Full Judgment Text
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 7
PETITIONER:
LAKHAN LAL AND OTHERS ETC.
Vs.
RESPONDENT:
THE STATE OF BIHAR AND OTHERS ETC.
DATE OF JUDGMENT:
26/03/1968
BENCH:
BACHAWAT, R.S.
BENCH:
BACHAWAT, R.S.
HIDAYATULLAH, M. (CJ)
VAIDYIALINGAM, C.A.
HEGDE, K.S.
GROVER, A.N.
CITATION:
1968 AIR 1408 1968 SCR (3) 534
CITATOR INFO :
RF 1980 SC1008 (22)
R 1983 SC1246 (15)
ACT:
Bihar Agricultural Produce Markets Act (16 of 1960), ss.
2(h), 4(1), 5(2), 18(ii) and Bihar Agricultural Market
Produce Rules, 1962, r. 59-Power of declaring market area
under s. 4(1)-Scope of-Market, if should have well defined
site, market equipment and facilities-Licence fees-If in
nature of tax-Setting up market in one area of State-If
offends Art. 14 of Constitution.
HEADNOTE:
The State Government of Bihar followed the procedure
prescribed by the Bihar Agricultural Produce Markets Act,
1960, and the Bihar Agricultural Produce Market Rules, 1962,
before issuing the necessary notifications for regulating
the purchase and sale of certain items of agricultural
produce and for establishing a market for them in the Gaya
area of the :State. Under s. 18(ii) of the Act no person
can do business as a trader -or other operator in the
notified agricultural produce in a market except under a
licence granted by the market committee on payment of the
prescribed licence fees,.
The validity of the notifications declaring the market area
and -establishing the market for the notified agricultural
produce and the legality of the levy of market fees and
licence fees were questioned on the following grounds. (1)
the area declared to be the market area was too wide; (2)
the market committee had not established any market within a
well-defined site with market equipment and facilities; (3)
the fees levied by the market committee were in the nature
of taxes as the committee did not render any services to the
users of the market and therefore the levy was illegal; (4)
the setting up of a market in Gaya was discriminatory .and
violative of Art. 14 as the Act and Rules had not been
implemented in all parts of Bihar.
HELD : (1) The power of the State Government under s. 4(1)
of declaring an area or part of it to be a market area in
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 7
respect of a notified agricultural produce, after
considering any objections and suggestions received by it,
should no doubt be exercised reasonably; But, there is
nothing to show that the Government acted unreasonably or
that the market was so wide that the sale and purchase of
agricultural produce within it could not be effectively
controlled by the market committee or that the growers
within the area could not conveniently bring their produce
to the market yards. [539 D-E]
(2) For establishing a market it is sufficient to issue a
notification ,under s. 5(2) fixing the boundaries of the
’market proper’ and the ’market -yards’ on the
recommendation of the market committee made under r. 59(2).
The definition of ’market’ does not require a well-defined
site with market equipment and facilities. Under s. 18(1),
the market committee must provide such facilities as the
State Government may direct, but it was not shown that the
market committee refused to carry out any -such direction.
Under ss. 28(2) and 30(i) the market committee may acquire
and own lands and buildings for the market, but it is not
obliged to do so. [539 F-H]
535
(3) The fees collected by the market committee were not
excessive and formed part of the market committee fund which
was set apart and ear-marked for the purposes of the Act
such as elimination of unhealthy market practices, ensuring
correct weighment and grading, quick settlement of disputes,
dissemination of information regarding prices of agri-
cultural produce etc. There is therefore, sufficient quid
pro quo for the levies add they satisfy the test of ’fees’.
[540 A-E]
Commissioner, Hindu Religious Endowments Madras v. Sri
Lakshmindra Thirtha Swamiar of Sri Shirur Mutt, [1954]
S.C.R. 1005, referred to.
(4)The State Government is not bound to implement the Act
and the Rules in all parts of Bihar at the same time. It
may establish markets regulating the sale and purchase of
agricultural produce in different parts of Bihar gradually
and from time to time. [540 F-G]
JUDGMENT:
ORIGINAL/CIVIL/CRIMINAL/APPELLATE JURISDICTION Writ Petition
Nos. 103 and 199 of 1967.
Petition under Art. 32 of the Constitution of India for the
enforcement of fundamental rights.
AND
Civil Appeal No. 1971 of 1966.
Appeal from the judgment and order dated December 2, 1965 of
the Patna High Court in C.W.J.C. 442 of 1965.
AND
Criminal Appeals Nos. 164 to 168 of 1966.
Appeals by special leave from the, judgment and order dated
December 22, 1965 of the Patna High Court in Criminal Misc.
Nos. 649, 666, 667, 668 and 669 of 1965.
N.C. Chatterjee and A. K. Nag, for the petitioners (in
W.P. Nos. 103 and 199 of 1967).
M.C. Chagla and A. K Nag, for the appellants (in C.A. No.
1971 of 1966).
A.K. Nag, for the appellants (in Cr. A. Nos. 164 to 168
of 1966).
C.K. Daphtary, Attorney-General, D. P. Singh, K. M. K.
Nair, Anil Kumar Gupta for respondents (in W.P. Nos. 103 and
199 of 1967).
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 7
B.P. Jha, for the respondents (in C.A. Nos. 1871 of 1966)
and the respondents (in Cr. A. Nos. 164 to 168 of 1966).
The Judgment of the Court was delivered by
Bachawat, J. W.P. No. 199 of 1967, C.A. No. 1971 of 1966 and
Cr. As. Nos. 164-168 of 1966 raise common questions as to
the validity of the notifications declaring a market area
and estab-
536
lishing a market for agricultural produce in Gaya and the
legality ,of the levy of market fees and licence fees
therein under the Bihar Agricultural Produce Markets Act,
1960 (Bihar Act 16 of 1960) and the Bihar Agricultural
Produce Markets Rules 1962. The contentions are that (1)
the notification declaring the market area is void as the
notified market area is too wide, (2) the market committee
has not established any market and in the absence of a
market and a lawful market area, the provisions of the Act
and the Rules are not enforceable in the area, (3) the fees
are in the nature of taxes and are illegally levied as no
services are being rendered by the market committee and (4)
the enforcement of the Act and the Rules in Gaya without
implementing them in the whole of Bihar is discriminatory
;and violative of Art. 14 of the Constitution. W.P. No. 199
of 1967 is a writ petition filed in this Court. C.A. No.
1971 of 1966 is an appeal from -an order of the Patna High
Court dismissing a writ petition filed in that Court. Cr.
As. Nos. ’164-168 of, 1966 are appeals filed against the
orders of the Patna High Court refusing to quash criminal
prosecutions under s. 48 for refusal to take out licences in
contravention of Rule 7 1.
The relevant provisions of the Act and the Rules and the
relevant notifications may be noticed briefly. As stated in
the preamble, the object of the Act is to provide for the
better regulation of buying and selling of agricultural
produce and the establishment of markets for it in the State
of Bihar and for matters connected therewith. "Agricultural
produce" as defined in s. 2(1)(a) includes all produce
mentioned in the schedule to the Act. Sections 2, 3, 4 and
5 define and deal with market area, market, proper and
market yards. "Market area" is the entire area within which
purchase and sale of agricultural produce is regulated.
"Market" for the area consists of a market proper, a
principal market yard and sub-market yard or yards, if any.
"Market proper" is an area inside the market area and within
a certain distance from a market yard. "Principal market
yard" and "sub-market yard" are enclosures, buildings or
localities within the market proper.
The State Government may issue a notification under S. 3
declaring its intention of regulating the purchase and sale
of specified agricultural produce in any Area. After
considering the objections and suggestions received by it
and after holding necessary enquiries, if any, the State
Government may issue a notification under s. 4(1) declaring
the area or any part of it to be the market area in respect
of any notified agricultural produce. Section 4(2) provides
that on the issue of such a notification no place can be set
up, established or continued except in accordance with the
provisions of the Act, rules and bye-laws for the purchase
or sale of the agricultural produce other, than sales by the
growers and
537
retail sales to consumers. The State Government is required
by s. 6 to establish a market committee for every market
area. Under Rule 61 read with s. 27 the market committee is
required to levy and collect market fees on the agricultural
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 7
produce bought in the market area at the rate of 25 naye
paise for Rs. 100/- worth of the produce.
The relevant provisions relating to the establishment of
market may now be read
"2(h) market means a market established under’
this Act for the market area and includes a
market proper, a principal market yard and
sub-market yard or yards, if any.
S. 5. Declaration of market yards-(1) For
each market there shall be one principal
market yard and there may also be one or more
sub-market yard or yards as may be
necessary.
(2) The State Government may, by notification,
declare-
(i) any enclosure, building or, locality in
any market area to be the principal market
"yard and other enclosures, buildings or
localities in such area to be one or more sub-
market yard or yards for the said market area;
and
(ii) any area, including all lands, with
buildings therein, within such distance of the
market yard or yards as it thinks fit, to be
market proper.
18.Objects and duties of the Market
Committee Subject to the other provisions of
this Act, the following shall be the objects
and duties of the Market Committee :-
(i) when so required by the State Government,
to establish a market for the market area
providing for such facilities as the State
Government may, from time to time, direct in
connection with the purchase and sale of the
agricultural produce concerned;....
Rule 59. Establishment of markets (1): After
the issue of the notification under section 4
and establishment of the market committee
under section 6, the State Government shall
direct the market committee to establish a
market.
(2) when. directed to do so under sub-rule
(1), the market committee shall establish a
market for the market area for which it is
established.
538
(3)After the establishment of a market by the market
committee, the State Government shall issue a notification
under section 5."
A market as defined in s. 2(h) is established for a market
area by following the procedure laid down in sees. 5, 18(i)
and Rule 59. The State Government issues a direction under
s. 18(i) read with r. 59(1) to the market committee to
establish a market for the market area. On receipt of this
direction the market committee decides under r. 59(2) to
establish a market by fixing the boundaries of the market
proper and the principal market yard and sub-market yard, if
any. Thereafter the government issues the necessary
notification under s. 5(2) declaring the market proper and
the market yards. These three steps form one integrated
process and on the issue of the notification under s. 5(2)
the market is finally established. The market so
established consists of the market proper and the market
yard or yards. There is no other separate market place.
The expression "market" is used in the Act as, meaning
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 7
either the market proper or the market yards or both. Under
section 15 read with r. 67 as soon as a market is
established all notified agricultural produce- brought into,
produced or processed in the market proper save a prescribed
quantity for retail sale or consumption must pass through a
market yard and shall not be sold at any other ’Place within
the market proper and the price shall be settled by open
auction and not otherwise. Thus the business of sale and
purchase of the agricultural produce is concentrated in the
market yards and takes place at fair prices under regulated
conditions in the presence of a large number of buyers and
sellers. Under sec. 18(ii) and Rule 71 and 73, as amended
by notification No. 4575 issued by the State Government on
March 25, 1965 no person can do business as a trader or
other operator in the notified agricultural produce in a
market except under a licence granted by the market
committee on payment of the prescribed licence fees.
The procedure prescribed by the Act and the Rules was fol-
lowed for regulating the purchase and sale of agricultural
produce and for establishing a market for it in the Gaya
area. On December 13, 1962 the State Government issued the
necessary notification under s. 3. On September 19, 1963 it
issued a notification under s. 4(1) declaring Gaya town,
Gaya Muffasil, Bodh Gaya and Paraiya Police Station within
the Sadar sub-division of Gaya District as the market area
for the sale and purchase of paddy, rice, masur, linseed,
gur and potato. On the same date it established a market
committee for the market area. On October 22, 1963 the
Government acting under S. 18(i) and r. 59(1) directed the
market committee to establish a market. On January 23, 1964
the market committee decided to establish a market under
539
r.59(2) and made its recommendations regarding market
proper and the principal market yard. On February 12, 1964
the market committee made its recommendation regarding the
sub-market yard. The resolution of the committee dated
January 23, 1964 stated that as directed by the State
Government "the committee appoints Gaya bazar to be area of
this bazar." This clumsy phrase really means that as
directed by-the Government the committee was establishing a
market for the Gaya market area. The market consisted of
the market proper and the market yards. There was no other
separate market known as the Gaya bazar. On April 6, 1964,
the Government issued a notification under s. 5(2)(ii) dec-
laring the entire area under the jurisdiction of the Gaya
municipality and several villages as the market proper. On
April 7, 1964 the Government issued a notification under s.
5(2)(i) declaring the locality of Mahallah Parani Godown
within Gaya Police Station to be the principal market yard
and the locality known as Kedarnath Market within Gaya
Police Station to be the sub-market yard.
Mr. M. C. Chagla submitted that the area declared to be the
market area by the notification on September 19, 1963 is too
wide. This objection is not well founded. It may be
conceded that the power under s. 4(1) should be exercised
reasonably. But there is no material on the record to show
that the Government acted unreasonably or that the market is
so wide that the sale and purchase of agricultural produce
within it cannot be effectively controlled by the market
committee or that the growers within the area cannot
conveniently bring their produce to the market yards. The
market area was duly declared under s. 4(1) after
considering all objections and suggestions made in that
behalf.
Counsel next submitted that the market committee has not
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 7
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 s. 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 s. 2(k) read with
s. 5(2)(ii) a larger area. For establishing a market it is
sufficient to make a declaration under s.5(2) fixing the
boundaries of the market proper and the market yards on the
recommendation of the market committee made under r. 59(2).
Under s. 18(i) 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(i) 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 L7 Sup. C.I/68-10
540
notification under 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 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 naye paise per Rs.
100/worth of agricultural produce and the licence fees
prescribed by Rules 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 ear-marked for the
purposes of the Act. There is sufficient quid pro quo for
the levies and they satisfy the test of "fee" as laid down
in Commissioner Hindu Religious Endowments, Madras v. Sri
Lakshmindra Thirtha Swamiar of Sri Shirur Mutt(1).
It is then said that the setting up of a market in Gaya is
discriminatory and violative of Art. 14 of the Constitution
as the Act and the Rules have not been implemented in all
parts of Bihar. There is no force in this Contention. The
State Government is not bound to implement the, Act and the
Rules in all parts of Bihar at the so time. I It may
establish markets regulating the sale and purchase of
Agricultural produce in different parts of Bihar gradually
and from.,time to time.
In Writ Petition No. 103, of 1967 the relevant notification
relating to Barh and the levy of fees by the market
committee are challenged on the same grounds. The
http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 7
notification under S. 4(1) declaring the area within Barh
police station to be a market area
(1) [1954] S.C.R. 1005.
541
in respect of the agricultural produce mentioned therein was
issued by the State Government on May 26, 1965. Thereafter
the market for the area was established and notifications
declaring the market proper and the market yards were issued
after-following the procedure laid down in secs. 5, 18 (i)
and r. 59. For the reasons already given we find no
substance in any of the contentions raised in this petition.
In Thakur Prasad Gupta v. The ’,State of Bihar(’) the High
Court of Patna upheld the constitutionality of the Act and
Rule 61 but it struck down Rule 71 then in force as the rule
imposed the liability to take out licences for operating in
the entire market area and was ultra vires s. 18(ii). This
judgment was pronounced on November 20, 1964. Thereafter
Rules 71 and 73 were amended by notification No. 4575 dated
Match 25, 1965 and the word "market" was substituted for the
words "market area" therein. The amendment cures the
objection that these rules were ultra vires s. 18(ii). In
all the matters before us the constitutionality of the Act
and the Rules were again; challenged. But when the hearing
of these cases commenced, counsel expressly gave up all
contentions regarding the invalidity of the Act and the,
Rules.
In the result, C.A. No. 1971 of 1966, W.P. Nos. 199 and 103
of 1967 are dismissed with costs. There will be one hearing
fee. Cr. As. Nos. 164-168 of 1966 are dismissed.
V.P.S. Petitions and appeals dismissed.
A.I.R. 1965 Pat 267
542