Krishi Utpadan Mandi
Samiti, Allahabad Vs. M/s Baidyanath Ayurved Bhawan (Pvt.) Ltd. & ANR.
J U D G M E N T
Dr. B.S. CHAUHAN, J.
appeal has been preferred against the judgment and order dated 14.7.2003 passed
by the High Court of Judicature at Allahabad in C.M.W.P. No. 12372 of 2003 by which
the High Court allowed the writ petition holding that respondent no.1 was not required
to take licence under Section 9 of the Uttar Pradesh Krishi Utpadan Mandi Adhiniyam,
1964 (hereinafter called `the Act 1964').
and circumstances giving rise to present appeal are as under:
A. Respondent no. 1 is a
company registered under the Indian Companies Act, 1956 and manufactures Ayurvedic
medicines including Chawanprash at Naini, Allahabad. For that purpose, the respondent
no. 1 has obtained a licence under the Drugs and Cosmetics Act, 1940. For manufacturing
Chawanprash the said respondent purchases certain agricultural produce e.g.
Gur, Amala and Ghee etc. and use the same as raw material.
B. The appellants served
a notice dated 17.3.1999 calling upon the respondent no. 1 for taking a licence
under section 9 of the Act 1964 as it was purchasing and processing the
aforesaid agricultural produce in its ordinary course of business. Respondent
no. 1 submitted reply to the said notice on 31.3.1999 pleading that it was not
required to take licence as the said respondent was not doing any business in
the sale or purchase of agricultural produce.
The appellant found
the explanation furnished by respondent no. 1 unsatisfactory and, thus, sent another
notice dated 2.12.2000 calling upon respondent no.1 to take a licence failing which
legal proceedings could be initiated against it. Similar notices were
subsequently sent to respondent no. 1 on 3.12.2000 and 16.12.2000 but respondent
no. 1 did not pay any heed to the said notices. The appellant issued notice
dated 14.2.2001 to respondent no. 1 for personal appearance and furnishing the
explanation as to why the licence under Section 9 of the Act 1964 was not required.
The respondent no. 1 did not comply with the said notice, thus the appellant filed
complaint Case No. 480 of 2002 in the court of Special Judicial Magistrate,
Allahabad against the respondent no. 1, alleging violation of the statutory
provisions of the Act 1964.
C. Being aggrieved, the respondent
no. 1 approached the High Court by filing Writ Petition No. 12372 of 2003 for quashing
of the complaint Case No. 480 of 2002. The High Court vide impugned judgment
and order dated 14.7.2003 allowed the writ petition holding that the said
respondent had been using the agricultural produces after buying for internal purpose
i.e. for consumption in its factory for manufacturing the end product and not for
further transferring the agricultural produces to someone else and thus, the respondent
no. 1 was not required to take licence under Section 9 of the Act 1964. Hence,
Shobha Dikshit, learned senior counsel appearing for the appellant, has submitted
that respondent no. 1 is manufacturing Ayurvedic medicines and purchases Amla,
Gur and Ghee etc. from the market area established under the Act 1964, which are
admittedly agricultural produce. Therefore, being a trader, the respondent no.
1 is required to take a licence so far as the purchase of specified agricultural
produce from the market area is concerned and also pay requisite market fee and
any violation of the provisions of the Act 1964 would attract penal
consequences i.e. prosecution under Section 37 of the Act 1964.
The use of the aforesaid
agricultural produce for manufacturing of the medicines cannot be termed as domestic
consumption. The word `domestic' means required for personal use of the family
and this term cannot be interpreted in such wide terms as to include
manufacturing of a different commodity at commercial level in an industry. The High
Court erred in defining the term `domestic' giving a very wide interpretation i.e.
meant for supplying the end product in the country and not for export. Even
otherwise, in view of the fact that an adequate and efficacious remedy provided
under the Act 1964 was available to the respondent, the High Court ought not to
4have entertained the Writ Petition. Thus, the appeal deserves to be allowed.
contra, Shri Subramonium Prasad, learned counsel appearing for the respondents,
has submitted that as per the statutory provisions of the Act 1964, the
respondent no. 1 cannot be held to be the buyer or seller of the agricultural produce
nor it is engaged in processing of agricultural produce, therefore, the
provisions of the Act 1964 are not applicable. The respondent-company purchases
agricultural produce only as raw material for manufacturing of Chawanprash in
its factory. Thus, in such a fact-situation, the respondent no. 1 is not required
to take a licence under Section 9(2) of the Act 1964 read with Rule 70 of the U.P.
Krishi Utpadan Mandi Niyamavali, 1965 (hereinafter called the `Rules 1965'). The
appeal lacks merit and is liable to be dismissed.
have considered the rival submissions made by the learned counsel for the
parties and perused the record.
Star Paper Mills Ltd. v. State of U.P. & Ors., (2006) 10 SCC 201, this
Court while dealing with the same statutory provisions accepted the submissions
made on behalf of the State that in view of the fact that adequate and
efficacious statutory remedy was available to 5the person aggrieved, the High
Court ought not to have entertained the writ petition without the statutory remedy
being exhausted. While deciding the said case, this Court placed reliance upon
large number of earlier judgments of this Court under the Act 1964. Be that as
it may, as the matter has been dealt by the High Court on merit and a period of
more than 8 years has elapsed, it is not desirable to entertain the issue of
availability of alternative remedy or exhaustion of statutory remedy. The matter
requires to be considered on merit.
appeal raises the following substantial question of law: Whether the specified agriculture
produce purchased by the Respondent No. 1 within the market area and used in manufacturing
a commercial product could be held to be for domestic consumption and thereby would
exempt it from obtaining licence under Section 9(2) as also from levy and
payment of market fee under Section 17(iii)(b) of the Act 1964?
Act 1964 has been enacted with the object to regulate the sale and purchase of
the specified agricultural produce in market area and to curb down the unfair
trade practices prevalent in the old market system within the State of Uttar Pradesh.
The object of the Act has been to reduce the multiple trade charges, levies and
exactions charged from the producer-seller; to provide for the verification of accurate
weights and scales and to ensure that the producer-seller is not denied his
legitimate dues. Further to provide amenities to the producer-seller in the market
and for providing better storage facilities, to stop inequalities and unauthorised
charges and levies from the producer-seller and 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 a particular
adjudication of the aforesaid issue, it may be necessary to refer to some of
the statutory provisions of the Act 1964.(a) Section 2(a) of the Act, 1964
defines "agricultural produce" as under: "Agricultural produce"
means such items of produce of agriculture, horticulture, viticulture, apiculture,
sericulture, pisciculture, animal husbandry or forest as are specified in the Schedule,
and includes admixture of two or more of such items, and also includes any such
item in processed form, and further includes gur, rab, shakkar, khandsari and
jaggery." (b) "Trader" is defined under Clause (y) of the Section
2 as under: "Trader" means a person who in the ordinary course of
business is engaged in buying or selling agricultural produce as a principal or
as a duly authorised agent of one or more principals and includes a person, engaged
in processing of agricultural produce." (c) Section 9 of the Act 1964
excludes the application of the Act on purchase of agricultural produce for "domestic
(1) As from the date
of declaration of an area as Market Area no local body or other person shall, within
the Market Area, set up, establish or continue, or allow to be set up, established
or continued, any place for the sale purchase, storage, weighment or processing
of the specified agricultural produce, except under and in accordance with the conditions
of a licence granted by the Committee concerned, anything to the contrary contained
in any other law, custom usage or agreement notwithstanding: Provided that the provisions
of this sub-section shall not apply to a producer in respect of agricultural
produce produced, reared, caught or processed by him or to any person who
purchases or stores any agricultural produce for his domestic consumption.
(2) No person shall,
in a Principal market Yard or any Sub-Market Yard, carry on business or work as
a trader, broker, commission agent, warehouseman, weighman, palledar or in such
other capacity as may be prescribed, in respect of any specified agricultural produce
except under and in accordance with the conditions of a licence obtained therefore
from the Committee concerned." 8(d) Section 17 of the Act 1964 empowers the
Committee to issue, renew, suspend or cancel a licence, and to levy and collect
market fee. However, the proviso thereto reads as under: "Provided that no
market fee or development cess 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." (Emphasis added)(e) Section 37 of the Act,
1964 further empowers the Committee to impose penalty on a person who contravenes
any of the provision contained in Section 9 of the Act 1964 or the Rules 1965. (f)
Rule 70 of the Rules 1965 reads as under:
"Licensing by the
Market Committee (Section 17(i) - (1) The Market Committee shall ......call upon
all Local Bodies and other persons wishing to set up, establish or continue any
place for the sale, purchase, storage, weighment or processing of the specified
agricultural produce, in the Market Area, and shall likewise call upon all Traders,
Commission Agents, Brokers, Warehouseman, Weighmen, Measures, Palledars and
other persons handling or dealing in specified agricultural produce, in the Market
Yards, to apply for a licence under sub Section (1) of Section 9 or Sub Section
(2) of Section 9 of the Act, as the case may be, in such form as may be
specified by the Market Committee in its bye-laws, within a period of fifteen
days from the date of publication of the said notice. Provided that the
provisions of this sub-rule shall not apply to a producer in respect of agricultural
produce produced, reared, caught or processed by him and to any person who
purchases or stores any agricultural produce for his domestic consumption."
cumulative effect of combined reading of the aforesaid statutory provisions comes
to the effect that sale of the specified agricultural produce from any place in
the market area is prohibited unless the person concerned has a licence. The
statute provides for an exception of having a licence or from paying the market
fee if the sale of an agricultural produce is made to a person for his "domestic
consumption" in "retail sale".
the aforesaid produce purchased by respondent company are agricultural produce.
In view of the circular dated 18.4.1988, issued by the appellant, a retail trader
cannot sell any specified agricultural produce to any person more than the
prescribed limit therein. The said circular fixed the maximum quantity of an agricultural
produce which the retail dealer can sell to an individual for domestic consumption.
The Circular issued under the Rules 1965 prescribes the limit of sale to an individual
and storage of the agricultural produces, by the retailer: 10Retailer could sell
to an Retailer can purchase individual Gur- 20 Kg. Gur- 10 Quintals Amla- 5 Kg.
Amla-1 Quintal Ghee- 4 Kg. Ghee- 50 Kg.
G. Giridhar Prabhu & Ors. v. Agricultural Produce Market Committee, AIR
2001 SC 1363, this Court considered similar provisions under the Karnataka Agricultural
Produce Marketing (Regulation) Act, 1966, wherein the Court was concerned with the
term "trader" contained therein. After considering earlier judgments
of this Court, particularly, in H.P. Marketing Board & Ors. v. Shankar Trading
Co. Pvt. Ltd. & Ors., (1997) 2 SCC 496; and Vijayalaxmi Cashew Co. &
Ors. v. Dy. CTO & Anr., (1996) 1 SCC 468 etc., the Court held that transaction
by a "trader" includes processing, manufacturing and selling. Therefore,
a trader who buys a particular agricultural produce, subjects it to selling or
manufacturing process and brings into existence a different agricultural produce
would cease to be a trader. The Court held as under: ".........
The definition of the
term "trader" is not a restrictive definition. It is not restricted to
a person who only buys. If a person buys for domestic or personal consumption, then
he would not be a trader. It is only when a person buys for the purpose of selling
or processing or manufacturing that he would become a trader. Thus a person may
buy, process or manufacture and then sell. When he processes or manufactures notified
agricultural produce which he had bought, it may change its character and become
another notified agricultural produce. Thus, by way of examples, a person may buy
milk and through processes make them into butter and/or cheese or a person may
buy hides and skins and by a process make it into leather. However, merely because
a distinct and separate notified agricultural produce comes into existence does
not mean that the person who bought, processed and sold ceases to be a trader.
"trader" encumbrances (sic embraces) not just the purchase
transaction but the entire transaction of purchase, processing, manufacturing
and selling." (Emphasis supplied)
The State of A.P. v. M/s. H. Abdul Bakhi and Bros., AIR 1965 SC 531, while
dealing with a similar issue, i.e. defining `Dealer' under the provisions of
Andhra Pradesh General Sales Tax Act, 1950, held that a person who buys goods for
consumption in a process of manufacturing is also a dealer. The Court held that
a person who consumes a commodity purchased by him in the course of his trade,
or use in manufacturing another commodity for sale, could be regarded as a `Dealer'.
Krishi Upaj Mandi Samiti & Ors. v. Orient Paper & Industries Ltd., (1995)
1 SCC 655, the similar provisions of M.P. Krishi Upaj Mandi Adhiniyam, 1973,
were considered by this Court. In the said case, the question arose as to whether
the market fee can be levied on agricultural produce brought for sale or sold
in the market area in case the mill did not produce the agricultural produce for
sale but produce them for use as its raw material for manufacturing the end product.
That was a case where
the bamboos were purchased for manufacturing of paper. The Court held that once
the agricultural produce is brought in the market area and sold therein, it
becomes liable to be levied with market fee, as no person can be permitted for
sale or purchase of the agricultural produce within the market area without a licence
even a raw material for manufacturing some other product.
The Court further
held as under: ".....It is immaterial for this purpose whether the bamboos
are purchased by the respondent-Mills for selling them or for using them as their
raw material in the manufacture of paper. The liability of the respondent-Mills
to pay the market fees is in no way negated on that account...." (Emphasis
case stands squarely covered by the judgment of Constitution Bench of this
Court in Ram Chandra Kailash Kumar & 13Co. & Ors. v. State of U.P. &
Anr., AIR 1980 SC 1124, wherein the provision of the Act 1964, which is involved
in the instant case was considered and the Court held as under: "If paddy is
purchased in a particular market area by a rice miller and the same paddy is converted
into rice and sold then the rice miller will be liable to pay market fee on his
purchase of paddy from the agriculturist-producer under sub- clause (2) of Section
(iii) (b). He cannot be asked to pay market fee over again under sub- clause (3)
in relation to the transaction of rice. Nor will it be open to the Market Committee
to choose between either of the two n the example just given. Market fee has to
be levied and collected in relation to the transaction of paddy alone."
Virendra Kumar & Ors. v. Krishi Utpadan Mandi Samiti & Ors., (1987) 4
SCC 454, this Court considered a case where it was claimed that petitioners had
been producers in respect of agricultural produce (khandsari), and thus they were
not required to take out any license under Section 9(1) of the Act 1964. This court
rejected the argument observing that Section 9(1) would not be applicable to a producer
of agricultural produce only in case the producer processed, reared, or caught for
domestic consumption. In case the agricultural produce is not for domestic
consumption, but for sale thereafter in the 14market area, such a producer will
not come within the exception of Section 9(1) of the Act 1964.
view of the above, we are of the considered opinion that as the retail trader cannot
sell the agricultural produce in quantity more than prescribed in the circular and
also such retailer himself cannot purchase and store more than prescribed in the
circular, therefore, the meaning of "domestic consumption" has to be understood
in such restricted sense. Thus, meaning thereby for personal use i.e. for the
use of family members of the purchaser and not for any production activity, otherwise
prescribing the limits of purchase and storage by the retail trader becomes redundant.
The parties could not bring to the notice of the High Court the relevant provisions
of the Act 1964 which were necessary to be considered to adjudicate upon the
issue in controversy. Purchase of agricultural produce in bulk cannot be termed
to have been made for "domestic consumption."
The Court cannot
travel beyond the pleadings. The meaning of "domestic trade" and
"foreign trade", had not been in issue in the instant case. The
"domestic consumption" under the Act 1964 has to be given a very restricted
and limited meaning i.e. for personal use of the purchaser, i.e. for the
consumption by the family and not for commercial and industrial activities.
Subramonium Prasad, learned counsel appearing for the respondents, has placed
very heavy reliance upon the judgment of this Court in M/s. Kesarwani Zarda
Bhandar v. State of Uttar Pradesh & Ors., AIR 2008 SC 2733, wherein it has been
held that market fee is leviable on specified agricultural produce and not on agricultural
produce simplicitor. Zarda, the end product of the manufacturing process is not
a specified agricultural produce and it can be subjected to payment of market fee
provided it is held to be "Tobacco". Zafrani Zarda, does not answer the
description of specified agricultural produce as defined under Section 2(a) of the
If it is held that Zafrani
Zarda is merely a processed form of "Tobacco", it could be subjected
to levy of market fee, but if it is manufactured it would not. The aforesaid judgment
has no application in the instant case for the reason that issue involved in
this case is relating to requirement of having a license under Section 9(2) of
the Act 1964 for the purchase of a specified agricultural produce from the
market area. The appellants have never asked the respondent company to pay
market fee on the end product Chawanprash.
view of the above, we are of the considered opinion that as the respondent-company
buys specified agricultural produce from the market area and it is not meant
for domestic consumption, the company is required to take license under Section
9(2) of the Act 1964.20. In such a fact-situation, appeal is allowed. The impugned
judgment and order dated 14.7.2003 passed by the High Court of Allahabad in
Writ Petition No.12372 of 2003 is hereby set aside. No costs.
(Dr. B.S. CHAUHAN)