Gokuldas Khimji vs State of Kerala and others

K.K. Mathew, J.—The petitioner is engaged in the business of buying and selling of coconuts and copra in Cannanore, a notified area under the Madras Commercial Crops Markets Act 1933 (hereinafter called the Act). Under the Act trading in commercial crops in a notified area can be carried on only under a licence issued by the Market Committee. The Government is bound to establish a market committee for every notified area and it shall be the duty of the Market committee to enforce the provisions of the Act and the Rules and Byelaws made thereunder. The petitioner contends that the Government have not constituted the market committee after 1959, that the functions of the market committee are being performed by the Collector, that this is illegal, that the provision of sec. 11 imposing a fee upon the sales and purchases of commercial crops in the notified area is bad and that the provisions of the Act violate the freedom of trade and commerce guaranteed under article 301.

u/s 6A of the Act, the Collector is entitled to carry on the functions of the Market committee until a new market committee is constituted. So there is nothing illegal in the Collector performing the functions of the Market committee until a new Market Committee is constituted. So the first contention fails.

The next contention of the petitioner was that the provisions of the Act providing for taking out licence for trading in commercial crops in the notified area and the levy of fee under sec. 11 of the Act violate the freedom of trade and commerce guaranteed under article 301 of the Constitution. The object for which the Act was enacted is clear from the preamble. The preamble reads: An Act to provide for the better regulation of buying and selling of commercial crops and the establishment of markets for commercial crops in the Presidency of Madras.

In G. Venkata Ramaiah and Another Vs. State of Andhra Pradesh and Others, it was held that the provisions of the Madras commercial Crops Markets Act 1933, do not violate the freedom of trade and commerce guaranteed under article 301. In T.M. Kannappa Mudaliar and Others Vs. The State of Madras and Another, it has been held that the provisions of the Madras Agricultural Produce Markets Act 1959, which repealed the 1933 Act, are not violative of the freedom of trade guaranteed by article 301. I think, the provisions impugned only regulate trade and commerce. They do not impose any restrictions which would affect the freedom of trade and commerce guaranteed by article 301.

The next contention is that the fee imposed u/s 11 of the Act is bad. Counsel for the petitioner said that no market committee was constituted, that no market has been established, that no services are being rendered, and therefore the fee is unsupported by quid pro quo, and is bad. In Mohammad Hussain Gulam Mohammad and Another Vs. The State of Bombay and Another, the Supreme Court had occasion to go into the question whether the fee imposed by section 11 of the Bombay Agricultural Produce Market Act 1939, identical in terms with section 11 of the Act, is valid. In paragraph 7, the Supreme Court observed: Section 11 gives power to the Market Committee subject to the provisions of the rules and subject to such maxima as may be prescribed to levy fees on the Agricultural produce bought and sold by licencees in the market area, it is said that the fee provided by section 11 is in the nature of sales tax. Now there is no doubt that the market committee which is authorised to levy this fee renders services to the licencees, particularly when the market is established. Under the circumstances, it cannot be held that the fee charged for services rendered by the Market Committee in connection with the enforcement of the various provisions of the act and the provisions of the various facilities in the various markets established by it, is in the nature of sales tax. It is true that the fee is calculated on the amount of produce bought and sold but that in our opinion is only a method of realising fees for the facilities provided by the committee. The attack on section 11 must therefore fail. Besides this however, it is also contended that rule 53 and 54 which provide for levying of fees under sec. 11 are ultra vires, as they do not conform to section 11 of the Act. It will be noticed that section 11 provides for levy of fees to be fixed by the Market committee subject to such maxima as may be prescribed by the rules and this fee is to be charged on the agricultural produce bought and sold.

In Lakhan Lal and Others etc. Vs. The State of Bihar and Others etc., construing the corresponding provision of the Bihar Agricultural Produce Markets Act 1960, the Supreme Court said:

Counsel next submitted that the Market committee has not established any market. According to Counsel, a market must be a well defined site with market equipment and facilities. The argument overlooks the definition of market in section 2(h). The market consists of market proper and the market yards. The market yards are well defined enclosures, buildings or localities but the market proper is under 6.2 (k) read with section 5(2)(ii) a large area. For establishing a market, it is sufficient to make a declaration u/s 5(2) fixing the boundaries of the market proper and market yards on the recommendation of the market committee made under rule 59(2). u/s 18(1) the market committee must provide for such facilities in the market as the State Government may from time to time direct. It is not shown that the market committee refused to carry out any direction of the Government. The market committee may in view of ss. 28 (2) and 30 (1) acquire and own lands and buildings for the market, but it is not always obliged to do so. The market is established on the issue of a notification u/s 5(2) declaring the market proper and the market yards. The next contention is that the fees levied by the market committee are in the nature of taxes as the committee does not render any services to the users of the market and the levy of fees is therefore illegal. This contention is not tenable. The market committee has taken steps for the establishment of a market where buyers and sellers meet and sales and purchases of agricultural produce take place at fair prices. Unhealthy market practices are eliminated, market charges are defined and improper ones are prohibited. Correct weighment is ensured by employment of licensed weighment and by inspection of scales, weights and measures and weighing and measuring instruments. The market committee has appointed a dispute sub committee for quick settlement of disputes. It has set up a market intelligence unit for collecting and publishing the daily prices and information regarding the stock, arrivals and despatches of agricultural produce. It has provided a grading unit where the technique of grading agricultural produce is taught. The contract form for purchase and sale is standardised. The provisions of the Act and the rules are enforced through inspectors and other staff appointed by the market committee. The fees charged by the Market Committee are correlated to the expenses incurred by it for rendering these services. The market fee of 25 naya paise per Rs. 100 worth of agricultural produce and the licence fees prescribed by Rule 71 and 73 are not excessive. The fees collected by the market committee form part of the market committee fund which is set apart and earmarked for the purposes of the Act. 1. There is sufficient quid pro quo for the levies and they satisfy the test of ''fee'' as laid down in The Commissioner, Hindu Religious Endowments, Madras Vs. Sri Lakshmindra Thirtha Swamiar of Sri Shirur Mutt.,

In Thakur Prasad Gupta and Others Vs. State of Bihar and Another, the question was considered by the Patna High Court on the basis of the corresponding provision of the Bihar Agricultural Produce Markets Act 1960. This is what Ramaswamy J., said.

On behalf of the petitioners it was submitted in the next place that the market has been established by the Market committee u/s 18(ii) of the Act and so the Market has no power to levy or collect market fees on agricultural produce u/s 27 of the Act. In paragraph 10 of the application it is also alleged by the petitioners that no facilities have been provided by the Market Committee; but in paragraph 10 of the counter affidavit respondent No.1 has said that the Market committee has taken steps to safeguard the interest of the agriculturists. The Market committee has appointed a number of staff who are always present in the market to see that the lots the cultivators are properly weighed, that payments are made quickly by the purchasers and that the ruling prices are prominently displayed in the market area. A grading unit has also been set up to educate the cultivator in the method of grading and improving the quality of agricultural produce offered for sale. A dispute sub committee has also been formed to decide disputes arising in the market between a purchaser and seller. Reference was also made in this connection to rule 61 of the Bihar Agrl. Produce Markets Rules which states as follows:

It was argued on behalf of the petitioners that a market committee cannot lawfully levy and collect market fees unless a market has been established u/s 18(ii) of the Act. But I see no warrant for accepting this argument. Section 27 of the Act empowers the market committee to ''levy and collect market fees on the agricultural produce bought in the market area''. Rule 61 provides that the market committee shall levy and collect fees on the agricultural produce bought in the market area at the rate of 25 naye paise per Rs. 100 worth of agricultural produce. There is nothing in the language of section 27 of the Act or rule 61 to suggest that the market committee cannot lawfully levy or collect market fees unless a market has been established in the first instance. I, therefore, reject the submission of learned counsel for the petitioners on this aspect of the case. It was also argued on behalf of the petitioners that section 27 empowered the market committee to levy and collect market fees on all agricultural produce bought in the market area and not merely on the agricultural produce specified in the notification u/s 4 of the Act.

In Garimell Satyanarayana and Appana Venkataraju firm of Ambajipeta and Others Vs. East Godavari Coconut and Tobacco Market Committee, Rajamundry and Others, Satyanarayana Raju J., considered the question of the legality of the levy of fee u/s 11 of the Act and held that the fee is validly leviable as it is supported by quid pro quo. This court has considered the question in O.P. No. 1339 of 1964, and the conclusion reached there is that the fee leviable u/s 11 is supported by quid pro quo. The petitioner had filed a writ petition as O.P. No. 2179 of 1966 raising this question also and it would appear that was withdrawn by the petitioner for the reason that the points raised in that petition were covered by the decision in O. P. No. 1339 of 1964. I see no merit in the contention of the petitioner. I overrule it.

The writ petition is dismissed. No costs.