REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO.9589 OF 2010
Krishi Utpadan Mandi Samiti & Anr. ...Appellants
Versus
Ved Ram ...Respondent
J U D G M E N T
T.S. THAKUR, J.
1. This appeal by special leave calls in question the correctness of an
order passed by the High Court of Judicature at Allahabad whereby Civil
Misc. Writ Petition No. 58900 of 2007 filed by the respondent-company has
been allowed, the order passed by the Krishi Utpadan Mandi Samiti,
Ghaziabad and that passed by the Deputy Director, Rajya Krishi Utpadan
Mandi Parishad, Meerut in revision set aside. The High Court has further
directed the Krishi Utpadan Mandi Samiti, Ghaziabad to make a fresh
assessment of the market fee for the period in question after providing an
opportunity of being heard to the writ-petitioner or his authorised agent.
The challenge arises in the following factual backdrop.
The respondent-company is engaged in the business of manufacture and
sale of milk products including desi ghee which it markets under the brand
name 'Paras'. The company has set up a manufacturing unit at Sahibabad,
District Ghaziabad, which falls within the market area of Krishi Utpadan
Mandi Samiti, Ghaziabad ('KUMS' for short). The company's case is that it
sells the milk products manufactured by it through its consignee agents
located at several places in different parts of the country. A list of 15
consignee agents spread over the States of West Bengal, Gujarat, Goa,
Orissa, Maharashtra, Rajasthan and New Delhi was in that regard enclosed by
the respondent with the writ petition filed by it before the High Court.
These consignee agents, according to the respondent-company, provide to the
company services like, unloading of goods from the trucks, storage in the
depots of the company, dispatch of the stocks by trucks to redistribution
stockists as per sale orders, raising sale invoices on behalf of the
company and collecting payments for the stocks sold.
In terms of a show-cause notice issued by the appellant-Samiti, the
respondent-company was called upon to produce all relevant documents with
regard to the production, sale-purchase, movement and storage of its
product for the relevant period. This notice was triggered by a
declaration received from the respondent-company that consignment note
No.94 dated 14th May, 2004 dispatching 5250 Kgs. of desi ghee to Anand
Sales Corporation at Ahmedabad was a stock transfer which did not require
any gate pass for its movement outside the market area.
On receipt of the notice the respondent-company filed a reply
explaining the nature of the transaction and claiming that transfer of
stocks to its godowns outside the mandi area was on "stock transfer basis"
and not pursuant to any sale effected within the mandi area. The Mandi
Samiti remained dissatisfied with that explanation with the result that by
an order dated 27th April, 2005 the Samiti held that obtaining of gate
passes after producing evidence to rebut the presumption arising under
Explanation to Section 17(iii)(b) of the Uttar Pradesh Krishi Utpadan Mandi
Adhiniyam, 1964 was necessary. The Samiti further held that the respondent-
company had not adduced sufficient evidence to rebut the presumption that
the movement of goods from the mandi area to places outside such area was
pursuant to a sale effected within the said area. The Samiti accordingly
levied a market fee of Rs.9,39,200/- and development fee of Rs.2,34,800/-
totalling Rs.11,74,000/- for 3906.80 quintals of desi ghee taken out from
the market area of KUMS, Ghaziabad under Section 17(iii)(b) of the
Adhiniyam mentioned above. It was further directed that in future the
respondent-company shall produce the details of its business and obtain
gate passes whenever it removes ghee from the market area of KUMS,
Ghaziabad.
Aggrieved by the order passed by the Samiti, the respondent-company
filed a revision under Section 32 of the Adhiniyam before the Regional
Deputy Director, Rajya Krishi Utpadan Mandi Parishad, U.P. which was
dismissed by the Deputy Director by its order dated 31st October, 2007. The
Deputy Director while affirming the order passed by the Samiti held that
the transactions in question were not by way of stock transfers but sales
within the market area of KUMS Ghaziabad, hence exigible to market fee.
The respondent-company then filed Writ Petition No.58900 of 2007
before the High Court of Judicature at Allahabad, challenging the orders
passed by the Samiti and the Deputy Director on several grounds. The High
Court has, by the order impugned in the present appeal, allowed the said
petition set aside the orders of the Samiti and the Deputy Director and
remanded the matter back to the Samiti for a fresh assessment in accordance
with law. While doing so, the High Court has not only found fault with the
approach adopted by the Samiti and the Deputy Director but also commented
adversely about the capacity of the officers making the orders in deciding
the questions of law and fact that arise in connection with such
transactions. According to the High Court the entire approach adopted by
the Samiti and the Deputy Director was biased, arbitrary, and authoritative
and based on a misreading of the legal provisions and the judgments of this
Court. The High Court felt that all this happened because the officers who
were handling the issue of such importance were not equipped with the
requisite knowledge about the legal principles and procedure applicable
while dealing with complex questions of law and fact. More importantly, the
High Court evolved a new and somewhat novel procedure for examination of
the issues involved in such cases while providing for safeguards by way of
securing the amount claimed by the Mandi Samiti towards market fee. The
High Court observed:
"The market fee is levied on the sale of agricultural produce in
the market area. The Explanation only raises a rule of presumption
which may be rebutted by manufacturing trader or the trader as the
case may be. The Court cannot presume that the movement of goods
cannot be occasioned unless the sale is affected. The nature of
evidence to be produced at the time of gate pass is a contentious
matter which has not been resolved in the last three decades. A
number of attempts made by the courts have not succeeded in proper
understanding of law by the officers and employees of the market
committees and Mandi Parishad. In the circumstances, in addition to
the directions, which have been given by the judgments cited above,
the Court directs that the Petitioner will furnish to Secretary,
KUMS Ghaziabad, a 'revolving bank guarantee' of the amount of
market fees on yearly basis based on the average of the historical
sales and payments of the market fees in the last three years. The
bank guarantee will be furnished on the first of April and unless
revoked, it shall be revalidated every year. The market committee
will issue gate passes on a declaration made by the petitioners
that the goods are moving by way of stock transfer and have not
been sold. They will produce the consignment note, and the proof
of dispatch giving names and addresses of stockists. These
documents will constitute sufficient proof of rebuttal at the stage
of a request for gate pass. The market committee will assess the
market fee on yearly basis after 31st March of the next year and
consider documents furnished by way of rebuttal of the presumption
of sale in respect of each and every transactions separately. It
will not be sufficient to say that the gate pass was not obtained
or obtained without payment of market fees or that documents are
not sufficient. The order would show application of mind and
reasoning for both accepting or rejecting the proofs on the
furnished in respect of each and every transactions separately."
2. On behalf of the appellant-Samiti it was argued by Mr. Rakesh
Dwivedi, learned senior counsel, that the observations made by the High
Court regarding the capacity of the officers to understand and effectively
determine the contentious issues that arose for determination was wholly
unjustified. He submitted that instead of finding fault with the capacity
of the officers to understand the issues, the High Court would have done
better in pointing out the errors committed by the authorities below in
either appreciating the law or applying the same to the facts of the case
at hand. He urged that the officers had appreciated the evidence adduced by
the respondent properly and were well within their powers to reject the
same for reasons which they had set out in their respective orders. So
long as there was no perversity in the approach adopted by the Samiti and
the Deputy Director in appreciating evidence and/or the application of
principles of law to the facts of the case, the mere fact that those
officers were not formally trained in law was no reason to dub them as
incompetent or incapable, especially when any such training was no
guarantee against commission of mistakes.
3. It was further argued that the High Court had completely overlooked
the fact that the respondent-company had, in complete breach of the
directions and procedure sanctioned by the orders passed by this Court,
removed the stock of ghee without the requisite gate passes necessary for
such removal. The High Court had also committed an error in evolving a
procedure which was different from the one that was stipulated by this
Court in Krishi Utpadan Mandi Samiti and Ors. v. Shree Mahalaxmi Sugar
Works and Ors. 1995 Supp (3) 433 and Krishi Utpadan Mandi Samiti v. M/s
Saraswati Cane Crusher & Co. & Ors. (Civil Appeal Nos. 1769-1773 of 1998)
decided on 25th March, 1998. Mr. Sudhir Chandra appearing for the
respondent supported the order passed by the High Court and prayed for
dismissal of this appeal.
4. In Shree Mahalaxmi Sugar Works (supra) this Court noticed the
Explanation under Section 17 of the Uttar Pradesh Krishi Utpadan Mandi
Adhiniyam, 1964 and declared that the Samiti was entitled to raise demands
against the dealers before passes for removal of the goods could be issued
to them. This Court held that if there was a valid rebuttal to the
statutory presumption that a sale had taken place within the notified
market area, the dealers will be entitled to the passes, otherwise not. If
the dealers are compelled to pay market fee as demanded, it shall be open
to the aggrieved to challenge the same in the manner provided under the
Act. The order passed by this Court being a short order may be extracted in
extenso:
"1. Leave granted.
2. The Explanation to Section 17 of the Uttar Pradesh Krishi
Utpadan Mandi Adhiniyam, 1964 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 a 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."
From this it is clear that there is a presumption against the
dealers. In view of that presumption, it is open to the appellants-
Krishi Utpadan Mandi Samiti to raise demands against the dealers
before passes could be issued. If there is a valid rebuttal in that
the sale did not take place within the notified market area, the
dealers will be entitled to the passes, otherwise not. Of course,
even the dealers are compelled to pay the market fee as demanded.
It is open to them to challenge it in the manner provided under the
Act.
3. The appeals are disposed of in the above terms."
5. Pursuant to the above pronouncements the Mandi Samiti appears to have
started issuing gate passes on payment of mandi fee demanded by them at the
time of issue of gate pass. A change in the procedure came about as a
result of the decision of this Court in M/s Saraswati Cane Crusher (supra).
In that case the dealers had argued that the procedure being followed
pursuant in Shree Mahalaxmi Sugar Works (supra) was not satisfactory
inasmuch as the requirement of hearing and of an adjudication was not being
satisfied unless an aggrieved dealer was in a position to challenge the
assessment in the manner provided under the Act. A three-Judge Bench of
this Court found merit in that contention and held that the order passed in
Shree Mahalaxmi Sugar Works (supra) required some repair work. The Court
observed:
"We are satisfied that the orders of this Court afore-referred to
would need some repair work. We treat the said order to be
conceiving of a provisional assessment where after doors are opened
for a final assessment. We conceive that when demands are raised
by the Krishi Utpadan Mandi Samiti against a trader before he could
ask for transit of goods outside the market area, the trader would
be entitled to tender a valid rebuttal to say that no sale had
taken place within the notified area and that if the explanation is
accepted there and then by the Mandi Samiti, no question of payment
would arise as also of withholding the gate passes. If prima facie
evidence led by the trader is not accepted by the Mandi Samiti, the
trader or the dealer can be compelled to pay the market fee as
demanded before issuance of gate pass. If the trader makes the
payment without demur, the matter ends and the assessment
finalized. But in case he does so and raises protest, then the
assessment shall be taken to be provisional in nature making it
obligatory on the trader to pay the fee before obtaining the
requite gate pass. After protest has been lodged and the
provisional assessment has been made, a time frame would be needed
to devise making the final assessment. We, therefore, conceive
that it innately be read in the order of this Court that a final
assessment has to be made within a period of two months after
provisional assessment so that the entire transaction in that
respect is over enabling the aggrieved party, if any, to challenge
the final assessment in the manner provided under the afore Act or
under the general law of the land in appropriate fora. Having
added this concept in this manner in the two Judge Bench decision
of this Court, we declare that what repair has been done instantly
would add to the order of the High Court and the instant corrective
decision shall be the governing rule. The Civil Appeals would thus
stand disposed of.
Since the assessment thus far made against the traders, who are
involved in the instant appeals, would have to be treated as
provisional awaiting final assessment, we permit the concerned
traders to move the respective Mandi Samiti within two months from
today to hear their objections and proceedings onwards be regulated
in accordance with procedure devised hereinbefore. Nonetheless we
add that should the basis of provisional assessment be knocked off,
the Samiti would refund the market fee to the traders/dealers
within two months thereafter."
6. It appears from the above that the orders passed by this Court in
Shree Mahalaxmi Sugar Works (supra) was interpreted to mean that a
provisional assessment would be made against the trader before he could ask
for a transit pass for removal of the goods outside the market area. In the
course of the said provisional assessment the trader would be entitled to
tender a valid rebuttal to the statutory presumption under Section 17 of
the Adhiniyam and argue that no sale having taken place within the notified
area, it was not liable to pay any market fee on the movement of goods. If
the explanation offered by the trader was accepted the gate pass would be
issued without insisting upon any payment of the fee. But if the evidence
laid by the trader is not prima facie accepted by the Mandi Samiti the
trader or the dealer can be compelled to pay market fee before issue of
gate pass to him. The Court further held that if the trader makes the
payment without demand the matter ends and the issue finalised. In case,
however, he raises a protest then the assessment shall be taken to be
provisional in nature making it obligatory for the trader to pay the fee
before obtaining the requisite gate pass. After protest has been lodged the
provisional assessment shall be followed by a final assessment within a
time frame. The Court prescribed a period of two months in respect of each
such transaction enabling the aggrieved party to challenge the same under
the Act or under the general law of the land before the appropriate fora.
7. The above procedure has been working effectively for the past decade
and a half and ought to have been effective in the instant case also. The
unfortunate part, however, was that the respondent-company did not respect
the procedure stipulated under the above orders of this Court. It did not
apply for and obtain gate passes for removal of its goods. The Samiti,
therefore, had no occasion to pass any provisional or final order based on
the material adduced before it. It is only when the respondent-company
filed a declaration that the removal of the stocks pursuant to consignment
note No.94 dated 14th May, 2004 in favour of Anand Sales Corporation at
Ahmedabad was a stock transfer and did not require a gate pass that the
Samiti issued a show-cause notice asking the respondent-company to furnish
the documents with regard to the production, sale, purchase, movement and
storage of the goods. Based on the figures furnished pursuant to the said
show-cause notice the Samiti determined the market fee and the development
fee and raised a demand for payment thereof with a direction to the company
to follow the prescribed procedure for removal of goods from the mandi
area. The revisional authority, as seen above, upheld the assessment of the
fee and the consequential directions issued by the Samiti. The High Court,
however, completely overlooked the effect of the orders passed by this
Court in the two cases mentioned earlier and brought in a new mechanism
which could in its opinion be more effective, in dealing with the situation
that arose so very often between the Samiti on the one hand and the traders
on the other. The High Court failed to appreciate that it was not on virgin
ground. The matter was fully covered by the decisions of this Court.
Further repair of the procedure and the mechanism so provided could only be
under the orders of this Court. The High Court ought to have left it to
this Court to determine as to whether the mechanism and procedure provided
by our orders required any modification, and if so, in what form and to
what extent. Instead of doing that, the High Court embarked upon an
exercise which was not necessary especially when the same did no service to
judicial discipline.
8. The High Court was also in error in holding that even when the
movement of goods without gate passes may have been in violation of the
rules regulating the issue of such passes, any such violation could only
call for a penalty under the said rules. Assessment of market fee on the
removal of such goods from the mandi area was, according to the High Court,
a different matter unrelated to the breach of the rules requiring the
traders to remove goods only on the authority of validly issued gate
passes. The High Court appears to have overlooked the fact that if gate
passes are required to be obtained under the rules, removal of stocks
without applying for such gate passes and without furnishing prima facie
evidence of proof that there was no sale of the goods involved, was a
reason enough for the Mandi Samiti to demand payment of the market fee on
the stocks that were removed. The absence of gate passes was tantamount to
removal of the goods in breach of the relevant rules and also in breach of
the directions issued by this Court in the two cases mentioned above. A
dealer who adopted such dubious procedure and means could not complain of a
failure of opportunity to produce material in support of its claim that no
sale was involved. No opportunity to a dealer who was acting in defiance of
the rules and removing the goods without any intimation and permission of
the Samiti could be granted for the occasion to grant such an opportunity
would arise only when the trader applied for the issue of a gate pass. As a
matter of fact, the goods having been taken away without gate passes and
without any material to show that there was no sale, the Samiti could
demand payment of the market fee and leave it open to the respondent-trader
to claim refund by rebutting the presumption that the removal was pursuant
to a sale. At any rate, the Samiti and the Deputy Director have
concurrently held that the respondent-company has not been able to rebut
the presumption under Section 17 of the Adhiniyam. We see no reason to
interfere with that finding especially when the appraisal of the evidence
by the said two authorities has not been shown to us to be in any way
perverse to warrant interference with the same.
9. In the result, we allow this appeal, set aside the order passed by
the High Court and restore that passed by the Samiti and the Deputy
Director in revision. The parties are left to bear their own costs.
...........................................J.
(T.S. THAKUR)
...........................................J.
(DIPAK MISRA)
New Delhi
March 23, 2012
