to be held as per
section 15, sub-section (2) of the Market Act for purchasing such packed
tea. At that stage, there is no inconsistency Qr conflict between the earlier
public auction held under the relevant statutory Orders issued under Section
30 of the Tea Act concerning roasted tea leaves and the auction of packed
D and processed tea by the appellant selling such commodities in the market
areas through their stockists to wholesale dealers and traders operating in
the market area and the market yard or sub-market yards concerned.
(240-H; 241-A-B)
17. So far as the appellant is concerned, all that is required of it is
E to take licence for selling packed tea in market yards or sub-market yards
from the market committee concerned. The appellant is not required to bear
the burden of any market fee. As per Section 27 of the Market Act, the
burden of market fee is to be borne by the purchasers of such packed tea,
namely, the wholesale dealers licensed to purchase such Tea as per the
F Central Orders mentioned earlier. Such purchasers have not brought in
challenge levy of market fee on them. Once the appellant's stockist sells the
pa_cked tea in the market yard or sub-market yards maintained by the
market committee, as laid down by s.15 which remains fully operative to
cover such transactions, the entire infrastructural facilities made available
by the market committee to all the purchasers and sellers of agricultural
G produce in the market yard, would automatically become available to the
appellant's stockist.. It can, therefore, not be said that there is no quid pro
quo underlying transactions of sale of packed tea by the appellant's stockist
in the market yard or sub-market yards maintained by the market committee
concerned. (242-E-G)
H 18. The contention that the Market Act would be unconstitutional
BEL SUND SUGAR CO. LTD. v. ST ATE [S.B. MAJMUDAR, J.] 165
cannot be countenanced for twin reasons. Firstly such a contention was not A
canvassed either before the High Court or before this Court in the present
proceedings. Secondly, in any case, on the applicability of the Act once the
transaction of sale of packed tea takes place in the market area, it cannot
but be said to be imposing reasonable restriction under Article 19 sub-
article (6) on the appellant's fundamental right. It is pertinent to note that B
the appellant has not challenged the vires of Section 27 of the Market Act.
Besides, the appellant, as a seller of manufactured tea, has not to bear any
burden of the imposed market fee on sale transactions. All that it gets is the
benefit of the infrastructural facilities made available by the market committee
for regulating such transactions. [246-C-D; B-E)
CIVIL APPEL LA TE JURISDICTION : Civil Appeal No. 398 of
c
1977 Etc. Etc.
From the Judgment and Order dated.20.4.76 of the Patna High Court in
C.W.J.C. No. 3296of1975.
R.N. Trivedi, Additional Solicitor General, Shanti Bhusan, Y.V. Giri, D
Dipankar Gupta, G.L. Sanghi (A.K. Goel) Addi.Adv. General, Subodh
Markeandeya, Rakesh Dwivedi, H.N. Salve, H.L. Agrawal, Ram Janam Ojha,
Shri Narain, Ramesh K. Agrawal, H. Deorajan, Sandeep Narain, Dhruv Agarwal,
Praveen Kumar, Ranjit Kumar, Ms. Vinu Tamta, Chandra Bhushan, Ms. Parul
Gupta, Gopal Jain, R.N. Karanjawala, Ms. Nandani Gore, Sandeep Mittal, Ms. E
Manik Karanjawala, Ms. Meera Mathur, A.K. Srivastava, R.B. Misra, K. Misra,
Sunil Jain, Gauri Rasgotra, S.S.Khanduja, C.N. Sree Kumar, A. Subba Rao,
Saket Singh, B.B. Singh, D. Goburdhan D.N. Goburdhan, Ravinder Narain, Ms.
A.K. Verma, Sanjiv Sen, lrshad Ahmad, Sudhir Kumar Gupta,M.P. Jha, Anis
Ahmad Khan, S. Ganesh, Ram Ekbal Roy and Ms. Pinki Anand for appearing
parties. F
The judgment of the Court was delivered by
S.B. MAJMUDAR, J. Leave granted in the Special Leave Petitions.
These appeals and writ petitions mainly raise the question regarding the
legality of the levy of market fee under the provisions of Bihar Agricultural G
Produce Markets Act, l 960 (hereinafter referred to as the 'Market Act' for
short). The grievance made by the appellants/writ petitioners pertained to the
following commodities with which the respective proceedings are concerned.
l. Sugarcane, Sugar and molasses (briefly referred to as 'Sugar
matters'); H
166 SUPREME COURT REPORTS [1999] SUPP. 1 S.C.R.
A 2. Wheat products Atta, Maida, Suji, Bran etc.;
3. Vegetable Oil;
4. Rice milling;
5. Mille and milk products; ,•
B 6. Tea
It will, therefore, be appropriate to deal seriatim the grievances centering
round the levy of market fee on transactions concerning the aforesaid
commodities.
GRIEVANCES IN CONNECTION WITH MARKET FEE CONCERNING
C SUGAR MATIERS
So far as this group of matters is concerned, first two Civil Appeal Nos.
398 & 399of1977 arise out of certificates of fitness granted by the High Court
of Judicature at Patna under Articles 132(1) and 133(1) of the Constitution of
D India. The said certificates pertain to a common judgment of the High Court
rendered in two writ petitions of two sugar mills located in the State of Bihar.
By the common judgment dated 20th April, 1976 the High Court dismissed
both the writ petitions. The said judgment of the High Court is reported in
The Belsund Sugar Co. Ltd., Riga and another v. The State of Bihar and
others, AIR (1977) Patna 136. By the impugned common judgment, the
E imposition of market fee under the Market Act on the transactions of purchase
of sugarcane by the sugar mills concerned and also on their transactions
covering sale of sugar and molasses manufactured by utilising the purchased
sugarcane was upheld by the High Court.
In view of the fact that the certificates of fitness were granted by the
F High Court as aforesaid this group of matters was directed to be placed before
a Constitution Bench of this Court as per Article 145 of the Constitution of
India. Though initially they were directed to be placed before a Bench of
seven Judges, subsequently by a latter order dated 9th December, 1998, these
appeals were directed to be placed before a five Judge Bench and that is how
G these appeals and other cognate matters were placed before this Bench for
final hearing.
Though the certificates of fitness granted by the High Court were on
the basis that the cases involved a substantial question of law as to the
interpretation of Article 254( 1) of the Constitutidn of India, at the time when
H these appeals and the cognate matters reached final hearing before us, learned
BELSUND SUGAR CO. LTD. v. STATE [S.B. MAJMUDAR. J.] 167
, senior counsel Shri Shanti Bhushan and Shri Gupta appearing for the appel- · A
· lants, raised mainly two contentions for our consideration :
1. Whether the Market Act can apply to the transactions of
purchase of sugarcane and sale of sugar and molasses by the
appellant sugar mills in view of the fact that regulation of these
transactions is already effected by Bihar Sugarcane (Regulation B
of Supply and Purchase) Act, 1981 (for short 'Sugarcane Act')
as well as by the Sugarcane (Control) Order 1996 and Sugar
(Control) Order 1966 both issued under Section 3 of the Essential
Commodities Act, 1955 (hereinafter referred to as the 'Essential
Commodities Act') and also under the provisions of Bihar C
Molasses (Control) Act, 1947.
2. In the alternative, whether imposition of market fee under the
Market Act by the respective market committees is justified in
the absence of any service rendered to the appellant sugar mills
under the provisions of the Market Act and consequently the D
levy of market fee can be said to be not supported by ariy quid
pro quo.
RIVAL CONTENTIONS:
Learned senior counsel for the appellants vehemently submitted in
support of the aforesaid twin contentions that the Market Act which was E
enacted by the Bihar legislature under Entries 26 and 27 of the State List read
with Entry 28 therein had to be read subject to Entry 33 of the Concurrent
List and as the Bihar Legislature itself had enacted the Sugar Act in exercise
of its legislative powers under Entry 33 of the Concurrent List, there was no
occasion left for the State of Bihar to get satisfied about the need to regulate
the production and sale of sugarcane as well as manufactured items therefrom F
as per the Market Act. In short, the invocation of Section 3 read with Section
4 of the Market Act was totally misconceived and uncalled for. It was further
contended that once the State of Bihar in exercise of its power of exemption
under Section 42 of the Market Act had exempted the appellant sugar factories
from applicability of Section 18 of the Market Act, the entire machinery under G
the Market Act became inapplicable to regulate the sale and purchase of
transactions concerning sugarcane, sugar and molasses as entered into by
the appellant sugar factories. Consequently, there remained no occasion for
the authorities functioning under the Market Act for demanding any market
fee from the appellants under Section 27 of the Market Act. It was also
contended in further support of this submission that the Sugarcane Control H
168 SUPREME COURT REPORTS [1999] SUPP. I S.C.R.
A Order, 1966 as well as the Sugar (Control) Order of the same year issued under.
Section 3 of the Essential Commodities Act, 1955 and also the provisions of
the Bihar Molasses (Control) Act, 1947 fully occupied the field of regulation
of sale and purchase of sugarcane, sugar and molasses and on that ground
also the provisions of the Market Act could not be pressed in service against
the appellant sugar factories undertaking the purchase and sale of the
B concerned transactions. In the alternative, it was contended that once Section
15 of the Market Act is out of picture and once it remains an admitted position
that the appellant sugar factories have to purchase sugarcane from purchase
centres, there remains no occasion for the market committees to give any
services under the Market Act to the appellant sugar factories. Hence the
C market committees were not entitled to recover any market fee from the
appellants as there was no return benefit or quid pro quo made available to
the appellants by the market committees and hence the impugned market fee
in substance became a tax which could not be recovered under the Market
Act by the market committees.
D Replying to these contentions, foamed senior counsel for the State of
Bihar and learned senior counsel appearing for the market committees submitted
that the appellant sugar factories have no locus standi to maintain these
proceedings for the simple reason that so far as their challenges to the levy
of market fee on transactions of sale of sugar and molasses were concerned,
as under Section 27 of the Market Act levy was imposed on the buyers of
E sugar and molasses manufactured by the appellant companies, these sugar
mills were not affected by the levy. That the appellant companies may at the
highest be collecting agents of market fee if the buyers were not licensed
under the Act but tn most of the cases the appellant sugar companies were
selling levy sugar to the Food Corporation of India and even free sugar was
F mostly sold by them to licensed buyers. Same was the case of sale of
molasses to the concerned buyers. They, however, rightly conceded that the
appellants cannot be said to be not having any locus standi to challenge the
market fee levied on their purchase of sugarcane as the charge of market fee
would be on them as buyers of sugarcane.
G On the merits of the contentions raised by learned senior counsel for
the appellants, learned senior counsel for the respondents submitted that
even if the exemption notification under Section 42 of the Act purports to
exempt the appellant sugar companies from whole of Section 15 of the Market
Act, in substance the exemption is confined to Section 15(2) of the Act as
there is already a declaration under Section 4 of the Market Act treating the
H purchase centres of the appellant sugar companies at the factory gates as well
BELSUND SUGAR CO. LTD. v. STATE [S.B. MAJMUDAR, J.] 169
as at other places in the market area as sub-market yards. On a conjoint A
reading of these two notifications, therefore, it can be seen that exemption
under Section 42 of the Act was confined to excluding the operation of
Section 15(2) of the Act qua these sugar factories. In the alternative, it was
submitted that if the exemption notification is treated to cover entire Section
15 even then once the transactions of sale and purchase take place within the B
market area, charge under Section 27 would get settled on these transactions.
It was further submitted that there is enough return -Oenefit made available to
the sugar factories admittedly situated within the market area. That, in fact,
their service centres are also declared to be sub-market yards even beyond
the factory gate. That they utilise the link roads made available by the market
committee for bringing sugarcane produce to the factory premises by giving C
facility of swift transportation. Thus the sugarcane as a raw material is
brought to the factory premises before it gets dried up. This yields better
quality and larger quantity of sugar and molasses. In addition thereto facilities
-- of supply of necessary information regarding the prevalent prices of sugarcane
are made available by the market committee. But even apart from that, the
market committee can act as a mediator in enabling the sugarcane growers to D
get better price of sugarcane above the minimultj pric~ fixed under the Control
Order and the Sugarcane Act and this role of the market committee would be
beneficial not only to the producers of sugarcane but also to the factories
which can be assured of appropriate good quality sugarcane purchased from
the sugarcane growers. It is, therefore, wrong to suggest that there is no quid E
pro quo between the charge of market fee and the payment thereof by the
sugarcane factories, that the inf~astructural facilities made available to the
industry as a whole have to be seen and transactions are not to be dissected
for finding out the quid pro quo between charging of the market fee and the
burden thereof borne by the sugar companies. It was, therefore, contended
that none of the submissions canvassed by learned senior counsel for the F
appellants deserved to be accepted.
In the light of the aforesaid rival contentions, we now proceed to deal
with the twin contentions submitted for our consideration by leamed senior
counsel for the appellants in support of these appeals. However, before we
deal with the merits of these contentions, the question of locus standi of the G
appellants is required to be considered at the outset.
LOCUS STAND/ OF THE APPELLANTS TO MAINTAIN THESE
PROCEEDINGS:
It has to be kept in view that as per Section 27 of the Market Act the H
170 SUPREME COURT REPORTS [1999] SUPP. I S.C.R.
A charge of the market fee is on the buyer of the agricultural produce bought
or sold in the market area. The said section reads as under :
"Power to levy fees - (I) The Market Committee shall levy and collect
market fees on the agricultural produce bought or sold in the market
area at the rate of rupee one per Rs. I 00 worth of agricultural produce.
B
Xxxxx xxxx xxxx
(2) The market fee chargeable under sub-section (I) shall be payable
by the buyer, in the manner prescribed.
(3) The fee chargeable under sub-section (1) shall not be levied more
c than once on a notified agricultural produce in the same notified
Market Area."
It is not in dispute between the parties that sugarcane is an 'agricultural
produce' as it is grown in fields by the cultivators. Both sugarcane and sugar
are listed as Item nos. I and 3 in Para XII dealing with miscellaneous items
D as found in the Schedule to the Market Act enacted as per Section 2(l)(a)
of the Act.
Section 2(l)(a) of the Act defines 'agricultural produce' as under:
'Agricultural produce' means all produce whether processed or non-
E processed, manufactured or not, of Agriculture, Horticulture, Plantation,
Animal, Husbandry, Forest, Sericulture, Pisciculture, and includes
livestock or poultry as specified in the Schedule."
In the light of the aforesaid provisions, it is obvious that the sugar
factories operating in the market area within the jurisdiction of the market
F committee concerned can be said to be buyers of sugarcane, an 'agricultural
produce'. Their purchase centres are situated within the market area. As
submitted by learned senior counsel for the respondents, all the purchase
centres at which the appellant sugar factories purchase sugarcane as raw
"
material are not only situated within the market area but are also declared as
G sub-market yards. In fact the entire Bihar State is comprised of various market
areas within the jurisdiction of different market committees. If that is so, it has
to be held that when the charge under Section 27 of paying market fee is
imposed on the sugar factories as buyers of sugarcane within the market area,
they have to be treated to be having sufficient locus standi as buyers of
sugarcane to challenge the imposition of market fee on their purchase
H transactions. On this aspect, learned senior counsel for the respondents did
BELSUND SUGAR CO. LTD. v. STATE [S.B. MAJMUDAR, J.) 171
not contest. A
However, their submission was that when purchased sugarcane is
processed at the factories and converted into sugar and molasses and when
- such sugar and molasses are sold by the sugar factories, the charge of market
fee on these sale transactions would settle on the buyers of sugar and
molasses who have not made any grievance about payment of market fee.
That may be so, however, the fact remains that if the sugar factories sell
B
manufactured sugar and molasses out of the purchased raw material-sugarcane,
and if the buyers are not licensed then as per the provisions of Rule 82 (iii)
of the Bihar Agricultural Produce Markets Rules, 197 5 the sugar factories as
sellers have to realise the market fee from the buyers and have to deposit the
same with the market committees. That obligation by itself would give sufficient
c
locus standi to the sugar factories which sell sugar and molasses within the
market area to challenge the aforesaid statutory obligation imposed on them
by the Act and the Rules and to submit as to how they are not covered by
the provisions of the Act. It may be that when they sell levy sugar to the
Food Corporation of India, they may not have to undertake this liability as D
collecting agents of the market committee, so far as the market fee is concerned.
Still even if partially in case of sale of free sugar to unlicensed buyers they
have to be called upon to discharge their' statutory obligation under Rule 82
(iii), it cannot be said that they have no locus standi to challenge the
imposition of market fee on the transactions of sale effected by them in
connection with sugar and molasses. The preliminary objection of learned
E
senior counsel for the respondents against the locus standi of the appellants
to maintain these proceedings is, therefore, over-ruled.
This takes us to the consideration of the main twin contentions
canvassed by learned senior counsel for the appellants for our consicleration.
F
CONTENTION NO. J :
Applicability of the Market Act to appellants' transaction of purchase
of sugarcane and sale of sugar and molasses.
So far as this content~on is concerned, we have to keep in view the G
relevant provisions of the Market Act, Sugar Act as well as the Orders under
--- the Essential Commodities Act.
.. In the first instance, we shall deal with the transactions of purchase of
sugarcane by the sugar factories functioning in the market areas falling within
the jurisdiction of respective market committees constituted under the Market H
172 SUPREME COURT REPORTS (1999) SUPP. 1 S.C.R.
A Act. The Market Act has been enacted by the Bihar Legislature as per the
legislative power vested in it by Entries 26, 27 and 28 of List II of Seventh
Schedule of the Constitution. These entries read as under :
"26. Trade and commerce within the State subject to the provisions
of entry 33 of List III.
B
27. Production, supply and distribution of goods subject to ·the
provisions of entry 33 of List III.
28. Markets and fairs."
C
It becomes at once clear that if location of markets and fairs simpliciter
and the management and maintenance thereof are only contemplated by the
Market Act, then they would fall squarely within the topic of legislative power
-
envisaged by Entry 28 of List II. However, the Market Act, as we will presently
D
show, deals with supply and distribution of goods as well as trade and
commerce therein as it seeks to regulate the sale and purchase of agricultural
produce to be carried on in the specified markets under the Act. To that extent
-
the provisions of Entry 33 of List III override the legislative powers of the
State Legislature in connection with legislations dealing with trade and
commerce in, and the production, supply and distribution of, goods. Once we
tum to Entry 33 of the Concurrent List, we find that on the topic of trade and
commerce in, and the production, supply and distribution of, goods enumerated ·•
E therein at sub-clause (b), we find listed items of foodstuffs, including edible
oilseeds and oils. Thus to the extent to which the ,_ .
Market Act seeks to
regulate the transactions of sale and purchase of sugarcaneand sugar which
are foodstuffs and trade and commerce therein, it has to b~ held that the
Market Act being enacted under the topics of legislative power's under Entries
F 26, 27 and 28 of List II will be subject to any other Ie&islat~ under Entry
33 of the Concurrent List. As it will be seen hereinafter, the Bihar Legislature
itself has enacted the Sugarcane Act in exercise of its legislative powers
under Entry 33 of the Concurrent List and, therefore, the field covered by the
Sugarcane Act would obviously remain exclusively governed by the Sugarcane
Act and to the extent the latter Act carves out an independent field for its
G operation, the sweep of the general field covered by the Market Act which
covers all types of agricultural produce, would pro tanto get excluded qua
sugarcane and the products prepared out of sit.
So far as the Market Act is concerned, it is necessary to note that it
is an Act to provide for better regulation of buying and selling of agricultural
H produce and the establishment of markets for agricultural produce in the State
BELSUND SUGAR CO. LTD. v. STATE (S.B. MAJMUDAR, J.] 173
of Bihar and for matters connected therewith. The said Act is enacted A
essentially to protect the growers of agricultural produce in the State who on
account of their ignorance, illiteracy and lack of collective bargaining power
- may get exploited by middlemen and economically strong purchasers of their
agricultural produce with the result that the agriculturists may not get adequate
price for their produce. It is with that end in view that the Market Act has
been enacted. The constitutional validity of the Madras Commercial Crops
B
Markets Act, concerned with the regulation of purchase and sale of commercial
crops grown by agriculturists was considered by a Constitution Bench of this
Court in the case of MC. V.S. Arunacha/a Nadar Etc. v. The State of Madras
& Others, [1959] Supp. I SCR 92. Subba Rao J., speaking for the Court while
upholding the constitutional validity of the said Act emphasised the necessity C
of such enactment with a view to protect the producers of commercial crops
... from being exploited by the middlemen and profiteers and to enable them to
secure a fair return for their produce. The learned Judge referred to, with
approval, the following recommendations of Royal Commission on Agriculture
in India appointed in 1928.
D
"That cultivator suffers from many handicaps : to begin with he is
illiterate and in general ignorant of prevailing prices in the markets,
especially in regard to commercial crops. The most hopeful solution
of the cultivator's marketing difficulties seems to lie in the improvement
of communications and the establishment of regulated markets and we E
recommend for the consideration of other Provinces the establishment
of regulated markets on the Berar system as modified by the Bombay
legislation. The establishment of regulated markets must form an
essential part of any ordered plan of agricultural development in this
country. The Bombay Act is, however, definitely limited to cotton
markets and the bulk of the transactions in Berar market is also in that F
crop. We consider that the system can conveniently be extended to
other crops and, with a view to avoiding difficulties, would suggest
that regulated markets should only be established under Provincial
legislation."
- Reference was also made to the Report of an Expert Committee appointed by
the Government of Madras which graphically described the difficulties of the
G
..
cultivators and their dependence upon the middlemen. The following is the
extract from the Report of the Expert Committee as noted by Subba Rao J.,
for highlighting the need for regulated markets for cultivators of commercial
crops. H
174 SUPREME COURT REPORTS (1999] SUPP. I S.C.R.
A "The middleman plays a prominent part in sale transactions and his
terms and methods vary according to the nature of tht~ crop and the
status of the cultivator. The rich ryot who is unencumbered by debt
and who has comparatively large stocks to dispose of, brings his
produce to the taluk or district centre and entrusts it to a commission
agent for sale. If it is not sold on the day on which it is brought, it
B is stored in the commission agent's godown at the cultivators' expense
and as the latter generally cannot afford to wait about until the sale
is effected he leaves his produce to be sold by the commission agent
at the best possible price, and it is doubtful whether eventually he
receives the best price. The middle class ryot invariably disposes of
c hi.s produce through the same agency but, unlike the rich ryot he is
not free to choose his commission agent, because he generally takes
advances from a particular commission agent on the condition that he
will hand over his produce to him for sale. Not only, therefore, he
places himself in a position where he cannot dictate and insist on the
sale being effected for the highest price but he loses by being compelled
-
D to pay heavy interest on the advance taken from the commission
agent. His relations with middlemen are more akin to those between
a creditor and a debtor, than of a selling agent and producer. In almost
all cases of the poor ryots, the major portion of their produce finds
its way into the hands of the village money-lender and whatever
E remains is sold to petty traders who tour the villages and the price
at which it changes hands is governed not so much by the market
rates, but by the urgent needs of the ryot which are generally taken
advantage of by the purchaser. The dominating position which the
middleman occl!pies and his methods of sale and the terms of his
dealings have long ago been realized."
F
Relying on the aforesaid observations Subba Rao J., speaking for the
Constitution Bench, justified the need for such legislations and upheld the
Act by laying down as under :
The aforesaid observations describe the pitiable dependence of the
G middle-class and poor ryots on the middlemen and petty traders, with
the result that the cultivators are not able to find markets for their
produce wherein they can expect reasonable price for them.
-
H
With a view to provide satisfactory conditions for the growers of
commercial crops to sell their produce on equal terms and at reasonable
prices, the Act was passed on July 25, 1933. The preamble introduces
...
BELSUND SUGAR CO. LTD. v. STATE [S.B. MAJMUDAR, J.] 175
the Act with the recital that it is exp~dient to provide for the better A
regulation of the buying and selling qf commercial crops in the
Presidency of Madras and for that purpose to establish markets and
make rules for their proper administration. The Act, therefore, was the
;-
result of a long exploratory investigation by experts in the field,
conceived and enacted to regulate the buying and selling of commercial B
crops by providing suitable and regulated markets by eliminating
middlemen and bringing face to face the producer and the buyer so
that they meet on equal terms, thereby eradicating or at any rate
reducing the scope for exploitation in dealings. Such a statute cannot
be said to create unreasonable restrictions on the citizens' right to do
business unless it is clearly established that the provisions are too C
drastic, unnecessarily harsh and overreach the scope of the object to
achieve which it is enacted."
It, therefore, cannot be gainsaid that the need to have a regulated market
where the agriculturist who grows sugarcane as a commercial crop can be
assured of adequate price of the sugarcane produced by him and may not be D
exploited by middlemen, would justify the enactment of the protective umbrella
of the Market Act. However, if the Act had stood by itself, no legitimate
grievance could have been made by anyone on this score. But so far as the
facts of the present cases are concerned, the very same Bihar Legislature
enacted the Sugarcane Act of 1981 which has operated simultaneously with
the Market Act for the entire State. The said latter Act is obviously enacted E
by the very same legislature in exercise of its legislative powers under Entry
33 of the Concurrent List. It is, of course, true that the Union Parliament has
not passed any similar legislation in exercise of its concurrent legislative
power under the very same Entry 33 of List Ill. We will, therefore, have to
see to what extent the Sugarcane Act, which is a latter Act, has carved out p
a field for itself for protecting ·the sugarcane growers resulting in withdrawing
the. same subject matter from the general sweep of the Market Act which
covers not only sugarcane but also number of other agricultural produce. In
this connection, Section 3 of the Market Act requires to be noted. It reads
as under :
G
"3. Notification of intention of exercising control over purchase,
sale, storage and processing of agricultural produce in specified
area-
[(I) Notwithstanding anything to the contrary contained in any other
Act for the 'time being in force, the State Government may, by H
176 SUPREME COURT REPORTS [1998] l S.C.R.
A notification, declare its intention of regulating the purchase, sale,
storage and processipg of such agricultural produce and in such area,
as may be specified in the notification.]
(2) A notification under sub-section (1) shall state that any objection 1
or suggestion which may be received by the State Government within
B a period of not less than two months to be specified in the notification,
shall be considered by the State Government."
As per the aforesaid provisions, it has to be kept in view by the State
Government concerned while forming the requisite intention whether there is
any special legislation of the same State Legislature holding the field and
C serving the very same purpose of regulating such transactions. Mr. Shanti
Bhushan, learned senior counsel for the appellant, vehemently contended
that the Bihar Legislature itself had enacted the Sugarcane Act of 1981
whereunder a~equate provision was made for regulating the purchase, sale,
storage and processing of sugarcane. The complete machinery was provided
D thereunder for protecting the sugarcane growers and, therefore, there was no
occasion for the State of Bihar to continue the regulation of purchase and sale
transactions of sugarcane atleast after 1981 as per Section 3( l) of the Market
Act. The preamble of the Sugarcane Act shows that amongst others it is
enacted to regulate the production, supply and distribution of sugarcane
intended for use in sugar factories and taxation of sugarcane and matters
E incidental thereto.
Chapter II of the Sugarcane Act provides for Administrative Machinery
for carrying out the purposes of the Act.
Section 3 thereof deals with Establishment of Sugarcane Board. Section
F 4 lays down the Functions of the Board -
"(l) The Board shall advise the State Government on the following
matters, namely :-
(a) planning of development schemes connected with production,
research, transport and sale of sugarcane;
G
(b) matters pertaining to regulation of supply, purchase and
weighment of cane;
(c) the varieties of sugarcane, tested by the Sugarcane Research
)
Institute in the State, which are suitable or unsuitable for use in
H a factory;
BELSUND SUGAR CO. LTD. v. STATE [S.B. MAJMUDAR, J.] 177
(d) recommendations in respect of the price of cane to be supplied A
to factories;
(e) determination of the price of cane payable by owners of units;
(f) maintenance of healthy relations between the occupiers and
managers of factories on the one hand and the cane-growers
and co-operative societies on the other; and B
(g) such other matters as may be prescribed."
Section 7 deals with Establishment of Zonal Development Council
working of which can be, supervised by the Board. The Collector of the
District or the Sub-divisional Officer is to be the Chairman of the Zonal C
Development Council and is to be assisted by various persons as provided
by Section 7.
Section 8 deals with Functions of the Council-The functions of the
Council shall be as follows :
D
"(a) to consider and prepare the programme for the development of
communications, irrigations, soil analysis and other agricultural
facilities relating to sugarcane;
(b) to devise ways and means for executing development plan in all
its essential in~luding improvement and development of E
communications, cane varieties, supply of good quality seeds,
fertilisers and manures, plant protection and prevention and
control of diseases and pests;
(c) to render all possible help in agricultural extension work of cane;
(d) to assist in arrangements for the training of cultivators in F
improved methods of sugarcane cultivation; and
(e) to perform such other functions pertaining and conducive to the
general development of the reserved area as may be prescribed."
Section 12 deals with Appointment of Cane Commissioner. It reads as G
under:-
"(I) The State Government may, by notification in the official Gazette,
appoint any person to be the Cane Commissioner for the State of
Bihar and to exercise the powers and perform the duties conferred and
imposed on the Cane Commissioner by or under this Act. H
178 SUPREME COURT REPORTS [1999] SUPP. I S.C.R.
A (2) The State Government may, by notification in the official Gazette,
appoint such persons as it thinks fit to be the Additional Cane
Commissioner, Joint Cane Commissioner, Deputy Cane
Commissioner and Assistant Cane Commissioner to assist the
Cane Commissioner within such local limits as may be assigned
to them and confer and impose upon them all or any of the
B powers and duties of the Cane Commissioner within their
respective jurisdiction."
Section 13 deals with Appointment of Cane Officer.
Then comes Chapter IV which deals with Purchase and Supply of Cane
C to sugar factories.
Section 25 deals with '1ppointment of Manager and provides as under:-
"(I) Within thirty days of the commencement of this Act and thereafter
within the same period before the commencement of every crushing
D year the occupier of a factory shall send to the Collector a notice of
appointment of any person as manager for the purposes of this Act
or the rules :
Provided that until the first notice of appointment of manager
under this Act is sent, the person appointed or deemed to be appointed
E as manager under the Bihar Sugarcane (Regulation of Supply and
Purchase) Ordinance, 1973 (Bihar Ordinance 47of1973) shall be deemed
to be a manager under this Act.
(2) No person shall be deemed to have been appointed as manager
until a sum of two thousand and five hundred rupees is deposited
F by him or on his behalf as security, with the Collector concerned
in the prescribed manner.
(3) Whenever a new manager is appointed, the occupier of the
factory shall send to the Collector a written notice of the change
within fifteen days of the date on which the new manager assumes
G. charge of his work.
(4) During any period for which provisions of sub-sections (1) and
(2) are not complied with or the person appointed as manager
does not manage the factory, or his security money is not
replenished to the extent of its forfeiture under sub-section (2)
H of section 57, the occupier of the factory himself shall be deemed
BELSUND SUGAR CO. LTD. v. STA.TE [S.B. MAJMUDAR, J.] 179
to be the manager of the factory for the purposes of this Act A
and the rules.''
Section 27 deals with Estimate of quantity of cane required by factory
and lays down as follows:-
"( I) The occupier of every factory shall submit to the Cane
Commissioner, on or before the prescribed date, in every crushing B
year, an estimate, in the prescribed manner, of the quantity of cane
which may be required in the factory during such crushing year.
(2) The Cane Commissioner shall examine every estimate submitted
under sub-section (I) and where the occupier of a factory has
failed to submit an estimate under sub-section (I), he shall draw C
up an estimate by himself in the prescribed manner and shall
publish the same in such manner as may be prescribed with such
modifications, if any, as he may think fit, after consultation with
the council concerned.
(3) The prescribed authority may, either suo motu or on an D
application made to it by the occupier of the factory, within
thirty days of the publication of the estimate under sub-section
(2), revise the estimate, published under that sub-section and
that authority shall cause the estimate so revised to be published
in the prescribed manner."
E
Section 28 deals with Conditions precedent to commencement of
purchase of cane. It states as under :
"(I) The occupier of a factory or any person acting on his behalf shall
not commence the purchase of cane unless adequate arrangements,
as may be prescribed, have been made in respect of the following F
matters, namely :-
(a) weighment of cane to be purchased;
(b) payment of the price of cane purchased;
(c) parking of cane-carts;
(d) approach roads to the place of weighment; and G
(e) distribution of requisition slips.
(2) Where survey has not been made under section 34, the occupier
of the factory shall, before the commencement of purchase of
cane, have the survey of the standing cane-crop made as the
prescribed manner." H
180 SUPREME COURT REPORTS [1999) SUPP. l S.C.R.
A Then follows Section 29 which deals with Establishment nf purchasing
centres. It reads as under :-
"(1) The occupier of a factory, or the Secretary of a Co-operative
Society may establish a purchasing centre after giving a notice in ...
writing to the Collector at least thirty days before the commencement "
B of purchase of cane and copies of such notice shall be sent by the
occupier of the factory or the Secretary of the Society forthwith to the
Cane Officer concerned and the Cane Commissioner ........"
The remaining sub-sections of Section 29 lay down the procedure under
which the Collector can direct shifting of the location of any purchasing
C centre to another place and also the power of the prescribed authority to
revise the order of the Collector.
Section 31 deals with Declaration of reserved area and provides as
follows:
"(1) The Cane Commissioner may, having regard to the crushing
D
capacity of the factory, the availability of sugarcane in such area and
the need for production of sugar and after consulting the council
concerned· and the occupier of the factory or the occupiers of other
affected factories and after considering any objection that may be
raised, issue an order, by notification in the official Gazette, declaring
E any area to be the reserved area for the purpose of supply of cane
to the factory during a particular crushing year or years and may
likewise cancel any such order or alter the extent of the area so
reserved :
Xxxxxxxxxxxxxxxxxxxx
F
xxxxxxxx xxxxxxxx xxxxxxxx"
Section 32 deals with Purchase of cane grown in a reserved area. Sub-
section (6) thereof reads as follows-
"Except with the permission of the State Government, cane grown in
G a reserved area shall not be sold to or purchased by -
(i) the occupier of any factory other than the factory for which the
area is reserved; or
(ii) any person for the purpose of suppJy to any factory other than
H the factory for which the area is reserved; or
BELSUND SUGAR CO. LTD. v. STATE [S.B. MAJMUDAR, J.] 181
(iii) the owner of a unit to whom a licence has not been granted under A
section 16."
Sub-section (9) of Section 32 reads as follows :-
"Subject to the provisions of sub-section (1), the State Government
may prohibit or restrict or otherwise regulate the movement of sugarcane B
from any reserved area except under and in accordance with a permit
issued by it in this behalf."
Section 39 deals with Recording of correct weight of cane and reads
as under:-
"(1) The occupier of every factory, the owner of every unit, Secretary C
of every Co-operative Society and every person in charge of
weighmen's shall maintain, subject to such limits of error as is
prescribed by the State Government under the law relating to weights
and measures, for the time being in force, a record of the correct
weight of cane purchased at the place of weighment. D
(2) No cane shall be purchased without being weighed."
Section 40 deals with Provisions for approach roads etc., at the
purchasing centres and reads as under :
"The occupier of a factory or a co-operative society purchasing cane E
at any purchasing centre shall make such provisions for the following
and keep them in such repairs as may be prescribed, namely :-
(a) approach road and parking space for animal-driven carts;
(b) sheds for animals and cart-drivers;
F
(c) drinking water for persons using the purchasing centre; and
(d) drinking water and water-trough for animals."
Then follows Chapter V which deals with Payment of price of cane and
other matters.
G
Section 42 deals with minimum price of cane supplied to a unit and
reads as under :
"The State Government may, after consulting the Board, determine by
notification in the official Gazette, in respect of any area the minimum
price of cane payable by the owners of units to the cane-growers or H
182 SUPREME COURT REPORTS [1999] SUPP. I S.C.R.
A co-operative societies for cane supplied to them in the crushing year
concerned :
Provided that the minimum price so determined shall not exceed the
minimum price payable by the occupier of a factory under any law for
the time being in force, in respect of the cane supplied from the same
B area."
Mode of payment of price of cane to the sugarcane growers is provided
by Section 43.
Section 44 deals with Deduction and provides as follows :
C "(I) The occupier of a factory or any person on his behalf shall not
make any other deductions from the price of cane except the deduction
on account of any loan advanced by him, or on his guarantee or
otherwise advanced by a bank or other institutions under section
50(1)".
D The remaining sub-sections of Section 44 deal with the circumstances
under which any person in charge of payment of price of cane on behalf of
a co-operative society cannot make deductions from the price of cane as fixed.
Section 46 deals with Decision of certain disputes and reads as under:- i-
E "(l) If any dispute arises regarding the price of cane supplied to the
occupier of a factory the person entitled to the price or the document
on the basis of which the price is claimed, payment of the price shall
be withheld and the occupier of the factory to which the cane was
supplied shall enter the dispute in a register in the prescribed form
and refer it within the prescribed period to the prescribed authority
F who shall, after giving the parties a reasonable opportunity of being
heard and after such inquiry as he may consider necessary, decide the
dispute :
Provided that whenever the payment of the price is whether held
under this sub-section, the occupier of the factory shall deposit with
G the prescribed authority in the prescribed manner the amount in
dispute, within one week of such reference.
(2) Any other dispute touching an agreement for purchase of cane by
the occupier of a factory or its supply to him and any dispute rel£!ting
to purchase of cane or cane-juice by the owner of a unit and payment
H of price thereof shall be referred to the authority prescribed under
BELSUND SUGAR CO. LTD. v. STATE [S.B. MAJMUDAR, J.] 183
sub-section (1) who shall decide it in the manner laid down in that A
sub-section.
Xxxx xxxx xxxx
(3) Any person aggrieved by a decision made under sub-section (I)
or sub-section (2) may, within thirty days of the decision, prefer an B
appeal to the Collector who shall, after giving the parties a reasonable
opportunity of being heard and after such inquiry as he may consider
necessary, pass such order, as he thinks fit.
(4) An order of the Collector under sub-section (3) and subject to
such order, the decision of the prescribed authority under sub-sections C
(I) or sub-section (2) shall be final.
Section 48 deals with Payment of commission on purchase of cane and
reads as follows :
"(l) The State Government may, by notification in the official Gazette,
require the occupier of a factory to pay in the prescribed manner a D
commission not exceeding fifteen paise per quintal on the purchase
of cane made by him or on his behalf and may, by a like notification
exempt the occupier of any new factory to be specified in the
notification, from the payment of such commission for prescribed
period. E
Xxxxxxxx xxxxxxx xxxxx
xxxxxxx xxxxxxx xxxxx ,,
Section 49 imposes Tax on Sugarcane which reads as follows :-
"(!)The State Government may, by notification in the official Gazette, F
impose -
(a) a tax not exceeding one rupee per quintal on entry of sugarcane
into a local area specified in such notification, for consumption
or use of, or sale to a factory situated therein :
(b) a tax not exceeding one rupee per quintal on the purchase of G
sugarcane by or on behalf of the occupier of a factory :
Xxxxxxxx xxxxxxx xxxxx
xxxxxxx xxxxxxx xxxxx ,,
Section 50 deals with Advance of loan by occupier offactory and lays H
184 SUPREME COURT REPORTS [1999) SUPP, l S.C.R.
A down as follows :
"( l) The occupier of a factory or any person working on his behalf
or any bank may advance loan to a cane-grower or a Co-operative
Society for such purposes connected with cultivation or supply of
cane to the extent of the amount and in the manner as may be
B prescribed.
(2) Interest at the rate specified in section 51 shall be payable on
the loan advanced under sub-section ( l) and the loan and the
interest shall be realisable in the prescribed manner."
c Chapter VI deals with miscellaneous items. Section 52 of the said
chapter deals with penalty for offences and p(ovides as follows :
"If any person contravenes or attempts to contravene or abets the
contravention of any of the provisions of this Act or the rules or of
any order made or direction given thereunder or the terms and
D conditions of any licence, he shall be punishable with imprisonment
which may extend to six months or with fine which may extend to five
thousand rupees or with both and in the case of a continuing
contravention, with an additional fine which may extend to one
thousand rupees for every day during which such contravention
continues after conviction for the first contravention :
E
Xxxxxxxx xxxxxxx xxxxxx
xxxxxxx xxxxxxx xxxxxx ,,
Section 58 deals with the power to summon and enforce attendance of witnesses
p and production of documents and provides as under :
"For the purposes of enquiries under this Act the Cane Commissioner
or any person exercising the powers of the Cane Commissioner or a
Cane Officer or an Officer appointed under section 34 shall have the
same powers to summon and enforce the attendance of witnesses and
G · parties and to examine .them on oath and to compel the production of
document as a civil court under the Code of Civil Procedure, 1908 (5
ofl908):
Provided that for the purpose of any penalty under the provision of
the said Code upon any defaulter, a reference shall be made to the
H civil court of competent jurisdiction for appropriate action."
BELSUND SUGAR CO. LTD. v. ST ATE [S.B. MAJMUDAR, J.] 185
The aforesaid provisions of the Sugarcane Act leave no room for doubt that A
the Bihar Legislature in its wisdom has enacted a special machinery for
regulating the purchase and sale of sugarcane to be supplied to sugar factories
for manufacturing sugar out of the sugarcane produced for them in the
reserved area. The relevant provisions of the Act project a well knit and
exhaustive machinery for regulating the production, purchase and sale of
sugarcane for being supplied as appropriate raw material to the factories B
manufacturing sugar and molasses out of them.
We may also tum to Rule 22 of the 1978 Rules, made under the Bihar
Sugarcane Act, which provides that the factory shall not commence the
purchase of cane at any purchasing centre unless : C
... "(a) all the weighbridges to be used for weighment of cane have duly
been checked and certified as workable by the competent
authority under the law relating to weights and measures;
(b) appropriate arrangements to the satisfaction of the Collector
D
have been made for arranging funds for making payment of the
price of cane;
( c) Cane Officer of the area concerned has certified that suitable
arrangements for parking of cane carts and approach roads, as E
specified in rule 30 and for distribution of requisition slips and
- identification cards have been made; and
(d) adequate arrangements for weighment, adequate staff, sufficient
number of weighbridges and adequate means of transport for
carrying cane from all outlying purchasing centres to the factory, F
to the satisfaction of the Collector, have been made."
Rule 30 requires the sugar factory to :
"(a) provide at every purchasing centre suitable approach roads G
connecting the nearest public roads with the parking ground
and likewise suitable tracks from the parking ground to the point
where cane is unloaded after weighment;
(b) keep such roads and tracks repaired and satisfactorily workable
at all times the purchasing centre is in operation; H
186 SUPREME COURT REPORTS (1999}-SUPP. I S.C.R.
A (c) provide space in the parking ground for accommodating at least
one-fourth of the maximum number of animal-driven carts carrying
cane required to be brought to the purchasing centre on any day
for weighment and purchase;
(d) keep the metalled tracks neat and-clean and separated by railing
B or trenches;
(e) provide shelters for animals and cart-drivers at every purchasing
centre, to the satisfaction of the Collector;
(f) provide at least four water taps or hand pumps at convenient
points of each purchasing centre located at or adjoining factory
c premises (referred to hereinafter as mill gate purchasing centre)
and one such water tap or hand pump at every purchasing
centre other than the mill gate purchasing centre (referred
hereinafter as the outstation purchasing centre);
(g) provide adequate number of water troughs in each parking yard
D to be located at such points as may be determined by the Cane .
Officer concerned, and;
(h) provide such other facilities at any purchasing centre as may be
specified in the directions of the Cane Commissioner issued from
time to time.
E
Xxxxxxxx xxxxxxx xxxxx
The aforesaid provisions, therefore, clearly indicate that the need for regulating
.
the purchase, sale, storage and processing of sugarcane, being an 'agricultural
produce', is completely met by the comprehensive machinery provided by the
F Sugarcane Act enacted by the very same legislature which enacted the general
Act being the Market Act.
Once that conclusion is reached, it becomes obvious that the Market
Act which is an enabling Act empowering the State Authorities to extend the
G regulatory net of the said Act to notified agricultural produce as per Section
3(1) will get its general sweep curtailed to the extent the special Act being
the Sugarcane Act enacted by the very same legislature carves out a special
field and provides special machinery for regulating the purchase and sale of
the specified 'agricultural produce', namely, sugarcane. It has also to be kept
in view that the very heart of the Market Act is Section 15 of the Act which
H reads as under :
BELSUND SUGAR CO.LTD. v. STATE [S.B. MAJMUDAR, J.] 187
"[J 5. Sale of agricultural pr.::>duce - (1) No agricultural produce A
specified in notification under sub-section (I) of section 4, shall be
made, bought or sold by any person at any place within the market
area other than the relevant principal market yard or sub-market yard
or yards established therein, except such quantity as may on this
behalf be prescribed for retail sale or personal consumption.
B
(2) The sale and purchase of such agricultural produce in such areas
shall not withstanding anything contained in any law be made by
means of open auction or tender system except in cases of such class
or description of produce as may be exempted by the Board.]"
It is this section which enables the market committee concerned to monitor C
and regulate the sale and purchase of the agricultural commodity which is
covered by the protective umbrella of the Act. Once such an agricultural
- produce is brought for sale in the market yard or sub-market yard, the sale
is to be effected by auction or by inviting tenders. Such a scheme is in direct
conflict with the scheme of the Sugarcane Act wherein there is no question D
of sugar factory being called upon to enter into a public auction for purchasing
sugarcane which is specially earmarked for it out of the reserved area. In fact,
provisions of the Sugarcane Act and the provisions of the Market Act,
especially Section 15 read with Section 3(1 ), cannot harmoniously co-exist. It
is precisely to avoid such a possible conflict and head-on collision between
general Act, namely, the Market Act and the special Act, namely. the Sugarcane E
Act which was later on enacted in 1981 by the very same Bihar Legislature,
that the State Government in exercise of its exemption power under Section
42 of the Market Act issued a notification dated 22nd March, 1976 to the
following effect:
"S.O. 550 the 22nd March, 1976 (Published in Bihar Gazette (ex- F
order) dated 23-3-1976).-In exercise of the powers conferred under
Section 42 of the Bihar Agricultural Produce Markets Act, 1960, the
Governor of Bihar is pleased to exempt all sugar mills from the
provisions of Section 15 of the Bihar Agricult~ral Produce Markets
Act, 1960 with regard to their sale and purchase of agricultural produce G
notified under sub-section (l) of Section 4 of the said Act)"
This very notification shows that the State Government had given up its
erstwhile intention of regulating the sale and purchase of sugarcane as per
Section 3(1) of the Market Act which cou(d not survive any further after the
issuance of the aforesaid exemption notification. It is easy to visualise that H
188 SUPREME COURT REPORTS [1999] SUPP. I S.C.R.
A the market committee can control purchase, sale, storage and processing of ....
agricultural produce in the specified area under the Market Act only when the
sale and purchase of agricultural produce can be effected as per Section 15
in the principal market yard or sub-market yard. Market is defined by Section
2(l)(h) of the Market Act which reads as under :
B " "market" means a market established under this Act for the market
area and includes, a principal market yard and sub-market yard or
yards, if any."
It is at such market yard that the regulation of sale and purchase of agricultural
C produce shall be effected as required by Section 15. Once Section 15 is out
of picture, the mere declaration of market area as per Section 4 and the general
declaration of intention to regulate purchase, sale, storage and processing of
agricultural produce like sugarcane as per Section 3 of the Market Act or
declaration of market yard or sub-market yards as per Section 5 would remain
an empty formality or would represent an empty eggshell with its contents
D taken out. The entire machinery of the Market Act would be rendered redundant
qua agricultural produce to which Section l 5 does not apply. Section 15 is
the heart and soul of the Act. Due to its inapplicability to a given agricultural
produce there would remain no occasion for the market committee concerned
to exercise its regulatory functions for such a produce. This is the precise
E result which has ensued regarding regulation of purchase and sale of sugarcane
by the market committee concerned in view of the combined operation of the
relevant provisions of the Sugarcane Act and the exemption notification
under Section 42 of the Market Act excluding the application of Section l 5
of the Market Act to the sale and purchase transactions of sugarcane in the
market area. It is not possible to agree with learned senior counsel for the
F respondents that notification under Section 42 of the Act in substance excludes
only the applicability of Section 15(2). On the express wordings of the said
notification it is not possible to countenance this contention. Even if
declaration under Section 5 treating the premises of the sugar factories and
the purchase centres from which they have to purchase sugarcane as per the
G Sugarcane Act is to be held to be operative, such a declaration would be
devoid of any efficacy under the Market Act as the very purpose of the
declaration of such market yard would not get fructified once sugarcane will
not be required to be brought for purchase and sale in such declared market
yard. It has to be kept in view that the relevant provisions of the Market Act
laying down the machinery for effecting the regulation of purchase, sale,
H storage and processing of agricultural· produce cannot be of any· avail once
BELSUND SUGAR CO. LTD. v. ST ATE [S.B. MAJMUDAR, J.] 189
purchase and sale of such an agricultural produce are not required to be A
effected at the relevant market yard and have not to be subjected to open
auction or tender for fixing proper prices for such agricultural produce to be
paid to the growers of such produce.
It must, therefore, be held that the entire machinery of the Market Act
cannot apply to the transactions of purchase of sugarcane by the appellant B
sugar factories as they are fully covered by the special provisions of the
Sugarcane Act. lt is also necessary to note that if both these Acts are treated
-
to be simultaneously applying to cover sale and purchase of sugarcane, the
possibility of a clear conflict of decisions of Officers and Authorities acting
under the Sugarcane Act on the one hand and the Market Act on the other C
would arise. These authorities acting under both the State Acts, dealing with
the same subject-matter and covering the same transactions may come to
independent diverse conclusions and none of them being subordinate to the
other may create a situation wherein there may be head-on collision between
the decisions and the orders of these authorities acting on their own in the
hierarchy of the respective statutory provisions. For example, the Marketing D
Inspector may find that weighment of sugarcane was not proper at a given
point of time, while the Cane Officer may find to the contrary. In the hierarchy
,. of proceedings under the Market Act the market committee may take one
decision with respect to the same subject matter, for which the Collector
exercising appellate powers under the Sugarcane Act may take a contrary E
decision. This would create an irreconcilable conflict of decisions with
consequential confusion. So far as the buyers and sellers of 'agricultural
produce-sugarcane' are concerned, it is of no avail to contend as submitted
by learned counsel for the respondents that for avoiding such conflicts,
Section 15 is dispensed with by the State in exercise of its power under
Section 42 of the Market Act, whether such an exemption can be granted by F
the State under Section 42 or not is not a relevant consideration for deciding
the moot question whether the statutory scheme of the Market Act can
harmoniously co-exist with the statutory scheme of the Sugarcane Act as
enacted by the very same legislature. It is possible to visualise that the State
Authorities may not exercise powers under Section 42 of the Act. In such an G
eventuality, the Sugarcane Act would not countenance a public auction of
sugarcane to be supplied by cane grower to the earmarked factory for which
sugarcane is grown in the reserved area. On the other hand, the Market Act
would require the very same sugarcane to be brought to the market yard for
being sold at the public auction to the highest bidder who may not be the
sugar factory itself. Thus what is reserved for the sugar factory by way of H
190 SUPREME COURT REPORTS (1999] SUPP. I S.C.R.
A raw material by the Sugarcane Act would get de-reserved by the sweep of
Section 15 of the Market Act. To avoid such a head-on conflict, it has to be
held that the Market Act is a general Act covering all types of agricultural
produce listed in the Schedule to the Act, but out of the listed items if any
of the agricultural produce like 'sugarcane' is made subject-matter ofa special
B enactment laying down an independent exclusive machinery for regulating
sale, purchase and storage of such a commodity under a special Act, then
the special Act would prevail over the general Act for that commodity and
by necessary implication will take the said commodity out of the sweep of the
general Act. Therefore, learned counsel for the appellants are right when they
submit that because of the Sugarcane Act the regulation of sale and purchase
C of sugarcane has to be carried out exclusively under the Sugarcane Act and
the said transactions would be out of the general sweep of the Market Act.
None of its machinery would be available to regulate these transactions.
But even apart from the provisions of the Sugarcane Act, learned senior
counsel for the appellants also placed reliance on the Sugarcane (Control)
D Order, 1966 enacted under the provisions of Section 3 of the Essential
Commodities Act, 1955 for submitting that purchase and sale of sugarcane is
also controlled by the aforesaid Central Government Order issued under the
Essential Commodities Act, and consequently the said provision would
supersede the general provisions of the Market Act. We, therefore, now
E proceed to consider this submission.
Sugarcane (Control) Order, 1966 is issued by the Central Government in
exercise of powers conferred by Section 3 of the Essential Commodities Act,
...
1955. Clause 2 sub-clause (c) defines factory and reads as under:
"factory" means any premises including the precincts thereto in any
F part of which sugar is manufactured by vacuum pan process."
Price is defined by sub-clause (g) thereof which reads as under :
"price" means the price or the minimum price fixed by the Central
Government from time to time for sugarcane delivered"
G Clause 3 of the Order deals with the fixation of minimum price by the
Central Government for making it payable by purchaser of sugar to the
sugarcane growers. Clause 3A deals with rebate that can be deducted by
purchaser of sugar from the price to be paid to the sugarcane grower or the
sugarcane growers' co-operative society. Rebate provided therein pertains to
the minimum price of sugarcane fixed under Clause 3, or the price agreed to
H between the producer or his agent and the sugarcane grower or the sugarcane
BELSUND SUGAR CO. LTD. v. STATE [S.B. MAJMUDAR, J.] 191
growers' co-operative society. A
There is a provision for additional price to be paid to the sugarcane
grower by the purchaser of sugarcane as laid down in Clause 5.
Clause 5-A deals with additional price for sugarcane purchased on or
after I st October, 1974 by the producer of sugar.
B
Clause 6 deals with power of the Central Government by Order to
regulate distribution and movement of sugarcane. As per this clause the
Central Government can, by order, direct the sugarcane growers to supply the
earmarked quantity of sugarcane grown by them in the reserved area fixed for
sugar factories to ensure continuous supply of sugarcane as raw material to C
such factories. This provision is parallel to the statutory provisions enacted
by the Bihar Legislature in the Sugarcane Act referred to earlier by us.
Clause 9 refers to the power of the Central Government or any person
authorised in this behalf to call for inform<:tion from various sources as
enacted therein.
D
Clause 9-A deals with the power of entry, search and seizure of premises
which obviously has to be exercised for fructifying the purposes of the Act.
Clause 11 deals with delegation of powers by the Central Government
to any officer or authority thereof or to any State Government or any officer/ E
authority of a State Government.
The aforesaid relevant provisions of the Sugarcane (Control) Order
show that it seeks to lay down the minimum guaranteed price of sugarcane
to the sugarcane growers with a corresponding obligation on them to supply
sugarcane to the earmarked factories for which the reserved areas can be F
fixed. This Order also contemplates negotiated price between the sugarcane
growers on the one hand and the sugarcane factories on the other, for whom
fixed quota of sugarcane can be earmarked.
It has to be appreciated that the aforesaid provisions of the Sugarcane
(Control) Order operate in the same field in which the Bihar Legislative G
enactment, namely, the Sugarcane Act operates and both of them are
complementary to each other. When taken together, they wholly occupy the
field of regulation of price of sugarcane and also the mode and manner in
which sugarcane has to be supplied and distributed to the earmarked sugar
factories and thus lay down a comprehensive scheme of regulating purchase
and sale of sugarcane to be supplied by sugarcane growers to the earmarked H
192 SUPREME COURT REPORTS [1999] SUPP. 1 S.C.R.
A sugar factories. It is, however, true that comprehensive procedure or machinery
for enforcing these provisions is found in greater detail in the Sugarcane Act
of the Bihar Legislation. But on a combined operation of both these provisions,
it becomes at once clear that the general provisions of the Market Act so far
as the regulation of sale and purchase of sugarcane is concerned get obviously
B excluded and superseded by· these special provisions.
In this connection, we may refer to a decision of the Kamataka High
Court in the case of Vasavi Traders v. State of Karnataka & Ors., (1982) 2
Kamataka Law Journal 357). In that case Venkatachaliah J., (as he then was)
speaking for a Division Bench of the Karnataka High Court, considered the
C impact of Sugarcane (Control) Order on the general sweep of the Karnataka
Agricultural Produce Market (Regulation) Act, 1966. Point no. 3 was framed
in this connection, which reads as under :
"Whether the 'Act' as amended by Act 17of1980 in so far it provides
for regulation of marketing of sugarcane is unconstitutional, as its
D marketing is regulated by the provisions of the Central Act, viz., The
Essential Commodities Act, 1955, and the Sugarcane (Control) Order
made thereunder?"
While answering point no.3 in affirmative, the learned Judge at para 39 of the
report, made the following pertinent observations :
E
" .... It appears to us that the Sugarcane (Control) Order regulates every
aspect of marketing of sugarcane and its provisions are irreconcilable
with the provisions relating to the marketing under the 'Act'. For
instance, the place of delivery, the price, the manner of its payments
are all fixed by the statutory order. The same aspects of marketing are
F sought to be regulated by the Act. The two sets of provisions collide.
S.6 of the Essential Commodities Act· gives overriding effect to the
orders made under S.3 of that Act as against any other Law. The small
portion of the sugarcane grown by the grower the sale of which is left
regulated under the statutory Order is again a matter - and part - of
G the policy of the regulation itself."
Accordingly, point no.3 in that case was answered in affirmative apart from
the question of repugnancy which strictly did not arise for their consideration.
The aforesaid reasoning of the learned iudges of the Kamataka High Court
' clearly indicates that the entire field of regulation of purchase and sale of
H sugarcane in the market area is occupied by the Sugarcane Control Order.
•
BELSUND SUGAR CO. LTD. v. STATE_[S.B. MAJMUDAR, J.] 193
This reasoning was left untouched by this Court in appeal against the said A
decision and, therefore, got confirmed in the case of I. T.C. ltd. and Ors. v.
State of Karnataka and Ors., [1985] (Suppl.) SCC 476.
Learned senior counsel for the respondents was right when he contended
in the aforesaid decision before this Court that the merits of the reasoning
which appealed to the High Court were not gone into as the appeal arising B
from the judgment on this point was not pressed. However, the fact remains
that the aforesaid reasoning of the Karnataka High Court remained untouched
by this Court, nor was it dissented from. The facts of the present case project
even a stronger situation, so far as the appellants are concerned. Whatever
shortfall is found in the Sugar (Control) Order has been supplemented by the C
Sugarcane Act by the Bihar legislation itself. Reasoning which appealed to
the Karnataka High Court in the above judgment rendered in absence of a
separate complementary legislation by the Karnataka Legislature gets further
strengthened in the light of the Sugarcane Act in the present case.
Consequently on a conjoint reading of the Sugarcane Order as well as the
Sugarcane Act, an inevitable conclusion has to be reached that the regulation D
of sale and purchase of sugarcane in the entire market area for which the
general Act, namely, the Market Act is enacted, is fully governed and
highlighted by these two special provisions harmoniously operating in the
very same field. Therefore, there would remain no occasion for the State
Authorities to rationalise and reasonably visualise any need for regulating the E
purchase, sale as well as storage of sugarcane in the market area concerned.
The wide sweep of general notification of Section 3 of the Market Act,
therefore, will have to be read down by excluding from its general sweep
sugarcane and its products as the definition of 'agricultural produce' as noted
earlier would otherwise include not only primary produce of agriculture but
also any other commodity processed or manufactured out of such primary F
agricultural produce. That is precisely the reason why the State of Bihar
having realised the futility of the need about controlling and regulating the
sale and purchase of sugarcane in the market area by the sugar factories
excluded the operation of Section 15 of the Act, which noted earlier, is the
soul of the Act. It is easy to visualise that if transactions concerning an G
'agricultural produce' are excluded from the operation of Section 15 of the Act,
the entire machinery available to the market committee to regulate such
transactions would get out of picture and there would be no room for the
market committee to supply any infrastructural facility or other benefits to the
seller of such agricultural produce on the one hand and the purchaser thereof
oo~m~ H
194 SUPREME COURT REPORTS (1999] SUPP. I S.C.R.
A Before parting with the discussion on this point, it is necessary to note
one submission of learned senior counsel Shri Rakesh Dwivedi for the
respondents - State of Bihar. He submitted that the legal proposition regarding
special Act excluding the operation of general Act can be invoked only when
the general Act irreconciliably derogates or conflicts with the special Act
while dealing with the same subject matter and cannot be harmonised. He
B submitted that the broad objective of the two enactments is different. The
Sugarcane Act purports to regulate production, supply and distribution of
sugarcane whereas the Market Act lays emphasis on regulating the market.
The subject matters are closely allied, but nevertheless distinct.
C He placed reliance on two decisions of this Court in support of his
aforesaid contention. In the case of Jugal Kishore v. State of Maharashtra
and Others, [1989] Suppl. 1 SCC 589, this Court was concerned with the
question whether the provisions regarding 'Ceiling on Land as fixed by the
Maharashtra Agricultural Lands (Ceiling on Holdings) Act, 1961 could be
reconciled and could harmoniously co-exist with 1958 Act.
D
In this connection, Sabyasachi Mukharji J., speaking for the Court
made the folfowing pertinent observations :
"Unless the Acts, with the intention of implementing various socio-
economic plans, are read in such complementary manner, the operation
E of the different Acts in the same field would create contradiction and
would become impossible. It is, therefore, necessary to take a
constructive attitude in interpreting provisions of these types and
detennine the main aim of the particular Act in question for adjudication
before the court."
F The aforesaid observations cannot ~e of any assistance to learned senior
counsel for the respondents as the schemes of the relevant Acts to which
.we have made a detailed reference contra-indicate the possibility of harmonious
operation of the Market Act on the one hand and the Sugarcane Act and the
Sugar (Control) Order ,on the other.
G
Shri Dwivedi tried to get out of this situation by submitting that as there
is already an exemption notification under Section 42 of the Market Act,
Section 15 will not be applicable to such transactions and, therefore, it would
remain governed by the provisions of the Sugarcane Order and the Sugarcane
Act. \\:'.ith respect, as seen earlier, it is an over simplification of the situation.
H As a qtiestion arises whether two legislations operating in the same field can
- BELSUND SUGAR CQ. LTD. v. STATE [S.B. MAJMUDAR, J.) 195
be reconciled or not, a mere possibility of the provisions of one of the A
inconsistent enactments being excluded by resorting to exemption power
under another enactment cannot cure the basic inconsistency between them.
It is obvious that such exemption power entrusted to its delegate by its
Legislature may or may not be utilised. Consequently, a basic inconsistency
between two legislative enactment would remain operative dehors such
exemption, if any. Such conflicting statutory schemes in their operation in the B
same field would directly collide. It may be that the Market Act and the
Sugarcane Act can both be treated as dealing with socio-economic balancing
of interests of growers of agricultural produce and the purchasers thereof, but
if it is impossible to reconcile them, the statute laying down the general
scheme of operation has to make room for a special statute for which a C
separate and exclusive field is carved out by the legislature itself.
Reliance placed by Shri Dwivedi, senior counsel for the State of Bihar,
on a decision of the two judge Bench of this Court in the case of S. Satyapal
Reddy and Ors. v. Govt. of A.P. and Ors., [1994] 4 SCC 391 submitting that
minimum qualifications prescribed by the rules framed under the Central Act D
could co-exist with higher qualifications prescribed by the State rules also
cannot be of real assistance to him for the simple reason that if minimum
prices were fixed by the Sugarcane (Control) Order and the Sugarcane Act
had stopped short by providing only minimum price and had not regulated
the fixation of even higher contractual price by providing for a machinery for E
the same and had not fixed and regulated 'the production, control, distribution,
sale and purchase of sugarcane, it could have been urged by counsel for the
respondents with some emphasis that both these statutory provisions could
harmoniously coexist but as discussed earlier such a possibility is not only
remote but incapable of visualisation. It is also not possible to agree with the
contention of learned senior counsel Shri Dwivedi that the Sugarcane Act of F
1981 does not expressly purport to exclude the Market Act, especially when
the Bihar Legislature that had enacted the former Act was aware of the Market
Act, 1960 holding the field. That this circumstance shows that the legislature
purposely did not exclude the applicability of the Market Act so far as the
purchase and sale of sugarcane in market areas were concerned. However, G
this contention by itself cannot clinch the issue. If the very same legislature
had felt that existing general Act was sufficient to foot the bill, then there
would have been remained no occasion for the very same legislature to enact
a special Act for control, regulation, sale and purchase of sugarcane after
passage of 2 \ years. Therefore, the latter Act clearly envisaged carving out
of a special field for regulating the sale and purchase of sugarcane and to that H
196 SUPREME COURT REPORTS [1999] SUPP. I S.C.R.
A extent pro tanto it excluded the operation of the Market Act for that commodity.
The intention of the legislature is thus very clear on this aspect. But apart
from that, intention of its delegate-the State of Bihar itself is also clear when
it excluded Section 15 of the Market Act in exercise of its exemption power
under Section 42 of the Market Act. It is difficult to appreciate the contention I.
of learned senior counsel that Section 15 of the Market Act is not the core
B of the Act. On a conjoint reading of Sections 3, 4, 15, 27 and 30 of the Act
it has to be held that it is only because of the operation of Section 15 covering
the sale and purchase transactions of agricultural produce that the market
committee can effectively discharge its functions entrusted to it by the Act.
But for Section 15 there would remain no occasion for the market committee
C to effectively regulate the sale and purchase transactions of the agricultural
produce concerned. Section 15 mandates the sellers and producers of
agricultural produce to operate in the notified market yard or sub-market yards
and only at these places the market committee through its officers and servants ,...
can discharge its functions effectively by regulating these transactions and
for that purpose all the infrastructural facilities would be available. The entire
D machinery provisions enacted for the purpose would fulcrum round the vibrant
operation of Section 15. Once Section 15 is excluded qua any agricultural
produce the entire machinery of the Market Act would come to a grinding halt
so far as such an excluded 'agricultural produce' is concerned. Sugarcane is
one such produce as we have already seen earlier. Consequently, qua such
E a produce the general sweep of the Market Act will be a total non-starter.
Logically, therefore, there would remain no occasion for the market committee
to justify levy of market fee under Section 27 of the Act read with Section
30 on these transactions. On a conjoint reading of Sections 27 and 30 of the
Market Act, it becomes clear that a market committee which has to effectively
control and regulate the sale and purchase of agricultural produce brought
F for sale and purchase in the market area as enjoined by Section 15 can
effectively discharge its functions and spend its funds for supplying the
necessary infrastructure for this purpose as laid down by Section 30.
,,.
At this stage, we may also refer to an additional submission of the
G Addi. Solicitor General of India Shri RN Trivedi in support of the respondents.
He submitted that Entry 28 of List II of the Seventh Schedule of the Constitution
operates on its owli and cannot be affected by any legislation pertaining to
industry as found in Entry 52 of List I of Seventh Schedule of the Constitution.
To that extent the learned senior counsel is right. However, as we have seen
earlier, Entry 28 of List II dealing with 'Markets and Fairs' has to be read
H jointly with Entries 26 and 27 dealing with 'Trade and Commerce' and once
BELSUND SUGAR CO. LTD. v. STATE [S.B. MAJMUDAR, J.) 197
the State Legislation deals with these topics then it also squarely invokes A
legislative powers under Entry 33 of List III. That is precisely the entry under
which the Sugarcane Act, 1981 can be said to have been enacted.
It is, of course, true that the Union Parliament has not exercised its
concurrent legislative powers under Entry 33 of List III for regulating the sale
and purchase of sugarcane. But, as noted earlier, the Sugarcane (Control) B
Order promulgated under the central legislation of the Essential Commodities
Act when read harmoniously and in conjunction with the State Sugarcane Act
carves out a special field for their operation and by the sweep of their
combined operation the general provisions of the Market Act pro tanto get
excluded so far as the transactions of purchase and sale of sugarcane in the C
market area are concerned.
2. SALE OF SUGAR AND MOLASSES:
So far as the sale transactions pertaining to these commodities are
concerned, it has to be kept in view that they will have to be treated as D
agricultural produce in the light of the definition of Section 2(l)(a) of the
Market Act. They get manufactured from the basic agricultural produce,
namely, the sugarcane. However, the question remains whether their sales are
also controlled by the relevant special statutory provisions. It will, therefore,
be necessary for us to have a look at these relevant special statutory
provisions. E
In this connection, our attention was invited to four Orders framed
under Section 3 of the Essential Commodities Act pertaining to sugar:
<)
I. Sugar (Control) Order, 1966;
F
2. Sugar (Packing & Marking) Order, 1970;
3. Sugar (Restriction on Movement) Order, 1970;
4. Levy Sugar Supply (Control) Order, 1979.
G
Clause 3 of the Sugar (Control) Order, 1966 deals with regulation and
production of sugar which enables the Central Government to direct that no
sugar can be manufactured from sugarcane except and in accordance with the
conditions specified in a licence issued in this behalf.
Clause 4 thereof deals with permissible directions to be issued by the H
198 SUPREME COURT REPORTS [1999] SUPP. 1 S.C.R.
A Central Government to the effect that no producer shall sell 9r agree to sell
or otherwise dispose of or deliver or agree to deliver any kind of sugar or
remove any kind of sugar from the bonded godowns of the factory in which
it is produced.
Clause 5 enables the Central Gov~rnment to issue directions to producers
B and dealers of sugar regarding the production, maintenance of stock, storage,
sale grading, packing, marking, weighment, disposal, delivery and di~ibution
of (any kind of sugar).
Clause 6 deals with the power of the Central Government to regulate
movement of sugar.
c
Clause 7 deals with the power to regulate quality of sugar.
Clause I 0 deals with the power of the Central Government to call for
requisite information from different sources enacted therein.
D Clause 11 deals with the power of any officer authorised by the Central
Government to inspection, entry, search, sampling, seizure, etc. as enacted
therein.
E
The Sugar (Packing and Marking) Order, 1970 provides statutory
directions as to the quality of sugar to be packed in each bag. -
The Sugar (Restriction on Movement) Order, 1970 deals with restrictions
on transport of certain types of sugar.
The Levy Sugar Supply (Control) Order, 1979 enables the Central
Government to issue directions to any producer or recognised dealer to
F supply levy sugar of such type or grade to such persons or organisation as
may be enacted in the Order.
The aforesajd provisions of the various Orders issued under Section 3
of the Essential Commodities Act clearly indicate that all sale transactions of
G sugar by factories manufacturing sugar out of the sugarcane, the basic
'agricultural produce' and raw material, are regulated by these provisions. As
noted earlier, Section 15 of the Market Act is out of picture qua even these
transactions. The sale of sugar manufactured out of sugarcane and fixation
of price thereof would also, therefore, go out of the sweep of Section 15( I)
& (2) of the Market Act and would be governed wholly by these special
H provisions of the Control Orders. On the parity of reasons governing the
BELSUND SUGAR CO. LTD. v. ST A TE [S.B. MAJMUDAR, J.] 199
transactions of sale and purchase of sugarcane, transactions of sale of sugar A
manufactured out of purchased sugarcane by the very same sugar factories
functioning in the market area would also be governed by special provisions
of the aforesaid special Sugar (Control) Orders and would pro tanto get
excluded from the general sweep of the Market Act.
In this connection, we may also refer to the main contentions of Shri B
Rakesh Dwivedi, learned Senior counsel for the State. He submitted that the
aforesaid various Control Orders regulating sugar have been issued with the
objective of maintaining supply of sugar and ensuring availability of the
same. Not only the object is different, but in effect the Control Orders regulate
production of sugar, impose levy, determine price of levy sugar, provide for C
packing in bags in quantities of I 00 kgs., provide for transport under a permit
issued by the Central Government/State Government when sold under Section
3(2)(t) of Essential Commodities Act, 1955 (levy sugar) and specifications of
dealer for supply of levy sugar. As far as free sugar is concerned, only
monthly quotas are fixed (see pages 44-46 of additional documents). Thus, as
far as free sale sugar is concerned, the Central Government does not fix the D
price and does not determine the person to whom it is to be sold or the
manner in which it is to be transported. The various provisions of the Market
Act for regulating sale, purchase and storage of free sugar would, therefore,
be available and the capacity of market committee to regulate these transactions
is not affected by these Orders and to that extent there is no repugnancy E
between them and the Market Act.
It is not possible to agree with this submission for the simple reason
that the provisions of Sugar (Control) Orders have not to be read in isolation
but will have to be read with the special provisions controlling the production,
sale and purchase of sugarcane out of which sugar is manufactured by the F
very same sugar factories functioning in the market area. They are all integrated
transactions and are subject to a well knit statutory scheme of control of
these commodities. It is obvious that regulation of sugarcane supply and
distribution is not in isolation. The main purpose of such regulation is for
ensuring better quality and adequate quantity of sugar manufactured out of G
sugarcane supplied by sugarcane growers to earmarked sugar factories which
manufacture sugar by crushing sugarcane in their factories by resorting to
vacuum pan manufacturing process. Therefore, it is the ultimate sale of the
manufactured article, namely, sugar by way oflevy sugar or in free market that
is sought to be controlled by the Control Orders which cannot effectively
operate save and except in harmony with the provisions enacted for the H
200 SUPREME COURT REPORTS [1999] SUPP. I S.C.R.
A control of raw material, namely, the sugarcane as envi.>aged by the Sugarcane
Orders as well as the Sugarcane Act. They together, therefore, provide a
complete machinery for controlling the production, sale and purchase not
only of the raw material - sugarcane but also finished product-sugar and in
this background we have to visualise the legislative intent underlying the ..'
I
enactment of the Sugarcane Act on the one hand and the exclusion of Section
B 15 to such transactions by the delegate of the legislature, namely, the State
of Bihar on the other. It is also necessary to visualise that once Section 15
is out of the way for governing the sale and purchase transactions by sugar
factories not only the purchase of sugarcane as raw material by them but also
the sale of their finished product, namely - sugar is also out of the sweep of
C Section 15 of the Market Act. Consequently, the entire regulatory machinery
and the infrastructural facilities to be made available by the market committees
for regulating the sale and purchase of such an 'agricultural produce' would
not give any signals and would get totally excluded.
SALE OF MOLASSES :
·-
D
This takes us to the consideration of the statutory control of sale of
molasses by sugar factories functioning in the market area. It has to be kept
-
in view that molasses is a by-product of the sugar industry and the sale of
molasses by the sugar factories is wholly controlled by the statutory provisions
contained in the Bihar Molasses (Control) Act, 194 7. The preamble to the Act
E reads as under :
"An Act to provide for the control of the distribution, supply, storage
and price of molasses produced by factories in the State of Bihar."
Section 2(c) of the Molasses Act defines Molasses as under :
F
"Molasses" means final residual by-product of factories manufacturing
sugar from cane or by refining gur, by means of vacuum pans but
does not include convertible molasses, which are the final residual by-
product of sugar factories operating on the open pan system."
G Section 3 of the Act provides as under :
"Submission of returns by occupiers of factories and stockists.-
Every owner, manager or occupier of a factory and every stockist shall
furnish to the Controller within the time and in the manner specified
by the Controller such returns relating to stocks of molasses as the
.H Controller may, by order from time to time, direct."
BELSUND SUGAR CO. LTD. v. STATE [S.B. MAJMUDAR, J.] 201
Section 4 of the Act provides that : A
"No molasses produced in the State nor any molasses held by the
stockists in this State, shall, without the permission of the Controller,
be moved by rail, road or river from any place in the State to any other
place therein."
B
As per Section 5 of the Act, a sugar factory cannot even enter into
an agreement or contract with any person other than the Government or
person licensed by the controller for supply of molasses.
All molasses have to be sold by sugar factories in accordance with the
directions of the Molasses Controller issued under Section 6 of the Molasses C
Act.
The price of molasses is regulated by Section S of the Act.
Section SA provides that the State Government may impose
administrative charges on the sale of released molasses for meeting the cost D
of establishment for supervision and control over such release.
It is thus clear that the sale of molasses is also regulated by the State
Government and the cost of such regulation is recovered under the Molasses
Act in the form of administrative charges.
Section SC requires every owner occupier and manager of sugar factory
E
to place in a separate fund suitable amount for the purpose of construction
and maintenance of adequate facilities for storage of molasses.
Section 9C makes detailed provisions relating to storage of molasses
and construction of storage tanks by the sugar factories. F
Section 11 gives overriding effect to the provisions of the: Molasses
Act over any provision contained in any other Act.
Section 13 which is the section conferring the power to make Rules
provides for the making of rules for carrying out the purposes of the Act and G
empowers in particular -
(a) prescribe the specifications and tests in respect of the purity of
molasses;
(b) regulate sale and price of molasses intended for use in distilleries
or for other purposes; H
202 SUPREME COURT REPORTS (1999] SUPP. I S.C.R.
A (c) prescribe conditions in respect of storage, loading and transport
of molasses at factories;
(d) prescribe the forms and returns to be submitted, and the records
and books to be maintained, by factories;
B (e) prescribe the manner in which. molasses produced in factories
shall be graded, marketed, packed or stored for sale;
(f) regulate imposition and recovery of permit fee and administrative
charges on released molasses;
c (g) prescribe the manner in which accounts of funds for regulation
of adequate storage facilities in respect of molasses produced in
(actories shall be maintained and operated;
(h) any other matter which is required to be or which may be
prescribed under this Act."
D
The Bihar Molasses (Control) Rules, 1955 contain detailed provisions
in Rule 3 relating to supply of molasses by sugar factories. Reference may
be made to clause "h" of Ru1e (3), which is in the following terms :
"Every sugar factory and every stockist shall, on receipt of an order
E from the Controller and on intimation of the allotment of tank wagons
for the transport of molasses, make all necessary arrangements promptly
for the haulage and loading of molasses and where the owner, occupier
or Manager of a sugar factory or the stockist fails to make such
arrangements without sufficient reason, the Excise Officer shall have
the power on his behalf, to enter upon the premises, make arrangement
F for the haulage and loading of molasses by manual labour, ifnecessary
recover the cost incurred thereby from the said owner, occupier as
manager of the sugar factory or the stockist."
Rule I 0 provides that no molasses can be moved from the premises of a sugar
G factory except under a pass in Form M.F.6. Rule I I provides that molasses
cannot be moved from the premises of any sugar factory except under a
movement order in Form M.F.7 issued by the Controller as provided in the
Act and Rules.
The aforesaid provisions leave no room for doubt that the sale and
H purchase of molasses which would be an agricultural produce as defined by
BELSUND SUGAR CO. LTD. v. STATE [S.B. MAJMUDAR, J.] 203
Section 2(l)(a) of the Market Act being a by-product resulting from manufacture A
of sugar by utilising the basic agricultural produce, namely, sugarcane are
wholly controlled by the Molasses Control Act enacted by the very same
legislature which has enacted the Market Act. It is easy to visualise that the
very same legislature which enacted both these provisions was pressed to be
alive to the need of having special provisions for regulating the sale and B
purchase of molasses and that by itself would exclude the need to get these
transactions generally controlled and regulated by the sweep of the Market
Act as per Section 3 of the said Act. That is precisely the reason for even
its delegate, the State of Bihar in its wisdom to exclude the applicability of
Section 15 of the Market Act, so far as the sale transactions of molasses by
the sugar factories operating in the market area are concerned. The validity C
of the Bihar Molasses Act, 1947 has been upheld by this Court in the case
of SIEL Ltd and Others v. Union of India and Others, [1998] 7 SCC 26. It has
been held to be traceable to Entry 33 List III and is having President's assent.
It is, therefore, obvious that the Molasses Act laying down a detailed
statutory scheme of control of sale and purchase of molasses produced by D
the sugar factories in the market area will remain within the statutory framework
of the aforesaid special statute. The general provisions of the Market Act has,
therefore, to give way to the aforesaid special provisions.
It was next submitted by learned senior counsel for the State of Bihar E
that even though the market committee may not be in a position to regulate
sale, purchase, storage or processing of molasses not released by the Controller
atleast after they were decontrolled by the Central Government in June, 1993
and even when the State Governments have partially decontrolled transactions
regarding molasses, such transactions could be regulated under the Market
Act. This submission also cannot be countenanced. The reason is obvious. F
Once the State of Bihar itself has exempted these sale transactions from the
operation of Section 15 of the Act, they would be out of sweep of the general
provisions of the Market Act and would not statutorily enjoin the market
committees to provide any infrastructure for regulating sale of molasses to
enable them to bring home the charge of market fee on the sale transactions G
of molasses as per Section 27 of the Act.
As a result of this discussion, the first contention will have to be
answered in negative by holding that the provisions of the Market Act
cannot apply to the transactions of purchase of sugarcane and sale of sugar
and molasses by the sugar mills situated and functioning within the market H
204 SUPREME COURT REPORTS [1999] SUPP. l S.C.R.
A area of the concerned market committee constituted under the Market Act.
CONTENTION NO. 2 :
This takes us to the consideration of the alternative contention canvassed
by learned senior counsel for the appellants in support of the appeals. Strictly
B speaking, this alternative contention does not survive for our consideration,
in view of our answer to the first contention. However, as we have heard
learned counsel for the parties on this alternative contention, we may deal
with the same on merits. It has to be kept in view that market fee levied under
the Market Act is a 'fee' and not a 'tax'. The Market Act in so far as it enacts
C Section 27 levying market fee is referable to Entry 66 of the State List read
with Entry 47 of the Concurrent List. Both of them deal with topics of
legislation pertaining to fees in respect of the matters enumerated in the
respective lists.
In the case of Kewal Krishan Puri and Anr. v. State of Punjab and
D Anr. etc. etc., [ 1980] 1 SCC 416, a Constitution Bench of this Court, while
upholding the levy of market fee under the Punjab Agricultural Produce
Markets Act, 1961, has made the following pertinent observations in paragraph
23 of the report. Untwalia J., speaking for the Court observed :
"From a conspectus of the various authorities of this Court we deduce
E the following principles for satisfying the tests for a valid levy of
market fees on the agricultural produce bought or sold by licensees
in a notified market area :
( 1) That the amount of fee realised must be earmarked for rendering
services to the licensees in the notified market area and a good
F 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 purposes
G
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 benefits must be conferred on them which have a
direct, close and reasonable correlation between the licensees
H and the transactions.
BELSUND SUGAR CO. LTD. v. STATE [S.B. MAJMUDAR, J.] 205
(4) That while conferring some special benefits on the licensees it A
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 B
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 benefiting the
traders also. Such an indirect and remote benefit to the traders C
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 D
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 with reasonable certainty as
being spent for rendering services of the kind mentioned above." E
It becomes at once clear that before justifying levy of market fee on any
transaction the services to be rendered by the market committee must be in
connection with the sale and purchase transactions of agricultural produce
falling for regulation under the Market Act, when the purchase and sale of F
agricultural produce like sugarcane, sugar or molasses are not governed by
the Market Act, as we have seen while considering contention no. I, there
would remain no occasion for the market committee to be statutorily under
any obligation to provide any services or infrastructural facilities for covering
such transactions so as to be entitled to charge market fee on such transactions.
It was vehemently contended by learned senior counsel for the respondents G
that various types of infrastructural facilities are being made available to
sugar factories who are purchasing sugarcane in the market area and selling
manufactured sugar and molasses in the very same market area. The following
are the various facilities and services highlighted in this connection :
I. Link road facilities by which market committees were to spend H
206 SUPREME COURT REPORTS (1999) SUPP. I S.C.R.
A monies for connecting villages in the market area with the main
roads for facilitating the movement of agricultural produce
including the sugarcane from the farms to the purchase centres
of the factories.
2 Spread of information regarding prices of agricultural produce
B for information of growers of sugarcane.
3. Providing mediation facility to enable the growers of sugarcane
to get higher price for sugarc~ne as compared to the minimum
prices fixed under the control orders.
4. Supervision of weighment of sugarcane.
c 5. Licensing of weighing inspectors.
6. Providing for drinking facility and park.
7. Parking facilities at the purchase centres.
D Shri Trivedi, Addi. Solicitor General, in his tum, tried to highlight the concept
of link roa9s being other than approach roads. He submitted that near the
factory gate or purchase centres provision of approach roads may be a
statutory obligation of the sugar factories. Thus approach roads would connect
the purchase centres with the nearby public roads. But so far as link roads
are concerned, they are also public roads other than approach roads which
E connect villages with main roads and all these facilities make possible quicker
movement of sugarcane from farms to the purchase centres. This results in
supplying better quality of sugarcane for being crushed in the factories so
that before such sugarcane dries out it gets crushed resulting in better quality
and larger quantity of sugar for the benefit of sugar factories.
F Strong reliance was placed in this connection on various provisions of
Section 30 of the Market Act and it was submitted by learned senior counsel
for the respondents that all these benefits are being made available to sugar
factories and there is no reason for them to oppose payment of small amounts
of market fees after getting these benefits from the market committees.
G
The aforesaid contentions of learned senior counsel for the respondents
for salvaging the situation for the market committees though appearing
attractive at the first blush, do not survive on a closer scrutiny. The reason
is obvious. Only because the sugarcane factories are located in the market
area they can be said to be covered by the general sweep of Section 27 of
H the Market Act as the agricultural produce, namely, 'sugarcane' as well as
BELSUND SUGAR CO. LTD. v. STATE [S.B. MAJMUDAR, J.) 207
'sugar and molasses' can be said to be bought and sold in the market area. A
But by the fact only of sale and purchase of these commodities in the market
area, it cannot be said that such agricultural produce belongs to the category
of agricultural produce which is covered by the general sweep of the Act. In
order to attract the charge under Section 27, the concerned agricultural
produce on which the market fee is to be levied must be required to be bought
and sold in the market area within the jurisdiction of the concerned market B
committee as per Section 15 of the Market Act which enjoins that no agricultural
produce specified in the notification under sub-section ( 1) of Section 4 shall
be bought or sold by any person within the market·area other than the
relevant principal market yard or sub-market yards. Thus, on a conjoint
reading of Sections 27 and 15 of the Market Act, it must be held that before C
any charge of market fee can settle regarding any purchase and sale
... transactions concerning the agricultural produce, such agricultural produce
must have been required to be sold or purchased at the relevant principal
market yard or sub-market yards. It is obvious that principal market yard or
submarket yards would be situated within the market area, but if any agricultural
produce is exempted from the provisions of Section 15( 1) of the Act as in the D
case of sugarcane, sugar and molasses there would remain no occasion for
transactions of sale and purchase of these commodities to be carried on only
in the principal market yard or sub-market yards and not elsewhere in any
other part of market area. It is only those agricultural produce which are
required to be bought and sold in the relevant principal market yard or sub- E
market yards situated within the market area that attract charge of Section 27
of the Act. Once this charge is attracted, the further question whether it is
backed by any quid pro quo would survive for consideration. On the facts
of the present case, Section 15 as a whole is out of picture for controlling
purchase and sale of sugarcane, sugar and molasses by sugar factories
operating in the market area, as we have seen earlier, the charge of market fee F
as envisaged. by Section 27 would not get attracted at all for them. Hence the
aforesaid list of the infrastructural facilities made available to sugar factories
in general with other dealers in agricultural produce attracting Section 15 of
the Act would pale into insignificance. Market Committees would not supply
adequate quid pro quo for levying market fee as the charge itself does not G
settle on these transactions by the sugar factories. It may be, as submitted
by learned senior counsel for the respondents, that some sugar factories may
have taken benefit of electric lighting and preparation of approach roads by
the market committees which might have spent sufficient funds for giving
-- these facilities. Still they would not be a part and parcel of the statutory
obligations of the market committees qua such sugar factories and may remain H
208 SUPREME COURT REPORTS [1999] SUPP. 1 S.C.R.
A in the domain of Section 72 of the Indian Contract Act and if such benefits
are received by the factories they may be liable on the principle of quantum
meruit to reimburse or compensate the market committees for the voluntary
facilities given by them but they would not support any legal quid pro quo
by way of statutory obligation of the market committees for giving facilities
B to the sugar mills for supporting the levy of market fees on their transactions.
Contention no. 2 is, therefore, answered in negative not on the ground
that the services rendered by the market committee to the appellant sugar
factories were not having any adequate quid pro quo but on the ground that
they were not statutorily required to be made available to the sugar factories
C by way of statutory obligation of the market committee to regulate the sale
and purchase transactions of sugarcane, sugar and molasses by these sugar
factories and also on the ground that the charge under Section 27 by levying
market fee on the aforesaid transactions was not attracted at all on the facts
and circumstances of the case, as seen earlier.
D As a result of our conclusion on the findings of the aforesaid two
contentions, the appeals and other Writ Petition in sugar group matters will
be required to be allowed and the impugned judgment of the High Court in
all these matters will have to be set aside. However, the further question that
survives is as to what relief can be given to the appellants and the writ
E petitioners in this sugar group of matters. It is obvious that during the
pendency of these proceedings no interim relief was given to the appellants
and the writ petitioners. Therefore, they must have paid the.market fee on the
concerned transaction all these years. In the common cours~ of events, they
would have passed on the burden of market fee on purchasers and the
ultimate consumers of sugar and molasses produced by the sugar factories
F by utilising sugarcane as raw material.
Shri Shanti Bhushan, learned senior counsel for the appellants, in this
connection, submitted that accepting the principle of unjust enrichment we
may reserve liberty to the appeliants to show before the authorities whether
G they have in fact passed on the burden of impugned market fee at the relevant
time and if they could show to the satisfaction of the authorities that in fact
they have not passed on the burden then they may be treated to be entitled
to get refund of all the appropriate amounts of market fee not passed on. In
our view it is not possible to accept this contention as years have rolled by
since the impugned market fees have been levied by the different market
H committees in the State of Bihar. In the normal course of events, no prudent
BEL SUND SUGAR CO. LTD. v. ST ATE [S.B. MAJMUDAR, J.] 209
businessman/manufacturer would ever bear the burden of such compulsory A
fee or tax to be paid from his own pocket. Even otherwise reserving such
liberty would create unnecessary complication and may give rise to spate of
avoidable litigations in the hierarchy of proceedings. Under these
circumstances, keeping in view the peculiar facts and circumstances of these
cases, we deem it fit to direct in exercise our powers under Article 142 of the
Constitution of India that the present decision will have only prospective B
effect. Meaning thereby that after the pronouncement of this judgment all
future transactions of purchase of sugarcane by the sugar factories concerned
in the market areas as well as the sale of manufactured sugar and molasses
produced therefrom by utilising this purchased sugarcane by these factories
will not be subjected to the levy of market fee under Section 27 of the Market C
Act by the market committees concerned. All past transactions upto the date
of this judgment which have suffered the levy of market fee will not be
- covered by this judgment and the collected market fees on these past
transactions prior to the date of this judgment will not be required to be
refunded to any of the sugar mills which might have paid these market fees. D
However, one rider has to be added to this direction. If any of the
market committees has been restrained from recovering market fee from the
writ petitioners in the High Court or if any of the writ petitioners in the High
Court has, as an appellant before this Court, obtained stay of the payment
of market fee, then for the period during which such stay has operated and E
consequently market fee was not paid on the transactions covered by such
stay orders, there will remain no occasion for the market committee concerned
to recover such market fee from the concerned sugar mill after the date of this
judgment even for such past transactions. In other words, market fees paid
in past shall not be refunded. Similarly market fees not collected in past also
shall not be collected hereafter. The impugned judgments of the High Court · F
in this group of sugar matters will stand set aside as aforesaid. The Writ
Petition directly filed before this Court also will be required to be allowed in
aforesaid tenns.
Before parting with this group of matters, it must be clarified that the G
present judgment will be applicable in connection with the purchase of
sugarcane by the sugar factories as well as the sale of manufactured sugar
and molasses by these factories functioning in the areas of market committees
concerned and whose transactions are governed by the provisions of the
Sugarcane (Control) Order, 1966 as well as the Sugarcane Act of 19& I and also
by the relevant provisions of the Sugar Orders and the provisions of Molasses H
210 SUPREME COURT REPORTS [1999] SUPP. 1 S.C.R.
A Control Act. Any other transactions of purchase and sale, in principal market
yard or sub-market yards, of sugarcane, sugar or molasses by any other
licensed dealers not governed by the aforesaid provisions will not be covered
by the ratio of this judgment.
2. WHEAT PRODUCTS -ATTA, MAIDA, SUJI, BRAN ETC.
B
In this group of matters, six flour mills functioning in market areas within
the jurisdiction of market committees concerned have brought in challenge
the applicability of the Market Act to the transactions of purchase of wheat
by these mills and manufacture out of the same different wheat products like
C atta, maida, suji, bran, etc. The High Court of judicature at Patna repelled their
contentions against the applicability of the Market Act. On grant of special
leave to appeal they are before us in these proceedings.
Shri Ranjit Kumar, learned counsel appearing for the appellants raised
two contentions for our consideration.
-
D I. Under the Industries (Development and Regulation) Act, 1951
(for short 'l.D.R. Act) in public interest the Union of India has
taken over the control of the wheat industry as specified in the
First Schedule to the Act arid consequently any transaction of
purchase and sale of the products of that industry cannot be
E regulated by the State Act like the Market Act. As·a part of the
very same contention, it was submitted that Wheat Rolling Flour
Mills (Licensing and Control) Order, 1957 and the Bihar Trading
Articles (Licenses Unification) Order, 1984 issued under Section
3 of the Essential Commodities Act, 1955 lay down a complete
S\:heme for regulating purchase and sale of wheat products and
F hence these transactions cannot be covered by the general
sweep of the Market Act.
2 Alternatively, it was contended that wheat may be an agricultural
produce, but sale of atta, maida, suji cannot be treated· as
agricultural produce.
G
We shall deal with the aforesaid contentions point wise.
Point No.I:
It is true that the Union Parliament in exercise of its legislative power
H under Entry 52 of List I of the Seventh Schedule has enacted the 1.D.R. Act.
BEL SUND SUGAR CO. LTD. v. ST A rE [S.B. MAJMUDAR, J.] 211
It is also true that flour industry is listed as one of the scheduled industries A
as item no.27(4) under the caption 'food processing industries'. However,
production of wheat as raw material or its sale is not covered by the said Act.
Consequently, so far as wheat as 'agricultural produce' is concerned, it is
outside the sweep of the l.D.R. Act. However, when flour industry is covered
by the said Act, question remains whether sale. of flour or any other products
out of wheat can be said to be covered· by the sweep of the I.D.R. Act. B
Regulation of sale and purchase of flour as a controlled industry was sought
to be emphasised by Shri Ranjit Kumar by inviting our attention to Section
l8G of the I.D.R. Act. Section l8G sub-section {l) reads as follows :
'J8G. Power to control, supply, distribution, price, etc., of certain C
articles. - (I) The Central Government, so far as it appears to it to be
necessary or expedient for securing the equitable distribution and
availability at fair prices of any article or class of articles relatable to
any scheduled industry, may, notwithstanding anything contained in
any other provision of this Act, by notified order, provide for regulating
the supply and distribution thereof and trade and commerce therein.' D
It is obvious that unless the Central Government in exercise of its statutory
power under Section l 8G promulgates any statutory order covering this field,
it cannot be said that mere existence of a statutory provision for entrustment
of such power by itself would result into regulation of purchase and sale of E
flour evl:n if it is a scheduled industry.
Shri Ranjit Kumar fairly stated that no such order has been promulgated
by the Central Government for regu.lating the purchase and sale of flour in
the market area. According to him, however, the mere existence of such a
statutory provision in the Act enabling the Central Government to issue such F
orders would be sufficient to occupy the field contemplated by this provision.
In support of this contention, he invited our attention to a decision of this
Court in the case of The Hingir-Rampur Coal Co., Ltd. and Ors. v. The State
ofOrissa and Ors., (1961] 2 SCR 537. At page 558 of the report Gajendragadkar
J., speaking for the Court, made the following pertinent observations :
G
" .... Entry 54 in List I dealing with "Regulation of mines and mineral
development to the extent to which such regulation and development
under the control of the Union is declared by Parliament by law to be
expedient in the public interest". The effect ofreading the two Entries
together is clear. The jurisdiction of the State Legislature under Entry H
212 S·l,.JPREME COURT REPORTS [1999] SUPP. I S.C.R.
A 23 is subject to the limitation imposed by the latter part of the said
Entry. If Parliament by its law has declared that regulation and
development of mines should in public interest be under the control
of the Union, to the extent of such declaration the jurisdiction of the
State Legislature is excluded .... "
B It was contended by Shri Ranjit Kumar relying on these observations
that mere declaration under the I.D.R. Act is enough to exclude the jurisdiction
of the State Legislature in connection with such a declared industry. It is
difficult to appreciate this contention. It has to be kept in view that any
legislation in exercise of legislative power under Entry 54 of List I would
C enable the Parliament to regulate mines and mineral development by taking
them under the control of the Union in public interest. Thus all aspects of
mining industry would be covered by the general sweep of such a declaration.
However, so far as thel.D.R. Act is concerned, it is enacted under Entry
52 of the First Schedule which deals with industries in general. Simultaneously
D in the State List itself there is Entry 24 which deals with industries subject
to the provisions of Entries 7 and 52 of List I. Consequently, the products
of such controlled industries would necessarily not be governed by the
sweep of the general legislation pertaining to such industries as per Entry 52
of the Union List. The aforesaid Constitution Bench judgment was not
E concerned with any State Legislation enacted under Entry 24. On the contrary,
it dealt with legislation of the Union Parliament under Entry 54 of the Union
List read with Entry 23 of the State List. The scheme of the aforesaid legislative
entries is entirely different from the scheme of Entry 52 of List I read with
Entry 24 of List II with which we are concerned. On a conjoint reading of the
aforesaid two entries, therefore, the ratio of the decision of the Constitution
F Bench in the aforesaid case cannot be effectively pressed in service by Shri
Ranjit Kumar for supporting his contention. In this connection, we may
usefully refer to a decision of this Court in SIEL Ltd and Others, (supra)
wherein one of us, Sujata V. Manohar, J. was a member. It has rightly
distinguished the ratio of the Constitution Bench decision in the case of The
G Hingir-Rampur Coal Co., Ltd and Others (supra) and taken the view that
merely because an industry is controlled by a declaration under Section 2 of
the l.D.R. Act enacted by Entry 52 of the Union List, the State Legislature
would not be denied of its powers to regulate the products of such an
industry by exercise of its legislative powers under Entry 24 of the State List.
In that case the question was whether U.P. Sheera Niyantran Adhiniyam, 1964
H could be said to be repugnant to the Molasses Control Order issued by the
!JELSUND SUGAR CO. LTD. v. STATE [S.B. MAJMUDAR, J.] 213
Central Government under Section 18-G of the I.D.R. Act imposing restrictions A
on the sale of molasses and fixing the maximum price of molasses. Answering
the question in negative, it was held that the term 'industry' in Entry 24 would
not take within its ambit trade and commerce or production, supply and
distribution of goods which are within the province of Entries 26 and 27 of
List II. Similarly, Entry 52 in List I which deals with industry also would not B
cover trade and commerce in, or production, supply and distribution of, the
products of those industries which fall under Entry 52 of List I. For the
industries falling in Entry 52 of List I, these subjects are carved out and
expressly put in Entry 33 of List III. It was also held that since the Molasses
(Control) Order of 1961 passed by the Central Government in exercise of
powers conferred by Section 18-G was not extended at any point of time to C
the State of U.P. or the State of Bihar, the question of repugnancy between
the Molasses Control Order, 1961 and the U.P. Sheera Niyantran Adhiniyam,
1964 does not arise. Consequently, it must be held that in the absence of
statutory order promulgated under Section 18G of the I.D.R. Act, it cannot be
said that the field for regulation of sale and purchase of products of flour
industry like atta, maida, suji, bran etc. would remain outside the domain of D
the State Legislature.
Shri Ranjit Kumar then placed reliance on the statutory orders framed
under Section 3 of the Essential Commodities Act, 1955. So far as the Wheat
Rolling Flour Mills (Licensing and Control) Order, 1957 is concerned, reliance E
was placed by him on Clauses 2 and I 0 of the definition clause. These clauses
clearly indicated that the said order was not concerned with agriculturists nor
was the order concerned with the pricing, purchase and sale of wheat or
wheat products. Consequently, the said order cannot be said to have occupied
the field so far as these topics are concerned. He then invited our attention
to the Bihar Trading Articles (Licenses Unification) Order, f9S.4. Clauses 2 (c) F
(g) (h) and U) as well as Clauses 15 and 18 on which reliance was placed were
found not to be of any assistance to him for the simple reason that under that
Order dealers of foodgrains like wheat had to be licensed and their activities
had to be supervised. This order had also nothing to do with fixation of prices
and regulating the purchase and sale of wheat and wheat products. G
Consequently, the first contention canvassed by Shri Ranjit Kumar cannot be
sustained and is accordingly rejected.
POINT NO. 2:
So far as the alternative contention is concerned, he submitted that H
214 SUPREME COURT REPORTS (1999] SUPP. I S.C.R.
A even though wheat is an agricultural produce, atta, maida, suji manufactured
out of the same cannot be said to be agricultural produce as it is a produce
of the factory and not of an agriculturist. This contention of Shri Ranjit Kumar
also cannot be sustained for the simple reason that agricultural produce as
defined by Section 2(1), as already noted earlier, would include all agricultural
produce whether processed, non-processed or manufactured out of any
...
'
B primary agricultural produce. Wheat is a produce of agriculture, therefore, any
product resulting after processing such basic raw material or which results
after process of manufacture is carried on qua such basic raw material would
remain agricultural produce. Shri Ranjit Kumar fairly stated that he has not
challenged the vires of Section 2 (l)(a) but in his submission items 14 to 16
C as found in the Schedule to the Act under the caption 'Cereals' are wrongly
included as agricultural produce as they are not produce of agriculture.
Moment the artificial definition of agricultural produce as aforesaid holds the
field, as a logical corollary these three disputed items would squarely get
covered by the sweep of the term 'agricultural produce' and hence their
inclusion in the schedule enacted under Section 2(l)(a) as types of cereals
D cannot be found fault with. These were the only contentions canvassed by
Shri Ranjit Kumar in support of his appeals. As they fail the inevitable result
is that all the civil appeals would be liable to be dismissed.
3. VEGETABLE OILS:
E Civil Appeal No.1427 of 1979 moved by Mis Rohtas Industries Ltd.,
which is now under liquidation represented through its liquidator raises
similar contention as canvassed by Shri Ranjit Kumar in support of the
appeals moved by flour mills. All vegetable oils are treated to be 'agricultural
produce' as per serial no.4 of the schedule framed under Section 2(l)(a) of the
F Market Act. In view of the general sweep of the said definition, oil manufactured
by the oil mills functioning within the areas of the Market Committees concerned
by crushing oil-seeds which are undisputedly agricultural produce and
subjecting them to manufacturing process cannot be said to be outside the
sweep of the regulatory provisions of the Market Act.
G Reliance placed in support of this appeal on the Vegetable Oil Products
Control Order, 1947 the Pulses, Edible Oilseeds and Edible Oils (Storage
Control) Order, 1977, the Vegetable Oil Product Producers (Regulation of
Refined Oil Manufacture) Order, 1973, all framed .under Section 3 of the
Essential Commodities Act, 1955, also cannot be of any avail to the appellant
industries for the simple reason that none of these orders deals with the topic
H of regulation of prices and sale and purchase of vegetable oil products.
BEL SUND SUGAR CO. LTD. v. ST ATE (S.B. MAJMUDAR, J.] 215
Consequently, the field is wide open for the legislation of the State, namely, A
the Market Act for its applicability to the transactions of sale and purchase
of vegetable oil products in the market areas concerned. This civil appeal,
therefore, also is liable to fail, falling in line with the appeals concerning wheat
and wheat products.
Civil Appeal Nos. 4500-05 of 1992 and Civil Appeal arising out of SLP B
(C) No.9684 of 1992 raise similar contentions in connection with vegetable
edible oils on the very same reasoning, as aforesaid. These appeals are liable
to fail.
4. RICE MILLING INDUSTRIES
c
The appeals arising from SLP (Civil) Nos.3159-60 of 1994 are moved by
Rice Milling Industries operating in the market area of the concerned market
committees. Learned senior counsel for the appellant mills challenged notices
issued to them by the Agricultur~l Produce Market Committees concerned
requiring them to shift their trade to principal market yards. It was contended D
that on account of the Rice Milling Industry (Regulation) Act, 1958 which is
a Central Act, the field for regulation of purchase and sale of products of rice
milling industries would be fully occupied by the Central Act and ifthe State
Act like the Market Act seeks to encroach upon the said field, it would
become repugnant to the Central Act.
E
A close look at the relevant provisions of the said Act shows that it
does not seek to cover the aforesaid field. Sub-section (I) of Section 6 of the
said Act reads as follows :
"Any owner of an existing rice mill or of a rice mill in respect of which
a permit has been granted under section 5 may make an application F
to the licensing officer for the grant of a licence for carrying on rice-
milling operation in that rice mill."
"Section 8 deals with restrictions statutorily imposed on rice mills.
Section 9 empowers the licensing officer or any person authorised by G
the Central Government to inspect the working of the rice mill.
The aforesaid relevant provisions of the Act leaves no room for doubt
that the working of the rice milling industries was sought to be regulated by
the said Act and it has nothing to do with the regulation of purchase and
sale of products of such mills. H
216 SUPREME COURT REPORTS [1999] SUPP. I S.C.R.
A It was then submitted that the appellant rice mills import paddy from
other State territories which are outside the notified market area falling under
the Market Act and such imported paddy is processed and after manufacturing
activities qua them, rice is manufactured, hence such activity cannot be
governed by the Market Act. It is obvious that if the appellant rice mills
import paddy already purchased from outside the market area then on such
B transactions of outside purchase and import of paddy in the market area, there
would remain no occasion for the market committees concerned to subject
such transactions to the regulating machinery of the Market Act or to demand
any market fee thereof. This was fairly conceded by learned senior counsel
for the respondents. He, however, added that if these rice milling industries (
C located and functioning in the market area purchase within the market area,
raw material paddy, whether grown in the market area concerned or outside,
then such purchases within the market area will attract the regulatory provisions
of the Market Act. There cannot be any dispute on this aspect as paddy
obviously is an 'agricultural produce' being item no. l in the category of
'Cereals' as found in Schedule to the Act.
D
So far as the manufactured rice out of such paddy is concerned, once
manufacturing takes place within the market area, it would get squarely
covered by the wide sweep of definition of Section 2(l)(a), as we have seen
earlier. Even apart from that, rice is mentioned as a separate item no.2 in the
E category of 'Cereals' in the Schedule of the Market Act. It cannot be disputed
that rice manufactured out of basic agricultural produce 'paddy' would also
remain agricultural produce falling within the sweep of the Act. So far as the
regulation of sale and purchase of rice within the market area is concerned,
Section 15 of the Act applies to the transactions of licensed dealers dealing
with such agricultural produce in the market area. Hence the entire machinery
F of the Market Act will be applicable to regulate transactions of sale and
purchase of paddy by the rice mills within the market area as well as sale of
rice by them within that area as all these transactions will have to take place
in the market yard or sub-market yards as per Section 15 of the Act. However,
one grievance voiced by learned senior counsel for the appellants deserved
G to be noted before parting with the discussion in these appeals. He submitted
that there is no power and authority in the market committee to insist that the
location of the rice milling industries also should be changed and must be
shifted to the market yard. In this connection, our attention was invited to
the notice (page 156 of the paper book) as a specimen notice. In the said
notice addressed to Janta Rice & Flour Mills issued by the advocate acting
H on behalf of the Secretary, Agricultural Produce Market Committee, Chakulia,
BELSUND SUGAR CO. LTD. v. ST ATE [S.B. MAJ MU DAR, J.] 217
in the last but one paragraph, the addressee was requested to shift the A
establishment of business in the main market yard at Dighi of the Agricultural
Produce Market Committee, Chakulia within 7 days.
It was submitted that this part of the direction is totally without
jurisdiction as no market committee can compel the shifting of the business
premises of the rice milling industries to any particular market yard as Section B
15 of the Act only requires the sale and purchase transactions regarding the
agricultural produce to be carried on in the market yard or sub-market yards.
To that extent, learned senior counsel for the appellant is right. The statutory
mandate of Section 15 does not go beyond the regulation of transactions
regarding purchase and sale of agricultural produce and that can be required C
to be effected only at the relevant principal market yard or sub-market yard
or yards. None of the provisions of the Market Act would entitle the market
committee to insist on shifting of the business premises of any milling company
or factory processing agricultural produce located within the market area to
any particular market yard or sub-market yards. Learned senior counsel for the
respondents Shri Dwivedi fairly conceded that the aforesaid direction contained D
in the impugned notice as worded is not correct and can be read down to
mean only the shifting of the sale and purchase transactions concerning
- paddy and rice to the relevant market yard or sub-market yards. These
directions are accordingly read down. The said notice when so read down
would remain well sustained. In other words, the appellants will not be
required to shift the location of the rice mills to principal market yard or sub-
market yards if otherwise they are not already so located but are functioning
E
at any place within the market area.
However, their sale and purchase transactions of paddy and rice will,
of course, be required to be carried on only in market yard or sub-market F
yards concerned as mandated by Section 15 of the Market Act.
Subject to these clarifications and modifications in the directions
contained in the impugned notice, these appeals are liable to fail.
5. MILK AND MILK PRODUCTS G
This takes us to the consideration of Civil Appeal No. l 880 of 1988. The
appellant in this appeal is an incorporated company with its Registered Office
and factory at Bombay. It claims to produce baby food under the trade names
"LACTODEX" and "RAPTAKOS" S.I.F. (Special infant food). Its products are
sold all over the country including Bihar State. It has its Central Office at H
218 SUPREME COURT REPORTS (1999] SUPP. l S.C.R.
A Patna. Being located outside Bihar it purchases its raw materials from the
territories outside Bihar. Out of the raw materials procured from outside, the
aforesaid two types of infant food are manufactured outside Bihar but some
of the products of the company are received in Bihar State packed in sealed
tins. The appellant company earlier had two branches being sales offices, one
at Patna and other at Muzaffarpur. The latter branch is since closed. Both
B these branches fall within the jurisdiction of the Agricultural Produce Market
Committees at Patna and Muzaffarpur. According to the appellant though its
activities were not covered by the sweep of the Market Act, it was required
to obtain licences under the Act for operating at both these places in the
market areas. The appellant contended in the Writ Petition before the High
C Court that the direction of the marketing authorities requiring the appellant
to take licences under the Market Act was clearly ultra vires and illegal for
the simple reason that the products sold by it within the market area were not
agricultural produce at all. Therefore, they were not governed by the sweep
of the Act.
D The High Court in the impugned judgment negated this contention and
held that both these articles sold in packed tins were in substance milk
products and, therefore, 'agricultural produce' as defined by Section 2(l)(a).
Learned counsel appearing for the appellant vehemently submitted that
before the aforesaid two products can be subjected to the regulatory procedure
E of the Market Act. it must be shown by the respondents that they are
'agricultural produce'. He invited our attention to Section 3 of the Act and
submitted that the very first step of the applicability of the Act is the
declaration of intention by the State Government for regulating the purchase,
sale, storage and processing of 'agricultural produce' as mentioned in the
notification. That the said term 'agricultural produce' as defined by Section
F 2(1 )(a) clearly indicates that the agricultural produce which is to be covered
by the sweep of the Act has to be one which should be specified in the
Schedule. When we turn to the Schedule of the Act framed as per Section
2(l)(a), we find one of the animal husbandry products at item VIII, sub-item
20 as milk except liquid milk. Thus any product consisting of solidified milk,
G like milk powder, is contemplated by the said item. It was submitted that in
the entire Schedule no where we find any mention of baby food which may
be a substitute for milk or solidified milk. It was, therefore, contended that the
appellant which manufactures and sells special infant foods like 'Lactodex'
and 'Raptakos' cannot be required to take any licence under the Market Act.
H Refuting this contention, learned senior counsel for the respondents
BELSUND SUGAR CO. LTD. v. STATE [S.B. MAJMUDAR, J.] 219
submitted that as noted by the High Court the aforesaid two products A
manufactured and sold by the appellant do contain as base material "milk"
in solidified form. He invited our attention to the details submitted by the
appellant before the High Court and as noted by the High Court in its
judgment in connection with the ingredients and constituents of these two
products.
B
"LACTODEX"
Per I 00 ml. When
reconstituted.
6 g. : 45 ml.
Protein 1.9 g. c
Carbohydrate 9.6 g.
Milk fat 0.9 g.
Minerals 0.5 g.
D
Vitamin A 265 I.U.
VitaminB6 40 mcg. Including
that derived from
milk powder
Vitamin D 40 LU. E
- Calories
"RAPTAKOS S.1.F."
54
Per I 00 ml. When
reconstituted F
4.5 g. : 30 ml.
Protein 1.8 g.
Fats 3.0 g.
Carbohydrates 9.6 g. G
Minerals( Ash) 0.4 g.
Iron 0.6 g.
Vitamin A 2251.U.
....
1-
Vitamin D 60 I.U . H
220 SUPREME COURT REPORTS [1999] SUPP. l S.C.R.
A VitaminE 1.3 LU.
Vitamin Bl 0.07 mg.
VitaminB2 0.11 mg.
Nicotinamide 0.9mg.
B VitaminB6 0.04mg.
VitaminB12 0.15 mg.
VitaminC 0.5mg.
Calories 73mg.
C Placing reliance on these ingredients, it was submitted that per l 00
milligrams ofLactodex milk fat content is 0.9 gms and that other minerals and
vitamins may also include milk powder. Similarly, Raptakos (Special infant
food) also contains proteins and fats. He also contended that even milk which
is a complete food may contain vitamins, therefore, it cannot be said that
these two products are not milk products or products containing some
D ingredients of milk. It is difficult to accept this contention for the simple
reason that the aforesaid Schedule at sub-item no.20 captioned under the title
"Animal Husbandry Products" refers to milk except liquid milk. By no stretch
of imagination, tinned baby food containing various ingredients which may
include some milk fats or proteins though in powder form can be said to be
E milk powder simpliciter or whole milk not in liquid form. It is also pertinent
to note that there is no item of milk products in the Schedule to the Act under
the caption "Animal Husbandry Products". In this connection, it is profitable
to contradistinguish this entry in the Schedule with items 14,15 and 16 under
the caption 'Cereals' in the very same Schedule. In the listed items under the
caption 'Cereals', we find 'Wheat' separately mentioned at item no.3 as
F compared to Wheat Atta, Suji and Maida separately mentioned at items 14,15
and 16. This shows that basic agricultural produce - 'wheat' is treated as a
separate agricultural produce as compared to its own products manufactured
out of wheat, namely, atta, suji and maida. Those products of the concerned
basic agricultural produce are separately mentioned as 'agricultural produce'
G in the Schedule so far as 'cereals' are concerned. But similar is not the scheme
in connection with milk. Milk products like baby foods are not separately
mentioned. Under the very caption 'Animal Husbandry Products', Butter and
Ghee are separately mentioned as items 7 & 8 which are wholly manufactured
out of milk. It, therefore, becomes clear that save and except butter and ghee
no other milk product is sought to be covered by the sweep of the Act as
H 'Animal Husbandry Products' and the basic Animal Husbandry Produce like
BELSUND SUGAR CO.LTD. v. STATE [S.B. MAJMUDAR, J.] 221
'milk' only in solid form is sought to be covered by a separate solitary item A
no.20 as one of the 'Animal Husbandry Products'. Therefore, any other
manufactured product like the present ones, utilising same ingredients of milk
powder as one of the ingredients but which are processed by addition of all
. other extra items with the result that finished products like baby foods emerge
as manufactured items for serving as substitute for milk to be fed to infants
who cannot digest liquid milk or solidified milk as such, cannot be treated to B
be 'agricultural produce' as part and parcel of listed 'Animal Husbandry
Products' mentioned in the Schedule to the Act. Learned senior counsel for
the appellant in support of his contentions tried to rely upon specimen copies
of printed material affixed to the sealed tins of these manufactured commodities,
'Lactodex' and 'Raptakos', which, according to him, are substitutes for mother's C
milk and are to be used to feed infant babies who cannot take milk in its
natural form. Learned senior counsel for the respondents tried to repel this
submission by contending that this type of printed material was not produced
before the High Court. Be that as it may, the undisputed fact remains that
these two special infant foods are meant for infant babies who are to be fed
by mixing this baby food powder with water to make it a paste as a substitute D
for mother's milk.
In the light of the express provisions concerning the relevant items of
the Schedule to the Act to which we have referred, it has to be held that on
the material before the High Court in connection with the ingredients of the
aforesaid two products of the appellant, it could not be effectively shown by E
the respondents beyond any doubt that these two products also were
'agricultural produce' being Animal Husbandry Products of 'milk' in a non-
liquid form. Consequently, there was no occasion for the respondent authorities
to insist that the appellant for the sale of the aforesaid two products within
the market area governed by the Market Act in the State of Bihar was required F
to take any licence under that Act. It is not the case of the appellant that any
market fee was required to be charged from him by the market committee. The
only grievance made was that the appellant was required to take licence under
the Market Act. Hence the question of refund of any market fee would not
survive for consideration in the present case. This appeal will have to be
_, allowed and the Writ Petition filed by the appellant in the High Court also
consequently will have to be allowed by quashing the impugned notice
G
calling upon the appellant to take licences under the Market Act.
6. TEA MA1TERS
In the appeal filed by M/s. Lipton Tea (India) Ltd., the appellant company H
222 SUPREME COURT REPORTS (1999] SUPP. l S.C.R.
A has brought in challenge the order of th.! High Court of judicature at Patna
in Writ Petition No. I 027 of 1977 which was disposed of along with other
cognate matters by a common judgment. The appellant had contended before
the High Court that the Market Act cannot apply to the transaction of
manufactured blended tea sold in packed tins and packets by it in the State
B of Bihar, consisting of areas of different market committees. According to the
appellant, the object of the Market Act was to provide for better regulation
of buying and selling of agricultural produce. It was for the benefit of the
agriculturists by providing them a market assuring a reasonable price of their
products and also eliminating unhealthy· competition and loss due to
malpractices prevailing in the market.
c
That the appellant was neither an agriculturist nor did it purchase any
article from any agriculturist in the Bihar State. That it purchased tea in
auction under the Tea Act held at various notified centres in other States ~
outside the Bihar territory. That the purchased tea was blended at appellant's
factories which were also situated outside Bihar. Only after the purchased tea
D had undergone manufacturing process in appellant's tea factories, after
blending and preparation of appropriate final product packed in tins and other
receptacles, this marketable commodity 'tea' consisting of red label, green
label tea etc. was being brought for sale within the territories of the State of
Bihar. Hence, there was no occasion for the market committees to regulate the
sale and purchase of such tea by the appellant manufactured outside the
E
State of Bihar. 1t was also contended that the Tea Act, which is the Central
Act, fully occupied the field of regulation of sale of such tea by the appellant.
/'
In view of the special machinery provided under the Tea Act, the general
sweep of the Market Act could not be made applicable to the appellant's sale
transactions of manufactured tea within the State of Bihar. It was lastly
F contended that when the appellant was selling its manufactured tea in packed
condition in the market area through its stockists, no benefits of infrastructural
facilities were required to be furnished by the market committee concerned
and, therefore, insistence on the part of the market committee, that the
appellant's stockists should sell packed tea only in the market yard or sub-
market yards was totally unauthorised and in fact amounted to imposition of
G
sales tax on the sale transactions of tea and could not remain in the realm of
genuine market fee. These contentions were repelled by the High Cou'l and ... _
it was also held that any manufactured product out of the basic agricultural
produce, namely, tea leaves, would be covered by the Act and as the
manufactured items in packed conditions out of the basic agricultural produce-
/
H 'tea' were being sold in the market area, the machinery of the Act was ....
BELSUND SUGAR CO. LTD. v. STATE [S.B. MAJMUDAR, J.] 223
applicable to cover these transactions. Accordingly, the Writ Petition was A
dismissed. Hence this appeal by special leave.
The learned senior counsel for the appellant Shri Shanti Bhushan
vehemently submitted that the very purpose of the Market Act is not to
regulate the sale of tea manufactured by big tea manufacturing companies like B
the appellant whose factories are situated outside the State of Bihar. They
purchase tea leaves in auction under the Tea Act held at different centres
outside the State of Bihar and manufacture after proper blending tea by
packing it in suitable packings having labels showing different qualities of tea
like green label tea, red label tea etc. That because the appellant imports
manufactured tea only for the purpose of sale in Bihar markets, it cannot be C
said that the machinery of the Market Act which is essentially meant to
regulate the sale and purchase of agricultural produce, gets attracted. That
the Market Act is, in substance, meant to cover agricultural produce which
are first grown in the market area and then sold within the same area. It was
also contended that tea was not one of the scheduled items earlier covered D
by the Act enacted as early as in 1960. That only after 16 years in 1976, tea
was added as one of the items in the Schedule to the Act under the caption
"Miscellaneous item No. XII" as sub item 30 being Tea (leaf and dust). It was
submitted that this addition to the Schedule was made by the State of Bihar
in exercise of its power under Section 39 of the Act which confers power on
the State Government by notification to add any of the items to be treated E
as "agricultural produce" for being specified in the Schedule. That this addition
was made after the basic notification under Section 3 of the Act was issued
declaring the intention of the State to regulate the purchase, sale, storage and
process of agricultural produce in such areas as may be specified in the
notification. This basic notification which was followed by the procedure of F
.. inviting objections and suggestions had culminated into declaration of market
area under Section 4. That initially as the item of tea was not in the Schedule,
it was obviously not sought to be subjected to the regulation under the Act.
Consequently, its purchase, sale, storage and process were obviously not
intended to be covered by the Act. But when tea was added as an item in G
the Schedule in 1976 the procedure contemplated by Section 3 was obviously
not undergone and no objections were invited. Section 4 (a) of the Act which
was inserted by way of clarification in 1993 also made it clear that the
provisions of Sections 3 and 4 shall not apply to the exercise of power by
the State Government under Section 39 to amend the Schedule by addition
/ of any item of agricultural produce not specified therein. H
224 SUPREME COURT REPORTS [1999) SUPP. 1 S.C.R.
A In the light of the aforesaid statutory scheme, it was vehemently
submitted by Shri Shanti Bhushan, learned senior counsel appearing for the
appellant, that this insertion of tea as an added item in the Schedule was ex-
facie unauthorised and a result of total non-application of mind on the part
of the State and it is this exercise under Section 39 of the Act by the State
B authorities that was challenged in the Writ Petition. Jn support of this challenge,.
Shri Shanti Bhushan pressed in service the following three contentions :
CONTENTION NO. I:
The very scheme and purpose underlying the enactment of the Market
C Act shows that only those agricultural produce which are grown within the
market area and whose sale in the first instance is to be regulated and also
the subsequent sale of any manufactured item out of such basic agricultural
produce raw material taking place within the market area are required to be
regulated by the Act so that illiterate and ignorant agriculturists who would,
otherwise, suffer at the hands of middlemen and may not get adequate price
D for their product and due compensation for the toil undertaken by them in
producing these agricultural commodities, may get adequate return for their
products. The benevolent provisions of the regulatory scheme of the Act are
essential to protect the agriculturists from exploitation of middlemen. In this
connection, our attention was drawn to the salient observations highlighting
E the basic purpose for enactment of such Market Acts as laid down by the
Constitution Bench of this Court in MC. V.S. Arunachala Nadar case (supra).
Shri Shanti Bhushan submitted that the large scale manufacturers like Lipton
Tea (India) Ltd. who manufacture tea outside the State in their sophisticated
factories having latest machineiy are not illiterate agriculturist producers of
agriculture goods and commodities in their fields and do not require protection
F under the Act. That as these salient features of the Act are not kept in view
by the State Authorities while inserting entry of tea in the Schedule, the said
Act on the part of the State authorities was clearly ultra vires and incompetent.
CONTENTION NO. 2:
G
In any case, as the purchase and sale of tea were governed by the
comprehensive provisions of the Central Act, namely, the Tea Act, 1953, the
said Act would wholly govern transactions of purchase and sale of tea by
the appellant and to that extent the Market Act would stand superseded or
at least the statutory intention of regulating the purchase, sale, storage and
H processing of tea as per the provisions of Section 3 of the Market Act would
BELSUND SUGAR CO. LTD. v. STATE [S.B. MAJMUDAR, J.] 225
stand completely negated. Hence, on that ground also the insertion of this A
item in the Schedule would remain unauthorised and consequently the
insistence on the part of the authorities that the sale transactions should be
carried on only within the market yard or sub-market yard was clearly illegal
and violative of Article 19 of the Constitution of India.
CONTENTION NO. 3: B
It was lastly contended by Shri Shanti Bhushan that no quid pro quo
existed between the demand for market fee by the market committees and the
sale transactions effected by appellant's selling agents so far as tea in packed
tins was concerned. No infrastructural facilities were available for or required C
to be supplied to the sellers of such tea.
Learned senior counsel for the iespondents, on the other hand, tried to
salvage the situation by submitting that even though the Tea Act may control
the sale and purchase of tea which is a highly monopolistic and export
earning commodity, once the blended tea in deliverable state duly packed in D
tins and other packages by the appellant tea company enters the Bihar
markets for sale, it cannot be said that the sale of this commodity cannot be
treated to be sale of agricultural produce by the appellant within the market
area in the State of Bihar as agricultural produce defined by Section 2(1 )(a),
would cover not only the purchase and sale of agricultural produce in its raw E
form but also in its processed and manufactured form as per the wide sweep
of the said definition. He submitted that it cannot be disputed that tea in its
raw form is an agricultural produce because tea leaves are grown in tea
gardens and then they are plucked and processed in tea factories and after
blending the manufactured tea in deliverable state becomes available to be
sold in wholesale markets and then in the retail markets. That even though F
the appellant's factory manufacturing the blended tea may be outside the
State ofBihar, the moment the blended tea in packed form is sold in the State
of Bihar in the market areas concerned, it cannot be said that the provisions
of the Market Act would not apply to such sale transactions. On a conjoint
reading of Section 2(l)(a) and the Schedule under Miscellaneous item XII G
sub-item 30, therefore, it has to be held that the Market Act would squarely
get attracted to regulate the sale of such produce of tea by the appellant in
the Bihar markets. So far as the Tea Act is concerned, it is submitted that it
only regulates the sale of plucked tea from the tea gardens and provides
machinery for sale by auction of such tea at the relevant centres and even
in such auction when the appellant purchases these roasted tea \eaves, it H
226 SUPREME COURT REPORTS [1999] SUPP. 1 S.C.R.
A cannot be said that the Tea Act would cover any further transactions of ;.
~-
manufactured tea out of the purchased tea leaves by auction purchasers like I
the appellant at its factories situated outside the Bihar State. That auction
purchased tea leaves are processed by the appellant and blending work is
done thereafter. That what is relevant for the applicability of the Market Act
B is the fact that this manufactured tea packed in suitable packets and tins is
brought for sale within the market area in the Bihar State and these are the
transactions of sale of manufactured tea out of the basic agricultural produce
tea leaves that would attract the sweep of the Market Act, notwithstanding
the provisions of the Tea Act. That once the Market Act applies to such sale
transactions, the entire infrastructural facilities would be available to the
C appellant as these sales have to take place in the market yard or sub-market
yards as required by Section 15 of the Act. Once the appellant gets the
benefit of this infrastructure, it cannot be said that no sufficient quid pro quo
is made available under the Act by the market committees concerned to justify
them to levy the market fee from the buyers of tea. That so far as the appellant
is concerned, there is no burden of paying market fee as a seller of
D manufactured tea. The burden will be borne by the buyers who are not making
any grievance in this connection.
In the light of the aforesaid contentions, the following points arise for
our consideration : ;..._
E I. Whether the basic agricultural produce i.e. "tea leaves" which
is subjected to manufacturing process outside the Bihar State
and is imported and sold in manufactured condition as packed
tea within the Bihar State in the market areas concerned, attracts
the provisions of the Market Act for regulating such transactions I
F of sale. I
2. ·Whether the Tea Act of 1953 and the relevant orders promulgated l
thereunder fully occupy the field regarding regulation of purchase I
and sale of tea and, consequently, the Market Act, being a
general Act, would get excluded for regulating the transactions
of sale of manufactured tea in Bihar State and
G
3. Whether there is adequate quid pro quo supporting the levy of
market fee on such transactions of sale of manufactured and
packed blended tea in markets governed by the Market Act.
We will now deal with the aforesaid three points in the same sequence r-
H in which they were pressed for consideration.
''
BELSUND SUGAR CO. LTD. v. STATE [S.B. MAJMUDAR, J.] 227
POINT NO. I: A
At first blush, learned senior counsel for the appellant Shri Shanti
Bhushan appeared to be on a firm footing when he submitted that the
legislative intention underlying the enactment of the Market Act was to
protect illiterate and unwary agriculturist from middlemen so that he may not
be exploited by them and may get appropriate price for his basic agricultural B
produce. But on a closer scrutiny, the said contention does not appear to be
well sustained. Section 2(l)(a) of the Market Act, as seen earlier, includes in
the definition of agricultural produce not only the primary produce grown in
the field but also covers all processed or non-processed, manufactured or
non-manufactured agricultural produce as specified in the Schedule. In the C
light of the afore.said wide sweep of this definition, it cannot be said that tea
leaves which are produced in tea gardens being primary agricultural produce
would cease to be agricultural produce once they got processed. After plucked
tea leaves are processed by roasting them and then by subjecting them to
further process of blending and ultimately packing them in suitable packets
they still remain all the same agricultural produce so manufactured out of the D
basic agricultural raw material 'tea leaves'. It is also not in dispute that Tea
(leaf and dust) is a Scheduled item. Once that is so, sale of manufactured tea
in packed condition within the market area would squarely attract the charge
under Section 27 of the Act which, as noted earlier, is widely worded. The
moment the agricultural produce as defined by Section 2( I )(a), is bought or E
sold in the market area, Section 27 would get attracted to cover such transaction.
It is also pertinent to note that Section 15 sub-section ( 1) of the Act is
applicable in the present case to cover such transactions of sale of packed
tea within the market areas of the concerned market committees governed by
the Act. Save and except such quantity as may be prescribed for retail sale
or personal consumption to be outside the sweep of Section 15(1) of the Act, F
rest of these sale transactions regarding manufactured agricultural produce
would remain governed by the sweep of the Act. On a conjoint reading of
Section 2(1 )(a) and Section 15 and the relevant entry in the Schedule, there
is no escape from the conclusion that whether the manufactured agricultural
produce has undergone manufacturing process within the market area or not G
or whether such agricultural produce in its raw form is grown in the market
area or outside or whether the processed 'agricultural produce' is imported
only for sale within the market area, the applicability of the Act cannot be said
to be ruled out to cover all these types of sale transactions. The question
posed by Shri Shanti Bhushan learned senior counsel appearing for the
appellant for qur consideration is no longer res integra. A Constitution Bench H
228 SUPREME COURT REPORTS [1999] SUPP. 1 S.C.R.
A of this Court in the case of Ram Chandra Kai/ash Kumar and Company and
Ors. v. State of UP. and Anr. etc. etc., [1980] SuppLSCC 27, speaking through
Untwalia J., had to consider.the question of imposition of market fee under
the Uttar Pradesh Krishi Utpadan Mandi Adhiniyam, 1964 on transactions of
purchase and sale of agricultural produce in the market area. While considering
B this question, various contentions raised by traders operating in the agricultural
market in U.P. were listed in para 9 of the report. Contentions no.9 and 23
listed in para 9 of the report are relevant for our purpose. Contention no.9
reads as under :
"No market fee could be levied on goods not produced within the
C limits of a particular market area and if produced outside and brought
in such area."
Contention no.23 reads as under :
"Fee can be charged only on those transactions in which the seller
D is producer and not on any other transaction."
Repelling these contentions, the Constitution Bench held that market fee
could be levied on transactions of sale of goods even though such goods
are· produced outside the State of Uttar Pradesh or outside the market area
of that particular market committee, provided the transactions of sale take
E place within the limits of that market area. It was also held that, on the other
hand, there was 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.
So far as Contention no.23 was concerned, approving the Patna view
F it was held that in the U.P. Act even traders under certain circumstances had
been made liable to pay such fee. Similarly, the argument that the 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, was also found
devoid of any substance by the Constitution Bench.
G
In view of the aforesaid pronouncement of the Constitution Bench,
therefore, it must be held that even if an agricultural produce initially is not
grown in the market area and it is brought in manufactured form within the
market area for sale, such sale transaction in connect.ion with such a produce
would be covered by the sweep of the Market Act. 1.'he same view was taken (
H by two later judgments of this Court. In the case of Rameshchandra Kachardas \
BEL SUND SUGAR CO. LTD. v. ST ATE [S.B. MAJMUDAR, J.] 229
l'orwal and Others v. State of Maharashtra and Others etc. etc., [1981] 2 SCC A
722, wherein a three Judge Bench of this Court, speaking through Chinnappa
Reddy, J. amongst others, had to consider the question whether change of
location of market under the Maharashtra Agricultural Produce Marketing
(Regulation) Act, 1963 could be held to be legally justified. It was held that
the power to establish principal market or a subsidiary market carried with it
the power to "dis-establish" such market and that power to establish principal B
or sub-market yard could be exercised from time to time. In para 11 of the
report the further contention was examined as to whether agricultural produce
which is imported into the market area from outside the market would be
covered by the sweep of the Market Act. While answering this contention
in affirmative, it was held that even if agricultural produce is imported into the C
market area and subjected to sale and purchase thereof in the market area, the
provisions of the Market Act would get attracted. The very same contention
which learned senior counsel Shri Shanti Bhushan urged for our consideration
that the Act is enacted for the interest of agriculturists only and for their sole
benefit was repelled. For coming to that conclusion reliance was placed on
a decision of the Constitution Bench of this Court in the case of Rameshchandra D
Kachardas Porwa/ and Others (supra). In this connection, the following
pertinent observations were made at page 735, para 11 of the report.
" .. The basic assumption of the submission was that the Maharashtra
Agricultural Produce Marketing (Regulation) Act was conceived in
the interests of the agriculturists only and intended for their sole E
benefit. This basic assumption is not well founded.
xxxx xxxx xxxx xxxx
It is also clear to our mind that the regulation of marketing of
agricultural produce, if confined to the sales by produce~s within the
market area to traders, will very soon lead to its circumvention in the F
guise of sales by traders to traders or import of agricultural produce
from outside the market area to within the market area."
In our view the aforesaid observations are in Rameshchandra Kachardas
Porwal's case (supra) are in consonance with the decision of the Constitution
Bench of this Court in Ram Chandra Kai/ash Kumar and Company and G
Others (supra) and are well sustained.
This very question was once again examined by another three Judge
Bench of this Court in the case of Rathi Khandsari Udyog and Others v.
State of Uttar Pradesh and Others, [1985) 2 SCC 485 wherein Fazal Ali J.,
speaking for majority, relying upon the earlier decisions of this Court including , H
230 SUPREME COURT REPORTS (1999] SUPP. I S.C.R.
A the Constitu:ion Bench judgment in the case of Ram Chandra Kai/ash Kumar
and Company and Others, (supra}, considered the very same contention as
canvassed by learned senior counsel Shri Shanti Bhushan, namely, that the
Market Act was meant to protect the agriculturists who produce basic
agricultural produce and was not meant to protect big producers having
B factories wherein they process the raw agricultural produce and manufacture
marketable commodity out of it. Repelling such narrow view of the regulatory
provisions of the Market Act, at para 35 of the report, the following pertinent
observations were made :
"The Legislature, it is also argued, 'could not have intended' to cover
C the produce turned out by producers like the petitioners.
Xxxxxxx xxxxxx xxxxxx.
While this is one of the objects of the Act, it is not the sole or only
object of the Act. The Act has many more objects and a much wider
perspective such as development of new market areas, efficient
D collection of data, and processing of arrivals in Mandis with a view
to enable the World Bank to give substantial economic assistance to
establish various markets In Uttar Pradesh;j as also protection of
consumers and even traders from being exploited in the matter of
quality, weight and price .. "
E In view of this settled legal position, therefore, it cannot be held that merely
because the tea leaves produced in tea gardens outside the State of Bihar are
processed by the appellant in its factories outside Bihar and are converted
into blended and branded qualities of packed tea like red label tea or green
label tea etc., and even though such packed tea is sold within Bihar Market
F areas, the Market Act cannot be applied to such sale transactions of
manufactured tea after importing it in the State of Bihar. The first point,
therefore, has to be rejected. That takes us to the second contention in
·support of the appeal.
POINT NO. 2:
G
1"I!e Tea Act of I 953 provides for control by the Union Government of
the .Tea Industry, including the control, in pursuan~e of the International
Agreement now in force, of the cultivation of tea in, and of the export of tea
from, India and for that purpose to establish a Tea Board and levy a duty of
excise on tea produced in India. It is necessary to have a bird's eye view of
H its relevant provisions; Section .4 deals with a board called~Tea Board'. The
I BELSUND SUGAR CO. LTD. v. STATE [S.B. MAJMUDAR, J.) 231
l members of the board not exceeding forty are to be appointed by the Central A
Government by notification in the official gazette and would consist of various
persons representing -
(a) owners of tea estate and gardens and growers of tea;
(b) persons employed in tea estates and gardens;
B
(c) manufacturers of tea;
(d) dealers including both exporters and internal traders of tea;
(e) consumers;
(f) Parliament; c
(g) the Government of the principle tea-growing States.
Amongst others, Section I 0 deals with the Functions of the Board - It
provides as under :
"(I) It shall be the duty of the Board to promote, by such measures D
as it thinks fit, the development under thf control of the Central
Government of the tea industry. ,
(2) Without prejudice to the generality of the provisions of sub-
section (1), the measures referred to therein may provide for -
• E
(a) regulating the production and extent of cultivation of tea;
(b) improving the quality of tea;
(c) promoting co-oPerative efforts among growers and manufacturers
of tea;
F
(d) undertaking, assisting or encouraging scientific, technological·
and economic research and maintaining or assisting in the
maintenance of demonstration farms and manufacturing stations;
(e) assisting in the control of insects and other pests and diseases
affecting tea; G
(f) regulating the sale and export of tea;
(g) training in tea testing and fixing grade standards of tea;
(h) increasing the consumption in India and elsewhere of tea and
carrying on propaganda for that purpose; H
232 SUPREME COURT REPORTS [1999] SUPP. 1 S.C.R.
A (i) 'registering and licensing of manufacturers, brokers, tea waste
dealers and persons engaged in the business of blending tea;
G) improving the marketing of tea in India and elsewhere;
(k) Xxxx. xxx xxxx"
B Section 12 deals with method of control of extension of tea cultivation.
Section 14 deals with grant of permission to plant tea.
Section 15 provides for grant of permission to plant tea in special
circumstances.
c
Owners of tea estate can establish tea nurseries as provided by Section
16.
Chapter IIIA deals with management or control of tea undertakings or
tea units by the Central Government in certain circumstances.
D
Section l 6E provides for power of the Central Government to take over
tea undertaking or tea unit without investigation under certain circumstances.
Chapter IV deals with control over the export of tea and tea seed .
....
E Section 30 in Chapter IV deals with power of the Central Government
to control price and distribution of tea or tea waste.
"Power to control price and distribution of tea or tea waste:--(1) The
Central Government may, by order notified in the Official Gazette, fix in respect
F of tea of any description specified therein : -
(a) the maximum price or the minimum price or the maximum and
minimum prices which may be charged by a grower of tea,
manufacturer or dealer, wholesale or retail, whether for the Indian
market or for export;
G (b) the maximum quantity which may in one transaction be sold to
any person."
Sub-section (3)·of Section 30 enables the Central Government by general or
special order to -
H "(a) prohibit the disposal of tea or tea waste except in such
BEL SUND SUGAR CO. LTD. v. ST ATE [S.B. MAJMUDAR, J.] 233
circumstances and under such conditions as may be specified in the A
order;
(b) direct any person growing, manufacturing or ho!ding in stock tea
or tea waste to sell the whole or a part of such tea or tea waste so
grown or manufactured during any specified period, or to sell the
whole or a part of the tea or tea waste so held in stock, to such person B
or class of persons and in such circumstances as m~y be specified in
the order."
Sub-section (4) of Section 30 reads as under :
"Where in pursuance of any order made with reference to clause (b) C
of sub-section (3), any person sells the whole or a part of any quantity
or tea or tea waste, there shall be paid to him as price therefor-
(a) where the price can be fixed by agreement consistently with the
order, if any, relating to the fixation of price issued under sub-section
(l ), the price so agreed upon; D
(b) Xxxxxxxxxx
(c) Xxxxxxxxx."
Section 32 deals with appeal to the Central Government.
E
Section 33 deals with licensing of brokers, tea manufacturers, etc.
Section 39 deals with penalty for illicit cultivation.
Section 40 deals with removal of tea planted without permission.
F
It is not in dispute between the parties that, as per the scheme of the
Tea Act, tea leaves which are plucked in tea gardens in different States of the
country, especially, in North-eastern State like Assam, West Cengal and other
States and which are roasted in tea factories are auctioned at Calcutta,
Guwahati, Siliguri and other notified places. It is also an admitted position that G
the appellant purchases roasted tea leaves at such auctions and then they
are blended and packed according to different brands and rates by the
appellant at its factories outside the Bihar State and then markets it throughout
India at fixed prices, local taxes varying from place to place.
The aforesaid provisions of the Tea Act which are enacted by the Union H
234 SUPREME COURT REPORTS (1999) SUPP. I S.C.R.
A Parliament under Entry 52 of List I read with Entry 33 of List III deal with the
control of tea industry in public interest. The basic feature of the Tea Act is
to provide for control of extension of tea cultivation in the areas where tea
leaves are grown in tea gardens. However, it is pertinent to note that the said
Act does not provide for regulating the sale of purchased roasted tea leaves
B after they are subjected to manufacturing process of blending and are brought
in the market for sale as packed tea. The place where such packed tea is to
be sold and the price at which it has to be sold are matters on which the Tea
Act, 1953 does not contain any statutory provisions. However, Shri Shanti
Bhushan, learned senior counsel for the appellant, strongly relied upon Section
30 of the Act. It is true, as seen earlier, that the said section found in Chapter
C VI deals with control by the Central Government and lays down the power
of the Central Government regarding control, price and distribution of tea or
tea waste. However, it is to be noted that till date no such control order has
been issued by the Central Government under the said provision. Learned
senior counsel submitted that once the Central Legislature has enacted the
aforesaid provision and evinced its intention to control price and distribution
D of tea or tea waste, the field gets occupied by legislation under Entry 33 of
the Concurrent List and to that extent the provisions of Market Act would
get excluded. It is not possible to accept this contention for the simple reason
that so long as the Central Government does not issue any order under
Section 30 of the Tea Act, the field dealing with fixation of maximum price or
E minimum price to be charged by a grower of tea, manufacturer or dealer,
wholesale or retail, for Indian market leaving aside the question of export,
;.
would not be occupied. In other words, it would remain open for the State
Legislature to cover that field by exercising its legislative power under Entry
33 of the Concurrent List. Even this aspect of the matter is also not res
integra. It is covered by a decision of the Constitution Bench of this Court
F in Ch. Tika Ramji & Others etc. v. The State of Uttar Pradesh & Others (1956
SCR 393). In that case, the Constitution Bench was concerned with the
question whether the U.P. Sugarcane (Regulation of Supply and Purchase)
Act, 1953 could be said to have been legally enacted by the Uttar Pradesh
State Legislature despite the operation of the l.D.R. Act which contained a
G declaration whereby sugarcane industry was sought to be regulated by the
l.D.R. Act. Section 18G of the Act referred to earlier whereunder there was
a possibility of the Central Government issuing appropriate control order to
occupy that field was held not to bar the legislative competence of the State
Legislature to enact appropriate provisions regarding the said industry. Such
a mere possibility of promulgation of order under Section I 8G of the l.D.R.
H Act was held not to have occupied the field whereby the State Legislature
BELSUND SUGAR CO. LTD. v. STATE [S.B. MAJMUDAR, J.] 235
could not enact appropriate statutory provisions by exercise of its legislative A
power under Entry 33 of List III.
Bhagwati, J., speaking for the Constitution Bench, placing reliance on
the observations of Sulaiman J., in the decision of the Federal Court in
Shyamakant Lal v. Rambhajan Singh, ( 1939) F.C.R. 188, 212 extracted, with
approval, the following passage from the said decision at page 427 of the · B
report as under :
"When the question is whether a Provincial legislation is repugnant
to an existing Indian law, the onus of showing its repugnancy and the
extent to which it is repugnant should be on the party attacking its
validity. There ought to be a presumption in favour of its validity, and C
every effort should be made to reconcile them and construe both so
as to avoid their being repugnant to each other; and care should be
taken to see whether the two do not really operate in different fields
without encroachment. Further, repugnancy must exist in fact, and
not depend merely on a possibility. Their Lordships can discover no D
adequate grounds for holding that there exists repugnancy between
the two laws in districts of the Province of Ontario where the
prohibitions of the Canadian Act are not and may never be in force:
(Attorney-Genera/for Ontario v. Attorney-Genera/for the Dominion)"
Thereafter the following pertinent observations were made by Bhagwati, J., E
speaking for the Constitution Bench :
"In the instant case, there is no question of any inconsistency in the
actual terms of the Acts enacted by Parliament and the impugned Act.
The only questions that arise are whether Parliament and the State
Legislature sought to exercise their powers over the same subject F
matter or whether the laws enacted by Parliar.1ent were intended to be
a complete exhaustive code or, in other words, expressly or impliedly
evinced an intention to cover the whole field."
and thereafter Section 18-G of the l.D.R. Act was considered and it was held
as under : G
"Even assuming that sugarcane was an article or class of articles
relatable to the sugar industry within the meaning of Section 18-G of
Act LXV of 1951, it is to be noted that no order was issued by the
Central Government in exercise of the powers vested in it under that
section and no question of repugnancy could ever arise because, as H
236 SUPREME COURT REPORTS [1999] SUPP. I S.C.R.
A he has noted above, repugnancy must exist in fact and not depend
merely on a possibility. The possibility of an order under Section 18-
G being issued by the Central Government would not be enough. The
existence of such an order would be the essential pre-requisite before
any repugnancy could ever arise."
B The aforesaid decision of the Constitution Bench, therefore, clearly
repels the submission of learned senior counsel Shri Shanti Bhushan that
merely because there is a possibility of issuance of a Control Order under
Section 30 of the Tea Act by the Central Government, the field is fully
occupied in connection with fixation of the maximum and minimum prices of
C packed tea to be charged by manufacturer or dealer, wholesale or retail or
regulating the maximum quantity of packed tea to be sold to any person. In
a later decision of the Bench of two learned judges to which one of us, Sujata
V. Manohar J., was a party, the very same view has been reiterated relying
upon the aforesaid decision in Ch. Tika Ramji & Others etc. v. The State of
Uttar Pradesh & Others, (supra). The latter decision is rendered in the case
D of SIEL Ltd and Others v. Union of India and Others, (supra), as noted
earlier.
It must, therefore, be held that mere possibility of issuance of any future
order under Section 30 (1) of the Tea Act by the Central Government, in the
absence of any existing express order to that effect, cannot be said to have
E occupied the field regarding purchase and sale of manufactured tea and
fixation of maximum or minimum price thereof, or the location of such sales.
these topics cannot be said to be legitimately covered by the Tea Act. Hence,
the field is wide open for the State Legislature to exercise its concurrent
legislative power under Entry 33 of List III for effectively dealing with these
F matters. This is precisely what has been done by the State Legislature by
enacting the Market Act. The insertion of item pertaining to Tea (leaf and
dust) in the Schedule, therefore, cannot be said to be an unauthorised exercise
on the part of the delegate of the State Legislature, namely, the State
Government which has exercised its power under Section 39 of the Market
Act.
G
Before parting with the discussion on the Tea Act, it is also necessary
to keep in view the history of tea industry in India.
It is apparent that the Tea Committee 1934, Indian Tea Control Act, 1938
and Cenfral Tea Board Act, 1949 had been made with a view to control export
H of tea and tea cultivation. The Tea Act, 1953 was enacted to provide for taking
BEL SUND SUGAR CO. LTD. v. ST ATE [S.B. MAJMUDAR, J.] 237
several functions of licensing and vesting it in the Board and to exercise ( 1) A
control over tea cultivation and (2) control over the export of tea and tea
seeds. The preamble of the Act states that it is· intended to provide for the
. control by the Union of the tea industry, including the control, in pursuance
of the International Agreement, of the cultivation of tea and export of tea.
Thus the objective of the Tea Act is focussed on tea cultivation/tea export
and establishment of tea manufacturing plants. It is quite different from that B
of the Market Act, 1960 made by the Bihar Legislature. The Tea Act has no
concern with the establishment of markets in the State ofBihar or other States
wherein packed tea could be sold in wholesale or retail markets so as to
ultimately reach the Indian consumers.
c
That takes us to the consideration of the Control Orders issued by the
Central Government in exercise of its power under Section 30, sub-sections
(3) and (5) thereof. One such order is the Tea (Distribution and Export) Control
Order, 1957 which pertains to licensing of the distribµtors and exporters of tea.
Clause 3 requires distributors carrying on the business of distributing tea to
have a licence under this order. The export of tea is not touched by the D
Market Act as it has nothing to do with the export of tea to other countries.
Clause 9 says that the licence given is personal and non-transferable. Clause
IO requires the licensee to pack and mark containers of tea in the manner
mentioned therein. The proviso is significant. According to it, Clause 10 (c)
does not apply to containers containing not more than 20 Kg. net or such E
other weight as to make it package tea for the purpose of the Central Excises
and Salt Act, 1944. Clause 11 provides that no distributor shall distribute tea
for sale which is not packed and marketed as per Clause 10 and which is
adulterated or which makes false claim for such tea. Thereafter, are noted
various statutory requirements. Firstly, the "distributor" contemplated by the
1957 Order is a distributor in the commercial sense who as principal or agent F
distributes tea to the wholesaler. Secondly, the distribution controlled is
linked with export. Thirdly, since distribution is clubbed with export, it can at
best be said to be distribution which is being made in similar bulk as exports.
Fourthly, Form A provides for granting of licence to carry on business in
manufactured tea as distributors at the places mentioned in the application. G
While Form B deals with licence to carry on business in manufactured tea as
distributor/exporter of tea.
It thus, becomes at once clear that this Control Order does not command
licencee to carry on distribution of tea for sale at any particular place/market.
The aforesaid Control Order has nothing to do with the establishment of H
238 SUPREME COURT REPORTS (1999] SUPP. l S.C.R.
A markets for selling packed tea.
The requirement of packing and marketing is again not contemplated by
the Market Act, 1960. Hence, it is difficult to appreciate how this Control
Order has occupied t.he field of regulation of sale and purchase of packed tea
in market areas.
B
The next Order on which Shri Shanti Bhushan, learned senior counsel
for the appellant, strongly relied was the Tea (Marketing) Control Order, 1984.
The said Order was promulgated by the Central Government in exercise of its
power under sub-sections (3) and (5) of Section 30 of the Tea Act, 1953. It
C pertains to licensing of the distributors and exporters.
A mere look at the said Order shows that it does not provide for any
regulation of sale and purchase of tea in the markets in different States in
India. Clause 3 requires registration of manufacturer of tea and such
manufacturer has to submit monthly return under Clause 5 in.Form C. Clauses
D 6 and 7 pertain to Organiser of Tea Auction and Broker in Tea Auction. Clause
14 declares that the licence is personal and non-transferable. These persons
are to maintain records as per Clause 16. Clause 17 directs the manufacturer
to sell not less than 75% or such higher percentage, as specified by the
Board, of tea manufactured by him in a year through public tea auctions in
India held under the control of organisers of tea auction. Clause 19 exempts
E tea marketed directly by the manufacturer as packet tea, instant tea, tea bags,
aromatic tea and green tea from computation of the total production under
para 17.
Firstly, 1984 Order deals with manufacturers and organisers of tea auction
and brokers of tea auction and its basic concern is to require them to have
F licences in the form of authority. It is obvious that even this Order cannot
advance the case of the appellant.
The next Order which was pressed in service was the Tea Warehouses
(Licensing) Order, 1989.
G
The said order was also promulgated by the Central Government in
exercise of the power conferred by sub-sections (3) and (5) of Section 30 of
the Tea Act, 1953. A mere look at the salient features of 1989 Order shows
that it has not covered the field tried to be occupied by the Market Act.
H The public tea auctions contemplated by 1984 Order are those which are
BELSUND SUGAR CO. LTD. v. STATE [S.B. MAJMUDAR, J.] 239
...,.._ held under Clause 3 of the Tea Warehouses (Licensing) Order, 1989. In fact A
Clause 14(7) prohibits the warehouse owner from entering into any transaction
with the manufacturer/broker/organiser of tea auction unless they have licences
under the 1984 Order. The public tea auctions are held in specified areas in
- Calcutta, Siliguri, Guwahati, Cochin, Coimbatore and Amritsar. Thus, the 1984
Order and the Tea Warehouses (Licensing) Order 1989 are basically concerned
with the public tea auctions and the licensing of manufacturer/broker/organiser
B
of public auction and warehouses with regard to holding of poblic tea auctions.
The warehouse is to be governed as per Clause 10(7) of the 1989 Order.
This Order does not apply to the storage godowns in the markets established
under the Market Act, 1960. But assuming it applies, the only effect would C
be that the storage places in markets should be in conformity with Clause
10(7). As far as obtaining of licence is concerned, it has to be obtained by
the warehouse owner who carries on the activities of storing, blending or
packing of tea in the warehouse. Once the manufacturer or trader takes space
from the Market Committee in the godown in the Market Yard, then he would
be the warehouse owner under Clause 2( 1) of the 1989 Order and would have D
to take a licence, as authority, from the Tea Board.
Both under the 1984 Order and 1989 Order, there ls no requirement to
carry on the business at any particular place/market. These Orders do not
concern themselves with establishment of market or fixing place of business.
E
The aforesaid Orders on which reliance was placed by learned senior
counsel Shri Shanti Bhushan indicate that the Central Government in its
wisdom did not think it fit to issue any Order under Section 30, sub-section
(1), clauses (a) & (b) and, therefore, kept the field wide open in connection
with the topics covered by the said provisions of Section 30 for the State F
Governments to exercise their legislative powers and enact suitable legislations
under Entry 33 of the Concurrent List III of the Seventh Schedule of the
Constitution.
Our attention was then invited by Shri Shanti Bhushan, learned senior
counsel for the appellant, to the Tea Waste (Control) Order, 1959. Even this G
order is issued by the Central Government under sub-sections (3) and (5) of
Section 30.
The Tea Waste (Control) Order, 1959 applies only to tea waste as
defined in Clause 2 (f). Thereunder a person selling/offering for sale/buying/
holding any stock in tea waste is required to have licence. (Clauses 3,4,5, and H
240 SUPREME COURT REPORTS [1999] SUPP. 1 S.C.R.
A 6). Clause 9 provides that licence is not transferable. Clause 13 provides that .~
licensee shall have in possession tea waste not exceeding that which may b,e
fixed by the licensing authority. Under Clause 19A false declaration is
prohibited.
I=
On a conjoint reading of the aforesaid statutory Orders issued under
B the Tea Act and the relevant scheme of the Tea Act, it becomes at once clear
that the provisions regarding fixation of appropriate price at which blended
and packed tea can be sold to wholesalers in any established market or
particular place at which sale transactions of such manufactured tea between
the manufacturers on the one hand and the traders or other wholesale
~
c producers/dealers on the other are outside the sweep either of the Tea Act
or of the relevant statutory Orders framed under Section 30 by the Central
Government under the very same Act. The places at which public auctions
can be held in connection with sale of roasted tea leaves to be purchased by
manufacturers like the appellant are the earmarked six places indicated in 1984 ~
and 1989 Orders. These auctions have nothing to do with the later sales of
D manufactured blended tea by such auction purchasers of tea leaves, who
manufacture packed tea by blending and packing roasted tea leaves in their
factories. The public auctions as contemplated by these Orders, therefore,
serve out their purpose once the manufacturers of blended tea, like the
appellants, purchase roasted tea leaves in public auctions. Once such
purchased tea leaves are further processed after blending and packed in
E
suitable receptacles for sale in local markets the stage is reached for regulating
such sale transactions by manufacturers of tea when they are subjected to
further auctions to be held in the market areas wherein the licensed distributors ..,
and manufacturers of tea can be subjected to the procedure of Section 15,
sub-section (2) of the Market Act. So far as these later transactions are
F concerned, neither the Tea Act nor any of the aforesaid Orders can hold the
field. Such sale transactions of manufactured tea in packed condition will,
therefore, necessarily have to be governed by the provisions of the Market
Act applicable to the area wherein such sale transactions in favour of
wholesalers or retailers are effected by the stockists of the appellant operating
in the market areas concerned. It is also pertinent to note that Section 15 of
G the Market Act gets attracted to such transactions of sale. It is not possible
to agree with the contention of learned senior counsel Shri Shanti Bhushan \._
that once the retail prices are fixed by the appellant there is no necessity of
auctioning this tea in packed condition as per Section 15 sub-section 2 of the
Market Act. It has to be kept in view that under the relevant Orders issued
H by the Central Government under Section 30 of the Tea Act, as noted earlier,
<.-
BELSUND SUGAR CO... LT.Q. v.• STATE [S.B. MAJMUDAR, J.] 241
the purchasers of tea have also to be licensed. Such licensed purchasers can A
bid at the auctions to be held as per Section 15, sub-section (2) of the Market
Act for purchasing such packed tea. At that stage, there is no inconsistency
.. or conflict between the earlier public auction held under the relevant statutory
Orders issued under Section 30 of the Tea Act concerning roasted tea leaves
and the auction of packed and processed tea by the appellant selling such
B
-·· commodities in the market areas through their stockists to wholesale dealers
and traders operating in the market area and the market yard or sub-market
yards concerned.
In this connection, we may note one other submission of learned senior
counsel Shri Shanti Bhushan for the appellant. He submitted that for almost C
16 years tea was not a scheduled item governed by the Market Act. In fact,
the Bihar Legislature did not think it fit to include Tea (leaf and dust) as a
scheduled item from the inception but it is only the delegate, namely, the State
of Bihar in exercise of its power under Section 39 thought it fit to introduce
Tea (leaf and dust) as a scheduled item. The procedure of Sections 3 and 4
has not to be followed while undertaking this exercise. In this connection, it D
was submitted that no reasonable person could have undertaken such an
exercise as tea was already a controlled commodity under the Tea Act and
also governed by the relevant Orders issued thereunder.
As we have seen earlier, under the relevant provisions of the Tea Act E
and the operative Orders promulgated thereunder the Central Government has
left untouched the field of regulation of prices and the location of market
places where such packed tea could be sold to the wholesale dealers or even
to the retailers. When that field was wide open, the State Government in its
wisdom, could legitimately try to cover the field by issuing appropriate Orders
under Section 39 of the Act. It cannot be said, therefore, that such an exercise F
was totally ultra vires or amounted to non-application of mind. In fact, what
the Central Government should have done and did not do by issuing
appropriate Orders under Section 30, subsection (1) Clauses (a) & (b) of the
Tea Act could legitimately be done by the State Government. It was not
required to wait indefinitely till the Central Government could find time to G
issue such an Order. Shri Shanti Bhushan, in this connection, further submitted
that if that is so, then if in future the Central Government wakes up and issues
such an Order, would the then existing Entry in the Schedule regarding tea
get superseded or become inoperative ? This is a hypothetical question raised
which does not require any answer obviously at this stage. As and when in
future such an eventuality occurs, then the question of continuation of H
242 ·SUPREME COURT REPORTS (1999) SUPP. I S.C.R.
A regulation of sale and purchase transactions of Tea (leaf and dust) by retaining
this item in the. Schedule may have to be examined. But as the statutory
provisions stand at present, in the absence of any such existing Order under
Section 30 sub-section (1) Clauses (a) & (b) by the Central Government, the
field remains wide open and at least it was definitely open when the State
Government introduced the Entry of ·Tea (leaf and dust) in the Schedule to
B the Market Act in 1976. This exercise, by no stretch of imagination, could be
said to be unauthorised, illegal.or amounting to non-application of mind. The
second contention, therefore, is answered .in negative against the appellant
and in favour of the respondent. That. takes us to the consideration of
contention no. 3 .
c
POINT NO. 3:
· Once it is held that the Market Act covers the transactions of sale of
packed blended tea in sealed packets and receptacles by the appellant's
· stockist in the market areas concerned especially when these transactions
D take placft in the market yard or sub-market yards as laid down by Section
15 of the Act which remains fully operative to cover such transactions, there
is no escape from the conclusion that the entire infrastructural facilities for
regulation of such sale transactions as made available by the market committee
concerned would enure for the benefit of sellers of such packed blended tea.
E
It is also pertinent to note that so far as the appellant is concerned, all
that is required of it is to take licence for selling packed tea in market yards,
sub-market yards from the market committee concerned. The appellant is not
required to bear the burden of any market fee. As per Section 27 of the Act,
the burden of market fee is to be borne by the purchasers of such packed L
F tea, namely, the wholesale dealers licensed to purchase such tea as per the .I
)
Central Orders mentioned earlier. Such purchasers have not brought in
challenge levy of market fee on them. So far as the appellant is concerned,
once its stockist sells the packed tea in the market yard or sub-market yards
maintained by the market committee, the entire infrastructural facilities made
G available by the market committee to all the purchasers and sellers of
agricultural produce in the market yard, would automatically become available
to the appellant's stockist who sells its goods, namely, packed tea in the
m~rket yard or sub-market yards concerned.
In this connection, it has also· to be kept in view that establishment of ;
H markets and maintenance thereof is a topic of legislation squarely covered by "''
.
BELSUND SUGAR,_CO. LTD. v. STATE [S.B. MAJMUDAR, J.) 243
Entry 28 of List II of the Seventh Schedule. For maintaining such markets, the A
market committees obviously have to spend large amounts for providing
necessary infrastructure for the benefit of those who use such established
markets. In this connection, Section 30 of the Market Act, as noted earlier,
becomes relevant for our consideration. Amongst others, the Market Committee
Fund has to be utilised under Section 30 for the following purposes :
B
"(i) the acquisition of a site or site for the market;
(ii) the maintenance and improvement of the market;
(iii) the provision and maintenance of standard weights;
(iv) the construction and repair of buildings [check posts, market C
gates and other fixtures] necessary for the purpose of such
market and for the health, convenience and safety of the persons
using it;
(v) Xxxxxxxxxx
(vi) X:Xxxxxxxxx D
(vii) Xxxxxxxxxx
(viii) The construction, repair and maintenance of means of
communication which are useful for the purposes of [regulation,
control and] development of a market or for the convenience and E
safety of the persons using it;
(viii-a) link roads connecting the main road from the villages in the
Market Area of the concerned market committee shall be
constructed on priority basis from the Development Fund to
facilitate the farmers to go to and from the villages;]
(ix) the planting and rearing of trees, and making arrangements for
providing to the persons and cattle coming to a market and like
purposes;
(x) Xxxxxx xxxxx xxxxx
G
(XI) Xxxxx XXXX XXXXX
(xiO Xxxxx xxxx xxxx"
All these provisions clearly indicate that once the transaction of sale or
purchase of any agricultural produce is governed by the Act and once
Section 15 of the Act applies to such transaction, the entire machinery of the H
244 SUPREME COURT REPORTS [1999] SUPP. I S.C.R.
A Act would get attracted to regulate such transaction and the complete
infrastructure for which provisions are made by the market committee including
the facilities available at such markets would become available to the purchasers
and sellers of such commodities in the market. For providing these
infrastructural facilities the market committee has to spend from its funds.
This would supply adequate quid pro quo for levying market fee on the
B buyers of commodities sold at its market yard or sub-market yard. It is,
therefore, not possible to agree with the learned senior counsel for the
appellant that there is no quid pro quo underlying transactions of sale of
packed tea by the appellant's stockist in the market yard or sub-market yards
maintained by the market committee concerned. The third contention, therefore,
C is to be answered in affirmative against the appellant and in favour of the
respondent.
Before parting with this appeal, it is necessary to briefly deal with the'
written submissions furnished in support of the appeal by learned counsel
after arguments were over and which have already been dealt with by us in
D detail hereinabove.
So far as the written submissions filed by the appellant on gm May, 1999
are concerned, we may state that to the extent they tried to re-iterate what
was submitted earlier and considered by us, will stand repelled in the light
E of the detailed reasons recorded by us earlier in this connection. Processing
of packed tea manufactured out of tea leaves purchased by the appellant in
the auction at six places obviously is not covered by the applicability of the
Market Act in the present case. All that the M~rket Act seeks to cover is the
sale transactions pertaining to packed tea branded and marked in accordance
with the regulations made by the Tea Board to the extent these sealed packets
F are sold by the appellant within the market area. These transactions of sale
of packed tea, as discussed by us earlier, would squarely attract the applicability
of the Market Act as they take place within the market area governed by the
Market Act. As seen earlier, manufacturing activities concerning this packed
tea h~s no relevance for arriving at an appropriate answer to this question.
G
Contention raised ·in para 2 of the written submissions is also besides
the point, whether other States levy market fee or not is not at all relevant.
The Bihar legislation may be a pioneer in this field. The short question is
whether the Market Act can govern the transaction of sale of packed
manufactured tea by the appellant within the market areas in the State of
H Bihar? So far as this question is concerned, the aforesaid contention can be
BEL SUND SUGAR CO. LTD. v. STATE [S.B. MAJMUDAR, J.] 245
of no assistance to the appellant. A
Contention in para 3 of the written submissions about the basic object
of the Bihar Market Act and whether it should ensure only the protection to
the grower of the agricultural produce within the market area stands repelled
by a Constitution Bench Judgment of this Court to which a detailed reference
has been made in the earlier part of this judgment. B
Para 4 of the written submissions deals with various statutory provisions
of the Tea Act of 1953 and the relevant Control Orders thereunder. As
discussed earlier, the schemes of the Tea Act and the Control Orders do not
cover the field carved out by the Market Act for bringing within its sweep
transactions of sale of agriculture produce encompassed by the wider definition C
thereof under that Act insofar as such produce is sold within the market area
to which the Market Act applies.
It is difficult to appreciate the contention in para 8 of the written
submissions to the effect that the State had not applied its mind in bringing D
tea within the sweep of the Market Act in exercise of its power under Section
39 of the Act. As discussed earlier, this contention is devoid of any substance.
Contention in para 9 of the written submissions is also devoid of any
merit. It is not the case of the appellant that the sale of manufactured tea in
Bihar markets within the market area of the concerned market committee E
requires the appellant to bear the burden of the market fee. It is obvious, as
seen earlier, that charge of market fee is on the buyer of branded tea and not
on the seller thereof, like the appellant. The purchas~rs of branded market tea
manufactured by the appellant who purchase the said produce in market areas
governed by the Market Act have made no grievance in this connection.
Even otherwise, as seen earlier, once the wide definition of "agricultural F
produce" as found in the Market Act governs such sale transactions and
when Section 15 of the Act covers such transactions, the charge under
Section 27 would obviously get settled on these transactions. As a logical
corollary thereof, even if the appellant may have tb act as a collecting agent
for the market committee concerned as per its legal obligation in given G
circumstances, that by itself cannot exonerate it, once the statutory scheme
of the Act covers transactions of sale of branded tea carried out by the
appellant in the market area governed by the Market Act.
Contentions found in para I 0 of the written submissions are to be
stated to be rejected. Once the sale transactions of packed tea are governed H
246 SUPREME COURT REPORTS [1999] SUPP. I S.C.R.
A by the sweep of the Market Act, and once such sale transactions have to be
regulated as per the machinery of the Market Act, on the applicability of
Section 15 of the Act, the entire infrastructure available for regulating such
sale transactions at the market yard or sub-market yards whose benefit would
obviously be available to the appellant cannot entitle the appellant to contend
B that its fundamental right under Article 'I 9( I )(g) of the Constitution is violated.
To say the least, it would be a reasonable restriction on exercise of such a
right. It is pertinent to note that the appellant has not challenged the vires
of Section 27 of the Market Act. It is difficult to appreciate the submission
that compelling the sealed and packed tea to be brought into the market yard
and to be auctioned thereof cannot be considered to advance the public
c interest in any manner. Public interest obviously gets advanced as the sale
transactions will get regulated by the infrastructural machinery at the market
yard and sub-market yards concerned, where such transactions take place.
The contention that the Bihar Act would be unconstitutional cannot be
countenanced for twin reasons. Firstly, such a contention was not canvassed "
D either before the High Court or before this Court in the present proceedings.
Secondly, in any case, on the applicability of the Act once the transaction
of sale of packed tea takes place in the market area, it cannot but be said to
be imposing reasonable restriction under Article 19 sub-article (6) on the
appellant's fundamental right. The appellant, as a seller of manufactured tea,
E has not to bear any burden of the imposed market fee on sale transactions.
All that it gets is the benefit of the infrastructural facilities made available by
the market committee for regulating such transactions and if the appellant is
likely to get more price fm its branded tea by subjecting its sale transactions
to auction, the said provision instead of adversely affecting the appellant
would, on the contrary, be more beneficial to it. Maybe, the appellant from
F commercial point of view may not like to charge higher price for the packed
tea from its customers but that does not mean that the infrastructural facilities
made available by the market committees to the appellant to get more price
of its branded tea if so desired by it can be construed in any way to be
adversely affecting its commercial business interests. For obvious reasons,
G therefore, none of the contentions found in the written submissions can
advance the case of the appellant's and they necessarily have to stand
repelled.
These were the only contentions canvassed by learned senior counsel
in support of the appeal and as they fail, the inevitable result is that this
H appeal fails and will be liable to be dismissed. .~
I
BELSUND SUGAR CO. LTD. v. STATE [S .. B. MAJMUDAR, J.] 247
FINAL ORDER: A
As a net result of the aforesaid discussion, therefore, the following
orders are passed :
1. SUGAR GROUP MATTERS:
B
These appeals, namely, Civil Appeal Nos. 398 and 399/1977, 234/1995,
8163/1994, 7432/1994, 2632-33/1982, 1282/1995 are allowed. The judgments and
orders passed by the High Court impugned in these appeals are set aside. The
Writ Petition No. 1250/1986 filed by the petitioner will stand allowed accordingly
as detailed in this judgment subject to the riders mentioned hereinabove.
c
Civil Appeal Nos.4500-05 of 1992, so far as they seek to challenge the
levy of m.arket fee on sugar are concerned, will stand allowed. The respective
six petitions filed before the High Court dealing with levy of market fee on
sugar will stand allowed.
Civil Appeal arising out ofS.L.P. (C) No.9684of1992 will stand allowed D
to the extent Civil Writ Petition No.5974 of 1988 filed b.efore the High Court
deals with the contention regarding market fee on sugar. Instead of the relief
granted by the High Court limiting to the non-levy of market fee on sugar after
2.5.1977, it is directed that levy of market fee on sugar for the entire period
covered by the writ petition will be treated to be unauthorised. E
·This judgment will have only prospective operation and will not affect
past transactions entered into prior to the date of this judgment.
. 2. WHEAT PRODUCTS LIKE ATTA, MAIDA, SUJJ, ETC.
These appeals, namely, Civil Appeal Nos. 2951, 2952 and 2953of1992, F
350~ & 3506 of 1992 and 82911993 are dismissed.
3. VEGETABLE OIL MATTERS:
Civil Appeal No.1427 of 1979 is dismissed.
G
Civil Appeal Nos.4500-05of1992, so far as they deal with levy of market
fee on Vanaspati Oil are concerned, will stand dismissed and the High Court's
decision in all six writ petitions pertaining to levy of market fee on edible oil
shall remain confirmed.
Civil Appeal arising out of S.L.P. (C) No.9684 of 1992, so far it challenges H
248 SUPREME COURT REPORTS (1999) SUPP. l S.C.R.
A the levy of market fee on edible oil is concerned, stands dismissed. The order
of the High Court in C.W.J.C. No.5974of1984 concerning the vegetable oil
is .confirmed and the writ petition to that extent will stand dismissed.
4. RICE MILLING INDUSTRY:
B These Civil Appeals arising out of SLP (C) Nos.3159-60 of 1994 are.
dismissed.
5. MILK AND MILK PRODUCTS
This Civil appeal No.1880 of 1988 is allowed. The judgment and order
C of the High Court are set aside. However, the past transactions will not be
reopened and this judgment will have only prospective effect governing
future transactions that are to be entered into after the date of this judgment.
6. TEA MA ITER
D This Civil Appeal No.2532of1980 is dismissed.
In the facts and circumstances of the case, there will be no order as to
costs in all these appeals.
RP. Appeals allowed/dismissed
and Petition allowed.
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