Full Judgment Text
REPORTAB
LE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICITON
CIVIL APPEAL NO. 8690 OF 2001
Krishi Utpadan Mandi Samiti Ghaziabad …Appellant
and Anr.
Versus
M/s. Metal Craft & Ors. …Respondents
JUDGMENT
Dr. ARIJIT PASAYAT, J.
1. Challenge in this appeal is to the judgment of a Division
Bench of the Allahabad High Court holding that the appellant
was not entitled to levy market fee under Section 17(iii) (b) of the
U.P. Krishi Utpadan Mandi Adhiniyam, 1964 (in short the
‘Adhiniyam’) if the agricultural produce is neither brought nor
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taken out of the market place, and deciding in favour of
respondent no.1.
2. Background facts in a nutshell are as follows:
Respondent is a registered partnership firm having its
business premises and office at 14, Navyug Market, Ghaziabad,
and it carried on the business of sale and purchase of iron and
steel and also export of rice. It wanted to purchase broken rice
from the rice millers of U.P. for the purpose of export to foreign
countries and accordingly, made an application on July 31,
1997, to Krishi Utpadan Mandi Samiti, Ghaziabad, for grant of a
licence. It was also stated in the application that the respondent
had exported rice in November, 1996 by purchasing it from
places outside U.P. Appellant No.1 asked the respondent no.1
to deposit the licence fees for the years 1995-96, 1996-97 and
1997-98, which was done as per the demand. Thereafter, the
appellant no.1 sent a demand notice to the respondent no.1 on
October 12, 1997, demanding market fee at the rate of 2 percent
amounting to Rs.12,94,860.00. The respondent no.1 sent a
reply on October 18, 1997, stating that it had never purchased
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any rice from inside the State of U.P. nor any transaction of sale
or purchase of rice was carried out within the State, It was
accordingly requested that the demand notice/order dated
October 12, 1997, be rescinded. The appellant no.1, however,
initiated proceeding for recovery of the amount in question and
issued a citation dated December 6, 1997. The respondent no.1
thereafter, filed C.M. Writ Petition No, 43329 of 1997 in the High
Court which was disposed of on December 17, 1997, with a
direction to appellant no.1 to decide the respondent no.1’s
representation within a month and the recovery proceeding were
suspended for six months. The respondent no.1 appeared before
appellant no.1 on the date fixed, namely January 14, 1998,
along with the relevant records and submitted that the rice had
been purchased from places outside the State of U.P. and had
been sent directly to the ports for being exported to South Africa
and as such, it was not liable to pay any market fee. The
appellant passed an order on January 25 , 1998, holding that the
transaction of sale of the rice exported by the respondent no.1
firm took place within the market area of Ghaziabad, and,
accordingly, the market fee imposed by the order dated October
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12, 1997 was valid and proper. Feeling aggrieved, the respondent
no.1 preferred a revision under Section 32 of the Act before the
Rajya Krishi Utpadan Mandi Parishad, Lucknow (appellant no.2)
which was dismissed by order dated March 9, 1998. The writ
petition under Article 226 of the Constitution of India, 1950 (in
short the ‘Constitution’) was filed for quashing the orders dated
October 12, 1997 passed by appellant no.1 and the order dated
March 9, 1998 passed by appellant no.2. The learned Single
Judge, who heard the petition, was of the opinion that the con-
troversy raised involved a substantial question of law of general
importance and made a reference to larger Bench. That is how
the matter came before the Division Bench.
The case of the respondent no.1 was that the rice was
exported by it because certain dealers in South Africa wanted to
buy rice from India. The respondent no.1 quoted the rates and
entered into negotiations. After the deal was settled, the rice was
purchased from rice millers in Haryana, Punjab, Madhya
Pradesh from where it was directly dispatched to the ports of
Mumbai and Kandla and clearing and forwarding agents of the
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respondent no.1 loaded the same on the ship. After the goods
had been loaded a Bill of Lading was prepared and signed by the
Master of the ship in the capacity of carrier acknowledging the
receipt of the goods. The Bill of Lading was given to the clearing
and forwarding agents and on receipt of the Bill of Lading by the
buyer through the respondent no.1’s bankers, the rice were
retired by the buyer in South Africa. The sale price of the rice
was received by the respondent no.1 through its banker viz.
Oriental Bank of Commerce at Delhi. It is the specific case of the
respondent no.1 was that the entire quantity of the exported rice
was purchased from places outside the State of U.P. and was
directly sent to the ports without it ever coming within the
market area of Ghaziabad or in the State of U.P. It was also
asserted that the sale was affected only at the ports when the
goods were loaded in the ship and the Bill of Lading was handed
over to the respondent no.1’s clearing and forwarding agents.
The case of the present appellants was that the business
establishment of the respondent is at 14, Navyug Market
Ghaziabad and the entire transaction was done from the said
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place. The purchase order was received and accepted by it at
Ghaziabad and the sale price was also received there and
therefore the transaction of sale took place in Ghaziabad. It was
also pleaded that the transport of the goods and how it was
actually exported was wholly irrelevant for ascertaining where
the transaction of sale took place.
The High court did not accept the said stand and allowed
the writ petition filed.
3. In support of the appeal, learned counsel for the appellants
submitted that since the transaction took place within the
jurisdiction of the market area, the levy was justified and the
High Court was wrong in its view.
4. Learned counsel for the respondent no.1 on the other hand
supported the judgment of the High Court.
5. It is to be noted that before the High Court the learned
counsel for the appellant no.1 had fairly admitted that rice
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exported by the appellant was never brought within the market
area of Mandi Parishad, Ghaziabad within the state of U.P.
6. Section 17(iii)(b) is the charging section which reads as
follows:
“17. Powers of the Committee-A Committee shall,
for the purposes of this Act, have the power to –
(i)………………..
(ii)……………….
(iii) levy and collect:
(a) such fees as may be prescribed for
the issue or renewal of licences,
and
(b) market fee, which shall be payable
on transactions of sale of specified
agricultural produce in the market
area at such rates being not less
than one percentum and not more
than two percentum of the price of
the agricultural produce so sold as
the State Government may specify
by notification,, and such fee shall
be realised in the following manner
-
(1) if the produce is sold through
a commission agent may realise
the market fee from the purchaser
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and shall be liable to pay the same
to the Committee;
(2) if the produce is purchased
directly by a trader from a
producer the trader shall be liable
to pay the market fee to the
Committee;
(3) if the produce is purchased by a
trader for another trader, the trader
selling the produce may realise it from
the purchaser and shall be liable to pay
the market fee to the Committee : and
(4) in any other case of sale of such
produce, the purchaser shall be liable to
pay the market fee to the Committees :
Provided that no market fee shall be
levied or collected on the retail sale of any
specified agricultural produce where such sale
is made to the consumer for his domestic
consumption only.”
7. The object for which the Act was enacted is as follows:
“(i) to reduce the multiple trade charges, levies and
exactions charged at present from the produce-
sellers;
(ii) to provide for the verification of accurate weight
and scales and see that the producer-seller is not
denied his legitimate due;
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(iii) to establish market committees in which the
agricultural producer will have his due
representation;
(iv) to ensure that the agricultural producer has his
say in the utilization of market funds for the
improvement of the market as a whole;
(v) to provide for fair settlement of disputes relating
to the sale of agricultural produce.
(vi) to provide amenities to the producer-seller in the
market;
(vii) to arrange for better storage facilites;
(vii) to stop inequitable and unauthorized charges
and levies from the producer-seller; and
(viii) to make adequate arrangements for market
intelligence with a view to posting the
agricultural producer with the latest position in
respect of the markets dealing with his produce.”
As the prefatory note and preamble clearly show the object of the
Act is to save the agricultural producer from innumerable
charges, levies etc. and to enable them to have a say in the
proper utilization of amounts paid by him to reduce multiple
charges levies, exactions charged from the producer and seller
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and generally to help the agricultural producer to sell his
produce to his best advantage.
8. At the end of the Section there is an explanation which
reads as follows:
“Explanation – For the purpose of clause
(iii), unless the contrary is proved, any
specified agricultural produce taken out or
proposed to be taken out of market area by or
on behalf of a licensed trader shall be
presumed to have been sold within such area
and in such case the price of such produce
presumed to be sold shall be deemed to be
such reasonable price as may be ascertained
in the manner prescribed.”
In exercise of the powers conferred by Section 40, Rules have
been framed, which are known as U.P. Krishi Utpadan Mandi
Niyamavali, 1965 (hereinafter referred to as the ‘Niyamavali’) and
Rules 66 and 68 reads as follows:
"(66) Market Fee (Section 17 (iii)- The Market
Committee shall levy and collect market fee in
the Market Area in accordance with the
provisions of sub-clause (b) of clause (iii) of
Section 17 of the Act at such rate as may be
specified in the bye-laws:
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Provided that no market fee shall be levied
and charged prior to the date on which
provisions, Section 10 of the Act are enforced :
Provided further that when the specified
agricultural produce is presumed to have been
sold in accordance with the explanation given
under clause (viii) of Section 17 of the Uttar
Pradesh Krishi Utpadan Mandi Adhiniyam,
1964 the price of such produce shall be the
price prevailed for that type of produce in that
market just on the previous working day.
(68) No market fee shall be levied more than
once on any consignment of the specified
agricultural produce brought for sale in the
Market Yard if the market fee has already been
paid on it in any Market Yard of the same
Market Area and in respect of which a
declaration has been made and a certificate
has been given the seller in Form No. V.”
9. A plain reading of Section 17(iii)(b) of the Act shows that the
Committee is empowered to levy and collect market fee which
shall be payable on transaction of sale of agricultural produce in
the market area. The words “specified agricultural produce in the
market area” have great relevance. The manner of realization of
market fee has been enumerated in sub clauses (1), (2), (3) & (4)
of Section 17(iii)(b). Reference is to “produce”. This apparently
shows that physical presence of the agricultural produce within
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the market area is necessary for levy of market fee. The
explanation to Section 17 (iii)(b) appended at the end of the
Section lays down that unless the contrary is proved any
specified agricultural produce taken out or proposed to be taken
out of a market area by or on behalf of the licenced traders shall
be presumed to have been sold within such area. The
explanation has application only if the agricultural produce is
physically present within the market area. The explanation
becomes redundant if the stand of the appellant that Section 17
(iii)(b) is applicable even in cases where agricultural produce is
neither physically brought nor is in existence within the market
area.
10. In Ram Chander kailash Kumar & Co. v. State of U.P.
(AIR1980 SC 1124) it was inter alia observed as follows:
“This point urged on behalf of the appellants is
well founded and must be accepted as correct.
On the very wordings of Clause (b) of Section
17(iii) market fee is payable on transactions of
sale of specified agricultural produce in the
market area and if no transaction of sale takes
place in a particular market area no fee can be
charged by the Market Committee of that area.
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If goods are merely brought in any market area
and are dispatched outside it without any
transaction of sale taking place therein, then
no market fee can be charged. If the bringing
of the goods in a particular market area and
their despatch therefrom are as a result of
transactions of purchase and sale taking place
outside the market area, it is plain that no fee
can be levied.”
11. In P.S.N.S. Ambalavana Chettiar and Company Ltd. v.
Express newspapers Ltd. (AIR 1968 SC 741) it was observed as
follows:
“Section 18 of the Sale of Goods Act provides
that where there is a contract for the sale of
unascertained goods no property in the goods
is transferred to the buyer unless and until the
goods are ascertained. It is a condition
precedent to the passing of property under a
contract of sale that the goods are ascertained.
The condition is not fulfilled where there is a
contract for sale of a portion of a specified
larger stock. Till the portion is identified and
appropriated to the contract, no property
passes to the buyer. In Gillett v. Hill [(1834) 2
C&M. 535: 149 E.R. 871, 873], Bayley, B. said:
"Where there is a bargain for a certain
quantity ex a greater quantity, and there
is a power of selection in the vendor to
deliver which he thinks fit, then the right
to them does not pass to the vendee until
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the vendor has made his selection, and
trover is not maintainable before that is
done. If I agree to deliver a certain
quantity of oil as ten out of eighteen tons,
no one can say which part of the whole
quantity I have agreed to deliver until a
selection is made. There is no
individuality until it has been divided."
12. Similarly, in Jute and gunny brokers Ltd. & Ors. v. The
Union of India and Ors. etc. (AIR 1961 SC 1214) it was held as
follows:
“The contention on behalf of the Union of India
is that property in the goods cannot pass in
law to the holders of the pucca delivery orders
till the goods are actually appropriated to the
particular order; therefore, as in this case it is
not in dispute that no goods were actually
appropriated towards the pucca delivery
orders concerned, the property in the goods
did not pass to the holders thereof but was
still in the mills. Reliance in this connection is
placed on s. 18 of the Indian Sale of Goods
Act, No III of 1930. That section lays down
that "where there is a contract for the sale of
unascertained goods, no property in the goods
is transferred to the buyer unless and until the
goods are ascertained." In the present case, as
we have already said it is not in dispute that
the goods covered by the pucca delivery orders
are not ascertained at the time such orders are
issued and ascertainment takes place in the
shape of appropriation when the goods are
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actually delivered in compliance therewith.
Therefore, till appropriation takes place and
goods are actually delivered, they are not
ascertained. The contract therefore
represented by the pucca delivery orders is a
contract for the sale of unascertained goods
and no property in the goods is transferred to
the buyer in view of s. 18 of the Indian Sale of
Goods Act till the goods are ascertained by
appropriation, which in this case takes place
at the time only of actual delivery. The appeal
court in our opinion was therefore right in
holding that the property in the goods
included in the pucca delivery orders did not
pass to the holders thereof in view of s. 18 of
the Sale of Goods Act in spite of the decision in
the case of the Anglo-India Jute Mills Co.
[(1910) I.L.R. 38 Cal. 127]. What that case
decided was that in a suit between a holder of
a pucca delivery order - be he the first holder
or a subsequent holder who has purchased
the pucca delivery order in the market - and
the mills, there will be an estoppel and the mill
will be estopped from denying that cash had
been paid for the goods to which the delivery
order related and that they held the goods for
the holder of the pucca delivery order. That
case therefore merely lays down the rule of
estoppel as between the mill and the holder of
the pucca delivery order and in a suit between
then the mill will be estopped from denying the
title of the holder of pucca delivery orders; but
that does not mean that in law the title passed
to the holder of the pucca delivery order as
soon as it was issued even though it is not
disputed that there was no ascertainment of
goods at that time and that the ascertainment
only takes place when the goods are
appropriated to the pucca delivery orders at
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the time of actual delivery. The appeal court
was in our opinion right in holding that the
effect of the decision in the case of Anglo-India
Jute Mills Co. [(1910) I.L.R. 38 Cal. 127], was
not that the property in the goods passed by
estoppel and that that case only decided that
as between the seller and the holder of the
pucca delivery order, the seller will not be
heard to say that there was no title in the
holder of the deliver order. That case was not
dealing with the question of title at all as was
made clear by Jenkins C.J. but was merely
concerned with estoppel. In the present case
the question whether the Government of India
will be estopped is a matter which we shall
consider later; but so far as the question of
title is concerned there can be no doubt in
view of s. 18 of the Sale of Goods Act that title
in these cases had not passed to the holders of
the pucca delivery orders on September 30,
1946, for the goods were not ascertained till
then, whatever may be the position of the
holders of the pucca delivery orders in a suit
between them and the mills to enforce them.”
13. Under Section 17(iii)(b) the measure of levy of the fee is on
the price of the goods sold. It obviously means that there must
be a complete transaction of sale or a concluded sale. If there is
only an agreement and the agreement fails, the remedy for the
aggrieved party is to suit for damages. Obviously, no fee can be
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charged on damages. The action for levy of fee can arise only on
a concluded sale and as the sale has not taken place within the
market area of Ghaziabad, no mandi fee can be levied.
14. The stand of the appellant is that the market fee is levied on
“transaction of sale” and not on “sale” only and, therefore, what
is to be seen is where the transaction took place and not the
situs of the sale. If this argument is accepted then even an
agreement to sale without the presence or existence of the
agricultural produce will come within the ambit of the charging
provision. It would also mean that if the agreement takes place
outside the boundaries of State of Uttar Pradesh, the provisions
would still become applicable.
15. It is to be noted that the challenge in the writ petition was
essentially to the revisional order passed by the revisional
authority under the Act. The revision was filed against the order
passed by the Mandi Samiti in respect of rice exported. A bare
perusal of the revisional order shows that the Samiti as well as
the revisional authority proceeded on the basis that since the
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contract for goods was entered into Ghaziabad and then goods
were sent through transport from Punjab, Haryana and Madhya
Pradesh directly through ports, therefore, the market fee was
leviable.
16. The High Court rightly noted that the admitted position
was that the rice was never brought or was in existence within
the market area, Mandi Samiti, Ghaziabad or for that matter
within the State of Uttar Pradesh. The High Court recorded a
categorical finding that the sale took place only when the rice
was loaded on the sea at the port in terms of the agreement.
That being so, there was no transaction of sale within the market
area of the Mandi Samiti, Ghaziabad. Therefore, the High Court
rightly held that the Mandi Samiti was not entitled to levy any
market fee. There is no merit in the appeal, which is accordingly
dismissed.
…………………………..
J.
(Dr. ARIJIT PASAYAT)
……………………...…..J.
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(P. SATHASIVAM)
…………………………..J.
(AFTAB ALAM)
New Delhi,
July 7, 2008
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