CASE NO.: Appeal (civil) 1495 of 1993 PETITIONER: Agriculture Market Committee, Rajam & Anr. RESPONDENT: Rajam Jute and Oil Millers Association, Rajam DATE OF JUDGMENT: 25/02/2003 BENCH: M.B. SHAH & ARUN KUMAR JUDGMENT:
J U D G M E N T
ARUN KUMAR, J.
This appeal is directed against the judgment dated 20th
February, 1992 passed by the Andhra Pradesh High Court
allowing the second appeal and decreeing the suit filed by the
plaintiff Association, respondent herein. Briefly, the facts are
that respondent filed a suit for declaration and injunction in the
court of Subordinate Judge, Rajam, District Srikakulam, Andhra
Pradesh. The plaintiff sought a declaration to the effect that the
defendant – Market Committee had no right to levy, demand and
collect any market fee from the members of the plaintiff –
Association. An injunction was also sought to restrain the
defendant – Committee from collecting market fee from the
members of the plaintiff – Association. The case set up by the
plaintiff as per the plaint was that Rajam Sub-Taluk was under the
jurisdiction of the Ponduru Agricultural Market Committee. On
Rajam Sub-Taluk being upgraded as a Taluk, a separate
Agricultural Market Committee was constituted for the Rajam
Taluk with effect from 24th December, 1979. The Market
Committee was constituted under the Andhra Pradesh Agricultural
(Produce & Livestock) Markets Act, 1966 (hereinafter referred to
as the ‘Act’). The primary object of the Act is to establish a
market within a notified area. The market committees which are
constituted under the Act have to provide facilities like sheds,
storage, accommodation, platforms, facilities for weighing and
grading of the agricultural produce etc. The Committee has also
to engage staff to supervise operations of the traders in the
market area. The market committee is to ensure that transactions
in the specified commodities are for the benefit of purchasers and
sellers of such commodities. In the process the committees are
supposed to regulate the purchase and sale of agricultural
produce by providing a market place and all the facilities
necessary for proper conduct of the trade in agricultural produce
in the market place so as to eliminate the middleman and to
ensure healthy trade practices. By eliminating the middleman the
committee tries to protect the purchasers of such agricultural
produce, live stock etc. from exploitation and to ensure to them a
fair price for their produce.
According to the plaintiff, the Market Committee had failed
to provide any facilities in the market area so much so even a
market yard had not been set up, no services or amenities were
being provided to the traders in the market area and therefore the
Market Committee was not entitled to levy, demand and collect
the market fee or cess from the members of the plaintiffs. In the
written statement filed on behalf of the market committee, it was
pointed out that the market committee was in its nascent stage, it
had come into existence on the declaration of Rajam as a
separate Taluk only on 24th December, 1979. It had already
taken possession of the site comprising 8.50 acres on 28th
November, 1981 for establishment of a market yard at Rajam by
incurring an expenditure of about Rs. 28,000/-. The process was
on for construction of godowns, weighing sheds, platforms etc.
The Market Committee had appointed corporates to attend to the
work of grading of the market produce. Supervising staff had
been appointed to inspect the premises of the traders to ensure
proper weighment. Thirteen persons had been licensed for the
weighment job. Thus, according to the market committee, it had
already started various services in the market area and the
process for providing further services was already on. The levy,
demand and collection of market fee by the defendant was sought
to be justified on this basis. The defendant also raised a plea that
the plaintiff Association had filed a Writ Petition in the High
Court challenging increase in the market fee. The Writ Petition
had been dismissed. In view of the dismissal of the Writ Petition,
an argument was raised by the learned counsel for the Market
Committee that the suit was barred by the principles of res
judicata. Although the issue raised in the Writ Petition was only
with respect to enhancement of the market fee, yet it was
submitted that the plaintiff could have agitated the question of levy
of market fee in the said petition and since it failed to do so, the
principle of constructive res judicata would come into play. It
would be deemed that the point which was available
to the plaintiff Association for being raised at that stage, was
given up. The said question therefore, could not be agitated in
the present suit. The learned counsel for the plaintiff did not have
any convincing reply to this argument. However, while going
through the record, we find that the earlier Writ Petition being
W.P. No. 1184/78 was filed when Rajam was under the erstwhile
Ponduru Agricultural Market Committee. It is possible that the
argument regarding non-availability of facilities and amenities in
the market area was not available then because Ponduru
Agricultural Market Committee which had jurisdiction over Rajam
Sub-Taluk, might have been in existence since long and the
requisite facilities in the notified market area were possibly
available. Since there is no material on record, in this connection,
we are not inclined to non-suit the plaintiff on this ground. The
only question left for decision in the present appeal is as to
whether there has to be a quid pro quo for the levy of fee in the
sense that services and facilities ought to be available in the
market area before a fee can be levied and if so the extent to
which such services and amenities be available. In other words,
it is to be decided as to whether the fee levied by a Market
Committee in pursuance of power conferred on it under the
relevant statute i.e., A.P. Agricultural (Produce & Livestock)
Markets Act, 1966, is to commensurate with or in proportion to the
services and facilities provided by the Market Committee to the
traders and purchasers in the market area. To facilitate
consideration of this question, it will be appropriate to notice
relevant provisions of the Act.
Section 2(vi) defines market to be a market established
under sub-section (3) of Section 4 and includes market yard and
any building therein.
Sub-Section (vii) defines a Market Committee as a
Committee constituted or reconstituted under the provisions of the
Act. Notified market area according to sub-section (xii) of Section
2 means any area declared to be a market area by notification
under Section 4.
Section 4 of the Act contains provision for constitution of a
Market Committee and for declaration of a notified market area.
The Government is required to constitute by a notification a
Market Committee for every notified area. The Market Committee
so constituted shall be a body corporate having perpetual
succession and a common seal with power to acquire, hold and
dispose of property. It is the duty of the Market Committee to
enforce the provisions of the Act and the rules and the bye-laws
thereunder in the notified area. A Market Committee under sub-
section (iii) is required to establish such number of markets as the
Government may from time to time direct for the purchase and
sale of any notified agricultural produce, livestock or products of
livestock. The Market Committee is required to provide such
facilities in the market as may be specified by the Government
from time to time by a general or special order.
Section 12 contains provision regarding levy of fee by the
Market Committee. It is reproduced as under :
“12(1) : The market committee shall
levy fees on any notified agricultural produce,
livestock or products of livestock purchased
or sold in notified market area [at such rate,
not exceeding [two rupees] as may be
specified in the bye-laws] for every hundred
rupees of the aggregate amount for which the
notified agricultural produce, livestock or
products of livestock is purchased or sold,
whether for cash or deferred payment or other
valuable consideration. ”
Section 14 (1) provides for Market Committee Fund :
“All moneys received by a Market
Committee shall be paid into a fund to be
called ‘The Market Committee Fund’ and the
said Fund shall be deposited, in a single
banking account with the nearest Government
treasury, or with the sanction of the
Government, in a Bank. All expenditure
incurred by the market committee under or for
the purpose of this Act shall be defrayed out
of the said Fund; and any surplus remaining
after such expenditure shall be invested in
such manner as may be prescribed.”
Section 15 enumerates the purposes for which the Market
Committee funds may be expended which are as under:
“Section 15 :
Subject to the provisions of Section 14, the Market
Committee Fund shall be expended for all or any of
the following purposes, namely :-
(i) the acquisition of site for the market ;
(ii) the establishment, maintenance and
improvement of the market;
(iii) the construction and maintenance of buildings
necessary for the market and for the health,
convenience and safety of the persons using the
market and maintenance of buildings under the
control of the market committee;
(iv) the provision and maintenance of standard
weights and measures;
(v) the pay, pensions, leave allowances,
gratuities compassionate allowances and
contribution towards leave allowances, pensions or
provident fund of officers and servants employed
by the market committee;
(vi) the payment of interest on loans that my
raised fir purposes of the market and the provisions
of a sinking fund in respect of such loans;
(vii) the collection and dissemination of
information regarding all matters relating to crop
statistics and marketing in respect of notified
agricultural produce, livestock and products of
livestock;
(viii) schemes for the extension of cultural
improvement of notified agricultural produce,
livestock and products of livestock within the
notified area, including the grant, subject to the
approval of the Government, of financial aid to the
schemes for such extension or improvement within
such area, undertaken by other bodies or
individuals;
(ix) propaganda for the improvement of
agriculture, livestock and products of livestock and
thrift;
(x) .
(xi) The promotion of grading services;
(xii) Measures for the preservation of foodgrains;
(xii)-a..
(xiii) such other purposes as may be specified by
the Government by general of special order.”
It is the case of the plaintiff that the Market Committee had
failed to establish a market yard within the notified market area.
The Committee had also to provide facilities like weighing of
market produce/commodities, laying roads, providing storage
space, platforms for grading and displaying of the products.
Inspite of passage of considerable time after its constitution, the
defendant Committee had not made provision for these facilities
and amenities in the market area. On account of these failures,
the Market Committee was not entitled to levy any fee or cess on
the members of the plaintiff Association. A fee or cess has an
element of quid pro quo which was missing in the present case.
Therefore, the levy of fee was illegal according to the plaintiff.
The immediate provocation for filing of the suit was the two
notices dated 25th May, 1982 and 8th December, 1982 issued by
the Market Committee to the members of the plaintiff
Association demanding market fee from the members. As
already noted, the trial court accepted the case set up by the
plaintiff. However, on appeal the learned District Judge,
Srikakulam allowed the appeal and dismissed the suit filed by the
plaintiff Association vide his judgment dated 9th October, 1990.
The plaintiff preferred a Second Appeal against the judgment of
the District Judge. The High Court vide its impugned judgment
dated 20th February, 1992 accepted the appeal and decreed the
suit of the plaintiff upholding the allegation of the plaintiff that the
Market Committee had failed to provide necessary services and
amenities in the notified market area and therefore it was not
entitled to levy and collect the market fee.
So far as the factual aspect of availability of facilities and
amenities in the market is concerned, the plaintiff did not lead any
evidence at all. We are left with only the averments in the plaint
about the absence of facilities and amenities in the notified market
area. There is nothing on record to support the plaint averments.
On the other hand, apart from controverting the plea of the
plaintiff regarding absence of facilities and amenities in the market
area in the written statement and stating the necessary facts
therein, the defendant led oral evidence on the point by examining
a witness who was an employee of the Market Committee. The
witness stated that after formation of the Market Committee,
Government notified the market area as per Section 4(4) of the
Act. He produced a copy of the notification as Exh. B.2.
According to the witness, the members of the plaintiff
Association made applications regarding business in their
premises. The Committee issued licenses to all the traders to
carry on business in their respective produce. All the traders
were sending monthly statements of the business carried on by
them from their respective premises. The traders had to pay a
market fee at the rate of 1% on the basis of their turnover in the
market. The market Committee had taken possession of a site
comprising an area of 8.50 acres on 28th November, 1981 for
establishment of regulated market yard at Rajam. Tenders had
been called for construction of the market yard. The godowns,
grain platforms, weighing sheds, grading platforms were in
operation. Wide publicity was being given about the benefit of
grading. The Market Committee also appointed supervisory staff
to inspect the premises and to ensure that there was proper
weighment of the commodities being traded in the market. The
supervisors were, besides ensuring proper weights, verifying the
proper payment to the ryots by the traders in respect of the goods
sold by the ryots to the traders. The Market Committee was
exhibiting price list in respect of notified agricultural produce on
the notice board. He stated in the cross-examination that the
market yard was already under construction. The witness was
cross-examined at length but nothing could emerge to show that
his statement about the services provided in the market was not
correct.
Though according to the trial court and the High Court, the
above facilities or amenities available in the notified market area
were not sufficient so as to hold that facilities and amenities had
been made available by the Market Committee in the notified
market area, the learned District Judge, who ordered dismissal of
the suit, accepted that such facilities had been made available in
the notified market area and this entitled the committee to levy
market fee in terms of Section 12 of the Act. The learned District
Judge noted from the evidence of DW 1 that no suggestion had
been put to him in the cross-examination that by 1982 the market
yard was not having all the basic amenities. According to the
learned District Judge, it was clear from the evidence of the said
witness that amenities were being provided in the notified market
area and the construction of building was in progress. Another
fact which emerged from the evidence of DW 1 was that Market
Committee was giving loans to the growers or ryots by way of
cash, loans or by way of supply of manures on credit. Thus the
Market Committee was discharging its functions.
The question is whether the market Committee was not
entitled to levy, demand and collect market fee till all the facilities
and amenities are fully and completely in place. The facilities
already provided for in the notified market area in the present
case have been enumerated hereinbefore. What remains to be
considered is the extent to which services, facilities and amenities
ought to be available in the market area before the market fee can
be levied.
The validity of notifications declaring the market area and
establishing the market for notified agricultural produce and the
legality of the levy of market fee came up for consideration before
a Constitution bench of this Court in Lakhan Lal and others etc.
vs. State of Bihar and others etc. [ (1968) 3 SCR 534 ]. This
was a case under the Bihar Agricultural Produce Markets Act,
1960. On the question of levy and collection of the market fee,
this court observed that the fee collected by the Market
Committee was not excessive and it formed part of the Market
Committee fund which was set apart and earmarked for the
purposes of the Act such as elimination of unhealthy market
practices, ensuring the correct weight and grading, dissemination
of information regarding prices of agricultural produce etc. It was
observed that there was sufficient quid pro quo for the levy.
Another Constitution bench judgment of this court in Kewal
Krishan Puri and another vs. State of Punjab and others
[ (1980) 1 SCC 416 ] while dealing with provisions of the Punjab
Agricultural Produce Markets Act, 1961, held that element of quid
pro quo must exist for the payer of the fee for the special services
rendered. The bench noted the well recognized distinction
between tax and fee. A fee is a charge for special service
rendered to individuals by the governmental agency and therefore
for levy of fee an element of quid pro quo for the services
rendered was necessary. Service rendered did not mean any
personal or domestic service. It meant service in relation to the
transaction, property or the institution in respect of which the fee
is paid. The court noted the literal meaning of the phrase quid pro
quo as “one for the other” meaning thereby “you charge fee for
the service.” A significant observation contained in the said
judgment which is relevant for our purposes is: “the element of
quid pro quo may not be possible, or even necessary, to be
established with arithmetical exactitude but even broadly and
evenly it must be established, with some amount of certainty,
reasonableness or preponderance of probability that quite a
substantial portion of the amount of fee realized is spent for the
special benefit of its payers. Each case has to be judged from a
reasonable and practical point of view for finding an element of
quid pro quo”.
In Rameshchandra Kachardas Porwal and others vs.
State of Maharashtra and others [ (1981) 2 SCC 722 ], this
court observed that a place ought not be notified as a market
unless it is ready for use as a market with all reasonable facilities
and conveniences. A view was expressed that a notification may
be quashed if nothing had been done beyond publishing a
notification.In cases where some facilities and conveniences have
been provided for while some other remain to be provided, the
court may instead of quashing the notification give appropriate
time bound directions for providing necessary facilities and
conveniences. The present is not a case of total absence of
facilities and amenities in the market area. It has come in
evidence that steps are being taken to improve and extend the
services and the work was actually in progress in that behalf. In
fact there is an admission on the part of the plaintiffs- association
that after all the facilities were provided in the market they had
started paying the market fee as levied by the Market Committee.
This is an admission of the fact that the steps for providing all the
requisite facilities which were on when the suit was filed, came to
be completed during the pendency of the suit. Therefore, so far
as the present case is concerned, the challenge to levy and
collection of market fee does not appear to be having any force.
In Sreenivasa General Traders and others vs. State of
Andhra Prasesh and others [ (1983) 4 SCC 353 ], the challenge
was to the constitutional validity of the increase in the rate of
market fee levied by the market committees in the State of
Andhra Pradesh under sub-section (1) of Section 12 of the Act.
There was no challenge to levy of market fee, only the increase in
rate of the fee was under challenge. The challenge was based on
the argument that there was no quid pro quo for the increase in
rate. We must note here that levy of market fee under Section
12(1) is correlated to the purposes mentioned in Section 15 for
which the proceeds of the Market Committee Fund are to be
expended. All the purposes are beneficial to the growers and the
traders. There was no material to show that the market
committees were rendering no service or were incurring
unauthorized expenditure. The court also referred to earlier
decisions and discussed the same.
Regarding Kewal Krishan Puri’s case (Supra), it was
observed that the case did not lay down any legal principle of
general applicability. The fact was that the Market Committees in
Punjab were making money by way of collection of market fee
and had huge surplus funds. The surplus funds were being
diverted by the State Government to purposes other than those
under the statute. Though the funds were being utilized for
laudable public purposes, yet the utilization was outside the
purpose spelled out in the statute. It was observed :
“The traditional view that there must be
actual quid pro quo for a fee has undergone a
sea change in the subsequent decisions. The
distinction between a tax and a fee lies primarily
in the fact that a tax is levied as part of a
common burden, while a fee is of payment of a
specific benefit or privilege although the special
advantage is secondary to the primary motive of
regulation in public interest. If the element of
revenue for general purpose of the State
predominates, the levy becomes a tax. In
regard to fees there is, and must always be,
correlation between the fee collected and the
service intended to be rendered. In determining
whether a levy is a fee, the true test must be
whether its primary and essential purpose is to
render specific services to a specified area or
class; it may be of no consequence that the
State may ultimately and indirectly be benefited
by it. The power of any legislature to levy a fee
is conditioned by the fact that it must be “by and
large” a quid pro quo for the services rendered.
However, correlationship between the levy and
the services rendered (sic or) expected is of
general character and not of mathematical
exactitude. All that is necessary is that there
should be a “reasonable relationship” between
the levy of the fee and the services rendered.”
While dealing with the question of difference between a tax
and a fee, the Court observed :
“There is no generic difference between a
tax and a fee. Both are compulsory exactions of
money by public authorities. Compulsion lies in
the fact that payment is enforceable by law
against a person in spite of his unwillingness or
want of consent. A levy in the nature of a fee
does not cease to be of that character merely
because there is an element of compulsion or
coerciveness present in it, nor is it a postulate of
a fee that it must have direct relation to the
actual service rendered by the authority to each
individual who obtains the benefit of the service.
It is now increasingly realized that merely
because the collections for the services
rendered or grant of a privilege or licence are
taken to the consolidated fund of the State and
not separately appropriated towards the
expenditure for rendering the service is not by
itself decisive. Presumably, the attention of the
Court in the Shirur Mutt case was not drawn to
Article 226 of the Constitution. The Constitution
nowhere contemplates it to be an essential
element of fee that it should be credited to a
separate fund and not the consolidated fund. It
is also increasingly realized that the element of
quid pro quo in the strict sense is not always a
sine qua non for a fee.”
On the question of increase in market fee, the Court had to
say :
“In the present case, there is no allegation
anywhere by any of the petitioners, nor was any
contention advanced that there was any
unauthorized expenditure by any of the market
committees for purposes not authorized by the
Act. There is only a bare assertion on their part
that there are surplus funds available with the
market committees and therefore the increase in
the rate of market fee from 50 paise per hundred
rupees to rupee one was without lawful
justification. From the material on record it is
quite apparent that the income from the market
fee derived by some of the market committees is
not sufficient to meet the expenditure incurred
by them. That apart, when the petitioners
concede that they do not challenge the levy of
market fee at 50 paise per hundred rupees in
the year 12972, there can be no basis for
challenging the increase in the rate of market
fee from 50 paise to rupee one in 1978. Surely
the cost of rendering services has
correspondingly increased with the fall in the
value of rupees. In the economic sense, 50
paise of 1972 is certainly equivalent to at least
rupee one of today, if not more.”
There is no material placed on record by
the petitioners to show that the market
committees are rendering no service. Under the
scheme of the Act, there are certain obligatory
duties of a market committee. Sub-section (3) of
Section 4 provides that every market committee
shall establish in the notified area such number
of markets as the Government may, from time to
time, direct for the purchase and sale of any
notified agricultural produce, livestock or
products of livestock and shall provide, such
facilities in the market as may be specified by
the Government from time to time by a general
or special order. Chapter V provides for various
regulatory measures in Rules 54 to 73 for the
control of a market in that correct weighments
would be secured, storage facilities provided
and equal powers of bargaining assured so that
the growers may bring their agricultural produce,
livestock and products of livestock to the market
and sell them at a reasonable price. There was
not a whisper during the course of the
arguments that the market committees were not
providing the services as enjoined by Rules 54
to 73.”
Another important aspect dealt with in this case is about
when the services are to be completed. The following
observations are pertinent :
“It will be noticed that these facilities are to
be provided by the market committees in course
of time ‘as and when funds permit’. It is
needless to stress that the question of providing
these facilities would depend on the financial
capacity of each market committee. That would
depend on whether there are sufficient funds
available at its disposal in the market committee
fund.”
The observations noted above in Sreenivasa’s case have
simplified our task to a great extent. It follows that while quid pro
quo between levy of fee and facilities provided in the notified
market area is necessary, exactitude in such matters is neither
required nor possible. The traditional view about actual quid pro
quo has undergone a sea change. The extent of
service/amenities cannot have correlation with the fee levied.
Secondly, the market committees can continue their efforts for
providing the amenities depending on availability of funds with
them. It is not that all the required services must be in place
before a fee can be levied.
It was in the case of Kewal Krishan Puri (Supra) that this
Court said that for a valid levy of market fee on the agricultural
produce bought or sold by the licensees in a notified market area,
the amount of fee realized must be earmarked for rendering
services to the licensees in the notified market area and a good
and substantial portion of it must be shown to be expended for
this purpose. However, gradually the concept of expending a
good and substantial portion of the market fee collected by the
market committee has been toned down. Most of the relevant
statutes have provision for creation of Market Committee Funds.
All market fee which is collected goes into the Fund. The statutes
also contain provisions as to how the Fund is to be utilized. The
powers of market committees to utilize the Funds are thus
circumscribed by the statutes. The Funds are utilized only for the
facilities in the markets and for the benefit of the members,
producers, growers and traders. When the Funds are in any case
to be utilized for specified purposes, the observation in Puri’s
case to the effect that a good and substantial portion of it must be
shown to be expended, does not have much significance. In
Sreenivasa Traders and other later cases, it has been accepted
that the market committees may keep on extending the services
and facilities in the notified market area as per availability of funds
with them.
In the case in hand, the levy of market fee by the market
Committee was challenged only on the ground that no basic
amenities or services were provided in the notified market area
and therefore the Market Committee had no right to levy, demand
and collect the market fee. We have noted from the evidence on
record that the market Committee had made provision for certain
services and facilities in the notified market area and efforts were
being made for extending the services. The market committee
had recently come into existence and completion of all the
intended services and facilities takes time. It has clearly emerged
from the evidence of DW 1 that steps were being taken for
extending the services and facilities in the market area. The
plaintiff has led no evidence to contradict the defendant’s
evidence. Whether particular services and amenities are
available at a given place and the extent thereof are questions of
fact which require to be proved or demolished on basis of
evidence to be led by the parties concerned. Since the plaintiff
has not led any evidence whether oral or documentary in support
of its case, the Court is left with no option but to accept the
evidence of defendant which shows that some services and
facilities in the notified market area were already available while
arrangements were being made for various other facilities and
services. The foundation for the case set up by the plaintiff is not
available on record. The law is well settled that though quid pro
quo is required in relation to a fee which is charged and collected
by a market committee, the quid pro quo cannot be in exact
proportion to the fee levied. Mathematical proportions are not
possible in such matters. We have accepted that some services
and amenities were already provided for in the notified market
area which fully justified the levy of market fee. We are thus
unable to agree with the finding of the High Court that the market
committee had failed to provide any services or amenities in the
notified market area. The findings of the High Court are
accordingly set aside. The appeal is allowed. As a result of this,
the suit filed by the plaintiff, respondent herein, shall stand
dismissed. There will be no order as to costs.