Krishi Utpadan Mandi
Samiti Ghazbd.& ANR Vs. M/S. Metal Craft & Ors. [2008] INSC 1038 (7
July 2008)
Judgment
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
Dr. ARIJIT PASAYAT,
J.
- 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 taken out of the market place, and deciding in favour of respondent
no.1.
- 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 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dated October 12, 1997, be rescinded.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 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 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
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.
- 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.
- Learned
counsel for the respondent no.1 on the other hand supported the judgment
of the High Court.
- It
is to be noted that before the High Court the learned counsel for the
appellant no.1 had fairly admitted that rice exported by the appellant was
never brought within the market area of Mandi Parishad, Ghaziabad within
the state of U.P.
- 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
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."
- 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;
iii.
(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;
viii.
to
stop inequitable and unauthorized charges and levies from the producer-seller;
and
ix.
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 and generally to help
the agricultural producer to sell his produce to his best advantage.
- 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:
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."
- 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 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.
- 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.
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."
- 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 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."
- 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 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 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."
- 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 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.
- 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.
- 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 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.
- 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.
18 (P. SATHASIVAM)
................................J.
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