PETITIONER:
M.C. V. S. ARUNACHALA NADAR ETC.
Vs.
RESPONDENT:
THE STATE OF MADRAS & OTHERS
DATE OF JUDGMENT:
06/10/1958
BENCH:
SUBBARAO, K.
BENCH:
SUBBARAO, K.
DAS, SUDHI RANJAN (CJ)
BHAGWATI, NATWARLAL H.
SINHA, BHUVNESHWAR P.
WANCHOO, K.N.
CITATION:
1959 AIR 300 1959 SCR Supl. (1) 92
CITATOR INFO :
R 1959 SC1124 (25,27)
F 1962 SC 97 (5)
R 1966 SC 385 (8)
RF 1967 SC 973 (4)
R 1973 SC 106 (102)
D 1974 SC1489 (6)
E 1980 SC1008 (22)
F 1983 SC1246 (15,18)
D 1984 SC1772 (15,16)
R 1985 SC 218 (3)
R 1986 SC1506 (6)
ACT:
Fundamental Right-Reasonable restrictions-Statute regulating
buying and selling of commercial crops-Constitutional
validity Madras Commercial Crops Markets Act (Mad. XX Of
1933) Constitution of India, Arts. 19(1)(g) and 19(6).
HEADNOTE:
The Madras legislature enacted the Madras Commercial Crops
Markets Act for providing satisfactory conditions for the
growers of commercial crops to sell their produce on equal
terms with the purchasers and at reasonable prices. The
Act, Rules and the Bye-laws framed thereunder have a long
term target of providing a net work of markets wherein
facilities for correct weighment are ensured, storage
accommodation is provided, and reliable market information
is given. Till such markets are established the Act
provides for the imposition of licensing restrictions to
enable the buyers and sellers to meet in licensed premises.
After the establishment of the markets no licenses would be
issued within a reasonable radius from the markets and all
growers will have to resort to the markets for selling their
crops. The result would be to eliminate, as far as
possible, the middlemen and to give reasonable facilities
for the growers of commercial crops to secure best prices
for their commodities.
Held, that the impugned provisions of the Act impose
reasonable restrictions on the citizen's right to do
business and are valid. Such a statute cannot be said to
create unreasonable restrictions on the citizen's right to
do business unless it is clearly established that the
provisions are too drastic, unnecessarily harsh and over-
reach the object for which they were made.
Chintaman Rao v. The State of Madhya Pradesh, [1950] S.C.R.
759 and State of Madras v. V. G. Rao, [1952] S.C.R. 597,
referred to.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 169-171 of
1955.
Appeals from the judgment and order dated July 10, 1953, of
the Madras High Court in Writ Petitions Nos. 75, 87 and 135
of 1953.
R. Ganapathy Iyer and Shanmugavel, for the appellants.
V. K. T. Chari, Advocate-General for the State of Madras,
V. V. Raghavan and R. H. Dhebar, for the respondents.
93
H. N. Sanyal, Additional Solicitor General of India and R.
H. Dhebar, for Intervener No. 1
T. M. Sen, for Interveners Nos. 2 and 3.
S. B. Sen, Additional Government Advocate for the State of
Madhya Pradesh and I. N. Shroff, for Intervener No. 4.
1958. October 6. The Judgment of the Court was delivered by
SUBBA RAO J.-These three appeals by certificate granted by
the High Court are directed against the common order of the
High Court of Judicature at Madras, dated July 10, 1953,
dismissing three writ petitions filed by the appellants
impugning the validity of the provisions of the Madras
Commercial Crops Markets Act (Mad XX of 1933), hereinafter
referred to as the Act, and the Rules framed thereunder, and
certain notifications issued by the first respondent herein
in pursuance thereof.
The Act was passed to provide for the better regulation of
the buying and selling of commercial crops in the State of
Madras and for that purpose to establish markets and make
Rules for their proper administration. On May 18, 1951, the
State Government issued G. 0. No. 1049 (Food & Agriculture
Department) extending the provisions of the Act to
Ramanathapuram and Tirunelveli Districts in respect of
cotton and groundnuts. On February 25, 1952, the State
Government issued G. 0. No. 251 (Food & Agriculture
Department) ordering the constitution of a Market Committee
at Koilpatti and Sankarankoil in Tirunelveli District. By a
similar G. O., viz., G. 0. No. 356 (Food &- Agriculture
Department) dated March 8,1952, the Government directed the
constitution of a Market Committee at Virudhunagar and
markets at (1) Virudhunagar; (2) Rajapalayan and (3) Sattur
in Ramanathapuram District. The Market Committees. were
duly constituted, and, on January 9, 1953, the Market
Committee at Virudhunagar issued a notice stating that the
Act and the Rules had come into force in Ramanathapuram
District on January 1, 1953, and requiring persons who did
business in cotton
94
and groundnut to take out licences as provided therein. A
further notice dated January 17, 1953, stated that all the
traders in cotton and groundnut, who failed to take out
licences on or before February 15, 1953, were liable to
prosecution. Similar notices dated January 22, 1953, and
February 14, 1953, were issued by the Chairman, Tirunelveli
Market Committee at Koilpatti calling upon all traders,
producers and weighmen dealing in cotton to take out
licences before February 28, 1953, and threatening
prosecution for failure to comply therewith. The appellants
in the above three appeals and others filed writ petitions
in the High Court of Madras against (1) the State of Madras;
(2) the Collectors of the concerned Districts and (3) the
Chairmen of the Market Committees, for the issue of a Writ
of Mandamus directing the respondents to forbear from
enforcing any or all the provisions of the Act as amended
and the Rules and Bylaws framed thereunder.
A Bench of the Madras High Court, consisting of Rajamanna C.
J. and Venkatarama Aiyar J. by an order dated July 10, 1953,
dismissed the applications. The learned Judges held that s.
5(4)(a) of the Act was void to the extent it conferred on
the Collector authority to refuse a licence at his own
discretion and rule 37 was void in so far as it prohibited
persons whose names had not yet been registered as buyers
and sellers, from carrying on business in the notified area.
Subject to that, the impugned Act and the Rules were upheld
under Art. 19(6) of the Constitution as a valid piece of
marketing legislation. In the result, the applications were
dismissed. The aforesaid three appellants have filed these
appeals against the order of the High Court in so far as it
dismissed their applications.
Learned counsel for the appellants contends that the
provisions of the Act and the Rules framed thereunder
constitute an unreasonable restriction upon the appellants’
fundamental right to do business and that they not only do
not achieve the object for which they are enacted but defeat
their purpose. Elaborating this argument, he took us
through some of the provisions
95
of the Act and the Rules made thereunder in an attempt to
establish that the provisions cripple the business of the
appellants, restrict the rights of the small traders, cause
unnecessary and unintentional hardship to the growers and
thereby exceed the purpose of the enactment and defeat its
object.
Before we scrutinize the provisions of the Act, the law on
the subject may be briefly noticed. Under Art. 19 (1)(g) of
the Constitution of India all persons have the right to
practice any profession, or to carry on any occupation,
trade or business. Clause (6) of that Article enables the
State to make any law imposing in the interest of general
public reasonable restrictions on the exercise of the right
conferred by sub-cl. (g) of el. (1). It has been held that
in order to be reasonable, a restriction must have a
rational relation to the object which the legislature seeks
to achieve and must not go in excees of that object (See
Chintaman Rao v. The State of Madhya Pradesh) (1). The mode
of approach to ascertain the reasonableness of a restriction
has been succinctly stated by Patanjali Sastry C. J., in
State of Madras v. V. G. ROW (2) thus:
It is important in this context to bear in mind that the
test of reasonableness, wherever prescribed, should be
applied to each individual statute impugned, and no abstract
standard, or general pattern, of reasonableness can be laid
down as applicable to all cases. The nature of the right
alleged to have been infringed, the underlying purpose of
the restrictions imposed, the extent and urgency of the evil
sought to be remedied thereby, the disproportion of the
imposition, the prevailing conditions at the time, should
all enter into the judicial verdict.”
Bearing the aforesaid principles in mind, we shall ascertain
the object of the Act, from the circumstances under which it
was passed, and its provisions, and see whether the
provisions have any reasonable relation to the object which
the legislature seeks to achieve.
There is a historical background for this Act. Marketing
legislation is now a well-settled feature of
(1) [1950] S.C.R. 759.
(2) [1952] S.C.R. 597, 607.
96
all commercial countries. The object of such legislation is
to protect the producers of commercial crops from being
exploited by the middlemen and profiteers and to enable them
to secure a fair return for their produce. In Madras State,
as in other parts of the country, various Commissions and
Committees have been appointed to investigate the problem,
to suggest ways and means of providing a fair deal to the
growers of crops, particularly commercial crops, and find a
market for selling their produce at proper rates. Several
Committees, in their reports, considered this question and
suggested that a satisfactory system of agricultural
marketing should be introduced to achieve the object of
helping the agriculturists to secure a proper return for the
produce grown by them. The Royal Commission on Agriculture
in India appointed in 1928, observed:
“That cultivator suffers from many handicaps: to begin with
he is illiterate and in general ignorant of prevailing
prices in the markets, especially in regard to commercial
crops. The most hopeful solution of the cultivator’s
marketing difficulties seems to lie in the improvement of
communications and the establishment of regulated markets
and we recommend for the consideration of other Provinces
the establishment of regulated markets on the Berar system
as modified by the Bombay legislation. The establishment of
regulated markets must form an essential part of any ordered
plan of agricultural development in this country. The
Bombay Act is, however, definitely limited to cotton markets
and the bulk of the transactions in Berar market is also in
that crop. We consider that the system can conveniently be
extended to other crops and, with a view to avoiding
difficulties, would suggest that regulated markets should
only be established under Provincial legislation.”
The Royal Commission further pointed out in its report:
” The keynote to the system of marketing agricultural
produce in the State is the predominant part played by
middlemen.”
It is the cultivator’s chronic shortage of money
97
that has allowed the intermediary to achieve the prominent
position he now occupies.”
The necessity for marketing legislation was stressed by
other bodies also like the Indian Central Banking enquiry
Committee, the All India Rural Credit and Survey Committee,
etc. Recently the Government of Madras appointed an expert
Committee to review the Act. In its report the Committee
graphically described the difficulties of the cultivators
and their dependence upon the middlemen thus:
” The middleman plays a prominent part in sale transactions
and his terms and methods vary according to the nature of
the crop and the status of the cultivator. The rich ryot
who is unencumbered by debt and who has comparatively large
stocks to dispose of, brings his produce to the taluk or
district centre and entrusts it to a commission agent for
sale. If it is not sold on the day on which it is brought,
it is stored in the commission agent’s godown at the
cultivators’ expense and as the latter generally cannot
afford to wait about until the sale is effected he leaves
his produce to be sold by the commission agent at the best
possible price, and it is doubtful whether eventually he
receives the best price. The middle class ryot invariably
disposes of his produce through the same agency but, unlike
the rich ryot he is not free to choose his commission agent,
because he generally takes advances from a particular
commission agent on the condition that he will hand over his
produce to him for sale. Not only, therefore, he places
himself in a position where he cannot dictate and insist on
the sale being effected for the highest price but he loses
by being compelled to pay heavy interest on the advance
taken from the commission agent. His relations with
middlemen are more akin to those between a creditor and a
debtor, than of a selling agent and producer. In almost all
cases of the poor ryots, the major portion of their produce
finds its way into the hands of the village money-lender and
whatever remains is sold to petty traders who tour the
villages and the price at which it changes hands is governed
not so much by the
13
98
market rates, but by the urgent needs of the ryot which are
generally taken advantage of by the purchaser. The
dominating position which the middleman occupies and his
methods of sale and the terms of his dealings have long ago
been realized.”
The aforesaid observations describe the pitiable ‘dependence
of the middle-class and poor ryots on the middlemen and
petty traders, with the result that the cultivators are not
able to find markets for their produce wherein they can
expect reasonable price for them.
With a view to provide satisfactory conditions for the
growers of commercial crops to sell their produce on equal
terms and at reasonable prices, the Act was passed on July
25, 1933. The preamble introduces the Act with the recital
that it is expedient to provide for the better regulation of
the buying and selling of commercial crops in the Presidency
of Madras and for that purpose to establish markets and make
rules for their proper administration. The Act, therefore,
was the result of a long exploratory investigation by ex-
perts in the field, conceived and enacted to regulate the
buying and selling of commercial crops by providing suitable
and regulated markets by eliminating middlemen and bringing
face to- face the producer and the buyer so that they may
meet on equal terms, thereby eradicating or at any rate
reducing the scope for exploitation in dealings. Such a
statute cannot be said to create unreasonable restrictions
on the citizens’ right to do business unless it is clearly
established that the provisions are too drastic,
unnecessarily harsh and overreach the scope of the object to
achieve which it is enacted.
It is therefore necessary to scrutinize the provisions of
the Act and the Rules made thereunder to ascertain whether
the restrictions imposed are not reasonable. The said
provisions fall under two groups: the first group provides
the machinery for controlling the trade in commercial crops
and the second group of provisions imposes restrictions On
the carrying on of the said trade. Section 2(1-a) defines I
commercial crop’ to mean cotton, groundnut or tobacco and
includes any
99
other crop or product notified by the State Government in
the Fort St. George Gazette as a commercial crop for the
purposes of this Act. Under s. 3, the State Government
issues a notification declaring their intention to exercise
control over the purchase and sale of such commercial crop
or crops in a particular area and calls for objections and
suggestions to be made within a prescribed time. After the
objections are received, the State Government considers them
and declares the areas to be specified in the notification
or any portion thereof to be a notified area for the purpose
of the Act in respect of commercial crop or crops specified
in the notification. Under s. 4-A, the State Government has
to establish a market committee for every notified area and
it shall be the duty of the market committee to enforce the
provisions of the Act. Sections 6 to 10 provide for the
constitution of Market Committees and s. 16 for their
supersession for the reasons mentioned therein. In exercise
of the powers conferred by s. 18 of the Act the State
Government made Rules which provide for the manner in which
the members of Market Committees should be elected, and also
for the constitution of sub-Committees. In exercise of the
powers conferred by s. 19 of the Act and also subject to the
Madras Commercial Crops Markets Rules, 1948, the Committees
for the various districts made, bye-laws for regulating
their meetings and for the discharge of their duties by the
various subordinate bodies. The said provisions which bring
into existence a machinery for regulating the trade are not
attacked by the learned counsel for the appellants.
Under the second group, there are provisions providing for
matters which are succinctly stated in the ‘Report of the
Expert Committee on the review of the Madras Commercial
Crops Markets Act, 1933 at p. 7 as under:
“(1) A common place is provided for seller and buyer to meet
and facilities are offered by way of space, buildings and
storage accommodation.
(2) Market practices are regularized and Market
100
charges clearly defined and unwarranted ones prohibited.
(3) Correct weighment is ensured by licensed weighmen and
all weights are checked and stamped.
(4) Payment on hand is ensured.
(5) Provision is made for settlement of disputes.
(6) Daily prevailing prices are made available to
the grower and reliable market information provided
regarding arrivals, stocks, prices, etc.
(7) Quality standards are fixed when necessary and contract
forms standardized for purchase and sale.”
Section 5 says: ‘No person shall, within a notified area,
set up, establish or use, or continue or allow to be
continued, any place for the purchase or sale of a notified
commercial crop, except under and in accordance with the
conditions of a licence granted to him by the Collector.
The first proviso to that section provides that after the
establishment in such area of a market for the purchase and
sale of a notified commercial crop, no licence for the
purchase or sale of such commercial crop shall be granted or
renewed in respect of any place situated within such
distance of the market as may from time to time be fixed by
the State Government. The second proviso enables the Market
Committee to exempt from the provisions of the above sub-
section any person who carries on the business of purchasing
or selling any commercial crop in quantities not exceeding
those prescribed by Rules made under the Act. The third
proviso authorizes the said Committee to exempt a person
selling commercial crop which has been grown by him, or a
cooperative society registered or deemed to be registered
under the Madras Co-operative Societies Act, 1932, selling a
commercial crop which has been grown by any of its members,
and also empowers it to withdraw the exemption. Sub-section
(2) of s. 5 gives exemption to a person purchasing for his
private use a commercial crop in quantities not exceeding
those prescribed by Rules made under the Act. Sub-section
(3) prohibits any person within a notified area from setting
up,
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establishing or using, continuing or allowing to be
continued, any place for the storage, weighment, pressing or
processing of any notified commercial crop except under and
in accordance with the conditions of a licence granted to
him by the Collector. Under proviso to sub-s. (3) a person
is exempted from the operation of that Rule in respect of
any notified commercial crop grown by him. Sub-section (4)
enables the Collector, on the report of the Market Committee
and after such inquiry as he deems fit, to cancel or suspend
any licence granted under the said section. There are
provisions providing for penalties for infringement of the
statutory regulations and for referring disputes to
compulsory arbitration. The bye-laws framed by the
Committees prescribe graded scales of licence fees in
respect of various licences required under the Act; these
show that a trader has to take separate licences under s.
5(1) and s. 5(3). The licence fee payable for additional
premises is comparatively smaller than the amount payable
for the main premises. Licence fee is also fixed for
brokers, weighmen, etc. Rule 28(3) (iii) of the Rules
states that it shall not be necessary for a poison to obtain
more than one licence for setting up, establishing or
continuing or allowing to be continued more than one place
in the same notified area for the purchase, sale, storage,
weighment, pressing or processing of the same commercial
crop. A combined reading Of the Rule and the bye-laws shows
that though different licences may have to be obtained under
s. 5(1) and s. 5(3), one licence is sufficient for different
places and only small payments have to be made for every
additional premises for the same purpose. It is not
necessary to notice the other provisions as nothing turns
upon them in the present ease. Shortly stated, the Act,
Rules and the Bye-laws framed thereunder have a long-term
target of providing a net work of markets wherein facilities
for correct weigbment are ensured, storage accommodation is
provided, and equal powers of bargaining ensured, so that
the growers may bring their commercial crops to the market
and sell them at reasonable prices. Till such markets are
102
established, the said provisions, by imposing licensing
restrictions, enable the buyers and sellers to meet in
licensed premises, ensure correct weighment, make available
to them reliable market information and provide for them a
simple machinery for settlement of disputes. After the
markets are built or opened by the marketing committees,
within a reasonable radius from the market, as prescribed by
the Rules, no licence is issued ; thereafter all growers
will have to resort to the market for vending their goods.
The result of the implementation of the Act would be to
eliminate, as far as possible, the middlemen and to give
reasonable facilities for the growers of commercial crops to
secure best prices for their commodities.
Learned counsel for the appellants contends that the
restrictions imposed by the provisions of s. 5 are not only
unreasonable but tend to defeat the very purpose of the
legislation. Elaborating this argument, the learned counsel
says that they are unreasonable from the standpoint of the
big trader, the small trader and also the grower of crops.
The trader, his argument proceeds, can only buy or sell in
the licensed premises paying heavy licensing fees under
different beads and paying also heavy overhead charges, with
the inevitable consequence that he will not be able to run
his business with profit. It is also said that he cannot go
wherever he likes to buy the produce at cheap rates and can
negotiate for or enter into contracts of sale only in the
licensed premises, with the result that be has to pay higher
prices to the sellers. The first argument rather
exaggerates the situation; for, the rates of licence fees
shown in the bye-laws framed by the Marketing Committee at
Virudhunagar do not appear to be so high as to cripple the
trader’s business. No material has been placed before us to
establish that the rates are so high and the burden is so
unbearable that a trader, who is otherwise making profit,
cannot carry on his business. The second objection of the
learned Counsel in itself affords a reasonable – basis for
the legislation ; for, what the learned counsel in effect
says is that the trader is exploiting the small growers
103
and that he is prevented from doing so under the licensing
regulations.
From the standpoint of the seller it is said that though he
may be exempted from the operation of the said Act under the
second proviso to s. 5 (1) he is prevented from selling his
produce by insisting that he should trade only with the
licensed trader and in the licensed premises. Assuming that
that is the legal position under the Rules, nothing prevents
the grower from selling his produce to another grower whose
requirements are greater than what he produces or to a
smaller trader exempted under the third proviso to s. 5 (1).
After the market is established, it is contended, a grower
will be obliged to carry the goods to a centralised place if
he is to dispose of the goods, which can hardly be described
as increasing the facilities for marketing the goods. It is
true that the growers may be under some difficulties in this
regard, but that is counter-balanced by the marketing
facilities provided for them under the Act.
It is also said that when a market is established, no
licence to purchase, or sell, commercial crops will be
granted or renewed in respect of any place situated within
such distance from the market as may from time to time be
fixed by the State Government and that nothing under the Act
prevents the Government from fixing a long distance as a
prohibited area; with the result that a person, who is
having a licence to trade ,in and about the place where the
market is fixed, is deprived of his livelihood, which is an
unreasonable restriction upon his right to do business. But
in our view, such a provision is necessary for preventing
the local business being diverted to other places and the
object of the scheme being defeated. Further, ,in practice,
it is seen that the Government fixes by notification under
s. 5 (1) a radius of five miles around the building and
occasionally ten miles. It is also not likely that it would
fix a longer distance in the present circumstances, having
regard to the inadequate facilities for transporting
commodities. That apart, the establishment of a market does
not prevent a trader from carrying on the business in the
market established,
104
but he could not run a market for himself in respect only of
the commodities declared to be commercial crops within the
radius prescribed.
While the object of the Act is to protect the growers, the
argument proceeds, the small traders are compelled to resort
to distant markets, with the result that some of them would
be forced to give up their business and others would have to
incur unnecessary expenditure which they could not afford.
The Act is an integrated one, and it regulates the buying
and selling of commercial crops. If the small traders are
exempted, it creates loopholes in the scheme through which
the big trader may operate, and thereby the object itself
would be defeated. That apart, the second proviso enables
the Committee to exempt small traders in appropriate cases.
The constitution of the Committee, in which there will be
representatives of the traders and the buyers, is a
sufficient guarantee against the implementation of the
provisions of the Act to the detriment of all concerned. If
a packed Committee abuses its powers, there is a further
provision to enable the Government to supersede it. We,
therefore, hold that, having regard to the entire scheme of
the Act, the impugned provisions of the Act constitute
reasonable restrictions on a citizen’s right to do business,
and therefore, they are valid.
The next contention of the learned counsel for the
appellants is that the G. 0. No. 356 dated 8-3-1952
directing the establishment of a market at Virudhunagar is
an unreasonable restriction on the appellants’ right to do
business, and is, therefore, invalid. In Viradhunagar,
there is already a well-established market which provides
facilities for the purchase and sale of cotton and other
goods. It is stated that the said market has been
functioning for over fifty years, that it has been largely
used by the merchants of the community, and that it contains
stalls for effecting sales, godowns for stockina goods,
halls, parks and other amenities. Certain charges called I
mahimai’ are collected on all transactions that take place
within the market; and they are constituted into a trust
fund which is utilised for the maintenance of schools
105
and for religious purposes. The argument is that the
appellants in C. A. No. 169 of 1955 are running the market
as an occupation or business with high standards and that
the notification directing the constitution of a market in
the same locality, when admittedly the entire scheme of
building a net work of markets could not be finished within
a, predictable time, is not a reasonable restriction on
their right to do business. It is also said that the same
advantages could be given to the growers by continuing the
said market with suitable restrictions and controls as the
market established by the Market Committee would conceivably
provide for them, and in those circumstances, when two
alternative methods would equally achieve the objects, the
notification directing the constitution of a market to the
exclusion of the existing one would be an unreasonable
restriction. The learned Advocate General of Madras
contends that the appellants have really two fundamental
rights: one is to carry on trade or business and the other
is to hold their property, i.e., the market; that by reason
of the notification they are not prevented from doing their
business, for they can still do business in the market
established subject to the regulations and also do business
outside the prescribed area ; and that they are not
prohibited from holding the market as property, for they
could still utilise it for commodities other than the
notified crops. In respect of the contention that holding
the market is only an incident of ownership of the property,
reliance is placed upon the decisions in T. B. Ibrahim v.
Regional Transport Authority, Tanjore (1); Ramunni Kurup v.
The Panchayat Board, Badagara (2); Captain Ganpati Singhji
v. The State of Ajmer (3) ; and Valia Raja of Edappally v.
The Commissioner for Hindu Religious Charitable Endowments,
Madras (4). It is unnecessary to express an opinion on the
question whether the right of the appellants falls under
Art. 19(1)(f) or (g) of the Constitution of India, or under
both the sub-clauses; for, the
(1) [1953] S.C.R. 290.
(3) [1955] S.C.R. 1065.
(2) I.L R. [1954] Mad. 513.
(4) I.L.R. [1955] mad. 870.
14
106
question whether the notification imposes an unreasonable
restriction on the appellants’ right cannot be decided on
the material placed before us. That question may
conveniently be left open to be decided at the time when the
market is established at Virudhunagar, pursuant to the
notification issued by the Government. It does not appear
from the record that there is any early prospect of such a
market being established in that place. The reasonableness
of the restrictions would depend upon the circumstances
obtaining at the time the market is established. It depends
upon the conditions then obtaining in the trade in
commercial crops, the standards that will be maintained in
the present market at that time, the comparative merits of
the existing market and the market to be built up and other
relevant considerations which cannot now be visualized. We
would, therefore, leave open that question to be decided at
the proper time by the authorities concerned when a market
is sought to be established in the manner provided by law.
The next argument relates to I mahimai’ allowances collected
by the appellants from the sellers and buyers of the crops
in the market. The learned judges of the High Court held
that the question relating to this allowance did not arise
for decision at that stage, but having heard full arguments
on the question, they expressed the view that ‘mahimai’
could not be claimed as a trade allowance. They concluded
their discussion on the subject in the following words:
” It has nothing to do with -the transaction as such and is
really a contribution levied at the time of the transaction
for a purpose unconnected with it. It cannot therefore be
properly regarded as a trade allowance, and bye-law 25(b) is
perfectly valid.”
We cannot share the opinion of the learned judges that the
question does not arise for decision at this stage. The
appellants prayed for issue of a writ of mandamus directing
the respondents to forbear from enforcing any or all the
provisions of the Act as amended and the Rules and bye-laws
framed thereunder by the Ramanathapuram Committee; and, the
provisions of
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the Act read with the bye-laws prohibited the collection of
‘mahimai’ by the appellants. The question whether the bye-
law prohibiting the collection off I mahimai’ allowance is
valid or not does directly arise for consideration in this
case. There is also some ambiguity in the conclusion
arrived at by the learned judges of the High Court. They
stated that the allowance had nothing to do with the
transaction as such and could not therefore be properly
regarded as a trade allowance. The learned counsel for the
appellants contends that if it is not a trade allowance, it
is not covered either by s. 14 of the Act or by bye-laws
framed thereunder, as s. 14 prohibits the deduction of trade
allowance and does not operate upon any other payments made
which are not trade allowances. There is considerable force
in this argument, but we think that the learned judges meant
only that the said allowance is not an admissible or a
permissible trade allowance prescribed by the bye-law. The
question, therefore, is whether the allowance described as I
mahimai’ is a trade allowance and if so, whether the
allowance is permitted to be received by the rules or bye-
laws made under that section. The relevant provisions may
be noticed at this stage. Section 14 says
“No trade allowance, other than an allowance prescribed by
rules or by-laws made under this Act, shall be made or
received in a notified area by any person in any transaction
in respect of the commercial crop or crops concerned and no
Civil Court shall, in any suit or proceeding arising out of
any such transaction, have regard to any trade allowance not
so prescribed.
Explanation:Every deduction other than deduction on account
of deviation from sample, when the purchase is made by
sample, or of deviation from standard, when the purchase is
made by reference to a known standard, or on account of
difference between the actual weight of the sacking and the
standard weight, or on account of the admixture of foreign
matter, shall be regarded as a trade allowance for the
purposes of this Act “.
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Section 19: ” (1) Subject to any rules made by the State
Government under section 18 and with the previous sanction
of the Director of Agriculture, Madras, a market committee
may in respect of the notified area for which it was
established make bylaws for the regulation of the business
and the conditions of trading therein.”
By-law 25: Trade allowance applying to the market and the
notified area:
(a)………………………………………….
” (b) Deductions such as I mahimai’ are prohibited. The
weight of alien substance such as mud and stone, if any,
contained in the lint or kapas borahs or in the bags of
groundnut pods or kernels shall be deducted.”
The gist of the aforesaid provisions may be stated thus:
Trade allowance cannot be received in any notified area by
any person in any transaction in respect of commercial crop
or crops. Every deduction in any transaction in respect of
the said crop other than those specified in the explanation
is trade allowance for the purpose of the Act. A market
committee generally may make bye-laws for the regulation of
the business and conditions of trading therein and
particularly it can make bye-laws prescribing what are
permissible trade allowances under the section. Such
allowances as are prescribed by a bye-law can be deducted in
any transaction notwithstanding the fact that they are trade
allowances. The argument of the learned counsel is that
that bye-law is bad, because the market committee did not
name the allowance or allowances taking them out of the pro-
hibition under s. 14 which they are entitled to do under
that section, but made the bye-law mentioning the ‘ mahimai’
allowance as one not deductible in any transaction. The
validity of that part of the bye-law prohibiting the
deduction of ‘ mahimai ‘ as trade allowance depends upon the
nature of that deduction. If ‘ mahimai’ is not a trade
allowance, the said part of the bye-law would obviously be
invalid as inconsistent with the provisions of s. 14. If,
on the other hand, mahimai’ is a trade allowance, the said
part of the
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bye-law will be superfluous, as the allowance falls within
the terms of the section itself This leads us to the
question whether ‘ mahimai’ is a trade allowance, within the
meaning of s. 14 of the Act.
What is a trade allowance? Trade involves exchange of
commodities for money, the business of buying and selling
and the transaction involves the seller, the buyer, the
commodity sold and the price paid for the sale. Allowance
means something given as compensation, rebate or deduction.
Under the section, the said deduction should be in any
transaction in respect of commercial crops. The deduction
may be out of the commodity or out of the price. The
recipient may be the seller, the buyer or a third party.
When A sells a quantity of cotton to B for a hundred rupees,
B, the purchaser, may deduct one rupee from the sale price
and pay ninety-Dine rupees to A; he may keep that amount for
himself or pay the same to C. So too, A, the seller, may
purport to sell one maund of cotton but in fact deduct a
small part of it, retain that part for himself or give it to
C; or both A and B may fix the price of the commodity
purchased at Rs. 102 but the purchaser pays one rupee to C
and the seller retains or pays one rupee to C; or it may be
that payments have nothing to do with the price or the
transaction, but both the parties pay C a specified amount
as consideration for the user of the premises or for the
services rendered by him. The question whether a particular
payment is a trade allowance or not, depends upon the facts
of each case. Firstly, it must be a deduction in any
transaction in respect of commercial crops. If it is a
deduction out of the price or commodity agreed to be paid or
transferred, it would be a trade allowance. On the other
hand, if the payment is de hors the terms of the transaction
but made towards consideration for the use of the premises
or services rendered, it would not be a deduction from the
price or in any transaction. No material has been placed
before us to arrive at a definite finding in the present
case whether ‘mahimai’ is a deduction from the price or
commodity within the meaning of s. 14 of the Act. The
learned judges, having expressed the view that the
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question did not arise for consideration at that stage, did
not also consider any material to support their finding. In
the circumstances, the only reasonable course is to leave
that question open so that it may be decided in appropriate
proceedings.
In the result, subject to the aforesaid observations, the
appeals are dismissed but without costs.
Appeals dismissed.