1. Dispute over the legality of fees levied under Section 11(1) of the Madras Commercial Crops Markets Act on commercial crops bought and sold in a notified area. (Para 2 , 3 )
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1966 Supreme(SC) 295
SUPREME COURT OF INDIA
K. SUBBA RAO, C.J.I., M. HIDAYATULLAH, S.M. SIKRI, R.S. BACHAWAT AND J.M. SHELAT, JJ.
1. Sri Krishna Coconut Co. (In C. As. Nos. 858 and 859 of 1964); 2. M/s. Kuchi Rajeswara Sastry and Sons (In C. As. Nos. 860 and 861 of 1964), Appellants
Versus
East Godavari Coconut and Tobacco Market Committee (In all the Appeals), Respondent.
Civil Appeals Nos. 856 to 861 of 1964, D/- 27-10-1966.
Advocates appeared
Mr. C. B. Agarwala, Senior Advocate, (Mr. T. V. R. Tatachari, Advocate, with him), for Appellants (In all the Appeals); Mr. P. Ram Reddy, Senior Advocate, (Mr. K. R. Sharma, Advocate, with him), for Respondent. 974
Advocates:
C.B.AGARWAL, K.R.SHARMA, P.RAM REDDY, T.V.R.TATACHARI
C.B.AGARWAL, K.R.SHARMA, P.RAM REDDY, T.V.R.TATACHARI
The phrase "bought and sold" in Section 11(1) of the Commercial Crops Markets Act refers to a single transaction of purchase and sale between two parties. It does not require a dealer to both buy and sell the same goods within the notified area for the fee to apply.
Headnote:(A) Commercial Crops Markets Act - Section 11(1) - Interpretation of "bought and sold" - Constitution of India - Article 286 - Levy of fees on commercial crops - The expression "bought and sold" in Section 11(1) refers to a single transaction of purchase and sale between two parties, such as a producer and a buyer, rather than requiring a duality of transactions where the same person must both buy and subsequently sell the identical goods within a notified area. (Paras 10, 11)
(B) Statutory Interpretation - Principle of Validity - Courts should endeavour to construe a statute in a manner that results in validity rather than invalidity and gives effect to the manifest intention of the legislature. Where the object of an Act is to prevent the exploitation of producers and ensure fair prices, the construction should not be so narrow as to defeat this purpose. (Para 11)
Facts of the case:
Appellants purchased commercial crops within a notified area and subsequently sold them to customers located outside the notified area and, in some instances, outside the State. The Market Committee levied fees under Section 11(1) of the Act on these transactions. The appellants sought a refund, contending that the fee was illegal because the sales to their customers were completed outside the notified area and that such a levy was repugnant to Article 286 of the Constitution.
Findings of Court:
The court found that the fee was levied on the transactions between the appellants and the producers or petty dealers within the notified area. These initial transactions of purchase by the appellants (and corresponding sales by the producers) were completed within the notified area and thus fell within the scope of Section 11(1). The subsequent sales by the appellants to outside customers were separate transactions and did not invalidate the fee levied on the initial purchase.
Issues: Whether the words "bought and sold" in Section 11(1) of the Act imply a requirement for a dealer to both purchase and then sell the same goods within the notified area, or whether it refers to a single transaction of purchase which inherently involves a corresponding sale.
Ratio Decidendi: The court ruled that "bought and sold" refers to a single transaction resulting in buying on one hand and selling on the other. If the law required a dual transaction by a dealer, the object of the Act—to protect producers from exploitation by middlemen—would be defeated, as many transactions stop at the buying stage. Since the purchase from the producer occurred within the notified area, the levy is valid regardless of where the goods were subsequently sold. (Paras 10, 11)
Result: Appeals dismissed.
Legal Category Hierarchy
Table of Contents
2. Whether the fee under Section 11(1) applies to goods sold outside the notified area and whether bought and sold requires a duality of transactions by one dealer. (Para 6 , 10 )
3. The Act aims to protect producers from exploitation; the fee is levied on the transaction between the producer and the buyer within the notified area. (Para 4 , 9 , 11 )
4. The phrase bought and sold in Section 11(1) refers to a single transaction of purchase, as every purchase necessarily involves a corresponding sale. (Para 10 , 11 )
5. Appeals dismissed; the levy of fees by the Market Committee was held valid. (Para 13 , 14 )
6. What is the legal interpretation of the phrase bought and sold under Section 11(1) of the Madras Commercial Crops Markets Act?
The phrase refers to a single transaction of purchase, as the concept of purchase inherently includes a corresponding sale. It does not require a dealer to both buy and subsequently sell the same goods within the notified area to trigger the levy. (Para 10 , 11 )
7. Can a market fee be levied on goods that are subsequently sold to customers outside the notified area or State?
Yes, provided the fee is levied on the initial transaction where the goods were bought from producers within the notified area. The subsequent sale location is irrelevant to the validity of the initial levy. (Para 9 , 11 )
8. What is the primary legislative objective behind the Madras Commercial Crops Markets Act regarding the regulation of commercial crops?
The Act is designed to regulate the buying and selling of commercial crops to eliminate middlemen and protect producers from exploitation, ensuring they have access to regulated markets and receive a fair price. (Para 4 , 11 )
Judgment
SHELAT, J. : All these four appeals by special leave raise a common question regarding interpretation of S. 11 (1) of the Madras Commercial Crops Markets Act XX of 1933 and R. 28 of the Rules made there under and, therefore, can be disposed of by a common judgment.
2. The Act was originally enacted by the Madras Legislature. It was a law in force immediately before the constitution of the State of Andhra Pradesh and governed the territories now forming part of that State. By virtue of Andhra Pradesh Act of 1953 and the Adaptation of Laws Order passed on November 1, 1953 by the State Government of Andhra Pradesh it became applicable to the newly formed State of Andhra Pradesh. By a Notification, dated June 27, 1949 the then Government of Madras, in exercise of the power conferred on it by S. 2 (1) (a), declared coconuts and copra to be commercial crops. Under S. 4 of the Act, the State Government also declared the District of East Godavari as the notified area" for purposes of the Act in respect of coconuts and copra. By a further notification, dated December 5, 1950, issued under S. 4 (a) of the Act it established a Market Committee at Rajahmundry for the said notified area. The said Market Committee levied the following fees, viz., (1) a licence fee under S. 5 (1) of the Act read with R. 28 (3); (2) a licence fee for storage, wharfage, etc., under S. 5 (3) read with R. 28 (3); (3) a registration fee under S. 18 read with Rule 37 (4) a fee on the said goods bought and sold within the notified area and under S. 11 (1) read with R. 28 (1) and (5) a fee under the same section on consignments of coconut oil.
3. Contesting the levy of fees under items 2 to 5 as being illegal on the ground that they sold coconuts and copra to customers outside the notified area and in some cases outside the State, the appellant filed various suits in the Court of the District Munsif, Amalapuram for refund of the said fees collected by the said Committee at different times. The Market Committee resisted the said suits claiming that the aforesaid provisions conferred power upon it to levy the said fees and that the said levy was valid and legal. The said suits were tried together and the District Munsif by his judgment, dated October 17, 1955 inter alia held that the levy under S. 11 (1) read with R. 28 (1) though called a "fee" was really a "tax", that the said provisions empowered the Committee to impose the said tax only when the said goods were bought and sold within the notified area, that the sales effected by the appellants were to customers outside the said area and in some cases outside the State that the Committee had no power to levy and collect the said fees and, therefore, the appellants were entitled to refund of the said fees and accordingly passed decrees in all the suits. In appeals by the Committee, the Subordinate Judge, Amalapuram, held that though the appellants purchased the said goods within the notified area they exported them to their customers outside the notified area and outside the State and relying upon the decision in Kutti Keya v. State of Madras AIR 1954 Mad 621, he held that though S. 11 (1) called the said levy as fee it was in substance a tax and that such a tax being on sales completed at the places of their customers outside the State offended Art. 286 of the Constitution and was, therefore, illegal. The Subordinate Judge, except for deleting the relief granted in respect of licence fee under S. 5 (3) of the Act, dismissed the appeals and confirmed the judgment and decree of the Trial Court. The Market Committee thereupon filed Second Appeals in the High Court of Andhra Pradesh. Before the High Court the controversy centred round the question of fee under S. 11 (1) only. By its common judgment, dated November 8, 1961 the High Court relying upon the judgment of a Division Bench of that Court in Satyanarayana v. E. G. C. and T. Market Committee , AIR 1959 Andh Pra 398, held that the word "fee" in S. 11 (1)
