IMPORTANT POINT
The legal fiction created by Rule 74(2) of the A.P. (Agricultural Produce and Livestock) Market Rules, 1969 and Bye-Law 24(5) of the Bye-Laws of Agricultural Market Committee, that if a notified agricultural produce is weighed, measured or counted within the notified area, it shall be deemed to have been sold or purchased in that area, is beyond the legislative policy, so the provisions are ultra vires.

Headnote:(i) Delegated Legislation-Constitution of India-Art. 245-Andhra Pradesh (Agricultural Produce and Livestock) Markets Act, 1966-Section 12-E(2)-A.P. (Agricultural Produce and Livestock) Market Rules, 1969-Rule 74(2)-Explanation to Bye-law 24(5) of Bye-laws of Agricultural Market Committee-Provisions relating to rule of presumption -Delegated legislation-Validity of Rule 74(2) and Bye-law 24(5)-Legal fiction under Explanation 1 to Section 12 limited to moving of commodity from within a market area to a place outside market area-Rule 74(2) and Bye law 24(5) widened scope of presumption -If a notified agricultural produce is weighed, measured or counted within notified area-It shall be deemed to have been sold or purchased in that area-Creation of legal fiction is beyond legislative policy-Such legal fiction could be created only by Legislature and not by a delegate in exercise of rule making power-Rule 74(2) and Bye-law 24(5) are beyond scope of Act and, therefore, ultra vires.
       Held that the delegate which has been authorised to make subsidiary Rules and Regulations has to work within the scope of its authority and cannot widen or constrict the scope of the Act or the policy laid down thereunder. It cannot, in the garb of making Rules, legislate on the field covered by the Act and has to restrict itself to the mode of implementation of the policy and purpose of the Act. (Para 26)
       The market fee can be levied under the Act only on the sales and purchase of notified agricultural produce within the notified area. Explanation I to Section 12 creates a legal fiction and provides that if any notified agricultural produce is taken out of a notified market area, it shall be presumed to have been purchased or sold within such area. The presumption is a rebuttable presumption and can be sown to be not correct. The policy in enacting this provision is only to cover such transactions of sale and purchase for which direct evidence may not be available. Since a notified agricultural produce can be sold only within the notified market area, and, that too, by a trader having a licence issued to him by the Committee, it is obvious that if such commodity is moved out of the notified area, it would mean either that is has been sold or purchased. Otherwise, there wound be on occasion to move such commodity out to the notified market area. The legal fiction was thus limited to the "moving" of the commodity from within the market area to a place outside the market area. (Para 27)
       Further held : The Government to whom the power to make Rules was given under Section 33 and the Committee to whom power to make Bye-laws was given under Section 34 widened the scope of "presumption" by providing further that if a notified agricultural produce is weighed, measured or counted within the notified area, it shall be deemed to have been sold or purchased in that area. The creation of legal fiction is thus beyond the legislative policy. Such legal fiction could be created only by the Legislature and not by a delegate in exercise of the rule making power. We are, therefore, in full agreement with the High Court that Rule 74(2) and Bye-law 24(5) are beyond the scope of the Act and, therefore, ultra vires. (Para 28)
       (ii) Andhra Pradesh (Agricultural Produce and Livestock) Markets Act, 1966-Section 12-E (2)-A.P. (Agricultural Produce and Livestock) Market Rules, 1969-Respondent is a licenced trader dealing in COPRA (dried coconut Kernel)-COPRA is a notified agricultural produce-Levy of market fee on transaction of sale and purchase by respondent-Challenged-On order being placed by respondent, seller in State of Kerala, loaded goods on lorry and despatched them to Hyderabad-Terms of contract that seller would not be liable for any future loss of goods-Goods despatched at risk of respondent-Weighment of goods at Hyderabad or collection of documents from bank or payment of price through bank at Hyderabad-Not material-Sale took place in State of Kerala and not at Hyderabad. (Sale of Goods Act, 1930-Sections 19 & 20).
       Held : In the instant case, the goods which were the subject matter of sale were ascertained goods. They were also in a deliverable state. On the order being placed by the respondent, the seller in the State of Kerala, loaded the goods on the lorry and despatched the same to Hyderabad. It is at this stage that the conduct of the parties becomes extremely relevant. It was one of the terms of the contract between the parties that the seller would not be liable for any future loss of goods and that the goods were being despatched at the risk of the respondent. The respondent had also obtained insurance of the goods and had paid the policy premium. He, therefore, intended the goods to be treated as his own so that if there was any loss of goods in transit, he could validly claim the insurance money. The weighment of the goods at Hyderabad or the collection of documents from the bank or payment of price through the bank at Hyderabad were immaterial, inasmuch as the property in the goods had already passed at Kerala and it was not dependant upon the payment of price or the delivery of goods to the respondent. (Para 42)
       (iii) Delegated Legislation -Power of delegation-Scope-Legislation has to lay down legislative policy and principles-Delegate authorised to make subsidiary Rules and Regulations has to work within scope of its authority. (Para 26)

JUDGMENT

S. Saghir Ahmad, J.-Leave granted.

2. Agricultural Market Committee (for short, for Committee ) which is the appellant before us is a statutory body created under the Andhra Pradesh (Agricultural Produce and Livestock) Markets Act, 1966 ( the Act ) while the respondent is a licenced trader dealing in "Copra (dried coconut Kernel) which it imports from various places in the State of Kerala for manufacturing coconut oil.

3. "Copra" is a notified agricultural produce and, therefore, the Committee has a right to levy and realise the market fee on all transactions of purchase and sale provided the transactions take place within the notified area of the Committee.

4. By orders dated 2.3.89 and 28.3.89, the Assessing Authority who is also the Secretary of the Committee levied the market fee on the respondent who challenged those orders in appeals (No. 1 of 1989 and No. 2 of 1989), filed under Section 12E but the appeals were dismissed on the technical ground of non-compliance with Section 12E(2) under which the whole amount of market fee had to be deposited before filing the appeal.

5. The respondent then approached the Andhra Pradesh High Court in Writ Petition 12199 of 1991 which was allowed and the appeals were directed to be entertained provided the respondent deposited half of the amount of market fee and furnished bank guarantee for the remaining half. The appeals were consequently taken up for hearing but were dismissed compellig the respondent to file a revision under Section 12F of the Act which was dismissed by the Director of Marketing by order dated 8.11.93. The respondent then approached the High Court by another appeal under Section 12G which was allowed by judgment dated 18.4.96 and consequently the matter has come to this Court.

6. In order to levy market fee on the transaction of sale and purchase by the respondent, the Assessing Authority had relied upon Rule 74(2) of the Andhra Pradesh (Agricultural Produce and Livestock) Market Rules, 1969 (for short, Rules ) and Explanation to Bye-law 24(5) of the Bye-laws of the Committee which contained a statutory presumption that if a notified agricultural produce was weighed or measured within the notified area of the Committee, it shall be deemed to have been purchased or sold within that area. The appellate as also the revisional authorities had also relied upon this provision and had held that since "Copra" which was imported from the State of Kerala was, admittedly, weighed at Hyderabad, it shall be deemed to have been sold to the respondent at Hyderabad and, consequently, the respondent was liable to pay market fee on all the transactions of sale/purchase of "Copra" during the period in question.

7. The High Court held that the provisions contained in Rule 74(2) and Bye-law 24(5) relating to the rule of presumption were beyond the scope of the Act and, consequently, were bad in law. It also held on the basis of evidence and material on record that the transaction of sale/purchase took place in the State of Kerala and not at Hyderabad and, therefore, the authorities under the Act were not justified in levying the market fee on those transactions.

8. The findings recorded by the High Court have been challenged before us on the ground that the goods were imported into the State of Andhra Pradesh on the basis of Form-X prescribed under the Act and the delivery of commodity was taken by the respondent after weighment which indicated that the transaction of sale took place at Hyderabad and not in the State of Kerala from where the goods were imported. It was also contended that after weighment, if the commodity was found to be deficient in weight, a debit note is issued to the seller which also indicated that the property in the goods passed only at Hyderabad where weighment was made by the respondent after payment of price and collection of documents through a Bank. The findings of the High Court that Rule 74(2) and Bye-law 24(5) were beyond the scope of the Act w

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1997 Supreme(SC) 832

Cases Referred (5)