# KEW AL KRISHAN PURI & ANR v. STATE OF PUNJAB & OTHERS

- **Citation:** [1979] 3 S.C.R. 1217
- **Court:** Supreme Court of India
- **Decided:** 1979-05-04
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/kew-al-krishan-puri-anr-v-state-of-punjab-others-7760
- **Pages:** 54

## Headnote

KEW AL KRISHAN PURI & ANR.
v.
STATE OF PUNJAB & OTHERS
May 4, 1979
1217
fY. V. CHANDRACHUD, CJ., P. N. BHAGWATI, N. L. UNTWALIA,
B
S. MURTAZA FAZAL ALI AND R. S. PATHAK, JJ.]
Punjab AgriculJural Produce Mnrkets Act, 1961 Ss. 23, 26 and 28 i: Punjab
Agricultural Produce (General) Rules, R 29-Marketing Developtt1ent Fttnd &
fee-ValidiJy-Principlcs for satisfying the test for a valid levy of market fees.
Punjab Agricultural Produce Markets Act, 1961 Ss. 23. 26 and 28 &: Punjab
Agricultural Produce (General) Rules, R29-Marketing Development Fund &
.41<;1'keting Conunittr:e Fund-,-UtilL~ation of market fees---Validity of purpvses
enumerated in clauses of Ss. 26 and 28 examined.
The Punjab Agricultural Produce J,1arkets Act, 1961 which \\'as passed by
the composite State of Punjab is an Act for the better regulation of the purchase,
sale, storage and proce~sing of agricultural produce and the establishment of
markets for agricultural produce in the Stnte.
Section 3 envisages the establishn1ent of the State Agricultural Marketing Board for the entire State and it
is provided in sub-sec, (9) that "The Board shall exercise superintendence and
<'.ontrol over the Committees".
Section 6(1) provides
for
"declaration
of
notified 1narket area" and the State Government is empo\\'ered to declare the
area notified under s. 5 or any portion thereof to be a notified market area
for the purpose of the Act in respect of the agricultural produce notified under
s. 5 or any part thereof. The market area<; and n1arket yards \Vere d~clared.
putting restriction on the traders to carry on their trade under a licence granted
by the various J\.farkets Committees established amci. constituted within the specified
boundaries or ureas.
After the declaration of the nol ified 1narket area no person
can establish or continue any place for the purchase, sale, storage and processing
of the a-gricultural produce except under a licence granted in accordance with
the provisions of the Act, the Rules and the Bye-laws.
Section 23 empowers
the committ'ee to levy, the fees subject to such rules as may be made by the
State Government in thi~ behalf on the agricultural prcxluce broui:ht or sold by
licensees in the notified market area at a certain percentage. Uader s. 27(1),
all rnoneys received by a Committee shall be pa.id into a fund to be called the
Market Committeo Fund and all expenditure incun·ed ~hall be defrayed out of
such fund, while under s. 25 all receipts of the Board are to be credited iA.to
a fund to be called the Marketing Development Fund and the purposes for
\Vhich it mny be expended are enumerated in s. 26 viz. better marketing of
agricultural produce on co-operative lines, collection and dissemination of market
rates and news, gr~1ding and standardisalion of agricultural produce etc.
Section
28 rntalogues the purposes for which the Marketing Committee Fl.lnd nlay 1--e
utilised viz. acquisition of sites for the market, maintenan'.:e and improvement
of the nlaiket, constn1ction a.nd repair of buildings \Vhich are necessary for the
pt1rp0se of. the n1arkt!t etc.
Jn the composite State of Punjab and even after the .bifurcation of the State
for about a period of three years the n1axin1un1 rate of market fee which could
c
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F
G
H
1218
SUPREME COURT REPORTS
[1979] 3 S.C.R.
A
be levied br the various market com1nittees under s. 23 was 50 paise for ..:very
one hundred rupees.
The fee \ .. .:as therea·fter raised from time to tinie.
B
c
D
E
F
G
A number of wril petitions werl.! filed in the High Court challenging the
po"'er of the Board to in..:::rease the levy of fee.
All the writ petitions were
heard togeth'er and the in-::rease and levy of fee up!o Rs. 2/- by the various
Market Committees in the State of Harynna \Vas upheld and the writ petitions
of the llaryana dea·lers were dis1nisscd while tho.'e of the Punjab dealers were
allowed and thei increase of rate brought about by Act 13 of 1974 to the extent
of Rs, 2.25 WM struck down.
[Mjs. Hanunzan Dall & Gene

## Text

_Characters 0–39,837 of 147,458. This is a partial read: ask again with offset=39837 for what follows._

KEW AL KRISHAN PURI & ANR.
v.
STATE OF PUNJAB & OTHERS
May 4, 1979
1217
fY. V. CHANDRACHUD, CJ., P. N. BHAGWATI, N. L. UNTWALIA,
B
S. MURTAZA FAZAL ALI AND R. S. PATHAK, JJ.]
Punjab AgriculJural Produce Mnrkets Act, 1961 Ss. 23, 26 and 28 i: Punjab
Agricultural Produce (General) Rules, R 29-Marketing Developtt1ent Fttnd &
fee-ValidiJy-Principlcs for satisfying the test for a valid levy of market fees.
Punjab Agricultural Produce Markets Act, 1961 Ss. 23. 26 and 28 &: Punjab
Agricultural Produce (General) Rules, R29-Marketing Development Fund &
.41<;1'keting Conunittr:e Fund-,-UtilL~ation of market fees---Validity of purpvses
enumerated in clauses of Ss. 26 and 28 examined.
The Punjab Agricultural Produce J,1arkets Act, 1961 which \\'as passed by
the composite State of Punjab is an Act for the better regulation of the purchase,
sale, storage and proce~sing of agricultural produce and the establishment of
markets for agricultural produce in the Stnte.
Section 3 envisages the establishn1ent of the State Agricultural Marketing Board for the entire State and it
is provided in sub-sec, (9) that "The Board shall exercise superintendence and
<'.ontrol over the Committees".
Section 6(1) provides
for
"declaration
of
notified 1narket area" and the State Government is empo\\'ered to declare the
area notified under s. 5 or any portion thereof to be a notified market area
for the purpose of the Act in respect of the agricultural produce notified under
s. 5 or any part thereof. The market area<; and n1arket yards \Vere d~clared.
putting restriction on the traders to carry on their trade under a licence granted
by the various J\.farkets Committees established amci. constituted within the specified
boundaries or ureas.
After the declaration of the nol ified 1narket area no person
can establish or continue any place for the purchase, sale, storage and processing
of the a-gricultural produce except under a licence granted in accordance with
the provisions of the Act, the Rules and the Bye-laws.
Section 23 empowers
the committ'ee to levy, the fees subject to such rules as may be made by the
State Government in thi~ behalf on the agricultural prcxluce broui:ht or sold by
licensees in the notified market area at a certain percentage. Uader s. 27(1),
all rnoneys received by a Committee shall be pa.id into a fund to be called the
Market Committeo Fund and all expenditure incun·ed ~hall be defrayed out of
such fund, while under s. 25 all receipts of the Board are to be credited iA.to
a fund to be called the Marketing Development Fund and the purposes for
\Vhich it mny be expended are enumerated in s. 26 viz. better marketing of
agricultural produce on co-operative lines, collection and dissemination of market
rates and news, gr~1ding and standardisalion of agricultural produce etc.
Section
28 rntalogues the purposes for which the Marketing Committee Fl.lnd nlay 1--e
utilised viz. acquisition of sites for the market, maintenan'.:e and improvement
of the nlaiket, constn1ction a.nd repair of buildings \Vhich are necessary for the
pt1rp0se of. the n1arkt!t etc.
Jn the composite State of Punjab and even after the .bifurcation of the State
for about a period of three years the n1axin1un1 rate of market fee which could
c
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E
F
G
H
1218
SUPREME COURT REPORTS
[1979] 3 S.C.R.
A
be levied br the various market com1nittees under s. 23 was 50 paise for ..:very
one hundred rupees.
The fee \ .. .:as therea·fter raised from time to tinie.
B
c
D
E
F
G
A number of wril petitions werl.! filed in the High Court challenging the
po"'er of the Board to in..:::rease the levy of fee.
All the writ petitions were
heard togeth'er and the in-::rease and levy of fee up!o Rs. 2/- by the various
Market Committees in the State of Harynna \Vas upheld and the writ petitions
of the llaryana dea·lers were dis1nisscd while tho.'e of the Punjab dealers were
allowed and thei increase of rate brought about by Act 13 of 1974 to the extent
of Rs, 2.25 WM struck down.
[Mjs. Hanunzan Dall & General Mills, His01· v.
State of Haryana & others AIR 1976 P & H l]
Jn Punjab, by C:•!nendn1ent .Act 14 of 1975, s. 23 of the Act \.Vas again
amended authorising the imposition of market fee at a
rate
not exceeding
Rs. 2.20 per hundred rupees only, and this increa~e in the rates of fee was
agaifl challenged in the High Court and a Full Bench upheld the increase. [Kewal
Kri.d1an Puri & Anr. v. State of P1111j11b & Ors., AIR 1977 P & H 347].
Thi-.
view \\as challenged in the appeal to this Court.
Both in the State of Punjab and the State of 1-Iaryana the rate of market
fee y,as further raised from R5. 2/- to Rs. 3.'-. It was un5uccessfully challenged
in tf1e High Court by the dealers of ea-ch of the States, who thereafter preferred
appeals to this Court against the Judgment of the IIigh Court and also chaltengeCl
the increases in fee, in writ petitions in this Court.
Tn the appeals and writ petitions it was contended that the Jevy of the 111arkrt
fee realised from the buyers under s. 23 of the Act could not be correlated
with the service to be rendered to the payers of the fees, and therefore cannot
be justified and sustained on the well kno\vn concept of fee· as pointed out by
this Court in scverJI decisions. and that the iten1s of expenditure authorised and
enun1erated in ss. 26 nnd 28 of the Act, go beyond the scope of the purpose
of the utili~ation of the market fees.
(Jn the question of the validity of the fixation of n1arket fees under s. 23
of the Act fron1 time to time and the1 scope and the purpose of the utilisa•tion
of such fl"es_:
HELD : 1. The impost of fee and th'e liability to pay it is on a particular
individual or a class of individuals.
They arc under the obligation to submit
accot;nts, returns or tile like to the authorities concerned in cases where quantification of the a·mount of fee depends upon the same.
They have to undergo
the botherations and
hara~sn1enls, sometimes justifiably and sometimes even
unjustifiably. in the process of discharging their liability to pay the fee.
1'he
authorities levying the fee deal with thern and renlise the fee from them.
By
operation of the economic l&ws in certain kinds of imposition of fee the burden
may be passed on to different other persons one after the other. [1229H-1230B]
In the instant case, the Market Committees and the Market Board assumed
to then1selves the liberty of utilising and spending the realisations from market
fee<; to a considerable extent, as if it \Vas a tax, altbouglJ. in reaility it was not
H
so.
[l240DJ
2. Rendering some· service. however remote the· service may be, cannot strictly
speaking satisfy the element of quid pro quo required to be established in cases
.{
·-4·
•
•
<
•
K. K. l'URI V. PUNJAB
1219·
of the impost of fee.
Registration fee, however has to be taken to. stand on
A..
a c..Li.fferent footing altogether. In tl\e case of such a fee the test of quid pro quo
is not tu be satisfied with such direct close or proximate relationship as in the
ca8e of many other fees.
By an<l large registration fee is charged as a regul<.tory
measure.
[1241B]
3. This Court in a large number of cases had the' occasion. to exan1in.c
the nature of fee and tax anJ from a conspectus of the various authorities the
following principles for .satisfying the test for a valid levy of market fees on
the agricultural produce bought or ~oh.I by licences in a notified market area
ar'e deducible :-
(i) That the amount of fee realised must be carm::irked for rendering services
to the Jiccncees in the notified market area and a good and substantial portion
of it must be shown to be expended for this- purpose.
[1243H]
(ii) That the services rendered to the licensees must be in relation to the
transaction of purchase or sale of the agricultural produce.
[12448]
1(iii) Thz.t while rendering services in the market area for the purpose of
facilitating the transactions of purchase and sale with a view to achieVe the
objects of the marketing legislation it is not fl;!CCssary to confer the whole of
B.
the bene'tit on the Iicen~ees but some special benefits must lie conferred on th~m
D·
\\hich have a direct, close ·and reasonable correlation between the 1icensee,s and
th!! transa1;tons.
[1244C].
\
(iv) That while conferring some special benefilo; on the licensees it is perffiissible to render such service in the market which may be in the general
interest of all concerned with the transaction taking place in the. market.
[I244DJ
E
(v) lhat spending the amount of market fees for the purpose of augmenting
the agricultural produce, its fa::ility of transport in village9 and to provide other
facilities meant n1ainly or exclusively for the benefit of agriculturists
is
not
permi1\ible on the ground -that such services in the long run go to increase the·
vclume (>f transnctions ·in the market ultimately benefiting thei traders also.
~uch an indirect and remote benefit to the t1t.1tlers is in no sense a special
benefit to them:
[l244E-F]
(vi) That the element of quid pro quo may not be possible, or even .necessary, to be established \vith arithmetical exactitude but even broa<lly and reasonably it must be established by the authorities v.·ho charge the fees that the
amount is being spent for rendering services to these on ,.,·horn f~lls the burden
of the fee.
[1244G]
·
·
:(\'ii) A.t least a good and substantial portion of the amount oo11ected on
accoont of fees, may be in the neighbourhood of two-thirds or three-fourths,
must j3e shown \.\·ith reasonable certainty as being spent for rendering services
of the "-ind mentioned above. [t 244 HJ
l"he Conuni.s.sioncr llindu Religious Enc/!jwmentl·, .Afadras v. Sri Lal.s.11111~;;:/ra
'.lliirtha SH"an1iar of Sri Shirur Mutt. 11954] SCR 1005; Matthews v.
Clticorv
M<1rl.eting Board. 60 CLR. 263: Allorney General for British Col11111bia &
Esquirnalt & Nanailno Railway Co. & Ors., (1950) Appeal Cases, 87; H. _II.
F
G
ll
A
B
D
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1220
SUPREME COURT REPORTS
[ 1979] 3 S.C.R.
Sud/tundra Tlrirtha Swaniiar v. Conunissioner for llhulu Religiout. & Charitable
E1,downrents, Mysore, [1963] Suppl. 2 SCR 302; J1ahant Sri Jagannath Ramanuj
Das & Anr. v. The State of Orissa & Anr., [1954] SCR 1046; Rati!al Panachand
Gandhi v. The State of Bombay and Ors» [1954] SCR 1055; The Hingir-&mpur
Cold Co. Ltd. & Ors. v. 1 he State of Orissa & Ors., [,1961] 2 SCR 537; Parton v.
A1ilk Botird (Victoria), 80 CLR 229; Corporation of Caicutta & Anr. v. Liberty
Cinema, [1965] 2 SCR 477; Har Shankar & Ors. etc. ere. v. The Dy. E~i:ise &
Taxation Commr. & OrJ., f1975J 3 SCR 254; Nagar ,\laliapaiika Vara,-1asi v.·
Durga Das Bhattacharya & Ors., [1968] 3 SCR 374; The Delhi Cloth & General
.ftJills c·o. Ltd. v. Chief Co1n111is.1ioner, Del/d & Ors., [1970} 2 SCR 348; Indian
Mica & Micanite Indu:1tries Ltd. v. State of Bihar & Ors., [1971] Suppl. SCR
319; Secretary, Government of Madras, Horne Departn1ent & Anr. Y. Zenith
Lamp & Electrical Ltd., [1973] 2 SCR 973; State of Afaharoshtra & Ors. 't. The
Sa/ration Army, Western India Territory, [1975] 3 SCR 475; Govt. 11/ ..--lndhra
Pradesh &: Anr. v. Hindustan Machine Tools Ltd., Ll975] Suppl. SCR 394; The
Municjpaf Council, Madurai, v. R. Naray(111a11 etc., [1976] 1 SCR 333;
.The
Chief Coo1n1i.ssioner, Delhi and Anr. v. The Delhi Cloi/1 & G'enera[ Mills Co.
Ltd. & Anr. AIR 1978, SC 1181; P, P. Kutti Keya &Ors. v. The State of Madras
& Ors., AIR 1954 Madras, 621; MCVS Arunachala 1\'adar etc. v. The State of
Atadras & Ors., [1959] Suppl. 1 SCR 92~ Mohmn1ad llussain Gulam & Anr. v.
State of Bo111bay & Or.1·., fl962J 2 SCR 659; Lek/tan l.nl & Or~. c'fc. v 7 !>.'State
of Bil1ar &
Or~., [1968] 3 SCR 534; referred to.
4. (i) A dispute arose between th~ parties as to whether
the
lic1..-n~e
is
g1anted for the whole of the area or for particular places therein.
On examining Form B in the Rules meant for grant of licence under s.10, it i" found
that the licence is granted for one or more places of business
spe .. :ified in
col. 6 situated in a particular notified market area named at the top of the
licence.
There will be no sense in specifying the place of
busines~ in the
licence if the licensee is to be permitted to establish his place of business any
where in a notified ma.rket area which i~ too big and extensh:e for the control
and supervision of a particular 1\.Iarket Committee.
Market yards are declared
under s. 7.
For each notified market area there can be one principal market
yard 21nJ. one or more sub-market yards as may be neces-sary.
The marginal
note of sec. 8 is, "No private market to be opened in or near places declared
to be markets."
[1246D-E]
(ii) There is no special prov1s1on in this Statute for an establishment of
markets or markets proper as per the definition contained in cl. (i) and (k)
of s. 2 of the Act, it is reasonable to assume that the intention of the le£i8'lature
is to constitute the n1arket yards as the market proper and ordinarily and generally the market would be the same but may include some other places where
transactions of purchase of ngricultural produce by the traders from the producers has been allo\\-·ed in order to avoid rush in the precincts of the riarket
proper.
But one thing is certcJiR that the whole of the marJ...et ai c~1 in rio
~en<;c can be equated with 1narket or market proper.
Nobody can b:: a:!o\Vc(i
to cstnblish a purchasing centre of his own at any place he likes in the market
<irea without there being such a permission or authority from the Market Comtnittees.
After all the whole object of the Act is the supervis-ion and control
cf the transactions of purch2.se by the traders fron1 the ngriculturists ir.. order
to rr~·:-ent exploitation of the latter by the former.
[1240H-1247A)
l
•
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•
•
•
K. K. PURI V. PUNJAB
1n1
5. The whole obJect of the Act is the supervision and
control of the
A
tiansactions of purchase by the traders from the agriculturists in order to prevent exploitation of the latter by the former. The supervision and control can
be effective only in specified localities and places and not throughout the ex·
tensive market area.
[1247B]
6. Rule 24(1) in both the States framed under the Act provides that "all
agricultural produce brought into the market for sale shall be sold by open
auction in the principal or sub-market yard", which indicates that market is
generally the principal and sub-markets yards. The benefit of market fee, therefore, has to be correlated with the transactions ta.king place at the specified
place in the market area and not in the whole of the area. [1247D]
7. The duties and pcnvers of a market committee are enumerated in s. 13
aiid this indicates that the Committee is primarily concerned with the establishing of a market in the notified area and with providing
facilities in the
market for persons visiti11g it and in connection with the transactions taking
place there.
[l247F]
8. Reading s. 23 along with r. 29 it would be noticed that the power of
the Committee to le\-y fees• is subject to the Rules as may be made by the State
<3-0vernment
The fee is levied on ad valorem basis at a rate
~:hich cannot
txceed the maximum mentioned in s. 23 by the legislature. But the power to
fix the rate from time to time within the maximum limit has been conferred
on tht Board and the Committee is merely bound to follow it.
[12480-H]
9. Section 23 in express language controls the power of the Committee to
levy fees subject to the rules. The power given to the Board to fix the rate
of market fees from titne to time under rule 29 is not ultra vires the provisions
of the Act, as sub-sec. (a) of s. 3 confers power on the Board to exercise superintendence and control over the committees, which power, in the context and the
scheme of the marketing law, will take within its ambit the power conferred
on the Board under rule 29(1). [l249C]
State of Punjab & Anr. v. Hari Krishan Sharma, [1966] 2 SCR 982; distinguished.
10. The fee levied is not on the agricultural produce in the sense of imposing any kind of tax or duty on the agricultural produce. Nor is it a tax on
the transaction of purchase or sale. The levy is an impost on the buyer of
the agricultural produce in the market in relation to transactions of his purchase. The agriculturists are not required to share any portion of the burden
of this fee. In CMe the buyer is not a licensee then the responsibility of paying the fees is of the seller who may realise the same from the buyer.
But
such a contingency cannot arise in respect of the transactions of sale by an
agriculturist of his agricultural produce in the market to a dealer who must be
a licensee. Probably such an alternative provision was meant to be made
ft>r outside buyers who are not licensees when they buy the agricultural procl~ce from or through the licensees.
[1249D-E]
B
c
E
F
II. Every Market Committee is obliged under sub-sec.
(2) (•)
of s. l7
H
to pay ont of its funds to the Marketing Board as contribution such percelltage
of its income derived from licence fee, market fee and fines levied by the
A
B
1222
SUPREME COURT REPORTS
[1979) 3 S.C.R.
c.c:urts as spec.i_fied in sub-cl. (i) and _(ii).
The purpOse of this contribution
'.l" mentioned in sub-sec.(2)(a) is to enable the Board to defray expenses of
th.: office, establishment of the Board and such other expenses incurred hy it
i-;1 the interest of the Committees in general. The income of almost all the
,\larket Committees were several lakhs of rupees per year and, therefore, each
is required to· pay 30 per centum of its income to the Board by \!irtue of the
amendment brought about by Punjab Act 4 of 1978. Under s. 25 ,all receipts
of the Board are to be credited into a fund to be called thi ~larketing Development Fund: Purposes for which the Marketing Development
Fund may
be experided are enuIDerated in s. 26 and the puiposes for which the hf~ket
Committee Funds may· be expended are cTM-alogued in s. 28. [1250A-C]
12~ No serious objection to- the items of expenditure mentioned in clauses
(xii), (xiv), (xv) and (xvi) can be taken. Clause (x) and clause (xi) cannot
-C
form the items of expenditure of the market fees.
The whole of the State
is d,ivided into market areas.
The propaganda in favour of agricultural improvement and expenditure for production and betterment of -agricultural produce will be in the general interest of agriculture in the market area. So lung
as the concept of fee remains distinct and limited in contrast to tax such expen·
diture out of t~ market fee cannot be countenanced in law.
[1252F·G]
D
E
13. The first part of cl. (xiii) may be justified in the sense of imparting
education in marketing to the staff of the 1farket Committee.
But imparting
education in agriculture in general cannot be correlated with the market fee.
(1252H]
14. How ill-conceived the second part of clause (xvii) is?
Is- it permissible
to spend the market fees realised from the traders for any purpose calculated
to promote the national or public interest? Obviously not. No market Com·
mittee can be permitted to utilise the fund for an ulterior purpose how;oever
benevolent, laudable and charitable th.e object may be. The v.-hole concept of
fee will collapse if the amount realised by market fees could be permitted to be
spent in this fashion.
[1253A-B]
Technically and legally, one may _not have any objection to the expenditure
of such money for the purposes mentioned in clauses (x), (xi), (xiii) and
.F
(xvii). [12530]
.G
H
·, __ JS. It is· not necessary to strike down any clauses of s. 28 as being uncons·
titutional merely on the ground that the expenditure authorised therein goes
beyond· the scope of the purpose of the utilisation of the market fees. The
authorities ha.Ye to bear this in mind aitd on a proper occasion the matter will
have to be dealt with by courts in the light of this Judgment v1here a concrete
case comes of· raiSing of a loan, spending thi money so raised which cannot be
reasonably connected with the purposes for "'·bich the market fee can be spent,
as to whether such a loan can be repaid or interest on it can be paid out of the
realisations of the market fees.
[1253G)
_16. The Board in the State is the Central Controlling and superintending •
authority over all the }rfarket Committees, the primary function of which i! to
render service in the market. Parting with 30% income by a 1farket Com·
mittee in favour of the Board is not so exCessive or unreasonable so as to
warrant any interference with the law in this regard on the ground of violation
of the principle of quid Pro quo in the utilisation of the market fee realised
•
•
•
~-
•
K. K. PURI v. PUNJAB
1223
from the traders in the inarket area.
En1phasised that the Marketing Development Fund can only be expended for the purposes of the :rtfarket Com··
mittees in a general way, or to L'e more accurate, as far as practicable, for the
purposes of the particular Market Committee which n1akes
the contribution.
[1254C-DJ
17. Section 26 of the Act provides for purposes for \vhich the Marketing
Development Fund may be
expended.
The Marketing
Development
Fund
constituted primarily and mainly out of the contributions by the Market Con1mittees from realisation Of market fee can also be expended for the purposes
,of the market in the notified n1arket area in relation to the transactions of pur-
-::1
chase and sale of agricultural prcxluce and for no other general purpose or in
-~
the general interest of the agriculture or
the
agriculturists. The
purposes
'
~{
mentioned in clauses (i), (ii), (iii), (iv), Hrst part of clause (v), clauses (vi),
(vii), (viii), (ix), (xii), first part of clause (xiii), clauses (xiv), (xv) and (xvi)
held valid.
The Marketing Development Fund constituted out of the J\.!arket
fees cannot be eJtPended for the purposes nlentioned in second part of clause
(v), clauses (x), (xi), second part of clause (xiii) and clause (xvii). As the
purpose of the law will be sen'ed by restricting the operation of s. 26, it is not
necessary to strike down those provisions
as
being constitutionally invalid.
[l254E, 1255F-l256A]
•
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18. The High Court has extracted s. 28 of the Act but has failed to scan the
effect of the various purposes in some of the clauses.
[1256H-1257A]
19. The High Court seems to be of the vie\V that since transportation is
very essential for the development of a market and to enable the growers of the
agricultural produce to bring the same to the market, the construction of link
roads becomes an essential purpose of the n1a.rket committe'es.
It may be so
but the purpose cannot be allowed to be achieved at the cost of the market fee
realised fron1 the dealers.
[1257G]
20. The impost must be correlated with the service to be rendered to
the
payers of the fees in the sense and to th'e extent pointed out.
[1260A]
21. Everybody seems to have allowed hi1nself to be carried too far by the
sentiment of the laudable object of the Act of Uoing whatever is possible to do
under it for the amelioration of the conditions and the uplift of the
villagers
....-- and the agriculturists.
Undoubtedly the Act is primarily meant for that purpose and to the extent it is permissible under the Jaw to achieve that object of
utilising the money collected by the n1arkct fee, it should be done.
But if the
la\v does not permit carrying on the sentiment too far for achieving of all the
laudable objects under the A.ct, then primarily it becomes the duty of the Court
to allow the la~' to have an upper hand over the sentiment and not vice versa.
[1263G-H]
22. If insecticides and pesticides are for use at the place \Vhere actually the
marketing operations are carried on it \VouJd be a justifiable expenditure. But
.if they are meant to be supplied to the agriculturists for use at their village
homes or in their fields surely they cannot be valid expenditure out of the colJectio!lB of the n:iarket fee.
[1267G-H]
In the instant cases the authorities took full liberty to treat the realisation
itom inarket fee as a general realisation of tax which they were free to spend
in any manner they liked for the purposes of the Act, the development of the
aroo, for giving a fillip to agricultural prod11ction and so forth and so on. The
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SUPREME COURT REPORTS
l1979J 3 S.C.R.-
sooner the authorities are made to reatis·e the correct position in la.\V the better
it will be for all concerned. [1269FJ
23. Taking a reasonable and practical vie\v of the matter and on appreciation of the true picture of justifiable and legal expenditure in relation to the
market fee income, even though it had to be done on the basis of some reasonable gue11!il work, the court did not disturb the raising of an imposition of the
rate of market fee upto Rs. 2 /- per hundred by the various Market Committees
and the Boards both in the State of Punjab and Haryana. After all, considerable deTelopment work seen1s to have been done by tnany Market Committees
in their reipective markets. The charging of fee @ Rs. 21- therefore, is justified and fit to be sustained.
[1269G-1270A]
24. The dealers of Haryana <lid not feel aggrieved when the High Court
maintained the rais·ing of the mark'et fee to the extent of Rs. 2/- per hundred
,rupees. The court did not uphold the raising of the fee from Rs. 2/- to R~. 3/-
as on the materials placed before it, it is clear that this has been done chiefly
because of the worng impression of la\v that the amount of market fee can be
spent for any developn1ent work in the notified n1arket area and especially for
the development of agriculture and the welfare of the agriculturists. The High
Court was wron& in maintaining this use on an erroneous vie\V of the matter.
[1270B-C]
25. In fw.ture if the market f ce is sought to be raised beyond the rate of
Rs. 21 ~ per hundred rupees, proper budgets, estimates, balance-sheets
showing
the balance of the n1oney in hand and in deposit, the estimated income and
expenditure, etc. should carefuly be prepared.
On drawing the correct balancesheets and framing of the correct estimates and budgets the authorities as also
the State Government will be able to know the correct position and to decide
reasonably as to what extent the raising of the market fee can be
justified
taking an oTer-all picture of the matter and keeping in view the reason behind
the restrictions of sales tax laVi'S concerning the transactions of foodgrai.as and
the other agricultural produce. Then, and then only, there may be a legal
justification fur raising the rate of the market fee further to a reasonable extent.
[1270E-GJ
F
CrvIL APPELLATE JURISDICTION : Civil Appeal No. 1083 of 1977. --4
G
(Appeal by Special Leave from the Judgment and Order dated
28-1-1977 of the Punjab
Haryana High Court in Civil Writ No.
5697/75)
CIVIL APPEAL NO: 1616 OF 1978
(Appeal by Special Leave from the Judgment and Order dated
18-9-1978 of the Punjab & Haryana High Court in CWP No. 3849/
78)
CIVIL APPEAL NOS :1700-1761 OF 1978
H
(Appeals by Special Leave from the Judgment and Order dated
30-8-1978 of the Punjab & Haryana High Court in Civil Writ Petition
Nos. 3351, 2662, 3094, 3221, 3303, 3330, 3347, 3348, 3349, 3350-,
•
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K. K. PURI V. PUNJAB
122 5
3384, 3390, 3393, 3459, 3460, 3489, 3517, 3533. 3548, 3551, 3563,
3570, 3576, 3598, 3615, 3665, 3673, 3773. 3775, 3776, 3826, 3827,
3883, 4024, 4171/77, 37/78, 178, 212, 283, 335, 381, 423, 483,
577, 666, 751, 887, 976, 1021, 1058, 1104, 1164, 1280, 1469/78,
2625/77, 1556/78, 1578/78, 1635, 1859, 1980, 1997 and 2095/78.
CIVIL APPEAL NOS. 1762-1773 OF 1978.
(Appeals by Special Leave from the Judgment and Order d;ted
30-8-1978 of the Punjab & Haryana High Court in, Civil Writ Petition
B
~
Nos. 45/78, 888, 1251 1451, 1556 3300, 3330, 3293/77,
329'.:',
"'--(' 3337, 3385 and 3426/77)
CIVIL APPEAL NOS. 1626-1627 OF 1978.
(Appeals by Special Leave from the Judgment and Order dated
30-8-1978 of the Punjab & Haryana High Court in Civil Writ Petition
Nos. 4171/77 and 1356/78)
AND
WRIT PETITION NOS. 4436, 4470, 4472, 4481, 4485,4564, 4420,
4450, 4460, and 4484 OF 1978
(Under Article 32 of the Constitution)
For the Appellants in CA No. !083/77:A. K. s,:11 Mr. Ra·,inder
Bana, and Bhal Singh Malik For the RR. 1-2 in CA No. 1083/77 :
S. N. Kackar, Sol. Genl., Hardev Singh and R. S. Sodhi, For the Intervener-State Agricultural Market Board and Market Committee, Nai
Mandi in CA No. 1083/77: V. M. Tarkunde, and S. C.
1 Patel. For
the Applicant Intervener: in CA No. 1083/77 Mrs. Urmila Kapoor.
For the Respondent No. 3 in CA No. 1083/77 H. L. Sibbal, G. G.
c
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E.
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.• : ... ,.,Parv and Mr. Atma Ram. For the Petitioner in the W.P. excoe111 in
,
...
WPs. Nos. 4481, 4470, 4564 Bhal Singh Malik, B. Datta and K. K.
•
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Manchanda. For the Petitioners in W. P. Nos. 4481, 4564, and for the
Appe!Jams in CA No. 1616/78 S. K. Wa!ia, and Mr. M. P. Jha. For
the Petitioner in W. P. No. 4470/78 Sarva Mitter. For the Respondents
in WP. 4430, 4472, 4481, 4485/78 and CA 1616/78 W.P. 4564/78:
G
Hardev Singh, G. C. Garg and R. S. Sodhi. For the Appel/ants in CA
Nos. 1700-1761/78 Anil Diwan, (1703) Adarsh Kumar Goel (in all
appeals) Prav*'1 Knmar, Adv.
(1703) Miss Bina Gupta, Adv.
(1703) Madan Gopal Gupta (1703 to 1752) Sarva Mitter (1751~
1761 and all other) For the Petitioners in W.P. Nos. 4420,
4450,
4460, 4484/78: A K. Sen, (4420) Dr. L. M. Singhvi, (4460) B.
H
Dutta, K. K. Manchanda and Bhal Singh Malik, For R. 1 in Appeai
Nos. 1700-1761/78 and WP Nos. 4420, 4450, 4460 and 4484/78:
22--4f!)SCJ./79
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SUPREME COURT REPORTS
[1979] 3 S.C.R.
P. N. Lekhi,
(FP 4420) and
R. N. Sachthey,
For RR. 2-3 in
Appeal Nos. 1760-1761/78 and
WP Nos. 4420, 4450, 4460 and
4-184/78:\1. M. Tarkunde, (in CA 1700 and WP 44~0) Gian Singh,
(WPs. 4420. 4450 4460, 4484 and CAs 1760-1761)
S. C. Patel,
Fer the Appellants in CA Nos. 1626-1627 /78·Mrs. Urrnila Kapoor,
For the Appellants in CA Nos. 1762-1773/78 : K. K. Mohan.
For the o!her appearing l<R. in CA Nos. 1762-1763 : S. C. Patel,
The Judgment of the Court was delivered by
UNTWALIA, J.-In these groups of Civil Appeals and Writ Petitions, broadly speaking, the question which falls for determination is
the validity of certain provisions of the Pnnjab Agricultural Produce
Markets Act, 1961 (Punjab Act No. 23 of 1961), hereinafter referred
to as the Act, and the Rules framed by the State of Pnnjab and Haryana under the said Act as also the validity of the fixation of market
fees from time to time by the various Market Committees in the States
aforesaid under the direction of the Punjab State Agricultural Produce
Marketing Board and the Haryana State Agricultural Produce Marketing Board.
All these cases have been heard together and are being
disposed of by a common judgment.
In the erstwhile composite State of Punjab the Act was passed in
the year 1961 to consolidate and amend the law relating to the better
regulation of the purchase, sale, storage and processing of agricultural
produce and the establishment of markets for agricultural produce in
the State.
Under section 3 of the Act the State Agricultural Marketing -.:i
Board was constituted for the entire area of the composite
State, :"'!""-
T
which later, in the year 1966 came to be bifurcated into the States of
Punjab and Haryana.
Under the various provisions of the Act, which
will be noticed shortly hereinafter, market areas and market yards were
declared putting restrictions on the traders to carry on their trade
under a licence granted by the various Market Committees established
and constituted in accordance with sections 11 and 12, within the specified boundaries or areas. The traders were required to take out
licences on payment of a licence fee.
Under section 23 of the Act a
Market Committee was required and authorised to levy on ad-valfJrem
basis fees on the agricultural produce bought or sold by licoosees in
the notified market area at a rate not exceeding the rate mentioned in
section 23 from time to time for every one hundred rupees.
•
K. K. PURI v. PUNJAB (Untwalia, J.)
1227
In the composite State of Punjab and even after the bifurcation of
the States for about a period of three years the maximum rate of
market fee which could be levied under section 23 was 50 paise for
every one hundred rupees.
Various Market Committees levied a fee
A
of 50 paise per hundred rupees and no dealer made any murmur of
grievance of it.
Tn the bifurcated State of Punjab by Act 25 of 1969
the rate of 50 paisc was raised to Re. 1/-. It was further raised to
Rs. 1.50 by Act 28 of 1973. Thereafter by Ordinance 4 of 1974
which was replaced by Act 13 of 1974 the rate was raised to Rs. 2.25.
Several dealers filed a number of Writ Petitions in the High Court of
"'
Punjab and Haryana challenging the increase in the rate of market fee
""-rfrom time to time, the !&st one being by Act 13 of 1974. Similarly
in the State of Haryana the rate of 50 paise was raised to Re. 1/- by
Haryana Amendment Act 28 of 1969. It was further raised to
Rs. 1.50 by Act 21 of 1973. By Ordinance 2 of 1974 which was replaced by Act 17 of 1974 in the State of Haryana the fee was raised to
Rs. 2/- for every one hundred rupees, as against the rise of Rs. 2.1*
in the State of Punjab. Several dealers of the State of Haryana als<l
challenged in the High Court the levy and increase of market fee frOft•
time to time.
All the Writ Petitions were heard together.
The mcrease and levy of fee upto· Rs. 2 /- by the various Market Committees
in the State of Haryana was upheld and the Writ Petitions of the Har-
..
•
yana dealers were dismissed while those of the Punjab dealers were
allowed atKI the increase of rate brought about by Ordinance 4 and
Act 13 of 1974 to the extent of Rs. 2.25 was struck down.
This decision of the High Conrt is reported in M/s. Hanuman Dall & General Mills, Hissar v. The State of Haryana and others.(')
The date of
the decision is November 8, 1974. In Punjab by Amendment Act 14
-0£ 1975 section 23 of the Act was again amended authorising the imposition of market fee at a rate not exceeding Rs. 2.20 per hundred
~pees. Telegraphic instructions were issued by the Punjab Board to
'I
the various Market Committees directing them to charge Rs. 2/- only
with effect from August 23, 1975 after the passing of the Act 14 of
•
1973 on August 8, 1975.
The increase in the rates of fee, the last
one being in August, 1975, were again challenged in the High Conrt.
•
But the Full Bench which finally heard the Writ Petition· npheld the
increases by its judgment delivered on January 28, 1977, which is reported in Kewal Krishan Puri and another v. The State of Punjab and
others.(')
Civil Appeal 1083 of 1977 has been preferred in this
Court from the said judgment of the High Court.
(I) A I. R. 1976 Punjab and Haryana J.
(2) A. I. R. 1977 Punjab and Haryana 347 .
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SUPREME COURT REPORTS
[1979) 3 s.c.R.
Both in the Staoo of Punjab ~d the State of Haryana the rate of
market fee was further raised from Rs. 2/- to Rs. 3 /-. It was unsuccessfully challenged in the High Court.
The dealers have preferred
appeals from the judgments of the High Court as also filed Writ Petitions in this Court. In the State of Punjab the fee was raised to Rs, 3/-
by Ordinance 2 of 1978 which must have been replaced by an
Act. The Ordinance was promulgated on April 28, 1978. The Writ
Petition 4436 of 1978 has been filed in this Court challenging the pre-
~
vious increases in the fee
along with the last increase of Rs. 3/--
The High Court upheld it by its judgment dated May 18, 1978. Special
v.
Leave Petition (Civil) 2768 of 1978 wa> preferred from this judgme~.,..
Writ Petition No. 3849 of 1978 was filed in the High Court by a large}
number of dealers, which was dismissed in I/mine by order dated September 18, 1978. Civil Appeal 1616 of 1978 arises out of this Writ
Petition.
Several other dealers have filed separate Writ Petitions also
being Writ Petitions 4470, 4472, 4481, 4485 and 4564 of 1978 challenging in the increase of market fee in the State of Punjab.
In the State of Haryana the rate of fee was raised from Rs. 2 /- to
Rs. 3/- with effect from September S, 1977 by Ordinance 12 of 1977
replaced by Act 22 of 1977.
The Haryana State Marketing Board
directed all the Market Committees in that State to collect market flOC
@ Rs. 3/- with effect from 5-9-1977.
A number of Writ Petitions
were filed in the High Court challenging the said increai;e and the
High Co4rt dismissed all the Writ Petitions by its judgment dated
August 30, 1978.
Civil Appeals 1700 to 1773 of 1978 and
Civil
Appeals 1626 and 1627 of 1978 are from the judgment of the High
Court dated August
30, 1978.
The said increase has also been
challenged by filing Writ Petitions in this Court and they are
Writ
Petitions 4420, 4450, 4460 and 4484 of 1978.
Although by now there is a catena of cases of this Court pointing
out the difference between "tax" and "fee" with reference to the constitutional provisions and otherwise also, the problem before
us has
presented some new angles and facets.
We, therefore, think it advisable and necessary to review many of the earlier decisions to pin-point
the precise difference as far as practicable in order to resolve the rival
contentions of the parties. The arguments of the learned counsel for
the parties whenever thought necessary would be referred to at the
appropriate places hereinafter in this judgment.
Clause (2) of Article 110 and clause (2) of Article
199 of the
Constitution, the former occurring in the Chapter of Parliament and the
r
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. "
K. K. PURI v. PUNJAB (Ulltwalia, !.)
1229
btter in relation to the State Legislature, are in identical terms as · A .
follows:-
"A Bill shall not be deemed to be a Money Bill by reason
only that it provides •..... for the demand or payment of
fees for licences or fees for services rendered . ... : ..... "
The Constitution, therefore, clearly draws a distinction between the
imposition of a tax by a Money Bill and the impost of 'fees by · any
other kind of bill. . So also in the Seventh Schedule both in List I and
II a distinction has been maintained in relation to the entires of tax
B
and fees. In the Union List entries 82 to 92A relate· to taxes and
C
duties and entry 96 carves out the legislative field for fees in respect
of any of the matters in the said list except the fees taken in any Court.
Similarly in the State List entries relating to taxes are entires 46 to 63 .
and entry 66 provides for fees in respect of any of the matters in List
n but not including fees taken in any Court. Entry relating to .fees
in List III is entry 47: Our Constitution,
therefore, recognises
a
D·
,different and distinct" connotation between taxes and fees.
. .
.
The leading case of this Court which has been referred and follow-
· rd in many subsequent decisions is the 'case 'of The Commissioner,
Hindu Religious Elldowments, Madras .v. Sri. Lakshmindra. Thirtha
Swamiar of Sri Shirur Mutt.(') The point decided therein was that
the provision relating to the payment of annual contribution contained in section 76(1) of the Madras Hindu Religious and Charitable
Endowments Act, 1951 is a tax and not a fee and so it was beyond
the legislative competence of the Madras State Legislature to enact
. such a provision.
The meaning given to the word "tax" by Latham
C.J. of the High Court of Australia in Matthews v. Chicory Marketing
Board(') has been quoted with approval at page 1040 and has been
·Often repeated in many other decisions. Generally. speaking a fee
is defined to be a charge for a special service rendered to· individuals
by some governmental agency.
A question arises--"specia\ service"
rendered to whom which kind of individuals?
Mr. V. M. Tarkunde
who appeared for the Haryana Marketing Board stressed the argument
·that service rendered must be correlated to those on whom the ultimate
·burden of the fee falls.